What changed in this filing

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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-09 · 544 added, 696 removed, 1339 unchanged (48% of the section changed)

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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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Richard Anderson

Tomer Ben-Kiki

Chief Operating Officer

Chairman of the Board of Directors

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Prior to joining us, from 2010 to 2012, Mr.

Raphael served as Head of Business Operations for Nokia Siemens Networks, where he was responsible for establishing and implementing a new portfolio business unit directed towards marketing and sales of complimentary products.

Raphael served as Head of Business Operations for Nokia Siemens Networks, where he was responsible for establishing and implementing

a new portfolio business unit directed towards marketing and sales of complimentary products.

Prior to that, from 1998 to 2010, he held increasingly senior positions at Amdocs Limited (Nasdaq:DOX) where he was ultimately responsible for advising the Chief Technology Officer and implementing matters of overall business strategy.

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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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in Business Economics from the University of California at Santa Barbara.

Tomer Ben-Kiki has served as our Chief Operating Officer since February 15, 2024.

Since October 2011, Mr.

Ben-Kiki served as Co-Founder and Chief Executive Officer of Twill.

From January 2003 through October 2010, he served as owner of Oberon Media, Inc.

Ben-Kiki holds a Bachelor of Science from Tel-Aviv University.

Yoav Shaked has served as the Chairman of our Board of Directors since July 5, 2018.

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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.

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.

Matheis has a B.S.

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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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Below is the biography of our current SAB member.

Eric Miledge - Chairman of our Advisory Board , has worked in the healthcare field for his entire career, with a focus on pharmaceuticals and medical devices.

With more than 34 years at Johnson & Johnson (JNJ) in roles of increasing responsibility, he built a vast network of relationships across the healthcare landscape.

As president of Ortho McNeil Pharmaceutical, Eric led in the licensing and successful introduction of levofloxacin (antibiotic), tramadol (analgesic) and the commercialization of Topamax (anticonvulsant), building a multi-billion dollar U.S.

pharmaceutical business.

Eric also served as Company Group Chairman for Johnson & Johnson Healthcare Systems which oversaw the negotiation and management of JNJ’s medical device, diagnostic and pharmaceutical U.S.

hospital contracts.

Eric also served as Company Group Chairman of LifeScan Inc., the blood glucose division of JNJ.

Under Eric’s leadership, LifeScan Global Diabetes franchise experienced rapid organic and inorganic growth, including the acquisition of Inverness Medical Technology’s Diabetes Care Products business.

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.

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

David Horwitz – Advisory Board Member , is presently a Senior Consultant with Numerof & Associates and also President of DLH Biomedical Consulting.

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She has published more than 20 qualitative articles on these topics.

Arnaud Robert – Advisory Board Member, is an accomplished international executive with 25 years of experience in creating new strategies, transforming companies, and driving business outcomes by leveraging digital, AI, and technology.

His journey through the realms of Disney, Nike, Viking Cruises, Shaw Communications, and most recently at Sanofi as the EVP & Chief Digital Officer, has been marked by thoughtful leadership and deep digital transformations across business, operations, technology, people, and culture.

He also launched several best-in-class experiences, including the Nike Apple watch running app and Disney Movies Anywhere (precursor to Disney+), both used by millions of consumers and widely profiled in the media.

Currently, Arnaud is managing director of an advisory firm that helps CEOs, Private Equity Partners, and a large consultancy achieve their strategic objectives through M&A, operational excellence, and digital / AI / GenAI solutions.

Arnaud was voted Business Transformation Top 150 (2022), Top 100 Global CDOs (2022 & 2023), and is a former member of the World Economic Forum Media Council.

He holds a PhD in Computer Science from the Swiss Institute of Technology and has filed 50 patents.

Board Composition

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For this purpose, the Audit Committee has a charter (which is reviewed annually) and performs several functions.

The Audit Committee charter is available on our website at www.mydario.com under the Investors / Governance section.

The Audit Committee charter is available on our website at dariohealth.investorroom.com under the “For Investors / Corporate Governance” section.

The Audit Committee:

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The Compensation Committee has a charter (which is reviewed annually) and performs several functions.

The Compensation Committee charter is available on our website at www.mydario.com under the Investors / Governance section.

The Compensation Committee has the authority to directly engage, at our expense, any compensation consultants or other advisers as it deems necessary to carry out its responsibilities in determining the amount and form of employee, executive and director compensation.

The Compensation Committee charter is available on our website at dariohealth.investorroom.com under the “For Investors / Corporate Governance” section.

The Compensation Committee has the authority to directly engage, at our expense, any compensation to consultants, or other advisers as it deems necessary to carry out its responsibilities in determining the amount and form of employee, executive and director compensation.

Nominating and Corporate Governance Committee

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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.

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

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(Chief Financial Officer)

(Chief Operating Officer) (20)

Richard Anderson

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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 years ended December 31, 2022 and December 31, 2021, computed in accordance with the provisions of ASC 718 “Compensation-Stock Compensation,” or ASC 718.

Instead, this amount reflects the aggregate grant date fair value of each stock option granted in the fiscal years ended December 31, 202 3 , and December 31, 202 2 , computed in accordance with the provisions of ASC 718 “Compensation-Stock Compensation” (“ASC 718”).

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

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On June 1, 2018, his monthly salary was increased to NIS 134,167 (approximately $36,188) and on April 1, 2021, his monthly salary was increased to NIS 137,466 (approximately $37,078 per month).

During 2021 and 2022, Mr.

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 March 2021, Mr.

(2) In March 2022, Mr.

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

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Raphael was paid a bonus of $101,939 for his performance during 2022.

(3) On January 19, 2021, Mr.

Raphael was granted 2,268 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2021.

(3) On May 18, 2022, Mr.

Raphael was granted 673 shares of our common stock under our 2020 Equity Incentive plan against waiver of cash salary for the period from April to June 2021.

On July 18, 2021, Mr.

Raphael was granted 688 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.

Raphael was granted 695 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2021.

On January 19, 2021, Mr.

Raphael was granted 275,000 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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Commencing June 1, 2018, his monthly salary was updated to NIS 67,200 (approximately $18,125), and commencing April 1, 2021, his monthly salary was updated to NIS 74,620 (approximately $20,127).

During 2021 and 2022, Mr.

Ben David agreed to a waiver of 9.3% and 0% of his cash salary according to our salary program (see further details in “Employment and Related Agreements” below).

(6) In March 2022, Mr.

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Ben David was paid a bonus of $31,479 for his performance during 2022.

(7) On January 19, 2021, Mr.

Ben David was granted 1,152 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2021.

(7) On May 18, 2022, Mr.

Ben David was granted 357 shares of our common stock under our 2020 Equity Incentive plan against waiver of cash salary for the period from April to June 2021.

On July 18, 2021, Mr.

Ben David was granted 365 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.

Ben David was granted 369 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2021.

On January 19, 2021, Mr.

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

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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These benefits, as well as other social benefits under Israeli law, are included as part of his “All Other Compensation.”

(9) In accordance with his second amendment to the employment agreement with our company effective April 2016, Mr.

Bacher was entitled to a monthly salary of NIS 48,000 (approximately $14,815 per month), commencing July 1, 2017, Mr.

Dror was appointed as our Chief Operating Officer and his monthly salary was increased to NIS 55,000 (approximately $16,975 per month).

Commencing June 1, 2018 his monthly salary was increased to NIS 61,490 (approximately $18,978 per month), and.

commencing April 1, 2021 his monthly salary was increased to NIS 68,910 (approximately $21,269 per month).

During 2020 and 2021, Mr.

Bacher agreed to a waiver of 10.6% and 9.6% of his cash salary respectively, according to our salary program (see further details in “Employment and Related Agreements” below).

(10) In March 2021, Mr.

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

In March 2022, Mr.

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

(11) On January 19, 2021, Mr.

Bacher was granted 1,039 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from January to March 2021.

On May 3, 2021, Mr.

Bacher was granted 346 shares of our common stock under our 2020 Equity Incentive plan against waiver of cash salary for the period from April to June 2021.

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.

On October 10, 2021, Mr.

Bacher was granted 357 shares of our common stock under our 2012 Equity Incentive plan against waiver of cash salary for the period from October to December 2021.

On January 19, 2021, Mr.

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

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.

Bacher is entitled to receive a leased automobile and mobile phone during his employment as well as reimbursements for expenses accrued.

These benefits, as well as other social benefits under Israeli law, are included as part of his “All Other Compensation.”

(9) In accordance with his employment agreement, effective in January 2020, Mr.

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

(14) In March 2021, Mr.

(10) In April 2022, Mr.

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

1 unchanged sentence

Anderson was paid a bonus of $80,000 for his performance during 2022.

(15) On January 19, 2021, Mr.

Anderson was granted 91,652 restricted shares of our common stock under our 2020 Equity Incentive Plan, and on July 18, 2021, Mr.

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.

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.

(11) On May 18, 2022, 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 $ 37 , 078 per month).

