What changed in this filing

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Item 9A. Controls and Procedures

2025-03-10 compared with 2024-03-28 · 804 added, 534 removed, 1349 unchanged (50% of the section changed)

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Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

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Chief Financial Officer, Treasurer and Secretary

Richard Anderson

Tomer Ben-Kiki

Chief Operating Officer

Steven Nelson

Chief Commercial Officer

Chairman of the Board of Directors

Dennis Matheis

Lawrence Leisure

Erez Raphael has served as our Chief Executive Officer since August 9, 2013 and as a director of our company since December 2013.

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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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in economics and accounting from Haifa University.

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

From November 2003 to December 2019, Mr.

Anderson worked for Catasys, Inc.

CATS), where he served as President and Chief Operating Officer from July 2008 to December 2019, and as a member of its board of directors from November 2003 to July 2019.

Prior to Catasys, Inc., Mr.

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.

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.

Earlier in his career, Mr.

Anderson was a Senior Manager/Director for PricewaterhouseCoopers.

Anderson holds a B.A.

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.

Nelson has served as our Chief Commercial Officer since June 5, 2024.

From October 2018 to September 2023, Mr.

Nelson served as President and Chief Executive Officer of Contigo Health, a Premier Inc.

subsidiary, where he previously served as Chief Operating Officer from 2017 to 2018, Vice President of Strategy, Planning, & Innovation from 2015 to 2016 and Chief of Staff in 2016.

From 2007 to 2014, he served as Senior Vice President of Strategy, Product, & Marketing at Highmark Inc., a healthcare company.

Prior to Highmark, from 2012 to 2014, he served as the Senior Vice President of Executive Oversight at Allegheny Health Network, a healthcare company.

Earlier in his

Nelson was a Senior Vice President for General Nutrition Centers, General Manager of Brand Marketing & Promotions for MET-Rx &Worldwide Sports Nutrition, Vice President of International Marketing for 141 Communicator, and Director of Marketing & Omnicom Integration for GMR Marketing.

Nelson holds a Bachelor of Science in Education from the University of Pittsburgh at Johnstown and a Master of Arts in Business Administration from Ohio 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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ANSR, now, The Hackett Group, Nasdaq:

HCKT), a business consulting and technology integration company, including from 1999 to 2000 as Chief Operating Officer of the Internet Practice, the largest division of AnswerThink Consulting Group, Inc., while concurrently during the merger of the companies, serving as the acting Chief Financial Officer of Think New Ideas, Inc.

Chief Financial Officer of Think New Ideas, Inc.

(then, Nasdaq:

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During his tenure at Arthur Andersen & Co., where he began his career, he became a Certified Public Accountant in 1981 and he holds a B.S., maxima cum laude, in accounting from LaSalle University.

In addition to serving as a director of PhotoMedex, he serves as the audit chair and a director of several medical device companies, including Noninvasive Medical Technologies, Inc.

and Cagent Vascular, LLC, and as an advisor to the board of an orphan drug company, Palvella Therapeutics, LLC.

Formerly from 2007 to 2009, Mr.

McGrath served as a director of Embrella Cardiovascular, Inc.

In addition to serving as the audit and compensation committee chair and director of several biopharmaceutical and medical device companies, including our Company, Citius Pharmaceuticals, Inc.

CTXR), Citius Oncology, Inc (Nasdaq:

CTOR), and LIV Process, Inc.

formerly BioVector, Inc.

Previously from 2014 to 2024 Mr.

McGrath served as a director and audit chair of Cagent Vascular, Inc, and from 2007 to 2009 served as a director of Embrella Cardiovascular, Inc.

(sold to Edwards Lifesciences Corporation, NYSE:

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

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

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

From September 2018 until July 2020, Mr.

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

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

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

Prior to BCG, Mr.

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

Kaplan received a M.B.A.

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

in Economics from Cornell University.

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

Lawrence Leisure has been a director of our company since February 25, 2025.

Leisure has extensive business experience consulting and advising in the senior living, provider services, value based care and technology enabled services sectors.

Since 2014, Mr.

Leisure has served as the Co-Founder and Co-Managing Partner of Chicago Pacific Founders, a private equity firm focused on senior living, provider services, value based care, and technology enabled services.

Leisure is serving on the Board of Directors, and the compensation committee, of P3 Health Partners Inc.

PIII), a publicly traded health management company.

Leisure has also served on the boards of directors of several private companies backed by Chicago Pacific Founders as well as several venture capital backed companies.

Since 2009, he has served as Co-Founder and Chairman of Healthspottr, a strategic networking and consulting firm focused on health innovation and collaboration in the healthcare industry and he also served as the Co-Founder of the Employer Health Innovation Roundtable since 2015.

Prior to Chicago Pacific Partners, Mr.

Leisure held senior management roles at Accenture, PricewaterhouseCoopers, Towers Perrin, Kaiser Foundation Health Plans and UnitedHealth Group.

Leisure was also employed by the venture capital firm, Kleiner Perkins, as an Operating Partner within the Life Sciences & Digital Health Practice.

Leisure is Chairman of the UCSF Rosenman Institute, member of the UCLA Anderson School of Management Board of Advisors, and a Senior Advisor at the Mussalem Center for BIODESIGN at Stanford University.

Leisure holds a B.A.

from Stanford University and an MBA from the University of California-Los Angeles Anderson School of Management.

We believe Mr.

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

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

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

He previously served as the Global Chief Medical Officer of the Johnson and Johnson Diabetes Institute.

He previously served as the Global Chief Medical Officer of the Johnson

and Johnson Diabetes Institute.

Prior to this, he was Vice President, Worldwide Clinical Affairs & Evidence-Based Medicine at LifeScan, Inc., a Johnson & Johnson company.

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Our Audit Committee oversees our corporate accounting, financial reporting practices and the audits of financial statements.

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

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

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

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

Shaked, Matheis McGrath and Kaplan, and Ms.

Shaked, Matheis and McGrath, and Ms.

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

Code of Ethics

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

accounting officer.

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

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We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Ethics by posting such information on the website address specified above.

Insider Trading Policy

We have adopted an insider trading policy, governing the purchase, sale and other transactions in our securities that applies to our directors, executive officers, employees, and other covered persons, including immediate family members and entities controlled by any of the foregoing persons, as well as by the Company itself.

The insider trading policy prohibits, among other things, insider trading and certain speculative transactions in our securities (including short sales, buying put and selling call options and other hedging or derivative transactions in our securities) and establishes a regular blackout period schedule during which directors, executive officers, employees, and other covered persons may not trade in the Company’s securities, as well as certain pre-clearance procedures that directors and executive officers must observe prior to effecting any transaction in our securities.

We believe that the insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us.

A copy of the insider trading policy is filed as Exhibit 19.1 to this Form 10-K.

Limitation of Directors Liability and Indemnification

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Richard Anderson

(Former President)

Steven Nelson

(Chief Commercial Officer) (20)

Tomer Ben Kiki

(Former Chief Operations Officer) (20)

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

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(1) In accordance with his second amendment to the employment agreement with our company effective August 11, 2013, Mr.

Raphael was entitled to a monthly salary of NIS 44,000, commencing April 1, 2016, his monthly salary was increased to NIS 80,000 (approximately $21,578 per month).

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).

Raphael was initially entitled to a monthly salary of NIS 44,000.

Since August 2013, the Compensation Committee has approved several increases to Mr.

Raphael’s monthly salary, most recently on April 1, 2021, when his monthly salary was increased to NIS 137,466 (approximately $37,078 per month).

(2) In March 2023, Mr.

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(3) On March 6, 2024, Mr.

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

(3) On May 18, 2022, Mr.

Raphael was granted 800,000 restricted shares of our common stock under our 2020 Equity Incentive Plan.

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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 per month, commencing April 1, 2016, his monthly salary was updated to NIS 60,000 (approximately $16,183).

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).

(6) In March 2022, Mr.

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

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

Since March 2015, the Compensation Committee has approved several increases to Mr.

Ben David’s salary, most recently on March 1, 2024, when his monthly salary was updated to NIS 105,000 (approximately $28,471)

(6) In March 2023, Mr.

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

(7) On May 18, 2022, Mr.

(7) On March 6, 2024, Mr.

Ben David was granted 400,000 restricted shares of our common stock under our 2020 Equity Incentive Plan.

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As of April 2022, Mr.

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

(10) In April 2022, Mr.

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

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

(10) In April 2023, Mr.

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

(11) On May 18, 2022, Mr.

(11) On March 6, 2024, Mr.

Anderson was granted 750,000 options to purchase shares of our common stock under our 2020 Equity Incentive Plan, at an exercise price of $1.68 per share.

(12) In addition to his salary, Mr.

Anderson is entitled to participate in any and other benefit plans and programs that the Company may offer to its employees from time to time according to the terms of such plans and the Company’s practices and policies as well as reimbursements for expenses accrued.

Anderson was entitled to participate in any and other benefit plans and programs that we may offer to our employees from time to time according to the terms of such plans and our practices and policies as well as reimbursements for expenses accrued.

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

(13) In accordance with his employment agreement, effective in June 2024, Mr.

Nelson was entitled to a monthly salary of $33,333.33.

(14) On June 5, 2024, Mr.

Nelson was granted 500,000 options to purchase shares of our common stock as an inducement grant pursuant to Nasdaq Listing Rule 5635 (c)(4), at an exercise price of $1.35 per share.

(15) In addition to his salary, Mr.

Nelson is entitled to participate in any and other benefit plans and programs that we may offer to our employees from time to time according to the terms of such plans and the Company’s practices and policies as well as reimbursements for expenses accrued.

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

(16) In accordance with his employment agreement, effective in February 2024, Mr.

Ben-Kiki was entitled to a monthly salary of $35,417.

(17) On February 15, 2024, Mr.

Ben-Kiki was granted 717,946 options to purchase shares of our common stock as an inducement grant pursuant to Nasdaq Listing Rule 5635 (c)(4), at an exercise price of $2.55 per share.

