UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

	For the quarterly period ended ~~September~~June 30, ~~2021~~2022

☐	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. 001-37704

DarioHealth Corp.

(Exact name of registrant as specified in its charter)

Delaware	45-2973162
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


~~142~~18 W. ~~57th~~18th St.~~, 8th Floor~~
New York, New York	~~10019~~10011
(Address of Principal Executive Offices)	(Zip Code)

(~~646~~972)-4 ~~665-4667~~770-6377

(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
Common Stock, par value $0.0001 per share	DRIO	The Nasdaq Capital Market LLC

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 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). Yes ☒ No ☐

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
☒	Non-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 ☐ No ☒

As of ~~November 12, 2021,~~August 10, 2022, the registrant had ~~16,575,633~~22,979,129 shares of common stock outstanding.

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.

Table of Contents

DarioHealth Corp.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

		Page

Cautionary Note Regarding Forward-Looking Statements		3

PART 1- FINANCIAL INFORMATION

Item 1.	Interim Consolidated Financial Statements (unaudited)	F-1

	Interim Consolidated Balance Sheets	F-2 – F-3

	Interim Consolidated Statements of Comprehensive Loss	F-4

	Interim Statements of Stockholders’ Equity	F-5 – F- 6

	Interim Consolidated Statements of Cash Flows	F-7 ~~– F- 8~~

	Notes to Interim Consolidated Financial Statements	~~F-9~~F-8 – ~~F-21~~F-24

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	~~Quantitative and Qualitative Disclosures about Market Risk~~	11

~~Item~~ 4.	Control and Procedures	12

PART II- OTHER INFORMATION		13

Item 1A.	Risk Factors	13

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 6.	Exhibits	13

SIGNATURES		1415

Table of Contents

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;

●

~~the expected timing of the enrollment, and receipt of revenue, from our agreements with various employers and health plan customers;~~

●

our ~~launch~~product launches and market penetration plans;

●

the ~~expected~~ execution of agreements with various providers for our solution;

●

our ability to ~~manufacture, market and generate sales of our medical devices, including Dario Blood Glucose monitor, Dario Blood Pressure monitor and Dario Weight Scale;~~

●

our ability to commercialize our membership programs, including our per member per month program for people with diabetes and hypertension, and our Business to Business to Consumer (“B2B2C”) services;

●

~~our ability to develop, launch and commercialize Dario Loop;~~

●

~~our ability to~~ maintain our relationships with key ~~partners;~~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;

●

~~our expectations regarding the impact of the COVID-19 pandemic on our business and operations;~~ 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, ~~2020~~2021 (filed on March ~~9, 2021)~~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.

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

UNAUDITED

INDEX

		Page
Interim Consolidated Balance Sheets		F-2 – F-3

Interim Consolidated Statements of Comprehensive Loss		F-4

Interim Statements of Stockholders’ Equity		F-5 – F- 6

Interim Consolidated Statements of Cash Flows		F-7 ~~– F-8~~

Notes to Interim Consolidated Financial Statements		F-98 – F-2124

F-1

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands


	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
	Unaudited				Unaudited
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	51,331	$	28,590	$	67,949	$	35,808
Short-term restricted bank deposits		251		187		177		192
Trade receivables		2,106		124		3,138		1,310
Inventories		4,058		2,293		8,347		6,228
Other accounts receivable and prepaid expenses		1,481		2,934		2,833		2,067

Total current assets		59,227		34,128		82,444		45,605

NON-CURRENT ASSETS:
Deposits		20		20		9		20
Operation lease right of use assets		361		498
Operating lease right of use assets						212		287
Long-term assets		57		185		71		57
Property and equipment, net		713		576		773		702
Intangible assets, net		17,409		-		12,190		12,460
Goodwill		39,399		-		41,640		41,640

Total non-current assets		57,959		1,279		54,895		55,166

Total assets	$	117,186	$	35,407	$	137,339	$	100,771

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-2

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except stock and stock data)

September 30,

December 31,


2021

2020

Unaudited

LIABILITIES AND STOCKHOLDERS’ EQUITY



CURRENT LIABILITIES:





Trade payables

$
3,990

$
2,480

Deferred revenues

1,213

1,224

Operating lease liabilities

293

310

Other accounts payable and accrued expenses

7,185

3,020

Total current liabilities

12,681

7,034

OPERATING LEASE LIABILITIES

66

222

STOCKHOLDERS’ EQUITY

Common Stock of $0.0001 par value - Authorized: 160,000,000 shares at September 30, 2021 (unaudited) and December 31, 2020; Issued and Outstanding: 16,509,344 and 8,119,493 shares at September 30, 2021 (unaudited) and December 31, 2020, respectively

*) -

*) -

Preferred Stock of $0.0001 par value - Authorized: 5,000,000 shares at September 30, 2021 (unaudited) and December 31, 2020; Issued and Outstanding: 12,097 and 15,823 shares at September 30, 2021 (unaudited) and December 31, 2020, respectively

*) -

*) -

Additional paid-in capital

304,382

171,399

Accumulated deficit

(199,943)

(143,248)

Total stockholders’ equity

104,439

28,151

Total liabilities and stockholders’ equity

$
117,186

$
35,407


	June 30,		December 31,
	2022		2021
	Unaudited
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Trade payables	$	3,280	$	5,109
Deferred revenues		999		1,195
Operating lease liabilities		137		266
Other accounts payable and accrued expenses		6,806		7,806
Earn-out liability		1,764		825

Total current liabilities		12,986		15,201

NON-CURRENT LIABILITIES
Operating lease liabilities		52		21
Long-term loan		23,061		—
Warrant liability		1,588		—

Total non-current liabilities		24,701		21

STOCKHOLDERS’ EQUITY
Common stock of $0.0001 par value - Authorized: 160,000,000 shares at June 30, 2022 (unaudited) and December 31, 2021; Issued and Outstanding: 22,860,044 and 16,573,420 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively		2		2
Preferred stock of $0.0001 par value - Authorized: 5,000,000 shares at June 30, 2022 (unaudited) and December 31, 2021; Issued and Outstanding: 10,797 and 11,927 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively		*) -		*) -
Additional paid-in capital		356,492		307,561
Accumulated deficit		(256,842)		(222,014)

Total stockholders’ equity		99,652		85,549

Total liabilities and stockholders’ equity	$	137,339	$	100,771

*) - Represents an amount lower than $1

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-3

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

U.S. dollars in thousands (except stock and stock data)


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

	Unaudited				Unaudited				Unaudited				Unaudited
Revenues	$	5,629	$	2,042	$	14,485	$	5,496	$	6,183	$	5,261	$	14,242	$	8,856
Cost of revenues		3,097		1,493		7,746		3,532
Amortization of acquired intangible assets and inventories step-up		1,706		-		3,324		-
Cost of revenues (excluding amortization shown separately below)										3,951		3,033		7,093		5,172
Amortization of acquired intangible assets										1,094		720		2,026		1,095

Gross profit		826		549		3,415		1,964		1,138		1,508		5,123		2,589

Operating expenses:
Research and development	$	5,506	$	954	$	11,903	$	3,010	$	4,137	$	3,742	$	10,064	$	6,397
Sales and marketing		10,696		3,635		27,476		10,334		9,297		9,648		18,832		16,780
General and administrative		7,123		2,562		18,865		9,459		5,059		6,121		9,454		11,742

Total operating expenses		23,325		7,151		58,244		22,803		18,493		19,511		38,350		34,919

Operating loss		(22,499)		(6,602)		(54,829)		(20,839)		17,355		18,003		33,227		32,330

Total financial (income) expenses, net		(55)		(52)		346		(391)		672		(238)		716		401

Loss before taxes										18,027		17,765		33,943		32,731

Income Tax										1		—		1		—

Net loss	$	(22,444)	$	(6,550)	$	(55,175)	$	(20,448)	$	18,028	$	17,765	$	33,944	$	32,731

Other comprehensive income (loss):
Deemed dividend	$	488	$	930	$	1,520	$	2,991		433		488		884		1,032

Net loss attributable to holders of Common Stock	$	(22,932)	$	(7,480)	$	(56,695)	$	(23,439)
Net loss attributable to shareholders									$	18,461	$	18,253	$	34,828	$	33,763

Net loss per share:

Basic and diluted net loss per share	$	(1.18)	$	(0.71)	$	(2.98)	$	(2.95)
Weighted average number of Common Stock used in computing basic and diluted net loss per share		16,473,449		7,328,420		16,202,541		4,856,115
Basic and diluted loss per share									$	0.74	$	0.99	$	1.43	$	1.85
Weighted average number of common stock used in computing basic and diluted net loss per share										22,426,019		15,691,359		21,925,089		15,460,758

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-4

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

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)	16,573,420	$	2	11,927	$	*)-	$	307,561	$	(222,014)	$	85,549

Exercise of warrants	81,221		*)-	—		—		—		—		—
Issuance of common stock to directors and employees	24,191		*)-	—		—		161		—		161
Issuance of common stock to consultants and service provider	4,983		*)-	—		—		113		—		113
Conversion of preferred stock to common stock	316,052		*)-	(1,030)		*)-		-		—		*)-
Deemed dividend related to issuance of preferred stock	—		—	—		—		451		(451)		—
Issuance of warrants to service providers	—		—	—		—		1,301		—		1,301
Stock-based compensation	139,982		*)-	—		—		3,768		—		3,768
Issuance of common stock and pre-funded warrants, net of issuance cost	4,674,454		*)-	—		—		38,023		—		38,023
Issuance of Common Stock, net of issuance cost upon Acquisition of Physimax Technologies Ltd.	256,660		*)-	—		—		1,186		—		1,186
Net loss	—		—	—		—		-		(15,916)		(15,916)

Balance as of March 31, 2022 (unaudited)	22,070,963	$	2	10,897	$	*)-	$	352,564	$	(238,381)	$	114,185

Issuance of common stock to consultants and service provider	7,977		*)-	—		—		74		—		74
Conversion of preferred stock to common stock	23,365		*)-	(100)		*)-		—		—		*)-
Deemed dividend related to issuance of preferred stock	—		—	—		—		433		(433)		-
Issuance of warrants to service providers	—		—	—		—		557		—		557
Stock-based compensation	816,396		—	—		—		2,998		—		2,998
Repurchase and retirement of common stock	(58,657)		*)-	—		—		(134)		—		(134)
Net loss	—		—	—		—		—		(18,028)		(18,028)

Balance as of June 30, 2022 (unaudited)	22,860,044	$	2	10,797	$	*)-		356,492		(256,842)		99,652

*) Represents an amount lower than $1.

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-5

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIMSTATEMENTS OF STOCKHOLDERS’ EQUITY(UNAUDITED)

U.S. dollars in thousands (except stock and stock data)


							Additional				Total								Additional				Total
	Common Stock			Preferred Stock			paid-in		Accumulated		stockholders’		Common Stock			Preferred Stock			paid-in		Accumulated		shareholders'
	Number	Amount		Number	Amount		capital		deficit		equity		Number	Amount		Number	Amount		capital		deficit		equity
Balance as of January 1, 2021	8,119,493	$	*)-	15,823	$	*)-	$	171,399	$	(143,248)	$	28,151
Balance as of December 31, 2020 (audited)													8,119,493	$	*)-	15,823	$	*)-	$	171,399	$	(143,248)	$	28,151

Payment for executives and directors under Stock for Salary Program	5,579		*)-	-		-		72		-		72	5,579		*)-	—		—		72		—		72
Exercise of options	33,773		*)-	-		-		201		-		201	33,773		*)-	—		—		201		—		201
Exercise of placement agent warrants	92,575		*)-	-		-		-		-		*)-	92,575		*)-	—		—		-		—		*)-
Exercise of warrants	219,760		*)-	-		-		633		-		633	219,760		*)-	—		—		633		—		633
Issuance of common stock to consultants and service provider	102,667		*)-	-		-		1,484		-		1,484	102,667		*)-	—		—		1,484		—		1,484
Conversion of preferred stock to common stock	802,061		*)-	(3,423)		*)-		-		-		*)-	802,061		*)-	(3,423)		*)-		-		—		*)-
Deemed dividend related to issuance of preferred stock	-		-	-		-		544		(544)		-	—		—	—		—		544		(544)		—
Issuance of warrants to service providers	-		-	-		-		846		-		846	—		—	—		—		846		—		846
Stock-based compensation	1,056,643		*)-	-		-		2,036		-		2,036	1,056,643		*)-	—		—		2,036		—		2,036
Issuance of common stock, net of issuance cost	3,278,688		*)-	-		-		64,877		-		64,877	3,278,688		*)-	—		—		64,877		—		64,877
Issuance of common stock upon acquisition of Upright Technologies Ltd.	1,687,612		*)-	-		-		28,933		-		28,933	1,687,612		*)-	—		—		28,933		—		28,933
Net loss	-		-	-		-		-		(14,966)		(14,966)	—		—	—		—		—		(14,966)		(14,966)
				-
Balance as of March 31, 2021 (unaudited)	15,398,851	$	*)-	12,400	$	*)-	$	271,025	$	(158,758)	$	112,267	15,398,851	$	*)-	12,400	$	*)-	$	271,025	$	(158,758)	$	112,267

Payment for executives and directors under Stock for Salary Program	1,754		*)-	-		-		27		-		`	1,754		*)-	—		—		27		—		27
Exercise of options	6,772		*)-	-		-		55		-		55	6,772		*)-	—		—		55		—		55
Exercise of placement agent warrants	18,486		*)-	-		-		-		-		-	18,486		*)-	—		—		—		—		—
Exercise of warrants	232		*)-	-		-		-		-		-	232		*)-	—		—		—		—		—
Issuance of common stock to consultants and service provider	72,754		*)-	-		-		889		-		889	72,754		*)-	—		—		889		—		889
Conversion of preferred stock to common stock	64,369		*)-	(278)		*)-		-		-		-	64,369		*)-	(278)		*)-		—		—		—
Deemed dividend related to issuance of preferred stock	-		-	-		-		488		(488)		-	—		—	—		—		488		(488)		—
Issuance of warrants to service providers	-		-	-		-		1,951		-		1,951	—		—	—		—		1,951		—		1,951
Stock-based compensation	(500)		*)-	-		-		2,595		-		2,595	(500)		*)-	—		—		2,595		—		2,595
Issuance of common stock upon acquisition of PsyInnovations Inc.(dba WayForward)	768,124		*)-	-		-		18,094		-		18,094	768,124		*)-	—		—		18,094		—		18,094
Net loss	-		-	-		-		-		(17,765)		(17,765)	—		—	—		—		—		(17,765)		(17,765)

Balance as of June 30, 2021 (unaudited)	16,330,842	$	*)-	12,122	$	*)-	$	295,124	$	(177,011)	$	118,113	16,330,842	$	*)-	12,122	$	*)-	$	295,124	$	(177,011)	$	118,113

Payment for executives and directors under Stock for Salary Program	1,791		*)-	-		-		34		-		34
Issuance of Common Stock to Directors and Employees	18,885		*)-	-		-		303				303
Issuance of common stock to consultants and service provider	112,332		*)-	-		-		1,705		-		1,705
Conversion of preferred stock to common stock	8,100		*)-	(25)		*)-		-		-		-
Deemed dividend related to issuance of preferred stock	-		-	-		-		488		(488)		-
Issuance of warrants to service providers	-		-	-		-		2,121		-		2,121
Stock-based compensation	37,394		*)-	-		-		4,607		-		4,607
Net loss	-		-	-		-		-		(22,444)		(22,444)

Balance as of September 30, 2021 (unaudited)	16,509,344	$	*)-	12,097	$	*)-	$	304,382	$	(199,943)	$	104,439

*) Represents an amount lower than $1.

