UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission File No.
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| |
(Address of Principal Executive Offices) | (Zip Code) |
( |
(Registrant’s telephone number, including area code) |
n/a |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of exchange on which registered |
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| The |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ | Large accelerated filer | ☐ | Accelerated filer |
☒ | Smaller reporting company | ||
|
| Emerging growth company |
If an emerging growth company, 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 9, 2022, the registrant had
When used in this quarterly report, the terms “DarioHealth,” “the Company,” “we,” “our,” and “us” refer to DarioHealth Corp., a Delaware corporation, our subsidiaries LabStyle Innovation Ltd. and Upright Technologies Ltd., each of which are Israeli companies, and Upright Technologies Inc. and PsyInnovations Inc., each a Delaware company. “Dario” is registered as a trademark in the United States, Israel, China, Canada, Hong Kong, South Africa, Japan, Costa Rica and Panama. “DarioHealth” is registered as a trademark in the United States and Israel.
DarioHealth Corp.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
| Page | ||
3 | |||
PART 1- FINANCIAL INFORMATION | |||
F-1 | |||
F-2 – F-3 | |||
F-4 | |||
F-5 – F- 6 | |||
F-7 | |||
F-8 – F-18 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 | ||
10 | |||
10 | |||
11 | |||
11 | |||
11 | |||
12 |
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:
● | our current and future capital requirements and our ability to satisfy our capital needs through financing transactions or otherwise; |
● | our product launches and market penetration plans; |
● | the execution of agreements with various providers for our solution; |
● | our ability to maintain our relationships with key partners, including Sanofi U.S. Services Inc. (“Sanofi”) ; |
● | our ability to complete required clinical trials of our product and obtain clearance or approval from the United States Food and Drug Administration (the “FDA”), or other regulatory agencies in different jurisdictions; |
● | our ability to maintain or protect the validity of our U.S. and other patents and other intellectual property; |
● | our ability to retain key executive members; |
● | our ability to internally develop new inventions and intellectual property; |
● | the impact of the COVID-19 pandemic on our manufacturing, sales, business plan and the global economy; |
● | interpretations of current laws and the passages of future laws; and |
● | acceptance of our business model by investors. |
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2021 (filed on March 22, 2022) entitled “Risk Factors” as well as in our other public filings.
In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
3
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2022
UNAUDITED
INDEX
Page | ||
| F-2 – F-3 | |
F-4 | ||
F-5 – F- 6 | ||
F-7 | ||
F-8 – F-18 |
F-1
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
March 31, | December 31, | ||||||
| 2022 |
| 2021 | ||||
Unaudited |
|
| |||||
ASSETS | |||||||
| |||||||
CURRENT ASSETS: |
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|
|
| |||
Cash and cash equivalents | $ | | $ | | |||
Short-term restricted bank deposits |
| |
| | |||
Trade receivables |
| |
| | |||
Inventories |
| |
| | |||
Other accounts receivable and prepaid expenses |
| |
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Total current assets |
| |
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NON-CURRENT ASSETS: |
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Deposits | | | |||||
Operating lease right of use assets |
| |
| | |||
Long-term assets | | | |||||
Property and equipment, net | | | |||||
Intangible assets, net | | | |||||
Goodwill | | | |||||
Total non-current assets | | | |||||
Total assets | $ | | $ | |
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
F-2
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except stock and stock data)
March 31, | December 31, | ||||||
| 2022 |
| 2021 | ||||
Unaudited | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
| |||||
CURRENT LIABILITIES: |
|
|
|
| |||
Trade payables | $ | | $ | | |||
Deferred revenues |
| |
| | |||
Operating lease liabilities | | | |||||
Other accounts payable and accrued expenses |
| |
| | |||
Earn-out liability | | | |||||
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Total current liabilities |
| |
| | |||
|
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NON-CURRENT LIABILITIES | |||||||
Operating lease liabilities |
| |
| | |||
Total non-current liabilities | | | |||||
STOCKHOLDERS’ EQUITY |
|
|
|
| |||
Common stock of $ |
| |
| | |||
Preferred stock of $ |
|
| |||||
Additional paid-in capital |
| |
| | |||
Accumulated deficit |
| ( |
| ( | |||
|
| ||||||