On November 4, 2024, Mr.

Ben-Kiki was granted a Warrant to purchase 319,653 shares of our common stock at an exercise price of $0.9475 per share.

(18) In addition to his salary, Mr.

Ben-Kiki was entitled to participate in any and other benefit plans and programs that we may offer to our employees from time to time according to the terms of such plans and our practices and policies as well as reimbursements for expenses accrued.

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

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

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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).

Raphael is entitled to a monthly salary of NIS 137,466 (approximately $ 37 , 275 ) and a target bonus equal to 75% of his annual base salary.

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 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.

Pursuant to his employment agreement, Mr.

Ben David was initially entitled to a monthly salary and additional compensation (excluding social benefits under applicable Israeli law) of NIS 31,200 (approximately $8,415) for providing eighty percent of his working time to our company.

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

Commencing April 1, 2016, Mr.

Ben David’s Salary was updated to NIS 60,000 (approximately $16,183) per month.

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).

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

Ben David is entitled to a monthly salary of NIS 105,000 (approximately $28,471) and a target bonus equal to 40% of his base salary.

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.

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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 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.

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

Steven Nelson, Chief Commercial Officer – On June 5, 2024, we appointed Mr.

Nelson as our Chief Commercial Officer.

In connection with Mr.

Nelson’s appointment, we agreed to pay Mr.

Nelson an annual base salary of $400,000.

Nelson shall also be subject to a six-month non-competition and one-year non-solicitation provision, certain confidentiality covenants and assignment of any of his company-related inventions.

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

In addition, Mr.

Nelson will be entitled to receive an annual incentive bonus of up to $400,000, subject to certain milestones and performance targets.

In conjunction with his appointment as Chief Commercial Officer, we agreed to issue Mr.

Nelson a stock option to purchase up to 500,000 shares of common stock, with such shares vesting over three years, with one third of such shares vesting on June 1, 2025, and the remaining shares vesting in equal quarterly amounts.

In addition, we agreed to issue Mr.

Nelson a stock option to purchase 400,000 shares of common stock, of which 150,000 shares commence vest upon our achieving 92% of a targeted revenue amount for the year ended December 31, 2024, and the remaining balance of 250,000 shares if the annual revenue is 100% or more of a targeted amount, provided, however that such options shall be canceled if the annual revenue does not reach at least 92% of the targeted amount.

We also agreed to issue Mr.

Nelson a stock option to purchase 450,000 shares of common stock, for each of the years ending December 31, 2025, December 31, 2026 and December 2027, of which 150,000 shares commence vesting if the Company’s annual revenue is at least 92% of a targeted amount, 150,000 shares commence vesting if the Company’s annual revenue is 100% or more of the targeted amount and an additional 150,000 shares will commence vesting upon reaching certain annual goals as determined by the Company’s Board of Directors for such fiscal year, provided, however that such options shall be canceled if the annual revenue does not reach at least 92% of the targeted amount.

Each of the performance options vests over a three-year period commencing on the first day of the following fiscal year to which such option relates, at the rate of 8.33% per quarter, at the last day of the relevant fiscal quarter.

All options were granted as an inducement material to Mr.

Nelson becoming an employee of the Company, in accordance with Nasdaq Listing Rule 5635(c)(4).

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

Anderson as our President and General Manager of North America.

In connection with Mr.

Anderson’s appointment, the Company agreed to pay Mr.

Anderson’s appointment, we agreed to pay Mr.

Anderson an annual base salary of $335,000.

Anderson shall also be subject to a six-month non-competition and one-year non-solicitation provision, certain confidentiality covenants and assignment of any of his company-related inventions.

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

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

On April 1, 2022 Mr.

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In addition, Mr.

Anderson will be entitled to receive an annual incentive bonus of up to $250,000, subject to certain milestones and performance targets.

In addition, and in conjunction with his appointment as President and General Manager of North America, the Company agreed to issue Mr.

Anderson was entitled to receive an annual incentive bonus of up to $250,000, subject to certain milestones and performance targets.

In addition, and in conjunction with his appointment as President and General Manager of North America, we agreed to issue Mr.

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

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The performance options for 2020, 2021, 2022 and 2023 did not vest and have expired.

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

Anderson of 5,182 shares of our Common Stock under our 2012 Equity Incentive Plan.

Such shares were issued in lieu of the waiver of $23,333 of salary otherwise payable to Mr.

Anderson from April to July 2020.

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

Anderson, in compliance with Rule 16b-3 promulgated by the SEC.

The redemption is part of previously granted 91,652 and 20,000 shares of restricted stock granted in January and July 2021, in exchange for the aggregate redemption price equal to the withholding tax obligation in the amount of $170,000.

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.

On May 30, 2024, we and Mr.

Anderson, mutually agreed that Mr.

Anderson would cease serving in his role as President of the Company and would continue as a consultant and member of Advisory Board.

Tomer Ben-Kiki, Former Chief Operating Officer .

Ben-Kiki acted as the Company’s Chief Operating Officer between February 15, 2024 and August 7, 2024.

Ben-Kiki’s employment agreement he was entitled to 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 was also 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 was 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.

On August 7, 2024, we and Tomer Ben-Kiki, mutually agreed that Mr.

Ben-Kiki would be relieved from his role as Chief Operating Officer and re-assigned to serve in a non-executive management role as our Chief Technology Officer.

In connection with his departure from his role, we made a consulting agreement with Mr.

Outstanding Equity Awards at December 31, 2024

unexercisable

January 6, 2024

(Chief Executive Officer)

Zvi Ben David

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January 19, 2031

March 6, 2034

Steven Nelson

(Chief Commercial Officer)

Tomer Ben-Kiki

February 15, 2034

(Former Chief Operating Officer)

Total Option Shares

(1) Vests in 12 equal quarterly installments over a three-year period.

(2) Vests in 3 equal annual installments over a three-year period.

(2) One third vests after one year followed by 8 equal quarterly amounts over the following two years.

(3) Unvested options were cancelled.

We do not have any formal policy that requires us to grant, or avoid granting, equity-based compensation at certain times.

We do not grant equity awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, and do not time the public release of such information based on award grant dates.

The timing of any equity grants to executive officers or directors in connection with new hires, promotions, or other non-routine grants is tied to the event giving rise to the award (such as an executive officer’s commencement of employment or promotion effective date).

During the year ended December 31, 2024, there were no equity grants made to our executive officers during any period beginning four business days before the filing of a periodic report or current report disclosing material non-public information and ending one business day after the filing or furnishing of such report with the Securities and Exchange Commission that were likely to result in changes to the price of our common stock, and do not time the public release of such information based on award grant dates.

Non-Employee Director Remuneration Policy

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Our non-employee directors (currently Messrs.

Shaked, Matheis, McGrath, Prof.

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

Shaked, Matheis, McGrath, Kaplan, Stern and Ms.

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

(i) $50,000 per year, to be paid quarterly in arrears and (ii) $20,000 for Board committee service, to be paid quarterly in arrears.

(i) $50,000 per year, to be paid quarterly in arrears and (ii)

$20,000 for Board committee service, to be paid quarterly in arrears.

Commencing the second quarter of 2024 Messrs Shaked, Mathies, Kaplan, Stern and Ms.

Karah have waived their cash compensation.

Stock and Option Awards

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:

On March 6, 2024, the Compensation Committee of our Board of Directors approved the following issuances, each was done under our 2020 Equity Incentive Plan:

(i) 90,000 restricted shares of our common stock to Mr.

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

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

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

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

and (iii) 70,000 restricted shares of our common stock to each of Ms.

Stern and Mr.

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

Stone and Mr.

On February 24, 2025, our Compensation Committee of our Board of Directors approved to accelerate the vesting of 35,000 restricted shares of our common stock as well as approved the grant of 30,000 restricted shares of Common Stock to Mr.

Compensation Committee Review

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New directors joining our Board of Directors shall be entitled to a pro-rated portion (based on months to be served in the fiscal year in which they join) of cash and stock option or other equity incentive awards (if applicable) for the applicable fiscal year at the time they join the board.

Prior Awards to Management

On November 4, 2024, our Compensation Committee approved amendments to certain previously issued awards of restricted shares of common stock in the aggregate amount of 68,750 and 250,000 shares of common stock, respectively, granted to Mr.

Erez Raphael, our Chief Executive Officer, and Mr.

Zvi Ben David, our Chief Financial Officer, in the aggregate amount of 23,750 and 125,000 shares of common stock, respectively, on May 18, 2022 and March 6, 2024 (collectively, the “Prior Awards”) to permit an immediate acceleration of the unvested portion of the Prior Awards in the event of change in control of the Company.

Summary Director Compensation Table

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Dennis McGrath

Jon Kaplan (13)

Dennis Matheis

Amount shown does not reflect dollar amount actually received.

Instead, this amount reflects the aggregate grant date fair value of each stock option granted in the fiscal year ended December 31, 2023, computed in accordance with the

provisions of ASC 718.

Instead, this amount reflects the aggregate grant date fair value of each stock option granted in the fiscal year ended December 31, 2024, computed in accordance with the provisions of ASC 718.

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

(1) 154,744 stock awards are outstanding as of December 31, 2024.

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

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

(2) No option awards are outstanding as of December 31, 2024.

(3) 70,000 stock awards are outstanding as of December 31, 2024.

(4) No option awards are outstanding as of December 31, 2024.

(5) 102,620 stock awards are outstanding as of December 31, 2024.

(6) 55,000 option awards are outstanding as of December 31, 2024.

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(12) No option awards are outstanding as of December 31, 2024.

Kaplan resigned from the Board of Directors on February 23, 2025.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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

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

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

Unless otherwise indicated, the address of each person listed below is c/o DarioHealth Corp., 322 W.

18th St., New York, New York 10011.

#33B, New York, New York 10019.

Name of Beneficial Owner

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Tomer Ben Kiki (6)

Jon Kaplan (7)

Lawrence Leisure (8)

Hila Karah (9)

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Nantahala Capital Management, LLC.

