What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-10 compared with 2024-03-28 · 112 added, 97 removed, 205 unchanged (50% of the section changed)

14 unchanged sentences

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

We began our sales in the direct-to-

consumer space, solving first for what we deemed the most difficult problems:

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

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

Our most developed AI tools leverage the direct-to-consumer experience from over 150,000 members to drive superior engagement and outcomes.

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

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

In early 2020, we broadened our solutions to include other medical conditions in addition to diabetes, and to serve business customers who seek to improve the health of their stakeholders.

9 unchanged sentences

In addition, the shares issued are subject to the terms of a lock-up agreement, pursuant to which the Selling Shareholders (subject to certain exceptions) have agreed to restrict their ability to transfer their shares as follows:

(i) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of one hundred and eighty (180) days from the date of the closing of the acquisition (the “Closing Date”), (ii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of two hundred and seventy (270) days from the Closing Date, (iii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of three hundred and sixty (360) days from the Closing Date and (iv) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of four hundred and fifty (450) days from the Closing Date.

(i) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of one hundred and eighty (180) days from the date of the closing of the acquisition, (ii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of two hundred and seventy (270) days from the closing date, (iii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of three hundred and sixty (360) days from the closing date and (iv) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of four hundred and fifty (450) days from the closing date.

We, along with TWILL Merger Sub, Inc.

6 unchanged sentences

The Company has agreed to seek stockholder approval within 135 days following the closing of the Merger to permit the full exercise of the Pre-Funded Warrants (the “Warrant Vote”).

In addition, we entered into voting agreements with certain existing

stockholders to vote in favor of the Warrant Vote.

In addition, we entered into voting agreements with certain existing stockholders to vote in favor of the Warrant Vote.

We have agreed to call a stockholder meeting each fiscal quarter thereafter to the extent the Warrant Vote is not approved by the Company’s stockholders.

21 unchanged sentences

Revenue Recognition

Revenue is recognized under the five-step methodology in accordance with Accounting Standards Codification (“ASC”) - ASC 606, which requires us to identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations identified, and recognize revenue when (or as) each performance obligation is satisfied.

Revenue is recognized under the five-step methodology in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from contracts with customers,” (“ASC 606”), which requires us to identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations identified, and recognize revenue when (or as) each performance obligation is satisfied.

We derive our revenue principally from:

2 unchanged sentences

For each contract, we consider 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, we evaluate whether the price is subject to rebates and adjustments to determine the net consideration to which we expect to receive.

In determining the transaction price, we evaluate whether the price is subject to rebates and

adjustments to determine the net consideration to which we expect to receive.

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

11 unchanged sentences

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.

In the 2024 fiscal year, our B2B2C channel included 36 new employers and health plan clients, which brought our total client base to 83.

Commercial revenue - Strategic partnerships

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

We have also entered into contracts with a preferred partner and a health plan provider in which we provide data license, development and implementation services.

Inventory write-down is measured as the difference between the cost of the inventory and net realized value based upon assumptions about future demand, and is charged to the cost of sales.

16 unchanged sentences

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.

Business combination and asset acquisitions.

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

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

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

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

We account 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

Results of Operations

Comparison of the Year Ended December 31, 2023 to Year Ended December 31, 2022

Comparison of the Year Ended December 31, 2024 to Year Ended December 31, 2023 (dollar amounts in thousands)

Revenues for the year ended December 31, 2024, amounted to $27,040 compared to $20,352 during the year ended December 31, 2023.

The decrease in revenues for the year ended December 31, 2023, compared to the year ended December 31, 2022, is due to a decrease in revenues from sales to consumers and our strategic partnerships .

Revenues generated during the year ended December 31, 2023, were derived from the sale of services to our strategic partners, commercial customers and consumers located mainly in the United States.

The increase in revenues for the year ended December 31, 2024, compared to the year ended December 31, 2023, resulted from an increase in our revenues from our commercial channel.

The revenues also include the consolidation of Twill’s revenues, as a result of its acquisition during the first quarter of 2024.

The pro forma revenues for the year ended December 31, 2024, if the closing of the acquisition of Twill would have taken place on the first day of the year would have amounted to $29,003.

Revenues generated during the year ended December 31, 2024, were derived from the sale of services to our commercial customers and consumers located mainly in the United States.

Cost of Revenues

During the years ended December 31, 2024 and 2023, we recorded costs related to revenues in the amount of $13,7 73 and $14,368, respectively.

