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Item 9A. Controls and Procedures

2023-03-09 compared with 2022-03-22 · 651 added, 524 removed, 1384 unchanged (46% of the section changed)

9 unchanged sentences

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.

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.

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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Based on our assessments and those criteria, management determined that we maintained effective internal control over financial reporting at December 31, 2022.

A registrant may omit an assessment of an acquired business’s internal control over financial reporting from the registrant’s assessment of its internal control;

however, such an exclusion may not extend beyond one year from the date of the acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting.

We acquired PsyInnovations, Inc.

(dba wayForward) during 2021, and we excluded from the assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021, the acquired entity’s internal control over financial reporting associated with the assets we acquired.

We are finalizing the process of integrating our acquisition of PsyInnovations, Inc.

(dba wayForward), including evaluating our internal controls, and designing and implementing an internal control structure over PsyInnovations, Inc.

(dba wayForward), which will be complete in the 2022 fiscal year.

Other Information

8 unchanged sentences

Chief Financial Officer, Treasurer and Secretary

Chief Operating Officer

Richard Anderson

President and General Manager of North America

Chairman of the Board of Directors

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in economics and accounting from Haifa University.

Dror Bacher has served as our Chief Operating Officer since July 25, 2017.

Bacher previously served as our Vice President of Research and Development as well as Vice President of Operations since 2013 where he worked on product development as well as building a scalable supply chain.

Bacher has over 18 years of experience in various technological companies and his expertise includes product management, product development and business operations in multi disciplinary environments.

Between 2008 and 2013, Mr.

Bacher Served in several leadership roles at Amdocs

Limited (Nasdaq:DOX), including working as a part of the Chief Technology Office, managing enterprise development programs for a variety of software products associated with service delivery, as well as serving as head of process Prior to Amdocs, Mr.

Bacher served in a senior role at Tower Semiconductor (Nasdaq:TSEM), the global specialty foundry leader for IC manufacturing, where he was responsible for business operations and commercialization expansion.

Bacher holds a B.Sc.

in computer science and an MBA degree from Haifa University.

Richard Anderson has served as our President and General Manager of North America since January 7, 2020.

Richard Anderson has served as our President since August 10 2022, and was previously our President and General Manager of North America from January 7, 2020 until August 10, 2022.

From November 2003 to December 2019, Mr.

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Anderson served as Senior Executive Vice President of Hythiam, Inc., a predecessor company of Catasys, Inc., from 2005 to 2008.

From 1999 to 2005, he also served as Chief Financial Officer and Secretary of Clearant, Inc., a biotechnology company.

From 1999 to 2005, he also served as Chief Financial Officer and Secretary of Clearant, Inc., a

biotechnology company.

Prior to Clearant, from 1999 to 2001, he served as the Chief Financial Officer and Managing Director of Intellect Capital Group, a venture consulting firm.

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Matheis spent nearly 30 years in various senior leadership roles in health insurance and healthcare.

Since October 2017, he has served as the President and Chief Executive Officer of Optima Health, Inc.

and the Executive Vice President of Sentara Healthcare Plans, Inc.

Prior to that, he spent 13 years in leadership roles at Anthem, Inc., serving as President of Central Region and Exchanges encompassing six states and representing $12 billion in annual revenue.

Since September 2022 he serves as the President and Chief Executive Officer of Sentara Healthcare, Inc.

Prior to that, he served for 5 years as the President of Optima Health, Inc.

and spent 13 years in leadership roles at Anthem, Inc., serving as President of Central Region and Exchanges encompassing six states and representing $12 billion in annual revenue.

Matheis also served in senior leadership roles at Anthem Blue Cross and Blue Shield of Missouri, CIGNA Healthcare and Humana Health Plan, as well as Advocate Health Care in Chicago.

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PHMD), he recently joined PAVmed, Inc (Nasdaq:

PAVM, PAVMW) as the its Executive Vice President and Chief Financial Officer.

PAVM, PAVMW) as its Executive Vice President and Chief Financial Officer.

Previously, from 2000 to 2017 Mr.

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Prior to PhotoMedex’s reverse merger with Radiancy, Inc.

in December 2011, he also served as Chief Executive Officer from 2009 to 2011 and served

as Vice President of Finance and Chief Financial Officer from 2000 to 2009.

in December 2011, he also served as Chief Executive Officer from 2009 to 2011 and served as Vice President of Finance and Chief Financial Officer from 2000 to 2009.

He received honors as a P.A.C.T.

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THNK, now, Nasdaq:

HCKT), an interactive marketing services and business solutions company.

HCKT), an interactive marketing

services and business solutions company.

McGrath also served from 1996 until 1999 as Chief Financial Officer, Executive Vice President and director of TriSpan, Inc., an internet commerce solutions and technology consulting company, which was acquired by AnswerThink Consulting Group, Inc.

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McGrath is qualified to serve on our Board of Directors because of his accounting expertise and his experiences serving as an officer and director of public and private companies.

Jon Kaplan has been a director of our company since February 2023.

Kaplan, has extensive business experience consulting and advising healthcare companies.

From September 2018 until July 2020, Mr.

Kaplan served on the Board of Directors, and the audit committee, of Quorum Health Corporation.

Since 2007, he has served as a Senior Partner and Managing Director of the Boston Consulting Group, Inc., or BCG, a privately-held company focused on providing management consulting services, where he recently served on BCG’s global leadership council and as the practice leader of BCG’s healthcare services.

Kaplan, previously served in advisory board roles at digital health leaders Livongo, Transcarent, Circulation, and Picwell.

Prior to BCG, Mr.

Kaplan held senior roles at Accenture, Pricewaterhousecooper and Ernst & Young.

Kaplan received a M.B.A.

from the Kellogg Graduate School of Management at Northwestern University, a Masters of Public Health from the University of Pittsburgh and a B.A.

in Economics from Cornell University.

Kaplan is qualified to serve on our Board of Directors because of his experience in consulting and advising healthcare companies.

Adam Stern has been a director of our company since March 1, 2020.

Stern, age 55, has been the head Private Equity Banking at Aegis Capital Corp.

Stern, has been the head Private Equity Banking at Aegis Capital Corp.

and CEO of SternAegis Ventures since 2012 and was a member of our board of directors between October 2011 and May 2014.

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Stern is qualified to serve on our Board of Directors because of his experience in the capital markets, his experiences serving as a director of public and private companies and his experience with life sciences companies.

Stone has been a director of our company since July 7, 2014.

For more than twenty-five years, Prof.

Stone has been active participant in early stage business enterprises as a director or investor, including technology and biotechnology companies.

He currently serves on the board of directors of multiple technology companies, including Powermat, Espro-Accoustiguide Group, Wellsense Technologies, NanoX Imaging Plc, Illumigyn Ltd, Cardiologic Innovations, Quality Inflow Ltd., and Check-Cap.

Since 1974, Prof.

Stone has been a member of the faculty of Columbia Law School, where he held the Wilbur Friedman Chair in Tax Law for twenty years.

In addition to basic and advanced tax courses, Prof.

Stone has taught in the areas of contracts, business planning and real estate planning.

Among other not-for-profit organizations he has been associated with, from 2011 to 2013, Prof.

Stone served as Chairman of the Conference of Presidents of Major American Jewish Organizations.

Stone began his career in 1967 in private practice in Washington, D.C, and thereafter joined the staff of the Solicitor General of the United States, where from 1969 to 1973 he was Assistant to the Solicitor General.

He is a graduate of Harvard College and Harvard Law School.

We believe Prof.

Stone is qualified to serve on our Board of Directors because of his legal expertise and experience with life sciences companies.

Scientific Advisory Board

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His leadership helped transform LifeScan into a global organization with thousands of employees and billions in annual revenues.

After retiring from JNJ, Eric served as chairman for a number of medical device startup companies including chairman of Nfocus Neuromedical, Symetis SA and CeQur SA.

After retiring from JNJ, Eric served as chairman for a number of medical

device startup companies including chairman of Nfocus Neuromedical, Symetis SA and CeQur SA.

Eric also served as an operating partner for Geneva based Endeavour Vision Growth, a medical device growth fund.

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Our Audit Committee is comprised of Messrs.

Shaked, McGrath and Stone, each of whom is an independent director.

Shaked, McGrath and Matheis, each of whom is an independent director.

McGrath is the Chairman of the Audit Committee.

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Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee is currently comprised of Prof.

Stone and Mr.

Stone is the Chairman of the Nominating and Corporate Governance Committee.

Our Nominating and Corporate Governance Committee is currently comprised of Messers.

Matheis and Shaked.

Matheis is the Chairman of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee is charged with the responsibility of reviewing our corporate governance policies and with proposing potential director nominees to the Board of Directors for consideration.

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Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly.

Based on this review, our Board of Directors has determined that Prof.

Stone, Messrs.

Shaked, Matheis and McGrath, and Ms.

Based on this review, our Board of Directors has determined that, Messrs.

Shaked, Matheis McGrath and Kaplan, and Ms.

Karah are “independent directors” as defined in the Nasdaq Listing Rules and Rule 10A-3 promulgated under the Exchange Act.

Code of Ethics

On March 5, 2013, our Board of Directors adopted a Code of Business Conduct and Ethics and Insider Trading Policy.

On March 5, 2013, our Board of Directors adopted a Code of Business Conduct and Ethics and Insider Trading Policy which applies to all insiders including our principal executive officer, principal financial officer, and principal accounting officer.

Our Code of Business Conduct and Ethics is available on our website at www.mydario.com under the Investors/Governance section.

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Limitation of Directors Liability and Indemnification

The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders for monetary damages for breach of their fiduciary duties.

their fiduciary duties.

Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by Delaware law.

16 unchanged sentences

Richard Anderson

(President and General Manager of North America)

Certain compensation paid by the company is denominated in New Israeli Shekel (or the NIS).

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Raphael agreed to a waiver of 9.4% and 0% of his cash salary according to our salary program (see further details in “Employment and Related Agreements” below).

(2) On September 2020, Mr.

Raphael was paid a bonus of $251,313 for the successful completion of the July 2020 private placement.

(2) On March 2021, Mr.

Raphael was paid a bonus of $345,906 for his performance during 2020.

(3) On January 28, 2020, Mr.

Raphael was granted 15,602 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2020.

On April 3, 2020, Mr.

Raphael was granted 15,146 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from April to June 2020.

On July 20, 2020, Mr.

Raphael was granted 15,593 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from July to September 2020.

On October 16, 2020, Mr.

Raphael was granted 2,127 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2020, and 5,060 shares of our common stock under our 2012 Equity Incentive plan against an additional cash waiver during the period April – July 2020.

On February 12, 2020, Mr.

Raphael was granted 351,546 shares of our common stock under our 2012 Equity Incentive Plan.

On March 2022, Mr.

Raphael was paid a bonus of $306,263 for his performance during 2021.

(3) On January 19, 2021, Mr.

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Raphael was granted 413,158 restricted shares of our common stock under our 2020 Equity Incentive Plan.

On May 18, 2022, Mr.

Raphael was granted 275,000 restricted shares of our common stock under our 2020 Equity Incentive Plan.

(4) In addition to his salary, Mr.

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Ben David was paid a bonus of $118,596 for his performance during 2020.

(7) On January 28, 2020, Mr.

Ben David was granted 7,287 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2020.

On April 3, 2020, Mr.

Ben David was granted 7,074 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from April to June 2020.

On July 20, 2020, Mr.

Ben David was granted 7,283 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from July to September 2020.

On October 16, 2020 Mr.

Ben David was granted 4,235 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2020, and 2,006 shares of our common stock under our 2012 Equity Incentive plan against an additional cash waiver during the period of April through July 2020.

On February 12, 2020, Mr.

Ben David was granted 45,000 shares of our common stock under our 2012 Equity Incentive Plan.

On September 9, 2020, Mr.