Total stockholders’ equity |
| |
| | |||
|
| ||||||
Total liabilities and stockholders’ equity | $ | | $ | |
*) - Represents an amount lower than $1
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
F-3
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except stock and stock data)
Three months ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 | ||||
Unaudited | |||||||
Revenues | $ | | $ | | |||
Cost of revenues (excluding amortization and inventories step-up shown separately below) |
| |
| | |||
Amortization of acquired intangible assets and inventories step-up | | | |||||
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| ||||||
Gross profit |
| |
| | |||
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Operating expenses: |
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Research and development | $ | | $ | | |||
Sales and marketing |
| |
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General and administrative |
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Total operating expenses |
| |
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Operating loss |
| |
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Total financial expenses, net |
| |
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Net loss | $ | | $ | | |||
|
| ||||||
Deemed dividend | $ | | $ | | |||
|
| ||||||
Net loss attributable to holders of common stock | $ | | $ | | |||
|
| ||||||
Net loss per share: |
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|
| |||
|
| ||||||
Basic and diluted loss per share | | | |||||
Weighted average number of common stock used in computing basic and diluted net loss per share |
| |
| |
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
F-4
INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
U.S. dollars in thousands (except stock and stock data)
Additional | Total | ||||||||||||||||||
Common Stock | Preferred Stock | paid-in | Accumulated | stockholders’ | |||||||||||||||
Number | Amount | Number | Amount | capital | deficit | equity | |||||||||||||
Balance as of December 31, 2021(audited) |
| |
| $ | |
| |
| $ | *)- |
| $ | |
| $ | ( |
| $ | |
Exercise of warrants |
| |
| *)- |
| - |
| - |
| - |
| - |
| - | |||||
Issuance of common stock to directors and employees |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Issuance of common stock to consultants and service provider |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Conversion of preferred stock to common stock |
| |
| *)- |
| ( |
| *)- |
| - |
| - |
| *)- | |||||
Deemed dividend related to issuance of preferred stock |
| - |
| - |
| - |
| - |
| |
| ( |
| - | |||||
Issuance of warrants to service providers |
| - |
| - |
| - |
| - |
| |
| - |
| | |||||
Stock-based compensation |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Issuance of common stock and pre-funded warrants, net of issuance cost |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Issuance of Common Stock, net of issuance cost upon Acquisition of Physimax Technologies Ltd. |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Net loss |
| - |
| - |
| - |
| - |
| - |
| ( |
| ( | |||||
- | |||||||||||||||||||
Balance as of March 31, 2022 (unaudited) |
| | $ | |
| | $ | *)- | $ | | $ | ( | $ | | |||||
*) Represents an amount lower than $1.
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
F-5
INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
U.S. dollars in thousands (except stock and stock data)
Additional | Total | ||||||||||||||||||
Common Stock | Preferred Stock | paid-in | Accumulated | shareholders' | |||||||||||||||
Number | Amount | Number | Amount | capital | deficit | equity | |||||||||||||
Balance as of December 31, 2020 (audited) |
| |
| $ | *)- |
| |
| $ | *)- |
| $ | |
| $ | ( |
| $ | |
Payment for executives and directors under Stock for Salary Program |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Exercise of options |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Exercise of placement agent warrants |
| |
| *)- |
| - |
| - |
| — |
| - |
| *)- | |||||
Exercise of warrants | | *)- | | | |||||||||||||||
Issuance of common stock to directors and employees | | *)- | | | |||||||||||||||
Conversion of preferred stock to common stock | | *)- | ( | *)- | — | *)- | |||||||||||||
Deemed dividend related to issuance of preferred stock | — | — | | ( | — | ||||||||||||||
Issuance of warrants to service providers |
| — |
| — |
|
|
| |
| - |
| | |||||||
Stock-based compensation |
| |
| *)- |
| - |
| - |
| |
| — |
| | |||||
Issuance of common stock, net of issuance cost |
| |
| *)- |
| - |
| - |
| |
| — |
| | |||||
Issuance of common stock upon acquisition of Upright Technologies Ltd. |
| |
| *)- |
| - |
| - |
| |
| - |
| | |||||
Net loss |
| - |
| - |
| - |
| - |
| — |
| ( |
| ( | |||||
Balance as of March 31, 2021 (unaudited) |
| | $ | *)- |
| | $ | *)- | $ | | $ | ( | $ | | |||||
*) Represents an amount lower than $1.