Solid Financial, LLC.

Tasso Partners, LLC.

less than 1%.

(1) Percentage ownership is based on 41,567,016 shares of our common stock outstanding as of March 3, 2025 and, for each person or entity listed above, warrants or options to purchase shares of our common stock which exercisable within 60 days of such date.

(2) Includes 234 vested options to purchase common stock and 1,046,492 vested restricted shares.

(2) Includes 1,315,242 vested restricted shares.

Also includes 37,876 shares of our common stock, held by Dicilyon Consulting and Investment Ltd.

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

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

(4) Excludes 500,000 options which are not vested.

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

Excludes 672,929 options which are not vested.

(5) Includes 867,902 vested options to purchase common stock and 93,695 vested restricted shares.

Excludes 198,750 options which are not vested.

(6) Includes 398,294 vested options to purchase common stock and 106,552 vested warrants to purchase common stock.

Excludes 213,101 warrants which are not vested.

(7) Includes 116,411 vested restricted shares.

(8) Includes 162,500 vested restricted shares and warrants to purchase 125,000 shares of common stock.

(9) Includes 150,356 vested restricted shares.

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(11) Includes 133,017 vested restricted shares.

Includes 250 C preferred shares exercisable into 124,000 shares of common stock.

Includes warrants exercisable into 507,648 shares of common stock, subject to a contractual beneficial ownership limitation of 4.99%.

(12) Includes 52,084 vested options to purchase common stock and 70,120 vested restricted shares.

Excludes 11,666 options which have not vested.

Excludes 2,916 options which have not been vested.

(13) Based solely on information contained in Form 13G/A filed with the SEC on February 14, 2025, and data provided by the holder.

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.

Includes 277,546 pre-funded warrants to purchase common stock issued in May 2019 and preferred shares convertible into 933,451 shares of common stock, subject to a contractual beneficial ownership limitation of 9.99% and excludes preferred shares convertible into 3,803,747 shares of common stock, 386,129 pre-funded warrants issued on July 31, 2020, and 331,814 pre-funded warrants issued on February 28, 2022.

(14) Based solely on information contained in Form 13G/A filed with the SEC on February 12, 2025.

The securities are held in discretionary accounts managed by Solid Financial LLC, where the firm has the power to vote and dispose of such securities on behalf of its clients.

(15) Based solely on information contained in Form 13G filed with the SEC on December 13 2024, and data provided by the holder.

Includes (i) 1,394,721 shares of Common Stock, (ii) shares of Preferred C Stock convertible into 1,222,772 shares of Common Stock, and (iii) shares of Preferred C-2 Stock convertible into 23,364 shares of Common Stock, 385,000 warrants to purchase common stock which are beneficially owned by Dana Carrera is the trustee of the GCL Family Trust, and included pursuant to Rule 13d-3(d)(1)(i) of the Securities Exchange Act of 1934, as amended.

Certain Relationships and Related Party Transactions

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

To the best of our knowledge, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

On September 3, 2021, we entered into to a consulting agreement, as amended (the “Consulting Agreement”), with NearWater Growth LCC (“NearWater”).

As remuneration for such services, we agreed to pay NearWater a monthly cash retainer upon the successful completion of an equity financing resulting in gross proceeds in excess of $25 million and we further agreed to issue NearWater shares of our common stock as equity compensation if certain milestones are met such as NearWater introducing entities to us for acquisition or partnership purposes, provided certain revenue milestones are met.

Further, the Consulting Agreement provides for the payment to NearWater of 150,000 shares of our common stock which shall vest quarterly over a four year period.

To date, NearWater has received approximately 258,000 shares of our common stock and common stock purchase warrants to purchase up to 125,000 shares of common stock.

On February 24, 2025, we and NearWater entered into a Second Amendment to the Consulting Agreement pursuant to which we agreed to pay NearWater a monthly retainer of $5,000 beginning on September 1, 2024, increasing to $10,000 per month on January 1, 2025.

Lawrence Leisure, a member of our Board of Directors is a Member of NearWater.

Leisure has in interest in, and will receive, the compensation due to NearWater.

immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

Principal Accounting Fees and Services

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December 31, 2023

Audited Related Fees

All Other Fees (2)

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Composite copy of Certificate of Incorporation, as amended (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2020).

Bylaws (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).

Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 19, 2024).

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).

Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock of DarioHealth Corp.

(incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on June 28, 2024).

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).

Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Preferred Stock of DarioHealth Corp.

(incorporated by reference to Exhibit 3.2 filed with the Company’s Current Report on Form 8-K filed on June 28, 2024).

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).

Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-3 Preferred Stock of DarioHealth Corp.

(incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on September 13, 2024).

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).

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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).

Form of Warrant (incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2018).

Certificate of Designation of Preferences, Rights and Limitations of Series D Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2024).

Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2024).

Certificate of Designation of Preferences, Rights and Limitations of Series D-2 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2025).

Certificate of Designation of Preferences, Rights and Limitations of Series D-3 Preferred Stock ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2025).

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 May 22, 2019).

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1 To Pre-Funded Warrant ( incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 9, 2019).

Description of Securities (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2020).

Form of Placement Agent Warrant (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2020).

Description of Securities.

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

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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).

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

and Avenue Venture Opportunities Fund, L.P.

( incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 8, 2024).

Form of Second Amendment to Warrant issued to Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities Fund, L.P.

Form of Third Amendment to Warrant issued to Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities Fund, L.P.

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

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Form of Preferred Exchange Agreement by and between DarioHealth Corp.

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

and certain holders of Series A-1 Preferred Stock, dated September 20, 2022 (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2023)

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).

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

and Tomer Ben-Kiki

and Tomer Ben-Kiki (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2024).

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

and Tomer Ben-Kiki

and Tomer Ben-Kiki (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2024).

Offer Letter dated May 29, 2024, by and between DarioHealth Corp.

and Steven Nelson (incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed on June 5, 2024).

Series D Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on December 18, 2024).

Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on December 18, 2024).

Third Amendment to Loan and Security Agreement and Supplement, dated December 17, 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 Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on December 18, 2024).

Insider Trading Policy.

List of Subsidiaries of the Company

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Clawback Policy.

( incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2024).

The following financial statements from the Company’s annual report on Form 10-K for the year ended December 31, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language):

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March 10 , 202 5

/s/ Jon Kaplan

/s/ Lawrence Leisure

March 10 , 202 5

Lawrence Leisure

/s/ Adam Stern

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Critical Audit Matters

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

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

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

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

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

Business combinations

Description of the Matter

As described in Note 4 to the consolidated financial statements, On February 15, 2024, the Company acquired 100% of the equity shares of Twill Inc.

The fair value of the consideration was estimated to be 34,456 $Twill Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”.

Auditing the Company's accounting for the Twill Acquisition was complex due to the significant estimation uncertainty in determining the fair values of identified intangible assets, which consisted of technology of $ 5.6 million and customer relationships of $13.7 million.

The significant estimation uncertainty in determining the fair values of identified intangible assets was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business.

The significant assumptions used to estimate the fair value of the technology and customer relationships intangible assets included discount rates and certain assumptions that form the basis of the forecasted results, such as revenue growth rates, profitability margins and estimated costs.

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

Kost Forer Gabbay & Kasierer

144 Menachem Begin Road, Building A,

Tel-Aviv 6492102, Israel

+972-3-6232525

+972-3-5622555

How We Addressed the Matter in Our Audit

To test the estimated fair value of the developed technology and customer relationships intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

For example, we compared the significant assumptions to current industry, market and economic trends and to the Company's budgets and forecasts, and Twill’s historical operating results.

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

Our valuation specialists’ procedures included, among others, developing a range of independent estimates for the discount rates used in the valuation models and comparing those to the discount rates selected by management.

/s/ KOST FORER GABBAY & KASIERER

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Cash and cash equivalents

Short-term bank deposits

Short-term restricted bank deposits

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Operating loss

Total financial expenses, net

Total financial expenses (income), net

Loss before taxes

Deemed dividend

Net loss attributable to shareholders

Deemed dividend (contribution)

Net loss attributable to common shareholders

Net loss per share:

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Balance as of January 1, 2023

Exercise of options

Exercise of warrants

Issuance of common stock to consultants and service provider

Issuance of common stock to directors and employees

Extinguishment of preferred stock in connection with preferred stock modification

Deemed dividend related to issuance of preferred stock

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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

Stock-based compensation

Issuance of Common Stock, net of issuance cost

Common stock related to earnout consideration

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

Balance as of December 31, 2023

Exercise of options

Exercise of warrants

Exercise of pre-funded warrant to common stock

Extinguishment of preferred stock in connection with preferred stock modification

Deemed dividend related to Preferred Stock

Deemed dividend related to issuance of preferred stock

Conversion of preferred stock to common stock

Issuance of warrants to service providers

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

Issuance of preferred stock, net of issuance cost

Modification of warrants

Balance as of December 31, 2024

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

Stock-based compensation, common stock, and payment in stock to directors, employees, consultants, and service providers

Stock-based compensation

Depreciation and impairment

Change in operating lease right of use assets

Amortization of acquired intangible assets

Decrease (increase) in trade receivables

Decrease in trade receivables, net

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

Decrease (increase) in inventories

Decrease in inventories

Decrease in trade payables

Decrease in other accounts payable and accrued expenses

Increase (Decrease) in deferred revenues

Decrease in deferred revenues

Change in operating lease liabilities

Remeasurement of earn-out

Change in fair value of warrant liability

Non-Cash financial expenses

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Proceeds from redemption of short-term investments

Purchase of intangible assets

Payments for business acquisitions, net of cash acquired

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock and prefunded warrants, net of issuance costs

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of preferred stock, net of issuance costs

Proceeds from borrowings on Loan agreement

Proceeds from borrowings on credit agreement

Repayment of long-term loan

Repurchase and retirement of common stock

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash and cash equivalents

Decrease in cash, cash equivalents and restricted cash and cash equivalents

Effect of exchange rate differences on cash, cash equivalents and restricted cash and cash equivalents

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

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

Earn-out extinguishment as part of WayForward acquisition

Exercise of pre-funded warrant to common stock upon acquisition

DARIOHEALTH CORP.