Ben David was granted 10,000 shares of our common stock under our 2012 Equity Incentive Plan.

In March 2022, Mr.

Ben David was paid a bonus of $87,504 for his performance during 2021.

(7) On January 19, 2021, Mr.

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Ben David was granted 111,228 restricted shares of our common stock under our 2020 Equity Incentive Plan.

(8) On February 12, 2020, Mr.

Ben David was granted 27,827 options to purchase shares of our common stock under our 2012 Equity Incentive Plan, at an exercise price of $7.736 per share.

On May 18, 2022, Mr.

Ben David was granted 95,000 restricted shares of our common stock under our 2020 Equity Incentive Plan.

(8) In addition to his salary, Mr.

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Bacher was paid a bonus of $118,596 for his performance during 2020.

(12) On January 28, 2020, Mr.

Bacher was granted 1,677 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2020.

On April 3, 2020, Mr.

Bacher was granted 1,628 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from April to June 2020.

On July 20, 2020, Mr.

Bacher was granted 1,676 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from July to September 2020.

On October 16, 2020, Mr.

Bacher was granted 974 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2020, and 3,772 shares of our common stock under our 2012 Equity Incentive plan against an additional cash waiver during the period from April through July 2020.

On February 12, 2020, Mr.

Bacher was granted 45,000 shares of our common stock under our 2012 Equity Incentive Plan.

On September 9, 2020, Mr.

Bacher was granted 10,000 shares of our common stock under our 2012 Equity Incentive Plan.

In March 2022, Mr.

Bacher was paid a bonus of $87,504 for his performance during 2021.

(11) On January 19, 2021, Mr.

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On July 18, 2021, Mr.

Bacher was granted 353 shares of our common stock under

our 2012 Equity Incentive plan against waiver of cash salary for the period from July to September 2021.

Bacher was granted 353 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from July to September 2021.

On October 10, 2021, Mr.

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Bacher was granted 100,580 restricted shares of our common stock under our 2020 Equity Incentive Plan.

(13) On February 12, 2020, Mr.

Bacher was granted 28,664 options to purchase shares of our common stock under our 2012 Equity Incentive Plan, at an exercise price of $7.736 per share.

On May 18, 2022, Mr.

Bacher was granted 95,000 restricted shares of our common stock under our 2020 Equity Incentive Plan.

(12) In addition to his salary, Mr.

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Anderson was entitled to a monthly salary of $27,916.67.

(16) In September 2020, Mr.

Anderson was paid a bonus of $100,000 for the successful completion of the July 2020 private placement.

As of April 2022, Mr.

Anderson is entitled to a monthly salary of $33,333.33.

(14) In March 2021, Mr.

Anderson was paid a bonus of $212,500 for his performance during 2020.

(17) On October 16, 2020, Mr.

Anderson was granted 5,182 shares of our common stock under our 2012 Equity Incentive Plan against a cash salary waiver during the period from April through July 2020.

On September 9, 2020, Mr.

Anderson was granted 10,000 shares of our common stock under our 2012 Equity Incentive Plan.

In April 2022, Mr.

Anderson was paid a bonus of $250,000 for his performance during 2021.

(15) On January 19, 2021, Mr.

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Anderson was granted 20,000 restricted shares of our common stock under our 2020 Equity Incentive Plan following the closing of the acquisition of wayForward.

(18) On January 30, 2020, Mr.

Anderson was granted 90,000 options to purchase shares of our common stock as an inducement grant pursuant to Nasdaq Listing Rule 5635 (c)(4), at an exercise price of $8.41 per share.

In June 2022 17,957 of the vested shares were redeemed by the Company for aggregate proceeds of $170.275, to satisfy certain withholding tax obligations ox existing vested restricted stock awards.

The redemption of the securities was approved by the Compensation Committee of the issuer and was exempt pursuant to Rule 16b-3.

(16) On January 19, 2021, Mr.

Anderson was granted 91,652 options to purchase shares of our common stock under our 2020 Equity Incentive Plan, at an exercise price of $17.89 per share.

On May 18, 2022, Mr.

Anderson was granted 135,000 options to purchase shares of our common stock under our 2020 Equity Incentive Plan, at an exercise price of $7.19 per share.

(17) In addition to his salary, Mr.

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These benefits are included as part of his “All Other Compensation.”

(18) On January 23, 2023, we executed a Termination of Employment and Separation Agreement with Mr.

Bacher, pursuant to which Mr.

Bacher’s position as Chief Operating Officer was terminated with immediate effect.

All compensation awarded to our executive officers was independently reviewed by our Compensation Committee.

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Raphael in connection with his August 2013 appointment as our President and Chief Executive Officer.

Pursuant to the terms of his employment agreement as amended, Mr.

Pursuant to the terms of

his employment agreement as amended, Mr.

Raphael is entitled to a monthly salary of NIS 137,466 (approximately $40,702 per month).

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Raphael from January to March 2021.

On April 3, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Raphael of 15,146 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $65,280 of salary otherwise payable to Mr.

Raphael from April to June 2020.

On July 20, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Raphael of 15,593 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $67,208 of salary otherwise payable to Mr.

Raphael from July to September 2020.

On October 16, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Raphael of 2,127 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $15,894 of salary otherwise payable to Mr.

Raphael from October to December 2020, and 5,060 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $21,809 of salary otherwise payable to Mr.

Raphael from April to July 2020.

On January 19, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Raphael of 2,268 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $16,942 of salary otherwise payable to Mr.

Raphael from January to March 2021.

On May 3, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

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Raphael from October to December 2021.

On April 7, 2021, the Compensation Committee of our Board of Directors approved an increase of Mr.

Raphael’s annual salary by $12,000 in the aggregate and increased his target bonus to 75% of his annual base salary.

Zvi Ben David , Chief Financial Officer, Treasurer and Secretary – On January 8, 2015, LabStyle Innovation Ltd., our Israeli subsidiary, entered into a Personal Employment Agreement with Mr.

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Ben David’s Salary was updated to NIS 60,000 (approximately $17,765) per month.

Commencing June 1, 2018, his monthly salary was updated to NIS 67,200 (approximately $20,741), and

commencing April 1, 2021, his monthly salary was updated to NIS 74,620 (approximately $23,031).

Commencing June 1, 2018, his monthly salary was updated to NIS 67,200 (approximately $19,897), and commencing April 1, 2021, his monthly salary was updated to NIS 74,620 (approximately $22,094).

During 2021 and 2022, Mr.

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Ben David's employment agreement may be terminated by either party at will upon 90 days prior written notice or terminated by us for cause, as defined under the employment agreement.

In the event the employment agreement is terminated by us at will, Mr.

In the event the employment agreement

is terminated by us at will, Mr.

Ben David shall be entitled to receive 90 days of severance plus any required severance payment pursuant to applicable Israeli severance law.

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Ben David from January to March 2021.

On April 3, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 7,074 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $30,490 of salary otherwise payable to Mr.

Ben David from April to June 2020.

On July 20, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 7,283 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $31,391 of salary otherwise payable to Mr.

Ben David from July to September 2020.

On October 16, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 4,235 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $31,638 of salary otherwise payable to Mr.

Ben David from October to December 2020, and 2,006 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $8,645 of salary otherwise payable to Mr.

Ben David from April to July 2020.

On January 19, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 1,152 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $8,610 of salary otherwise payable to Mr.

Ben David from January to March 2021.

On May 3, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

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Ben David from October to December 2021.

On April 7, 2021, the Compensation Committee of our Board of Directors approved an increase of Mr.

Ben-David’s annual salary by $27,000 in the aggregate and increased his target bonus to 40% of his annual base salary.

Dror Bacher, Chief Operating Officer – On August 30, 2013, LabStyle Innovation Ltd., our Israeli subsidiary, entered into an employment agreement with Mr.

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Pursuant to Mr.

Bacher’s existing personal employment

agreement as amended, either Mr.

Bacher’s existing personal employment agreement as amended, either Mr.

Bacher or we may terminate his employment agreement upon four months’ notice, provided, however, that in the event of a termination for cause, Mr.

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Such shares were issued in lieu of the waiver of $7,635 of salary otherwise payable to Mr.

Bacher from October to December 2020, and 3,772 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $16,256 of salary otherwise payable to Mr.

Bacher from April to July 2020.

On January 19, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Bacher of 1,039 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,761 of salary otherwise payable to Mr.

Bacher from January to March 2021.

On April 3, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Bacher of 346 shares of our common stock under our 2020 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,394 of salary otherwise payable to Mr.

Bacher from April to June 2021.

On July 20, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Bacher of 353 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,558 of salary otherwise payable to Mr.

Bacher from July to September 2021.

On October 16, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Bacher of 357 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,635 of salary otherwise payable to Mr.

Bacher from October to December 2021.

On April 7, 2021, the Compensation Committee of our Board of Directors approved an increase of Mr.

Bacher’s annual salary by $27,000 in the aggregate and increased his target bonus to 40% of his annual base salary.

On January 23, 2023, we executed a Termination of Employment and Separation Agreement with Mr.

Bacher, pursuant to which Mr.

Bacher’s position as Chief Operating Officer was terminated with immediate effect.

Pursuant to the terms of the Separation Agreement, we agreed to retain Mr.

Bacher as a member of our advisory board.

We also agreed to pay Mr.

Bacher, in lieu of his notice period and accrued vacation, a reduced monthly salary of 42,137 NIS ($12,504) for the period from February 1, 2023 through May 31, 2025.

In addition, we agreed, subject to the approval of our Compensation Committee, to issue Mr.

Bacher 75,000 shares of restricted stock which shall vest on a quarterly basis from the date of grant through December 31, 2024.

Richard Anderson, President and General Manager of North America – On January 7, 2020, we appointed Mr.

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Anderson will also be entitled to certain expense reimbursements and other standard benefits, including vacation and sick leave.

On April 1, 2022 Mr.

Anderson’s base salary was increased to $400,000.

In addition, Mr.

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Anderson a stock option to purchase up to 90,000 shares of common stock at an exercise price of $8.41 per share, subject to vesting.

Anderson was also issued a stock option to purchase up to 90,000 shares of common stock at an exercise price of

$8.41 per share, subject to vesting and the achievement of certain business revenue targets.

Anderson was also issued a stock option to purchase up to 90,000 shares of common stock at an exercise price of $8.41 per share, subject to vesting and the achievement of certain business revenue targets.

In that regard, Mr.

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Anderson from April to July 2020.

On June 8, 2022, the Compensation Committee authorized the Company to redeem 17,957 shares of restricted stock held by Mr.

Anderson, 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 $170,000.

Outstanding Equity Awards at December 31, 2022

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Shaked, Matheis, McGrath, Prof.

Stone and Ms.

Stone (till his pass away on May 30, 2022) and Ms.

Karah) will receive the following cash payments for each fiscal year:

1 unchanged sentence

Stock and Option Awards

On January 28, 2020, the Compensation Committee of our Board of Directors approved the issuance to each of Prof.

McGrath, and Ms.

Karah of 2,378 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of $10,250 in fees otherwise payable to each of Prof.

McGrath, and Ms.

Karah for the period from October 1, 2019, to December 31, 2019.

The Compensation Committee of our Board of Directors also approved the issuance to each of Mr.

Moller and Mr.

Kamer of 1,450 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued in lieu of $6,250 in fees otherwise payable to each of Mr.

Moller and Mr.

Kamer for the period October 1, 2019, to December 31, 2019.

In addition, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Moller 396 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued to Mr.

Moller upon his resignation from the Board of Directors.

On February 12, 2020, the Compensation Committee of our Board of Directors approved the following issuances, each was done under our 2012 Equity Incentive Plan:

(i) 60,000 shares of our common stock to Mr.

(ii) 30,000 shares of our common stock to Ms.

(iii) 7,000 shares of our common stock to Mr.

(iv) 7,000 shares of our common stock to Mr.

