What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-09 compared with 2020-03-17 · 346 added, 336 removed, 309 unchanged (69% of the section changed)

16 unchanged sentences

the terms of any future debt or credit financings may preclude us from paying dividends.

Securities Authorized for Issuance Under Equity Compensation

Plans as of December 31, 2019:

Securities Authorized for Issuance Under

Equity Compensation Plans as of December 31, 2020:

The following table

8 unchanged sentences

exercise price of

outstanding options,

warrants and rights

7 unchanged sentences

Equity compensation plans not approved by security holders (4)

Equity compensation plans not approved by security holders (5)

Equity compensation plans not approved by security holders (6)

In March 2013, our Board adopted a non-employee director’s remuneration policy.

7 unchanged sentences

these options have a cashless exercise feature and a six-year term.

On January 23, 2012, our Board of Directors and a majority of

the holders of our then outstanding shares of our common stock adopted our 2012 Equity Incentive Plan (which includes both U.S.

In January 2020, our Board approved the grant of non-plan options as a material inducement for employment, in accordance with Nasdaq Listing Rule 5635(c)(4), to our newly hired President and General Manager for North America.

The options have an exercise price of $8.41 per share.

90,000 options are time based and vest over a three-year period.

One third vests after one year and the balance vests over eight quarterly installments after the first anniversary;

these options have a cashless exercise feature and a six-year term.

An additional 90,000 options are performance based, and vest over a three-year period.

One third vest after one year and the balance vest over eight quarterly installments after the first anniversary;

these options have a cashless exercise feature and a six-year term.

22,500 options will commence vesting every calendar year for the next four years, commencing in 2021, and only if certain performance milestones were met in the immediately preceding year.

In March 2020, our Board approved the grant of non-plan options as a material inducement for employment, in accordance with Nasdaq Listing Rule 5635(c)(4), to our newly hired Chief Medical Officer.

The options have an exercise price of $5.75 per share, and vest over a three-year period.

One third vests after one year and the balance vests over eight quarterly installments after the first anniversary;

these options have a cashless exercise feature and a six-year term.

January 23, 2012, our Board of Directors and a majority of the holders of our then outstanding shares of our common

stock adopted our 2012 Equity Incentive Plan (which includes both U.S.

and Israeli sub-plans).

On January 23, 2012, an Israeli sub-plan was adopted under our 2012 Equity Incentive Plan, which sets forth

the terms for the grant of stock awards to Israeli employees or Israeli non-employees.

The sub-plan was adopted in accordance with

the amended sections 102 and 3(i) of Israel’s Income Tax Ordinance.

The sub-plan is part of the 2012 Equity Incentive Plan

and subject to the same terms and conditions.

On September 26, 2016 and November 30, 2016, respectively, our Board of Directors

and stockholders approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available

under the plan to 1,873,000 as well as amended the 2012 Equity Incentive Plan to permit grants of shares of common stock.

2, 2017 and March 9, 2017, respectively, our Board of Directors and stockholders approved an amendment to the 2012 Equity Incentive

Plan increasing the number of shares of common stock available under the plan to 2,373,000.

On October 9, 2017 and December 4,

2017, respectively, our Board of Directors and stockholders approved an amendment to the 2012 Equity Incentive Plan increasing

the number of shares of common stock available under the plan to 3,873,000.

On March 26, 2018 and May 18, 2018, respectively, our

Board of Directors and stockholders approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of

common stock available under the plan to 5,373,000.

On October 7, 2018 and November 29, 2018, respectively, our Board of Directors

and stockholders approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available

under the plan to 7,873,000.

On September 3, 2019 and November 6, 2019, respectively, our Board of Directors and stockholders approved

On January 23, 2012, an

Israeli sub-plan was adopted under our 2012 Equity Incentive Plan, which sets forth the terms for the grant of stock awards

to Israeli employees or Israeli non-employees.

The sub-plan was adopted in accordance with the amended sections 102 and

3(i) of Israel’s Income Tax Ordinance.

The sub-plan is part of the 2012 Equity Incentive Plan and subject to the

same terms and conditions.

On September 26, 2016 and November 30, 2016, respectively, our Board of Directors and

stockholders approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock

available under the plan to 1,873,000 as well as amended the 2012 Equity Incentive Plan to permit grants of shares of common

On February 2, 2017 and March 9, 2017, respectively, our Board of Directors and stockholders approved an

amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the plan to

On October 9, 2017 and December 4, 2017, respectively, our Board of Directors and stockholders approved

an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the plan to

(618,650 post reverse split).

On December 26, 2019 and February 5, 2020, respectively, our Board of Directors and stockholders

approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the plan

to 1,968,650.

Following amendments, there are currently 345,673 shares of Common Stock reserved for issuance under the 2012 Equity

Incentive Plan.

The purpose of our

2012 Equity Incentive Plan is to attract and retain directors, officers, consultants, advisors and employees whose services are

considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in our development

and financial achievements.