The decrease in cost of revenues was due to the decrease in revenues.

Cost of revenues excluding amortization of acquired technology during the year ended December 31, 2023 and 2022, was $10,370,000 and $1 4 , 012 ,000, respectively.

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

Gross profit for the year ended December 31, 2023, amounted to $5,984,000 (29.4% of revenues) compared to $9,655,000 (34.9% of revenues) for the year ended December 31, 2022.

The decrease in gross profit as a percentage of revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022, is due to the decrease in revenues derived from sales through our strategic partnerships.

Gross profit for the year ended December 31, 2023, excluding amortization of acquired technology were $10,370,000 (51.0% of revenues) compared to $14,012,000 (50.7% of revenues) during the year ended December 31, 2022.

The decrease in cost of revenues was mainly due to a reduction in payroll related expenses included in the cost of revenues and stock-based compensation during the period, partially offset by an increase in amortization of technology related to the acquisition of Twill, and hosting costs.

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

Gross profit for the year ended December 31, 2024, amounted to $13,267 ( 49 .

1 % of revenues) compared to $5,984 (29.4% of revenues) for the year ended December 31, 2023

The increase in gross profit as a percentage of revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, resulted mainly from the increase in the revenues from the commercial channel, mainly related to the acquisition of Twill.

Gross profit for the year ended December 31, 2024, excluding amortization of acquired technology, depreciation and stock-based compensation was $18,366 ( 6 7.9% of revenues) compared to $10,801 (53.1% of revenues) during the year ended December 31, 2023.

Research and Development Expenses

Our research and development expenses increased by $3,931 to $ 24 , 1 79 for the year ended December 31, 2024, compared to $20,248 for the year ended December 31, 2023.

This increase was mainly due to the increase in our payroll expenses during the year ended December 31, 2023.

This increase was mainly a result of higher payroll related expenses, software licenses and an increase in subcontractor and consulting expenses due to the consolidation of Twill during the year ended December 31, 2024, partially offset by stock-based compensation and bonus payments.

Our research and development expenses, excluding stock-based compensation and depreciation, for the year ended December 31, 2024, were $ 20 , 6 45 compared to $16,367 for the year ended December 31, 2023, an increase of $ 4 ,278.

This increase is mainly as a result of an increase in salaries and software development expenses.

Research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, expenses related to:

(i) our solutions including our Dario Smart Diabetes Management Solution,

DarioEngage platform, Dario Move solution and our digital behavioral health solution, (ii) labor contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development, (iv) clinical trials performed in the United States to satisfy the FDA product approval requirements and (v) facilities expenses associated with and allocated to research and development activities.

This increase was mainly a result of higher payroll related expenses, software licenses, and an increase in subcontractor and consulting expenses due to the consolidation of Twill.

Research and development expenses consist mainly of employees’ salaries and related overhead costs involved in research and development activities, expenses related to:

(i) our solutions including our Dario Smart Diabetes Management Solution, Dario Move solution and our digital behavioral health solution, (ii) labor, stock-based compensation contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development, (iv) clinical trials performed in the United States to satisfy the FDA approval requirements and (v) facilities expenses associated with and allocated to research and development activities.

Sales and Marketing

Our sales and marketing expenses decreased by $6,538,000 to $23,785,000 for the year ended December 31, 2023, compared to $30,323,000 for the year ended December 31, 2022.

This decrease was mainly due to the decreases in our digital marketing and payroll related expenses during the year ended December 31, 2023.

Our sales and marketing expenses, excluding stock-based compensation, depreciation and amortization, for the year ended December 31, 2023, were $17,146,000 compared to $23,880,000 for the year ended December 31, 2022, a decrease of $6,734,000.

This decrease was due to a decrease in our digital marketing, and payroll related expenses.

Sales and marketing expenses consist mainly of payroll expenses, online marketing campaigns of our service offering, trade show expenses, customer support expenses and marketing consultants, marketing expenses and subcontractors.

Our sales and marketing expenses increased by $ 2 ,5 65 to $ 26 , 350 for the year ended December 31, 2024, compared to $23,785 for the year ended December 31, 2023.

This increase was mainly a result of higher payroll related expenses, amortization of customer relationship, software licenses and an increase in subcontractor and consulting expenses due to the consolidation of Twill, partially offset by a decrease in bonus payments and stock-based compensation expenses during the year ended December 31, 2024.