(v) 13,000 shares of our common stock to Prof.

and (vi) 50,000 shares of our common stock to Mr.

On April 3, 2020, the Compensation Committee of our Board of Directors approved the issuance to each of Prof.

McGrath, and Ms.

Karah of 2,378 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of $10,250 in fees otherwise payable to each of Prof.

McGrath, and Ms.

Karah for the period from January 1, 2020, to March 31, 2020.

The Compensation Committee of our Board of Directors also approved the issuance to each of Mr.

Farhi and Mr.

Kamer of 1,450 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued in lieu of $6,250 in fees otherwise payable to Mr.

Farhi and Mr.

Kamer for the period January 1, 2020, to March 31, 2020.

In addition, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Stern 493 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued in lieu of $2,129 in fees otherwise payable to Mr.

Stern for March 2020.

In addition, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Farhi 4,638 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued to Mr.

Farhi upon his voluntary resignation from the Board of Directors in April 2020.

On July 20, 2020, the Compensation Committee of our Board of Directors approved the issuance to each of Prof.

McGrath, and Ms.

Karah of 2,378 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of $10,250 in fees otherwise payable to each of Prof.

McGrath, and Ms.

Karah for the period from April 1, 2020, to June 30, 2020.

The Compensation Committee of our Board of Directors also approved the issuance to each of Mr.

Stern and Mr.

Kamer of 1,450 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued in lieu of $6,250 in fees otherwise payable to Mr.

Farhi and Mr.

Kamer for the period April 1, 2020, to June 30, 2020.

On August 18, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Matheis 15,000 shares of our common stock under our 2012 Equity Incentive Plan, and the grant of 20,000 options.

These options have an exercise price of $18.68 per share.

One third of the options will become fully vested and exercisable on the first anniversary of the grant date, and the balance will vest in eight equal quarterly installments following the first anniversary of the grant date, subject to Mr.

Matheis’s continued membership on the Company’s Board of Directors.

On October 9, 2020, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Kamer of 10,000 shares of our common stock under the 2012 Equity Incentive Plan.

Such shares were issued to Mr.

Kamer upon his withdrawal from the Board of Directors in October 2020.

On October 16, 2020, the Compensation Committee of our Board of Directors approved the issuance to Ms.

Karah of 1,372 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of $10,250 in fees otherwise payable to Ms.

Karah for the period from July 1, 2020, to September 30, 2020.

On April 3, 2020, the Audit and Compensation Committees of the Board of Directors approved the monthly grant of 1,500 shares of the Company’s Common Stock, to be granted monthly over a 12 month period pursuant to a certain consulting agreement with said service providers.

During the fiscal year ended December 31, 2020, a total of 5,691 shares of the Company’s common stock were issued under the said approval to Mr.

Adam Stern, a member of our Board.

On January 19, 2021, the Compensation Committee of our Board of Directors approved the following issuances, each was done under our 2020 Equity Incentive Plan:

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and (vi) 29,616 restricted shares of our common stock to Mr.

On May 18, 2022, the Compensation Committee of our Board of Directors approved the following issuances, each was done under our 2020 Equity Incentive Plan:

(i) 60,000 restricted shares of our common stock to Mr.

(ii) 80,000 restricted shares of our common stock to Ms.

(iii) 17,620 restricted shares of our common stock to Mr.

(iv) 55,000 restricted shares of our common stock to each of Mr.

Stern and Mr.

and (v) 35,000 options to purchase shares of our common stock with an exercise price of $7.19 per share, to each of Prof.

Stone and Mr.

Compensation Committee Review

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Amount shown does not reflect dollar amount actually received.

Instead, this amount reflects the aggregate grant date fair value of each stock option granted in the fiscal year ended December 31, 2021, computed in accordance with the provisions of ASC 718.

Instead, this amount reflects the aggregate grant date fair value of each stock option granted in the fiscal year ended December 31, 2022, computed in accordance with the

provisions of ASC 718.

Assumptions used in accordance with ASC 718 are included in Note 9 to our consolidated financial statements included in this Annual Report.

** Passed away on May 30, 2022 and ceased serving on the Board of Directors on such date.

(1) 74,744 stock awards are outstanding as of December 31, 2022.

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(3) 49,999 stock awards are outstanding as of December 31, 2022.

(4) 885 option awards are outstanding as of December 31, 2021.

(4) No option awards are outstanding as of December 31, 2022.

(5) 32,620 stock awards are outstanding as of December 31, 2022.

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Except as otherwise indicated, each person or entity named in the table has sole voting and investment power with respect to all shares of our capital shown as beneficially owned, subject to applicable community property laws.

In computing the number and percentage of shares beneficially owned by a person, shares that may be acquired by such person within 60 days of the date of this Annual Report are counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other person.

counted as outstanding for computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each person listed below is c/o DarioHealth Corp., 18 W.

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Nantahala Capital Management, LLC.

Collaborative Holdings Master Fund LP (13)

Clal Insurance Enterprises Holdings Ltd.

Y.D More Investments Ltd.

The Phoenix Holdings Ltd.

less than 1%.

(1) Percentage ownership is based on 21,814,967 shares of our common stock outstanding as of March 17, 2022 and, for each person or entity listed above, warrants or options to purchase shares of our common stock which exercisable within 60 days of the such date.

(1) Percentage ownership is based on 25,871,889 shares of our common stock outstanding as of March 6, 2023 and, for each person or entity listed above, warrants or options to purchase shares of our common stock which exercisable within 60 days of such date.

(2) Includes 7,718 vested options to purchase common stock and 378,620 vested restricted shares.

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(3) Includes 29,419 vested options to purchase common stock and 107,172 vested restricted shares.

Excludes 6,956 options which are not vested.

Includes 1,786 shares owned by his spouse, for which Mr.

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(4) Includes 30,673 vested options to purchase common stock and 108,562 vested restricted shares.

Excludes 7,166 options which are not vested.

(5) Includes 192,490 vested options to purchase common stock and 17,595 vested restricted shares.

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(7) Includes 801 vested options to purchase common stock and 35,112 vested restricted shares.

(8) Includes 801 vested options to purchase common stock and 8,395 vested restricted shares.

(8) Includes 27,457 vested restricted shares.

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Shaked disclaims beneficial ownership except to the extent of his pecuniary interest therein.

(10) Includes 14,617 vested restricted shares and 300 Series A Preferred Shares convertible into 74,100 shares of common stock.

(9) Includes 29,234 vested restricted shares.

Includes warrants exercisable into 409,535 shares of common stock, subject to a contractual beneficial ownership limitation of 4.99%.

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(12) Based solely on information contained in Form 13G filed with the SEC on February 14, 2023.

(14) Based Solely on information contained in form 13G filed with the SEC on March, 7, 2022.

The address for Y.D More Investments Ltd.

is 2 Ben-Gurion Street, Ramat Gan, Israel.

(13) Based solely on information contained in Form 13G filed with the SEC on February 14, 2023.

The address of the Phoenix Holdings Ltd.

is Derech Hashalom 53, Givataim, 53454, Israel.

Certain Relationships and Related Party Transactions

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(“Aegis”) certain a fee of up to 3% of any proceeds from sales derived by us through commercial transactions entered into with parties introduced by Aegis.

investment, licensing transaction, co-promotion or distribution agreement or other profit or revenue sharing, or similar business arrangement) from parties introduced by Aegis.

In addition, on April 3, 2020, we entered into a Sales Fee Agreement with Aegis, pursuant to which we agreed to pay Aegis a fee of up 4.5% of consideration we may receive in a business development transaction (including, any joint-venture, partnership, strategic collaboration or investment, licensing transaction, co-promotion or distribution agreement or other profit or revenue sharing, or similar business arrangement) from parties introduced by Aegis.

To date, we have not paid Aegis any fees as a result of these agreements.

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Principal Accounting Fees and Services

The following table sets forth fees billed to us by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, our independent registered public accounting firm, during the fiscal years ended December 31, 2021 and December 31, 2020 for:

December 31, 2022 for:

(i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements;

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Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Convertible Preferred Stock of the Company ( incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on December 3, 2019).

Certificate of Designation of Preferences, Rights and Limitations of Series A-2 Convertible Preferred Stock of the Company ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2019).

Certificate of Designation of Preferences, Rights and Limitations of Series A-3 Convertible Preferred Stock of the Company ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2019).

Certificate of Designation of Preferences, Rights and Limitations of Series A-4 Convertible Preferred Stock of the Company ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2019).

Form of Representatives’ Warrant ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2016).

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Form of 2022 Pre-Funded Warrant ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2022).

Form of Warrant to be issued to OrbiMed Royalty and Credit Opportunities III, LP ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 15, 2022).

Personal Employment Agreement, dated January 8, 2015, between the Company and Zvi Ben David (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 9, 2015).

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Form of 2022 Securities Purchase Agreement ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2022).

Termination of Employment and Separation Agreement dated January 23, 2023 by and between Dror Bacher and Labstyle Innovation Ltd.

( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 27, 2023).

Amendment to the Company’s Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on October 14, 2022).

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 ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 15, 2022).

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 ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 15, 2022).

Credit Agreement, dated June 9, 2022, by and among the Company, as borrower, and OrbiMed Royalty and Credit Opportunities III, LP, as lender ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2022).

Pledge and Security Agreement, dated June 9, 2022, by and among the Company, Labstyle Innovation Ltd, Upright Technologies, Inc., Psyinnovations, Inc., and OrbiMed Royalty and Credit Opportunities III, LP ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2022).

Registration Rights Agreement, dated June 9, 2022, by and between the Company and OrbiMed Royalty and Credit Opportunities III, LP ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2022).

Exclusive Preferred Partner, Co-Promotion, Development Collaboration and License Agreement by and between Sanofi US Services, Inc.

and DarioHealth Corp., dated February 28, 2022 ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022).

Technology Purchase Agreement by and among Physimax Technologies Ltd., Labstyle Innovation Ltd.

and DarioHealth Corp., dated January 18, 2022 ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022).

Redemption Agreement by and between DarioHealth Corp.

and Richard Allan Anderson dated June 9, 2022.

Form of Preferred Exchange Agreement by and between DarioHealth Corp.

and certain holders of Series A-1 Preferred Stock, dated September 20, 2022.

List of Subsidiaries of the Company

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Form 10-K Summary.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 9, 2023

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Chief Financial Officer, Secretary and Treasurer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Erez Raphael

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March 9, 2023

/s/ Adam Stern

/s/ Jon Kaplan

March 9, 2023

/s/ Richard B.

/s/ Adam Stern

March 9, 2023

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Notes to Consolidated Financial Statements

F- 10 – F- 49

- - - - - - - - - - - - - - -

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of DarioHealth Corp.

To the Shareholders and the Board of Directors of DarioHealth Corp.

Opinion on the Financial Statements

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Kost Forer Gabbay & Kasierer

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Description of the Matter

As discussed in Note 2 to the consolidated financial statements, a significant portion of the Company's revenue is derived from the offering of a membership package which contains multiple goods and services that are accounted for as separate performance obligations.

Such agreements require the Company to allocate the transaction price to the separate performance obligations based on their relative standalone selling price.

The Company does not offer the services included in the membership package on a standalone basis, and estimates the standalone selling price of the performance obligations based on, among others, comparable companies' offerings, customer type and price lists, pricing practices, government backed reimbursement programs, and market standard prices.

Auditing the Company's estimates of the standalone selling prices for the performance obligations included in the membership package was challenging and required complex auditor judgment due to the significant judgment required by management in determining the relevant comparable data used, the extent of required adjustments to the data, the effects of market conditions and customer demographics.

As described in Note 2 and Note 6 to the consolidated financial statements, a significant portion of the Company's revenue is derived from agreements with enterprise business market groups to provide a mobile and web-based digital therapeutics health management programs, data license and related development and implementation services.