The accompanying notes are an integral ~~notes~~ part of the unaudited interim consolidated financial ~~statements.~~statements

~~F-5~~F-6

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

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 January 1, 2020

2,235,649

$
*)-

21,375

$
*)-

$
129,039

$
(110,145)

$
18,894

Payment for executives and directors under Stock for Salary Program

47,074

*)-

-

-

274

-

274
Issuance of common stock to directors and employees

654,246

*)-

-

-

4,076

-

4,076
Issuance of common stock to consultants and service provider

66,905

*)-

-

-

360

-

360
Conversion of preferred stock to common stock

2,160

*)-

(12)

*)-

-

-

*)-
Deemed dividend related to warrant exchange

97,536

*)-

-

-

376

(376)

*)-
Deemed dividend related to issuance of preferred stock

-

-

-

-

899

(899)

-
Issuance of warrants to service providers

-

-

-

-

1,131

-

1,131
Stock-based compensation

-

-

-

-

583

-

583
Net loss

-

-

-

-

-

(9,892)

(9,892)

Balance as of March 31, 2020 (unaudited)

3,103,570

$
*)-

21,363

$
*)-

$
136,738

$
(121,312)

$
15,426

Payment for executives and directors under Stock for Salary Program

37,504

*)-

-

-

141

-

141
Issuance of common stock to directors and employees

4,638

*)-

-

-

17

-

17
Issuance of common stock to consultants and service provider

36,249

*)-

-

-

180

-

180
Conversion of preferred stock to common stock

917,130

*)-

(3,965)

*)-

-

-

-
Deemed dividend related to issuance of preferred stock

-

-

-

-

786

(786)

-
Issuance of warrants to service providers

-

-

-

-

150

-

150
Stock-based compensation

-

-

-

-

318

-

318
Net loss

-

-

-

-

-

(4,006)

(4,006)

Balance as of June 30, 2020 (unaudited)

4,099,091

$
*)-

17,398

$
*)-

$
138,330

$
(126,104)

$
12,226

Payment for executives and directors under Stock for Salary Program

38,771

*)-

-

-

193

-

193
Exercise of Agent Warrants

144,053

*)-

-

-

-

-

-
Exercise of repriced Warrants

88,889

*)-

-

-

1,088

-

1,088
Issuance of Common Stock to directors and employees

52,936

*)-

-

-

670

-

670
Issuance of Common Stock to consultants and service provider

58,458

*)-

-

-

531

-

531
Conversion of Preferred Stock to Common Stock

345,577

*)-

(
)

*)-

-

-

-
Deemed dividend related to warrants exchange

63,781

*)-

-

-

223

(223)

-
Deemed dividend related to issuance of Preferred Stock

-

-

-

-

707

(707)

-
Issuance of Warrants to service providers

-

-

-

-

90

-

90
Issuance of Common Stock, net of issuance cost

3,000,752

*)-

-

-

26,460

-

26,460
Stock-based compensation

-

-

-

-

326

-

326
Net loss

-

-

-

-

-

(6,550)

(6,550)

Balance as of September 30, 2020 (unaudited)

7,892,308

$
*)-

15,879

$
*)-

$
168,618

$
(133,584)

$
35,034

*) Represents an amount lower than $1.


	Six months ended
	June 30,
	2022		2021

	Unaudited
Cash flows from operating activities:
Net loss	$	(33,944)	$	(32,731)
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		8,972		9,900
Depreciation		154		133
Change in operating lease right of use assets		75		65
Amortization of acquired inventories step-up		-		523
Amortization of acquired intangible assets		2,087		1,106
Increase in trade receivables		(1,828)		(452)
Decrease (increase) in other accounts receivable, prepaid expense and long-term assets		(562)		134
Increase in inventories		(2,119)		41
Increase in trade payables		(1,838)		54
Decrease in other accounts payable and accrued expenses		(1,107)		(1,472)
Decrease in deferred revenues		(196)		(43)
Change in operating lease liabilities		(98)		(96)
Remeasurement of earn-out		939		—
Non-Cash financial expenses		256		—

Net cash used in operating activities		(29,209)		(22,838)

Cash flows from investing activities:
Investment In deposit		-		(1)
Purchase of property and equipment		(225)		(97)
Cash paid as part of PsyInnovations Inc. (dba WayForward) acquisition		-		(5,023)
Cash paid as part of Upright Technologies Ltd. acquisition		-		(2,472)
Intangible assets purchases incurred, Physimax Technologies LTD.		(115)		—

Net cash used in investing activities		(340)		(7,593)

Cash flows from financing activities:
Proceeds from issuance of common stock and prefunded warrants (net of issuance costs)		38,023		64,877
Proceeds from exercise of warrants		-		633
Proceeds from exercise of options		-		256
Proceeds from borrowings on credit agreement		23,786		-
Repurchase and retirement of common stock		(134)		-

Net cash provided by financing activities		61,675		65,766

Increase in cash, cash equivalents and restricted cash and cash equivalents		32,126		35,335
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		35,948		28,725

Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	68,074	$	64,060

Supplemental disclosure of cash flow information:

Cash paid during the period for interest on long-term loan	$	181	$	-

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

~~F-6~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~U.S. dollars in thousands~~

Nine months ended

September 30,


2021

2020

Unaudited

Cash flows from operating activities:

Net loss

$
(55,175)

$
(20,448)

Adjustments required to reconcile net loss to net cash used in operating activities:

Stock-based compensation, common stock, and stock instead of cash compensation to directors, employees, consultants, and service providers

18,670

8,988

Depreciation

202

140

Change in operating lease right of use assets

137

224

Amortization of acquired inventories step-up

985

-

Amortization of acquired intangible assets

2,396

-

Decrease (increase) in trade receivables

(1,125)

129

Decrease (increase) in other accounts receivable, prepaid expense and long-term assets

221

(338)

Decrease (increase) in inventories

96

(158)

Increase in trade payables

-

343

Increase (decrease) in other accounts payable and accrued expenses

(1,368)

311

Increase (decrease) in deferred revenues

(139)

62

Change in operating lease liabilities

(173)

(229)

Net cash used in operating activities

(35,273)

(10,976)

Cash flows from investing activities:





Investment in deposit

(2)

(4)

Purchase of property and equipment

(193)

(69)

Cash paid as part of PsyInnovations Inc. (dba WayForward) acquisition

(5,023)

-

Loans repaid as part of Upright Technologies Ltd. acquisition

(3,016)

-

Cash acquired as part of Upright Technologies Ltd. acquisition

544

-

Net cash used in investing activities

(7,690)

(73)

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

64,877

27,548

Proceeds from exercise of warrants

633

-

Proceeds from exercise of options

256

-

Net cash provided by financing activities

65,766

27,548

Increase in cash, cash equivalents and short-term restricted bank deposits

22,803

16,499

Cash, cash equivalents and short-term restricted bank deposits at beginning of period

28,725

20,535

Cash, cash equivalents and short-term restricted bank deposits at end of period

$
51,528

$
37,034

F-7

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)~~

~~U.S. dollars in thousands~~

Schedule A- Acquisition of Upright Technologies Ltd:

Estimated net fair value of assets acquired and liabilities assumed at the date of acquisition was as follows:

Working capital, net (excluding cash and cash equivalents)

$
(2,171)

$
-

Equipment and other assets

142

-

Intangible assets

9,600

-

Goodwill

25,334

-

Loan of Upright Technologies Ltd

(4,516)

-

Issuance of common stock to Upright Technologies Ltd. shareholders

(28,933)

-

Cash acquired as part of Upright Technologies Ltd. acquisition

$
(544)

$
-

Schedule B- Acquisition of PsyInnovations Inc. (dba WayForward):

Estimated net fair value of assets acquired and liabilities assumed at the date of acquisition was as follows:

Working capital, net (excluding cash and cash equivalents)

$
(901)

$
-

Equipment and other assets

4

-

Intangible assets

10,205

-

Goodwill

14,065

-

Liability to PsyInnovations Inc. (dba WayForward) previous shareholders

(256)

Issuance and expected issuance of common stock to PsyInnovations Inc. (dba WayForward) shareholders

(18,094)

-

Cash paid as part of PsyInnovations Inc. (dba WayForward) acquisition

$
5,023

$
-

~~The accompanying notes are an integral part of the unaudited interim consolidated financial statements.~~

~~F-8~~

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 1: - GENERAL

DarioHealth Corp. (the “Company” or “DarioHealth”) was incorporated in Delaware and commenced operations on August 11, 2011.

DarioHealth is a ~~leading~~ Global Digital Therapeutics (DTx) company ~~revolutionizing~~changing the way people with chronic conditions manage their health. By delivering personalized evidence-based interventions that are driven by precision data analytics, ~~high quality~~ software, and personalized coaching, DarioHealth has developed ~~a novel~~an approach that empowers individuals to adjust their lifestyle in ~~a unique and~~ 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. ~~Being one of the highest rated~~Our diabetes ~~solutions,~~solution, its user-centric approach is ~~loved~~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.

~~DarioHealth has~~The Company operates as 1 reporting unit and 1 operating segment.

The ~~Company’s~~Company has a wholly owned subsidiary, LabStyle Innovation Ltd. ~~(the “Subsidiary”~~(“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.

Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, short-term deposits, restricted deposits and trade receivables. For cash and cash equivalents, the Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets exceed federally insured limits. The Company places its cash and cash equivalents and short-term deposits with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts.

For trade receivables, the Company is exposed to credit risk in the event of non-payment by customers to the extent of the amounts recorded on the accompanying consolidated balance sheets.

As of June 30, 2022, the Company's major customer accounted for 63.7% of the Company's accounts receivable balance.

For the three and six-months period ended June 30, 2022, the Company's major customer accounted for 32% and 42%, respectively, of the Company's revenue in the period.

On January 26, 2021, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) pursuant to which the Company, through ~~the Subsidiary,~~LabStyle, acquired all of the outstanding securities of Upright Technologies Ltd. and its wholly owned subsidiary Upright Technologies Inc. (“Upright”). Upright is a ~~leading~~ digital musculoskeletal (“MSK”) health company focused on preventing and treating the most common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech. ~~See note (4a).~~

F-8

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 1: - GENERAL (Cont.)

d.e.

On May 15, 2021, the Company entered into an agreement and plan of merger ~~(the “Agreement and Plan of Merger”)~~ pursuant to which the Company, through its ~~fully~~wholly owned subsidiary WF Merger Sub, Inc. (“Merger Sub”), merged with PsyInnovations Inc. (“WayForward”), pursuant to which the Merger Sub was the surviving company. ~~PsyInnovations Inc. (dba WayForward)~~WayForward is a mental health company who ~~develops~~developed 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. ~~See note (4b).~~

e.f.

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company incurred operating losses and negative cash flows from operating activities amounting to ~~$54,829~~$33,227 and ~~$35,273,~~$29,209, respectively. On ~~September~~June 30, ~~2021,~~2022, we had ~~$51,331~~$67,949 in available cash and cash equivalent. Management believesthat ~~the Company’s~~our cash on hand is sufficient to meet ~~its~~our obligations as they come due for at least a period of twelve months from the date of the issuance ofthese ~~unaudited condensed~~ consolidated financial statements. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that are required for the long-term development and commercialization of its product offering.

~~F-9~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars in thousands (except stock and stock data)~~

~~NOTE 1: - GENERAL~~ ~~(Cont.)~~

In December 2015, the United States Food and Drug Administration granted the Subsidiary 510(k) clearance for the Dario Blood Glucose Monitoring System, including its components, the Dario Blood Glucose Meter, Dario Blood Glucose Test Strips, Dario Glucose Control Solutions and the Dario app on the Apple IOS 6.1 platform and higher.

On March 4, 2016, the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”) and warrants to purchase shares of Common Stock were approved for listing on the Nasdaq Capital Market under the symbols “DRIO” and “DRIOW,” respectively. Our listed warrants expired in March 2021 and ceased trading on the Nasdaq Capital Market as a result.

~~The Company has been carefully monitoring the COVID-19 pandemic and its impact on its business. In that regard, the Company has continued to sell its Dario~~^TM Blood Sugar Monitor and has not experienced disruptions in its supply chains. With respect to the Company’s DTx platform, it has observed that some of its business-to-business prospective partners have been addressing their business needs as a result of the COVID-19 pandemic, which has resulted in a slowdown of negotiations and discussions with some of these potential partners. In addition, the Company has also seen an increase in interest from other business-to-business prospective partners in its DTx platform, as certain parties are seeking tele-health products. The Company expects the significance of the COVID-19 pandemic, including the extent of its effect on the Company’s financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. While the Company is not able at this time to estimate the impact of the COVID-19 pandemic on its financial and operational results, it could be material.