During 2021 and 2022, Mr.

Raphael agreed to a waiver of 9.4% and 0% of his cash salary according to our salary program pursuant to which Mr.

Raphael received compensation shares of restricted common stock as consideration for cash salary waived.

On July 25, 2017, we, through our Israeli subsidiary, LabStyle Innovation Ltd., executed an Amended and Restated Employment Agreement with Mr.

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Raphael’s employment to expire on December 31, 2022.

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.

Raphael of 673 shares of our common stock under our 2020 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $14,380 of salary otherwise payable to Mr.

Raphael from April to June 2021.

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

Raphael of 688 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $14,698 of salary otherwise payable to Mr.

Raphael from July to September 2021.

On October 10, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Raphael of 695 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $14,853 of salary otherwise payable to Mr.

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.

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

Raphael’s 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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Beginning on March 1, 2015, Mr.

Ben David began working for us on a full-time basis pursuant to the terms of his employment agreement at which point Mr.

Ben David began working for us on a full-time basis pursuant to the terms

of his employment agreement at which point Mr.

Ben David’s salary was increased to NIS 39,000 (approximately $10,519).

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Commencing June 1, 2018, his monthly salary was updated to NIS 67,200 (approximately $18.215), and commencing April 1, 2021, his monthly salary was updated to NIS 74,620 (approximately $20.127).

During 2021 and 2022, Mr.

Ben David agreed to a waiver of 9.3% and 0% respectively of his cash salary according to our salary program pursuant to which Mr.

Ben David received compensation shares of restricted common stock as consideration for cash salary waived.

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 is entitled to certain expense reimbursements and other standard benefits, including vacation, sick leave, contributions to a manager’s insurance policy and study fund and mobile phone allowances.

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.

Ben David of 357 shares of our common stock under our 2020 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,637 of salary otherwise payable to Mr.

Ben David from April to June 2021.

On July 18, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 365 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,805 of salary otherwise payable to Mr.

Ben David from July to September 2021.

On October 10, 2021, the Compensation Committee of our Board of Directors approved the issuance to Mr.

Ben David of 369 shares of our common stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $7,887 of salary otherwise payable to Mr.

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.

Bacher, pursuant to which Mr.

Bacher receives an annual base salary of NIS 55,000 (approximately $16,975), effective as of July 2017.

Commencing June 1, 2018 his monthly salary was increased to NIS 61,490 (approximately $18,978 per month), and commencing April 1, 2021 his monthly salary was increased to NIS 68,910 (approximately $21,269 per month).

Pursuant to 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.

Bacher’s employment may be terminated immediately.

Bacher’s employment agreement also includes a twelve (12) month non-competition and non-solicitation provision, certain confidentiality covenants and assignment of any of his company-related inventions.

Under the terms of Mr.

Bacher’s employment agreement, Mr.

Bacher is entitled to certain expense reimbursements and other standard benefits, including vacation, sick leave, life, and disability insurance and car and mobile phone allowances.

In addition, in conjunction with his appointment as Chief Operating Officer, we issued Mr.

Bacher 500 shares of common stock, and 500 options that will vest in 12 equal quarterly installments over a three-year period with an exercise price of $49.20 per share, all issued pursuant to the Registrant’s Amended and Restated 2012 Equity Incentive Plan.

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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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.

Tomer Ben-Kiki, Chief Operating Officer .

On February 15, 2024, we appointed Mr.

Ben-Kiki as Chief Operating Officer.

In connection with his appointment as Chief Operating Officer, we entered into an employment agreement with Mr.

Ben-Kiki will earn an annual salary of $ 212 ,000 for his work in the United States, and 65 ,000 NIS per

month for his work in Israel.

Ben-Kiki will be entitled to a bonus of up to 20% of his base salary, subject to certain performance objectives as defined by the Board of Directors.

In addition, he will be entitled to receive a stock option to purchase up to 1,017,947 shares of Common Stock, at an exercise price of $2.55 per share, which were granted as an inducement material to Mr.

Ben-Kiki becoming an employee of the company, in accordance with Nasdaq Listing Rule 5635(c)(4).

Time-based options to purchase up to 717,947 shares of common stock shall vest as follows:

291,742 shares shall vest immediately, and the remaining 426,205 shares will vest over two years in eight equal quarterly amounts, subject to Mr.

Ben-Kiki’s continued employment by the Company on the applicable vesting date.

The performance-based option to purchase up to 300,000 shares of Common Stock will vest immediately upon achieving certain milestones relating to the achievement of revenues (on a U.S.

generally accepted account principals basis) relating to Twill products for the year ending December 31, 2024, the achievement of certain operating expense targets for the years ending December 31, 2024 and December 31, 2025, the ability to generate software value from funds invested and meet product roadmap and the retention of key employees post transaction, subject in each case to Mr.

Ben-Kiki's continued employment by us on the applicable vesting date.

Ben-Kiki will be employed at-will with a 90 days’ notice period, unless it is terminated for cause.

Outstanding Equity Awards at December 31, 2023

unexercisable

March 14, 2023

(Chief Executive Officer)

August 28, 2023

January 6, 2024

January 30, 2023

(Chief Executive Officer)

Zvi Ben David

January 30, 2023

(Chief Financial Officer, Secretary and Treasurer)

February 12, 2026

January 6, 2024

(Chief Operating Officer)

January 30, 2023

July 25, 2023

February 12, 2026

(Chief Financial Officer, Secretary and Treasurer)

Richard Anderson

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Stock and Option Awards

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:

(i) 16,609 restricted shares of our common stock to Mr.

(ii) 20,147 restricted shares of our common stock to Ms.

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

(iv) 43,850 restricted shares of our common stock to Mr.

(v) 20,000 restricted shares of our common stock to Prof.

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:

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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, 2023.

(2) 98 option awards are outstanding as of December 31, 2023.

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

(3) No stock awards are outstanding as of December 31, 2023.

(4) No option awards are outstanding as of December 31, 2023.

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(7) 148,751 stock awards are outstanding as of December 31, 2023.

(8) 801 option awards are outstanding as of December 31, 2022.

(8) No option awards are outstanding as of December 31, 2023.

(9) 163,896 stock awards are outstanding as of December 31, 2023.

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Zvi Ben David (3)

Dror Bacher (4)

Richard Anderson (4)

Tomer Ben Kiki (5)

Jon Kaplan (7)

Hila Karah (8)

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Nantahala Capital Management, LLC.

Y.D More Investments Ltd.

The Phoenix Holdings Ltd.

less than 1%.

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(4) Includes 646,652 vested options to purchase common stock and 78,696 vested restricted shares.

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

Excludes 740,000 options which are not vested.

(6) Includes 899 vested options to purchase common stock and 19,744 vested restricted shares.

(5) Includes 345,018 vested options to purchase common stock.

Excludes 672,929 options which are not vested.

(6) Includes 98 vested options to purchase common stock and 96,411 vested restricted shares.

(7) Includes 35,000 vested restricted shares.

(8) Includes 112,856 vested restricted shares.

(9) Includes 107,234 vested restricted shares.

Includes 1,667 shares owned by his spouse, for which Mr.

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(12) Based solely on information contained in Form 13G/A filed with the SEC on February 14, 2024, and data provided by the holder.

Includes 277,546 pre-funded warrants to purchase common stock issued in May 2019 and preferred shares convertible into 859,800 shares of common stock, subject to a contractual beneficial ownership limitation of 9.99% and excludes preferred shares convertible into 18,779 shares of common stock and 824,689 pre-funded warrants issued on July 31, 2020, and 667,559 pre-funded warrants issued on February 28, 2022.

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

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.

Includes 197,622 pre-funded warrants to purchase common stock issued in May 2019, subject to a contractual beneficial ownership limitation of 9.99% and excludes preferred shares convertible into 4,737,198 shares of common stock, 79,924 pre-funded warrants issued on May 24, 2019, 386,129 pre-funded warrants issued on July 31, 2020, and 619,117 pre-funded warrants issued on February 28, 2022.

Certain Relationships and Related Party Transactions

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All transactions (if any) between us and our officers, directors or five percent stockholders, and respective affiliates will be on terms no less favorable than could be obtained from unaffiliated third parties and will be approved by a majority of our independent directors who do not have an interest in the transactions and who had access, at our expense, to our legal counsel or independent legal counsel.

On December 28, 2023, we entered into a placement agency agreement (the “Placement Agency Agreement”) with Aegis Capital Corp.

(“Aegis”), as amended on January 31, 2024, with respect to the offering of the Series C Preferred Stock.

Pursuant to the terms of the Placement Agency Agreement, in connection with each closing of the offering, we agreed to pay Aegis an aggregate cash fee representing 10% of aggregate proceeds raised in the offering (and fees representing 5% and 1.5% for certain company introduced investors), non-accountable expense allowance representing 3% of aggregate proceeds raised in the offering (and fees representing 1.5% and none for certain Company introduced investors).

