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Form 10-Q DarioHealth Corp. For: Jun 30

August 15, 2022 6:54 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File No. 001-37704

DarioHealth Corp.

(Exact name of registrant as specified in its charter)

Delaware

45-2973162

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

18 W. 18th St.

 

New York, New York

10011

(Address of Principal Executive Offices)

(Zip Code)

(972)-4 770-6377

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of exchange on which registered

Common Stock, par value $0.0001 per share

 

DRIO

 

The Nasdaq Capital Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

As of August 10, 2022, the registrant had 22,979,129 shares of common stock outstanding.

When used in this quarterly report, the terms “DarioHealth,” “the Company,” “we,” “our,” and “us” refer to DarioHealth Corp., a Delaware corporation, our subsidiaries LabStyle Innovation Ltd. and Upright Technologies Ltd., each of which are Israeli companies, and Upright Technologies Inc. and PsyInnovations Inc., each a Delaware company. “Dario” is registered as a trademark in the United States, Israel, China, Canada, Hong Kong, South Africa, Japan, Costa Rica and Panama. “DarioHealth” is registered as a trademark in the United States and Israel.

DarioHealth Corp.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

    

Page

Cautionary Note Regarding Forward-Looking Statements

3

PART 1- FINANCIAL INFORMATION

Item 1.

Interim Consolidated Financial Statements (unaudited)

F-1

Interim Consolidated Balance Sheets

F-2 – F-3

Interim Consolidated Statements of Comprehensive Loss

F-4

Interim Statements of Stockholders’ Equity

F-5 – F- 6

Interim Consolidated Statements of Cash Flows

F-7

Notes to Interim Consolidated Financial Statements

F-8 – F-24

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

Item 4.

Control and Procedures

12

PART II- OTHER INFORMATION

13

Item 1A.

Risk Factors

13

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

13

Item 6.

Exhibits

13

SIGNATURES

15

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

our current and future capital requirements and our ability to satisfy our capital needs through financing transactions or otherwise;
our product launches and market penetration plans;
the execution of agreements with various providers for our solution;
our ability to maintain our relationships with key partners, including Sanofi U.S. Services Inc. (“Sanofi”) ;
our ability to complete required clinical trials of our product and obtain clearance or approval from the United States Food and Drug Administration (the “FDA”), or other regulatory agencies in different jurisdictions;
our ability to maintain or protect the validity of our U.S. and other patents and other intellectual property;
our ability to retain key executive members;
our ability to internally develop new inventions and intellectual property;
the impact of the COVID-19 pandemic on our manufacturing, sales, business plan and the global economy;
interpretations of current laws and the passages of future laws; and
acceptance of our business model by investors.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2021 (filed on March 22, 2022) entitled “Risk Factors” as well as in our other public filings.

In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

3

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2022

UNAUDITED

INDEX

Page

Interim Consolidated Balance Sheets

    

F-2 – F-3

Interim Consolidated Statements of Comprehensive Loss

F-4

Interim Statements of Stockholders’ Equity

F-5 – F- 6

Interim Consolidated Statements of Cash Flows

F-7

Notes to Interim Consolidated Financial Statements

F-8 – F-24

F-1

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

June 30, 

December 31, 

    

2022

    

2021

Unaudited

 

  

ASSETS

CURRENT ASSETS:

 

  

 

  

Cash and cash equivalents

$

67,949

$

35,808

Short-term restricted bank deposits

 

177

 

192

Trade receivables

 

3,138

 

1,310

Inventories

 

8,347

 

6,228

Other accounts receivable and prepaid expenses

 

2,833

 

2,067

Total current assets

 

82,444

 

45,605

NON-CURRENT ASSETS:

 

 

Deposits

9

20

Operating lease right of use assets

 

212

 

287

Long-term assets

71

57

Property and equipment, net

773

702

Intangible assets, net

12,190

12,460

Goodwill

41,640

41,640

Total non-current assets

54,895

55,166

Total assets

$

137,339

$

100,771

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-2

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except stock and stock data)

June 30, 

December 31, 

    

2022

    

2021

Unaudited

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

CURRENT LIABILITIES:

 

  

 

  

Trade payables

$

3,280

$

5,109

Deferred revenues

 

999

 

1,195

Operating lease liabilities

137

266

Other accounts payable and accrued expenses

 

6,806

 

7,806

Earn-out liability

1,764

825

Total current liabilities

 

12,986

 

15,201

NON-CURRENT LIABILITIES

Operating lease liabilities

 

52

 

21

Long-term loan

23,061

Warrant liability

 

1,588

 