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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 February 15, 2024 (the “Closing Date”), the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Twill, Inc.

(“Twill”), (see note 4).

Pursuant to the provisions of the Merger Agreement, on the Closing Date, TWILL Merger Sub, Inc.

(“Merger Sub”) was merged with and into Twill, the separate corporate existence of Merger Sub ceased and Twill continued as the surviving company and a wholly owned subsidiary of the Company.

Twill is a clinical grade technology company working to shorten the distance between need and care by configuring personalized digital therapeutics and care solutions at scale for the modern healthcare cloud.

Twill’s Intelligent Healing Platform(tm):

integrates artificial intelligence (AI) with empathy, making healing more personal, precise, and connected for the entire care journey.

Twill deploys a full spectrum of science-backed care solutions-including digital therapeutics, coaching, community, and well-being products for pharma, health plans, enterprises, and individuals everywhere.

The Company has incurred net losses since its inception.

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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 expects 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 to fund its operations.

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”.

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

DARIOHEALTH CORP.

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

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.

Although a portion of the Company’s expenses is denominated in New Israeli Shekels (“NIS”), 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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Transactions and balances denominated in dollars are presented at their original amounts.

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

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

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

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

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

The Company identified its Chief Executive Officer as the Chief Operating Decision Maker (CODM).

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

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

Cash and cash equivalents:

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Short-term restricted bank deposits:

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

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

The short-term restricted bank deposits are denominated in NIS and USD and bear interest at an average rate of 4.56 % and 5.2 % as of December 31, 202 4 and 202 3 , respectively.

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

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.

As of December 31, 202 4 , and 202 3 , the Company had a short-term restricted bank deposit which are used as collateral for rent in the amount of $ 175 and $ 229 , respectively.

As of December 31, 202 4 , and 2023, the Company had short-term restricted bank deposits which were used as collateral for credit payments in amounts of $ 0 and $ 63 , respectively.

The following table provides a reconciliation of the cash balances reported on the balance sheets and the cash, cash equivalents and short-term restricted bank deposits balances reported in the statements of cash flows:

Cash, and cash equivalents 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 Company records trade receivables when an enforceable right to payment exists, net of allowance for credit losses.

The Company’s expected credit 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.

As of December 31, 2024, and 2023, the credit loss allowance was $ 169 and $ 163 , respectively.

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

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Impairment of long-lived assets:

The Company's long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets.

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.

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

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets.

If such assets (or asset group) 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 (or asset group).

For the years ended December 31, 202 4 , and 202 3 , the Company recorded an impairment loss of $ 860 and $ 0 , respectively.

Revenue recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue from contracts with customers,” when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive.

The Company recognizes revenue in accordance with ASC 606, when (or as) it satisfies performance obligations by transferring promised hardware or services to its customers in an amount that reflects the consideration the Company expects to receive.

The Company applies the following five steps:

(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.

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.

The Company uses judgment in determining the SSP for its performance obligations.

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

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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company’s payment terms are generally 45 days or less.

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determines its contracts generally do not include a significant financing component since the Company's selling prices are not subject to billing terms nor is the Company’s purpose to receive financing from its customers or to provide customers with financing.

In addition, the Company elected to apply the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at the inception of a contract, that the period between when the Company will transfer a promised good or service to a customer and when the customer will pay for that good or service will be one year or less.

Revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities.

The Company elected to account for shipping and handling activities as fulfillment activities.

Shipping and handling activities are classified as part of cost of revenues.

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.

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

For each contract, the Company considers the promise to transfer tangible hardware and/or services, each of which are distinct, and accounted for as separate 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.

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.

Revenue from tangible hardware is recognized when control of the hardware 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 as the services have a consistent continuous pattern of transfer to a customer during 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).

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

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

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

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

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

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

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

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

Revenues related to the Company's newly acquired Twill platform are recognized over time, since the customer simultaneously receives and consumes the benefits provided by the Company’s performance.

Revenues related to health management programs and to the Twill platform are recognized using a time-elapsed measure of progress, since those services have a consistent continuous pattern of transfer to the customer.

To the extent the transaction price includes variable consideration, revenue is recognized using the variable consideration allocation exception, or, if the allocation exception is not met, the Company recognizes revenue ratably based on estimates of the variable consideration to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

When the variable consideration allocation exception is met, the Company recognizes revenue each month using either on a per engaged member per month (PEMPM) or a per employee per month (PEPM) basis.

Since the acquisition of Twill (note 4), the Company also provides professional services and advertisement serving services related to the Twill platform.

Revenues related to professional services are recognized over time, since the customer simultaneously receives and consumes the benefits provided by the Company’s performance.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company generally recognizes revenues for professional services using an input method, based on labor hours consumed, which the Company believes best depicts the transfer of the services to the customer.

Revenues related to advertisement serving services are recognized when impressions are delivered.

The Company recognizes revenue from the display of advertisements in the contracted period in which the impressions are delivered.

Impressions are considered delivered when an advertisement is displayed.

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 rates.

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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.

The Company follows the guidance provided in ASC 606 for determining whether it is a principal (i.e., report revenues on a gross basis) or an agent (i.e., report revenues on a net basis) in arrangements with customers that involve another party that contributes to providing specified services to a customer, based on whether the Company controls the specified good or service.

Commercial revenue - Strategic partnerships

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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.

beginning of period

end of period

Year ended December 31, 2024

Allowance for credit losses

Year ended December 31, 2023

Allowance for credit losses

The Company has no off-balance-sheet concentration of credit risk.

As of December 31, 2024, and as December 31, 2023, the Company's major customer accounted for 41.6 % and 0 %, respectively of the Company's accounts receivable balance.

For the year ended December 31, 2024 and December 31, 2023, the Company's major customer accounted for 24.6 % and 0 %, respectively, of the Company's revenue in the period.

As of December 31, 2024, and as December 31, 2023, the Company's major customer accounted for 0 % and 66.5 %, respectively of the Company's accounts receivable balance.

For the year ended December 31, 2024, and December 31, 2023, the Company's major customer accounted for 0 % and 29.9 %, respectively, of the Company's revenue in the period.

Income taxes:

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

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

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

As of December 31, 2024, and 2023, no liability for unrecognized tax benefits was recorded.

Research and development costs:

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

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Research and development costs:

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

Accounting for stock-based compensation:

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Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

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

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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.

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

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

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

Basic and diluted net loss per share:

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

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

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

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

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

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

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

Intangible Assets:

Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.

The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives.

The Company routinely reviews the remaining estimated useful lives of finite-lived intangible assets.

In case the Company reduces the estimated useful life for any asset, the remaining unamortized balance is amortized over the revised estimated useful life (see Note 11).

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

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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.

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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for the fiscal years beginning after December 15, 2024.

The Company adopted the ASU 2023-07 during the year ended December 31, 2024, on a retrospective basis which resulted in updated segment disclosures.

See Note 18 in the accompanying notes to the consolidated financial statements for further detail.

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold.

Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption is permitted, and the amendments should be applied on a prospective basis.

The Company is currently evaluating the effect of adopting the ASU on its 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, and may be applied either prospectively or retrospectively.

The Company is currently evaluating the effect of adopting the ASU on its disclosures.

NOTE 3:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

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Government authorities

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 4:- ACQUISITIONS

Technology Purchase of Physimax Technologies Ltd.

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

The Company considered this transaction as an asset acquisition .

The consideration transferred included the issuance of 256,660 shares of its common stock subjected to certain terms of lock-up periods valued at $ 1,186 , a cash payment of $ 500 , of which $ 400 was paid during the fourth quarter of 2021, and the remaining during the second quarter of 2022, The total consideration transferred in the acquisition of Physimax Technology was $ 1,686 .

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

Acquisition of Twill

On February 15, 2024, the Company completed the merger and the associated acquisition of all issued and outstanding shares of Twill for an aggregate consideration of (A) $ 10.0 million in cash, and (B) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 10,000,400 shares of the Company’s Common Stock, per value $ 0.0001 per share (the "common stock").

In addition, the Company issued stock options to purchase up to 2,963,459 shares of Common Stock and a combination of warrants and restricted stock units (“RSUs”) to acquire up to 1,766,508 shares of Common Stock to certain employees and officers of Twill.

The Company accounted for the stock options, warrants and RSUs separately from the acquisition.

The Company incurred acquisition-related costs in a total amount of $ 857 , which were included in general and administrative expenses in the Consolidated Statements of Comprehensive loss.

The acquisition of Twill advances the Company’s strategy to evolve from a point solution to a comprehensive multi condition platform.

With the integration of Twill, the Company believes it can achieve multiple advantages as well as synergies in multiple fronts like its product offering, commercial channels, improved clients and member experience.

Preliminary purchase price allocation:

Pursuant to ASC 805, the total purchase price was allocated to Twill’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.

A portion of the acquisition price was recorded as goodwill due to the synergies with Twill and is not expected to be deductible for tax purposes.

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:

DARIOHEALTH CORP.

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NOTE 4 – ACQUISITIONS (Cont.)

Purchase price allocation:

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

Cash and cash equivalents

Short-term restricted bank deposits

Trade receivables

Other accounts receivable and prepaid expenses

Property and equipment, net

Operating lease right of use assets

Acquisition-related intangibles

Total assets acquired

Trade payables

Other accounts payable and accrued expenses

Deferred revenues

Operating lease liabilities

Deferred tax liability

Liabilities assumed

Fair value of net assets acquired

Total purchase consideration

Following are details of the purchase consideration allocated to acquired intangible assets:

period (Years)

Technology (1)

Customer relationship healthcare (2)

Total identified intangible assets acquired

(1) The technology has been calculated through the Income Approach, in particular the Relief from Royalty method.