The 2012 Equity Incentive Plan will be administered by the Compensation Committee of our Board of Directors

or by the full board, which may determine, among other things, the (a) terms and conditions of any option or stock purchase right

granted, including the exercise price and the vesting schedule, (b) persons who are to receive options and stock purchase rights

and (c) the number of shares to be subject to each option and stock purchase right.

The 2012 Equity Incentive Plan will provide

for the grant of (i) ”incentive”

options (qualified under section 422 of the Internal Revenue Code of 1986, as

amended) to employees of our company and (ii) non-qualified options to directors and consultants of our company.

our Board of Directors has authorized the appointment of Tamir Fishman Equity Plan Services to act as a trustee for grants of options

under the Israeli sub-plan to Israeli residents.

On March 26, 2018 and May 18, 2018, respectively, our Board of Directors and stockholders approved an

amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the plan to

On October 7, 2018 and November 29, 2018, respectively, our Board of Directors and stockholders approved

an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the plan to

On September 3, 2019 and November 6, 2019, respectively, our Board of Directors and stockholders

approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares of common stock available under the

plan to 618,650 on a post reverse stock split basis.

On December 26, 2019 and February 5, 2020, respectively, our

Board of Directors and stockholders approved an amendment to the 2012 Equity Incentive Plan increasing the number of shares

of common stock available under the plan to 1,968,650.

Following the amendments to the 2012 Equity Incentive Plan, as of

March 1, 2021, there are 115 shares of Common Stock reserved for issuance thereunder.

On September 2, 2020 and

October 14, 2020, respectively, our Board of Directors and stockholders approved and adopted the Company’s 2020

Equity Incentive Plan (the “2020 Equity Incentive Plan”), reserving for issuance a pool of 900,000 shares of the

Company’s common stock under the plan.

On January 1, 2021 the number of shares of common stock available under the

plan increased to 1,828,890 according to the terms thereof.

As of March 1, 2021, there are 633,171 shares of Common Stock

reserved for issuance thereunder.

The Company’s officers and directors are among the persons

eligible to receive awards under the 2020 Equity Incentive Plan in accordance with the terms and conditions thereunder.

The purpose of both

our 2012 and 2020 Equity Incentive Plans is to attract and retain directors, officers, consultants, advisors and employees whose

services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in

our development and financial achievements.

Each of the 2012 and 2020 Equity Incentive Plans will be administered by the Compensation

Committee of our Board of Directors or by the full board, which may determine, among other things, the (a) terms and conditions

of any option or stock purchase right granted, including the exercise price and the vesting schedule, (b) persons who are

to receive options and stock purchase rights and (c) the number of shares to be subject to each option and stock purchase

The 2012 and 2020 Equity Incentive Plans will each provide for the grant of (i) ”incentive”

options (qualified

under section 422 of the Internal Revenue Code of 1986, as amended) to employees of our company and (ii) non-qualified options

to directors and consultants of our company.

In addition, our Board of Directors has authorized the appointment of IBI Capital

Compensation and Trusts (2004) Ltd.

to act as a trustee for grants of options under the Israeli sub-plan to Israeli residents.

In connection with

the administration of our 2012 Equity Incentive Plan, our Compensation Committee will:

which employees and other persons will be granted awards under our 2012 Equity Incentive Plan;

the administration of our 2012 and 2020 Equity Incentive Plans, our Compensation Committee will:

which employees and other persons will be granted awards under our 2012 and 2020 Equity Incentive Plans;

the awards to those selected to participate;

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Our Compensation Committee

(i) interpret our 2012 Equity Incentive Plan;

and (ii) make all other determinations and take all other action that may be

necessary or advisable to implement and administer our 2012 Equity Incentive Plan.

The 2012 Equity Incentive

Plan provides that in the event of a change of control event, the Compensation Committee or our Board of Directors shall have the

discretion to determine whether and to what extent to accelerate the vesting, exercise or payment of an award.

(i) interpret our 2012 and 2020 Equity Incentive Plans;

and (ii) make all other determinations and take all other

action that may be necessary or advisable to implement and administer our 2012 and 2020 Equity Incentive Plans.

The 2012 and 2020 Equity

Incentive Plans each provide that in the event of a change of control event, the Compensation Committee or our Board of Directors

shall have the discretion to determine whether and to what extent to accelerate the vesting, exercise or payment of an award.

In addition, our Board

of Directors may amend our 2012 Equity Incentive Plan at any time.

However, without stockholder approval, our 2012 Equity Incentive

Plan may not be amended in a manner that would:

the number of shares that may be issued under our 2012 Equity Incentive Plan;

modify the requirements for eligibility for participation in our 2012 Equity Incentive Plan;

increase the benefits to participants provided by our 2012 Equity Incentive Plan;

disqualify our 2012 Equity Incentive Plan for coverage under Rule 16b-3 promulgated under the Exchange Act.

of Directors may amend our 2012 or 2020 Equity Incentive Plan at any time.

However, without stockholder approval, our 2012 or 2020

Equity Incentive Plan may not be amended in a manner that would:

the number of shares that may be issued under such Equity Incentive Plan;

modify the requirements for eligibility for participation in such Equity Incentive Plan;

increase the benefits to participants provided by such Equity Incentive Plan;

disqualify such Equity Incentive Plan for coverage under Rule 16b-3 promulgated under the Exchange Act.