Total non-current liabilities

24,701

21

STOCKHOLDERS’ EQUITY

 

 

Common stock of $0.0001 par value - Authorized: 160,000,000 shares at June 30, 2022 (unaudited) and December 31, 2021; Issued and Outstanding: 22,860,044 and 16,573,420 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively

 

2

 

2

Preferred stock of $0.0001 par value - Authorized: 5,000,000 shares at June 30, 2022 (unaudited) and December 31, 2021; Issued and Outstanding: 10,797 and 11,927 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively

 

*) -

 

*) -

Additional paid-in capital

 

356,492

 

307,561

Accumulated deficit

 

(256,842)

 

(222,014)

Total stockholders’ equity

 

99,652

 

85,549

Total liabilities and stockholders’ equity

$

137,339

$

100,771

*) -  Represents an amount lower than $1

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-3

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

U.S. dollars in thousands (except stock and stock data)

Three months ended

Six months ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Unaudited

Unaudited

Revenues

$

6,183

$

5,261

$

14,242

$

8,856

Cost of revenues (excluding amortization shown separately below)

 

3,951

 

3,033

 

7,093

 

5,172

Amortization of acquired intangible assets

1,094

720

2,026

1,095

Gross profit

 

1,138

 

1,508

 

5,123

 

2,589

Operating expenses:

 

 

 

 

Research and development

$

4,137

$

3,742

$

10,064

$

6,397

Sales and marketing

 

9,297

 

9,648

 

18,832

 

16,780

General and administrative

 

5,059

 

6,121

 

9,454

 

11,742

Total operating expenses

 

18,493

 

19,511

 

38,350

 

34,919

Operating loss

 

17,355

 

18,003

 

33,227

 

32,330

Total financial (income) expenses, net

 

672

 

(238)

 

716

 

401

Loss before taxes

18,027

17,765

33,943

32,731

Income Tax

1

1

Net loss

$

18,028

$

17,765

$

33,944

$

32,731

Other comprehensive income (loss):

Deemed dividend

433

488

884

1,032

Net loss attributable to shareholders

$

18,461

$

18,253

$

34,828

$

33,763

Net loss per share:

 

 

 

 

Basic and diluted loss per share

$

0.74

$

0.99

$

1.43

$

1.85

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

 

22,426,019

 

15,691,359

 

21,925,089

 

15,460,758

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-4

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

U.S. dollars in thousands (except stock and stock data)

Additional

Total

Common Stock

Preferred Stock

paid-in

Accumulated

stockholders’

Number

Amount

Number

Amount

capital

deficit

equity

Balance as of December 31, 2021(audited)

    

16,573,420

    

$

2

    

11,927

    

$

*)-

    

$

307,561

    

$

(222,014)

    

$

85,549

Exercise of warrants

 

81,221

 

*)-

 

 

 

 

 

Issuance of common stock to directors and employees

 

24,191

 

*)-

 

 

 

161

 

 

161

Issuance of common stock to consultants and service provider

 

4,983

 

*)-

 

 

 

113

 

 

113

Conversion of preferred stock to common stock

 

316,052

 

*)-

 

(1,030)

 

*)-

 

-

 

 

*)-

Deemed dividend related to issuance of preferred stock

 

 

 

 

 

451

 

(451)

 

Issuance of warrants to service providers

 

 

 

 

 

1,301

 

 

1,301

Stock-based compensation

 

139,982

 

*)-

 

 

 

3,768

 

 

3,768

Issuance of common stock and pre-funded warrants, net of issuance cost

 

4,674,454

 

*)-

 

 

 

38,023

 

 

38,023

Issuance of Common Stock, net of issuance cost upon Acquisition of Physimax Technologies Ltd.

 

256,660

 

*)-

 

 

 

1,186

 

 

1,186

Net loss

 

 

 

 

 

-

 

(15,916)

 

(15,916)

Balance as of March 31, 2022 (unaudited)

 

22,070,963

$

2

 

10,897

$

*)-

$

352,564

$

(238,381)

$

114,185

Issuance of common stock to consultants and service provider

7,977

 

*)-

 

 

 

74

 

 

74

Conversion of preferred stock to common stock

 

23,365

 

*)-

 

(100)

 

*)-

 

 

 

*)-

Deemed dividend related to issuance of preferred stock

 

 

 

 

 

433

 

(433)

 

-

Issuance of warrants to service providers

 

 

 

 

 

557

 

 

557

Stock-based compensation

 

816,396

 

 

 

 

2,998

 

 

2,998

Repurchase and retirement of common stock

(58,657)

 

*)-

 

 

 

(134)

 

 

(134)

Net loss

 

 

 

 

 

 

(18,028)

 

(18,028)

 

 

 

 

 

 

Balance as of June 30, 2022 (unaudited)

 

22,860,044

$

2

 

10,797

$

*)-

 

356,492

 

(256,842)

 

99,652

 

 

 

 

 

 

*)  Represents an amount lower than $1.