(2) The fair value of Twill’s customer relationships has been calculated using the Multi-Period excess earnings method (“MPEEM method”).

Number of shares of common stock issuable upon the exercise of the consideration warrants.

Value of each warrant issued

Total consideration warrant shares

Cash consideration

Total purchase price

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 4 – ACQUISITIONS (Cont.)

The consolidated statement of comprehensive loss includes the following revenue and net loss attributable to Twill in 2024:

December 31, 2024

The Company recognized $ 2,001 of a deferred tax liability which relates to the purchase price allocation fair value adjustments, other than goodwill.

The Company is planning to file a consolidated tax return in the U.S.

together with Twill and to utilize the benefit of the Company's loss carryforwards against the future taxable income of Twill and consequently decreased its valuation allowance in an amount equal to the deferred tax liability recognized in the business combination.

Supplemental Unaudited Pro Forma Information

The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisition of Twill, which closed in February 2024, had taken place had Twill been acquired as of January 1, 2023.

Total revenues

The unaudited pro forma financial information presented is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Twill acquisition was completed at the beginning of 2023 and are not indicative of the future operating results of the combined company.

The pro forma results include adjustments related primarily to purchase accounting, and amortization of acquisition-related intangible assets.

The pro forma results also include 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.

NOTE 5:- INVENTORIES

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Finished products

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

The Company is operating a multi-condition healthcare business, empowering individuals to manage their chronic conditions and take steps to improve their overall health.

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Pursuant to the Exclusive Agreement, the Company will provide a license to access and use certain Company data.

The contract included fixed and variable amounts, which were fully constrained.

In addition, the Company may provide development services for new products of the other party.

The aggregate consideration under the contract is up to $ 30 million over the initial term of the Exclusive Agreement, consisting of (i) an upfront payment, (ii) payments for development services per development plan to be agreed upon annually and (iii) certain contingent milestone payments upon meeting certain net sales and enrollment rate milestones at any time during the term of the Exclusive Agreement.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

- 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.

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 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.

During fiscal year 2022 and 2023, three development plans were approved and accounted for as separate contracts.

The Company's measured the progress of the development services performance obligations using an input method, based on labor hours consumed as the Company believes that this method best depicts the transfer of services to the customer.

In the years ended December 31, 2022, and 2023, the Company recognized revenues in the amounts of $ 5,506 and $ 4,592 , respectively.

During fiscal 2024, the Company provided a price concession to the preferred partner in the amount of $ 1,088 to resolve an outstanding dispute.

As a result, the Company has recorded the price concession amount as a reduction in revenue.

On December 26, 2024, the agreement with the preferred partner was terminated.

Concurrently, the Company entered into a new agreement (the "New Agreement") to provide its SaaS services.

As part of these arrangements, the preferred partner shall pay $ 1,580 .

The Company accounted for the termination and the creation of a new contract as a contract modification.

Since the additional services were not priced at SSP, the contract modification was accounted for prospectively.

Under the new contract, the Company will provide the preferred customer with SaaS and professional services and ad-serving services.

During the year ended December 31, 2024, the Company recognized revenues related to the modified contract in the amount of $ 292 .

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.

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

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

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

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

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

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

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

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dollars in thousands

- REVENUE (Cont.)

- REVENUES (Cont.)

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

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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.

On February 21, 2023, and July 1, 2024, the Company entered into change orders 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 orders include a fixed consideration in the amount of $ 90 and $ 85 , respectively.

For the year ended December 31, 2023, the Company recognized revenues of $ 962 .

The August SOW was completed during the second quarter of 2023.

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:

The following table represent the Company total revenues for the year ended December 31, 2024 and 2023 disaggregated by revenue source:

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

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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 Company expects to recognize approximately $ 1,525 over the next 12 months and the remainder thereafter.

The Company elected to not disclose information about remaining performance obligations for which the variable consideration is allocated to a wholly unsatisfied promise to transfer a distinct good or service that is subject to the variable consideration allocation exception.

The following table presents the significant changes in the deferred revenue balance during the year ended December 31, 2024:

Balance, beginning of the period

Additions through acquisition of Twill

New performance obligations

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Costs to fulfill a contract

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 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 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.

2 unchanged sentences

dollars in thousands

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 the Company’s performance obligations under the contract;

- REVENUE (Cont.)

expected to be recovered through revenue generated under the contract.

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.

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:

Costs to fulfill a contract as of December 31, 2024, and December 2023, consisted of the following:

Costs to fulfill a contract, current

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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 Company refinanced its existing $ 25,000 credit facility with a new $ 30,000 credit facility in the Loan and Security Agreement, and Supplement thereto (the “LSA” or the “Avenue Loan Facility”) by and between the Company and its subsidiary PsyInnovations Inc., 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”).

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 (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.

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.

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 and the outstanding balance shall be due and payable.

As part of the LSA, the Company issued a warrant (the “Warrant”) to purchase up to 584,882 shares of the Company’s Common Stock, at an exercise price of $ 3.334 per share, which has a term of five years from the issuance date.

On February 15, 2024, the Company and the Borrowers entered into the First Amendment to Loan and Security Agreement and Supplement (the “Avenue Amendment”) with the Avenue 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 permit the lenders, subject to Nasdaq rules, to convert up to $ 2,000 of the principal amount of its loan to the Company at a fixed conversion price of $ 4.001 per share.

On June 25, 2024, the Company stockholders approved the Avenue Amendment and repriced the Warrant to purchase up to 584,882 shares of Common Stock issued to the lenders on May 1, 2023 at an exercise price $ 3.334 per share, to permit an amendment to the exercise price of such Warrants to $ 2.02 which is 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 $ 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 conversion price of $ 4.001 .

Pursuant to the LSA and the Avenue Amendment, the Company is obligated to maintain at least $ 5,000 of unrestricted cash in deposit accounts located in the United States.

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

The Company has concluded that the Warrant meets 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 Facility 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 Avenue Loan Facility at fair value in the amount of $ 28,215 and the remaining amount of $ 1,389 was allocated to the Warrant.

DARIOHEALTH CORP.

3 unchanged sentences

- 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 Company remeasurement expenses related to the Avenue Loan for the year ended December 31, 2024 were $ 378 , compared to $ 42 of remeasurement income for the year ended December 31, 2023, which were included as part of the financial (income) expenses in the Company's statements comprehensive loss.

During the years ended December 31, 2024, and December 31, 2023, the Company did not recognize any instrument specific credit risk fair value adjustment.

In connection with the debt modification, the Company also modified the Warrant by reducing the exercise price of the Warrant from $ 3.334 to $ 2.02 .

The Company recognized the incremental fair value resulting from the modification through earnings in the amount of $ 70 .

On December 16, 2024, the Company, entered into the Third Amendment to Loan and Security Agreement and Supplement (the “Third Avenue Amendment”) with the 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 May 30, 2025 was extended by a period of six months provided the Company achieving certain net 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 the Company achieving a certain net revenue milestone, with cash burn not to exceed a certain 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 the Company meets the foregoing amended milestones.

In January 2025, the Company met the equity financing milestone.

In addition, the Avenue Amendment provides (i) that the Company will seek stockholder approval to reprice the Warrant issued to the Avenue Lenders on May 1, 2023 to permit an amendment to the exercise price of such Warrant 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 $ 2,000 of the principal amount of its loan to the Company’s common stock at a conversion price of $ 0.8650 per share.

As of December 31, 2024, the Company has not yet obtained stockholder approval for these items.

Orbimed Warrants

On June 9, 2022 (the closing date of the Orbimed Loan, which was repaid in May 2023), 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 $ 6.62 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.

Following the issuance and sale of the Company’s Series C Preferred Stock in February 2024, and as a result of a certain price protection provision in the Orbimed Warrant, the exercise price of the Orbimed Warrant was adjusted to a price per share of $ 4.00 .

The Company has concluded that the Orbimed Warrant is 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 remeasurement income related to the Orbimed Warrant for the year ended December 31, 2024, were $ 168 , compared to $ 670 for the year ended December 31, 2023.

Pre-funded warrants

On February 15, 2024, as part of the acquisition of Twill (See note 4) the Company issued Pre-Funded Warrants to purchase up to 10,000,400 shares of Company Common Stock, issuable to a trust (the “Trust”) formed for the benefit of certain equity and debt holders of Twill.

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands

- DEBT (Cont.)

The Company has classified the Pre-Funded Warrants as liability pursuant to ASC 815-40 since the Pre-Funded Warrants do not meet all the equity classification conditions.

Accordingly, the Company measured the Pre-Funded Warrants at their fair value.

The warrants liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of comprehensive loss.

In November 2024, a total of 2,500,100 Pre-Funded Warrants were exercised into 2,499,828 shares of Common Stock.

During the year ended December 31, 2024, the Company recognized $ 16,336 respectively, of remeasurement income related to the Pre-Funded Warrants.

The estimated fair value of the Pre-Funded Warrants liabilities is determined using Level 1 inputs based on quoted prices in active markets.

NOTE 8:- FAIR VALUE MEASUREMENTS

GAAP, fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:

Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access.

Valuation adjustments and block discounts are not applied to Level 1 instruments.

Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

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

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 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 Company’s Orbimed loan facility was measured at fair value using Level 3 unobservable inputs until the payoff date of May 1, 2023.

The Orbimed Warrant liability was measured at fair value using Level 3 unobservable inputs.

In addition, the Avenue Loan Facility is also measured at fair value using level 3 inputs.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 8:- FAIR VALUE MEASUREMENTS (Cont.)

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:

1 unchanged sentence

(in thousands)

Financial assets:

Cash and cash equivalents:

treasury notes

Total financial assets

Financial liabilities:

Current maturity of long term loan

Long-term loan

Warrant liability

Orbimed Warrant liability

Pre-funded warrant liability

Total financial liabilities

2 unchanged sentences

Financial liabilities:

Current maturity of long term loan

Long-term loan

Warrant liability

Orbimed Warrant liability

Total financial liabilities

Loan Facilities

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 “Orbimed Lender”).