Awards previously granted

under our 2012 Equity Incentive Plan may not be impaired or affected by any amendment of our 2012 Equity Incentive Plan, without

the consent of the affected grantees.

under our 2012 or 2020 Equity Incentive Plans may not be impaired or affected by any amendment of such without the consent of the

affected grantees.

Option Exercises

To date, no options have been exercised

by our directors or officers.

Unregistered Sales of Equity Securities and Use of Proceeds

To date, no options

have been exercised by our directors or officers.

Unregistered Sales of Equity Securities

and Use of Proceeds

During the fourth quarter

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We are a leading global

Digital Therapeutics (DTx) company revolutionizing the way people manage their health across the chronic condition spectrum by

delivering evidence-based interventions that are driven by precision data analytics, high quality software, and personalized coaching.

We empower individuals to make healthy adjustments to their daily lifestyle choices in a personalized way and improve their overall

Our cross-functional team operates at the intersection of life science, behavioral science, and software technology to

deliver highly engaging therapeutic interventions.

With 4.9/5.0 stars from 9,000+ reviews on the Apple App Store as of March 2020,

the Dario TM Blood Sugar Monitor’s user-centric approach is loved by tens of thousands of customers around the

We are rapidly expanding solutions for additional chronic conditions such as hypertension, using a performance-based approach

to improve the health of users managing chronic disease.

Our flagship product,

Dario, which we also refer to as our Dario Smart Diabetes Management Solution, is a mobile, real-time, cloud-based, diabetes management

solution based on an innovative, multi-feature software application to track and monitor all facets of diabetes, combined with

a stylish, ‘all-in-one’, pocket-sized, blood glucose monitoring device, which we call the Dario Blood Glucose Monitoring

System, that essentially turns a smartphone into a glucometer.

In addition, our product offerings will focus on the newly launched

DarioEngage software platform, where we digitally engage with Dario users, assist them in monitoring their chronic illnesses and

provide them with coaching, support, digital communications and real time alerts, trends and pattern analysis.

The DarioEngage

platform can be leveraged by our potential partners, such as clinics, health care service providers, employers and payers for scalable

monitoring of people with diabetes in a cost-effective manner, which we expect will open for us additional revenue streams.

we intend to utilize the data we obtain from our Dario Smart Diabetes Management Solution and DarioEngage platform to develop our

upcoming healthcare analytics program, Dario Intelligence.

As such, we intend to develop our solutions such that they will span

the full spectrum of disease monitoring, user-centric engagement, coaching tools, and big data and intelligence solutions.

obtained regulatory clearance or approval for the Dario Blood Glucose Monitoring System in the U.S., Canada, the E.U., Israel and

Australia, among others.

We believe that our targeted health platform is a highly personalized preventative and proactive approach

to health improvement based on individual behavior and treatment, tailored to each person’s unique profile.

DTx company revolutionizing the way people manage their health across the chronic condition spectrum to live a better and healthier

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 actions that are or are not taken.

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.

Our digital therapeutics endeavor to produce lasting behavior changes

in our customers by applying a novel combination of AI-driven dynamic personalization and behavioral science at scale.

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.

Our principal operating

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We were formed on August 11,

11, 2011 as a Delaware corporation.

2011, as a Delaware corporation with the name LabStyle Innovations Corp.

On July 28, 2016, we changed our name to DarioHealth

We began our sales in the direct-to-consumer space, solving first for what we deemed the most difficult problems:

engage users and support behavior change to improve clinical outcomes in diabetes.

Our most developed AI tools leverage the direct-to-consumer

experience from over 150,000 members to drive superior engagement and outcomes.

In early 2020, we broadened our solutions to include

other medical conditions in addition to diabetes, and to serve business customers who seek to improve the health of their stakeholders.

Presently, we have deployed solutions for diabetes, hypertension, and pre-diabetes, and through our acquisition of Upright, we now offer solutions for musculoskeletal (“MSK”) conditions.

We intend to deploy behavioral health and other

condition solutions in 2021, which conditions will also be powered by our AI-driven behavior change platform.

We are currently

delivering B2B2C solutions for providers, employers, and pharmaceutical companies, and we plan to develop a full-risk health plan

business across a range of customer product lines in 2021.

We commenced a commercial

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(including the app and the Dario Blood Glucose Monitoring System) in selected jurisdictions in March 2014.

We continued to scale

up launch during 2014 in the United Kingdom, the Netherlands and New Zealand, and during 2015 in Australia, Israel and Canada,

with the goal of collecting customer feedback to refine our longer-term roll-out strategy.

We are consistently adding new additional

features and functionality in making Dario the new standard of care in diabetes data management.

We continued to

scale up launch during 2014 in the United Kingdom, the Netherlands and New Zealand, and during 2015 in Australia, Israel and

Canada, with the goal of collecting customer feedback to refine our longer-term roll-out strategy.

We are consistently adding new

additional features and functionality in making Dario the new standard of care in diabetes data management.

