DarioHealth Corp

Previous wording

Comparison of the three months ended March 31, 2024, and March 31, 2023 (dollar amounts in thousands)

Current wording

Comparison of the three and six months ended June 30, 2024, and June 30, 2023 (dollar amounts in thousands)

Previous wording

Revenues for the three months ended March 31, 2024, amounted to $5,758, compared to revenues of $7,066 during the three months ended March 31, 2023, representing a decrease of 18.5%. The decrease in revenues for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, resulted mainly from a decrease in revenues from the Company’s partnerships channel. The revenues also include the consolidation of Twill Inc.’s (“Twill”) revenues, as a result of its acquisition during the quarter. The proforma revenues for the three months ended March 31, 2024, if the closing of the acquisition of Twill would have taken place on the first day of the quarter would have amounted to $7,721.

Current wording

during the three and six months ended June 30, 2023, representing an increase of 1.7% and a decrease of 9.1%. The increase in revenues for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, resulted from an increase in our revenues from the commercial channel, and the decrease for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, resulted mainly from a decrease in revenues from the Company’s partnerships channel. The revenues also include the consolidation of Twill Inc.’s (“Twill”) revenues, as a result of its acquisition during the first quarter of 2024. The proforma revenues for the six months ended June 30, 2024, if the closing of the acquisition of Twill would have taken place on the first day of the year would have amounted to $13,976.

Previous wording

During the three months ended March 31, 2024, we recorded costs related to revenues in the amount of $3,326, compared to costs related to revenues of $3,898 during the three months ended March 31, 2023, representing a decrease of 14.7%. The decrease in cost of revenues in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was mainly due to a reduction in payroll costs included in the cost of revenues during the period.

Current wording

During the three and six months ended June 30, 2024, we recorded costs related to revenues in the amount of $3,499 and $6,825, compared to costs related to revenues of $4,078 and $7,976 during the three and six months ended June 30, 2023, representing a decrease of 14.2% and 14.4%. The decrease in cost of revenues in the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was mainly due to a reduction in payroll costs included in the cost of revenues during the period, offset by an increase in amortization of technology related to the acquisition of Twill.

Previous wording

Gross profit for the three months ended March 31, 2024, amounted to $2,432 (42.2% of revenues) compared to $3,168 (44.8% of revenues) during the three months ended March 31, 2023. The decrease in gross profit as a percentage of revenues for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, resulted mainly from lower revenues from the partnership channel.

Current wording

Gross profit for the three and six months ended June 30, 2024, amounted to $2,756 (44.1% of revenues) and $5,188 (43.2% of revenues) compared to $2,074 (33.7% of revenues) and $5,242 (39.7% of revenues) during the three and six months ended June 30, 2023. The increase in gross profit as a percentage of revenues for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, resulted mainly from the increase in the revenues from the commercial channel mainly related to the acquisition of Twill.

Previous wording

Our research and development expenses increased by $1,477, or 28.6%, to $6,642 for the three months ended March 31, 2024, compared to $5,165 for the three months ended March 31, 2023. This increase was mainly a result of higher payroll and stock-based compensation expenses due to the consolidation of Twill during the three months ended March 31, 2024. Our research and development expenses, excluding stock-based compensation and depreciation, for the three months ended March 31, 2024, were $5,466 compared to $3,961 for the three months ended March 31, 2023, an increase of $1,505. This increase was mainly due to the consolidation of Twill during the three months ended March 31, 2024.

Current wording

Our research and development expenses increased by $1,588, or 30.4%, to $6,810 for the three months ended June 30, 2024, compared to $5,222 for the three months ended June 30, 2023, and increased by $3,065, or 29.5%, to $13,452 for the six months ended June 30, 2024, compared to $10,387 for the six months ended June 30, 2023. This increase was mainly a result of higher payroll related expenses due to the consolidation of Twill, offset by a decrease in stock-based compensation expenses during the three and six months ended June 30, 2024. Our research and development expenses, excluding stock-based compensation and depreciation, for the three and six months ended June 30, 2024, were $6,299 and $11,765 compared to $3,904 and $7,865 for the three and six months ended June 30, 2023, an increase of $2,395 and $3,900 respectively. This increase during the three and six months ended June 30, 2024 was mainly due to the increase in payroll and other research and development expenses resulting from the consolidation of Twill.

Previous wording

Our sales and marketing expenses increased by $570, or 9%, to $6,910 for the three months ended March 31, 2024, compared to $6,340 for the three months ended March 31, 2023. The increase was mainly due to the consolidation of Twill during the three months ended March 31, 2024. Our sales and marketing expenses, excluding stock-based compensation, depreciation, and amortization of acquired brand and customer relationship, for the three months ended March 31, 2024, were $5,078 compared to $4,448 for the three months ended March 31, 2023, an increase of $630. This increase was mainly due to the consolidation of Twill during the three months ended March 31, 2024.