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.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 8:- FAIR VALUE MEASUREMENTS (Cont.)

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.

The Avenue Loan Facility fair value estimate 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 %).

1 unchanged sentence

The fair value of the Avenue Loan Facility, as of December 31, 2024, 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 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.

The fair value of the warrant liability, which is reported within non-current liabilities on the consolidated balance sheets, is estimated by the Company based on the Monte-Carlo simulation valuation technique, in order to predict the probability of different outcomes that rely on repeated random variables.

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

Exercise price

Expected term (in years)

Dividend rate

Risk-free interest rate

For the years ended December 31, 2024 and December 31, 2023, the change in the fair value of the loan was recorded in earnings since the Company concluded that the change in fair value was not related to instrument-specific credit risk.

Orbimed Warrant Liability

The fair value of the Orbimed Warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The fair value of the Orbimed Warrant liability is estimated by the Company based on the Monte-Carlo simulation valuation technique, in order to predict the probability of different outcomes that rely on repeated random variables.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 8:- FAIR VALUE MEASUREMENTS (Cont.)

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

December 31, 2023

The following inputs were used to estimate the fair value of the Orbimed Warrant liability:

Exercise price

Expected term (in years)

Dividend rate

Risk-free interest rate

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

Long-Term Loan

Warrant Liability

Orbimed Warrant Liability

Pre-funded Warrant Liability

Balance as of January 1, 2023

2 unchanged sentences

Balance as of December 31, 2023

Long-Term Loan

Orbimed Warrant Liability

Pre-funded Warrant Liability

Balance as of January 1, 2024

Change in fair value

Balance as of December 31, 2024

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 9:- LEASES

6 unchanged sentences

Operating lease cost

Sublease rent income

Short term lease cost

5 unchanged sentences

Operating leases

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 9:- LEASES

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 202 4 :

3 unchanged sentences

Supplemental cash flow information related to leases are as follows:

Cash payments related to operating lease

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

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

NOTE 10:- PROPERTY AND EQUIPMENT, NET

10 unchanged sentences

Property and equipment, net

Depreciation expenses for the year ended December 31, 2024, and 202 3 amounted to $ 466 and $ 392 , respectively.

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

Finite-lived other intangible assets:

Weighted Average

Remaining Life

As of December 31, 2024

Original amounts:

Customer Relationship Healthcare

Accumulated amortization:

Customer Relationship Healthcare

Other intangible assets, net

2 unchanged sentences

For the year ended December 31,

NOTE 12:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands

NOTE 12:-GOODWILL

The following table set forth the changes in the carrying amount of the Company’s goodwill during the year ended December 31, 2024 and the year ended December 31, 2023 (in thousands):

As of December 31, 2022

As of December 31, 2023

As of December 31, 2024

NOTE 13:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Employees and payroll accruals

Accrued expenses

NOTE 14:- COMMITMENTS AND CONTINGENT LIABILITIES

2 unchanged sentences

If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.

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

The Company is obligated to pay royalties to the IIA, amounting to 3 % of the sales of the products and other related revenues (based on the US dollar) generated from such projects, up to 100 % of the grants received.

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

The Company is obligated to pay royalties to the IIA, amounting to 3 % of the sales of the products and other related revenues (based on the U.S.

dollar) generated from such projects, up to 100 % of the grants received.

Royalty payment obligations also bear interest at the LIBOR rate.

The obligation to pay these royalties is contingent on actual sales of the products and in the absence of such sales, no payment is required.

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.

In connection with specific research and development activities, Physimax Technology (“Physimax”), prior to its acquisition by the Company, received $ 1,012 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, 2024.

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

As of December 31, 2023, substantially all of the Company long live assets are located in Israel.

During the year ended December 31,2024 and the year ended December 31, 2023 the company recorded IIA royalties related to the acquisition of Physimax Technology in amount of $ 2 and $ 1 , respectively.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands

NOTE 15:- TAXES ON INCOME

13 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.

2 unchanged sentences

Losses generated in these years are able to be carried backward for 5 years, and carried forward indefinitely, without the 80% limitation.

Tax rates applicable to Labstyle and Upright:

Tax rates applicable to Labstyle:

The Corporate tax rate in Israel in 2024 and 2023 was 23 %.

2 unchanged sentences

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

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

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

federal net operating loss carryforward of approximately $ 42,429 , $ 6,305 and $ 143,670 of which $ 7,120 , $ 371 and $ 19,779 respectively, were generated from tax years 2011-2017 and can be carried forward and offset against taxable income and that expires during the years 2031 to 2037 .

2 unchanged sentences

The annual limitations may result in the expiration of losses before utilization.

Since the Company has not yet utilized the losses to offset income, no study has been performed to assess the potential limitations, but when relevant, a study will be performed.

The remaining NOLs of the Company and WayForward are approximately $ 29,666 and $ 7,713 , were generated in years 2018-2022, and are subject to the TCJA, which modified the rules regarding utilization of NOLs.

A "change in ownership" has occurred during 2024 when Twill was acquired by Dario, resulting in a limitation of $ 2,316 per year for the years 2025-2028.

The remaining NOLs of the Company, WayForward and Twill are approximately $ 35,309 , $ 5,934 and $ 123,891 were generated in years 2018-2024, and are subject to the TCJA, which modified the rules regarding utilization of NOLs.

NOLs generated after December 31, 2017, can only be used to offset 80 % of taxable income with an indefinite carryforward period for unused carryforwards (i.e., they should not expire).

Utilization of the federal and state net operating losses and credits may be subject to a substantial annual limitation due to an additional ownership change.

The annual limitation may result in the expiration of net operating losses and credits before utilization and in the event, the Company has a change of ownership, utilization of the carryforwards could be restricted.

As discussed above, under the CARES Act, the losses from 2018-2023 are excluded from the limitation and can be carried forward indefinitely to offset 100 % of future net income.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 15:- TAXES ON INCOME (Cont.)

As discussed above, under the CARES Act, the losses from 2018-202 4 are excluded from the limitation and can be carried forward indefinitely to offset 100 % of future net income.

Deferred income taxes:

3 unchanged sentences

Net operating loss and capital losses carry forward

Temporary differences - Research and development expenses

Temporary differences - Accrued employees costs

Temporary differences - Stock-based compensation

Temporary differences - Credit Facility

Temporary differences - Loan

Temporary differences - Intangible Assets

Temporary differences - Lease Liability

Research and development expenses

Accrued employees costs

Credit losses

Deferred revenue

Debt issuance costs

Stock-based compensation

R&D Capitalization under section 174

Intangible Assets

Deferred tax assets:

2 unchanged sentences

Deferred tax liability:

Temporary differences - Intangible Assets

Temporary differences - Lease Right of Use Assets

Intangible Assets

Deferred tax liability

1 unchanged sentence

The deferred tax balances included in the consolidated financial statements as of December 31, 2024, are calculated according to the tax rates that were in effect as of the reporting date and do not take into account the potential effects of the changes in the tax rate.

The net change in the total valuation allowance for the year ended December 31, 2023, was an increase of $ 5,798 and is mainly relates to increase in deferred taxes on net operating loss for which a full valuation allowance was recorded.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences and tax loss carryforward are deductible.

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

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 15:- TAXES ON INCOME (Cont.)

The net change in the total valuation allowance for the year ended December 31, 2024, was an increase of $ 18,886 and is mainly relates to increase in deferred taxes on net operating loss for which a full valuation allowance was recorded.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences and tax loss carryforward are deductible.

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

Loss before taxes on income consists of the following:

The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes.

Income tax expense (benefit) was as follows:

Total current income tax expense

Total deferred income tax expense (benefit)

DARIOHEALTH CORP.

5 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 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.

In January and March 2024, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company approved the grant of 1,946,500 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 of Common Stock 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.

The restricted shares of Common Stock and the options were issued under the Company’s 2020 Equity incentive Plan, as amended (the “2020 Plan”).

In April 2024, the Compensation Committee approved the grant of 260,500 restricted shares of Common Stock subject to time vesting to employees of the Company and approved the grant of options to purchase up to 564,900 shares of Common Stock, to employees and consultants of the Company, at exercise prices between $ 1.38 and $ 1.48 per share.

The time vesting restricted shares of Common Stock 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.

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

In May 2024, the Compensation Committee approved the grant of a non-qualified stock option to purchase up to 2,250,000 shares of Common Stock as an inducement grant to the new Chief Commercial Officer.

Out of the 2,250,000 shares of Common Stock, 500,000 shares will vest over three years , with one third of such shares vesting on June 1, 2025 , and the remaining shares vesting in equal quarterly amounts during the following two years .

1,750,000 of the options are performance-based and will commence vesting upon reaching certain performance goals during the fiscal years between 2024 and 2027.

Each performance option will vest over a three-year period commencing on the first day of the following fiscal year to which such option relates, in eight equal quarterly instalments.

In August 2024, the Compensation Committee approved the grant of 590,000 restricted shares of Common Stock subject to time vesting to employees of the Company and approved the grant of 1,692,250 options to purchase Common Stock, and 300,000 performance-based options to purchase Common Stock to officers, employees, and consultants of the Company, at exercise prices between $ 0.93 to $ 1.05 per share.

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

The options have a ten-year term.

The restricted shares of Common Stock and the options were issued under the Company’s 2020 Plan.

In November 2024, the Compensation Committee approved the grant of 10,000 restricted shares of Common Stock subject to time vesting to employees of the Company and approved the grant of options to purchase up to 367,500 shares of Common Stock, to employees and consultants of the Company, at an exercise price of $ 0.9475 per share.

The time vesting restricted shares of Common Stock and stock options vest over various periods between one to three years commencing on the respective grant dates.

The options have a ten-year term.

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

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 2024, the Compensation Committee approved the grant of 300,000 restricted shares of Common Stock subject to time vesting to an employee of the Company and approved the grant of options to purchase up to 363,500 shares of Common Stock, to employees of the Company, at an exercise price of $ 0.80 per share.

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

The options have a ten-year term.