Through our Israeli

subsidiary, Labstyle Innovation Ltd., our plan of operations is to continue the development of our software and hardware offerings

and related technology.

During 2015, we successfully launched the Dario Smart Diabetes Management Solution according to plan and

are currently expanding the launch to other jurisdictions.

In 2016, we established our direct to consumer model in the U.S.

achieve higher and faster penetration into the market during the launch phase.

We have invested in a robust digital marketing department

with in-house platforms, experienced personnel and robust infrastructures to support expected growth of users and online subscribers

in this market.

During the third quarter of 2016 we expanded these efforts to include Australia as well.

In 2017, we expanded our

direct to consumer marketing efforts in the United Kingdom in cooperation with our local distributor and launched similar marketing

efforts in Germany.

In support of these goals, we intend to utilize our funds for the following activities:

subsidiary, Labstyle, and its subsidiary Upright, our plan of operations is to continue the development of our

software and hardware offerings and related technology.

During 2015, we successfully launched the Dario Smart Diabetes Management

Solution according to plan and are currently expanding the launch to other jurisdictions.

In 2016, we established our direct-to-consumer

model in the U.S.

to achieve higher and faster penetration into the market during the launch phase.

We have invested in a robust

digital marketing department with in-house platforms, experienced personnel and robust infrastructures to support expected growth

of users and online subscribers in this market.

During the third quarter of 2016 we expanded these efforts to include Australia

In 2017, we expanded our direct-to-consumer marketing efforts in the United Kingdom in cooperation with our local distributor

and launched similar marketing efforts in Germany.

In support of these goals, we intend to utilize our funds for the following

ramp up of mass production, marketing and distribution and sales efforts related to the Dario Smart Diabetes Management Solution and the DarioEngage platform;

develop our customer support and telemarketing services in order to support the expect growth of our revenues and the increase of user, and service provider who will use our platform to better serve people with diabetes and improve their clinical outcome;

continued product and software development, and related activities (including costs associated with application development and data storage capabilities as well as any necessary design modifications to the various elements of the Dario Smart Diabetes Management Solution, the DarioEngage platform and the Dario Intelligence tools and capabilities);

continued work on registration of our patents worldwide;

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general and administrative matters.

In September 2019 we

formed a strategic alliance with Dance Biopharm Holdings, Inc., a clinical-stage company reimagining the treatment of chronic diseases

with inhaled therapies to expand access to a personalized digital health management platform for patients with chronic diseases.

Also in September 2019,

we received a notice of allowance from the U.S.

Patent and Trademark Office titled “Systems and Methods for Enabling Optical

Transmission of Data Between a Sensor and a Smart Device.”

The patent will allow us to develop paired smartphone devices

that can collect and analyze real-time medical data and provide immediate and highly detailed, personalized data reports to the

Once collected, this data can be shared with healthcare providers through the DarioEngage platform to facilitate digital

health interventions based on the data analysis.

On January 26,

2021, Dario, Labstyle, Upright Technologies Ltd., an Israeli limited company, Vertex C (C.I.) Fund L.P.

(in its capacity as the representative of the Selling Shareholders), and all holders of Upright’s outstanding securities

(the “Selling Shareholders”), entered into a share purchase agreement (the “Upright Agreement”) pursuant

to which Dario, through Labstyle, acquired all of the outstanding securities of Upright.

The agreement was consummated on February 1,

2021, and Upright now operates as a wholly owned subsidiary of the Company.

As part of the acquisition, Dario issued the Selling

Shareholders 1,687,612 shares of the Company’s common stock, and agreed to assume options to purchase up to 100,193 shares

of the Company’s common stock, subject to certain escrow and indemnity provisions contained in the Upright Agreement (in

the aggregate, the “Consideration Shares”).

In addition, the shares issued are subject to the terms of a lock-up agreement,

pursuant to which the Selling Shareholders (subject to certain exceptions) have agreed to restrict their ability to transfer their

shares as follows:

(i) shares representing 20% of their respective Consideration Shares will be restricted from transfer for

a period of one hundred and eighty (180) days from the date of the closing of the acquisition (the “Closing Date”),

(ii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of two

hundred and seventy (270) days from the Closing Date, (iii) shares representing 30% of their respective Consideration Shares

will be restricted from transfer for a period of three hundred and sixty (360) days from the Closing Date and (iv) shares

representing 20% of their respective Consideration Shares will be restricted from transfer for a period of four hundred and fifty

(450) days from the Closing Date.

The Company has also agreed to file a registration statement covering the resale of the shares

within ninety (90) days following the Closing Date.

In addition, 30% of the Consideration Shares issuable to Upright’s founder,

Oded Cohen, shall be held in a specific holdback retention mechanism, of which 50% shall be released at the lapse of twelve

(12) months of retention following the Closing Date, and the balance of 50% shall be released at the lapse of eighteen (18) months

of retention following the Closing Date.

On February 1,

2021, the Company, through Labstyle, has also agreed to enter into an employment agreement with Mr.

Cohen, pursuant to which

he will serve as General Manager of MSK.

In consideration for Mr.