The Company contracts with customers often include promises to transfer multiple promises to provide goods and services, which are accounted for separately if they are distinct performance obligations.

In such contracts, the transaction price is then allocated to the distinct performance obligations on a relative standalone selling price basis and revenue is recognized when control of the distinct performance obligation is transferred.

The accounting for contracts with multiple promises requires the company to exercise significant judgment in determining revenue recognition for these contracts and includes:

(a) identification and determination of whether products and services are considered distinct performance obligations that should be accounted for separately based on the terms and conditions of the relevant agreements, (b) determination of stand-alone selling prices for each distinct performance obligation that are not sold separately.

(c) the pattern of transferring control (i.e., timing of when revenue is recognized) for each distinct performance obligation.

Given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer contracts was extensive and required a high degree of auditor judgment.

How We Addressed the Matter in Our Audit

To test management’s estimate of standalone selling prices our audit procedures included, among others, understanding the methodology applied and testing the accuracy and completeness of the underlying data used in the Company’s estimate.

We obtained and evaluated management’s analysis of comparable companies and services by assessing the comparability of the comparable companies, reviewing the list of the Company’s services and prices and comparing that list with the services and prices of comparable companies.

We analyzed the government backed reimbursement programs and market standards used in the Company's assessment, including the review of the aforementioned programs and their relation to the Company’s services.

We also performed inquiry of key personnel and inspected supporting documentation to evaluate the adjustments made to the comparable data, including effects of market conditions and customer demographics.

For a sample of customers, we:

(1) obtained and read contract source documents, including master agreements, and other documents that were part of the agreement and evaluating management's identification of the contract and the distinct performance obligations based on the terms of the arrangements and the company's accounting policies, (2) tested management’s identification of significant terms for completeness, including the identification and determination of distinct performance obligations, (3) evaluating the methodology and reasonableness of management’s assumptions used for the estimate of stand-alone selling prices on a sample basis for products and services that are not sold separately (4) tested management’s calculations of revenue and the associated timing of revenue recognition.

We have also evaluated the Company’s disclosures in relation to this matter.

Kost Forer Gabbay & Kasierer

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+972-3-5622555

Business Combinations

Going concern assessment

Description of the Matter

As described in Note 1 to the consolidated financial statements, during 2021, the Company completed its acquisitions of Upright Technologies Ltd.

("Upright "), And PsyInnovations Inc.

("Wayforward") for total considerations of $33,578 and $21,079 thousands, respectively (collectively, "the acquisitions").

The Acquisitions were accounted for as business combinations in accordance with ASC 805 “Business Combination”.

Auditing the Company's accounting for its acquisitions was complex due to the significant estimation required by management in determining the fair value of the technology-related intangible assets of Upright and Wayforward in the amounts of $9,599 thousands and $5,520 thousands, respectively (collectively, “the intangible assets").

The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of these intangible assets, as well as the sensitivity of the respective fair values to the underlying significant assumptions.

The Company used the discounted cash flow method to measure the fair value of the intangible assets.

The significant assumptions used to estimate the fair value of the intangible assets included, among others, discount rates, projected financial information and profit margins.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

As discussed in Note 1 to the consolidated financial statements, management identified there were conditions that raised substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements were issued.

The conditions that resulted in the substantial doubt being raised included a history of net losses, net operating cash outflows, significant interest payments, a requirement through its Credit Agreement to maintain a minimum liquidity of $10 million, and an accumulated deficit.

However, based on management’s operating plan and resulting available liquidity, management believes the Company’s liquidity is sufficient to fund operations and satisfy their financial obligations as they become due for at least one year from the financial statement issuance date.

Therefore, the Company concluded these plans alleviate the substantial doubt that was raised about the Company’s ability to continue as a going concern for at least twelve months from the date that the financial statements were issued.

We identified the evaluation of going concern as a critical audit matter.

There was significant auditor judgment required in evaluating the Company’s forecasted cash flows, and resulting available liquidity, throughout the 12 months from the date of the issuance of the consolidated financial statements.

How We Addressed the Matter in Our Audit

To test the fair value of the acquired intangible assets and brand, our audit procedures included, among others, evaluating the Company's use of appropriate valuation methodologies, evaluating the prospective financial information and testing the completeness and accuracy of underlying data supporting the significant assumptions and estimates.

For example, we compared the significant assumptions to current industry, market and economic trends, historical results of the acquired business and to other relevant factors.

We involved our valuation professionals to assist in evaluation of the methodology used by the Company and certain assumptions included in the fair value estimates.

For example, our valuation professionals performed independent comparative calculations to estimate the acquired entity discount rate.

In addition, we assessed the adequacy of the related disclosures in the consolidated financial statements.

In addressing the matter our audit procedures included, among others, , assessing the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash used in management’s assessment of whether the company has sufficient liquidity to fund operations for at least one year from the consolidated financial statement issuance date.

This testing included inquiries with management, comparison of prior period forecasts to actual results, consideration of positive and negative evidence impacting management’s forecasts and liquidity and evaluated management’s analysis of their impact on the forecasted cash flows.

We performed sensitivity analyses to assess the impact of changes in the key assumptions included in management's liquidity forecast models.

We also assessed the probability and timing of forecasted cash outflows related to the settlement of current liabilities included in management’s assessment and evaluated the reasonableness of management's cost reduction initiatives.

In addition we assessed the adequacy of the company’s going concern disclosures included in note 1 to the consolidated financial statements.

/s/ KOST FORER GABBAY & KASIERER

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Other accounts payable and accrued expenses

Loan, current

Total current liabilities

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Earn-out liability

Long-term loan

Warrant liability

Total non-current liabilities

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Common stock of $ 0.0001 par value - Authorized:

160,000,000 shares at December 31, 2021 and 2020;

160,000,000 shares at December 31, 2022 and December 31, 2021;

Issued and Outstanding:

16,573,420 and 8,119,493 shares at December 31, 2021 and 2020, respectively

25,724,470 and 16,573,420 shares at December 31, 2022 and December 31, 2021, respectively

Preferred stock of $ 0.0001 par value - Authorized:

5,000,000 shares at December 31, 2021 and 2020;

5,000,000 shares at December 31, 2022 and December 31, 2021;

Issued and Outstanding:

11,927 and 15,823 shares at December 31, 2021 and 2020, respectively

3,567 and 11,927 shares at December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

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dollars in thousands (except stock and stock data)

Cost of revenues (excluding of amortization shown separately below)

Amortization of acquired intangible assets and inventories step-up

Hardware and consumable products

Total revenues

Cost of revenues:

Hardware and consumable products

Amortization of acquired intangible assets

Total cost of revenues

Operating expenses:

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Operating loss

Total financial (income) expenses, net

Total financial expenses, net

Loss before taxes

Other comprehensive loss:

Deemed dividend

Net loss attributable to holders of Common Stock

Net loss attributable to shareholders

Net loss per share:

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dollars in thousands (except stock and stock data)

Preferred shares

shareholders’

Preferred Stock

stockholders’

Balance as of January 1, 2021

Payment for executives and directors under stock for salary program

Exercise of Options

Exercise of agent warrants

Exercise of repriced warrants

Exercise of warrants

Issuance of common stock to consultants and service provider

Issuance of common stock to directors and employees

Deemed dividend related to warrants exchange

Deemed dividend related to issuance of Preferred Stock

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Issuance of common stock, net of issuance cost

Issuance of Common Stock, net of issuance cost upon Acquisitions

Stock-based compensation

Balance as of December 31, 2021

Payment for executives and directors under stock for salary program

Exercise of Options

Exercise of agent warrants

Exercise of warrants

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Issuance of common stock, net of issuance cost upon Acquisitions

Earnout resolution

Repurchase and retirement of common stock

Stock-based compensation

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Change in operating lease right of use assets

Amortization of acquired inventories step-up

Amortization of acquired intangible assets

Decrease (increase) in trade receivables

Increase in trade receivables

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

Decrease (increase) in inventories

Increase in trade payables

Increase (decrease) in other accounts payable and accrued expenses

Increase in inventories

Increase (decrease) in trade payables

Decrease in other accounts payable and accrued expenses

Increase (decrease) in deferred revenues

Change in operating lease liabilities

Revaluation of earn-out

Remeasurement of earn-out

Non-Cash financial expenses

Net cash used in operating activities

Cash flows from investing activities:

Investment in deposit

Purchase of property and equipment

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Cash paid as part of Upright Technologies Ltd.

Loans receivables

Investment in a loan

Purchase of intangible assets

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock and prefunded warrants (net of issuance costs)

Proceeds from exercise of warrants

Proceeds from exercise of options

Proceeds from borrowings on credit agreement

Repurchase and retirement of common stock

Net cash provided by financing activities

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Cash, cash equivalents and restricted cash and cash equivalents at beginning of period

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

Cash, cash equivalents and restricted cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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

Non-cash activities:

Right-of-use assets obtained in exchange for lease liabilities

Earn-out extinguishment as part of WayForward acquisition

DARIOHEALTH CORP.

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

DarioHealth is a Global Digital Therapeutics (DTx) company changing the way people with chronic conditions manage their health.

By delivering personalized evidence-based interventions that are driven by precision data analytics, software, and personalized coaching, DarioHealth has developed an approach that empowers individuals to adjust their lifestyle in holistic way.

DarioHealth is a Global Digital Therapeutics (DTx) company delivering personalized evidence-based interventions that are driven by precision data analytics, software, and personalized coaching, DarioHealth has developed an approach with the intent to empower individuals to adjust their lifestyle in holistic way.

DarioHealth’s cross-functional team operates at the intersection of life sciences, behavioral science, and software technology to deliver seamlessly integrated and highly engaging digital therapeutics interventions.

Our diabetes solutions, its user-centric approach is used by tens of thousands of customers around the globe.

Our diabetes solution, its user-centric approach is used by tens of thousands of customers around the globe.

DarioHealth is rapidly expanding its solutions for additional chronic conditions such as hypertension and moving into new geographic markets.

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Upright is a digital musculoskeletal (“MSK”) health company focused on preventing and treating the most common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech.

See note (4a).

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 owned subsidiary WF Merger Sub, Inc.

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(dba WayForward) is a mental health company who develops the WayForward behavioral digital health platform with artificial intelligence (AI) enabled screening to triage and navigate members to specific interventions, digital cognitive behavioral therapy (CBT), self-directed care, expert coaching and access to in-person and telehealth provider visits.

See note (4b).

Under Accounting Standard Codification (“ASC”) Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year after the date that the financial statements are issued.

As required under ASC 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

DARIOHEALTH CORP.

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NOTE 1:- GENERAL (Cont.)

During the year ended December 31, 2021, the Company incurred operating losses and negative cash flows from operating activities amounting to $ 76,494 and $ 50,409 , respectively.

On December 31, 2021, we had $ 35,808 in available cash and cash equivalent.

On February 28, 2022, the Company entered into securities purchase agreements with accredited investors relating to an offering of its common stock, resulting in aggregate gross proceeds of approximately $ 40,000 ( $ 38,026 net of issuance expenses).

Management believes that the proceeds from the recent securities purchase agreements, 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 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.

Evaluation of Substantial Doubt Raised

In performing the first step of the evaluation, the Company concluded that the following conditions raised substantial doubt about its ability to continue as a going concern:

- History of net losses of $ 62,193 and $ 76,761 for the years ended December 31, 2022, and 2021, respectively.

- Net operating cash outflow of $ 47,845 and $ 50,409 in 2022 and 2021, respectively.

- Significant cash payments for interest on our Loan Facility (as hereinafter defined) of $ 1,876 in 2022 and significant cash payments for interest and principal of $ 8,823 expected in 2023.

- A requirement that the Company maintain a minimum of $ 10,000 in liquidity, at all times, to not be in default of the Loan Facility.

If the Company will be in default of the Loan Facility, the lender could require the immediate payment of all the outstanding loan amount.