Our sales and marketing expenses, excluding stock-based compensation, depreciation and amortization, for the year ended December 31, 2024, were $20, 27 7 compared to $17,146 for the year ended December 31, 2023, an increase of $3,1 3 1.

This increase was mainly due to an increase in payroll expenses, subcontractor and consulting services and software licenses resulting from the consolidation of Twill during the year ended December 31, 2024.

Sales and marketing expenses consist mainly of employees’ salaries and related overhead costs, stock-based compensation, online marketing campaigns of our service offering, trade show expenses and marketing consultants, marketing expenses and subcontractors.

General and Administrative Expenses

Our general and administrative expenses increased by $2, 342 to $20, 482 for the year ended December 31, 2024, compared to $18,140 for the year ended December 31, 2023.

The increase was mainly due to an increase in our stock-based compensation, during the year ended December 31, 2023.

Our general and administrative expenses, excluding stock-based compensation, acquisition costs and depreciation, for the year ended December 31, 2023, were $8, 663 ,000 compared to $9,803,000 for the year ended December 31, 2022, a decrease of $1, 140 ,000.

This decrease was due to a decrease in, insurance, consulting services, and investor relations expenses.

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

Finance expenses, net

Our finance expenses, net, decreased by $2,205,000 to $3,174,000 for the year ended December 31, 2023, compared to $5,379,000 financing expenses for the year ended December 31, 2022.

The changes in our financial expenses were mainly due to the remeasurement of our long term loan and interest income received.

Financial expenses, net mainly include bank charges, interest expenses, interest income, and foreign currency translation differences .

Income tax expenses were $64,000 for the year ended December 31, 2023, as compared to $4,000 for the year ended December 31, 2022.

The increase was mainly due to higher payroll related expenses and acquisition costs related to the consolidation of Twill during the year ended December 31, 2024, partially offset by a decrease in stock-based compensation.

Our general and administrative expenses, excluding stock-based compensation, acquisition costs and depreciation, for the year ended December 31, 2024, were $1 1 , 236 compared to $8, 663 for the year ended December 31, 2023, an increase of $2, 573 .

This increase was mainly due to higher payroll related expenses and acquisition costs related to the consolidation of Twill.

Our general and administrative expenses consist mainly of employees’ salaries and related overhead costs, stock-based compensation, directors’ fees, legal and accounting fees, patent registration, expenses related to investor relations, as well as our office rent and related expenses.

Finance income (expenses), net

Our finance income, net, increased by $16,319 to $13,145 for the year ended December 31, 2024, compared to $3,174 financing expenses for the year ended December 31, 2023.

The increase in the finance income, net for the year ended December 31, 2024, compared to the year ended December 31, 2023, was due to income from revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, as these warrants are classified as a liability under U.S.

Financial expenses, net primarily consist of credit facility interest expense, interest income from cash balances, revaluation of warrants, revaluation of short-term investments, bank charges, lease liability and foreign currency translation differences.

Income from tax was $1,852 for the year ended December 31, 2024, representing an increase of $1,916 as compared to $64 of income tax expenses for the year ended December 31, 2023.

The increase in our income from tax was due to a change in the valuation allowance for deferred tax liability that resulted from the acquisition of Twill.

Net loss for the year ended December 31, 2024 was $42, 747 .

Net loss for the year ended December 31, 2023, was $59,427.

The decrease from 2022 was mainly due to the decrease in our operating and financing expenses.

The decrease from 2023 was mainly due to the increase in our financial income.

Net operating loss carryforwards

As of December 31, 2023, we and WayForward had a U.S.

As of December 31, 2024, we, WayForward and Twill had a U.S.

federal net operating loss carryforward of approximately $ 192 , 404 , of which $27,270 were generated from tax years 2011-2017 and can be carried forward and offset against taxable income, which expires during the years 2031 to 2037.

1 unchanged sentence

Tax Cuts and Jobs Act of 2017 (the “TCJA”) modified the rules regarding utilization of net operating loss and net operating losses generated subsequent to the TCJA can only be used to offset 80% of taxable income with an indefinite carryforward period for unused carryforwards (i.e., they should not expire).

During 2018 - 2023, we generated additional $37,379,000 of net operating losses carryforwards which are not subject to the annual limitation described above.

The remaining net operating losses carryforwards of approximately $165,134 were generated during 2018 - 2024, and are not subject to the annual limitation described above.