Current wording

Our sales and marketing expenses increased by $672, or 10.4%, to $7,132 for the three months ended June 30, 2024, compared to $6,460 for the three months ended June 30, 2023, and increased by $1,242, or 9.7%, to $14,042 for the six months ended June 30, 2024, compared to $12,800 for the six months ended June 30, 2023. The increase was mainly due to the consolidation of Twill during the six months ended June 30, 2024. Our sales and marketing expenses, excluding

Previous wording

Our general and administrative expenses increased by $2,664, or 65.4%, to $6,735 for the three months ended March 31, 2024, compared to $4,071 for the three months ended March 31, 2023. This increase was mainly due to an increase in stock-based compensation expenses related to the consolidation of Twill during the three months ended March 31, 2024. Our general and administrative expenses, excluding stock-based compensation, depreciation, and acquisition costs for the three months ended March 31, 2024, were $2,150 compared to $2,239 for the three months ended March 31, 2023, a decrease of $89.

Current wording

Our general and administrative expenses increased by $593, or 13.4%, to $5,005 for the three months ended June 30, 2024, compared to $4,412 for the three months ended June 30, 2023, and increased by $3,257 or 38.4% to $11,740 for the six months ended June 30, 2024, compared to $8,483 for the six months ended June 30, 2023. This increase was mainly due to an increase in stock-based compensation expenses related to the consolidation of Twill during the six months ended June 30, 2024. Our general and administrative expenses, excluding stock-based compensation, depreciation, and acquisition related costs for the three and six months ended June 30, 2024 were $2,993 and $5,143 compared to $2,229 and $4,468 for the three and six months ended June 30, 2023, an increase of $764 and $676, respectively. This increase was mainly due to the consolidation of Twill during the six months ended June 30, 2024.

Previous wording

Our financial income, net for the three months ended March 31, 2024, was $8,686, representing an increase of $9,103, compared to financial expenses of $417 for the three months ended March 31, 2023. The increase in our financial income was due to income from revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, as these warrants are classified as a liability under U.S. GAAP (as hereinafter defined).

Current wording

Our financial income, net for the three months ended June 30, 2024, was $2,581, representing an increase of $5,146, compared to financial expenses of $2,565 for the three months ended June 30, 2023. Our financial income, net for the six months ended June 30, 2024, was $11,267 representing an increase of $14,249, compared to financial expenses of $2,982 for the six months ended June 30, 2023. The increase in our financial income was due to income from revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, as these warrants are classified as a liability under U.S. GAAP (as hereinafter defined).

Previous wording

Income from tax was $1,994 for the three months ended March 31, 2024, as compared to $0 for the three months ended March 31, 2023. The increase in our income from tax was due to a change in the valuation allowance for a deferred tax liability that resulted from the acquisition of Twill.

Current wording

Income from tax was $0 for the three months ended June 30, 2024, as compared to $0 for the three months ended June 30, 2023. Our income tax for the six months ended June 30, 2024, was $1,994 representing an increase of $1,994, compared to income tax of $0 for the six months ended June 30, 2023. The increase in our income from tax was due to a change in the valuation allowance for deferred tax liability that resulted from the acquisition of Twill.

Previous wording

Net loss decreased by $5,650, or 44%, to $7,175 for the three months ended March 31, 2024, compared to a net loss of $12,825 for the three months ended March 31, 2023. The decrease in net loss for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was mainly due to the increase in our financial income for the three months ended March 31, 2024.

Current wording

Net loss decreased by $2,975, or 17.9%, to $13,610 for the three months ended June 30, 2024, compared to a net loss of $16,585 for the three months ended June 30, 2023, and decreased by $8,625, or 29.3%, to $20,785 for the six months ended June 30, 2024, compared to a net loss of $29,410 for the six months ended June 30, 2023. The decrease in net loss for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was mainly due to the increase in our financial income for the three and six months ended June 30, 2024.

Previous wording

The factors described above resulted in net loss attributable to common stockholders for the three months ended March 31, 2024, amounted to $9,209, compared to net loss attributable to common stockholders of $12,825 for the three months ended March 31, 2023.

Current wording

The factors described above resulted in net loss attributable to common stockholders for the three and six months ended June 30, 2024, amounted to $4,904 and $14,113, respectively, compared to net loss attributable to common stockholders of $18,276 and $31,101 for the three and six months ended June 30, 2023.

Previous wording

As of March 31, 2024, we had approximately $34,367 in cash and cash equivalents compared to $36,797 on December 31, 2023.

Current wording

As of June 30, 2024, we had approximately $22,938 in cash and cash equivalents compared to $36,797 on December 31, 2023.

Previous wording

We have experienced cumulative losses of $358,570 since inception (August 11, 2011) through March 31, 2024, and have a stockholders’ equity of $78,033 as of March 31, 2024. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. However, we believe that our sources of liquidity and capital resources will be sufficient to meet our business needs for at least the next twelve months.

Current wording

We have experienced cumulative losses of $363,474 since inception (August 11, 2011) through June 30, 2024, and have a stockholders’ equity of $68,055 as of June 30, 2024. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future.

Previous wording

On October 22, 2021, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as agent, pursuant to which we may issue and sell shares ofour common stock having an aggregate offering price of up to $50 million from time to time through Cowen. In April 2024, the funds available under the Sales Agreement was reduced to $21,000. As of March 31, 2024, we have sold an aggregate of $2.03 million of our common stock pursuant to the Sales Agreement at an average price per share of $4.22. During the three month period ended March 31, 2024, no sales were conducted pursuant to the Sales Agreement.