Consideration of Management’s Plans

In performing the second step of this assessment, the Company is required to evaluate whether it is probable that the Company’s plans will be effectively implemented within one year after the financial statements are issued and whether it is probable those plans will alleviate the substantial doubt raised about the Company’s ability to continue as a going concern.

As of December 31, 2022, the Company had $ 49,357 in available cash and cash equivalents.

The Company has approved a plan, to improve its available cash balances, liquidity and cash flows generated from operations.

The Company is prepared to implement the following actions as required by business and market conditions :

reducing non-essential expenses to conserve cash and improve its liquidity position, deferral and reprioritization of certain research and development programs that would involve reduced program spend and total compensation reductions for senior executives to strengthen liquidity and to preserve key research and development, commercial and functional roles.

Management Assessment of Ability to Continue as a Going Concern

The Company has a history of operating losses and negative cash flows from operations.

However, despite these conditions, the Company believes management’s plans, as described more fully above, will provide sufficient liquidity to meet its financial obligations and maintain levels of liquidity as specifically required under the Loan Facility.

Therefore, management concluded these plans alleviate the substantial doubt that was raised about the Company’s ability to continue as a going concern for at least twelve months from the date that the consolidated financial statements were issued.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 1:- GENERAL (Cont.)

Future Plans and Considerations

Although not considered for purposes of the Company’s assessment of whether substantial doubt was alleviated, the Company has plans to improve operating cash flows by entering into strategic partnerships with other companies that can provide access to additional customers and new markets.

The Company may also seek to raise additional funds through the issuance of debt and/or equity securities or otherwise.

The Company’s plans are subject to inherent risks and uncertainties.

Accordingly, there can be no assurance that the Company’s plans can be effectively implemented and, therefore, that the conditions can be effectively mitigated.

Until such time, if ever, that the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through equity or debt financings, which may not be available to the Company on the timing needed or on terms that the Company deems to be favorable.

To the extent that the Company raises additional capital through the sale of equity or debt securities, the ownership interest of its stockholders will be diluted.

If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected.

In December 2015, the United States Food and Drug Administration granted LabStyle 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.

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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.

While the Company is not able at this time to estimate future impacts of the COVID-19 pandemic on its financial and operational results, such impacts could be material.

DARIOHEALTH CORP.

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Management believes the Company’s critical accounting policies and estimates are reasonable based upon information available at the time they are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements including other accounts receivable and prepaid expenses and other accounts payable and accrued expenses, and the reported amounts of revenue, cost of revenues and operational expenses during the reporting period.

Actual results could differ from those estimates.

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Transactions and balances denominated in dollars are presented at their original amounts.

Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with Accounting Standard Codification (“ASC”) 830, “Foreign Currency Matters”.

Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC 830, “Foreign Currency Matters”.

All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the consolidated statements of comprehensive loss as financial income or expenses, as appropriate.

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Intercompany accounts and transactions have been eliminated upon consolidation.

Segment information:

Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance.

The Company defines the term “chief operating decision maker” to be its Chief Executive Officer.

The Company’s Chief Executive Officer reviews the financial information presented on consolidated basis for purposes of allocating resources and evaluating its financial performance.

Accordingly, the Company has determined that it operates as a single reportable segment.

Cash and cash equivalents:

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Short-term restricted bank deposits are restricted deposits with maturities of up to one year and are pledged in favor of the bank as a security for the bank guaranties issued to the landlords of the Company’s offices and credit card payments.

The short-term restricted bank deposits are denominated in NIS and USD and bear interest at an average rate of 0.01 %as of December 31, 2021 and 2020, respectively.

The short-term restricted bank deposits are denominated in NIS and USD and bear interest at an average rate of 0.61 % and 0.01 % as of December 31, 2022 and 2021, respectively.

The short-term restricted bank deposits are presented at their cost, including accrued interest.

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Total write-downs during the years ended December 31, 2022, and 2021 amounted to $ 88 and $ 73 , respectively.

Property and equipment:

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:

DARIOHEALTH CORP.

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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Property and equipment:

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:

Computers, and peripheral equipment

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(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

Consumers revenue

The Company considers customer and distributers purchase orders to be the contracts with a customer.

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The revenues from fixed-price services are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Commercial revenue

The Company provide a mobile and web-based digital therapeutics health management programs to employers and health plans for their employees or covered individuals.

Including live clinical coaching, content, automated journeys, hardware, and lifestyle Coaching, currently supporting diabetes, prediabetes and obesity, hypertension, behavioral health (BH) and musculoskeletal health (MSK).

At contract inception, the Company assesses the type of services being provided and assesses the performance obligations in the contract.

These solutions integrate access to the Company’s web-based platform, and clinical and data services to provide an overall health management solution.

The promises to transfer these goods and services are not separately identifiable and is considered a single continuous service comprised of a series of distinct services that are substantially the same and have the same pattern of transfer (i.e., distinct days of service).

These services are consumed as they are received, and the Company recognizes revenue each month using the variable consideration allocation.

Revenue is recognized either on a per engaged member per month (PEMPM) or a per employee per month (PEPM) basis.

Contracts typically have a duration of more than one year.

Certain of the Company’s contracts include client performance guarantees and a portion of the fees in those contracts are subject to performance-based metrics such as clinical outcomes or minimum member utilization rate.

The Company includes in the transaction price some or all of an amount of variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Refund to a customer that results from performance levels that were not met by the end of the measurement period are adjusted to the transaction price, and therefore estimated at the outset of the arrangement.

The Company has also entered into contracts (Note 6) with a preferred partner and a health plan provider in which the Company provides data license, development and implementation services.

Cost of revenues:

Cost of revenues is comprised of the cost of production, data center costs, shipping and handling inventory, personnel and related overhead costs, depreciation of production line and related equipment costs, amortization of deferred costs and inventory write-downs.

Cost of revenues is comprised of the cost of production, data center costs, shipping and handling inventory, hosting services, personnel and related overhead costs, depreciation of production line and related equipment costs, amortization of costs to fulfill a contract and inventory write-downs.

Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term restricted bank deposits and trade receivables.

Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, short-term restricted bank deposits, and trade receivables.

For cash and cash equivalents, the Company is exposed to credit risks 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 performs ongoing credit evaluations of its customers.

An allowance for doubtful accounts is determined with respect to those specific amounts that the Company has determined to be doubtful of collection.

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 December 31, 2022, the Company's major customer accounted for 80.9 % of the Company's accounts receivable balance.

The Company's major customer accounted for 39.8 %, for the year ended December 31, 2022, of the Company's revenue in the relevant period.

DARIOHEALTH CORP.

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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

All of the cash and cash equivalents and short-term restricted bank deposits of the Company and its Subsidiaries are invested in deposits and current accounts with major U.S.

and Israeli banks.

Such cash and cash equivalents and short-term restricted bank deposits may be in excess of insured limits and are not insured in other jurisdictions.

Generally, cash and cash equivalents and short-term restricted bank deposits may be redeemed and therefore a minimal credit risk exists with respect to these deposits and investments.

The Company’s trade receivables are derived mainly from sales to distributers and to end-users world-wide.

The Company performs ongoing credit evaluations of its customers.

An allowance for doubtful accounts is determined with respect to those specific amounts that the Company has determined to be doubtful of collection.

The Company had no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

Income taxes:

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The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes.

The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

As of December 31, 2021, and 2020, no liability for unrecognized tax benefits was recorded as a result of the implementation of ASC 740.

The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate

As of December 31, 2022, and 2021, no liability for unrecognized tax benefits was recorded.

Research and development costs:

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The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model.

The value of the portion of the

award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statement of comprehensive loss.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statement of comprehensive loss.

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures.

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The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Fair value of financial instruments:

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Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction.

To the extent that valuation is based on models or inputs that

are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorized as Level 3.

The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment, and the investments are categorized as Level 3.

The carrying amounts of cash and cash equivalents, short-term restricted bank deposits, trade receivables, other accounts receivable and prepaid expenses, trade payables and other accounts payable and accrued expenses approximate their fair value due to the short-term maturity of such instruments.

The Company's Loan Facility, warrants liability and earn-out liability were measured at fair value using Level 3 unobservable inputs (see note 4b) until the resolution date of December 31, 2022.

The Company utilized a Monte Carlo simulation model for the initial and subsequent valuations of the earn-out liability.

DARIOHEALTH CORP.

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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company's earn-out liability is measured at fair value using Level 3 unobservable inputs (see note 4b).

The Company utilized a Monte Carlo simulation model for the initial and subsequent valuations of the earn-out liability.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance.

The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.

Warrants that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital.

Warrants that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter.

The liability-classified warrants are recorded under non-current liabilities.

Changes in the estimated fair value of the warrants are recognized in “Financial expenses, net” in the consolidated statements of operations.

Basic and diluted net loss per share:

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The Company considers its Convertible Preferred shares to be participating securities as the holders of the Convertible Preferred shares would be entitled to dividends that would be distributed to the holders of Common Stock, on a pro-rata basis assuming conversion of all Convertible Preferred shares into shares of Common Stock.

These participating securities do not contractually require the holders of such shares to participate in the Company’s losses.

As such, net loss for the period presented was not allocated to the Company’s participating securities.

The Company’s basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of Common Stock, without consideration of potentially dilutive securities.

The Company’s basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares, without consideration of potentially dilutive securities.

The diluted net loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities.

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Severance pay expense for the year ended December 31, 2022 and 2021 amounted to $ 1,136 and $ 870 , respectively.

The Company has a 401(k) defined contribution plan covering certain employees in the U.S.

All eligible employees may elect to contribute up to 92 %, but generally not greater than $ 20 per year (for certain employees over 50 years of age the maximum contribution is $ 26 per year), of their annual compensation to the plan through salary deferrals, subject to Internal Revenue Service limits.

DARIOHEALTH CORP.

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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company has a 401(k) defined contribution plan covering certain employees in the U.S.

All eligible employees may elect to contribute up to 92 %, but generally not greater than $ 21 per year (for certain employees over 50 years of age the maximum contribution is $ 27 per year), of their annual compensation to the plan through salary deferrals, subject to Internal Revenue Service limits.

Legal and other contingencies:

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(1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset.

The Company elected to not recognize a lease liability or right-of-use ("ROU") asset for leases with a term of twelve months or less.

The Company elected to not recognize a lease liability or right-of-use (“ROU”) asset for leases with a term of twelve months or less.

The Company also elected the practical expedient to not separate lease and non-lease components for its leases.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease payments arising from the lease.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred.

The ROU assets are reviewed for impairment.

The lease liability is initially measured at lease commencement date based on the discounted present value of minimum lease payments over the lease term.

The lease liability is initially measured at lease commencement date based on the discounted present value of the lease payments over the lease term.

The implicit rate within the operating leases is generally not determinable;

therefore, the Company uses the Incremental Borrowing Rate ("IBR") based on the information available at commencement date in determining the present value of lease payments.

therefore, the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments.

The Company’s IBR is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located.

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An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option.

Business combination:

See also Note 9.

Business combination and asset acquisitions:

The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.

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Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

The Company accounts for a transaction as an asset acquisition pursuant to the provisions of ASU 2017-01, “Clarifying the Definition of a Business,” 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.

The Company accounts for a transaction as an asset 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 direct costs are capitalized as part of the asset or assets acquired.

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For the years ended December 31, 2022 and 2021, no impairment of goodwill has been recorded.

Recently adopted accounting pronouncements:

In December 2019, the FASB issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance.

ASU 2019-12 is effective for the Company as of January 1, 2021 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements, not yet adopted:

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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.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The guidance also requires increased disclosures.

For the Company, the amendments in the update were originally effective for

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

For the Company, the amendments in the update were originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

In November 2019, the FASB issued ASU No.

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Early adoption is permitted.