Our Israeli subsidiary, Labstyle, accumulated net operating losses for Israeli income tax purposes as of December 31, 2024, in the amount of approximately $221,030.

10 unchanged sentences

“net loss before interest, taxes, depreciation, and amortization” or “EBITDA,” and “Non-GAAP Adjusted Loss,” as presented herein below.

Importantly, we note the NGFM measures captioned “EBITDA” and “Non-GAAP Adjusted Loss” are not recognized terms under U.S.

Importantly, we note the NGFM measures captioned

“EBITDA” and “Non-GAAP Adjusted Loss” are not recognized terms under U.S.

GAAP, and as such, they are not a substitute for, considered superior to, considered separately from, nor as an alternative to, U.S.

13 unchanged sentences

Net loss - as reported

Depreciation expense

Amortization of acquired technology and brand

Other financial expenses, net

Depreciation and impairment expense

Amortization of acquired technology, brand and customer relationship

Other financial (income) expenses, net

Acquisition costs

Earn-out remeasurement

Stock-based compensation expenses

Non-GAAP adjusted loss

Liquidity and Capital Resources

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.

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

We have incurred net losses since its inception.

As of December 31, 2024, we had incurred recurring losses and negative cash flows since inception and has an accumulated deficit of $390,343 as of December 31, 2024.

For the year ended December 31, 2024, we used approximately $38,562 of cash in operations.

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

Until we achieve profitability or generate positive cash flows, we will continue to be dependent on raising additional funds.

We intend to fund our 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 we will be able to obtain an adequate level of financial resources that are required for the long-term development and commercialization of our product offerings.

As of December 31, 2024, we had approximately $27,7 64 in cash and cash equivalents compared to $36,797 at December 31, 2023.

4 unchanged sentences

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

The purchase price per share represents the “Minimum Price” of the Company’s Common Stock pursuant to Nasdaq Rule 5635(d) as of the date of execution of each respective securities purchase

The Company and the investors participating in the offering also executed a registration rights agreement pursuant to which the Company agreed to file a registration statement covering the resale of the shares within sixty (60) days following the final closing of the offering.

The purchase price per share represents the “Minimum Price” of the Company’s Common Stock pursuant to Nasdaq Rule 5635(d) as of the date of execution of each respective securities purchase agreement.

We and the investors participating in the offering also executed a registration rights agreement pursuant to which we agreed to file a registration statement covering the resale of the shares within sixty (60) days following the final closing of the offering.

On October 22, 2021, we entered into a Sales Agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $50,000 from time to time through Cowen.

Upon entering into the Sales Agreement, we filed a new shelf registration statement on Form S-3, which was declared effective by the SEC on November 12, 2021.

During the year ended December 31, 2023, we sold 408,043 shares of our common stock under the Sales Agreement for aggregate net proceeds of approximately $1,614,000.

During the year ended December 31, 2023, we sold 408,043 shares of our common stock under the Sales Agreement for aggregate net proceeds of approximately $1,614, The Sales Agreement has since expired.

On February 28, 2022, we entered into securities purchase agreements with institutional accredited investors relating to a registered direct offering with respect to the sale of an aggregate of 4,674,454 shares of our common stock and pre-funded warrants to purchase an aggregate of 667,559 shares of our common stock, at a purchase price of $7.49 per share.

3 unchanged sentences

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

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

The LSA provides for a four-year secured credit facility in an aggregate principal amount of up to $40,000 (the “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 Lender approves 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.

5 unchanged sentences

The Borrowers 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 LSA.

During the term of the Loan Facility, interest payable in cash by the Borrowers shall accrue on any outstanding balance due under the 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%).

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 Loan Facility will bear interest at a rate of 5.00% in excess of the otherwise applicable rate of interest.

3 unchanged sentences

In addition, the Avenue Amendment provides (i) that we 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 Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $4.001 per share.

On December 16, 2024, we entered into the Third Amendment to Loan and Security Agreement and Supplement (the “Third Avenue Amendment”) with Avenue Lenders.