Current wording

On October 22, 2021, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as agent, pursuant to which we may issue and sell shares ofour common stock having an aggregate offering price of up to $50 million from time to time through Cowen. In April 2024, the funds available under the Sales Agreement was reduced to $21,000. As of June 30, 2024, we have sold an aggregate of $2.03 million of our common stock pursuant to the Sales Agreement at an average price per share of $4.22. During the six month period ended June 30, 2024, no sales were conducted pursuant to the Sales Agreement.

Previous wording

On February 15, 2024, we 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 our existing loan facility with the Avenue Lenders. In addition, the Avenue Amendment provides (i) that we will seek stockholder approval to reprice the warrants issued to the lenders on May 1, 2023 to permit an amendment to the exercise price of such warrants to the “minimum price” as defined by Nasdaq rules as of the closing of the Twill Agreement and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $4.0001 per share.

Current wording

On February 15, 2024, we 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 our existing loan facility with the Avenue Lenders. In addition, the Avenue Amendment provides (i) that we will seek stockholder approval to reprice the warrants issued to the lenders on May 1, 2023 to permit an amendment to the exercise price of such warrants to the “minimum price” as defined by Nasdaq rules as of the closing of the Twill Agreement and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $4.001 per share.

Previous wording

On May 1, 2023, we executed an agreement (the “Preferred Agreement”) with existing holders of our Series A-1 Convertible Preferred Stock. Pursuant to the Preferred Agreement, we agreed to issue such holders of Series A-1 Convertible Preferred Stock up to an aggregate of an additional 382,050 shares of common stock, in addition to the 1,273,499 shares of common stock issuable upon conversion of the Series A-1 Preferred Stock, in consideration for such holders agreeing not to convert their shares of Series A-1 Convertible Preferred Stock. Such shares of common stock are issuable on the following dates, assuming the Series A-1 Convertible Preferred Stock has not yet been converted: (i) up to an aggregate of 63,675 shares of Common Stock before July 1, 2023, if not converted for at least one quarter, (ii) up

Current wording

On May 1, 2023, we executed an agreement (the “Preferred Agreement”) with existing holders of our Series A-1 Convertible Preferred Stock. Pursuant to the Preferred Agreement, we agreed to issue such holders of Series A-1 Convertible Preferred Stock up to an aggregate of an additional 382,050 shares of common stock, in addition to the 1,273,499 shares of common stock issuable upon conversion of the Series A-1 Preferred Stock, in consideration for such holders agreeing not to convert their shares of Series A-1 Convertible Preferred Stock. Such shares of common stock are issuable on the following dates, assuming the Series A-1 Convertible Preferred Stock has not yet been converted: (i) up to an aggregate of 63,675 shares of Common Stock before July 1, 2023, if not converted for at least one quarter, (ii) up to an aggregate of 127,350 shares of Common Stock before October 1, 2023, if not converted for at least two quarters, (iii) up to an aggregate of 191,026 shares of Common Stock before January 1, 2024, if not converted for at least three quarters, (iv) up to an aggregate of 254,700 shares of Common Stock before April 1, 2024, if not converted for at least four quarters, and (v) up to an aggregate of 382,050 shares of Common Stock before July 1, 2024, if not converted for at least five quarters. The holders of Series A-1 Convertible Preferred Stock will not be entitled to receive any such shares if the issuance of such shares will exceed a non-waivable 19.99% ownership blocker.

Previous wording

Net cash used in operating activities was $13,110 for the three months ended March 31, 2024, an increase of 175.6% compared to $4,757 used in operations for the same period in 2023. Cash used in operations increased mainly due to the increase in our trade receivables, other accounts receivable and prepaid expenses and a decrease in other account payables and accrued expenses.

Current wording

Net cash used in operating activities was $24,473 for the six months ended June 30, 2024, an increase of 70% compared to $14,393 used in operations for the same period in 2023. Cash used in operations increased mainly due to the increase in our trade receivables, other accounts receivable and prepaid expenses.

Previous wording

Net cash used in investing activities was $8,852 for the three months ended March 31, 2024, compared to $4,362 net cash used in investing activities during the same period in 2023. The increase is mainly related to net fair value of assets acquired and liabilities assumed upon the acquisition of Twill during the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Net cash used in investing activities was $8,881 for the six months ended June 30, 2024, compared to $183 net cash used in investing activities during the same period in 2023. The increase is mainly related to net fair value of assets acquired and liabilities assumed upon the acquisition of Twill during the six months ended June 30, 2024, compared to the same period in 2023.

Previous wording

Net cash derived from financing activities was $20,206 for the three months ended March 31, 2024, compared to $1,389 net cash used by financing activities during the same period in 2023. The increase is mainly due to proceeds from the issuance of preferred shares in the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Current wording

Net cash derived from financing activities was $20,206 for the six months ended June 30, 2024, compared to $18,049 net cash used by financing activities during the same period in 2023. The increase is mainly due to proceeds from the issuance of preferred shares in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.