The Company is currently assessing the impact the guidance will have on its consolidated financial statements.

The Company does not expect this standard to have a material effect on its consolidated financial statements.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature.

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For the Company, the guidance is effective for fiscal years beginning after 15 December 2022 and interim periods within those fiscal years.

The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements.

The Company does not expect this standard to have a material effect on its consolidated financial statements.

NOTE 3:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

Prepaid expenses

Costs to fulfill a contract

Government authorities

Loan receivables

*) see notes 4a and 17.

NOTE 4:- ACQUISITIONS

2022 Acquisition

Technology Purchase of Physimax Technologies Ltd.

On March 31, 2022 (the “Acquisition Date”), the Company completed the acquisition, through its subsidiary LabStyle, of a technology from Physimax Technologies Ltd (“Physimax Technology”).

The Company considered this transaction as an asset acquisition .

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 during the second quarter of 2022, The total consideration transferred in the acquisition of Physimax Technology was $ 1,686 .

In addition, the Company incurred acquisition-related costs in an amount of $ 131 .

DARIOHEALTH CORP.

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dollars in thousands

NOTE 4:- ACQUISITIONS

NOTE 4:- ACQUISITIONS (Cont.)

Purchase price allocation:

Under asset acquisition accounting principles, the total purchase price was allocated to Physimax Technology as set forth below.

period (Years)

Prior Year Acquisitions

Acquisition of Upright

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Total purchase price

*) Including step-up in inventory fair value of $ 1,140

DARIOHEALTH CORP.

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The acquisition was accounted for as a business combination.

The consideration transferred included 768,124 restricted shares of Common Stock, cash consideration of $ 5,387 and an earn-out consideration payable in up to 237,076 restricted shares of Common Stock, subject to certain revenue thresholds that will be resolved in 2022.

The consideration transferred included 889,956 restricted shares of Common Stock (including 121,832 hold-back shares that were issued in December 2022), cash consideration of $ 5,387 and an earn-out consideration payable of 76,856 restricted shares of Common Stock, subject to certain revenue thresholds that will be resolved in 2022.

The fair value total consideration transferred in the acquisition of WayForward was $ 21,079 .

The fair value, as of the closing date, of the earn-out consideration was $ 1,328 and was included as part of the consideration transferred.

Since the earn-out arrangement is not indexed to the Company's own stock, the earn-out arrangement was accounted for as a liability, subsequently measured at fair value through earnings until settlement.

Goodwill is primarily attributable to expected synergies arising from technology integration and expanded product availability to the Company’s existing and new customers.

Goodwill is not deductible for income tax purpose.

As of December 31, 2021, the earn-out liability fair value was $ 825 .

For the year ended December 31, 2021, the Company recorded reevaluation income in the amount of $ 503 .

As of December 31, 2022, the earnout conditions have been satisfied.

Pursuant to the settlement agreement, the Company remeasured the earn-out liability measured at fair value through earnings until the resolution date.

The Company is to issue 76,856 shares of Common Stock with a fair value of $ 328 as of December 31, 2022.

For the year ended December 31, 2022, the Company recorded remeasurement income in the amount of $ 497 .

In addition, the Company incurred acquisition-related costs in a total amount of $ 502 acquisition-related costs which include legal and accounting acquisition-related costs include legal and accounting services which were included in general and administrative expenses in the Consolidated Statements of Comprehensive loss.

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dollars in thousands

NOTE 4:- ACQUISITIONS (Cont.)

Pro forma results

The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisitions of Upright, which closed in February 2021, 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 been acquired as of January 1, 2020.

The following table doesn’t include WayForward results prior to the acquisition date due to lack of materiality.

Total revenue

Total expenses

Preferred stock Deemed dividend

Net loss attributable to holders of common stock

Basic and diluted net loss per share

NOTE 5:- INVENTORIES

Inventory consists of the following:

Raw materials

Finished products

The following tables represent the Company total revenues for the year ended December 31, 2021 and 2020 by performance obligation type as a result of implementing ASC 606:

Hardware and consumable products

(*) Software application and remote monitoring services

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.

Agreement with Preferred Partner

On February 28, 2022, the Company entered into an exclusive preferred partner, co-promotion, development 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 aggregate consideration under the contract is up to $ 30 million over the initial term of the Exclusive Agreement, consisting of (i) an upfront payment, (ii) payments for development services per development plan 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.

Since the contract consideration includes variable consideration, as of December 31, 2022, the Company excluded the variable payments from the transaction price since it is not probable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is resolved.

During 2022, the first development plan was approved and completed.

The Company concluded that the first development plan should be accounted for as a separate contract.

As such, for the year ended December 31, 2022, the Company recognized $ 4,000 revenues for the completion of the first development plan.

On December 13, 2022, the second development plan was approved.

The Company concluded that the second development plan should be accounted for as a separate contract which includes development services performance obligations, satisfied over time, based on labor hours.

As such, for the year ended December 31, 2022, the Company recognized $ 1,506 revenues with respect to the second development plan, with additional revenues from the second development plan of $ 2,494 expected to be recognized by the end of June 2023 .

DARIOHEALTH CORP.

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- REVENUES (Cont.)

Agreement with National Health Plan

On October 1, 2021, the Company entered into a Master Service Agreement (“MSA”) and into a SOW ("October SOW") with a national health plan (“Health Plan”).

Pursuant to the October SOW, the Company will provide the Health Plan access to web and app-based platform, for behavioral health.

The Company has concluded that the Contract contained a single performance obligation – to provide access to the Company's platform.

The consideration in the Contract was based entirely on customer usage.

On August 2022, the Company entered into an additional SOW (“August SOW”) with the Health Plan according to which, the Company will provide implementation service and shall develop additional features to be included in the platform.

The Company concluded that the August SOW should be accounted for as a separate contract.

The Company has concluded that the August SOW contained two performance obligations as follows:

(i) Digital Behavioral Health Navigation Platform Implementation.

This performance obligation includes configuration and implementation of the platform.

(ii) Enhancements to the Digital Behavioral Health Navigation Platform.

This performance obligation includes adding additional features and capabilities to the Platform.

The August SOW includes a fixed consideration in the amount of $ 2,650 .

The Company allocated the consideration between the two performance obligations based on standalone selling prices.

The Company determined the standalone selling prices based on the expected cost plus a margin approach.

As of December 31, 2022, the Company has recognized revenues of $ 1,778 with additional revenues of $ 872 expected to be recognized by June of 2023.

Revenue Source:

The following tables represent the Company total revenues for the year ended December 31, 2022 and 2021 disaggregated by revenue source:

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- REVENUE (Cont.)

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.

Deferred Revenue

The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers prior to the satisfaction of the Company's performance obligations.

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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Balance, end of the period

Because all performance obligations in the Company’s contracts with customers relate to contracts with a duration of less than one year, the Company has 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.

Costs to fulfill a contract

The Company defer costs incurred to fulfill contracts that:

(1) relate directly to the contract;

(2) are expected to generate resources that will be used to satisfy our performance obligation under the contract;

and (3) are expected to be recovered through revenue generated under the contract.

Contract fulfillment costs are expensed as we satisfy our performance obligations and recorded in cost of revenue.

Costs to fulfill a contract are recorded to other accounts receivable and prepaid expenses and long term assets.

Costs to fulfill a contract consist of (1) deferred hardware cost incurred in connection with delivery of services that are deferred.

(2) deferred costs incurred, related to future performance obligations which are capitalized.

Costs to fulfill a contract as of December 31, 2022, consisted of the following:

Costs to fulfill a contract, current

Costs to fulfill a contract, noncurrent

Total Costs to fulfill a contract

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 7:- FAIR VALUE MEASUREMENTS

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.

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:

December 31, 2022

(in thousands)

Financial Liabilities:

Long Term Loan

Warrant liability

Total Financial Liabilities

December 31, 2021

(in thousands)

Financial Liabilities:

Earn out liability

Total Financial Liabilities

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 8).

The fair value of the FCA is estimated by the Company at each reporting date, 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, 2022 and 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 initially estimated as 50 % of the sum of the commitment fee paid upfront and the lender expenses in relation to the Loan origination.

As of December 31, 2022, the Company will not be eligible to the Delayed Draw Commitment Amount.

Based on that, the fair value of the FCA was de-recognized.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 7:- FAIR VALUE MEASUREMENTS (Cont.)

Loan Facility

The fair value of the Loan Facility is recognized in connection with the Company’s Credit Agreement with respect to the Initial Commitment Amount only (Note 8).

The fair value of the 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 the Loan, which is reported within non-current liabilities and current liabilities (Maturity Date - June 9, 2027) on the consolidated balance sheets, is estimated by the Company at each reporting date based on significant inputs that are generally determined based on relative value analyses.

The Loan incorporates comparisons to instruments with similar covenants, collateral, and risk profiles and was obtained using a discounted cash flow technique.

On the date of Loan origination, or June 9, 2022, the discount rate was arrived at by calibrating the loan amount of $ 25 million with the fair value of the warrants of $ 910 and the loan terms interest rate of secured overnight financing rate (“SOFR”) + 9.5 %.

The implied internal rate of return of the loan was 15.6 %.

The fair value of the Loan, as of December 31, 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 no adjustment related to instrument specific credit risk was required.

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 8).

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 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):

Exercise price

Expected term (in years)

Dividend rate

Risk-free interest rate

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 7:- FAIR VALUE MEASUREMENTS (Cont.)

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

December 31, 2022

Long-Term Loan

Warrant Liability

Balance as of January 1, 2022

Initial measurement of the FCA

Change in fair value

Balance as of December 31, 2022

Earn out Liability

As part of the acquisition of wayForward on June 7, 2021, the consideration transferred included earn-out payable in up to 237,076 restricted shares of Common Stock.

The earn-out arrangement is not indexed to the Company's own stock and was accounted as a liability and subsequently measured at fair value through earnings until resolution of the earn-out.

In determining the earn-out fair value, the Company used the Monte-Carlo simulation valuation technique, in order to predict the probability of different outcomes that rely on repeated random variables.

On July 7, 2022, the Company entered into an Amendment to Agreement and Plan of Merger (the “Amendment”) with representatives of the former equity holders of PsyInnovations, Inc.

Pursuant to the terms of the Amendment, the Company agreed to reduce the earn-out threshold of revenue derived from wayForward products from $ 5 million to $ 3 million.

As of December 31, 2022, the earnout conditions have been satisfied.

As a result, the Company will issue 76,856 shares of Common Stock with fair value of $ 328 .

NOTE 8:- 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”).

The Credit Agreement contains a revenue covenant effective to the maturity date, of which if 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.

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.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- DEBT (Cont.)

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.

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.

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.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- DEBT (Cont.)

During the year ended December 31, 2022, the Company recognized $ 2,838 of remeasurement expenses related to the Initial Commitment Amount, which were included as part of financial expenses (income) in the Company's statements comprehensive loss.

During the year ended December 31, 2022, the Company did not recognize any instrument specific credit risk fair value adjustment.

Pursuant to the terms of the Credit Agreement the Company started repayment of the outstanding principal amount of the initial commitment Amount of $ 25 million issued as part of the Loan Facility, together with a repayment premium and other fees in monthly installments of up to $ 518 beginning as of January 31, 2023, and continuing through the maturity date, or June 9, 2027.

NOTE 9:- LEASES

17 unchanged sentences

dollars in thousands

- LEASES (Cont.)

NOTE 9:- LEASES

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2022:

7 unchanged sentences

Operating leases

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 10:- PROPERTY AND EQUIPMENT, NET

11 unchanged sentences

Depreciation expenses for the year ended December 31, 2022 and 2021 amounted to $ 356 and $ 282 , respectively.

During the year ended December 31, 2022 , the Company recorded a decrease of computers equipment amounted to $ 143 .

DARIOHEALTH CORP.