In addition, we will issue to Aegis or its designees warrants (the “Placement Agent Warrant”) to purchase shares of common stock representing 14.5% of the equivalent shares of Common Stock issuable upon initial conversion of the Series C Preferred Stock at an exercise price equal to the consolidated bid price of the common stock as of the date of such closing.

The Placement Agent Warrant provides for a cashless exercise feature and are exercisable for a period of five years from the date of closing.

We also granted the Placement Agent the right of first refusal, for a twelve (12) month period after the final closing of the offering, to serve as the Company’s lead or co-placement agent for any proposed private placement of our securities (equity or debt) that is proposed to be consummated to investors in the United States with the assistance of a registered broker dealer.

Adam Stern, a member of our Board of Directors, has an interest, and will receive fees due to, Aegis.

On April 3, 2020, we entered into a financial advisory agreement with Aegis Capital Corp., pursuant to which we agreed to pay Aegis Capital Corp.

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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, 2022 and

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).

Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023).

Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023).

Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-2 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023).

Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-3 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023).

Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Certificate of Designation of Preferences, Rights and Limitations of Series C-2 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

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 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).

Form of Warrant issued to Avenue Venture Opportunities Fund L.P.

( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2023).

Form of Warrant Amendment Agreement, dated June 14, 2023 ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023).

Form of Pre-Funded Warrant ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Form of Placement Agent Warrant ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

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

Form of Securities Purchase Agreement for Series B, Series B-1, and Series B-2 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2023).

Loan and Security Agreement, dated May 1, 2023, by and among the Company, as borrower, and Avenue Venture Opportunities Fund II, L.P., as lender ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2023).

Form of Preferred Agreement with Series A-1 Convertible Preferred Stockholders ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2023).

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

and DarioHealth Corp., dated July 10, 2023 ( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2023).

Agreement and Plan of Merger dated February 15, 2024, by and among DarioHealth Corp., Twill Merger Sub, Inc., Twill, Inc.

and Bilal Khan solely in his capacity as holders’ representative ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Lock Up/Leak Out Agreement dated February 15, 2024, by and among DarioHealth Corp., Titan Trust 2024 I, a Delaware statutory trust, and WhiteHawk Capital Partners LP, a Delaware limited partnership ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Series C Securities Purchase Agreement ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Amendment No.

1 to Placement Agency Agreement dated January 31, 2024 ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

First Amendment to Loan and Security Agreement and Supplement, dated February 15, 2024, by and among DarioHealth Corp., PsyInnovations, Inc., LabStyle Innovation Ltd., Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities Fund, L.P.

( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2024).

Personal Employment Agreement, dated February 16, 2024, between DarioHealth Corp.

and Tomer Ben-Kiki

Personal Employment Agreement, dated February 16, 2024, between LabStyle Innovation Ltd.

and Tomer Ben-Kiki

List of Subsidiaries of the Company

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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Clawback Policy.

The following financial statements from the Company’s annual report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language):

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the 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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(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.

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

Kost Forer Gabbay & Kasierer

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Description of the Matter

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.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses and negative cash-flow from operations since inception.

The Company’s operations are dependent on its ability to raise additional funds.

This dependency will continue until the Company will be able to completely finance its operations by generating revenue from its products and services.

Management has concluded that, based on its current projections and plans, the Company will be able to satisfy its liquidity requirements for at least one year from the date these financial statements were issued.

We identified the assessment of liquidity and the Company’s ability to continue as a going concern as a critical audit matter due to the subjective judgments required of management to conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements.

This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions.

How We Addressed the Matter in Our Audit

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 addressing the matter, our audit procedures included, among others, assessing the reasonableness of forecasted revenue, operating expenses and sources of cash used in management’s assessment to determine 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 and consideration of positive and negative evidence impacting management’s forecasts and liquidity.

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

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

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Short-term restricted bank deposits

Trade receivables

Trade receivables, net

Other accounts receivable and prepaid expenses

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Other accounts payable and accrued expenses

Loan, current

Current maturity of long term loan

Total current liabilities

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Operating lease liabilities

Earn-out liability

Long-term loan

Warrant liability

Other long-term liabilities

Total non-current liabilities

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Common stock of $ 0.0001 par value - authorized:

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

160,000,000 shares;

issued and outstanding :

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

27,191,849 and 25,724,470 shares on December 31, 2023 and December 31, 2022, respectively

Preferred stock of $ 0.0001 par value - authorized:

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

5,000,000 shares;

issued and outstanding :

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

18,959 and 3,567 shares on December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

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dollars in thousands (except stock and stock data)

Hardware and consumable products

Consumer hardware

Total revenues

Cost of revenues:

Hardware and consumable products

Consumer hardware

Amortization of acquired intangible assets

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Loss before taxes

Other comprehensive loss:

Deemed dividend

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Net loss per share:

Basic and diluted loss per share

Basic and diluted loss per share of common stock

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

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Balance as of January 1, 2022

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

Balance as of December 31, 2022

Exercise of Options

Exercise of warrants

Issuance of common stock to consultants and service provider

Issuance of common stock to directors and employees

Deemed dividend related to issuance of Preferred Stock

Extinguishment of preferred stock in connection with preferred stock modification

Deemed dividend related to Preferred Stock

Conversion of preferred stock to common stock

Issuance of warrants to service providers

Issuance of common stock, net of issuance cost

Issuance of common stock, net of issuance cost upon Acquisitions

Earnout resolution

Repurchase and retirement of common stock

Issuance of common and preferred stock, net of issuance cost

Issuance of warrants related to loan agreement, net of issuance cost

Common stock related to earnout consideration

Stock-based compensation

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Amortization of acquired intangible assets

Increase in trade receivables

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

Increase in inventories

Increase (decrease) in trade payables

Decrease (increase) in trade receivables

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

Decrease (increase) in inventories

Decrease in trade payables

Decrease in other accounts payable and accrued expenses

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Purchase of property and equipment

Cash paid as part of PsyInnovations Inc.

(dba WayForward) acquisition

Cash paid as part of Upright Technologies Ltd.

Investment in a loan

Purchase of short-term investments

Proceeds from redemption of short-term investments

Purchase of intangible assets

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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

Proceeds from issuance of preferred stock, net of issuance costs

Proceeds from borrowings on Loan agreement

Repayment of long-term loan

Repurchase and retirement of common stock

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DarioHealth Corp.

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

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

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 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.

Our platform and suite of solutions deliver personalized and dynamic interventions driven by data analytics and one-on-one coaching for diabetes, hypertension, weight management, musculoskeletal pain, and behavioral health.

DarioHealth’s digital therapeutic platform has been designed with a ‘user-first’ strategy, focusing on the user’s needs first and foremost, and user experience and satisfaction.

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Its principal business activity is to hold the Company’s intellectual property and to perform research and development, manufacturing, marketing, and other business activities.

On January 26, 2021, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) pursuant to which the Company , through LabStyle , acquired all of the outstanding securities of Upright Technologies Ltd.

and its wholly owned subsidiary Upright Technologies Inc.

Upright 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.

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.

(“Merger Sub”) merged with PsyInnovations Inc.

(“WayForward”), pursuant to which the Merger Sub was the surviving company.

PsyInnovations Inc.

(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.

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.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 1:- GENERAL (Cont.)

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.

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

Our listed warrants expired in March 2021 and ceased trading on the Nasdaq Capital Market as a result.

The Company has been carefully monitoring the COVID-19 pandemic and its impact on its business.

In that regard, the Company has continued to sell its Dario TM Blood Sugar Monitor and has not experienced disruptions in its supply chains.

With respect to the Company’s DTx platform, it has observed that some of its business-to-business prospective partners have been addressing their business needs as a result of the COVID-19 pandemic, which has resulted in a slowdown of negotiations and discussions with some of these potential partners.

In addition, the Company has also seen an increase in interest from other business-to-business prospective partners in its DTx platform, as certain parties are seeking tele-health products.

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.

The Company has incurred net losses since its inception.

As of December 31, 2023, The Company has incurred recurring losses and negative cash flows since inception and has an accumulated deficit of $ 349,361 as of December 31, 2023.

For the year ended December 31, 2023, the Company used approximately $ 30,379 of cash in operations.

Management believes the Company has sufficient funds to support its operation for at least a period of twelve months from the date of the issuance of these consolidated financial statements.

The Company expect to incur future net losses and our transition to profitability is dependent upon, among other things, the successful development and commercialization of the Company’s products and the achievement of a level of revenues adequate to support the cost structure.

Until the Company achieves profitability or generates positive cash flows, it will continue to be dependent on raising additional funds.

The Company intends to fund its future operations through cash on hand, additional private and/or public offerings of debt or equity securities or a combination of the foregoing.

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 offerings.

The Company’s Common Stock is listed on the Nasdaq Capital Market under the symbol “DRIO”.

DARIOHEALTH CORP.

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Actual results may differ from these estimates, and such differences may be material.

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.