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES

~~a. The significant accounting policies applied in the audited annual consolidated financial statements~~Basis of ~~the Company as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 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:

September 30,
September 30,

2021

2020

Unaudited

Unaudited

Cash, and cash equivalents as reported on the balance sheets

$
51,331

$
36,907

Short-term restricted bank deposits, as reported on the balance sheets

197

127

Cash, restricted cash, cash equivalents and short-term restricted bank deposits as reported in the statements of cash flows

$
51,528

$
37,034

Presentation

~~F-10~~

~~Table of Contents~~

~~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.)~~

~~c. Recently issued accounting pronouncements, not yet adopted:~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the timelier recognition of losses. Topic 326 will be effective on the Company beginning on January 1, 2023. The Company is currently evaluating the impact of this new standard on its financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature and a beneficial conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for the Company for fiscal years beginning after December 15, 2023, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis. The Company is currently evaluating the impact of this new standard on its financial statements.

~~NOTE 3: - UNAUDITED INTERIM FINANCIAL STATEMENTS~~

The accompanying unaudited interim consolidated financial statements as of ~~September~~June 30, ~~2021,~~2022, have been prepared in accordance with U.S. generally accepted accounting principles and standards of the Public Company Accounting Oversight Board for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States ~~for complete~~(“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial ~~statements.~~reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. 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 ~~September~~June 30, ~~2021,~~2022, and the Company’s consolidated results of operations and the Company’s consolidated cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Results for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~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, ~~2020.~~2021.

Use of Estimates

Preparation of condensed consolidated financial statements in conformity with U.S. 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.

~~F-11~~F-9

Table of Contents

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.)

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:


	June 30,		June 30,
	2022		2021
	Unaudited		Unaudited
Cash, and cash equivalents as reported on the balance sheets	$	67,949	$	63,865
Short-term restricted bank deposits, as reported on the balance sheets		125		195

Cash, restricted cash, cash equivalents and restricted cash and cash equivalents as reported in the statements of cash flows	$	68,074	$	64,060

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. 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.

F-10

Table of Contents

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.)

d. Recently issued accounting pronouncements, not yet adopted:

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 trade and 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 the fiscal years beginning after December 15, 2019, including the 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 SEC) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including the 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.

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 (a) convertible debt with a cash conversion feature and (b) 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.

In October 2021, the FASB issued ASU 2021-08, which requires companies to apply Accounting Standards Codification 606 (“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 Accounting Standards Codification 805 (“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.

F-11

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 43: – ACQUISITIONS

~~Acquisition of Upright~~

Technology Purchase of Physimax Technologies Ltd.

On ~~January 26, 2021~~March 31, 2022 (the “Acquisition Date”), the Company ~~entered into the Share Purchase Agreement with Upright’s shareholders pursuant to which the Company, through the Subsidiary, acquired 100% of the ordinary shares of Upright.~~

~~Pursuant to the terms of the Share Purchase Agreement,~~completed the acquisition, closed on February 1, 2021. The consideration payable in connection with the Agreement was capped at $31,000 and in any event, is subject to certain indemnity provisions, and took into account certain working capital excess generated, among other matters, bythrough its subsidiary LabStyle, of a ~~convertible bridge loan in the amount of $1,500 previously disbursed by the Company to Upright, which was converted into 1 ordinary share of Upright at the closing.~~ technology from Physimax Technologies Ltd (“Physimax Technology”). The Company ~~agreed to bear certain liabilities of Upright, which were reduced from~~considered this transaction as an asset acquisition. As a result, the ~~aggregate consideration, in an estimated amount of $3,700.~~

~~The preliminary~~ estimated fair value of the assets acquired have been included in the accompanying balance sheet from the Acquisition Date.

The consideration transferred included the issuance of 256,660 shares of its common stock subjected to certain terms of lock-up periods valued at $1,186, a cash payment of $500, of which $400 was paid during the fourth quarter of 2021, and the remaining to be paid on the ~~Acquisition Date~~second quarter of 2022, The total consideration transferred in the acquisition of Physimax Technology was comprised of (i) share consideration to owners of Upright for approximately 1,490,154 shares of the Company’s Common Stock (ii) and approximately 37,857 employees’ options to purchase shares of the Company’s Common Stock on account of Upright’s vested options valued at a total of $28,933.$1,686.

In addition, 62,371 restricted stock units are being held in escrow for future vested stock options valued at $969, and 113,576 restricted shares of Common Stock are being held in escrow issuable to Upright Founder upon the completion of a holdback service period of 18 months (“Holdback restricted stock units”), valued at $2,751. In addition, the Company ~~incurred~~capitalized acquisition-related costs in ~~a total~~an aggregate amount of ~~$378. Acquisition-related~~$131. The acquisition-related costs include legal and accounting services.

A portion of the share consideration, consisting of 24,266 shares of Common Stock, was issued under the Company’s Amended and Restated 2012 Equity Incentive Plan as amended (the “2012 Plan”), and the 2020 Equity Incentive Plan (the “2020 Plan”).

Purchase price allocation:

Under ~~business combination~~asset acquisition accounting principles, the total purchase price was allocated to ~~Upright’s net tangible and~~Physimax Technology as an intangible ~~assets~~asset based on ~~their estimated fair values~~cost value as set forth below. ~~The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.~~

~~The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:~~


	September 30,
	2021		Amortization				Amortization
	Unaudited		period (Years)				period (Years)
Tangible assets acquired	$	1,427
Inventory *)		2,845
Liabilities assumed		(10,273)
Net liabilities assumed		(6,001)

Technology		9,600		4	$	1,817		3
Goodwill		25,334		Infinite
Total purchase price	$	28,933

*) Including step-up in

NOTE 4: - INVENTORIES


	June 30,		December 31,
	2022		2021
	Unaudited
Raw materials	$	1,222	$	714
Finished products		7,125		5,514

	$	8,347	$	6,228

During the six-month period ended June 30, 2022, and the year ended December 31, 2021, total inventory ~~fair value of $1,140~~write-downs expenses amounted to $22 and $73, respectively.

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

~~NOTE 4 – ACQUISITIONS~~ ~~(Cont.)~~

~~Acquisition of Upright~~ ~~(Cont.)~~

~~The table below summarizes the value of the total consideration given in the transaction:~~

Amount

Unaudited
Shares issued to owners

$
28,221
Shares issued for vested options

712
Preliminary purchase price

$
28,933

~~Acquisition of WayForward~~

On June 7, 2021, the Company through the Merger Sub, completed the acquisition of WayForward through the merger of WayForward into Merger Sub., which changed its name to PsyInnovations, Inc. in connection with the merger (collectively, the “Merger”). Under the Agreement and Plan of Merger, dated as of May 15, 2021, the Company paid, aggregate consideration (“Merger Consideration”) of (A) $5,750 in cash and (B) up to $21,250 equal to 768,124 in shares of Common Stock, (C) Up to $5,000 equal to 237,076 in shares of Common Stock structured as an earn-out payable in shares of Common Stock if behavioral health revenues from the Company exceed a certain threshold in 2022, subject to customary working capital and other adjustments as of the closing of the Merger (the "Closing"). The Company will pay $3,000 of the Merger Consideration, consisting of $2,750 equal up to 130,397 in shares of Common Stock and up to $250 in cash, after a minimum of ~~eighteen~~ (18) months to secure indemnification obligations. In addition, the Company incurred acquisition-related costs in a total amount of $502. Acquisition-related costs include legal and accounting services.

~~Purchase price allocation:~~

Under business combination accounting principles, the total purchase price was allocated to WayForward’s net tangible and intangible assets based on their estimated fair values as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.

~~The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:~~

September30,

2021

Amortization

Unaudited

period (years)
Tangible assets acquired

$
398

Liabilities assumed

(1,157)

Net liabilities assumed

(759)

Technology

9,666

4
Brand

539

3
Goodwill

14,065

Infinite
Total purchase price

$
23,511

~~F-13~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars in thousands (except stock and stock data)~~

~~NOTE 4 – ACQUISITIONS~~ ~~(Cont.)~~

~~Acquisition of WayForward~~ ~~(Cont.)~~

~~The table below summarizes the value of the total consideration given in the transaction:~~

Amount

Unaudited
Shares issued and expected to be issued to owners

$
14,272
Cash consideration

5,417
Earn-out consideration

3,822
Preliminary purchase price

23,511

In accordance with Accounting Standards Codification (ASC) 805 “Business Combinations” the measurement period for the acquisition of Upright and WayForward is for one year during which the Company may reevaluate the assets acquired, liabilities assumed and the goodwill resulting from the transaction as well as the change in amortization as a result of changes in the provisional amounts as if the accounting had been completed at the Acquisition Date. Our purchase price allocation was made using our best estimates of fair value, which are dependent upon certain valuation and other analyses that are not yet final.

~~Pro forma results~~

The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisition of Upright and WayForward, which closed in February and June 2021, respectively, had taken place on the first day of the period presented. These combined results are not necessarily indicative of the results that may have been achieved had Upright and WayForward been acquired as of the first day of the period presented.

Nine months ended

September 30,

2021
Total revenue

$
15,927
Total expenses

77,551
Preferred stock Deemed dividend

1,520
Net loss attributable to holders of common stock

(63,144)

Basic and diluted net loss per share

$
(3.21)

~~NOTE 5: - INVENTORIES~~

September 30,

December 31,

2021

2020

Unaudited

Raw materials

$
1,117

$
377
Finished products

2,941

1,916

$
4,058

$
2,293

~~During the nine-month period ended September 30, 2021, and the year ended December 31, 2020, total inventory write-off expenses amounted to $91 and $99, respectively.~~

~~F-14~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars in thousands (except stock and stock data)~~

NOTE 6:5: - 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 (the “Exclusive Agreement”). Pursuant to the Exclusive 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 $30 million over the initial term of the Exclusive Agreement, consisting of (i) an upfront payment, (ii) annual compensation for development costs per annual development plans to be agreed upon annually and (iii) certain contingent milestone payments upon meeting certain net sales and enrollment rate milestones at any time during the term of the Exclusive Agreement.

During the second quarter of 2022, the parties joint steering committee approved the first-year development plan, pursuant to the terms of the Exclusive Agreement. The Company has concluded that the development plan includes a performance obligation to provide development services which is satisfied over time. The Company has also concluded that the measure of progress that depicts the Company's performance in transferring control of the services transferred to the customer is an input method, based on labor hours consumed. During the three months ended June 30, 2022, the Company has recognized revenues under the development plan of $1,975 with additional revenues of $2,025 expected to be recognized by the end of 2022.

The following tables represent the Company’s total revenues for the three and ~~nine~~six months ended ~~September~~June 30, 2022, and 2021 ~~and 2020~~disaggregated by revenue ~~type:~~source:


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

	Unaudited				Unaudited				Unaudited				Unaudited
Hardware and consumable products	$	4,853	$	1,556	$	12,613	$	4,052
Service (*)		776		486		1,872		1,444
Commercial									$	2,847	$	129	$	7,396	$	182
Consumers										3,336		5,132		6,846		8,674

		5,629		2,042	$	14,485	$	5,496	$	6,183	$	5,261	$	14,242	$	8,856

~~(*) Software application and remote monitoring services~~

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.

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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 table presents the significant changes in the deferred revenue balance during the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


Balance, beginning of the period	$	1,224	$	1,195
New performance obligations		2,617		3,187
Reclassification to revenue as a result of satisfying performance obligations		(2,628)		(3,383)
Balance, end of the period	$	1,213	$	999

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 elected 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 7:6: - ~~COMMITMENTS AND CONTINGENT LIABILITIES~~FAIR VALUE MEASUREMENTS

~~From time to time the Company~~Under U.S. GAAP, fair value 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 anddefined as the amount ~~can~~that would be ~~reasonably estimated, the Company accrues~~received for selling an asset or paid to transfer a liability ~~for~~in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the ~~estimated loss.~~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. The carrying amounts of cash and cash equivalents, short-term and restricted bank deposits, trade receivables, trade payables, other receivables and prepaid expenses and other payables and accrued expenses approximate their fair value due to the short-term maturity of such instruments.

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Table of Contents

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.)

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:


	June 30, 2022
	Unaudited
	Fair Value		Level 1		Level 2		Level 3

			(in thousands)
Financial Assets:
Financial commitment asset (“FCA”)	$	607	$	—	$	—	$	607

Total Financial Assets	$	607	$	—	$	—	$	607

Financial Liabilities:
Earn out liability	$	1,764	$	—	$	—	$	1,764
Long Term Loan		23,061		—		—		23,061
Warrant liability		1,588		—		—		1,588

Total Financial Liabilities	$	26,413	$	—	$	—	$	26,413


	December 31, 2021
	Fair Value		Level 1		Level 2		Level 3

			(in thousands)
Financial Liabilities:
Earn out liability	$	825	$	—	$	—	$	825

Total Financial Liabilities	$	825	$	—	$	—	$	825

FCA

On June 9, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”), by and between the Company, as borrower, and OrbiMed Royalty and Credit Opportunities III, LP, as the lender (the “Lender”). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million (the “Loan Facility” or “Loan”), of which $25 million was made available on the Closing Date (the “Initial Commitment Amount” or "First Tranche") and up to $25 million may be made available on or prior to June 30, 2023, subject to certain revenue requirements (the “Delayed Draw Commitment Amount” or "Second Tranche"). On June 9, 2022, the Company closed on the Initial Commitment Amount, less certain fees and expenses payable to or on behalf of the Lender.

The FCA instrument was recognized in connection with the Delayed Draw Commitment Amount (Note 7). The fair value of the FCA is estimated by the Company at each reporting date based, in part, on the results of third-party valuations, which are prepared based on significant inputs that are generally determined based on relative value analyses. The FCA fair value was estimated using a discount rate of 15.6% which reflects the internal rate of return of the Loan at closing of the transactions contemplated by the Credit Agreement as of June 9, 2022and represents the $25 million Delayed Draw Commitment Amount that may be made available on or prior to June 30, 2023 on similar terms to the Initial Commitment Amount. Therefore, the value of the FCA for the Delayed Draw Commitment Amount of the Loan was estimated as 50% of the sum of the commitment fee paid upfront and the lender expenses in relation to the Loan origination. The total amount was estimated at $607.

F-15

Table of Contents

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.)

~~NOTE 8: - STOCKHOLDERS’ EQUITY~~Earn out Liability

~~During the nine-month period ended September 30, 2021, the Company’s Compensation Committee (the “Compensation Committee”)~~

As part of the Board of Directors approved an aggregate of 9,124 shares of Common Stock to certain officers and employees of the Company as consideration for a reduction in, or waiver, of cash salary, or fees owed to such individuals and the grant of 5,000 restricted shares of Common Stock to employee. 12,370 shares were issued under the Company’s 2012 Plan and 1,754 shares were issued under the 2020 Plan.