Cohen’s duties, he will be entitled to (a) a

monthly salary of NIS 63,000, (b) an annual bonus of up to four times his monthly salary, and (c) up to 220,980 shares

of restricted stock of the Company, subject to meeting certain key performance metrics.

See “Management –

Agreements.”

Readers are cautioned

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that we will have sufficient resources to continue our activity only into June 2021 without raising additional capital.

This includes

an amount of anticipated inflows from sales of Dario through direct sales in the United States and through distribution partners.

includes an amount of anticipated inflows from sales of Dario through direct sales in the United States and through distribution

As such, we have a significant present need for capital.

If we are unable to scale up our commercial launch of Dario or meet our

commercial sales targets (or if we are unable to ramp up revenues), and if we are unable to obtain additional capital resources

in the near term, we may be unable to continue activities, absent a material alternations in our business plans and our business

If we are unable to scale up our commercial launch of Dario

or meet our commercial sales targets (or if we are unable to ramp up revenues), 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.

Critical Accounting Policies

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principally from:

sale of our products,

device-specific disposables test strip cartridges, lancets and our Dario Blood Glucose Monitoring System through distributors

or directly to end users;

revenue from providing

Remote Patient Monitoring services to healthcare providers through the DarioEngage platform;

sale of our products, device-specific disposables test strip cartridges, lancets and our Dario Blood Glucose Monitoring System through distributors or directly to end users;

revenue from providing Remote Patient Monitoring services to healthcare providers through the DarioEngage platform;

revenue from ongoing membership programs, providing our users personalized diabetes management programs, including lifestyle changes, healthy eating, advanced tracking and live coaching.

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During the year ended

December 31, 2019, total inventory write-off expenses amounted to $62,000.

December 31, 2020, total inventory write-downs expenses amounted to $99,000.

Production Lines

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Results of Operations

Comparison of the Year Ended December 31, 2019 to Year

Ended December 31, 2018

Comparison of the Year Ended December 31,

2020 to Year Ended December 31, 2019

Revenues for the year

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offering of our membership services to our customers located mainly in the United States.

This increase in revenues is mainly due

to the increase in sales of our membership offering compared to 2018.

Cost of Revenues

During the years ended December 31, 2019 and 2018, we recorded

costs related to revenues in the amount of $4,962,000 and $5,629,000, respectively.

The decrease in cost of revenues was mainly

due to the increase in the sales of our membership offerings, which includes a service component in addition to our products, and

therefore resulted in a reduction in the quantities of product sold compared to 2018.

During the years ended

December 31, 2020 and 2019, we recorded costs related to revenues in the amount of $5,063,000 and $4,962,000, respectively.

The increase in cost of revenues was mainly due to higher costs related to shipping products to our customers.

Cost of revenues consist

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cost of equipment used in production, shipping and handling costs and inventory write-downs.

Research and Development Expenses

Research and Development

Our research and development

expenses increased by $16,000 to $3,692,000 for the year ended December 31, 2019 compared to $3,676,000 for the year ended December

This increase was mainly due to increase in salaries, partially offset by software development costs.

expenses increased by $741,000 to $4,433,000 for the year ended December 31, 2020 compared to $3,692,000 for the year ended

December 31, 2019.

This increase was mainly due to increase in salaries and stock-based compensation, partially offset by

a decrease of other research and development costs relating primarily to product development.

Our research and development expenses,

excluding stock-based compensation and depreciation, for the year ended December 31, 2020, were $3,584,000 compared to $3,432,000

for the year ended December 31, 2019, an increase of $152,000.

This increase was due to an increase in salaries and related

Research and development

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Our sales and marketing

expenses increased by $818,000 to $11,127,000 for the year ended December 31, 2019 compared to $10,309,000 for the year ended December

This increase was mainly due to the increase in salaries and, expenses on digital marketing campaigns in the U.S.

expenses increased by $4,100,000 to $15,227,000 for the year ended December 31, 2020 compared to $11,127,000 for the year

ended December 31, 2019.

This increase was mainly due to the increase in salaries and stock-based compensation.

and marketing expenses, excluding stock-based compensation and depreciation, for the year ended December 31, 2020 were $12,452,000

compared to $10,790,000 for the year ended December 31, 2019, an increase of $1,662,000.

This increase was due to an increase

in salaries and related expenses, as a result of hiring our sales and marketing team in the U.S.

to lead the penetration into the

B2B2C market.

Sales and marketing

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Our general and administrative

expenses increased by $15,000 to $5,483,000 for the year ended December 31, 2019 compared to $5,468,000 for the year ended December

The increase was mainly due to an increase in franchise taxes.

expenses increased by $7,273,000 to $12,756,000 for the year ended December 31, 2020 compared to $5,483,000 for the year ended

December 31, 2019.

The increase was mainly due to an increase in stock-based compensation.

Our general and administrative

expenses, excluding stock-based compensation and depreciation, for the year ended December 31, 2020 were $5,239,000 compared

to $3,753,000 for the year ended December 31, 2019, an increase of $1,486,000.

This increase was due to an increase in insurance,

legal expenses and investor relations expenses.