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The Company’s revenues and financing activities are incurred in U.S.

Although a portion of LabStyle and Upright expenses is denominated in New Israeli Shekels (“NIS”) (mainly cost of personnel), a substantial portion of its expenses is denominated in dollars.

Although a portion of LabStyle expenses is denominated in New Israeli Shekels (“NIS”) (mainly cost of personnel), a substantial portion of its expenses is denominated in dollars.

Accordingly, the Company’s management believes that the currency of the primary economic environment in which the Company and its subsidiaries operate is the dollar;

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

As of December 31, 2022, and 2021, the Company had a short-term restricted bank deposit which are used as collateral for rent in the amount of $ 113 and $ 127 , respectively.

As of December 31, 2023, and 2022, the Company had a short-term restricted bank deposit which are used as collateral for rent and gratuity in the amount of $ 229 and $ 113 , respectively.

As of December 31, 2023, and 2022, the Company had short-term restricted bank deposits which are used as collateral for credit payments in amounts of $ 63 and $ 52 , respectively.

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Cash, and cash equivalents as reported on the balance sheets

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

Short-term restricted bank deposits

Cash, restricted cash, cash equivalents, and restricted cash and cash equivalents as reported in the statements of cash flows

Trade receivables, net:

The Company records trade receivables for amounts invoiced and yet unbilled invoices.

The Company’s expected loss allowance methodology for trade receivables is based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.

The estimated credit loss allowance is recorded as general and administrative expenses on the Company's Consolidated Statements of Comprehensive Loss.

As of December 31, 2023, and 2022, credit loss allowance was immaterial.

Inventories are stated at the lower of cost or net realized value.

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Inventory write-downs represent the difference between the cost of the inventory and net realizable value.

Inventory write-downs are charged to the cost of revenues and ramp up of manufacturing when a new lower cost basis is established.

Inventory write-downs are charged to the cost of revenues when a new lower cost basis is established.

Subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

As of December 31, 2022, and 2021, no impairment was recorded.

For the years ended December 31, 2023, and 2022, no impairment was recorded.

Revenue recognition

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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.

For each contract, the Company considers the promise to transfer tangible products and\or services, each of which are distinct, to be the identified performance obligations.

In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive.

As the Company’s standard payment terms are less than one year, the contracts have no significant financing component.

The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price.

Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment.

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

The Company applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation.

The Company uses judgment in determining the SSP for its hardware and services.

To determine SSP, the Company maximizes the use of observable standalone sales and observable data, where available.

In instances where performance obligations do not have observable standalone sales, the Company may use alternative methods to estimate the standalone selling price, such as cost plus margin approach.

DARIOHEALTH CORP.

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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).

Consumers revenue

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

For each contract, the Company considers the promise to transfer tangible products and/or services, each of which are distinct, to be the identified performance obligations.

In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive.

The revenues from fixed-price services are recognized ratably over the contract period.

Commercial revenue – B2B2C

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

Such programs include among others, 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.

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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.

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

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.

Refunds to a customer that result 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.

Commercial revenue - Strategic partnerships

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.

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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 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.)

Concentrations of credit risk:

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

For cash and cash equivalents, the Company is exposed to credit risks in the event of default by the financial institutions to the extent that amounts recorded on the accompanying consolidated balance sheets exceed federally insured limits.

The Company places its cash and cash equivalents and short-term deposits with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts.

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

As of December 31, 2023, the Company's major customer accounted for 66.5 % of the Company's accounts receivable balance.

For the year ended December 31, 2023 and December 31, 2022, the Company's major customer accounted for 29.9 % and 39.8 %, respectively, of the Company's revenue in the period.

Income taxes:

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The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized.

As of December 31, 2022, and 2021 a full valuation allowance was provided by the Company.

ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions.

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Research and development costs are charged to the consolidated statements of comprehensive loss, as incurred.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Accounting for stock-based compensation:

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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 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.)

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

The Company's Loan Facility, and warrants liability were measured at fair value using Level 3 unobservable inputs (see note 8).

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.

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The two-class method requires income available to common stockholders for the period to be allocated between shares of Common Stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

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.

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 Company's Convertible Preferred shares would be entitled to dividends that would be distributed to the holders of Common Stock, based on the conversion ratio, assuming conversion of all Convertible Preferred shares into shares of Common Stock.

The Company’s basic net loss per share is calculated by dividing net loss attributable to common and preferred 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.

Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of Common Stock are anti-dilutive.

The total number of potential common shares related to the outstanding options, warrant and preferred shares excluded from the calculations of diluted net loss per share due to their anti-dilutive effect was 5,744,428 and 6,812,285 for the year ended December 31, 2022 and 2021, respectively.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Severance pay:

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Severance pay expense for the year ended December 31, 2023 and 2022 amounted to $ 947 and $ 1,136 , respectively.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

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.

All eligible employees may elect to contribute up to $ 22.5 per year (for certain employees over 50 years of age the maximum contribution is $ 30 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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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.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Certain leases include options to extend or terminate the lease.

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When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Significant estimates in valuing certain intangible assets include, but are not limited to future expected cash flows from acquired technology and acquired brand from a market participant perspective, useful lives and discount rates.

Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

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

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.

The Company accounts for a transaction as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business.

Asset acquisition-related direct costs are capitalized as part of the asset or assets acquired.

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired.

Under ASC 350, "Intangible - Goodwill and Other"

("ASC 350"), goodwill is not amortized, but rather is subject to an annual impairment test.

Under ASC 350, "Intangible - Goodwill and Other" ("ASC 350"), goodwill is not amortized, but rather is subject to an annual impairment test.

ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

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If the Company elects not to use this option, or if the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company prepares a quantitative analysis to determine whether the carrying value of a reporting unit exceeds its estimated fair value.

If the carrying value of a reporting unit would exceed its estimated fair value, the Company would have recognized an impairment of goodwill for the amount of this excess, in accordance with the guidance in FASB Accounting Standards Update (“ASU”) No.

Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which was adopted as of January 1, 2020.

If the carrying value of a reporting unit would exceed its estimated fair value, the Company would have recognized an impairment of goodwill for the amount of this excess.

For the years ended December 31, 2023 and 2022, no impairment of goodwill has been recorded.

Recently issued accounting pronouncements, not yet adopted:

In September 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”).

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

The guidance also requires increased disclosures.

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

In November 2019, the FASB issued ASU No.

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

Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods.

Early adoption is permitted.

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

DARIOHEALTH CORP.

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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.

As a result, entities will not separately present in equity an embedded conversion feature in such debt.

Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met.

The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06.

ASU 2020-06 also requires that the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or share.

This amendment removes current guidance that allows an entity to rebut this presumption if it has a history or policy of cash settlement.

Furthermore, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, the treasury stock method will be no longer available.

The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted for fiscal years beginning after December 15, 2020.

The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the timelier recognition of losses, with an effective date for the first quarter of fiscal year 2020.

In November 2019, the FASB issued ASU No.

2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the SEC) and other non- Securities and Exchange Commission (“SEC”) reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods.

The Company adopted the standard effective as of January 1, 2023, and the adoption of this standard did not have material impact on the Company's consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40)” (“ASC470-20”).

The new standard reduces the number of accounting models in ASC 470-20 that require separate accounting for non-bifurcated embedded conversion features.

As a result, convertible instruments will no longer be subject to the cash conversion features model or to the beneficial conversion features model and be accounted for as a single unit of account as long as no other features require bifurcation and recognition as derivatives, The Company adopted ASU 2020-06, effective January 1, 2023, using the modified retrospective method.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, which requires companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

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

The Company completed its evaluation of ASU 2021-08, which we adopted on January 1, 2023.

The adoption of ASU 2021-08 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently issued accounting pronouncements, not yet adopted:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

In addition, it provides new segment disclosure requirements for entities with a single reportable segment.

The guidance will be effective for the Company for annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025.

Early adoption is permitted.

The Company is currently evaluating the impact on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid.

The guidance will be effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the impact on its financial statement disclosures.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 3:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

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Government authorities

Loan receivables

NOTE 4:- ACQUISITIONS

2022 Acquisition

Technology Purchase of Physimax Technologies Ltd.

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period (Years)

Prior Year Acquisitions

Acquisition of Upright

On February 1, 2021 (the “Acquisition Date”), the Company completed the acquisition, through its subsidiary LabStyle, of Upright.

The acquisition was accounted as a business combination.

The consideration transferred included 1,649,887 shares of Common Stock, the repayment of Upright's outstanding debt in the amount of $ 3,020 , a settlement of a loan previously granted by the Company to Upright in the amount of $ 1,500 and an issuance of a replacement share based compensation awards in the amount of $ 712 .

The total consideration transferred in the acquisition of Upright was $ 33,578 .

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.

In addition, the Company incurred acquisition-related costs in a total amount of $ 378 .

Acquisition-related costs include legal and accounting services which were included in general and administrative expenses in the Consolidated Statements of Comprehensive loss.