4 unchanged sentences

Definite-lived other intangible assets:

Remaining Life

Original amounts:

1 unchanged sentence

Other intangible assets, net

Amortization expense amounted to $ 3,035 for the year ended December 31, 2021.

Amortization expense amounted to $ 4,361 and $ 3,035 for the year ended December 31, 2022 and 2021, respectively.

Estimated amortization expense:

1 unchanged sentence

NOTE 12:- GOODWILL

Following the Company's acquisitions in 2021 as described in Note 4, the changes in the carrying amount of goodwill allocated to reportable segments for the year ended December 31, 2021 are as follows:

As of January 1, 2021

Following the Company's acquisitions in 2021 as described in Note 4, the changes in the carrying amount of goodwill for the year ended December 31, 2022 and 2021 are as follows:

As of December 31, 2020

NOTE 11:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

As of December 31, 2021

As of December 31, 2022

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands

NOTE 13:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

NOTE 14:- COMMITMENTS AND CONTINGENT LIABILITIES

As of December 31, 2021 , LabStyle.

had established guarantees to cover rent agreements and credit cards commitments that amounted to $ 192 .

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.

The company has a liability to pay future royalties to the Israeli Innovation Authority (the “IIA”) for participated in programs sponsored by the Israeli government for the support of research and development activities.

The Company is obligated to pay royalties to the IIA, amounting to 3 % of the sales 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 pay these royalties is contingent on actual sales of the products and in the absence of such sales , no payment is required.

During the Year ended the company recorded IIA royalties related to the acquisition of Physimax Technology in amount of $ 120 .

NOTE 15:- LONG-LIVED ASSETS

10 unchanged sentences

The GILTI tax imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 16:- TAXES ON INCOME (Cont.)

Net Operating Losses- Before the TCJA, taxable losses generated in the U.S.

10 unchanged sentences

Net operating loss carryforward:

Labstyle and Upright have accumulated net operating losses for Israeli income tax purposes as of December 31, 2021, in the amount of approximately $ 100,120 and $ 33,840 , respectively.

Labstyle has accumulated net operating losses for Israeli income tax purposes as of December 31, 2022, in the amount of approximately $ 150,228 .

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

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 14:- TAXES ON INCOME (Cont.)

As of December 31, 2022, the Company and WayForward had a U.S.

9 unchanged sentences

As discussed above, under the CARES Act, the losses from 2018-2022 are excluded from the limitation and can be carried forward indefinitely to offset 100 % of future net income.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 16:- TAXES ON INCOME (Cont.)

Deferred income taxes:

6 unchanged sentences

Temporary differences - Stock-based compensation

Temporary differences - Credit Facility

Temporary differences - Intangible Assets

Temporary differences - Lease

Deferred tax assets:

3 unchanged sentences

Temporary differences - Intangible Assets

Temporary differences - Lease

Deferred tax liability

Net deferred tax asset

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 14:- TAXES ON INCOME (Cont.)

The deferred tax balances included in the consolidated financial statements as of December 31, 2022, are calculated according to the tax rates that were in effect as of the reporting date and do not take into account the potential effects of the changes in the tax rate.

3 unchanged sentences

Management considers the projected taxable income and tax-planning strategies in making this assessment.

In consideration of the Company’s accumulated losses and the uncertainty of its ability to utilize its deferred tax assets in the future, management currently believes that it is more likely than not that the Company will not realize its deferred tax assets and accordingly recorded a valuation allowance to fully offset all the deferred tax assets.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 16:- TAXES ON INCOME (Cont.)

Loss before taxes on income consists of the following:

9 unchanged sentences

The waiver of cash salary will be done upon the average closing price of the Common Stock for the 30 trading days prior to the date the Compensation Shares are granted or as otherwise defined by the Compensation Committee of the Board of Directors.

In September 2019, the Company’s Compensation Committee of the Board of Directors approved the grant of an aggregate of 5,378 shares of Common Stock to service providers of which 4,753 shares were issued during the third and fourth quarters of 2019 and the remainder of 625 shares were issued during the first quarter of 2020.

During the year ended December 31, 2020, the Company issued 164,479 Compensation Shares to certain members of the Board of Directors, officers, and employees as consideration for a waiver of cash owed to such individuals amounting to $ 1,001 .

In addition, the Company granted 15,034 shares to directors upon departure from the Board of Directors.

During the year ended December 31, 2020, the Board of Directors approved the grant of 170,229 shares of Common Stock to certain consultants of the Company, a portion of which were made in lieu of cash owed to such consultants.

During the year ended December 31, 2020, the Company’s Compensation Committee of the Board of Directors approved the grant of an aggregate of 707,182 shares to directors, officers, employees and consultants of the Company.

In January 2020, the Board of Directors authorized the Company to issue warrants to purchase up to 13,750 , and 250,000 shares of Common Stock, respectively, to certain consultants of the Company, at a purchase price of $ 12.00 and $ 6.56 , respectively.

As such, the Company recorded a warrant compensation expense for service providers in the amount of $ 1,131 .

In April 2020, the Compensation Committee of the Board of Directors approved a monthly grant of shares of the Company’s Common Stock equal between $ 12.00 to $ 18.00 of restricted shares to certain service providers per month, to be granted monthly during the period that the certain consulting agreement remains in effect.

In April 2020, the Compensation Committee of the Board of Directors approved a monthly grant of shares of the Company’s Common Stock equal to $ 18.00 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 years ended December 31, 2022 and 2021, a total of 32,926 and 16,126 restricted unregistered shares of Common Stock, respectively, were issued to certain service providers under this approval.

During the year ended December 31, 2022 and 2021, the Company recorded compensation expense for service providers in the amount of $ 172 and $ 159 , respectively.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 15:- STOCKHOLDERS’ EQUITY (Cont.)

In April 2020, the Audit and Compensation Committee of the Board of Directors approved monthly grants of 1,500 shares of the Company’s Common Stock, of which 639 shares were issued to a board member under the 2012 Plan, and 861 restricted shares to certain service providers to be granted monthly during the 12-month period that the certain consulting agreement with said service providers is in effect.

During the year ended December 31, 2020, a total of 13,500 shares of the Company’s Common Stock were issued under the said approval of which 9,195 shares were issued under the plan including 5,691 to a board member and the remaining 4,305 shares were issued as restricted shares to certain service providers.

The Company recorded compensation expense for service providers in the amount of $ 55 .

During the year ended December 31, 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.

The Company recorded compensation expense for service providers in the amount of $ 21 .

In May 2020, the Compensation Committee of the Board of Directors authorized the Company to issue, in several installments, 45,000 shares and warrants to purchase 110,000 shares of Common Stock, to certain consultants of the Company, of which warrants to purchase 60,000 shares of Common Stock which shall vest over a 12-month period.

The warrants exercise prices are between $ 6.39 and $ 10.00 per share.

During the year ended December 31, 2020 and 2021, the Company issued all said shares and warrants, and recorded compensation expense for service providers in the amount of $ 576 and $ 18 , respectively.

During the year ended December 31, 2021, the Company’s Compensation Committee of the Board of Directors approved an aggregate of 10,934 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.

2 unchanged sentences

The shares were issued under the Company’s 2020 Plan.

During the year ended December 31, 2021, the Board of Directors approved the grant of 319,414 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 year ended December 31, 2021, the Board of Directors approved the grant of 319,914 unregistered shares of Common Stock to certain consultants and service providers of the Company, and the grant of 7,500 shares of Common Stock that were issued under the 2012 Plan.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

During the year ended December 31, 2021, the Company’s Compensation Committee approved the grant of an aggregate of 1,102,243 restricted shares of Common Stock, subject to time vesting to directors, officers, employees and consultants of the Company.

1 unchanged sentence

The shares were issued under the 2020 Plan.

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.

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 .

On December 15, 2022, the Compensation Committee authorized the Company to issue 65,000 shares of which 35,000 shell vest over a three-year period, to certain consultants of the Company.

As such, during the year ended December 31, 2022 the Company recorded compensation expense for service providers in the amount of $ 106 .

During the year ended December 31, 2022, the Company’s Compensation Committee of the Board of Directors approved the grant of 29,755 shares of the Company’s common stock to employees of the Company, and the grant of 1,233,050 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.

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 .

As such, the Company recorded compensation expense for service providers in the amount of $ 5,700 .

As such, during the year ended December 31, 2022 and 2021 the Company recorded compensation a warrant expense for service providers in the amount of $ 863 and $ 5,700 , respectively.

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 compensation expense for service providers in the amount of $ 387 .

As such, during the year ended December 31, 2021, 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 Stock are subjected to certain performance terms.

As of December 31, 2021, the terms of 3,000 performance-based warrants were met.

As such, during the year ended December 31, 2022 and 2021 the Company recorded a warrant compensation expense for service providers in the amount of $ 131 and $ 312 , respectively.

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, during the year ended December 31, 2021, the Company recorded a warrant compensation expense for service providers in the amount of $ 194 .

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

As of December 31, 2021, the terms of 3,000 performance-based warrants were met.

As such, the Company recorded a warrant compensation expense for service providers in the amount of $ 312 .

As such, the Company recorded a warrant compensation expense for service providers in the amount of $ 194 .

In October and December 2021, the Compensation Committee authorized the Company to issue 8,000 shares which shell vest over a six-month period, and warrants to purchase up to 40,000 , and 208,000 shares of Common Stock, to certain consultants of the Company, at a purchase price of $ 25.10 and $ 13.60 , respectively.

As such, the Company recorded compensation expense for service providers in the amount of $ 214 .

As such, during the year ended December 31, 2022 and 2021 the Company recorded compensation expense for service providers in the amount of $ 1,806 and $ 214 , respectively.

On January 4, 2022, out of the pre-funded warrants that were issued in May 2019 private placement, 81,233 were exercised on a cashless basis into 81,221 shares of the Company’s common stock.

As of December 31, 2022, the Company’s total outstanding prefunded warrants were exercisable into 1,769,794 shares of common stock.

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 year ended December 31, 2022, the Company recorded a warrant compensation expense for service providers in the amount of $ 375 .

In December 2022, the Compensation Committee authorized the Company to issue warrants to purchase up to 500,000 , shares of Common Stock, to a certain consultant of the Company, at a purchase price of $ 5.00 .

As such, during the year ended December 31, 2022 the Company recorded compensation a warrant expense for service providers in the amount of $ 29 .

In November and December, 2019, the Company entered into subscription agreements (the “Series A, A-1, A-2, A-3 and A-4 Subscription Agreement”) for a sale of an aggregate of 21,375 shares of newly designated Series A, A-1, A-2, A-3 and A-4 Preferred Stock (the “Series A Preferred Stock”), at a purchase price of $ 1,000 per share (the “Stated Value”), for aggregate gross proceeds, of approximately $ 21,375 ( $ 18,689 net of issuance expenses).

1 unchanged sentence

As such, the Company recorded a deemed dividend during 2019 in the amount of $ 2,860 for the benefit created to the series A-2, A-3 and A-4 holders.

During the year ended December 31, 2021 and 2020, a total of 3,896 and 5,552 of certain Series A Convertible Preferred Stock, were converted into 918,237 and 1,278,695 shares of Common Stock, respectively, including issuance of dividend shares.

The holders of series A Preferred Stock (excluding Series A-1 Preferred Stock, which do not possess any voting rights) shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.

3 unchanged sentences

and (ii) “Senior Securities” shall mean any class or series of capital stock of the Company hereafter created which expressly ranks senior to the Parity Securities.

Each share of Series A Preferred Stock is convertible at the option of the holder, subject to certain beneficial ownership limitations as set forth in the Series A Certificate of Designation into such number of shares of Company’s Common Stock equal to the number of Series A Preferred Shares to be converted, multiplied by the Stated Value, divided by the conversion price in effect at the time of the conversion.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

The Series A 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 Preferred with respect to the Series A Preferred Stock;

The Series A Preferred Stock was to 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 Preferred with respect to the Series A Preferred Stock;

or (ii) the 36-month anniversary of each of the Series A Effective Date.