Our general and administrative

expenses consist mainly of payroll and stock-based compensation expenses for management, employees, directors and consultants,

legal fees, patent registration, expenses related to investor relations, as well as our office rent and related expenses.

legal and accounting fees, patent registration, expenses related to investor relations, as well as our office rent and related

Finance income (expenses),

Our finance expenses,

net, decreased by $84,000 to $31,000 for the year ended December 31, 2019 compared to $115,000 financing expenses for the year

ended December 31, 2018.

Finance expenses include mainly the results of bank charges, lease liability translation differences,

and foreign currency translation adjustments.

Our finance income,

net, increased by $489,000 to $458,000 for the year ended December 31, 2020 compared to $31,000 financing expenses for the

year ended December 31, 2019.

The increase from 2019 was mainly due to gains derives from currency translation differences.

Finance expenses include mainly bank charges, lease liability translation differences, and foreign currency translation adjustments.

Net loss for the year

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Net loss for the year ended December 31, 2019 was $17,736,000.

The decrease from 2018

was mainly due to the increase in our gross profit.

Net operating loss carryforwards

from 2019 was mainly due to the increase in our operating expenses.

Net operating loss

carryforwards

As of December 31,

2020, we had U.S.

federal net operating loss carryforwards of approximately $11,046,000, of which 7,120,000 was generated from

tax years 2011-2017 and can be carryforward and offset against taxable income and that expires during the years 2031 to 2037.

On December 22, 2017,

Tax Cuts and Jobs Act of 2017 (the “TCJA”) modified the rules regarding utilization of net operating loss

and net operating losses generated subsequent to the TCJA can only be used to offset 80% of taxable income with an indefinite

carryforward period for unused carryforwards (i.e., they should not expire).

During 2018 and 2019, we generated additional $3,926,000

of net operating losses carryforwards which are not subject to the annual limitation described above.

federal net operating loss carryforwards of approximately $16,223,000, of which $7,120,000 was generated from tax

years 2011-2017 and can be carryforward and offset against taxable income and that expires during the years 2031 to 2037.

December 22, 2017, the U.S.

Tax Cuts and Jobs Act of 2017 (the “TCJA”) modified the rules regarding utilization

of net operating loss and net operating losses generated subsequent to the TCJA can only be used to offset 80% of taxable

income with an indefinite carryforward period for unused carryforwards (i.e., they should not expire).

During 2018 - 2020,

we generated additional $9,103,000 of net operating losses carryforwards which are not subject to the annual limitation described

Our Israeli subsidiary

has accumulated net operating losses for Israeli income tax purposes as of December 31, 2020 in the amount of approximately

The net operating losses may be carried forward and offset against taxable income in the future for an indefinite

The net operating losses may be carried forward and offset against taxable income in the future for an indefinite period.

In accordance with

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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 consolidated financial statements to understand

the effects of the non-cash impact on our (U.S.

GAAP) unaudited statement of operations of the revaluation of the warrants and

the expense related to stock-based compensation, each as discussed herein above.

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

consolidated financial statements to understand the effects of the non-cash impact on our (U.S.

GAAP) unaudited statement of operations

of the revaluation of the warrants and the expense related to stock-based compensation, each as discussed herein above.

A reconciliation to

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Net Loss Reconciliation

Net loss attributable to common stockholders

Deemed dividend –

related to preferred shares issued

Deemed dividend –

related to Warrant Exchange Agreement

Net loss - as reported

Depreciation expense

Other financial expenses, net

Other financial expenses (income), net

Stock-based compensation expenses

Revaluation of warrants

Non-GAAP adjusted loss

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cumulative losses of $143,248,000 from inception (August 11, 2011) through December 31, 2020 and have a stockholders’

of $18,894,000 at December 31, 2019.

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.

There are no assurances

that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development

and commercialization of our product.

These conditions raise substantial doubt about our ability to continue as a “going

concern.”

equity of $35,407,000 at December 31, 2020.

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.

Since inception, we

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shares of our common stock, receiving aggregate net proceeds totaling $123,974,000 as of December 31, 2020.

On March 3, 2016, we

conducted a public offering, pursuant to which we issued 66,667 shares of common stock and warrants exercisable for an aggregate

of 66,667 shares of common stock for an aggregate net consideration of $5,038,000.

Concurrently with our

public offering, on March 3, 2016, we conducted a concurrent private placement pursuant to which we issued 27,778 units, with each

unit consisting of one share of common stock and one warrant to purchase 1.2 shares of common stock, such that an aggregate of

27,778 shares of common stock and a warrant to exercisable for an aggregate of 33,334 shares of common stock was issued and sold

for an aggregate net consideration of approximately $2,500,000.

On January 9, 2017,

we commenced a private placement offering of up to $5,100,000 consisting of up to 91,072 shares of common stock and warrants to

purchase up to 91,072 shares of common stock.

The warrants are exercisable after the six month anniversary of each respective closing

and will expire on the 5 year anniversary of their issuance.

On January 9, 2017, we held the initial closing of the offering with

a lead investor and an additional investor and issued and sold 55,697 shares of Common Stock and Warrants to purchase 55,697 shares

of common stock for aggregate gross proceeds of approximately $3,119,000.