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

In August 2024, the Compensation Committee approved the grant of 418,550 restricted shares of Common Stock to certain service providers.

During the year ended December 31, 2024, the Company recorded compensation expense in the amount of $ 354 related to the issuance of these shares of Common Stock.

On November 4, 2024, the Compensation Committee approved amendments to certain previously issued awards of restricted Common Stock in the aggregate amount of 68,750 and 250,000 , respectively, granted to Mr.

Erez Raphael, our Chief Executive Officer, and Mr.

Zvi Ben David, our Chief Financial Officer, in the aggregate amount of 23,750 and 125,000 , respectively, on May 18, 2022 and March 6, 2024 (collectively, the “Prior Awards”) to permit an immediate acceleration of the unvested portion of the Prior Awards in the event of change in control of the Company.

In December 2024, the Compensation Committee approved amendments to certain previously issued awards of restricted Common Stock in the aggregate amount of 176,001 , granted to certain employees, to permit an immediate acceleration of the unvested portion of the Prior Awards.

152,000 of the accelerated shares will be subject to a lockup until December 31, 2025.

During the year ended December 31, 2024, the Company recorded stock-based compensation expenses related to the acceleration of the unvested portion of the Prior Awards at the amount of $ 75 .

In April 2024, the Compensation Committee approved the grant of warrants to purchase up to 1,471,250 shares of Common Stock, with exercise prices between $ 1.43 to $ 2.00 per share, to certain consultants.

The warrants are exercisable into shares of Common Stock on or before December 31, 2026.

In addition, the Compensation Committee approved a reduction in the exercise price of warrants to purchase up to 700,000 shares of Common Stock issued to certain consultants in the past at exercise prices between $ 5.20 to $ 6.45 per share, to an exercise price of $ 1.60 per share.

During the year ended December 31, 2024, the Company recorded stock-based compensation expenses related to those repriced warrants at the amount of $ 332 .

In August 2024, the Compensation Committee approved the grant of warrants to purchase up to 600,000 shares of Common Stock subject to time vesting of one to two years , with exercise prices of $ 0.93 per share to certain consultants.

Out of the warrants to purchase 600,000 shares of Common Stock, 100,000 shares are exercisable into Common Stock on or before December 31, 2027, and 500,000 shares are exercisable into Common Stock on or before August 31, 2029.

In addition, the Compensation Committee approved the grant performance-based warrants to purchase up to 800,000 shares of Common Stock, with exercise prices of $ 0.93 per share to a certain consultant.

The warrants are exercisable into Common Stock on or before August 31, 2029.

Management's assumption is that it is not probable that the condition will be met.

During the year ended December 31, 2024, the Company recorded stock-based compensation expenses related to the warrants at the amount of $ 67 .

In November 2024, the Compensation Committee approved the grant of warrants to purchase up to 469,653 shares of Common Stock, with an exercise price of $ 0.9475 per share to a certain consultant.

The warrants are exercisable into Common Stock on or before the five years anniversary of the grant date.

During the year ended December 31, 2024, the Company recorded stock-based compensation expenses related to the warrants at the amount of $ 46 .

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 2024, the Compensation Committee approved a reduction in the exercise price of warrants to purchase up to 881,250 shares of Common Stock issued to certain consultants in the past at exercise prices between $ 1.60 to $ 12.00 per share, to an exercise price of $ 0.70 per share.

During the year ended December 31, 2024, the Company recorded stock-based compensation expenses related to those repriced warrants at the amount of $ 164 .

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 .

On February 15, 2024, the Company executed a consulting agreement with a former officer of Twill.

Pursuant to the terms of the consulting agreement, the Company agreed to issue to the former officer of Twill 350,000 fully vested RSUs.

On June 25, 2024, the stockholders of the Company approved the issuance of certain restricted shares of Common Stock and warrants of the Company, under certain consulting agreements with former officers and directors of Twill.

Pursuant to the terms of the consulting agreements, the Company agreed to issue to those former officers of Twill warrants to purchase up to 1,032,946 shares of the Company’s Common Stock, of which 717,946 are subject to time vesting and 315,000 are subject to certain performance-based metrics, with an exercise price of $ 2.55 and 383,562 fully vested RSUs.

During the year ended December 31, 2024, the Company recorded share-based compensation expenses related to these service providers in the amount of $ 3,196 .

For the year ended December 31, 2024, no expenses were recorded related to the performance-based warrants.

On January 30, and September 27, 2024, out of the pre-funded warrants that were issued in July 2020, 400,017 and 287,303 were exercised on a cashless basis into 400,000 and 287,273 shares of Common Stock respectively.

As of December 31, 2024, the Company’s total outstanding prefunded warrants were exercisable into 995,499 shares of Common Stock.

2 unchanged sentences

(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).

The initial conversion price for the Series A, A-1, A-2, A-3 and A-4 Preferred Stock was $ 4.05 , $ 4.05 , $ 4.28 , $ 4.98 and $ 5.90 , respectively, subject to adjustment in the event of stock splits, stock dividends, and similar transactions).

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.

In February 2024, the Company issued 17,307 , 4,000 and 1,115 Series C, C-1 and C-2 preferred shares, respectively, at a purchase price of $ 1,000 per preferred share.

The Series C and C-1 Preferred Stock are

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

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”).

The Placement Agent Warrants are exercisable for a period of five years from the date of the final closing of the Series A Preferred Stock Offering.

As of December 31, 2023, out of the Placement Agent Warrants that were issued in December 2019 and July 2020, 451,226 were exercised into 333,077 shares of Common Stock.

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 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 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.

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 were approximately $ 22,422 .

In addition, the holders of preferred stock will also be entitled to dividends payable as follows:

(i) a number of shares of Common Stock equal to seven and a half five percent ( 7.5 %) 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 fifteen percent ( 15 %) 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 Date.

In May, September and November 2024, a total of 100 , 25 and 20 shares of certain Series C Convertible Preferred Stock were converted into 49,505 , 14,234 and 12,129 shares of Common Stock, respectively.

During the year ended December 31, 2024, the Company accounted for the dividend shares of Common Stock upon the dividend shares earned by Series C, C-1 and C-2 Preferred Stock as a deemed dividend in a total amount of $ 6,542 .

In December 2024, the Company issued 7,055 and 11,750 Series D and D-1 preferred shares, respectively, at a purchase price of $ 1,000 per preferred share.

The Series D and D-1 Preferred Stock are convertible into Common Stock at $ 0.73 per Common Stock.

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

The conversion of the preferred stock is subject to stockholder approval, the preferred stock will automatically convert into shares of Common Stock, subject to certain beneficial ownership limitations, including a non-waivable 19.99 % ownership blocker, on the 12 -month anniversary of the issuance date.

The holders of preferred stock will also be entitled to dividends equal to 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 for each full quarter anniversary of holding for a total of four ( 4 ) quarters from the Closing Date, all issuable upon conversion of the preferred stock.

In addition, the Company and certain purchasers in the Offering that are holders of the Company's Series B and C Preferred Stock executed lock up agreements (the “Lock Up Agreement”), pursuant to which the Company agreed to issue, subject to stockholder approval, up to forty percent ( 40 %) of the shares of Common Stock conversion shares of the preferred stock held by such purchaser, including dividend shares of Common Stock due upon conversion of these shares into shares of Common Stock, over the course of twelve ( 12 ) months (the “Additional Shares”).

Each holder shall be entitled to receive 10 % of the Additional Shares for each three ( 3 ) month period each holder agrees not to transfer or otherwise sell (subject to certain limitations) the shares of Common Stock issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock and the dividend shares of Common Stock due upon conversion.

During the year ended December 31, 2024, the Company accounted for the dividend shares of Common Stock upon the dividend shares earned by Series D and D-1 Preferred Stock as a deemed dividend in a total amount of $ 318 .

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

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

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.

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.

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).

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.

purchased shares of Series B-2 Preferred Stock in the offering.

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.

4 unchanged sentences

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 .

On June 25, 2024, following the approval of the necessary preferred holders, the Company modified the terms of the Series B and B-1 preferred stock to (i) extend the mandatory conversion period from fifteen ( 15 ) to eighteen

( 18 ) months from the original issue date and (ii) increase the percentage of dividends the holders of the preferred stock will be entitled to receive by including a dividend of ten percent ( 10 %) for the fifth full quarter from the closing date and a dividend of twenty five percent ( 25 %) for the sixth quarter from the closing date.

On September 11, 2024, following the approval of the necessary preferred holders, the Company modified the terms of the Series B-3 preferred stock to (i) extend the mandatory conversion period from fifteen ( 15 ) to eighteen ( 18 ) months from the original issue date and (ii) increase the percentage of dividends the holders of the preferred stock will be entitled to receive by including a dividend of ten percent ( 10 %) for the fifth full quarter from the closing date and a dividend of twenty five percent ( 25 %) for the sixth quarter from the closing date.

The Company concluded that the Series B, B-1 and B-3 preferred shares modification should be accounted for as an extinguishment transaction.

As such, the Company recorded the modified preferred shares at their fair value and derecognized the carrying amount of the previous unmodified shares, resulting in a deemed contribution of $ 12,194 .

In November, on the 18-month anniversary of the Series B, B-1 and B-3 Effective Date, 5,950 Series B, 3,000 B-1 and 406 B-3 Preferred Stock converted into 2,766,201 , 1,394,721 and 185,526 shares of Common Stock.

During the year ended December 31, 2024, the Company accounted for the dividend shares of common stock upon the deferred conversion of the Series B, B-1, B-2, and B-3 Convertible Preferred Stock as a deemed dividend in a total amount of $ 2,953 .

In April and June 2024, a total of 700 and 250 of certain Series B Convertible Preferred Stock were converted into 237,323 and 89,982 shares of Common Stock, respectively, including the issuance of dividend shares.

In addition, during the year ended December 31, 2024, the Company recorded deemed dividend in the amount of $ 616 with respect to the Series B convertible Preferred Stock.