~~During~~ the ~~nine months ended September 30,~~acquisition of Wayforward on June 7, 2021, the ~~Board of Directors approved the grant of an aggregate of 18,885 shares of Common Stock, as well as the grant of 99,074 options~~consideration transferred included earn-out payable in up to purchase Common Stock to officers, employees, and consultants of Upright, at exercise prices between $0.01 to $24.48 per share. The stock options vest over a period of four years or less commencing on the respective original grant dates. The options have a ten-year term. The shares and options were issued under the Company’s 2020 Plan.

During the nine months ended September 30, 2021, the Board of Directors approved the grant of 275,340 unregistered shares of Common Stock to certain consultants and service providers of the Company, of which 7,500 were issued under the 2012 Plan.

~~During the nine months ended September 30, 2021, the Company’s Compensation Committee approved the grant of an aggregate of 1,088,537~~237,076 restricted shares of Common ~~Stock, subject~~Stock. The earn-out arrangement is not indexed to ~~time vesting to directors, officers, employees~~the Company's own stock, and ~~consultants of the Company,~~was accounted as ~~well as the grant of 701,499 options to purchase Common Stock,~~ a liabilityand ~~10,000 performance-based options to purchase Common Stock to officers, employees and consultants of the Company,~~subsequently measured at ~~exercise prices between $12.84 and $25.84 per share. The time vesting restricted shares and stock options vest over a period of three years commencing~~fair value through earnings until settlement on ~~the respective grant dates. The options have a ten-year term and were issued under the 2020 Plan.~~

In April 2020, the Compensation Committee approved a monthly grant of shares of Common Stock equal up to between $12.00 to $16.00 of restricted shares to certain service providers per month, to be granted monthly during the period that the certain consulting agreement remains in effect.

~~During the nine months ended September 30, 2021, a total of 7,913 restricted unregistered shares of Common Stock were issued to certain service providers under this approval.~~

In April 2020, the Audit and Compensation Committee of the Board of Directors approved monthly grants of 1,500 shares of Common Stock, of which 639 shares are to be issued to a board member granted monthly during the twelve month period that the certain consulting agreement with said service providers is in effect.

During the nine months ended September 30, 2021, a total of 4,500 shares of Common Stock were issued under the said approval of which 1,857 shares were issued to a board member and 2,643 shares were issued to certain service providers under the 2012 and 2020 Plans.

~~F-16~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~December 31, 2022.

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars in thousands (except stock~~On July 7, 2022, the Company entered into an Amendment to Agreement and ~~stock data)~~

~~NOTE 8: - STOCKHOLDERS' EQUITY (Cont.~~Plan of Merger (the “Amendment”)

In May 2021, the Compensation Committee of the Board of Directors approved an inducement grant of a non-qualified stock option award to purchase 60,000 shares of the Company’s Common Stock, as well as an additional inducement grant consisting of a non-qualified performance-based stock option award to purchase an additional 15,000 shares of the Company’s Common Stock outside of the Company’s 2020 Plan, pursuant to Nasdaq Listing Rule 5635(c)(4),in connection with the employment of one employee as part of the acquisition of WayForward (see note 4), the options were granted on June 7, 2021 as part of the closing of the Merger.

~~In July 2021, the Compensation Committee~~ with representatives of the ~~Board~~former equity holders of Directors approved the grant of a non-qualified stock option award to purchase 20,000 shares of the Company’s Common Stock outside of the Company’s existing equity incentive plans, pursuant to Nasdaq Listing Rule 5635(c)(4), in connection with the employment of its Special Vice President of Market Access.

~~In January and September 2021, pursuant~~PsyInnovations, Inc. Pursuant to the terms of the ~~2020 Plan as approved by~~Amendment, the ~~Company’s stockholders,~~Company agreed to reduce the ~~number~~earn-out threshold of ~~shares authorized for issuance under the 2020 Plan increased by 1,628,890 shares,~~revenue derived from ~~900,000~~Wayforward products from $5 million to ~~2,528,890.~~$3 million.

In ~~May 2020,~~determining the ~~Compensation Committee of the Board of Directors authorized~~earn-out fair value, the Company used the Monte-Carlo simulation valuation technique, in order to ~~issue warrants to purchase 60,000 shares~~predict the probability of ~~Common Stock vesting over a 12 month period, to certain consultants.~~ different outcomes that rely on repeated random variables.

The ~~warrants exercise price is $6.39 per share. During~~significant inputs into the ~~nine~~models were:


	June 30,	December 31,
	2022	2021
Expected Term (in years)	0.59		1.08
Expected Volatility	32.1%		32.1%
Beta	45%		45%
Debt Rate	3.18%		0.82%

For the six months ended ~~September~~June 30, ~~2021,~~2022, the Company recorded ~~warrants compensation expense for service provider~~expenses from remeasurement of the earn-out in the amount of ~~$18.~~$939.

~~In February 2021,~~

Loan Facility

The fair value of the ~~Board~~Loan Facility is recognized in connection with the Company’s Credit Agreement with with respect to the Initial Commitment Amount only (Note 7). The fair value of ~~Directors authorized~~ the ~~Company to issue warrants to purchase up to 400,000, shares~~Loan Facility was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of ~~Common Stock, to certain consultant of~~the Loan, which is reported within non-current liabilities (Maturity Date - June 9, 2027) on the consolidated balance sheets, is estimated by the Company at ~~a purchase price~~each reporting date based, in part, on the results of ~~$25.00. As such, the Company recorded a warrant compensation expense for service providers in the amount of $4,046.~~

In April 2021, the Compensation Committee authorized the Company to issue warrants to purchase 30,000 shares of Common Stock, to a certain consultant of the Company, with an exercise price of $30.00 per share, and warrants to purchase 12,500 shares of Common Stock with an exercise price of $18.57 per share. As such, the Company recorded a warrant compensation expense for service providers in the amount of $387.

In July 2021, the Compensation Committee authorized the Company to issue warrants to purchase 30,000 shares of Common Stock, to certain consultants of the Company, with an exercise price of $23.30 per share, and warrants to purchase 83,948 shares of Common Stock with an exercise price of $16.06 per share. Of these warrants, warrants to purchase 35,000 shares of Common Stock shall vest over a 48-month period and warrants to purchase 48,948 shares of Common Stockthird-party valuations, which are ~~subjected to certain performance terms. As such, the Company recorded a warrant compensation expense for service providers in the amount of $273.~~

In September 2021, the Compensation Committee authorized the Company to issue warrants to purchase 25,000 shares of Common Stock, to certain consultant of the Company, with an exercise price of $13.88 per share. As such, the Company recorded a warrant compensation expense for service providers in the amount of $194.

~~During the nine months ended September 30, 2021 certain Company warrants holders have exercised warrants into 219,992 shares for total proceeds of $633.~~

~~F-17~~

~~Table of Contents~~

~~DARIOHEALTH CORP. AND ITS SUBSIDIARIES~~prepared based on Significant inputs that are generally determined based on relative value analyses.

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars in thousands (except stock~~The Loan incorporates comparisons to instruments with similar covenants, collateral, and ~~stock data)~~

~~NOTE 8: - STOCKHOLDERS' EQUITY (Cont.)~~

In November and December 2019, the Company entered into subscription agreements for a sale of an aggregate of 21,375 shares of newly designated Series A, A-1, A-2, A-3 and A-4 Convertible Preferred Stock (collectively, the “Series A Convertible Preferred Stock”), at a purchase price of $1,000 per share, for aggregate gross proceeds of $21,375 ($18,689 net of issuance expenses). The initial conversion price for the Series A, A-1, A-2, A-3 and A-4 Convertible Preferred Stock was $4.05, $4.05, $4.28, $4.98 and $5.90, respectively, and the total amount of Common Stock issuable upon conversion of all classes of the Series A Convertible Preferred Stock is up to 4,960,281 shares of Common Stock.

~~During the nine months ended September 30, 2021 3,726 of certain Series A Convertible Preferred Stock were converted into 874,530 shares of Common Stock.~~

Pursuant to the placement agency agreement executed by and between the Company and the registered broker dealer retained to act as the Company’s exclusive placement agent (the “Placement Agent”) for the offering of the Series A Preferred Stock, the Company paid the Placement Agent an aggregate cash fee of $1,788, a non-accountable expense allowance of $641risk profiles and was required to issue to the Placement Agent or its designees warrants to purchase 719,243 shares of Common Stock at an exercise price ranging from $4.05 to $5.90 per share (the “Placement Agent Warrants”). The Placement Agent Warrants are exercisable forobtained using a ~~period of five years from~~discounted cash flow technique. On the date of Loan origination, or June 9, 2022, the ~~final closing~~discount rate was arrived at by calibrating the loan amount of $25 million with the fair value of the ~~Series A Preferred Stock Offering.~~

~~During~~warrants of $1,930 and the ~~nine months ended September~~loan terms interest rate of secured overnight financing rate (“SOFR”) + 9.5%. The implied internal rate of return of the loan was 15.6%. Due to the short time passed between the origination date and June 30, ~~2021, 144,425 Placement Agent Warrants~~2022, the fair value of the Loan as of June 30, 2022 was estimated using a discount rate of 15.6% which reflects the internal rate of return of the Loan at closing, as of June 9, 2022. The change in the fair value of the loan was recorded in earnings since the Company has concluded that ~~were issued in December 2020 were exercised into 111,061 shares of Common Stock.~~

The Series A Convertible Preferred Stock will automatically convert into shares of Common Stock, subject to certain beneficial ownership limitations, on the earliest to occur of (i) upon the approval of the holders at least 50.1% of the outstanding shares of Series A Convertible Preferred with respect to the Series A Convertible Preferred Stock; or (ii) the 36-month anniversary of each of the date the Series A Convertible Preferred Stock was issued (each, the “Series A Effective Date”). The holders of Series A Preferred Stock will also be entitled dividends payable as follows: (i) a number of shares of Common Stock equal to ten percent (10%) of the number of shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock then held by such holder on the 12-month anniversary of the Series A Effective Date, (ii) a number of shares of Common Stock equal to fifteen percent (15%) of the number of shares of Common Stock issuable upon conversion of the Series A Convertible Preferred then held by such holder on the 24-month anniversary of the Series A Effective Date, and (iii) a number of shares of Common Stock equal to twenty percent (20%) of the shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock then held by such holder on the 36-month anniversary of the Series A Effective Date. The Company accounted for the dividend as deemed dividend, during the nine months ended September 30, 2021 a total amount of $1,520 was recorded.

On February 1, 2021, the Company entered into securities purchase agreements with institutional accredited investors relating to an offering with respect to the sale of an aggregate of 3,278,688 shares of Common Stock, at a purchase price of $21.35 per share. The aggregate gross proceeds were approximately $70,000 ($64,877, net of issuance expenses).

~~During the nine months ended September 30, 2021, options were exercised into 40,545 shares of Common Stock, with aggregate gross proceeds of approximately $256.~~

no adjustment related to instrument specific credit risk was required.

~~F-18~~F-16

Table of Contents

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.)

Warrant Liability

The fair value of the warrant liability is recognized in connection with the Company’s Loan agreement with the Lender and with respect to the Initial Commitment Amount only (Note 7). The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrant liability, which is reported within non-current liabilities on the consolidated balance sheets, is estimated by the Company at each reporting date based, in part, on the results of third-party valuations, which are prepared based on significant inputs that are generally determined based on relative value analyses. The warrant liability is measured based on the Monte-Carlo simulation valuation technique, in order to predict the probability of different outcomes that rely on repeated random variables.

The fair value of the warrant liability was estimated using a Monte-Carlo simulation valuation technique, with the following significant unobservable inputs (Level 3):


		June 9,		June 30,
		2022		2022
Stock price	$	7.45	$	6.14
Exercise price		6.62		6.62
Expected term (in years)		7.00		6.94
Volatility		148.8%		148.5%
Dividend rate		-		-
Risk-free interest rate		3.13%		3.16%

The following tables present the summary of the changes in the fair value of our Level 3 financial instruments:


	Long-Term Loan
Balance as of January 1, 2022	$	—
Issuance of Loan		23,070
Change in fair value		(9)

Balance as of June 30, 2022	$	23,061


	Warrant Liability
Balance as of January 1, 2022	$	—
Issuance of warrant liability		1,930
Change in fair value		(342)

Balance as of June 30, 2022	$	1,588


	FCA
Balance as of January 1, 2022	$	—
FCA		607
Change in fair value		—

Balance as of June 30, 2022	$	607

F-17

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 7: - LONG TERM DEBT

Loan Facility

On June 9, 2022 the Company entered into the Credit Agreement with the Lender. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million, of which $25 million, representing the Initial Commitment Amount, was made available on the closing date and up to $25 million, representing the Delayed Draw Commitment Amount, may be made available on or prior to June 30, 2023, subject to certain revenue requirements. On June 9, 2022, the Company closed on the Initial Commitment Amount, less certain fees and expenses payable to or on behalf of the Lender.

All obligations under the Credit Agreement are guaranteed by all of the Company’s wholly owned subsidiaries other than Dario Health Services Private Limited. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the Company's and each guarantor's assets by a Pledge and Security Agreement, dated June 9, 2022 (the “Pledge and Security Agreement”). If, until the maturity date of the Loan Facility, the Company’s net revenue does not equal or exceed the applicable amount for such period as set in the Credit Agreement, then the Company shall repay in equal monthly installments the outstanding principal amount of the Loan Facility, together with a repayment premium and other fees. The Company shall repay amounts outstanding under the Loan Facility in full immediately upon an acceleration as a result of an event of default as set forth in the Credit Agreement, together with a repayment premium and other fees.

During the term of the Loan Facility, interest payable in cash by the Company shall accrue on any outstanding balance due under the Loan Facility at a rate per annum equal to the higher of (x) the adjusted SOFR rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 0.50% plus, in either case, 9.50%. During an event of default, any outstanding amount under the Loan Facility will bear interest at a rate of 5.00% in excess of the otherwise applicable rate of interest.

The Credit Agreement contains customary events of default, including with respect to non-payment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe

covenants; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key person events and change of control.

Each of the Credit Agreement and a Pledge and Security Agreement also contain a number of customary representations, warranties and covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material documents; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements. In addition, the Company will be required to maintain at least $10 million of unrestricted cash and cash equivalents at all times.

F-18

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 7: - LONG TERM DEBT (Cont.)