Purchase price allocation:

Under business combination accounting principles, the total purchase price was allocated to Upright’s net tangible and intangible assets based on their estimated fair values as set forth below.

The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.

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

period (Years)

Tangible assets acquired (including cash of $ 544 )

Liabilities assumed

Net liabilities assumed

Total purchase price

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 4:- ACQUISITIONS (Cont.)

Acquisition of WayForward

On June 7, 2021, the Company through the Merger Sub, completed the acquisition of WayForward through the merger of WayForward into Merger Sub, which changed its name to PsyInnovations, Inc.

The acquisition was accounted for as a business combination.

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 resolution.

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, 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.

Purchase price allocation :

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

The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.

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

period (years)

Tangible assets acquired (including cash of $ 139 )

Liabilities assumed

Net liabilities assumed

Total purchase price

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 5:- INVENTORIES

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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.)

Since the contract consideration includes variable consideration, as of December 31, 2023, 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.

In 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 in revenues for the completion of the first development plan.

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

As such, for the year ended December 31, 2022, the Company recognized $ 1,506 in revenues, and for the year ended December 31, 2023, the Company recognized $ 2,494 in revenues for the completion of the second development plan .

On June 15, 2023, the third development plan (initiated in April 2023), was approved by the parties.

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

The Company determined that this method under ASC 606 best measures progress towards satisfying the performance obligation and faithfully depicts the transfer of goods and services.

For the year ended December 31, 2023, the Company recognized $ 2,098 in revenues, with additional revenues from the third development plan of $ 602 expected to be recognized by the end of June 2024.

In July 2023, the Company entered into an amended and restated strategic agreement with the preferred partner.

Pursuant to the amendment, the parties adjusted certain pre-agreed economic parameters, including revenue share adjustments and to allow to expedite certain development milestones agreed upon in the parties’ initial agreement.

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.

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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.

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- REVENUE (Cont.)

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.

On February 21, 2023, the Company entered into a change order with the Health Plan according to which the Company will provide additional implementation services and shall develop additional features to be included in the platform.

The change order includes a fixed consideration in the amount of $ 90 .

For the years ended December 31, 2023, and December 31, 2022 the Company recognized revenues of $ 962 and $ 1,778 respectively for the completion of the August SOW.

Revenue Source:

The following tables represent the Company total revenues for the year ended December 31, 202 3 and 202 2 disaggregated by revenue source:

Commercial - Business-to-Business-to-Consumer (“B2B2C”)

Commercial - Strategic partnerships

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.

The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of the reporting period.

The company expects all remaining performance obligations to be satisfied in less than a year.

The following table presents the significant changes in the deferred revenue balance during the year ended December 31, 202 3 :

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Costs to fulfill a contract

The Company defer costs incurred to fulfill contracts that:

The Company defers 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;

(2) are expected to generate resources that will be used to satisfy the Company’s performance obligations 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.

Contract fulfillment costs are expensed as the Company satisfies its performance obligations and recorded into cost of revenue.

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

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- REVENUE (Cont.)

Costs to fulfill a contract consist of (1) deferred consumer hardware costs incurred in connection with the delivery of services that are deferred, and (2) deferred costs incurred, related to future performance obligations which are capitalized.

Costs to fulfill a contract as of December 31, 202 3 , consisted of the following:

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Total costs to fulfill a contract

Costs to fulfill a contract were as follows:

fulfill a contract

Beginning balance as of December 31, 2022

Cost of revenue recognized

Ending balance as of December 31, 2023

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands

NOTE 7:- DEBT

Loan Facility

On May 1, 2023, the Company refinanced its existing $ 25,000 credit facility with a new $ 30,000 credit facility in the LSA by and between Borrowers and the Avenue Lenders.

The LSA provides for a four-year secured credit facility in an aggregate principal amount of up to $ 40,000 , of which $ 30,000 was made available on the closing date and up to $ 10,000 may be made available on the later of July 1, 2023, or the date the Avenue Lenders approve the issuance of the Discretionary Tranche.

On May 1, 2023, the Borrowers closed on the Initial Tranche, less certain fees and expenses payable to or on behalf of the Avenue Lenders.

During the term of the Avenue Loan Facility, interest payable in cash by the Borrowers shall accrue on any outstanding balance due under the Avenue Loan Facility at a rate per annum equal to the higher of (x) the sum of four one-half percent ( 4.50 %) plus the prime rate as published in the Wall Street Journal and (y) twelve and one-half percent ( 12.50 %).

During an event of default, any outstanding amount under the Avenue Loan Facility will bear interest at a rate of 5.00 % in excess of the otherwise applicable rate of interest.

The Borrowers will pay certain fees with respect to the Avenue Loan Facility, including an upfront commitment fee, an administration fee, and a prepayment premium, as well as certain other fees and expenses of the Avenue Lenders.

On the closing date, and with respect to the Initial Tranche only, the Company agreed to issue for each Avenue Lender a warrant (the “Warrant”) to purchase up to 292,442 shares of the Company’s common stock, at an exercise price of $ 3.334 per share (also see note 20f), which shall have a term of five years from the issuance date.

The Warrant contains customary share adjustment provisions, as well as adjustments to the number of shares issuable upon exercise of the Warrant and the exercise price in the event of a bona fide equity raise prior to September 30, 2023, at a price less than the then current exercise price.

As of December 31, 2023, the customary share adjustment provisions and adjustments related to a bona fide equity raise prior to September 30, 2023, remain unchanged.

The Avenue Lenders have the right, at any time while the Avenue Loan Facility is outstanding, to convert an amount of up to $ 2,000 of the principal amount of the outstanding Avenue Loan Facility into Borrower’s unrestricted shares of the Company’s common stock at a price per share equal to 120 % of the then effective exercise price of the Avenue Warrant(Also see note 20f).

On the closing date, and with respect to the Initial Tranche only, the Company agreed to issue each Avenue Lender the Avenue Warrant to purchase up to 292,442 shares of the Company’s common stock, at an exercise price of $ 3.334 per share, which shall have a term of five years from the issuance date.

The Company concluded that Avenue Loan and the Avenue Warrants are freestanding financial instruments since these instruments are legally detachable and separately exercisable.

The Company has concluded that the warrants meet all the conditions to be classified as equity pursuant to ASC 480 and ASC 815-40.

In addition, the Company elected to account for the Avenue Loan 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.

As such, the proceeds were first allocated to the Loan at fair value in the amount of $ 28,215 and the remaining amount of $ 1,389 was allocated to the warrants.

During the year ended December 31, 2023 and 2022, the Company recognized $ 187 of remeasurement income related to the Initial Commitment Amount, which was included as part of financial expenses in the Company's statements comprehensive loss.

During the year ended December 31, 2023, the Company did not recognize any instrument specific credit risk fair value adjustment.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- DEBT (Cont.)

Warrant Liability

On June 9, 2022 (the closing date of the Orbimed Loan), the Company agreed to issue Orbimed a warrant (the “Orbimed Warrant”) to purchase up to 226,586 shares of the Company’s common stock, at an exercise price of $ 5.79 per share, which shall have a term of 7 years from the issuance date.

The Orbimed Warrant contains customary share adjustment provisions, as well as weighted average price protection in certain circumstances but in no event will the exercise price of the Warrant be adjusted to a price less than $ 4.00 per share.

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.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 8:- 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:

The Company's Avenue Loan Facility (as defined herein), and warrant liability were measured at fair value using Level 3 unobservable inputs until the payoff date of May 1, 2023.

Subsequently, a new loan agreement (Note 7) was obtained, and both the new loan and the warrant liability were measured at fair value.

The following tables present information about the Company’s financial 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, 2023

1 unchanged sentence

Financial liabilities:

Current maturity of long term loan

Long term loan

4 unchanged sentences

Financial liabilities:

Earn out liability

Current maturity of long term loan

Long term loan

Warrant 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.

Loan Facilities

The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $ 50,000 (the “Orbimed Loan”), of which $ 25,000 was made available on the closing date (the “Initial Commitment Amount”) and up to $ 25,000 was available on or prior to June 30, 2023, subject to certain revenue requirements (the “Delayed Draw Commitment Amount”).

On June 9, 2022, the Company closed on the Initial Commitment Amount, less certain fees and expenses payable to or on behalf of the Orbimed Lender.

The company did not draw the Delayed Draw Commitment Amount.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 8:- 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.

On May 1, 2023, the Company entered into a Loan and Security Agreement, and Supplement thereto (the “LSA”), by and between the Company and its subsidiary PsyInnovations Inc.

(“PsyInnovations”), collectively as the borrowers (the “Borrowers”) and Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities Fund, L.P., collectively as the lenders (the “Avenue Lenders”) (Note 6).

Upon the initial closing of the LSA, the Company repaid the Orbimed Loan to the Orbimed Lender.

The LSA provides for a four-year secured credit facility in an aggregate principal amount of up to $ 40,000 (the “Avenue Loan Facility”), of which $ 30,000 was made available on the closing date (the “Initial Tranche”) and up to $ 10,000 (the “Discretionary Tranche”) may be made available on the later of July 1, 2023, or the date the Avenue Lenders approve the issuance of the Discretionary Tranche.

On May 1, 2023, the Borrowers closed on the Initial Tranche, less certain fees and expenses payable to or on behalf of the Avenue Lenders

The fair value of the Avenue Loan Facility is recognized in connection with the Company’s LSA with respect to the Initial Commitment Amount only (Note 7).

The fair value of the Avenue 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 Avenue Loan Facility, which is reported within non-current liabilities (Maturity Date - May 1, 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 Avenue Loan Facility incorporates comparisons to instruments with similar covenants, collateral, and risk profiles and was obtained using a discounted cash flow technique.

On the date of Avenue Loan Facility origination, or May 1, 2023, the discount rate was arrived at by calibrating the loan amount of $ 30 million with the fair value of the warrants of $ 1,413 and the loan terms interest rate equal to the greater of (i) the sum of four and one-half percent ( 4.50 %) plus the Prime Rate, and (ii) twelve and one-half percent ( 12.50 %).

During an event of default, any outstanding amount under the Avenue Loan Facility will bear interest at a rate of 5.00% in excess of the otherwise applicable rate of interest.

The fair value of the Avenue Loan Facility, as of December 31, 2023, was estimated using a discount rate of 19 % which reflects the internal rate of return of the Avenue Loan Facility at closing, as of May 1, 2023.

For the year ended December 31, 2023, the change in the fair value of the loan was recorded in earnings since the Company concluded that those were not 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 is recognized in connection with the Company’s Credit Agreement with the Orbimed 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.

15 unchanged sentences

Balance as of January 1, 2023

Initial measurement of the FCA

Principal repayments on long-term loan

Change in fair value

Balance as of December 31, 2023

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

3 unchanged sentences

The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants, the Company elected the practical expedient for short term leases.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants, the Company elected to not recognize a lease liability and a ROU asset for lease with a term of twelve months or less.

The components of lease costs, lease term and discount rate are as follows:

17 unchanged sentences

Supplemental cash flow information related to leases are as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Lease liabilities arising from obtaining right-of-use assets:

Operating leases

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

Cash payments related to operating lease

New right-of-use assets obtained in exchange for operating lease obligations

NOTE 10:- PROPERTY AND EQUIPMENT, NET

10 unchanged sentences

Property and equipment, net

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.

2 unchanged sentences

dollars in thousands

NOTE 10:- PROPERTY AND EQUIPMENT, NET

Depreciation expenses for the year ended December 31, 2023 and 2022 amounted to $ 392 and $ 356 , respectively.

During 2023 the Company recorded a reduction of $ 81 to the cost and accumulated depreciation of fully depreciated computers equipment no longer in use.

NOTE 11:- OTHER INTANGIBLE ASSETS , NET

Definite-lived other intangible assets:

Finite-lived other intangible assets:

Remaining Life

2 unchanged sentences

Other intangible assets, net

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

Amortization expenses for the years ended December 31, 2023 and December 31, 2022 amounted to $ 4,512 and $ 4,361 , respectively.

Estimated amortization expense:

For the year ended December 31,

NOTE 12:- GOODWILL

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

As of December 31, 2021

As of December 31, 2022

NOTE 12:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands

NOTE 13:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

NOTE 13:- COMMITMENTS AND CONTINGENT LIABILITIES

6 unchanged sentences

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 .

In connection with specific research and development activities, Physimax, prior to its acquisition by the Company, received $ 1,011 of participation payments from the IIA.

The Company’s total commitment for royalties payable with respect to future sales, based on IIA participations received, net of royalties accrued or paid, totaled $ 932 as of December 31, 2023.

During the Year ended December 31,2023 and December 31, 2022 the company recorded IIA royalties related to the acquisition of Physimax Technology in amount of $ 1 and $ 120 , respectively.

NOTE 14:- 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.

3 unchanged sentences

Carryback losses are no longer allowed.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 15:- TAXES ON INCOME (Cont.)

In response to the COVID-19 pandemic, the U.S.

32 unchanged sentences

Temporary differences - Credit Facility

Temporary differences - Loan

Temporary differences - Intangible Assets

Temporary differences - Lease

Temporary differences - Lease Liability

Deferred tax assets:

3 unchanged sentences

Temporary differences - Intangible Assets

Temporary differences - Lease

Temporary differences - Lease Right of Use Assets

Deferred tax liability

5 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 offset the deferred tax assets.

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 all of its deferred tax assets and accordingly recorded a valuation allowance to offset the deferred tax assets.

DARIOHEALTH CORP.

12 unchanged sentences

Except for contractual rights of certain investors, the holders of Common Stock have no pre-emptive or similar rights and are not subject to redemption rights and carry no subscription or conversion rights.

On April 3, 2015, the Company’s Board of Directors approved stock for salary program pursuant to which the Company will issue compensation shares of restricted Common Stock (“Compensation Shares”) to directors, officers, and employees of the Company as consideration for a reduction in or waiver of cash salary, bonus or fees owed to such individuals.

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 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.

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, 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 .

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.

14,180 shares were issued under the Company’s 2012 Plan and 1,754 shares were issued under the 2020 Plan.

During the year ended December 31, 2021, the Board of Directors approved the grant of an aggregate of 18,885 shares of Common Stock, to officers, employees, and consultants of Upright .

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 319,914 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.

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

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, 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, 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.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 17:- STOCKHOLDERS’ EQUITY (Cont.)

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, 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 .

On July 11, 2023, out of the pre-funded warrants that were issued in July 2020 and February 2022, 86,985 were exercised on a cashless basis into 86,983 shares of common stock.

I n April 2023, the Company issued 76,637 shares of common stock to settle an earn-out payment owed in connection with the acquisition of PsyInnovations, Inc.

(dba wayForward).

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.

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.

Except as provided by law or by the other provisions of the Certificate of Incorporation, Holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

Upon any liquidation, dissolution or winding-up of the Company, after the satisfaction in full of the debts of the Company and payment of the liquidation preference to the Senior Securities, holders of Series A Preferred Stock shall be entitled to be paid, on a pari passu basis with the payment of any liquidation preference afforded to holders of any Parity Securities, the remaining assets of the Company available for distribution to its stockholders.

For these purposes, (i) “Parity Securities” means the Common Stock, Series A Preferred Stock and any other class or series of capital stock of the Company hereinafter created that expressly ranks pari passu with the Series A Preferred Stock;

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 16:- STOCKHOLDERS’ EQUITY (Cont.)

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.

The holders of Series A Preferred Stock will also be entitled dividends payable as follows:

(i) a number of shares of Common Stock equal to ten percent ( 10 %) of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such holder on the 12-month anniversary of the Series A Effective Date, (ii) a number of shares of Common Stock equal to fifteen percent ( 15 %) of the number of shares of Common Stock issuable upon conversion of the Series A Preferred then held by such holder on the 24-month anniversary of the Series A Effective Date, and (iii) a number of shares of Common Stock equal to twenty percent ( 20 %) of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such holder on the 36-month anniversary of the Series A Effective Date.

During the year ended December 31, 2022 and 2021, the Company accounted for the dividend as a deemed dividend in a total amount of $ 1,580 and 2,005 , respectively.

The Series A Preferred Stock automatically converted into shares of Common Stock, on the 36-month anniversary of the Series A Effective Date.

During the year ended December 31, 2022, the Company accounted for the dividend as a deemed dividend in a total amount of $ 1,580 .

Pursuant to the Placement Agency Agreement (the “Placement Agency Agreement”) executed by and between the Company and the registered broker dealer retained to act as the Company’s exclusive placement agent (the “Placement Agent”) for the offering of the Series A Preferred Stock, the Company paid the Placement Agent an aggregate cash fee of $ 1,788 , non-accountable expense allowance of $ 641 and was required to issue to the Placement Agent or its designees warrants to purchase 719,243 shares of Common Stock at an exercise price ranging from $ 4.05 to $ 5.90 per share (the “Placement Agent Warrants”).

2 unchanged sentences

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.

During the year ended 31, 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 .

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

In November, to December 2022 and January 2023, 6,355 Series A Preferred Stock automatically converted into 2,133,904 shares of Common Stock after completing 36-month anniversary of each the Series A Preferred Stock.

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

On May 1, 2023, the Company entered into agreements with certain holders of 3,557 of the Company’s Series A-1 Preferred Stock pursuant to a subscription agreement dated November 27, 2019, which are convertible to 1,273,498 shares of common stock.

In consideration for deferring the conversion of the Series A-1 Convertible Preferred Stock, the Company agreed to issue additional shares of common stock upon the deferred conversion of the Series A-1 Convertible Preferred Stock as follows:

63,676 shares, in the aggregate, if not converted for at least one quarter, 127,350 shares, in the aggregate, if not converted for at least two quarters, 191,026 shares, in the aggregate, if not converted for at least three quarters, 254,700 shares, in the aggregate, if not converted for at least four quarters and 382,050 shares, in the aggregate, if not converted for at least five quarters.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- 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).