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-5

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

U.S. dollars in thousands (except stock and stock data)

Additional

Total

Common Stock

Preferred Stock

paid-in

Accumulated

shareholders'

Number

Amount

Number

Amount

capital

deficit

equity

Balance as of December 31, 2020 (audited)

    

8,119,493

    

$

*)-

    

15,823

    

$

*)-

    

$

171,399

    

$

(143,248)

    

$

28,151

Payment for executives and directors under Stock for Salary Program

 

5,579

 

*)-

 

 

 

72

 

 

72

Exercise of options

 

33,773

 

*)-

 

 

 

201

 

 

201

Exercise of placement agent warrants

 

92,575

 

*)-

 

 

 

-

 

 

*)-

Exercise of warrants

219,760

 

*)-

 

 

 

633

 

 

633

Issuance of common stock to consultants and service provider

102,667

 

*)-

 

 

 

1,484

 

 

1,484

Conversion of preferred stock to common stock

802,061

 

*)-

 

(3,423)

 

*)-

 

-

 

 

*)-

Deemed dividend related to issuance of preferred stock

 

 

 

 

 

544

 

(544)

 

Issuance of warrants to service providers

 

 

 

 

 

846

 

 

846

Stock-based compensation

1,056,643

 

*)-

 

 

 

2,036

 

 

2,036

Issuance of common stock, net of issuance cost

3,278,688

 

*)-

 

 

 

64,877

 

 

64,877

Issuance of common stock upon acquisition of Upright Technologies Ltd.

 

1,687,612

 

*)-

 

 

 

28,933

 

 

28,933

Net loss

 

 

 

 

 

 

(14,966)

 

(14,966)

Balance as of March 31, 2021 (unaudited)

 

15,398,851

$

*)-

 

12,400

$

*)-

$

271,025

$

(158,758)

$

112,267

Payment for executives and directors under Stock for Salary Program

 

1,754

 

*)-

 

 

 

27

 

 

27

Exercise of options

 

6,772

*)-

55

 

55

Exercise of placement agent warrants

 

18,486

*)-

 

Exercise of warrants

 

232

*)-

 

Issuance of common stock to consultants and service provider

72,754

 

*)-

 

 

 

889

 

889

Conversion of preferred stock to common stock

64,369

 

*)-

 

(278)

 

*)-

 

 

Deemed dividend related to issuance of preferred stock

 

 

 

 

488

 

(488)

Issuance of warrants to service providers

 

 

 

 

 

1,951

 

 

1,951

Stock-based compensation

 

(500)

 

*)-

 

 

 

2,595

 

 

2,595

Issuance of common stock upon acquisition of PsyInnovations Inc.(dba WayForward)

 

768,124

*)-

18,094

 

18,094

Net loss

 

 

 

 

 

 

(17,765)

 

(17,765)

Balance as of June 30, 2021 (unaudited)

 

16,330,842

$

*)-

 

12,122

$

*)-

$

295,124

$

(177,011)

$

118,113

*)   Represents an amount lower than $1.

The accompanying notes are an integral part of the unaudited interim consolidated financial statements

F-6

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

Six months ended

June 30, 

    

2022

    

2021

Unaudited

Cash flows from operating activities:

Net loss

$

(33,944)

$

(32,731)

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

 

8,972

 

9,900

Depreciation

 

154

 

133

Change in operating lease right of use assets

 

75

 

65

Amortization of acquired inventories step-up

 

-

 

523

Amortization of acquired intangible assets

 

2,087

 

1,106

Increase in trade receivables

 

(1,828)

 

(452)

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

 

(562)

 

134

Increase in inventories

 

(2,119)

 

41

Increase in trade payables

 

(1,838)

 

54

Decrease in other accounts payable and accrued expenses

 

(1,107)

 

(1,472)

Decrease in deferred revenues

 

(196)

 

(43)

Change in operating lease liabilities

 

(98)

 

(96)

Remeasurement of earn-out

 

939

 

Non-Cash financial expenses

 

256

 

Net cash used in operating activities

 

(29,209)

 

(22,838)

Cash flows from investing activities:

 

  

 

  

Investment In deposit

-

(1)

Purchase of property and equipment

 

(225)

 

(97)

Cash paid as part of PsyInnovations Inc. (dba WayForward) acquisition

-

(5,023)

Cash paid as part of Upright Technologies Ltd. acquisition

-

(2,472)

Intangible assets purchases incurred, Physimax Technologies LTD.