Pursuant to the Third Avenue Amendment, the parties agreed to (i) amend the potential interest only period under the loan facility such that the existing interest only period ending on April 30, 2024 was extended by a period of six months provided that we net certain proceeds from an equity financing on or before March 31, 2025 in the aggregate;

(ii) an additional sixth month interest only extension period was added, which is conditioned on our achieving a multi-million dollar net revenue milestone, with cash burn not to exceed a certain multi-million dollar level, for the trailing six month period ending September 30, 2025;

(iii) the interest only period may not exceed a total of 36 months from the closing of the loan as of May 1, 2023;

and (iv) the maturity date of the loan will be extended from May 1, 2027 to November 1, 2027, provided that we meet the foregoing amended milestones.

In addition, the Third Avenue Amendment provides (i) that we will seek stockholder approval to reprice the warrants issued to the Avenue 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 Avenue Amendment (or $0.7208 per share) and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $0.8650 per share.

As of December 31, 2024, we have not yet obtained stockholder approval for the warrant repricing.

In consideration for the Third Avenue Amendment, we agreed to pay a certain amendment fee at closing, and the exit payment due under the loan was increased by a certain amount, in addition to accrued interest and then outstanding principal.

On May 1, 2023, we entered into securities purchase agreements (each, a “Series B Purchase Agreement”) 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, we entered into purchase agreements (the “Series B-3 Purchase Agreement” and together with the Series B Purchase Agreement, the “Purchase Agreement”) with accredited investors, relating to the Offering, to an offering and the sale of an aggregate 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.

As a result of the sale of the Preferred Stock, the aggregate gross proceeds to the Company from the Offering are approximately $15.4 million.

On May 5, 2023, we entered into purchase agreements (the “Series B-3 Purchase Agreement” and together with the Series B Purchase Agreement, the “Purchase Agreement”) with accredited investors, relating to the Offering, to an offering and the sale of an aggregate of 1,106 shares of newly designated Series B-3 Preferred Stock (the “Series B-3 Preferred Stock”), at a purchase price of $1,000 for each share of preferred stock.

As a result of the sale of the preferred stock, the aggregate gross proceeds to us from the Offering are approximately $15.4 million.

The closing of the Series B Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock occurred on May 4, 2023, and the closing of the Series B-3 Preferred Stock occurred on May 9, 2023.

On May 1, 2023, we executed an agreement (the “Preferred Agreement”) with existing holders of our Series A-1 Convertible Preferred Stock.

Pursuant to the Preferred Agreement, we agreed to issue such holders of Series A-1 Convertible Preferred Stock up to an aggregate of an additional 382,050 shares of common stock, in addition to the 1,273,499 shares of common stock issuable upon conversion of the Series A-1 Preferred Stock, in consideration for such holders agreeing not to convert their shares of Series A-1 Convertible Preferred Stock.

Such shares of common stock are issuable on the following dates, assuming the Series A-1 Convertible Preferred Stock has not yet been converted:

(i) up to an aggregate of 63,675 shares of Common Stock before July 1, 2023, if not converted for at least one quarter, (ii) up to an aggregate of 127,350 shares of Common Stock before October 1, 2023, if not converted for at least two quarters, (iii) up to an aggregate of 191,026 shares of Common Stock before January 1, 2024, if not converted for at least three quarters, (iv) up to an aggregate of 254,700 shares of Common Stock before April 1, 2024, if not converted for at least four quarters, and (v) up to an aggregate of 382,050 shares of Common Stock before July 1, 2024, if not converted for at least five quarters.

The holders of Series A-1 Convertible Preferred Stock will not be entitled to receive any such shares if the issuance of such shares will exceed a non-waivable 19.99% ownership blocker.

On February 15, 2024, we 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 “Series C Preferred Stock”), at a purchase price of $1,000 for each share of Preferred Stock.

As a result of the sale of the Series C Preferred Stock, the aggregate gross proceeds to the Company from the Offering were approximately $22,422,000.

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

On May 1, 2023, we executed an agreement (the “Preferred Agreement”) with existing holders of our Series A-1 Convertible Preferred Stock (the “Series A-1 Preferred Stock”).

Pursuant to the Preferred Agreement, we agreed to issue such holders of Series A-1 Preferred Stock up to an aggregate of an additional 382,050 shares of common stock, in addition to the 1,273,499 shares of common stock issuable upon conversion of the Series A-1 Preferred Stock, in consideration for such holders agreeing not to convert their shares of Series A-1 Preferred Stock.