The accompanying notes are an integral part of the unaudited interim consolidated financial statements
F-6
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Three months ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 | ||||
Unaudited | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments required to reconcile net loss to net cash used in operating activities: |
|
|
|
| |||
Stock-based compensation, common stock, and payment in stock to directors, employees, consultants, and service providers |
| |
| | |||
Depreciation |
| |
| | |||
Change in operating lease right of use assets |
| |
| | |||
Amortization of acquired inventories step-up |
| - |
| | |||
Amortization of acquired intangible assets |
| |
| | |||
Decrease (increase) in trade receivables |
| ( |
| | |||
Decrease (increase) in other accounts receivable, prepaid expense and long-term assets |
| ( |
| | |||
Increase in inventories |
| ( |
| ( | |||
Increase in trade payables |
| ( |
| ( | |||
Decrease in other accounts payable and accrued expenses |
| ( |
| ( | |||
Increase (decrease) in deferred revenues |
| ( |
| | |||
Change in operating lease liabilities |
| ( |
| ( | |||
Remeasurement of earn-out |
| ( |
| - | |||
|
| ||||||
Net cash used in operating activities |
| ( |
| ( | |||
Cash flows from investing activities: |
|
|
|
| |||
Purchase of property and equipment |
| ( |
| ( | |||
Cash paid as part of Upright Technologies Ltd. acquisition | - | ( | |||||
Intangible assets purchases incurred, Physimax Technologies LTD. | ( | - | |||||
Net cash used in investing activities |
| ( |
| ( | |||
|
| ||||||
Cash flows from financing activities: |
|
| |||||
Proceeds from issuance of common stock and prefunded warrants (net of issuance costs) |
| |
| | |||
Proceeds from exercise of warrants |
| - |
| | |||
Proceeds from exercise of options |
| - |
| | |||
Net cash provided by financing activities |
| |
| | |||
Increase in cash, cash equivalents and restricted cash and cash equivalents |
| |
| | |||
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period |
| |
| | |||
Cash, cash equivalents and restricted cash and cash equivalents at end of period | $ | | $ | |
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
F-7
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 1: - GENERAL
a. | DarioHealth Corp. (the “Company” or “DarioHealth”) was incorporated in Delaware and commenced operations on August 11, 2011. |
DarioHealth is a Global Digital Therapeutics (DTx) company changing the way people with chronic conditions manage their health. By delivering personalized evidence-based interventions that are driven by precision data analytics, software, and personalized coaching, DarioHealth has developed an approach that empowers individuals to adjust their lifestyle in holistic way.
DarioHealth’s cross-functional team operates at the intersection of life sciences, behavioral science, and software technology to deliver seamlessly integrated and highly engaging digital therapeutics interventions. Our diabetes solution, its user-centric approach is used by tens of thousands of customers around the globe. DarioHealth is rapidly expanding its solutions for additional chronic conditions such as hypertension and moving into new geographic markets.