5 unchanged sentences

As of December 31, 2022, out of the Placement Agent Warrants that were issued in December 2019 and July 2020, 451,226 were exercised into 333,077 shares of Common Stock.

In March 2020, the Board of Directors authorized the Company to enter into an agreement to issue in the future warrants to purchase up to 500,000 shares of Common Stock to a business partner of the Company, upon reaching certain performance criteria, at a purchase price of $ 5.94 .

Certain performance criteria with respect to the first and the second tranches of 250,000 warrants to purchase shares were not met and that portion of such warrant expired as of December 31, 2021.

On July 28, 2020, the Company 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 the Company’s 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, the Company entered into a subscription agreement with an accredited investor for the purchase of 31,486 shares of Common Stock at a purchase price per share of $ 7.94 per Share.

The aggregate gross proceeds were approximately $ 28,591 ( $ 26,460 net of issuance costs).

On September 20, 2022, the Board of Directors authorized the Company to enter into an exchange agreement with a certain preferred stockholder to exchange 885 shares of the Company’s Series A-1 Preferred Stock for 308,711 shares of the Company’s common stock.

During the nine months ended 30, 2022, the investor exchanged those certain shares.

The Company has accounted for the exchange as a modification and recorded the increase in fair value as a deemed dividend in the amount of $ 62 .

During the year ended December 31, 2022 and 2021, a total of 1,130 and 3,896 of certain Series A Convertible Preferred Stock, were converted into 339,417 and 918,237 shares of Common Stock, respectively, including issuance of dividend shares.

In November and December 2022, 6,345 Series A Preferred Stock automatically converted into 2,130,322 shares of Common Stock after completing 36-month anniversary of each the Series A Preferred Stock.

The conversion was including accumulative dividends payable available upon conversion of each Series A Preferred Stock.

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 year ended December 31, 2021, options were exercised into 40,545 shares of Common Stock, with aggregate gross proceeds of approximately $ 256 .

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

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 year ended December 31, 2021, options were exercised into 40,545 shares of Common Stock, with aggregate gross proceeds of approximately $ 256 .

On October 22, 2021, the Company entered into an At-The-Market Equity Offering Sales Agreement (the “ATM”), allowing the Company to sell its common stock for aggregate sales proceeds of up to $ 50,000 from time to time and at various prices, subject to the conditions and limitations set forth in the sales agreement.

If shares of the Company’s common stock are sold, there is a three percent fee paid to the sales agent.

For the year ended December 31, 2022, the Company received net proceeds of $ 260 from the sale of 73,037 shares of the Company’s common stock.

As of December 31, 2022, there were $ 49,600 remaining funds available under the ATM.

The table below summarizes the outstanding warrants as of December 31, 202 2 :

2 unchanged sentences

Expiration date

March 2017 Public Offering - Representative’s Warrants

March 31, 2022

Placement Agent Warrants A-1 December 2019

December 19, 2024

Placement Agent Warrants A-2 December 2019

December 19, 2024

Placement Agent Warrants A-3 December 2019

December 19, 2024

Placement Agent Warrants A-4 December 2019

December 19, 2024

February 16, 2024

6 unchanged sentences

December 1, 2024

Placement Agent Warrants A-1 December 2019

December 19, 2024

Placement Agent Warrants A-2 December 2019

December 19, 2024

Placement Agent Warrants A-3 December 2019

December 19, 2024

Placement Agent Warrants A-4 December 2019

December 19, 2024

February 12, 2025

9 unchanged sentences

December 31, 2026

Lender of loan facility

August 1, 2029

6 unchanged sentences

During the year ended December 31, 2022 and 2021, certain Company warrant holders have exercised and exchanged Company warrants as detailed here below:

In January and July 2020, the Company entered into exchange agreements (each an “Exchange Agreement”) with certain Company warrant holders who were granted warrants to purchase up to an aggregate of 230,452 shares of Common Stock in September 2018.

Pursuant to the terms of the Exchange Agreements, the warrant holders agreed to surrender such warrants for cancellation and received, as consideration for the cancellation of such 2018 warrants, an aggregate of 161,317 restricted shares of Common Stock, thereby creating a benefit to these warrant holders.

As such the Company recorded a deemed dividend in the amount of $ 599 .

In September 2020, the Company entered into an agreement with a certain warrant holder who was granted warrants to purchase up to an aggregate of 88,889 shares of Common Stock in September 2018.

Warrants to purchase 88,889 shares of Common Stock were exercised into shares of Common Stock at an exercise price of $ 13.00 per share.

The aggregate gross proceeds were approximately $ 1,156 ($ 1,088 net of issuance expenses costs).

During the year ended December 31, 2021, certain Company warrants holders have exercised warrants into 219,992 shares for total proceeds of $ 633 .

6 unchanged sentences

During 2021 , pursuant to the terms of the 2020 Plan as approved by the Company’s stockholders, the number of shares authorized for issuance under the 2020 Plan increased by 1,628,890 shares, from 900,000 to 2,528,890 .

The following options were issued under the 2012 Plan during 2020 and 2021:

During the year ended December 31, 2020, the Company’s Compensation Committee of the Board of Directors approved the grant of an aggregate of 623,491 options to employees, directors and consultants of the Company, at exercise prices between $ 6.35 and $ 18.68 per share.

The stock options vest over a period of three years commencing on the respective grant dates.

The options have a six-year term and were issued under the 2012 Plan.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 15:- STOCKHOLDERS’ EQUITY (Cont.)

In January and March 2020, the Compensation Committee of the Board of Directors approved an inducement grant of a non-qualified stock option award to purchase 140,000 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 90,000 shares of the Company’s Common Stock outside of the Company’s Amended and Restated 2012 Equity Incentive Plan, as amended (the “2012” Plan”), pursuant to Nasdaq Listing Rule 5635(c)(4), in connection with the employment of its President and General Manager of North America and of its Chief Medical Officer.

In March and May 2020, the Board of Directors approved the grant of fully vested options to purchase 5,540 shares of Common Stock to certain consultants of the Company, a portion of which were made in lieu of cash owed to such consultants.

During the year ended December 31, 2021, the Board of Directors approved of 99,074 options 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 year ended December 31, 2021, the Company’s Compensation Committee approved the grant of 763,999 options to purchase Common Stock, and 10,000 performance-based options to purchase Common Stock to officers, employees and consultants of the Company, at exercise prices between $ 12.77 and $ 25.84 per share.

The time vesting restricted shares and stock options vest over a period of three years commencing on the respective grant dates.

The options have a ten-year term and were issued under the 2020 Plan.

As of December 31, 2021, the terms of the performance-based stock options were met.

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 .

The following shares, restricted shares and, options were issued under the 2012 Plan during 2021 and 2022:

In May 2021, the Compensation Committee of the Board of Directors approved an inducement grant of a non-qualified performance-based 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.

8 unchanged sentences

Transactions related to the grant of options to employees, directors and non-employees under the above plans and non-plan options during the year ended December 31, 2022 were as follows:

Options outstanding at beginning of year

Options outstanding at beginning of period

Options granted

2 unchanged sentences

Options forfeited

Options outstanding at end of year

Options vested and expected to vest at end of year

Exercisable at end of year

Options outstanding at end of period

Options vested and expected to vest at end of period

Exercisable at end of period

Weighted average grant date fair value of options granted during the year ended December 31, 2022 and 2021 is $ 4.43 and $ 13.59 , respectively.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

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 fiscal 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 December 31, 2022.

2 unchanged sentences

Restricted shares

Restricted shares outstanding at beginning of year

Restricted shares outstanding at beginning of period

Restricted shares granted

Restricted shares forfeited

Restricted shares outstanding at end of year

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 15:- STOCKHOLDERS’ EQUITY (Cont.)

Restricted shares outstanding at end of period

The following table presents the assumptions used to estimate the fair values of the options granted to employees, non-employees and directors in the period presented:

11 unchanged sentences

Total stock-based compensation expenses

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 18:- SELECTED STATEMENTS OF OPERATIONS DATA

Financial (income) losses, net:

Foreign currency adjustments (income) expenses, net

Financial losses, net:

Foreign currency adjustments expenses, net

Interest income

Total Financial (income) losses, net

Loan Interest Expenses

Remeasurement of long-term loan

Remeasurement of warrant liability

Debt issuance cost

Remeasurement of FCA

Total Financial expenses, net

- BASIC AND DILUTED NET LOSS PER COMMON STOCK

We compute net loss per share of common stock using the two-class method.

Basic net loss per share is computed using the weighted-average number of shares outstanding during the period.

Diluted net loss per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period.

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

Net loss attributable to common stock shareholders used in computing basic net loss per share

Weighted average number of common stock used in computing basic loss per share

Basic net loss per common stock

DARIOHEALTH CORP.

5 unchanged sentences

During the first quarter of 2023, the Company issued a total of 7,030 restricted shares of the Company’s Common Stock to certain service providers.

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 Common Stock.

In January 2023, 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 1,994,346 shares, from 3,868,514 to 5,862,860 .

In January 2022, the Company entered into a Technology Purchase Agreement, to acquire certain assets of Physimax Technologies Ltd.

in consideration of the Company’s issuing up to 256,660 shares of the Company’s Common Stock representing a purchase price of $ 5,500 in the aggregate, at a price per share equal to $ 21.35 , plus a cash payment of $ 500 , of which $ 400 were transferred as convertible loan and $ 100 are payable at closing, as well as assume certain liabilities in an approximate amount of $ 1,020 .

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 Common Stock, at a purchase price of $ 7.49 per share.

The aggregate gross proceeds were approximately $ 40,000 ($ 38,026 , net of issuance expenses).

On February 28, 2022, the company entered into a strategic service agreement with Sanofi U.S for a term of five years .

Pursuant to the Agreement, the company will develop new products and services based on insights derived from the Company’s historical and current data relating to the use of current services.

On March 9, 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, the grant of 149,550 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 396,050 options to employees and a consultant of the Company, at exercise prices between $ 6.67 and $ 8.0957 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 Plan.

During the first quarter of 2022, certain series A Convertible Preferred Stockholders converted 1,030 shares of various classes of the Company’s A Convertible Preferred Stock into 254,322 shares of Common Stock.

During the first quarter of 2022, 61,730 shares of common Stock were issued as dividend to certain Series A Convertible Preferred Stockholders upon conversion of such shares.

In January 2023, the Compensation Committee of the Board of Directors approved the grant of 280,000 warrants with an exercise price of $ 5.20 per share to certain consultants.

The warrants are exercisable into common stock on or before December 31, 2026.

In addition, the Compensation Committee approved to change the exercise price of 350,000 warrants issued to certain consultants in the past at exercise prices between $ 7.50 to $ 30.00 per share, to an exercise price of $ 5.20 per share.

In January 2023, the Compensation Committee of the Board of Directors approved the grant of a non-qualified stock option award to purchase 100,000 shares of the Company’s Common Stock, as well as an additional non-qualified performance-based stock option award to purchase an additional 100,000 shares of the Company’s Common Stock outside of the Company’s existing equity compensation plans, pursuant to Nasdaq Listing Rule 5635(c)(4), in connection with the employment of its Senior Vice President of Growth’.

In February 2023, the Compensation Committee of the Board of Directors approved the grant of 105,000 restricted shares subject to time vesting to employees and consultant of the Company and approved the grant of 50,000 options to purchase Common Stock, and 100,000 performance-based options to purchase Common Stock to employee of the Company, at exercise price $ 4.48 per share.

The time vesting restricted shares and stock options vest over a period of three years commencing on the respective grant dates.

The options have a ten-year term.

75,000 shares and the options were issued under the 2020 Plan.

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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 9A. Controls and Procedures