The Company has concluded that the Series A-1 preferred shares modification should be accounted for as an extinguishment transaction and recorded the increase in fair value as a deemed dividend in the amount of $ 984 .

During the year ended December 31, 2023, the Company accounted for the dividend shares of common stock upon the deferred conversion of the Series A-1 Convertible Preferred Stock as a deemed dividend in a total amount of $ 618 .

During the year ended December 31, 2023, options were exercised into 4,800 shares of Common Stock.

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 (3%) 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.

During the year ended December 31, 2023 and 2022, the Company received net proceeds of $ 1,614 and $ 260 from the sale of 408,043 and 73,037 shares of the Company’s common stock, respectively.

As of December 31, 2023, there were $ 47,971 remaining funds available under the ATM.

The aggregate gross proceeds were approximately $ 40,000 ( $ 38,023 , net of issuance expenses).

On May 1, 2023, the Company entered into securities purchase agreements with accredited investors relating to an offering and the sale of an aggregate of 6,200 shares of newly designated Series B Preferred Stock (the “Series B Preferred Stock”), an aggregate of 7,946 shares of Series B-1 Preferred Stock (the “Series B-1 Preferred Stock”), and an aggregate of 150 shares of Series B-2 Preferred Stock (the “Series B-2 Preferred Stock”) at a purchase price of $ 1,000 for each share of preferred stock.

Certain of our executive officers and directors purchased shares of Series B-2 Preferred Stock in the offering.

On May 5, 2023, the Company entered into purchase agreements with accredited investors, relating to the offering of 1,106 shares of newly designated Series B-3 Preferred Stock (the “Series B-3 Preferred Stock” and, collectively with the Series B Preferred Stock, the Series B-1 Preferred Stock, and the Series B-2 Preferred Stock, the “Preferred Stock”), at a purchase price of $ 1,000 for each share of Preferred Stock.

The initial conversion price for the Series B, B-1, B-2, and B-3 Preferred Stock was $ 3.334 , $ 3.334 , $ 3.370 and $ 3.392 , respectively, subject to adjustment in the event of stock splits, stock dividends, and similar transactions.

As a result of the sale of the Preferred Stock, the aggregate gross proceeds to the Company from the offerings were approximately $ 15,402 ($ 14,868 net of issuance expenses).

The Preferred Stock will automatically convert into shares of common stock, on the 15 -month anniversary of the issuance date.

The holders of Preferred Stock will also be entitled dividends payable as follows:

(i) a number of shares of common stock equal to five percent ( 5.0 %) of the number of shares of common stock issuable upon conversion of the Preferred Stock then held by such holder for each full quarter anniversary of holding for a total of four ( 4 ) quarters from the closing date, and (ii) a number of shares of common stock equal to ten percent ( 10 %) of the number of shares of common stock issuable upon conversion of the Preferred Stock then held by such holder on the fifth full quarter from the closing.

The Series B-2 Preferred Stock dividend is subject to receipt of the approval of the Company’s shareholders.

The Preferred Stock has been accounted for as an equity instrument.

During the year ended December 31, 2023, the Company accounted for the dividend shares of common stock upon the dividend shares earned by Series B Preferred Stock as a deemed dividend in a total amount of $ 2,482 .

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.

Stock-based compensation:

On January 23, 2012, the Company’s 2012 Plan was adopted by the Board of Directors of the Company and approved by a majority of the Company’s stockholders, under which options to purchase shares of Common Stock have been reserved.

Under the 2012 Plan, options to purchase shares of Common Stock may be granted to employees and non-employees of the Company or any affiliate, each option granted can be exercised to one share of Common Stock.

On February 5, 2020, the Company’s stockholders approved an amendment to the 2012 Plan to increase the number of shares authorized for issuance under the 2012 Plan by 1,350,000 shares, from 618,650 to 1,968,650 .

On October 14, 2020, the Company’s stockholders approved the 2020 Equity incentive Plan (the “2020 Plan”) and the immediate reservation of 900,000 shares under this Plan for the remainder of the 2020 fiscal year.

Under the 2020 Plan, options to purchase shares of Common Stock may be granted to employees and non-employees of the Company or any affiliate, each option granted can be exercised to one share of Common Stock.

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 .

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 .

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 .

On May 1, 2023, the Company repaid its existing $ 25,000 credit facility to the Orbimed Lender with a new $ 30,000 credit facility in the LSA, by and between the Company and the Avenue Lenders.

The Company accounted the Avenue Warrants as equity instruments and recorded it in fair value as of May 1, 2023, using the relative fair value method in the amount of $ 1,389 .

(See also note 20f (

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

In December 2021, the Compensation Committee authorized the Company to issue warrants to purchase up to 8,000 shares of Common Stock, to certain consultants of the Company, at a purchase price of $ 13.60 .

As such, during the year ended December 31, 2023 and 2022 the Company recorded compensation expense for service providers in the amount of $ 28 and $ 29 , respectively.

In May 2022 and June 2022, the Compensation Committee authorized the Company to grant warrants to purchase up to 70,000 , and 175,000 shares (of which warrants to purchase 87,500 shares have expired) of the Company’s common stock which shall vest over 12 months and 24-month periods, respectively, to certain consultants of the Company, with an exercise price of $ 6.45 and $ 7.20 , respectively.

As such, during the year ended December 31, 2023 and 2022 the Company recorded compensation expense for service providers in the amount of $ 263 and $ 375 , respectively

In November 2023, the Compensation Committee approved a reduction in the exercise price of said warrants to an exercise price of $ 1.08 per share, subject to the performance of additional services.

The Company has accounted for the change as a modification and recorded increase in warrants fair value.

As such, during the year ended December 31, 2023 and 2022 the Company recorded compensation expense for a certain consultant in the amount of $ 1,502 and $ 29 , respectively.

In January 2023, the Compensation Committee approved the grant of warrants to purchase up to 280,000 shares of common stock, 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.

During the year ended December 31, 2023, the Company recorded compensation expenses for certain consultants in the amount of $ 650 .

In January 2023, the Compensation Committee approved a reduction in the exercise price of warrants to purchase up to 350,000 shares of common stock 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, subject to the performance of additional services.

The Company has accounted for the change as a modification and recorded the increase in fair value as compensation expense for those certain consultants in the amount of $ 960 .

On July 25, 2023, the Compensation Committee approved the grant of warrants to purchase up to 40,000 shares of common stock, with an exercise price of $ 3.46 , per share to a certain consultant, the stock options vests over a three-year period.

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

During the year ended December 31, 2023, the Company recorded compensation expenses for this certain consultant in the amount of $ 29 .

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

The table below summarizes the outstanding warrants as of December 31, 2023:

10 unchanged sentences

December 1, 2024

Placement Agent Warrants A-1 December 2019

Agent warrants A-1 December 2019

December 19, 2024

Placement Agent Warrants A-2 December 2019

Agent warrants A-2 December 2019

December 19, 2024

Placement Agent Warrants A-3 December 2019

Agent warrants A-3 December 2019

December 19, 2024

Placement Agent Warrants A-4 December 2019

Agent warrants A-4 December 2019

December 19, 2024

10 unchanged sentences

December 31, 2025

December 31, 2026

Lender of loan facility

August 1, 2029

5 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

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

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

Stock-based compensation:

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.

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

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

On November 9, 2021, the Compensation Committee of the Board of Directors approved the grant of a non-qualified stock option award to purchase 140,000 shares of the Company’s Common Stock outside of the Company’s existing equity incentive plans, pursuant to Nasdaq Listing Rule 5635(c)(4), in connection with the employment of a Chief Commercial Officer.

During the years ended December 31, 2023 and 2022, a total of 69,180 and 32,926 restricted unregistered shares of Common Stock, respectively, were issued to certain service provider under this approval the Company recorded compensation expense in the amount of $ 181 and $ 172 , respectively

On April 23, 2022, the Company released 56,788 holdback shares of the Company’s common stock to a 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 December 15, 2022, the Compensation Committee authorized the Company to issue 30,000 shares, to a certain consultant 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 1,268,050 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.

The Compensation Committee also approved the grant of options to purchase up to 1,009,550 shares of the Company’s common stock to employees and a consultant of the Company, at exercise prices between $ 4.30 and $ 8.10 per share.

The stock options vest over a three-year period commencing on the respective grant dates.

The options have a ten-year term and were issued under the 2020 Equity Incentive Plan, as amended (the “2020 Plan”).

In January 2023 and March 2023, the Compensation Committee approved the grant of a non-qualified stock option awards to purchase 200,000 shares of the Company’s common stock, as well as an additional non-qualified performance-based stock option award to purchase an additional 180,000 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 its Senior Vice President of Growth and its Chief Product Officer.