Such shares of common stock are issuable on the following dates, assuming the Series A-1 Preferred Stock has not yet been converted:

(i) up to an aggregate of

63,675 shares of Common Stock before July 1, 2023, if not converted for at least one quarter, (ii) up to an aggregate of 127,350 shares of Common Stock before October 1, 2023, if not converted for at least two quarters, (iii) up to an aggregate of 191,026 shares of Common Stock before January 1, 2024, if not converted for at least three quarters, (iv) up to an aggregate of 254,700 shares of Common Stock before April 1, 2024, if not converted for at least four quarters, and (v) up to an aggregate of 382,050 shares of Common Stock before July 1, 2024, if not converted for at least five quarters.

The holders of Series A-1 Preferred Stock will not be entitled to receive any such shares if the issuance of such shares will exceed a non-waivable 19.99% ownership blocker.

On February 15, 2024, we entered into securities purchase agreements (each, a “Series C Purchase Agreement”) with accredited investors relating to an offering (the “Series C 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, we 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 “Series C Preferred Stock”), at a purchase price of $1,000 for each share of preferred stock.

As a result of the sale of the preferred stock, the aggregate gross proceeds to us from the Series C Offering were approximately $22,422.

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 December 16, 2024, we entered into securities purchase agreements with accredited investors relating to an offering and the sale of an aggregate of (i) 7,055 shares of newly designated Series D Preferred Stock, and (ii) 11,750 shares of Series D-1 Preferred Stock, at a purchase price of $1,000 for each share of preferred stock.

As a result of the sale of the preferred stock, the aggregate gross proceeds to us from the offering were approximately $18,805.

The closing of the offering occurred on December 18, 2024.

On January 7, 2025, we entered into securities purchase agreements with accredited investors relating to an offering and the sale of an aggregate of (i) 4,950 shares of newly designated Series D-2 Preferred Stock, and (ii) 1,850 shares of Series D-3 Preferred Stock, at a purchase price of $1,000 for each share of preferred stock.

As a result of the sale of the preferred stock, the aggregate gross proceeds to us from the offering were approximately $6,800.

The closing of the offering occurred on January 14, 2025.

Readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected.

3 unchanged sentences

This would particularly be the case if we are unable to commercially distribute our products and services in the jurisdictions and in the timeframes we expect.

We believe that we have sufficient cash to fund our operations for at least the next twelve months.

Cash Flows (dollar amounts in thousands)

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

3 unchanged sentences

Net cash used in operating activities

Net cash used in operating activities was $30,379,000 for the year ended December 31, 2023, compared to $47,845,000 used in operations for the same period in 2022.

Cash used in operations decreased mainly due to the decrease in our receivables and inventories, and the decrease in operating and financing expenses.

Net cash used in operating activities was $38,562 for the year ended December 31, 2024, compared to $30,379 used in operations for the year ended December 31, 2023.

Cash used in operations increased mainly due to the increase in our operating expenses and an increase in our working capital.

Net cash used in investing activities

Net cash used for investing activities was $8,934 for the year ended December 31, 2024, compared to cash used in investing activities of $547 for the year ended December 31, 2023.

Cash used in investing activities increased mainly due to purchase of property and equipment and investment in short-term bank deposits in 2023 compared to 2022.

The increase is mainly due to the acquisition of Twill in the year ended December 31, 2024, compared to the year ended December 31, 2023.

Net cash provided by financing activities

Net cash provided by financing activities was $38,531 for the year ended December 31, 2024, compared to $18,253 for the year ended December 31, 2023.

During the year ended December 31, 202 3 , we raised net proceeds in an amount of approximately $16,482,000 through our May 2023 offering and net proceeds in an amount of approximately $1,771,000 through the LSA with the Avenue Lenders.

During the year ended December 31, 2024, we raised net proceeds in an amount of approximately $38,531 through our February and December 2024 private placements.

Contractual Obligations

16 unchanged sentences

Recently Issued and 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.

This creates an exception to the general recognition and measurement principle in ASC 805.

requires companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

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

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 November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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.

The guidance will be effective for us 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.

We adopted the fiscal year standard for the period beginning January 1, 2024 on a retrospective basis which resulted in updated segment disclosures.

For more information on the updated segment disclosures, refer to Note 18 of our consolidated financial statements.

Recently issued accounting pronouncements, not yet adopted:

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

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

We are currently evaluating the impact on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses .

The ASU requires, among other items, additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the Statements of Operations.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the effect of adopting the ASU on our disclosures.

Quantitative and Qualitative Disclosure About Market Risk

1 unchanged sentence

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 7. Management’s Discussion and Analysis