DarioHealth Corp
For the period ended Dec 31, 2023. Filed Mar 28, 2024.
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FY2023 · Filed Mar 28, 2024
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
DARIOHEALTH CORP.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DarioHealth Corp. and its subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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 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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| Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building A,Tel-Aviv 6492102, Israel | Tel: +972-3-6232525Fax: +972-3-5622555ey.com |
| Revenue Recognition | | |
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| Description of the Matter | As described in Note 2 and Note 6 to the consolidated financial statements, a significant portion of the Company's revenue is derived from agreements with enterprise business market groups to provide a mobile and web-based digital therapeutics health management programs, data license and related development and implementation services. The Company contracts with customers often include promises to transfer multiple promises to provide goods and services, which are accounted for separately if they are distinct performance obligations. In such contracts, the transaction price is then allocated to the distinct performance obligations on a relative standalone selling price basis and revenue is recognized when control of the distinct performance obligation is transferred. The accounting for contracts with multiple promises requires the company to exercise significant judgment in determining revenue recognition for these contracts and includes: (a) identification and determination of whether products and services are considered distinct performance obligations that should be accounted for separately based on the terms and conditions of the relevant agreements, (b) determination of stand-alone selling prices for each distinct performance obligation that are not sold separately. (c) the pattern of transferring control (i.e., timing of when revenue is recognized) for each distinct performance obligation. Given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer contracts was extensive and required a high degree of auditor judgment. | |
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| How We Addressed the Matter in Our Audit | | For a sample of customers, we: (1) obtained and read contract source documents, including master agreements, and other documents that were part of the agreement and evaluating management's identification of the contract and the distinct performance obligations based on the terms of the arrangements and the company's accounting policies, (2) tested management’s identification of significant terms for completeness, including the identification and determination of distinct performance obligations, (3) evaluating the methodology and reasonableness of management’s assumptions used for the estimate of stand-alone selling prices on a sample basis for products and services that are not sold separately (4) tested management’s calculations of revenue and the associated timing of revenue recognition. In addition, We have also evaluated the Company’s disclosures in relation to this matter. |
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| Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building A,Tel-Aviv 6492102, Israel | Tel: +972-3-6232525Fax: +972-3-5622555ey.com |
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| Going concern assessment | | |
| Description of the Matter | As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses and negative cash-flow from operations since inception. The Company’s operations are dependent on its ability to raise additional funds. This dependency will continue until the Company will be able to completely finance its operations by generating revenue from its products and services. Management has concluded that, based on its current projections and plans, the Company will be able to satisfy its liquidity requirements for at least one year from the date these financial statements were issued.We identified the assessment of liquidity and the Company’s ability to continue as a going concern as a critical audit matter due to the subjective judgments required of management to conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions. |
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| How We Addressed the Matter in Our Audit | | In addressing the matter, our audit procedures included, among others, assessing the reasonableness of forecasted revenue, operating expenses and sources of cash used in management’s assessment to determine whether the company has sufficient liquidity to fund operations for at least one year from the consolidated financial statement issuance date. This testing included inquiries with management, comparison of prior period forecasts to actual results and consideration of positive and negative evidence impacting management’s forecasts and liquidity. We also performed sensitivity analyses to assess the impact of changes in the key assumptions included in management's liquidity forecast models. In addition, we assessed the adequacy of the company’s going concern disclosures included in note 1 to the consolidated financial statements. |
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/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company’s auditor since 2012.
Tel-Aviv, Israel
March 28, 2024
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