(115)

Net cash used in investing activities

 

(340)

 

(7,593)

Cash flows from financing activities:

 

 

Proceeds from issuance of common stock and prefunded warrants (net of issuance costs)

 

38,023

 

64,877

Proceeds from exercise of warrants

 

-

 

633

Proceeds from exercise of options

 

-

 

256

Proceeds from borrowings on credit agreement

23,786

-

Repurchase and retirement of common stock

(134)

-

Net cash provided by financing activities

 

61,675

 

65,766

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

 

32,126

 

35,335

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

 

35,948

 

28,725

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

$

68,074

$

64,060

Supplemental disclosure of cash flow information:

 

 

  

Cash paid during the period for interest on long-term loan

$

181

$

-

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

F-7

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 1:  -   GENERAL

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

DarioHealth is a Global Digital Therapeutics (DTx) company changing the way people with chronic conditions manage their health. By delivering personalized evidence-based interventions that are driven by precision data analytics, software, and personalized coaching, DarioHealth has developed an approach that empowers individuals to adjust their lifestyle in holistic way.

DarioHealth’s cross-functional team operates at the intersection of life sciences, behavioral science, and software technology to deliver seamlessly integrated and highly engaging digital therapeutics interventions. Our diabetes solution, its user-centric approach is used by tens of thousands of customers around the globe. DarioHealth is rapidly expanding its solutions for additional chronic conditions such as hypertension and moving into new geographic markets.

DarioHealth’s digital therapeutic platform has been designed with a ‘user-first’ strategy, focusing on the user’s needs first and foremost, and user experience and satisfaction. User satisfaction is constantly measured and drives, all company processes, including our technology design.

The Company operates as one reporting unit and one operating segment.

b.The Company has a wholly owned subsidiary, LabStyle Innovation Ltd. (“LabStyle”), which was incorporated and commenced operations on September 14, 2011 in Israel. Its principal business activity is to hold the Company’s intellectual property and to perform research and development, manufacturing, marketing and other business activities.
c.Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, short-term deposits, restricted deposits and trade receivables. For cash and cash equivalents, the Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets exceed federally insured limits. The Company places its cash and cash equivalents and short-term deposits with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts.

For trade receivables, the Company 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 June 30, 2022, the Company's major customer accounted for 63.7% of the Company's accounts receivable balance.

For the three and six-months period ended June 30, 2022, the Company's major customer accounted for 32% and 42%, respectively, of the Company's revenue in the period.

d.On January 26, 2021, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) pursuant to which the Company, through LabStyle, acquired all of the outstanding securities of Upright Technologies Ltd. and its wholly owned subsidiary Upright Technologies Inc. (“Upright”). Upright is a digital musculoskeletal (“MSK”) health company focused on preventing and treating the most common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech.

F-8

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 1:  -   GENERAL (Cont.)

e.On May 15, 2021, the Company entered into an agreement and plan of merger pursuant to which the Company, through its wholly owned subsidiary WF Merger Sub, Inc. (“Merger Sub”), merged with PsyInnovations Inc. (“WayForward”), pursuant to which the Merger Sub was the surviving company. WayForward is a mental health company who developed the WayForward behavioral digital health platform with artificial intelligence enabled screening to triage and navigate members to specific interventions, digital cognitive behavioral therapy, self-directed care, expert coaching and access to in-person and telehealth provider visits.
f.During the six months ended June 30, 2022, the Company incurred operating losses and negative cash flows from operating activities amounting to $33,227 and $29,209, respectively. On June 30, 2022, we had $67,949 in available cash and cash equivalent. Management believes that our cash on hand is sufficient to meet our obligations as they come due for at least a period of twelve months from the date of the issuance of these consolidated financial statements. 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 offering.

NOTE 2: -   SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of June 30, 2022, have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s consolidated financial position as of June 30, 2022, and the Company’s consolidated results of operations and the Company’s consolidated cash flows for the six months ended June 30, 2022. Results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates

Preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.

F-9

Table of Contents

DARIOHEALTH CORP. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except stock and stock data)

NOTE 2: -   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Significant Accounting Policies

a.    The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are applied consistently in these unaudited interim consolidated financial statements.

b.    Short-term restricted bank deposits:

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:

June 30, 

June 30,