DarioHealth’s digital therapeutic platform has been designed with a ‘user-first’ strategy, focusing on the user’s needs first and foremost, and user experience and satisfaction. User satisfaction is constantly measured and drives, all company processes, including our technology design.
The Company operates as a unit and
b. | The Company has a wholly owned subsidiary, LabStyle Innovation Ltd. (“LabStyle”), which was incorporated and commenced operations on September 14, 2011 in Israel. Its principal business activity is to hold the Company’s intellectual property and to perform research and development, manufacturing, marketing and other business activities. |
c. | On January 26, 2021, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) pursuant to which the Company, through LabStyle, acquired all of the outstanding securities of Upright Technologies Ltd. and its wholly owned subsidiary Upright Technologies Inc. (“Upright”). Upright is a digital musculoskeletal (“MSK”) health company focused on preventing and treating the most common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech. |
d. | On May 15, 2021, the Company entered into an agreement and plan of merger pursuant to which the Company, through its wholly owned subsidiary WF Merger Sub, Inc. (“Merger Sub”), merged with PsyInnovations Inc. (“WayForward”), pursuant to which the Merger Sub was the surviving company. WayForward is a mental health company who develops the WayForward behavioral digital health platform with artificial intelligence (AI) enabled screening to triage and navigate members to specific interventions, digital cognitive behavioral therapy (CBT), self-directed care, expert coaching and access to in-person and telehealth provider visits. |
e. | During the three months ended March 31, 2022, the Company incurred operating losses and negative cash flows from operating activities amounting to $ |
F-8
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements as of March 31, 2022, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. s. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s consolidated financial position as of March 31, 2022, and the Company’s consolidated results of operations and the Company’s consolidated cash flows for the three months ended March 31, 2022. Results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Use of Estimates
Preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
Significant Accounting Policies
a. The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are applied consistently in these unaudited interim consolidated financial statements.
b. Short-term restricted bank deposits:
The following table provides a reconciliation of the cash balances reported on the balance sheets and the cash, cash equivalents and short-term restricted bank deposits balances reported in the statements of cash flows:
F-9
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
March 31, | March 31, | ||||||
| 2022 |
| 2021 | ||||
Unaudited | Unaudited | ||||||
Cash, and cash equivalents as reported on the balance sheets | $ | |
| $ | | ||
Short-term restricted bank deposits, as reported on the balance sheets | |
| | ||||
Cash, restricted cash, cash equivalents and restricted cash and cash equivalents as reported in the statements of cash flows | $ | |
| $ | |
c. Business and Asset Acquisitions
When the Company acquires a business, the purchase price is allocated to the tangible and identifiable intangible assets, net of liabilities assumed. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.
The Company accounts for a transaction as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business. Asset acquisition-related costs are capitalized as part of the asset or assets acquired.
d. Recently issued accounting pronouncements, not yet adopted:
1. | In September 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For tradeand other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. For the Company, the amendments in the update were originally effective for |
fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.
F-10
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2. | In August 2020, the FASB issued ASU 2020-06 (“ASU 2020-06”), which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and |
increase reported net income for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. ASU 2020-06 also requires that the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or share. This amendment removes current guidance that allows an entity to rebut this presumption if it has a history or policy of cash settlement. Furthermore, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted for fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.
3. | In October 2021, the FASB issued ASU 2021-08, which requires companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. This creates an exception to the general recognition and measurement principle in ASC 805. requires companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. For the Company, the guidance is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements. |
NOTE 3: – ACQUISITIONS
Technology Purchase of Physimax Technologies Ltd.
On
The consideration transferred included the issuance of
In addition, the Company capitalized acquisition-related costs in an aggregate amount of $
F-11
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 3: – ACQUISITIONS (Cont.)