In August 2024, 150 Series B-2 Preferred Stock automatically converted into 57,868 shares of Common Stock after the completion of the fifteen ( 15 )-month anniversary of the Series B-2 Preferred Stock.

The conversion included accumulative dividends payable upon conversion of Series B-2 Preferred Stock.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

Through November 2022, December 2022 and January 2023, 6,355 Series A Preferred Stock automatically converted into 2,133,904 shares of Common Stock after the completion of the 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.

As of December 31, 2024, there were 3,557 shares of Series A-1 Preferred stock issued and outstanding.

The outstanding Series A-1 Preferred stock is convertible into approximately 1,655,548 shares of Common Stock, including the issuance of dividend shares.

As of December 31, 2024, there were 4,946 shares of Series B-1 Preferred stock issued and outstanding.

The outstanding Series B-1 Preferred stock is convertible into approximately 2,299,432 shares of Common Stock, including the issuance of dividend shares.

As of December 31 , 2024, there were 22,277 shares of Series C, C-1 and C-2 Preferred stock issued and outstanding.

The outstanding Series C, C-1 and C-2 Preferred stock is convertible into approximately 13,497,265 shares of Common Stock, including the issuance of dividend shares.

As of December 31 , 2024, there were 18,805 shares of Series D, and D-1 Preferred stock issued and outstanding.

The outstanding Series D, and D-1 Preferred stock is convertible into approximately 25,762,850 shares of Common Stock, including the issuance of dividend shares.

During the year ended December 31, 2024, options were exercised into 10,714 shares of Common Stock.

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.

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

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

The 2012 Plan has expired.

On October 14, 2020, the Company’s stockholders approved the 2020 Plan.

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 2023, pursuant to the terms of the 2020 Plan as approved by the Company’s stockholders, the Company increased the number of shares authorized for issuance under the 2020 Plan by 1,994,346 shares, from 3,868,514 to 5,862,860 .

In January 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 .

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 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 .

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 .

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 .

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 .

In June 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 3,000,000 shares, from 8,356,624 to 11,356,624 .

DARIOHEALTH CORP.

7 unchanged sentences

Expiration date

February 16, 2024

April 6, 2024

April 13, 2024

June 17, 2024

Agent warrants July 31 2020

July 31, 2025

Agent warrants July 31 2020

July 31, 2025

September 26, 2025

November 9, 2024

December 16, 2025

December 31, 2025

Agent warrants A-1 December 2019

December 31, 2025

Agent warrants A-2 December 2019

December 31, 2026

Agent warrants A-3 December 2019

December 31, 2026

Agent warrants A-4 December 2019

December 31, 2026

February 12, 2025

April 1, 2025

Agent warrants B-1 July 31 2020

July 31, 2025

Agent warrants B-1 July 31 2020

July 31, 2025

September 26, 2025

October 1, 2025

December 31, 2026

5 unchanged sentences

December 31, 2026

August 24, 2027

December 31, 2027

Lender of loan facility

Agent warrants C Feb.

February 21, 2029

Agent warrants C-2 Feb.

February 21, 2029

Lender of loan facility

August 1, 2029

Total outstanding

August 25, 2029

November 4, 2029

February 15, 2034

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

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, 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 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 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.

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

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

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.

During the year ended December 31, 2023, the Company’s Compensation Committee approved the grant of 927,100 restricted shares of 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 of Common Stock will vest immediately, 30,000 restricted shares will vest over a period of six months , and the remaining 662,100 restricted shares of Common Stock 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.

1 unchanged sentence

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

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

Transactions related to the grant of options to employees, directors and non-employees under the above plans and non-plan options during the year ended December 31, 2024 were as follows:

4 unchanged sentences

Options forfeited

( 1,715,671 )

Options outstanding at end of period

4 unchanged sentences

This amount is impacted by the changes in the fair market value of the Common Stock.

Transactions related to restricted shares granted\forfeited during the year ended December 31, 2023 were as follows

Restricted shares

Restricted shares outstanding at beginning of the period

Restricted shares granted

Restricted shares forfeited

Restricted shares outstanding at end of period

The average intrinsic value of the options exercised in 2024 and 2023 were $ 1.20 and $ 3.26 , respectively.

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

Transactions related to the grant of restricted shares of Common Stock to employees, directors, and non-employees under the above plans during the year ended December 31, 2024 were as follows:

Restricted shares

Restricted shares outstanding at beginning of year

Restricted shares granted

Restricted shares forfeited

Restricted shares outstanding at end of period

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

The fair value of the restricted shares vested during 2024 amounts to $ 1,644 .

The assumptions used are determined as follows:

2 unchanged sentences

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.

When establishing the expected term assumption, the Company utilizes the simplified method.

Risk-Free Interest Rate.

9 unchanged sentences

Expected life (years)

As of December 31, 2023, the total unrecognized estimated compensation cost related to non-vested stock options and restricted shares granted prior to that date was $ 9,407 , which is expected to be recognized over a weighted average period of approximately 0.82 year.

As of December 31, 2024, the total unrecognized estimated compensation cost related to non-vested stock options and restricted shares granted prior to that date was $ 8,367 , which is expected to be recognized over a weighted average period of approximately 1.10 years.

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 16:- STOCKHOLDERS’ EQUITY (Cont.)

The total compensation cost related to all the Company’s equity-based awards, recognized during year ended December 31, 2024 and 2023 were comprised as follows:

4 unchanged sentences

Total stock-based compensation expenses

DARIOHEALTH CORP.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except stock and stock data)

NOTE 17:- SELECTED STATEMENTS OF OPERATIONS DATA

Financial losses, net:

Financial expenses (income), net:

Foreign currency adjustments expenses, net

1 unchanged sentence

Revaluation of short-term investments

Loan Interest Expenses

Remeasurement of long-term loan

Remeasurement of warrant liability

Modification of warrants

Debt issuance cost

Remeasurement of financial commitment asset

Total Financial expenses, net

Total Financial expenses (income), net

DARIOHEALTH CORP.

2 unchanged sentences

dollars in thousands (except stock and stock data)

NOTE 1 8 :- SEGMENT REPORTING

The Company identifies operating segments in accordance with ASC Topic 280, “Segment Reporting,” as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and evaluating financial performance.

The Company operates as one operating segment.

Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the CODM, which is the Company’s chief executive officer, in deciding how to allocate resources and assess performance.

The Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis.

There is no expense or asset information that are supplemental to those disclosed in these consolidated financial statements, that are regularly provided to the CODM.

The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss as shown in our consolidated statement of comprehensive loss.

The CODM considers net loss in the annual forecasting process and reviews actual results when making decisions about allocating resources.

Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.

Geographic Information

• As of December 31, 2024, the majority of the Company’s long live assets are located in Israel.

• As of December 31, 2024, the majority of the Company's revenue is generated in the U.S.

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 and preferred stock using the two-class method.

The Company computes 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:

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 35,670,853 for the year ended December 31, 2024, and for the year ended December 31, 2023, was 12,188,189 .

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

Preferred A-1

2 unchanged sentences

Preferred B-3

Basic and diluted loss per share

Preferred C-1

Preferred C-2

Preferred D-1

Basic earnings (loss) per share

Allocation of undistributed loss

( 30,088,977 )

( 1,145,280 )

( 1,710,847 )

( 4,933,826 )

( 1,146,033 )

Number of shares used in per share computation

Basic earnings (loss) per share amounts:

Distributed earnings - deemed dividends

Distributed earnings - deemed dividends (contribution)

Undistributed loss - allocated

Basic and diluted loss per share

Basic earnings (loss) per share

* Series D Preferred Stock which are subject to the lockup agreements (see Note 16).

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 (Cont.)

Preferred A-1

Preferred B-1

Preferred B-2

Preferred B-3

Basic earnings (loss) per share

Allocation of undistributed loss

( 54,860,245 )

( 2,528,086 )

( 2,476,171 )

( 3,173,493 )

Number of shares used in per share computation

Basic loss per share amounts:

Distributed earnings - deemed dividends

Basic earnings (loss) per share amounts:

Distributed earnings - deemed dividends (contribution)

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.

Basic earnings (loss) per share

DARIOHEALTH CORP.

3 unchanged sentences

NOTE 20:- SUBSEQUENT EVENTS

On January 7, 2025, the Company entered into securities purchase agreements (each, a “Series D Purchase Agreement”) with accredited investors relating to an offering (the “Series D Offering”) and the sale of an aggregate of (i) 4,950 shares of newly designated Series D-2 Preferred Stock (the “Series D-2 Preferred Stock”), and (ii) 1,850 shares of Series D-3 Preferred Stock (the “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 the Company from the Series D Offering are approximately $ 6,800 .

The closing of the Series D-2 Preferred Stock, and Series D-3 Preferred Stock occurred on January 14, 2025.

The conversion of the preferred stock is subject to stockholder approval.

In addition, the preferred stock will automatically convert into shares of Common Stock, subject to certain beneficial ownership limitations, on the 12 -month anniversary of the issuance date.

The holders of preferred stock will also be entitled to dividends equal to 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 for each full quarter anniversary of holding for a total of four quarters from the Closing Date, all issuable upon conversion of the preferred stock.

In January 2025, 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 6,541,028 shares, from 11,356,624 to 17,897,652 .

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.

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.

In February 2025, the Compensation Committee approved the grant of 575,000 restricted shares of Common Stock to certain service providers and approved the grant of warrants to purchase up to 1,050,000 shares of Common Stock, with exercise prices of $ 0.64 per share, to certain consultants.

The warrants are exercisable into shares of Common Stock on or before February 10, 2028.

In February 2025, a total of 2,500,100 Pre-Funded Warrants were exercised into 2,499,698 shares of Common Stock.

In February 2025, the Compensation Committee approved the grant of 30,000 restricted shares of Common Stock to a director of the Company and an amendment to certain previously issued awards of restricted Common Stock in the aggregate amount of 35,000 , granted to the director, to permit an immediate acceleration of the unvested portion of the Prior Awards.

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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