In January 2023 and April 2023, the Board of Directors approved the acceleration of the unvested portion of 42,500 restricted shares of the Company’s common stock to a certain employee of the Company.

The share acceleration was part of a separation agreement with the employee.

The Company has accounted for the acceleration as a type-3 modification and recorded compensation expenses in the amount of $ 153 .

During the year ended December 31, 2023, the Company’s Compensation Committee approved the grant of 927,100 restricted shares of the Company’s common stock to employees and consultants of which 537,100 are under the Company’s 2020 Equity Incentive Plan, as amended (“2020 Plan”).

Out of the restricted shares granted, 235,000 restricted shares will vest immediately, 30,000 restricted shares will vest over a period of six months , and the remaining 662,100 restricted shares will vest over a period between two to four years commencing on the respective grant dates.

The Compensation Committee also approved the grant of options to purchase up to 833,900 shares of common stock for employees and consultants of the Company, at exercise prices between $ 3.69 and $ 4.48 per share.

Stock options to purchase 528,900 shares of common stock vest over a three-year period commencing on the respective grant dates, and options to purchase 305,000 shares of common stock are performance-based.

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

DARIOHEALTH CORP.

13 unchanged sentences

Weighted average grant date fair value of options granted during the year ended December 31, 2023 and 2022 is $ 2.14 and $ 4.43 , 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 2023 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, 2023.

2 unchanged sentences

Restricted shares

Restricted shares outstanding at beginning of period

Restricted shares outstanding at beginning of the period

Restricted shares granted

1 unchanged sentence

Restricted shares outstanding at end of period

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model.

The assumptions used are determined as follows:

The expected volatility was derived from the historical volatilities of the Company’s stock price over a period equivalent to the expected term of the stock option grants.

Expected Term.

The expected term represents the period that the stock-based awards are expected to be outstanding.

When establishing the expected term assumption, the Company utilizes historical data.

Risk-Free Interest Rate.

The risk-free interest rate is based on U.S.

Treasury zero-coupon issues with terms similar to the expected term on the options.

Dividend Yield.

The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, it used an expected dividend yield of zero.

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:

19 unchanged sentences

Interest income

Revaluation of short-term investments

Loan Interest Expenses

2 unchanged sentences

Debt issuance cost

Remeasurement of FCA

Remeasurement of financial commitment asset

Total Financial expenses, net

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

- 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

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

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

This calculation includes the total weighted average number of the common stock, which includes prefunded warrants.

The total number of potential common shares related to the outstanding options, warrant and preferred shares excluded from the calculations of diluted net loss per share due to their anti-dilutive effect was 12,188,189 and 5,744,428 for the year ended December 31, 2023 and 2022, respectively.

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

Preferred A-1

Preferred B-1

Preferred B-2

Preferred B-3

Basic and diluted loss per share

Allocation of undistributed loss

Number of shares used in per share computation

Basic earnings (loss) per share amounts:

Distributed earnings - deemed dividends

Undistributed loss - allocated

Basic and diluted loss per share

Allocation of undistributed loss

Number of shares used in per share computation

Basic loss per share amounts:

Distributed earnings - deemed dividends

Undistributed loss - allocated

Basic and diluted loss per share

For the year ended December 31, 2022 the basic and diluted net loss per share of Preferred A , A-1 , A-2 , A-3 and A-4 was 590.97 , 599.21 , 524.32 , 381.15 and 286.94 respectively.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 19:- SUBSEQUENT EVENTS

In April 2020, the Compensation Committee of the Board of Directors approved a monthly grant of shares of the Company’s Common Stock equal up to $ 18 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 first quarter of 2023, the Company issued a total of 7,030 restricted shares of the Company’s Common Stock to certain service providers.

In January 2024, 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 2,493,764 shares, from 5,862,860 to 8,356,624 .

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.

In January and March 2024, the Compensation Committee of the Board of Directors approved the grant of 1,941,500 restricted shares subject to time vesting to directors, officers and employees of the Company and approved the grant of 1,100,400 options to purchase Common Stock, and 320,000 performance-based options to purchase Common Stock to officers, employees and consultants of the Company, at exercise prices between $ 1.68 and $ 2.14 per share.

The time vesting restricted shares and stock options vest over various periods between two to 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.

The restricted shares and the options were issued under the 2020 Plan.

On January 30, 2024, out of the pre-funded warrants that were issued in July 2020, 400,017 were exercised on a cashless basis into 400,000 shares of common stock.

On February 15, 2024 (the “Closing Date”), The Company, TWILL Merger Sub, Inc.

(“Merger Sub”), Twill, Inc.

(“Twill”) and Bilal Khan, solely in his capacity as the representatives of Twill’s stockholders and other equity holders, entered into an Agreement and Plan of Merger (the “Merger Agreement”), Pursuant to the provisions of the Merger Agreement, on the Closing Date, (i) Merger Sub was merged with and into Twill (the “Merger”), the separate corporate existence of Merger Sub ceased and Twill continued as the surviving company and a wholly owned subsidiary of the Company, (ii) the Company paid to Twill’s debt holders and equity holders aggregate consideration (“Merger Consideration”) of (A) $ 10.0 million in cash, (B) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 10,000,400 shares (the “Warrant Shares”) of Company common stock, par value $ 0.0001 per share (the “Common Stock”), issuable to a trust (the “Trust”) formed for the benefit of certain equity and debt holders of Twill, issuable in 4 equal tranches, (C) stock options to purchase up to 2,963,459 shares of Common Stock issued to employees of Twill as an inducement to their employment with the Company, issued outside of the Company’s equity compensation plans, pursuant to Nasdaq Rule 5635(c)(4), with an exercise price of $ 2.55 per share, and (D) a combination of warrants and restricted stock units (“RSUs”) to acquire up to 1,766,508 shares of Common Stock issued to certain outgoing board members, consultants and outgoing officers of Twill (all of such RSUs and warrants being subject to the approval of the Company’s stockholders, pursuant to Nasdaq Rule 5635), and (iii) the parties to the Merger Agreement consummated the transactions contemplated thereby.

The Merger Agreement contains various customary representations, warranties and covenants.

As a result of the Merger, Twill will operate as a wholly owned subsidiary of the Company.

In addition, the Company executed certain consulting agreements (the “Consulting Agreements”) with Ofer Leidner and Bilal Khan, each former officers of Twill.

Pursuant to the terms of the Consulting Agreements, the Company agreed to retain their services.

Leidner and Khan for a period of at least 14 months and 6 months respectively, in exchange for monthly consulting fees of $ 35,416 and $ 35,417 , respectively.

In addition, the Company agreed to issue to Mr.

Leidner warrants to purchase up to 1,032,946 shares of Common Stock, of which 717,946 are subject to time vesting and 315,000 are subject to certain performance-based metrics, and to issue to Mr.

Khan 350,000 fully vested RSUs which shall be vest subject to stockholder approval.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 19:- SUBSEQUENT EVENTS (Cont.)

On February 15, 2024, the Company entered into securities purchase agreements (each, a “Series C Purchase Agreement”) with accredited investors relating to an offering (the “Offering”) and the sale of an aggregate of (i) 17,307 shares of newly designated Series C Preferred Stock (the “Series C Preferred Stock”), and (ii) 4,000 shares of Series C-1 Preferred Stock (the “Series C-1 Preferred Stock”), at a purchase price of $ 1,000 for each share of Preferred Stock.

In addition, on February 16, 2024, the Company entered into Series C Purchase Agreements with accredited investors relating to the Offering and the sale of an aggregate of 1,115 shares of Series C-2 Preferred Stock (the “Series C-2 Preferred Stock” and together with the Series C Preferred Stock and the Series C-1 Preferred Stock, the “Preferred Stock”), at a purchase price of $ 1,000 for each share of Preferred Stock.

The Series C and C-1 Preferred Stock are convertible into Common Stock at $ 2.02 per Common Stock.

The Series C-2 Preferred Stock is convertible into Common Stock at $ 2.14 per Common Stock.

As a result of the sale of the Preferred Stock, the aggregate gross proceeds to the Company from the Offering are approximately $ 22,422 thousands.

The closing of the Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock occurred on February 21, 2024.

On February 15, 2024, the Company and its subsidiaries, PsyInnovations, Inc.

and LabStyle Innovation Ltd., entered into the First Amendment to Loan and Security Agreement and Supplement (the “Avenue Amendment”) with Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities Fund, L.P., as lenders.

Pursuant to the Avenue Amendment, the parties agreed to include the Merger Sub and Twill as parties to the Company’s existing loan facility with the lenders.

In addition, the Avenue Amendment provides (i) that the Company will seek stockholder approval to reprice the warrants issued to the lenders on May 1, 2023 to permit an amendment to the exercise price of such warrants to the “minimum price” as defined by Nasdaq rules as of the closing of the Twill Agreement and (ii) permit the lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to the Company at a conversion price of $ 4.0001 per share.

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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