Purchase price allocation:
Under asset acquisition accounting principles, the total purchase price was allocated to Physimax Technology as an intangible asset based on cost value as set forth below.
| ||||||
Amortization | ||||||
period (Years) | ||||||
Technology | $ | |
NOTE 4: - INVENTORIES
March 31, | December 31, | ||||||
2022 | 2021 | ||||||
Unaudited | |||||||
Raw materials |
| $ | |
| $ | | |
Finished products |
| |
| | |||
|
| ||||||
$ | | $ | |
During the three-month period ended March 31, 2022, and the year ended December 31, 2021, total inventory write-downs expenses amounted to $
NOTE 5: - REVENUES
The Company is operating a multi-condition healthcare business, empowering individuals to manage their chronic conditions and take steps to improve their overall health. The Company generates revenue directly from individuals through a la carte offering and membership plans. The Company also contracts with enterprise business market groups to provide digital therapeutics solutions for individuals to receive access to services through the Company’s commercial arrangements.
On February 28, 2022, the Company entered into an exclusive preferred partner, co-promotion, development collaboration and license agreement for a term of five (5) years. Pursuant to the Agreement, the Company will provide a license to access and use certain Company data. In addition, the Company may provide development services for new products of the other party.
The Company has determined that the other party is a customer. The aggregative consideration under the contract is up to $
F-12
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 5: - REVENUES (Cont.)
The following tables represent the Company’s total revenues for the three months ended March 31, 2022, and 2021 disaggregated by revenue source:
March 31, | |||||||
|
| 2022 |
| 2021 | |||
| Unaudited | ||||||
Commercial |
| $ | |
| $ | | |
Consumers | | | |||||
| $ | |
| $ | |
The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations primarily related services have been performed. Advance payments are received at the beginning of the service period and the related deferred revenues are reclassified to revenue ratably over the service period. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period.
The following table presents the significant changes in the deferred revenue balance during the three months ended March 31, 2022:
Balance, beginning of the period |
| $ | |
New performance obligations | | ||
Reclassification to revenue as a result of satisfying performance obligations | ( | ||
Balance, end of the period |
| $ | |
Because all performance obligations in the Company’s contracts with customers relate to contracts with a duration of less than one year, the Company has
to apply the optional exemption and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.NOTE 6: - FAIR VALUE MEASUREMENTS
Under U.S. GAAP, fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:
Level 1- |
| Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at measurement date. |
Level 2- | Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. | |
Level 3 |
| Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. |
F-13
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 6: - FAIR VALUE MEASUREMENTS (Cont.)
As part of the acquisition of Wayforward on June 7, 2021, the consideration transferred included earn-out payable in up to
In determining the earn-out fair value, the Company used the Monte-Carlo simulation valuation technique, in order to predict the probability of different outcomes that rely on repeated random variables.
For the three months ended March 31, 2022, the Company recorded income from remeasurement in the amount of $
The following table presents information about our financial instruments that are measured at fair value basis:
| March 31, 2022 | ||||||||||||
Unaudited | |||||||||||||
| Fair Value |
| Level 1 | Level 2 | Level 3 | ||||||||
|
| (in thousands) | |||||||||||
Financial Liabilities: |
|
| |||||||||||
Earn out liability |
| $ |
| $ | — | $ | — | $ | |||||
December 31, 2021 | |||||||||||||
Fair Value |
| Level 1 | Level 2 | Level 3 | |||||||||
| (in thousands) | ||||||||||||
Financial Liabilities: |
|
| |||||||||||
Earn out liability |
| $ |
| $ | — | $ | — | $ |
NOTE 7: - COMMITMENTS AND CONTINGENT LIABILITIES
a. | From time to time, the Company is involved in claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. |
b. | Royalties: |
The company has a liability to pay future royalties to the Israeli Innovation Authority (the “IIA) for participated in programs sponsored by the Israeli government for the support of research and development activities. The Company is obligated to pay royalties to the IIA, amounting to
F-14
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 8: - STOCKHOLDERS’ EQUITY
a. | On January 4, 2022, out of the pre-funded warrants that were issued in May 2019, |
b. | On February 28, 2022, the Company entered into securities purchase agreements with institutional accredited investors relating to an offering with respect to the sale of an aggregate of |
c. | On March 9, 2022, the Company’s Compensation Committee of the Board of Directors approved the grant of |
d. | In April 2020, the Compensation Committee of the Board of Directors approved a monthly grant of shares of the Company’s Common Stock equal up to $ |
e. | In February 2021, the Board of Directors authorized the Company to issue warrants to purchase up to |
f. | In July 2021, the Compensation Committee authorized the Company to issue warrants to purchase |
g. | In October and December 2021, the Compensation Committee authorized the Company to issue |
h. | During the three-month ended March 31, 2022, certain series A Convertible Preferred Stockholders converted |
F-15
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 8: - STOCKHOLDERS' EQUITY (Cont.)
i. | During the three-month ended March 31, 2022, |
j. | Stock based compensation: |
On January 23, 2012, the Company’s Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”) was adopted by the Board of Directors of the Company and approved by a majority of the Company’s stockholders, under which options to purchase shares of Common Stock have been reserved. Under the 2012 Plan, options to purchase shares of Common Stock may be granted to employees and non-employees of the Company or any affiliate, each option granted can be exercised to one share of Common Stock. The 2012 Plan has expired.
On October 14, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan (the “2020 Plan”) and the immediate reservation of
In January 2022, pursuant to the terms of the 2020 plan as approved by the Company’s stockholders, the Company increased the number of shares authorized for issuance under the 2020 Plan by
Transactions related to the grant of options to employees, directors, and non-employees under the above plans during the three-months period ended March 31, 2022, were as follows:
|
|
|
| Weighted |
| |||
Weighted | average | |||||||
average | remaining | Aggregate | ||||||
exercise | contractual | Intrinsic | ||||||
Number of | price | life | value | |||||
options | $ | Years | $ | |||||
Options outstanding at beginning of period |
| | ||||||
Options granted |
| | — | — | ||||
Options exercised |
| — | — | |||||
Options expired |
| ( | | — | — | |||
Options forfeited |
| ( | | — | — | |||
|
|
|
| |||||
Options outstanding at end of period |
| | ||||||
|
|
|
| |||||
Options vested and expected to vest at end of period |
| | ||||||
|
|
|
| |||||
Exercisable at end of period |
| |
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on the last day of the first quarter of 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2022. This amount is impacted by the changes in the fair market value of the Common Stock.
F-16
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)
NOTE 8: - STOCKHOLDERS' EQUITY (Cont.)
Transactions related to the grant of restricted shares to employees, directors, and non-employees under the above plans during the three-months period ended March 31, 2022, were as follows:
Number of | ||||||||
Restricted shares | ||||||||
Restricted shares outstanding at beginning of period |
| | ||||||
Restricted shares granted |
| | ||||||
Restricted shares forfeited |
| ( | ||||||
| ||||||||
Restricted shares outstanding at end of period |
| |
As of March 31, 2022, the total amount of unrecognized stock-based compensation expense was approximately $
The following table presents the assumptions used to estimate the fair values of the options granted to employees, directors, and non-employees in the period presented:
Three months ended |
| ||||
March 31, |
| ||||
| 2022 | 2021 |
| ||
Unaudited | |||||
Volatility | % | | % | ||
Risk-free interest rate | | % | % | ||
Dividend yield | | % | | % | |
Expected life (years) |
The total compensation cost related to all of the Company’s stock-based awards recognized during the three-month period ended March 31, 2022, and 2021 was comprised as follows:
Three months ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 | ||||
Unaudited | |||||||
Cost of revenues | $ | | $ | | |||
Research and development |
| |
| | |||
Sales and marketing |
| |
| | |||
General and administrative |
| |
| | |||
|
| ||||||
Total stock-based compensation expenses | $ | | $ | |
F-17
DARIOHEALTH CORP. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except stock and stock data)