On the closing date of the Credit Agreement, and with respect to the Initial Commitment Amount only, the Company agreed to issue the Lender a warrant (the “Warrant”) to purchase up to 226,586 shares of the Company’s common stock, at an exercise price of $6.62 per share, which shall have a term of 7 years from the issuance date. The Warrant contains customary share adjustment provisions, as well as weighted average price protection in certain circumstances but in no event will the exercise price of the Warrant be adjusted to a price less than $4.00 per share. In the event the Company is eligible to draw the Delayed Draw Commitment Amount, the Company agreed to issue the Lender an additional warrant (the “Additional Warrant”), with a term of 7 years from the issuance date, to purchase up to 6% of the Delayed Draw Commitment Amount based on a 10 day volume weighted average price of the Company’s common stock (the “Volume Weighted Average Price”) with an exercise price equal to the Volume Weighted Average Price.

The Company concluded that the Credit Agreement includes three legally detachable and separately exercisable freestanding financial instruments: the Initial Commitment Amount, the warrants, and the right to receive the Delayed Draw Commitment Amount, which we refer to as the "Financial Commitment Asset" or "FCA".

The Company has concluded that the warrants are not indexed to the Company's own stock and should be recorded as a liability measured at fair value with changes in fair value recognized in earnings.

The Company has also concluded that the FCA is not indexed to the Company's own stock and should be recorded as an asset, measured at fair value with changes in fair value recognized in earnings. The FCA is presented within other accounts receivable on the interim consolidated balance sheets.

The Company elected to account for the Initial Commitment Amount under the fair value option in accordance with ASC 825, “Financial Instruments.” Under the fair value option, changes in fair value are recorded in earnings except for fair value adjustments related to instrument specific credit risk, which are recorded as other comprehensive income or loss.

During the six-month period ended on June 30, 2022, the Company recognized $351 of remeasurement income related to the Initial Commitment Amount, which were included as part of financial expenses (income) in the Company's statements comprehensive loss. During the six-month period ended on June 30, 2022, the Company did not recognize any instrument specific credit risk fair value adjustment.

NOTE 8: - COMMITMENTS AND CONTINGENT LIABILITIES

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.

Royalties:

The company has a liability to pay future royalties to the Israeli Innovation Authority (the “IIA”) for participated in programs sponsored bythe Israeli government for the support of research and development activities. The Company is obligated to pay royalties to the IIA, amounting to 3% of thesales of the products and other related revenues (based on the US dollar) generated from such projects, up to 100%of the grants received. Royalty payment obligations also bear interest at the LIBOR rate. The obligation to paythese royalties is contingent on actual sales of the products and in the absence of suchsales, 0 payment isrequired.

F-19

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 9: - STOCKHOLDERS’ EQUITY

On January 4, 2022, out of the pre-funded warrants that were issued in May 2019, 81,233 were exercised on a cashless basis into 81,221 shares of the Company’s common stock.As of June 30, 2022, the Company’s total outstanding prefunded warrants were exercisable into 1,769,794 shares of common stock.

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 4,674,454 shares of the Company’s common stock, and pre-funded warrants to purchase an aggregate of 667,559 shares of the Company’s common stock at an exercise price of $0.0001 per share, at a purchase price of $7.49 per share (or share equivalent). The aggregate gross proceeds were approximately $40,000 ($38,023, net of issuance expenses).

During the six-month ended June 30, 2022, the Company’s Compensation Committee of the Board of Directors approved the grant of 24,191 shares of the Company’s common stock to employees of the Company, and the grant of 1,018,550 restricted shares of the Company’s common stock to employees and consultants. The shares vest over a period of three years commencing on the respective grant dates. The Compensation Committee also approved the grant of options to purchase up to 719,050 shares of the Company’s common stock to employees and a consultant of the Company, at exercise prices between $5.46 and $8.10 per share. The stock options vest over a three-year period commencing on the respective grant dates. The options have a ten-year term and were issued under the 2020 Equity Incentive Plan, as amended (the “2020 Plan”).

In February 2021, the Board of Directors authorized the Company to issue warrants to purchase up to 400,000, shares of Common Stock, to a certain consultant of the Company, at a purchase price of $25.00. During the six-month ended June 30, 2022, the Company recorded compensation expense for this certain service provider in the amount of $863.

In July 2021, the Compensation Committee authorized the Company to issue warrants to purchase 30,000 shares of Common Stock, to certain consultants of the Company, with an exercise price of $23.30 per share, and warrants to purchase 83,948 shares of the Company’s common stock with an exercise price of $16.06 per share. Of these warrants, warrants to purchase 35,000 shares of the Company’s common stock shall vest over a 48-month period and warrants to purchase 48,948 shares of the Company’s common stock are subjected to certain performance terms. During the six-month ended June 30, 2022 the Company recorded compensation expense for this certain service provider in the amount of $22.

In May and June 2022, the Compensation Committee authorized the Company to grant warrants to purchase up to 70,000, and 175,000 shares of the Company’s common stock which shall vest over 12 months and 24 months period, respectively, to certain consultants of the Company, at a purchase price of $6.45 and $7.20, respectively. During the six-month ended June 30, 2022, the Company recorded compensation expense for those certain service providers in the amount of $53.

On June 8, 2022, the Compensation Committee authorized the Company to redeem 17,957 shares of restricted stock held by a certain officer, in compliance with Rule 16b-3 promulgated by the SEC, The redemption is part of previously granted 91,652 and 20,000 shares of restricted stock granted in January and July 2021, in exchange for the aggregate redemption price equal to the withholding tax obligation in the amount of $170.

During the six-month ended June 30, 2022, certain series A Convertible Preferred Stockholders converted 1,130 shares of various classes of the Company’s A Convertible Preferred stock into 277,687 shares of Common Stock.

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 9: - STOCKHOLDERS' EQUITY (Cont.)

g.i.

During the six-month ended June 30, 2022, 61,730 shares of the Company’s common stock were issued as dividend to certain Series A Convertible Preferred stockholders upon conversion of such shares.

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 the Company’s 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 1 share of Common Stock. The 2012 Plan has expired.

On October 14, 2020, the Company’s stockholders approved the 2020 Plan and the immediate reservation of 900,000 shares under the 2020 Plan for the remainder of the 2020 fiscal year. Under the 2020 Plan, options to purchase shares of the Company’s common stock may be granted to employees and non-employees of the Company or any affiliate, each option granted can be exercised to 1 share of Common Stock.

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 1,339,624 shares, from 2,528,890 to 3,868,514.

On April 23, 2022, the Company released 56,788 holdback shares of the Company’s common stock to certain employee of the Company. The holdback release was part of a separation agreement with the employee, pursuant to which the Company waived the lock-up period.

F-21

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 9: - STOCKHOLDERS' EQUITY (Cont.)

Transactions related to the grant of options to employees, directors, and non-employees under the above plans during the ~~nine-months~~six-months period ended ~~September~~June 30, ~~2021,~~2022, were as follows:


			Weighted
		Weighted	average				Weighted
		average	remaining	Aggregate		Weighted	average
		exercise	contractual	Intrinsic		average	remaining	Aggregate
	Number of	price	life	value		exercise	contractual	Intrinsic
	options	$	Years	$	Number of	price	life	value
					options	$	Years	$
Options outstanding at beginning of period	973,575	17.56	4.99	5,510	1,878,168	18.13	6.96	3,861
Options granted	905,573	20.28	-	-	719,050	7.14	—	—
Options exercised	(40,545)	6.32	-	-		—	—	—
Options expired	(46,900)	49.33	-	-	(78,692)	17.47	—	—
Options forfeited	(52,195)	16.93	-	-	(209,098)	13.91	—	—

Options outstanding at end of period	1,739,508	18.40	6.87	4,518	2,309,428	15.12	7.39	253

Options vested and expected to vest at end of period	1,647,018	18.51	6.84	4,324	2,149,618	15.23	7.35	245

Exercisable at end of period	372,630	32.41	4.65	4,070	842,507	20.07	5.54	206

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 June 30, 2022. This amount is impacted by the changes in the fair market value of the Common Stock.

Transactions related to the grant of restricted shares to employees, directors, and non-employees under the above plans during the ~~nine-months~~six-months period ended ~~September~~June 30, ~~2021,~~2022, were as follows:


								Number of
								Restricted shares

Restricted shares outstanding at beginning of period								-1,094,627
Restricted shares granted								~~1,096,743~~2,322,548
Restricted shares forfeited								~~(3,206)~~(62,172)

Restricted shares outstanding at end of period								~~1,093,537~~3,355,003

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 third quarter of 2021 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 September 30, 2021. This amount is impacted by the changes in the fair market value of the Common Stock.

As of ~~September~~June 30, ~~2021,~~2022, the total amount of unrecognized stock-based compensation expense was approximately ~~$28,459~~$32,966 which will be recognized over a weighted average period of ~~1.2~~1.3 years.

~~F-19~~F-22

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 8:9: - STOCKHOLDERS' EQUITY (Cont.)

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										Three months ended
	September 30,										June 30,
	2021					2020					2022				2021

Volatility	93.34	%	-	96.01	%	94.00	%	‑	99.89	%	91.42	-	92.04	%	95.84	-	95.84	%
Risk-free interest rate	0.01	%	-	0.01	%	0.19	%	‑	0.25	%	2.89	-	3.00	%	0.01	-	0.01	%
Dividend yield	-			-	%				-	%	-		-	%	-		-	%
Expected life (years)	5.25		-	5.88		3.5		‑	4.5		5.81	-	6.00		5.81	-	5.81

The total compensation cost related to all of the Company’s stock-based awards recognized during the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021 was comprised as follows:


	Nine months ended				Six months ended
	September 30,				June 30,
	2021		2020		2022		2021

	Unaudited				Unaudited
Cost of revenues	$	63	$	24	$	48	$	37
Research and development		2,480		591		2,048		1,064
Sales and marketing		4,007		2,267		3,132		2,204
General and administrative		12,120		6,106		3,744		6,595

Total stock-based compensation expenses	$	18,670	$	8,988	$	8,972	$	9,900

NOTE 9:10: - FINANCIAL EXPENSES (INCOME), NET


	Nine months ended				Six months ended
	September 30,				June 30,
	2021		2020		2022		2021

	Unaudited				Unaudited
Bank charges	$	60	$	42	$	45	$	56
Foreign currency adjustments (income) losses, net		322		(382)
Foreign currency adjustments expenses, net						138		369
Interest income		(36)		(51)		(21)		(24)
Loan Interest Expenses						181		—
Revaluation of long-term loan						(9)		—
Revaluation of warrant liability						(342)		—
Debt issuance cost						724		—

Total financial (income) losses, net	$	346	$	(391)
Total Financial expenses (income), net					$	716	$	401

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DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 11: - BASIC AND DILUTED NET LOSS PER COMMON STOCK

Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted net income per share is computed based on the weighted average number of shares of common stock outstanding during the period, plus potential dilutive shares (deriving from options, RSUs, and convertible notes) considered outstanding during the period, in accordance with ASC 260-10, as determined under the if-converted method.

The total number of potential shares of common stock related to the outstanding options, warrant and preferred shares excluded from the calculations of diluted net loss per share due to their anti-dilutive effect was 7,198,771 and 5,746,978 for the six months ended June 30, 2022, and 2021, respectively.

The following table sets forth the computation of the Company’s basic and diluted net loss per ordinary share:


	Six months ended
	June 30,
	2022		2021

	Unaudited
Net loss attributable to common stock shareholders used in computing basic net loss per share	$	31,267	$	28,608

Weighted average number of common stock used in computing basic loss per share		21,925,089		15,460,758

Basic net loss per common stock	$	1.43	$	1.85

NOTE ~~10:~~12: - SUBSEQUENT EVENTS

~~In October 2021,~~On July 13, 2022, the ~~Compensation Committee of the Board of Directors approved a grant of 41,074 restricted shares of Common Stock to certain consultants and service providers.~~

In October 2021, the Compensation Committee of the Board of Directors approved a grant of 10,500 shares of Common Stock to certain employees, which were issued under the 2020 Plan. In addition, the Compensation Committee approved the grant of options to purchase up to 58,500 shares of Common Stock at exercise prices of $12.23 and $12.77 per share.

In April 2020, the Compensation Committee approved a monthly grant of shares of Common Stock, equal to up to $16.00 per share, of restricted shares to a certain service provider per month, to be granted monthly during the period that the certain consulting agreement remains in effect. During the third quarter of 2021, the Company issued a total of 2,139 restricted shares of Common Stock to that certain service provider.

In October 2021, the Compensation Committee approved the grant of 1,810 shares of Common Stock to officers and employees of the Company as consideration for a reduction in or waiver of cash salary owed to such individuals. The shares of Common Stock were issued under the Company’s ~~2012 Plan.~~

In October 2021, the Compensation Committee authorized the Company to issue warrants to purchase 40,000 shares of Common Stock, to certain consultants of the Company, with an exercise price of $25.10 per share.

~~On November 9, 2021, the~~ Compensation Committee of the Board of Directors approved the grant of ~~a non-qualified stock option award to purchase 140,000~~131,000 restricted shares of the Company’s ~~Common Stock outside~~common stock to employees and consultants. The shares vest over a period of three years commencing on the respective grant dates. The Compensation Committee also approved the grant of options to purchase up to 94,000 shares of the Company’s ~~existing equity incentive plans, pursuant~~common stock to ~~Nasdaq Listing Rule 5635(c)(4), in connection with~~employees and a consultant of the ~~employment of~~Company, at exercise prices between $6.12 and $6.24 per share. The options vest over a ~~Chief Commercial Officer.~~three-year period commencing on the respective grant dates and have a ten-year term. The restricted shares and the options were issued under the 2020 Plan.

g.b.

In ~~November 2021, certain Series A Convertible Preferred Stockholders converted 50~~July and August 2022, the Company issued a total of 5,622 restricted shares ~~of various classes~~ of the Company’s ~~Series A Convertible Preferred Stock into 12,346 shares of Common Stock.~~common stock to a certain service provider. These issuances were made under the compensation committee approval, dated April 2020.

On August 4, 2022, the Company and a National Health Plan entered into that certain Amendment No. 1 to Master Service Agreement (the “Amendment”), amending that certain Master Service Agreement dated as of October 1, 2021, between the parties (the “MSA”). The MSA, as amended, provides a framework for the Company’s provision of services to the National Health Plan and its affiliates. Concurrently with the Amendment and pursuant to the MSA, on August 4, 2022, the Company and the National Health Plan entered into that certain Statement of Work No. 1 (the “SOW”), pursuant to which the Company will deliver and implement a customized, white-labeled instance of the Company’s web- and app-based digital behavioral health navigation platform.

~~F-21~~F-24

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the fiscal year ended December 31, ~~2020~~2021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The following financial data in this narrative are expressed in thousands, except for stock and stock data or as otherwise noted.

We are ~~a leading global Digital Therapeutics (“DTx”) company~~ revolutionizing ~~the way~~how people with chronic conditions manage their health ~~across~~through the ~~chronic condition spectrum to live~~innovation of a better and healthier life. Our mission is to transform how affected individuals manage their health and chronic conditions by empowering our customers to easily manage their conditions and take steps to improve their overall health. Most chronic conditions are driven by personal behaviors and the individual actions that are or are not taken.new category of digital health: Digital Therapeutics as a Service (DTaaS). We believe that ~~changing these behaviors can dramatically improve~~ our customers’ overall health and substantially reduce unnecessary health spending. However, behavioral change and habit formation are difficult, especially in managing chronic disease and related conditions. Ourinnovative approach to digital therapeutics ~~endeavor~~disrupts the traditional provider-centered system of health care delivery by offering user-centric care that is continuous, customized and multi-condition. Our solutions combine the power of technologies and behavior science to ~~produce lasting behavior changes~~make better health accessible, affordable, and easy for all by solving for what people need, when and where they want it, with hyper-personalized care that is always connected – to services, devices, and people – and delivered continuously. This is how we deliver meaningful and sustainable results that result in ~~our customers by applying~~measurable value for all stakeholders, supporting the full transformation of health care into a ~~novel combination of artificial intelligence (“AI”)-driven dynamic personalization~~more effective and behavioral science at scale. This allows us to engage and support our customers, and offer them a complete virtual care solution, ideally resulting in improved health outcomes and reduced total cost of care.affordable ecosystem.

~~Our principal operating subsidiary, LabStyle Innovation Ltd., is an Israeli company with its headquarters in Caesarea, Israel.~~ We ~~were formed on August 11, 2011,~~began as a ~~Delaware corporation with the name LabStyle Innovations Corp. On July 28, 2016, we changed our name to DarioHealth Corp. We began our sales in the~~ direct-to-consumer ~~space,~~digital therapeutics company, solving first for ~~what we deemed~~ the ~~most difficult problems:~~problem of how to engage users and support behavior change to improve clinical outcomes in diabetes. ~~Our most developed AI tools leverage~~In the last two years, we made two strategic shifts to transform our business: first, we significantly expanded commercial growth opportunities by adding a business-to-business product (B2B) and a commercial team alongside the legacy direct-to-consumer ~~experience~~channel. In addition, we began targeting three traditional health business verticals – health plans, employers, and provider groups. As a result, we believe that our new B2B business now leverages our consumer-centric capabilities as a competitive advantage.

Second, we transitioned from ~~over 150,000 members~~a single condition platform to ~~drive superior engagement and outcomes. In early 2020, we broadened our~~a multi-condition platform, creating a robust suite of solutions to ~~include other medical~~address the five most commonly co-occurring and expensive chronic conditions, ~~in addition to diabetes, and to serve business customers who seek to improve~~which are also representative of some of the most sought-after digital health ~~of their stakeholders. Presently, we have deployed solutions for~~solutions: diabetes, hypertension, pre-diabetes/weight management, musculoskeletal and ~~pre-diabetes,~~behavioral health. After building weight loss and ~~through our~~hypertension management into the legacy diabetes platform, we made three acquisitions in order to expand into musculoskeletal and behavioral health.

Our acquisition of Upright Technologies Ltd. (“Upright”)~~, we now offer solutions for~~ in early 2021 and Physimax in early 2022 enables our musculoskeletal (“MSK”) ~~conditions. We are currently delivering B2B2C~~ solutions ~~for providers, employers, and pharmaceutical companies, and we plan to develop a full-risk~~– “Dario Move.”, our digital behavioral health ~~plan business, which we expect will provide our AI driven, remote patient monitoring (“RPM”) and coaching for a variety~~capabilities were secured through the acquisition of ~~chronic conditions, across a range of customer product lines in 2021.~~

Upright, which we acquired on February 1, 2021, is a leading digital MSK health company focused on preventing and treating the most common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech. Upright has over 90,000 active users and its clinically validated solution is recommended by more than 500 clinics worldwide.

~~On June 7, 2021, we acquired to~~ PsyInnovations, Inc. (“WayForward”), a behavioral digital health platform with AI-enabled screening to triage and navigate members to specific interventions, digital cognitive behavioral therapy (“CBT”), self-directed care, coaching and access to in-person and telehealth provider visits.(dba WayForward) in mid-2021.

We ~~offer~~believe a ~~customized, user-centric, modular~~key success factor is our ability to integrate multiple chronic conditions into a single digital therapeutics’ platform, ~~integrating digital therapeutics, coaching, devices,~~the “Dario One.” During 2021 we successfully won contracts in all three B2B business segments, including several contracts for Dario One, creating a compounding effect as more members enroll and ~~care providers. Our suite~~many in multiple programs. The combination of ~~offerings includes Dario Tools, which are devices~~moving from direct-to-consumer to the enterprise business market (B2B2C) and expanding from a single condition to multi condition platform, created multiple commercial growth engines as well as a multiplying impact that ~~integrate with applications~~we believe will improve our financial profile by increasing potential revenue per account and per user.

According to our management’s estimates, based on ~~a user’s smartphone, DarioEngage, a population health management platform (“DarioEngage”),~~our current cash on hand and further based on our budget and the ~~Dario Loop,~~assumption that initial commercial sales will commence during our ~~AI-driven journey engine.~~anticipated timeframes, we believe that we will have sufficient resources to continue our activities through 2023.

Since we might be unable to generate sufficient revenue or cash flow to fund our operations for the foreseeable future, we will need to seek additional equity or debt financing to provide the capital required to maintain or expand our

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~~In addition,~~operations. We may also need additional funding for developing products and services, increasing our sales and marketing capabilities, and promoting brand identity, as well as for working capital requirements and other operating and general corporate purposes. Moreover, the regulatory compliance arising out of being a publicly registered company has dramatically increased our costs.

Except as otherwise disclosed herein, we currently do not have ~~continued to carefully monitor the COVID-19 pandemic and its impact on our business. In that regard, we have continued to sell our Dario~~^TM ~~Blood Sugar Monitor and have not experienced disruptions~~any arrangements or credit facilities in ~~our supply chains. With respect to our DTx platform, we have observed that some of our business-to-business prospective partners have been addressing their business needs~~place as a ~~result~~source of ~~the COVID-19 pandemic, which has resulted in a slowdown of negotiations~~funds, and ~~discussions with some of these potential partners. In addition,~~there can be no assurance that we ~~have also seen an increase in interest from other business-to-business prospective partners in our DTx platform, as certain parties are seeking tele-health products.~~

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. While we are not able at this time to estimate the impact of the COVID-19 pandemic on our financial and operational results, it could be material.

Management believes that the proceeds from the recent subscription agreement combined with our cash on hand are sufficient to meet our obligations as they come due for at least a period of twelve months from the date of the issuance of these unaudited condensed consolidated financial statements. As a result, the Company has resolved to remove the going concern note from its financial statements. There are no assurances, however, that the Company will be able to ~~obtain an adequate level~~raise sufficient additional capital on acceptable terms, or at all. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back or eliminate the development of business opportunities and our operations and financial ~~resources~~condition may be materially adversely affected.

If we raise additional capital by issuing equity securities, the percentage ownership of our existing stockholders may be reduced, and accordingly these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. Given our need for cash and that equity raising is the most common type of fundraising for companies like ours, the risk of dilution is particularly significant for stockholders of our company.

Debt financing, if obtained, may involve agreements that include liens on our assets, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets be provided as a security for such debt. Debt financing would also be required to be repaid regardless of our operating results.

If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are ~~required for~~not favorable to us.

Funding from any source may be unavailable to us on acceptable terms, or at all. If we do not have sufficient capital to fund our operations and expenses, we may not be able to achieve or maintain competitiveness, which could lead to the ~~long-term development~~failure of our business and ~~commercialization~~the loss of ~~its product offering.~~your investment.

Recent Developments

~~People One~~Employer Contracts and Health Providers

In ~~August 2021,~~May 2022, we announced ~~that~~two new contracts to provide digital therapeutics solutions to a national employer and a provider, both of which are expected to begin enrolling members in the third quarter of 2022.

In June 2022, we announced a new contract to deliver our digital behavioral health solution ~~was~~ ~~selected by regional primary care~~for a leading provider ~~PeopleOne Health to be the digital behavioral health solution~~ of ~~choice~~integrated technology solutions for ~~patients beginning in September 2021.~~

~~Employer Contracts~~

~~In September 2021, we announced that our~~ ~~digital behavioral health solution was selected by~~ ~~a casino resort company in California, which~~financial professionals. The new account is expected to ~~contribute revenue beginning~~launch in the ~~fourth~~third quarter of ~~2021.~~ 2022.

In ~~addition, in September 2021,~~July 2022, we ~~also~~ announced ~~that we~~ ~~entered into an agreement~~a new contract to ~~provide~~deliver our full suite of ~~digital therapeutics for diabetes, hypertension and pre-diabetes to a Northeast regional employer, which is expected to contribute revenue beginning in the first quarter of 2022.~~

~~Agreement with Leading National Health Plan~~

In October 2021, we announced that we entered into an agreement with one of the largest U.S. national health plans to offer its self-insured employer customers the Dario digital behavioral health solution as part of its behavioral health offering. Initial members are expected on the platform in the fourth fiscal quarter of 2021, with additional rollout anticipated over the course of 2022. Dario will be paid a monthly fee for members that have access to the platform. We believe that the agreement has the potential to generate millions of dollars in annual revenue.

~~Agreement with U.S. National Employer~~

~~In October 2021, we announced that we entered into a contract with a U.S. national employer for our full multi-condition suite of~~integrated chronic condition management solutions including diabetes, pre-diabetes, hypertension, musculoskeletal, behavioral health, and digital employee assistance programs. Enrollment of our multi-condition suite of chronic condition management solutionsto a national employer. The new account is expected to ~~begin~~launch in the ~~first~~third quarter of ~~2022, consistent with the employer’s benefit year.~~

2022.

~~Virgin Pulse Network~~Presentation of New Studies

In ~~October 2021,~~June 2022, we announced ~~that we partnered~~three new research studies presented at the American Diabetes Association's 82nd Scientific Sessions being held June 3rd to 7th, 2022 in New Orleans, Louisiana. Two of the new studies add to our growing body of evidence in support of an integrated approach to managing multiple chronic conditions by examining the impact of our solution on users with ~~Virgin Pulse,~~ co-occurring physical and mental conditions. The third study analyzed the ~~leading global provider~~impact across the ethnicities of ~~digital~~users living with Type 2 diabetes.

More than two thirds of people living with Type 2 diabetes also report high blood pressure, and ~~live health~~the bi-directional impacts are well-documented. Our research provides new data to support the co-management of these conditions in a single solution. The study examined a group of users with diabetes, and ~~wellbeing solutions, making our next-gen digital therapeutic~~stage 1 and ~~health solutions available~~above hypertension, to understand the impact of using a single solution on both conditions, and results showed significant improvements for ~~contract through Virgin Pulse to employers~~both hypertension and ~~health plans worldwide.~~diabetes after six months: (i) two thirds of users improved their systolic blood pressure by 13 mmHg and diastolic by

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8 mmHg, (ii) 38.7% lowered their hypertension by one stage and (iii) a subgroup of users with high-risk Type 2 diabetes reduced average blood glucose readings by 15%. The research demonstrates that our integrated approach to managing chronic conditions in one solution offers significant benefits for users with co-occurring conditions.

Diabetes is closely linked with stress and symptoms of depression, and conversely, the presence of depression can lead to poor outcomes in people living with diabetes. We examined the outcomes of users living with high-risk diabetes and self-reported stress and/or depression and found that users reduced their average blood glucose by 13% after one year. This study indicates that our holistic support focused on behavior change can positively impact outcomes for users living with diabetes and depression and/or stress.

A third study examined the impact on blood sugar readings in users with high-risk Type 2 diabetes across ethnicities as reported in our app: White, Black, Latino or Asian. The research found that average blood glucose readings were significantly reduced by 14% for White users and 15% for Black, Latino and Asian users. The evidence demonstrates the ability of our solution to improve self-care across diverse populations.

~~RPM Contracts~~OrbiMed Credit Facility

On June 9, 2022 (the “Closing Date”), we entered into a credit agreement (the “Credit Agreement”) with OrbiMed Royalty and Credit Opportunities III, LP (the “Lender”). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million, of which $25 million was made available on the Closing Date (the “Initial Commitment Amount”) and up to $25 million may be made available on or prior to June 30, 2023, subject to certain revenue requirements (the “Delayed Draw Commitment Amount”). On the Closing Date, we closed on the Initial Commitment Amount, less certain fees and expenses.

On the Closing Date, and with respect to the Initial Commitment Amount only, the Company agreed to issue the Lender a warrant to purchase up to 226,586 shares of its common stock at an exercise price of $6.62 per share, which has a term of 7 years from the issuance date. The warrant contains customary share adjustment provisions, as well as weighted average price protection in certain circumstances but in no event will the exercise price of the warrant be adjusted to a price less than $4.00 per share. In the event we are eligible to draw the Delayed Draw Commitment Amount, we agreed to issue the Lender an additional warrant (the “Additional Warrant”) with a term of 7 years from the issuance date, to purchase up to 6% of the Delayed Draw Commitment Amount based on a 10-day volume weighted average price of the Company’s common stock (the “Volume Weighted Average Price”) with an exercise price equal to the Volume Weighted Average Price.

On the Closing Date, we also executed a Registration Rights Agreement with the Lender pursuant to we agreed to file a registration statement with the SEC to register the shares of the Company’s common stock underlying the Warrant and the Additional Warrant.

WayForward Amendment

~~In November~~As part of the acquisition of WayForward on June 7, 2021, the consideration paid included an earn-out payable in up to 237,076 restricted shares of Common Stock. On July 7, 2022, we ~~announced that we~~ entered into ~~contracts~~an Amendment to Agreement and Plan of Merger with ~~two prominent regional providers in Hawaii and Georgia for our RPM services.~~

~~Agreement with Leading National Benefits Administrative Platform~~the representatives of the former equity holders of WayForward, pursuant to which we agreed to reduce the earn-out threshold of revenue derived from WayForward products from $5 million to $3 million.

~~In November 2021, we announced that we~~ entered into a new strategic partnership with a leading national benefits administrative platform to provide our full suite of integrated digital therapeutic and health solutions to a wide range of employers, beginning in January of 2022.

~~Critical Accounting Policies~~

Please see Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, reference is made to Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 31, 2020 (filed on March 9, 2021) with respect to our Critical Accounting Policies. There have been no other material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2020.

Results of Operations

Comparison of the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (dollar amounts in thousands)

Revenues

Revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, amounted to ~~$5,629~~$6,183 and ~~$14,485,~~$14,242 respectively, compared to revenues of ~~$2,042~~$5,261 and ~~$5,496~~$8,856 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, representing an increase of 17168% and 164%61% respectively. The increase in revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, is due to an increase in ~~our direct to consumer (“D2C”)~~revenues from sales in the nine months ended September 30, 2021, and from the consolidation of Upright and WayForward revenues. The proforma revenues for the nine months ended September 30, 2021, assuming that the closing of the acquisition of Upright and WayForward would have taken place on the first day of the 2021 fiscal year would have amounted to $15,927.

~~Revenues were derived mainly from the sales of Dario’s products and our membership offering through D2C acquisitions located mainly in the United States and Australia,~~ through our ~~on-line store and through distributors. Revenues also include the consolidated revenues~~commercial channel.

Table of ~~Upright and WayForward for the periods of February 2, 2021, and June~~ 8Contents~~, 2021 respectively, through September 30, 2021.~~

Cost of Revenues

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we recorded cost of revenues in the amount of ~~$4,~~$5,~~803~~045 and $1$9,1,~~070~~119 respectively, compared to costs related to revenues of ~~$1,493~~$3,753 and ~~$3,532~~ $6,267 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, representing an increase of 22234% and 24136% respectively. The increase in cost of revenues in the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, are~~2021, was mainly ~~a result of~~due to higher costs related to the ~~increase in the sales of our products and the amortization~~shipping of inventory ~~step up~~ and amortization of acquired technology in the amount of ~~$1,706~~$1,094 and $3$2,026 ,~~324~~respectively, ~~as a result of~~compared to $720 and $1,095 for the ~~acquisition of Upright~~three and ~~WayForward.~~six months ended June 30, 2021.

Cost of revenues consist mainly of cost of device production, employees’ salaries and related overhead costs, depreciation of production line and related cost of equipment used in production, amortization of technologies, hosting costs, shipping and handling costs and inventory write-downs.

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Gross Profit

Gross profit for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, amounted to $~~826~~1 (14.7%,138 (18.4% of revenues) and ~~$3,415~~ (23~~.6%~~$5,123 (36% of revenues) respectively compared to ~~$549 (26.9%~~$1,508 (28.7% of revenues) and ~~$1,964 (35.7%~~$2,589 (29.2% of revenues) during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The decrease in gross profit as a percentage of revenue for the three month and ~~nine~~the increase for the six months ended ~~September~~June 30, ~~2021,~~2022, compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, is ~~mainly as a result of~~due to the revenues derived from sales through our commercial channel, partially offset by amortization of ~~inventory step up and~~ acquired technology ~~following~~amounting to$1,094 and $2,026 for the ~~acquisition of Upright~~three and ~~WayForward amounting~~six months ended June 30, 2022 respectively compared to ~~$1,706~~$720 and $3,~~324~~ ~~respectively.~~$1,095 during the three and six months ended June 30, 2021. Gross profit for the three and six months ended June 30, 2022, excluding these amortizations ~~was $2,532 (45%~~were $2,232 (36.1% of revenues) and ~~$6,739 (46.5%~~$7,149 (50.2% of revenues). compared to $2,228 (42.3% of revenues) and $3,684 (41.6% of revenues) during the three and six months ended June 30, 2021.

Research and Development Expenses

Our research and development expenses increased by $4~~,552,~~$395, or ~~477%~~10.6%, to ~~$5,506~~$4,137 for the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$954~~$3,742 for the three months ended ~~September~~June 30, ~~2020,~~2021, and increased by ~~$8,893,~~$3,667, or ~~295%~~57.3%, to ~~$11,903~~$10,064 for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$3,010~~$6,397 for the ~~nine~~six months ended ~~September~~June 30, ~~2020. These increases were~~2021. This increase was mainly ~~due to the consolidation~~a result of ~~Upright~~expanding our research and ~~WayForward during the nine months ended September 30, 2021.~~development activities into additional product offerings. Our research and development expenses, excluding stock-based compensation and depreciation, for the ~~nine~~three and six months ended ~~September~~June 30, ~~2021~~2022, were ~~$9,372~~$3,567 and $7,795 compared to ~~$2,401~~$3,075 and $5,301 for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$6,971.~~$485 and $2,832 respectively.

Research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, expenses related toto: (i) our ~~software application~~solutions including our Dario Smart Diabetes Management Solution, DarioEngage platform, Dario Move solution and ~~related devices,~~our digital behavioral health solution, (ii) labor contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development, ~~Dario’s~~(iv) clinical trials performed in the United States to satisfy the FDA product approval requirements and (v) facilities expenses associated with and allocated to research and development activities. We view research and development as a principal strategic investment and have continued our commitment to invest in this area. We will need to continue to invest in research and development and such expenses may increase in the future to keep pace with new trends in our industry.

Sales and Marketing Expenses

Our sales and marketing expenses ~~increased~~decreased by ~~$7,061,~~$351, or ~~194%~~3.6%, to ~~$10,696~~$9,297 for the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$3,635~~$9,648 for the three months ended ~~September~~June 30, ~~2020,~~2021, and increased by ~~$17,142,~~$2,052, or ~~166%~~12.2%, to ~~$27,476~~$18,832 for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$10,334~~$16,780 for the ~~nine~~six months ended ~~September~~June 30, ~~2020. These increases were~~2021. The increase was mainly due to increases in our stock-based compensation and payroll related ~~digital marketing and the consolidation of Upright and WayForward during the nine months ended September 30, 2021.~~expenses. Our sales and marketing expenses, excluding stock-based compensation and depreciation, for the ~~nine~~three and six months ended ~~September~~June 30, 2022 were $7,553 and $15,396 compared to $8,456 and $14,542 for the three and six months ended June 30, 2021, ~~were $23,378 compared to $8,042 for the nine months ended September 30, 2020, an~~a decrease of $903 and increase of ~~$15,336.~~$854 respectively.

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Sales and marketing expenses consist mainly of payroll expenses, online marketing campaigns of ~~the Dario~~our service offering, and other costs associated with sales and marketing activities, as well as trade show expenses, customer support expenses and marketing consultants and subcontractors.

General and Administrative Expenses

Our general and administrative expenses ~~increased~~decreased by ~~$4,5~~61,$1,062, or ~~178%~~17.4%, to ~~$7,1~~23$5,059 for the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$2,562~~$6,121 for the three months ended ~~September~~June 30, ~~2020,~~2021, and ~~increased~~decreased by ~~$9,4~~06,$2,288, or ~~99%~~19.5% to ~~$18,8~~65$9,454 for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$9,459~~$11,742 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This ~~increase~~decrease was mainly due to ~~increases~~decrease in ~~our stock-based~~share based compensation ~~investor relations, insurance~~ expenses ~~and the costs related with the acquisition of Upright and WayForward~~ during the ~~nine~~three and six months ended ~~September~~June 30, ~~2021.~~2022. Our general and administrative expenses, excluding stock-based compensation, depreciation, acquisition related ~~expenses~~costs and ~~depreciation,~~earn-out remeasurement for the ~~nine~~three and six months ended ~~September~~June 30, ~~2021~~2022 were ~~$5,83~~9$2,290 and $4,929 compared to ~~$3,343~~$1,991 and 4,251 for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$2,49~~6.$299 and $678 respectively.

Our general and administrative expenses consist mainly of payroll and stock-based compensation expenses for management, employees, directors and consultants, legal fees, directors’ and officers’ insurance, patent registration, expenses related to investor relations, as well as our office rent and related expenses.

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Financial ~~(Income)~~ Expenses, net

Our financial ~~income,~~expenses, net for the three months ended ~~September~~June 30, ~~2021, was $55,~~2022, were $672, representing an increase of ~~5.7%,~~$910, compared to financial income of ~~$52~~$238 for the three months ended ~~September~~June 30, ~~2020.~~2021. Our financial expenses, net for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, were ~~$346,~~$716, representing ~~decrease~~increase of ~~188%,~~$315, compared to financial ~~income~~expenses of ~~$391~~$401 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The ~~changes~~increase in our financial ~~income were~~expenses was mainly due to ~~foreign currency translation differences.~~cost related to obtaining the credit facility agreement dated June 9, 2022 and interest expense for the period from June 9, 2022 in the amount of $905 offset by revaluation of the long-term loan and the warrant liability of $351.

Financial ~~(income)~~ expenses, net ~~mainly include~~primarily consists of credit facility interest expense, debt issuance costs, interest income from cash balances, bank charges, ~~interest income,~~ lease liability and foreign currency translation differences.

Net loss

Net loss increased by ~~$15,894~~,$263, or 243%1.5%, to ~~$22,444~~$18,028 for the three months ended ~~September~~June 30, ~~2021,~~2022, compared to a net loss of ~~$6,550~~$17,765 for the three months ended ~~September~~June 30, ~~2020,~~2021, and increased by ~~$34,727~~,$1,213, or ~~170~~%3.7%, to ~~$55,~~$3~~175~~3,944 for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to a net loss of ~~$20,448~~$32,731 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

The increase in net loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, was mainly due to the increase in our operating expenses.

~~Non-GAAP Financial Measures~~

The factors described above resulted in net loss attributable to common stockholders for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, amounted to ~~$22,444~~$18,462 and ~~$55,175,~~$34,829, respectively, compared to net loss attributable to common stockholders of ~~$6,550~~$18,253 and ~~$20,448.~~$33,763.

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) within this Quarterly Report on Form 10-Q, management provides certain non-GAAP financial measures (“NGFM”) of the Company’s financial results, including such amounts captioned: “net loss before interest, taxes, depreciation, and amortization” or “EBITDA”, and “Non-GAAP Adjusted Loss”, as presented herein below. Importantly, we note the NGFM measures captioned “EBITDA” and “Non-GAAP Adjusted Loss” are not recognized terms under U.S. GAAP, and as such, they are not a substitute for, considered superior to, considered separately from, nor as an alternative to, U.S. GAAP and /or the most directly comparable U.S. GAAP financial measures.

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Such NGFM are presented with the intent of providing greater transparency of information used by us in our financial performance analysis and operational decision-making. Additionally, we believe these NGFM provide meaningful information to assist investors, shareholders, and other readers of our unaudited condensed consolidated financial statements, in making comparisons to our historical financial results, and analyzing the underlying financial results of our operations. The NGFM are provided to enhance readers’ overall understanding of our current financial results and to provide further information to enhance the comparability of results between the current year period and the prior year period.

We believe the NGFM provide useful information by isolating certain expenses, gains, and losses, which are not necessarily indicative of our operating financial results and business outlook. In this regard, the presentation of the NGFM herein below, is to help the reader of our unaudited condensed consolidated financial statements to understand the effects of the non-cash impact on our (U.S. GAAP) unaudited condensed consolidated statement of operations of the revaluation of the warrants and the expense related to stock-based compensation, each as discussed herein above.

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A reconciliation to the most directly comparable U.S. GAAP measure to NGFM, as discussed above, is as follows:


	Three Months Ended September 30,						Three Months Ended June 30,
	(in thousands)						(in thousands)
	2021		2020		$ Change		2022		2021		$ Change
Net Loss Reconciliation
Net loss - as reported	$	(22,444)	$	(6,550)	$	(15,894)	$	(18,028)	$	(17,765)	$	(263)

Adjustments
Depreciation and amortization expenses		1,821		48		1,773
Depreciation expense								84		69		15
Inventory step up amortization								—		372		(372)
Amortization of acquired technology and brand								1,125		731		394
Other financial expenses (income), net		(55)		(52)		(3)		672		(238)		910
Income Tax								1		—		1

EBITDA		(20,678)		(6,554)		(14,124)		(16,146)		(16,831)		685

Acquisition costs								—		502		(502)
Earn-out remeasurement								1,391		—		1,391
Stock-based compensation expenses		8,770		1,810		6,960		3,629		5,462		(1,833)
Acquisition costs		-		-		-

Non-GAAP adjusted loss	$	(11,908)	$	(4,744)	$	(7,164)	$	(11,126)	$	(10,867)	$	(259)

Nine Months Ended September 30,

(in thousands)

2021

2020

$ Change
Net Loss Reconciliation






Net loss - as reported

$
(55,175)

$
(20,448)

$
(34,727)

Adjustments






Depreciation and amortization expenses

3,583

140

3,443
Other financial (income) expenses, net

346

(391)

737

EBITDA

(51,246)

(20,699)

(30,547)

Stock-based compensation expenses

18,670

8,988

9,682
Acquisition costs

880

-

880

Non-GAAP adjusted loss

$
(31,696)

$
(11,711)

$
(19,985)

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	Six Months Ended June 30,
	(in thousands)
	2022		2021		$ Change
Net Loss Reconciliation
Net loss - as reported	$	(33,944)	$	(32,731)	$	(1,213)

Adjustments
Depreciation expense		154		133		21
Inventory step up amortization		—		523		(523)
Amortization of acquired technology and brand		2,088		1,106		982
Other financial expenses, net		716		401		315
Income Tax		1		—		1

EBITDA		(30,985)		(30,568)		(417)

Acquisition costs		—		880		(880)
Earn-out remeasurement		939		—		939
Stock-based compensation expenses		8,972		9,900		(928)

Non-GAAP adjusted loss	$	(21,074)	$	(19,788)	$	(1,286)

Liquidity and Capital Resources (amounts in thousands except for share and share amounts)

As of ~~September~~June 30, ~~2021,~~2022, we had approximately ~~$51,331~~$67,949 in cash and cash equivalents compared to ~~$28,590~~$35,808 on December 31, ~~2020.~~2021.