On January 11, 2017, we entered into securities purchase

agreements with 18 investors for the future issuance and sale of 35,376 shares of common stock and warrants to purchase 707,515

shares of common stock, provided that the issuance and sale of such securities shall only occur upon our obtaining stockholder

approval, pursuant to Nasdaq rules.

On March 9, 2017, following receipt of stockholder approval, we issued and sold 35,376 shares

of common stock and warrants to purchase 707,515 shares of common stock to the 18 investors.

On March 31, 2017, we conducted a public

offering, pursuant to which we issued 72,500 shares of common stock for aggregate gross consideration of $4,500,000.

Between August 16,

2017 and August 22, 2017, we executed securities purchase agreements with a total of 23 accredited and non-U.S.

investors relating

to two concurrent placement offerings of 24,167 shares of our common stock at a purchase price of $36.00 per share and 115,383

shares of our designated Series B Preferred Stock at a purchase price of $36.00 per share, for aggregate gross proceeds of approximately

The closing of the offering took place on August 22, 2017.

On February 28,

and March 6, 2018, we closed two concurrent private placements offerings consisting of 113,110 shares of our common stock at $28.00

per share, 61,704 shares of our Series C Convertible Preferred Stock at $56.00 per share and warrants to purchase up to 189,218

shares of common stock for aggregate gross proceeds of approximately $6,623,000.

2018 and March 6, 2018, we closed two concurrent private placements offerings consisting of 113,110 shares of our common

stock at $28.00 per share, 61,704 shares of our Series C Convertible Preferred Stock at $56.00 per share and warrants to

purchase up to 189,218 shares of common stock for aggregate gross proceeds of approximately $6,623,000.

On September 13,

and September 26, 2018, we closed two concurrent private placements offerings consisting of 213,340 shares our common stock at

$18.00 per share, 94,513 shares of our Series D Convertible Preferred Stock at $72.00 per share and warrants to purchase up to

473,114 shares of common stock, for aggregate gross proceeds of approximately $10,645,000.

2018 and September 26, 2018, we closed two concurrent private placements offerings consisting of 213,340 shares our common

stock at $18.00 per share, 94,513 shares of our Series D Convertible Preferred Stock at $72.00 per share and warrants to purchase

up to 473,114 shares of common stock, for aggregate gross proceeds of approximately $10,645,000.

On December 13,

and December 27, 2018, we closed a private placement offering of 152,504 shares of our common stock at a purchase price of $20.00

per share and warrants to purchase up to 152,500 shares of our common stock at $25.00 per share for aggregate gross proceeds of

approximately $3,050,000.

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 $1,000 for each share of Series A Preferred

2018 and December 27, 2018, we closed a private placement offering of 152,504 shares of our common stock at a purchase price

of $20.00 per share and warrants to purchase up to 152,500 shares of our common stock at $25.00 per share for aggregate gross proceeds

of approximately $3,050,000.

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 $1,000 for each share of Series A Preferred

Stock and Series A-1 Preferred Stock, for aggregate gross proceeds to the Company of $13,560,000.

The initial closing of the offering

took place on November 27, 2019.

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 Preferred Stock, at a purchase price

of $1,000 per share, for aggregate gross proceeds to the Company of $1,915,000.

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 Preferred Stock, at a purchase price of $1,000 per share, for aggregate gross proceeds to the Company of $3,808,000.

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 Preferred Stock, at a purchase price of $1,000 per share, for aggregate gross proceeds

to the Company of $745,000.

The initial closing of the

offering took place on November 27, 2019.

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 Preferred Stock,

at a purchase price of $1,000 per share, for aggregate gross proceeds to the Company of $1,915,000.

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 Preferred Stock, at a purchase price of $1,000 per share, for aggregate gross proceeds to the

Company of $3,808,000.

On December 5, 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 Preferred Stock, at a purchase price of

$1,000 per share, for aggregate gross proceeds to the Company of $1,346,000.

The total aggregate gross proceeds of the offering

described above, together with gross proceeds from the closing of the offering of Series A Preferred Stock, Series A-1 Preferred

Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4 Preferred Stock was $21,375,000.

According to our management’s

estimates, based on our budget and the initial launch of our commercial sales, we believe that we will have sufficient resources

to continue our activity into June 2021 without raising additional capital.

This includes an amount of anticipated inflows from

sales of Dario through distribution partners and to direct customers.

As such, we have a

significant present need for capital.

If we are unable to scale up our commercial launch of Dario 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.

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.

The following tables sets forth selected

cash flow information for the periods indicated:

an offering and the sale of an aggregate of 745 shares of newly designated Series A-4 Preferred Stock, at a purchase price

of $1,000 per share, for aggregate gross proceeds to the Company of $745,000.

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

Preferred Stock, at a purchase price of $1,000 per share, for aggregate gross proceeds to the Company of $1,346,000.

aggregate gross proceeds of the offering described above, together with gross proceeds from the closing of the offering of Series A

Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4

Preferred Stock was $21,375,000.

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 $28,591,000.