We have experienced cumulative losses of ~~$199,943~~$256,842 from inception (August 11, 2011) through ~~September~~June 30, ~~2021~~2022 and have a stockholders’ equity of ~~$104,439~~$99,652 on ~~September 30, 2021.~~June 31, 2022. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. However, we believe that our sources of liquidity and capital resources will be sufficient to meet our business needs for at least the next twelve months.

Since inception, we have financed our operations primarily through private placements and public offerings of our common stock, warrants to purchase shares of our common stock, ~~and~~ the exercise of existing warrants and options, and credit facility,receiving aggregate net proceeds totaling ~~$189,685~~$251,494 as of ~~September~~June 30, ~~2021.~~

On November 27, 2019, we entered into subscription agreements with accredited investors relating to an offering with respect to the sale of an aggregate of 8,361 shares of newly designated Series A Convertible Preferred Stock and an aggregate of 5,200 shares of newly designated Series A-1 Convertible Preferred Stock, at a purchase price of $1 for each share of Series A Preferred Stock and Series A-1 Preferred Stock, for aggregate gross proceeds to the Company of $13,561.

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The initial conversion price for the Series A and Series A-1 Convertible Preferred Stock to Common Stock is $4.05. The initial closing of the offering took place on November 27, 2019. The Series A and Series A-1 Convertible Preferred Stock issued are convertible into up to 3,349,567 shares of Common Stock. On December 3, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 1,915 shares of newly designated Series A-2 Convertible Preferred Stock, at a purchase price of $1 for each share, for aggregate gross proceeds to the Company of $1,915. The initial conversion price for the Series A-2 Convertible Preferred Stock to Common Stock is $4.28. The Series A-2 Convertible Preferred Stock issued are convertible into up to 448,110 shares of Common Stock. On December 4, 2019, we into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 3,808 shares of newly designated Series A-3 Convertible Preferred Stock, at a purchase price of $1 for each share, for aggregate gross proceeds to the Company of $3,808. The initial conversion price for the Series A-3 Convertible Preferred Stock to Common Stock is $4.98. The Series A-3 Convertible Preferred Stock issued are convertible into up to 765,408 shares of Common Stock. On December 5, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 745 shares of newly designated Series A-4 Convertible Preferred Stock, at a purchase price of $1 for each share, for aggregate gross proceeds to the Company of $745.The initial conversion price for the Series A-4 Convertible Preferred Stock to Common Stock is $5.90. The Series A-4 Convertible Preferred Stock issued are convertible into up to 126,650 shares of Common Stock. On December 19, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 1,346 shares of newly designated Series A-3 Convertible Preferred Stock, at a purchase price of $1 for each share, for aggregate gross proceeds to the Company of $1,346. The initial conversion price for the Series A-3 Convertible Preferred Stock to Common Stock is $4.98. The Series A-3 Convertible Preferred Stock issued are convertible into up to 270,546 shares of Common Stock. The total aggregate gross proceeds of the offering described above, together with gross proceeds from the closing of the offering of Series A Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock, Series A-3 Convertible Preferred Stock and Series A-4 Convertible Preferred Stock was $21,375, and the total amount of Common Stock issuable upon conversion of all the shares of Convertible Preferred Stock is up to 4,960,281 shares of Common Stock. As of November 10, 2020, certain Convertible Preferred Stockholders converted 5,552 shares of various classes of the Company’s A Preferred Stock to 1,278,695 shares of Common Stock.

On July 28, 2020, we entered into subscription agreements with accredited investors relating to an offering with respect to the sale of an aggregate of (i) 2,969,266 shares of our common stock, at a purchase price of $7.47 per Share, and (ii) pre-funded warrants to purchase 824,689 shares of common stock, at a purchase price of $7.4699 per Pre-Funded Warrant. In addition, on July 30, 2020, we entered into a subscription agreement with an accredited investor for the purchase of 31,486 shares of our common stock at a purchase price per share of $7.94 per Share. The aggregate gross proceeds were approximately $28,591.

In September 2020, we and an existing warrant holder entered into an agreement pursuant to which we agreed to lower the exercise price of certain warrants from $25.00 to $13.00 per share, issued in September 2018. As a result, the warrant holder exercised warrants to purchase 88,889 shares of our common stock resulting in aggregate e gross proceeds of approximately $1,156.2022.

On February 1, 2021, we entered into securities purchase agreements with institutional accredited investors relating to an offering with respect to the sale of an aggregate of 3,278,688 shares of Common Stock, at a purchase price of $21.35 per share. The aggregate gross proceeds were approximately $70,000.

On February 28, 2022, we entered into a securities purchase agreement with institutional investors, pursuant to which we agreed to issue and sell to the investors in a registered direct offering priced at-the-market under Nasdaq rules an aggregate of 4,674,454 shares of our common stock, par value $0.0001 per share, and pre-funded warrants to purchase an aggregate of 667,559 shares of our common stock. Each share was sold at an offering price of $7.49 per share, and each pre-funded warrant was sold at an offering price of $7.4899, for aggregate gross proceeds of approximately $40 million before deducting the offering expenses. In addition, the investors have executed lock up agreements agreeing to a lock up period of three days.

On October 22, 2021, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as agent, pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $50 million from time to time through Cowen. As of June 30, 2022, we have not conducted any sales through our Sales Agreement with Cowen.

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On June 9, 2022, we entered into the Credit Agreement, the with Lender. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million, of which $25 million, representing the Initial Commitment Amount, was made available on the Closing Date and up to $25 million, representing the Delayed Draw Commitment Amount, may be made available on or prior to June 30, 2023, subject to certain revenue requirements. If, until the maturity date of the Loan Facility, our net revenue does not equal or exceed the applicable amount for such period as set in the Credit Agreement, then we shall repay in equal monthly installments the outstanding principal amount of the Loan Facility During the term of the Loan Facility, interest payable in cash by us shall accrue on any outstanding balance due. We will pay certain fees with respect to the Loan Facility, including an upfront fee, an unused fee on the undrawn portion of the Loan Facility, an administration fee, a repayment premium and an exit fee, as well as certain other fees and expenses of the Lender. We agreed to issue the Lender a warrant to purchase up to 226,586 shares of our common stock, at an exercise price of $6.62 per share, which shall have a term of 7 years from the issuance date. In the event we are eligible to draw the Delayed Draw Commitment Amount, we agreed to issue the Lender an additional warrant, with a term of 7 years from the issuance date, to purchase up to 6% of the Delayed Draw Commitment Amount based on a 10 day volume weighted average price of our common stock with an exercise price equal to the Volume Weighted Average Price.

Management believes that the proceeds from the recent private placement and the Loan Facility, combined with our cash on hand are sufficient to meet our obligations as they come due for at least a period of twelve months from the date of the issuance of these unaudited condensed consolidated financial statements. As a result, ~~the Company has~~we have resolved to remove the going concern note from its financial statements. There are no assurances, however, that ~~the Company~~we will be able to obtain an adequate level of financial resources that are required for the long-term development and commercialization of ~~its~~our product offering.

As such, we have a significant present need for capital. If we are unable to scale up our commercial launch of ~~Dario~~our products or meet our commercial sales targets (or if we are unable to generate any revenue at all), and if we are unable to obtain additional capital resources in the near term, we may be unable to continue activities absent material alterations in our business plans and our business might fail.

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Additionally, readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected. Should this occur, we will need to seek additional capital earlier than anticipated in order to fund (1) further development and, if needed (2) our efforts to obtain regulatory clearances or approvals necessary to be able to commercially launch Dario, DarioEngage and Dario Intelligence, (3) expenses which will be required in order to expand manufacturing of our products, (4) sales and marketing efforts and (5) general working capital. Such funding may be unavailable to us on acceptable terms, or at all. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to the failure of our company. This would particularly be the case if we are unable to commercially distribute our products and services in the jurisdictions and in the timeframes, we expect.

Cash Flows (dollar amounts in thousands)

The following table sets forth selected cash flow information for the periods indicated:


	September 30,		June 30,
	2021	2020	2022	2021
	$	$	$	$
Cash used in operating activities:	(35,273)	(10,976)	(29,209,000)	(22,838,000)
Cash used in investing activities:	(7,690)	(73)	(340,000)	(7,593,000)
Cash provided by financing activities:	65,766	27,548	61,675,000	65,766,000
	22,803	16,499	32,126,000	35,335,000

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Net cash used in operating activities

Net cash used in operating activities was ~~$35,27~~3$29,209 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 an increase of ~~221%~~27.9% compared to ~~$10,976~~$22,838 used in operations for the same period in ~~2020.~~2021. Cash used in operations increased mainly due to the increase in our ~~marketing activities and the consolidation of Upright and WayForward.~~operating activities.

Net cash used in investing activities

Net cash used for investing activities was ~~$7,6~~90$340 for the ~~nine~~six months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~10,434%~~$7,253 compared to ~~$73~~$7,593 for the same period in ~~2020.~~2021. Cash used for investing activities ~~increased~~decreased mainly due to the ~~repayment of a loan we~~reduction in acquisition activities compared to the payments made ~~to Upright as well as the acquisition of WayForward and cash acquired~~ as part of the acquisition of Upright and ~~WayForward.~~PsyInnovations, Inc. during the six months ended June 30, 2021.

Net cash provided by financing activities

Net cash provided by financing activities was ~~$65,766~~$61,675 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$27,548~~$65,766 net cash provided by financing activities during the same period in ~~2020.~~2021.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.~~Click or tap here to enter text.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.~~

~~We are a smaller reporting company and therefore are not required to provide the information for this item of Form 10-Q.~~

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer, or the Certifying Officers, conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended, ~~or the Exchange Act,~~(the “Exchange Act“, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange ~~Commission.~~Commission (the “SEC”). Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on their evaluation, the Certifying Officers concluded that, as of ~~September~~June 30, ~~2021,~~2022, our disclosure controls and procedures were designed at a reasonable assurance level and were therefore effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions.

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Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II- OTHER INFORMATION

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results.

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, except as noted below.

Currently, our revenues are concentrated with one major customer, Sanofi, and our revenues may decrease significantly if we were to lose our major customer or do not

Due to our limited operating history, we have a limited customer base and have depended on a major customer, Sanofi, for a significant portion of our revenue. On February 8, 2022, we entered into an exclusive preferred partner, co-promotion, development collaboration and license agreement for a term of five (5) years (the “Exclusive Agreement”) with Sanofi. Pursuant to the Exclusive Agreement, we will provide a license to access and use certain Company data. As of June 30, 2022, our major customer accounted for 63.7% of our accounts receivable balance and, for the six and three month periods ended June 30, 2022, Sanofi accounted for 42% and 32%, respectively, of our revenue in the relevant periods. If Sanofi were to terminate the Exclusive Agreement, or if we fail to adequately perform under the Exclusive Agreement, and if we are unable to diversify our customer base, our revenue could decline, and our results of operations could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.

During the ~~third~~second quarter of ~~2021,~~2022, we issued an aggregate of ~~104,832~~7,977 shares of ~~our~~the Company’s common stock to certain of our service providers as compensation in lieu of cash compensation owed to them for services rendered. We claimed exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, for the foregoing transactions under Section 4(a)(2) of the Securities Act.

Item 6. Exhibits.

No.		Description of Exhibit
4.1*	Form of Warrant to be issued to OrbiMed Royalty and Credit Opportunities III, LP.
10.1*	Agreement and Plan of Merger by and among DarioHealth Corp., WF Merger Sub, Inc., PsyInnovations, Inc., and certain representatives of the former equity holders of PsyInnovations, Inc., dated May 15, 2021.
10.2*	Amendment to Agreement and Plan of Merger by and between the Company and certain representatives of the former equity holders of PsyInnovations, Inc., dated July 7, 2022.

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31.1*	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a).
31.2*		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a).
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.1*		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Loss, (iii) Statements of Changes in Stockholders’ Deficiency, (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
104		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

*Filed herewith.

**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: ~~November~~August 15, ~~2021~~2022		DarioHealth Corp.

	By:	/s/ Erez Raphael
		Name:	Erez Raphael
		Title:	Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Zvi Ben David
		Name:	Zvi Ben David
		Title:	Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)

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Schedule A- Acquisition of Upright Technologies Ltd:
Estimated net fair value of assets acquired and liabilities assumed at the date of acquisition was as follows:
Working capital, net (excluding cash and cash equivalents)	$	(2,171)	$	-
Equipment and other assets		142		-
Intangible assets		9,600		-
Goodwill		25,334		-
Loan of Upright Technologies Ltd		(4,516)		-
Issuance of common stock to Upright Technologies Ltd. shareholders		(28,933)		-

Cash acquired as part of Upright Technologies Ltd. acquisition	$	(544)	$	-

Schedule B- Acquisition of PsyInnovations Inc. (dba WayForward):
Estimated net fair value of assets acquired and liabilities assumed at the date of acquisition was as follows:
Working capital, net (excluding cash and cash equivalents)	$	(901)	$	-
Equipment and other assets		4		-
Intangible assets		10,205		-
Goodwill		14,065		-
Liability to PsyInnovations Inc. (dba WayForward) previous shareholders		(256)
Issuance and expected issuance of common stock to PsyInnovations Inc. (dba WayForward) shareholders		(18,094)		-

Cash paid as part of PsyInnovations Inc. (dba WayForward) acquisition	$	5,023	$	-


	Amount
	Unaudited
Shares issued to owners	$	28,221
Shares issued for vested options		712
Preliminary purchase price	$	28,933


	September30,
	2021		Amortization
	Unaudited		period (years)
Tangible assets acquired	$	398
Liabilities assumed		(1,157)
Net liabilities assumed		(759)

Technology		9,666		4
Brand		539		3
Goodwill		14,065		Infinite
Total purchase price	$	23,511


	Amount
	Unaudited
Shares issued and expected to be issued to owners	$	14,272
Cash consideration		5,417
Earn-out consideration		3,822
Preliminary purchase price		23,511


	Nine Months Ended September 30,
	(in thousands)
	2021		2020		$ Change
Net Loss Reconciliation
Net loss - as reported	$	(55,175)	$	(20,448)	$	(34,727)

Adjustments
Depreciation and amortization expenses		3,583		140		3,443
Other financial (income) expenses, net		346		(391)		737

EBITDA		(51,246)		(20,699)		(30,547)

Stock-based compensation expenses		18,670		8,988		9,682
Acquisition costs		880		-		880

Non-GAAP adjusted loss	$	(31,696)	$	(11,711)	$	(19,985)