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 issued in September 2018, from $25.00 to $13.00 per share.

As a result, the warrant holder exercised warrants to

purchase 88,889 shares of our common stock, resulting in aggregate gross proceeds of approximately $1,156,000.

On January 26,

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 the Company’s common stock at a purchase price of $21.35 per share, for

aggregate gross proceeds of $70,000,000.

The closing of the offering was consummated on February 1, 2021.

The purchase price

per share represents the “Minimum Price”

of the Company’s Common Stock pursuant to Nasdaq Rule 5635(d) as

of the date of execution of each respective securities purchase agreement.

The Company and the investors participating in the offering

also executed a registration rights agreement pursuant to which the Company agreed to file a registration statement covering the

resale of the shares within sixty (60) days following the final closing of the offering.

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) expenses which will be required in order to expand manufacturing of our products, (3) sales

and marketing efforts and (4) 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.

The following tables

sets forth selected cash flow information for the periods indicated:

Cash used in operating activities:

(17,736,000 )

(15,725,000 )

Cash used in investing activities:

Cash provided by financing activities:

Net cash used in operating activities

Net cash used in

operating activities

Net cash used in operating

activities was $17,736,000 for the year ended December 31, 2020 compared to $15,725,000 used in operations for the same period

Cash used in operations increased mainly due to an increase in our operating expenses, and offset by a decrease in our

trade payables and other accounts payable and accrued expenses.

Cash used in operations increased mainly due to an increase in our operating expenses.

Net cash used in

investing activities

Net cash used for investing

activities was $113,000 for the year ended December 31, 2019 compared to cash used in investing activities of $72,000 for the year

ended December 31, 2018.

Cash used in investing activities increased mainly due to higher investment in fixed assets.

Net cash used for

investing activities was $1,622,000 for the year ended December 31, 2020 compared to cash used in investing activities

of $113,000 for the year ended December 31, 2019.

Cash used in investing activities increased mainly due to a

convertible bridge loan extended to Upright and higher investments in fixed assets.

Net cash provided

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financing activities was $27,548,000 for the year ended December 31, 2020 compared to $25,247,000 for the year ended December 31,

During the year ended December 31, 2019, we raised net proceeds in an amount of approximately $25,247,000 through our May

and December 2019 offerings.

During the year ended December 31, 2020, we raised net proceeds in an amount of approximately $27,548,000 mainly through

our July 2020 offering.

Contractual Obligations

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materials and services from our vendors.

Payments due by period (U.S.

Payments due by period

dollars thousands)

Contractual Obligations

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that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.

Recently Issued and Adopted Accounting Pronouncements

In May 2014, the

Financial Accounting Standards Board (the “FASB”) issued ASC 606.

The standard replaced the revenue recognition guidance

generally accepted accounting principles under ASC 605, and was required to be applied retrospectively to each prior period

presented or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings

during the period of initial application.

Subsequently, the FASB issued several additional Accounting Standard Updates (each an

“ASU”) related to ASU No.

2014-09, collectively referred to as the “new revenue standards,”

effective for us beginning January 1, 2019.

We adopted the standard using the modified retrospective method.

The adoption of ASC

606 did not have a significant impact on our consolidated financial statements.

In February 2016, the

FASB issued ASU No.

2016-02, “Leases”

(Topic 842) (“ASC 842”).

The standard requires lessees

to recognize almost all leases on the balance sheet as a right-of-use (“ROU”) asset and a lease liability and requires

leases to be classified as either an operating or a finance type lease.

The standard excludes leases of intangible assets or inventory.

The standard became effective for us beginning January 1, 2019.

We adopted ASC 842 using the modified retrospective approach, by

applying the new standard to all leases existing at the date of initial application.

Results and disclosure requirements for reporting

periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue

to be reported in accordance with our historical accounting under ASC 840.

We elected the package of practical expedients permitted

under ASC 842, which also allowed us to carry forward historical lease classifications.

We also elected the practical expedient

related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy

exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.

In November 2016, the

FASB issued ASU No.

2016-18, “Statement of Cash Flows (Topic 230):

Restricted Cash,”

which requires companies to include

amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period

and end-of-period total amounts shown on the statement of cash flows.

This guidance is effective from the first quarter of 2019.

In June 2018, the FASB

issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting.”

This ASU supersedes ASC 505-50, “Equity—Equity Based Payments to Non-Employees,”

and expands the scope of ASC

718, “Compensation—Stock Compensation,”

to include all share-based payment arrangements related to the acquisition

of goods and services from both nonemployees and employees.

The standard became effective for us beginning January 1, 2019.

adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued and Adopted Accounting

Pronouncements

In September 2016,

the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13,

“Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”

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.

also requires increased disclosures.

For the Company, the amendments in the update were originally effective for fiscal years beginning

after December 15, 2019, including interim periods within those fiscal years.

In November 2019, the FASB issued

2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S.

and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including

interim periods within those fiscal periods.

Early adoption is permitted.

The Company is currently assessing the impact the guidance

will have on its consolidated financial statements.

Quantitative and Qualitative Disclosure About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity