DarioHealth(DRIO) - 2019 Q3 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section provides a standard disclaimer on forward-looking statements, highlighting inherent risks and advising readers to consult the 'Risk Factors' section - Forward-looking statements address future events and expectations, reflecting current projections about results, performance, liquidity, financial condition, prospects, and opportunities[11] - Key areas of forward-looking statements include capital requirements, market penetration, product commercialization (Dario Smart Diabetes Management Solution, DarioEngage, Dario Intelligence), partner relationships, regulatory approvals (FDA), intellectual property, executive retention, internal development, legal interpretations, and business model acceptance[11] - Actual results may differ materially due to various risks and uncertainties, particularly given the start-up nature of the business[11][12] PART I - FINANCIAL INFORMATION This part presents the unaudited interim consolidated financial statements and management's discussion and analysis of financial condition and results Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited interim consolidated financial statements, including Balance Sheets, Comprehensive Loss, and Cash Flows, detailing the company's financial position and performance Consolidated Balance Sheets The Consolidated Balance Sheets summarize assets, liabilities, and stockholders' equity as of September 30, 2019, compared to December 31, 2018, showing a decrease in total assets and equity Consolidated Balance Sheets Summary (in thousands) | Metric | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :-------------------------- | :----------------------- | :----------- | | Cash and cash equivalents | $4,585 | $10,997 | | Total current assets | $7,158 | $13,313 | | Total assets | $8,603 | $14,089 | | Total current liabilities | $4,219 | $5,164 | | Total stockholders' equity | $3,907 | $8,925 | - Common Stock outstanding increased from 36,607,755 shares at December 31, 2018, to 43,683,840 shares at September 30, 2019[21] Consolidated Statements of Comprehensive Loss This statement details financial performance, showing a decreased net loss for the three months ended September 30, 2019, but an increased net loss for the nine months Consolidated Statements of Comprehensive Loss Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenues | $1,868 | $1,879 | $5,761 | $5,694 | | Cost of revenues | $995 | $1,411 | $4,004 | $4,152 | | Gross profit | $873 | $468 | $1,757 | $1,542 | | Operating expenses | $3,672 | $4,522 | $15,281 | $14,304 | | Operating loss | $(2,799) | $(4,054) | $(13,524) | $(12,762) | | Net loss | $(2,805) | $(4,063) | $(13,563) | $(12,820) | | Basic and diluted loss per share | $(0.06) | $(0.17) | $(0.28) | $(0.67) | - Gross profit margin increased significantly for the three months ended September 30, 2019, to 46.7% from 24.9% in the prior year, and for the nine months ended September 30, 2019, to 30.5% from 27.1%[25][110] Statements of Changes in Stockholders' Equity This statement tracks changes in stockholders' equity, detailing the impact of stock issuances for compensation, public offerings, and net losses, reflecting an overall decrease from December 2018 to September 2019 Statements of Changes in Stockholders' Equity Summary (in thousands) | Metric (in thousands) | Dec 31, 2018 | Mar 31, 2019 | Jun 30, 2019 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | | Common Stock (Number) | 36,607,775 | 36,821,173 | 42,859,386 | 43,683,840 | | Additional paid-in capital | $98,171 | $98,487 | $106,098 | $106,716 | | Accumulated deficit | $(89,254) | $(94,630) | $(100,012) | $(102,817) | | Total stockholders' equity | $8,925 | $3,865 | $6,094 | $3,907 | - During the nine months ended September 30, 2019, the company issued 4,855,341 shares of Common Stock in a public offering, generating $6,558 thousand (net of issuance expenses)[29][80] - Common Stock was also issued for executive and director compensation under the Stock for Salary Program, and to directors, employees, and consultants[29][78][79][83] Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows illustrate the company's cash generation and usage across operating, investing, and financing activities, showing a significant decrease in cash and cash equivalents for the nine months ended September 30, 2019 Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(12,873) | $(8,031) | | Net cash used in investing activities | $(97) | $20 | | Net cash provided by financing activities | $6,558 | $15,720 | | Increase (decrease) in cash and cash equivalents | $(6,412) | $7,709 | | Cash and cash equivalents at the end of the period | $4,585 | $11,427 | - The company experienced a 60% increase in net cash used in operating activities, from $8,031 thousand in 2018 to $12,873 thousand in 2019[37][141] - Net cash provided by financing activities decreased by 58%, from $15,720 thousand in 2018 to $6,558 thousand in 2019, primarily due to lower funds raised from equity securities[37][144] Notes to Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering company background, significant accounting policies, inventory, revenue recognition, leases, stockholders' equity, and subsequent events NOTE 1: - GENERAL This note provides general information about DarioHealth Corp., its subsidiary, core business, and highlights substantial doubt about its ability to continue as a going concern - DarioHealth Corp. is a Delaware corporation, incorporated on August 11, 2011, with its wholly-owned Israeli subsidiary, LabStyle Innovation Ltd., incorporated on September 14, 2011[40][44] - The company is a Global Digital Therapeutics (DTx) company focused on revolutionizing chronic condition management through personalized, evidence-based interventions, precision data analytics, high-quality software, and personalized coaching[41][42] - The company incurred operating losses of $13,524 thousand and negative cash flows from operating activities of $12,873 thousand for the nine months ended September 30, 2019, raising substantial doubt about its ability to continue as a going concern[45][46] NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES This note outlines the significant accounting policies applied, including the adoption of new accounting standards for revenue recognition (ASC 606) and leases (ASC 842) effective January 1, 2019 - The company adopted ASC 606, 'Revenue from Contracts with Customers,' using the modified retrospective method, which did not have a significant impact on the financial statements[48][51] - The company adopted ASC 842, 'Leases,' using the modified retrospective approach, resulting in the recognition of $847 thousand in operating lease ROU assets and operating lease liabilities as of January 1, 2019[48][54][55] - The company is currently assessing the impact of ASU No. 2016-13, 'Financial Instruments – Credit Losses,' which is effective for fiscal years beginning after December 15, 2019[62] NOTE 3: - UNAUDITED INTERIM FINANCIAL STATEMENTS This note confirms that the accompanying interim consolidated financial statements are unaudited, prepared in accordance with U.S. GAAP for interim financial information, and include all necessary normal recurring adjustments for fair presentation - The interim financial statements are unaudited and prepared in accordance with U.S. GAAP and PCAOB standards for interim financial information[63] - Management believes the statements include all normal recurring adjustments necessary for fair presentation, but results for the interim periods are not necessarily indicative of the full year[63] NOTE 4: - INVENTORIES This note provides a breakdown of the company's inventory into raw materials and finished products, and discloses inventory write-off expenses for the periods presented Inventories Breakdown (in thousands) | Inventory Component (in thousands) | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--------------------------------- | :----------------------- | :----------- | | Raw materials | $573 | $424 | | Finished products | $900 | $953 | | Total Inventories | $1,473 | $1,377 | - Total inventory write-off expenses amounted to $34 thousand for the nine months ended September 30, 2019, a decrease from $190 thousand for the year ended December 31, 2018[66] NOTE 5: - REVENUE This note details the adoption of ASC 606 for revenue recognition, presents the breakdown of revenues by product and services, and outlines the changes in deferred revenues - The company adopted ASC 606 on January 1, 2019, using the modified retrospective method, with prior periods not adjusted[67] Revenue by Type (in thousands) | Revenue Type (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Products | $1,244 | $1,826 | $4,315 | $5,641 | | Services | $624 | $53 | $1,446 | $53 | | Total Revenues | $1,868 | $1,879 | $5,761 | $5,694 | Deferred Revenue Changes (in thousands) | Deferred Revenue Changes (in thousands) | Nine Months Ended Sep 30, 2019 | | :-------------------------------------- | :----------------------------- | | Balance, beginning of the period | $736 | | New performance obligations | $2,662 | | Reclassification to revenue | $(2,087) | | Balance, end of the period | $1,311 | NOTE 6: - COMMITMENTS AND CONTINGENT LIABILITIES This note states that the company is periodically involved in claims and legal proceedings and accrues a liability for potential losses when they are probable and can be reasonably estimated - The company reviews the status of claims and legal proceedings and accrues a liability for estimated losses if considered probable and reasonably estimable[72] NOTE 7: - LEASES This note details the adoption of ASC 842 for leases, outlining lease costs, weighted average remaining lease term, and discount rate, and provides a schedule of lease liability maturities - The adoption of ASC 842 at the beginning of fiscal 2019 did not have a significant impact on the company's consolidated financial statements[73] Lease Metrics (in thousands) | Lease Metric | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2019 | | :---------------------------- | :------------------------------ | :----------------------------- | | Operating lease cost | $67 | $200 | | Short term lease cost | $11 | $30 | | Variable lease cost | $11 | $48 | | Total lease cost | $89 | $278 | | Weighted Average Remaining Lease Term (Operating leases) | N/A | 2.98 years | | Weighted Average Discount Rate (Operating leases) | N/A | 7.32% | Lease Liabilities Maturities (in thousands) | Lease Liabilities Maturities (in thousands) | Operating Leases | | :---------------------------------------- | :--------------- | | The remainder of 2019 | $78 | | 2020 | $293 | | 2021 | $262 | | 2022 | $214 | | Total undiscounted cash flows | $847 | | Less imputed interest | $(83) | | Present value of lease liabilities | $764 | NOTE 8: - STOCKHOLDERS' EQUITY This note details various transactions affecting stockholders' equity, including common stock issuances for compensation, the 2019 public offering, and stock option grants, along with associated stock-based compensation expenses - In January, April, and July 2019, 1,097,916 shares of Common Stock were issued to directors, officers, and employees for $796 thousand as consideration for reduced or waived cash compensation[78] - On May 24, 2019, the company closed a public offering of 4,855,341 shares of Common Stock and pre-funded warrants to purchase 7,175,525 shares, for aggregate net consideration of $6,558 thousand[80] Stock-based Compensation Expenses (in thousands) | Stock-based Compensation Expenses (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :----------------------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $82 | $99 | | Research and development | $198 | $347 | | Sales and marketing | $231 | $497 | | General and administrative | $1,417 | $2,341 | | Total stock-based compensation expenses | $1,928 | $3,284 | NOTE 9: - SUBSEQUENT EVENTS This note discloses a subsequent event where 12,500 shares of Common Stock were issued to a service provider in October 2019 - In October 2019, 12,500 shares of Common Stock were issued to a service provider[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on DarioHealth's financial condition and results of operations, discussing business overview, strategic initiatives, detailed analysis of revenues and expenses, liquidity, capital resources, and cash flows Company Overview and Business Strategy DarioHealth is a Global Digital Therapeutics (DTx) company focused on managing chronic conditions with its flagship Dario Smart Diabetes Management Solution, expanding into other conditions and platforms, while highlighting its need for additional capital - DarioHealth is a leading Global Digital Therapeutics (DTx) company, providing evidence-based interventions for chronic conditions through precision data analytics, software, and personalized coaching[94] - The flagship product, Dario Smart Diabetes Management Solution, combines a mobile app with a pocket-sized blood glucose monitoring device, complemented by DarioEngage for user engagement and coaching, and Dario Intelligence for healthcare analytics[95] - The company formed a strategic alliance with Dance Biopharm Holdings, Inc. in September 2019 and received a U.S. patent allowance for 'Systems and Methods for Enabling Optical Transmission of Data Between a Sensor and a Smart Device'[101][102] - Management estimates sufficient resources to continue activity into January 2020 without additional capital, but acknowledges a significant present need for capital and the risk of business failure if unable to scale commercial launch or obtain funding[103] Critical Accounting Policies This section refers readers to Note 2 of the current report for significant accounting policies and to the Annual Report on Form 10-K for the year ended December 31, 2018, for a discussion of critical accounting policies, noting no material changes since then - Readers are directed to Note 2 of Part I, Item 1 of this Quarterly Report for a summary of significant accounting policies[104] - No material changes to critical accounting policies and estimates have occurred since the Annual Report on Form 10-K for the year ended December 31, 2018[104] Results of Operations This section provides a comparative analysis of the company's financial performance for the three and nine months ended September 30, 2019, versus 2018, detailing changes in revenues, cost of revenues, gross profit, and operating expenses Revenues Revenues for the three months ended September 30, 2019, slightly decreased by 0.6% due to a strategic shift from direct-to-consumer (D2C) to business-to-business (B2B) channels, while nine-month revenues increased by 1.2% primarily from higher Q1 2019 performance Revenues Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Revenues | $1,868 | $1,879 | -0.6% | $5,761 | $5,694 | 1.2% | - The decrease in Q3 2019 revenues was due to a decrease in D2C acquisition, offset by a decrease in provision for deferred income, reflecting a strategic shift to lower-cost B2B channels[105] - Revenues were mainly derived from sales of Dario's components, including the Dario Blood Glucose Monitoring System and membership offerings, through direct sales to consumers in the U.S. and Australia, and through distributors[107] Cost of Revenues Cost of revenues decreased by 29% for the three months and 3.6% for the nine months ended September 30, 2019, primarily due to decreased product sales and a significant increase in higher-margin service revenues Cost of Revenues Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Cost of Revenues | $995 | $1,411 | -29% | $4,004 | $4,152 | -3.6% | - The decrease in cost of revenues was mainly a result of decreased product sales and a substantial increase in revenues generated from services (from $53 thousand to $624 thousand for the three months, and from $53 thousand to $1,446 thousand for the nine months)[108] - Cost of revenues primarily consists of device production costs, employee salaries, overhead, depreciation of production line equipment, shipping, handling, and inventory write-downs[109] Gross Profit Gross profit significantly increased for both the three and nine months ended September 30, 2019, driven by a lower cost of revenues as a percentage of sales and positive reclassification from deferred revenues related to membership offerings Gross Profit Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Gross Margin | Three Months Ended Sep 30, 2018 | Gross Margin | Nine Months Ended Sep 30, 2019 | Gross Margin | Nine Months Ended Sep 30, 2018 | Gross Margin | | :-------------------- | :------------------------------ | :----------- | :------------------------------ | :----------- | :----------------------------- | :----------- | :----------------------------- | :----------- | | Gross Profit | $873 | 46.7% | $468 | 24.9% | $1,757 | 30.5% | $1,542 | 27.1% | - The increase in gross profit was mainly due to a lower cost of revenues as a percentage of sales and the positive classification from deferred revenues generated from membership offerings[110] Research and Development Expenses Research and development expenses decreased by 14% for the three months ended September 30, 2019, due to lower subcontractor and regulatory consultant costs, but increased by 3.7% for the nine months due to higher payroll for product development Research and Development Expenses Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | R&D Expenses | $859 | $997 | -14% | $2,852 | $2,749 | 3.7% | - Q3 2019 decrease was mainly due to lower costs for subcontractors and regulatory consultants, partially offset by increased payroll for software development[111] - Nine-month increase was primarily due to higher payroll expenses related to product development[111] Sales and Marketing Expenses Sales and marketing expenses decreased by 34% for the three months ended September 30, 2019, due to reduced D2C acquisition costs and lower share-based payments, but increased by 25% for the nine months due to expanded marketing activities and online campaigns Sales and Marketing Expenses Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | S&M Expenses | $1,865 | $2,816 | -34% | $8,804 | $7,049 | 25% | - The Q3 2019 decrease was mainly attributed to a reduction in D2C cost of acquisition and lower share-based payments[113] - The nine-month increase was primarily due to expanded sales and marketing activities in the U.S., increased online marketing campaigns, and employee payroll costs during the first six months of 2019[113] General and Administrative Expenses General and administrative expenses increased by 34% for the three months ended September 30, 2019, due to higher consulting expenses, but decreased by 20% for the nine months due to a reduction in share-based payments General and Administrative Expenses Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | G&A Expenses | $948 | $709 | 34% | $3,625 | $4,506 | -20% | - The Q3 2019 increase was mainly due to higher consulting expenses[116] - The nine-month decrease was primarily due to a reduction in expenses related to payments in shares[116] Financial Expenses, net Financial expenses, net, decreased by 33% for both the three and nine months ended September 30, 2019, primarily due to favorable foreign currency translation differences Financial Expenses, net Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Financial Expenses, net | $6 | $9 | -33% | $39 | $58 | -33% | - The decreases were mainly attributable to differences in foreign currency translation expenses[118] Net loss Net loss decreased by 31% for the three months ended September 30, 2019, due to lower operating expenses, but increased by 6% for the nine months due to higher operating expenses over the longer period Net Loss Summary (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (%) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Net Loss | $(2,805) | $(4,063) | -31% | $(13,563) | $(12,820) | 6% | - The decrease in net loss for the three-month period was mainly due to a decrease in operating expenses[121] - The increase in net loss for the nine-month period was mainly due to an increase in operating expenses[121] Non-GAAP Financial Measures This section presents non-GAAP financial measures, including EBITDA and Non-GAAP Adjusted Loss, to provide additional transparency and comparability of the company's financial results by isolating certain non-cash expenses - Non-GAAP financial measures (EBITDA and Non-GAAP Adjusted Loss) are provided to supplement GAAP statements, offering greater transparency and aiding in understanding underlying operational results[123][124] Net Loss Reconciliation (Three Months Ended Sep 30) (in thousands) | Net Loss Reconciliation (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change | | :------------------------------------- | :------------------------------ | :------------------------------ | :----- | | Net loss as reported | $(2,805) | $(4,063) | $1,258 | | Depreciation expense | $45 | $59 | $(14) | | Other financial expenses, net | $6 | $9 | $(3) | | EBITDA | $(2,754) | $(3,995) | $1,241 | | Stock-based compensation expenses | $618 | $633 | $(15) | | Non-GAAP adjusted loss | $(2,136) | $(3,362) | $1,226 | Net Loss Reconciliation (Nine Months Ended Sep 30) (in thousands) | Net Loss Reconciliation (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change | | :------------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net loss as reported | $(13,563) | $(12,820) | $(743) | | Deemed dividend – related to warrant exchange | $- | $493 | $(493) | | Depreciation expense | $138 | $160 | $(22) | | Other financial expenses, net | $39 | $58 | $(19) | | EBITDA | $(13,386) | $(12,602) | $(784) | | Stock-based compensation expenses | $1,928 | $3,284 | $(1,356) | | Revaluation of warrants | $- | $(1) | $1 | | Non-GAAP adjusted loss | $(11,458) | $(9,319) | $(2,139) | Liquidity and Capital Resources This section addresses the company's cash position, cumulative losses, and ongoing need for additional capital, emphasizing the substantial doubt about its ability to continue as a going concern without further funding or significant revenue growth Cash and Cash Equivalents (in thousands) | Metric (in thousands) | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------- | :----------- | :----------- | | Cash and cash equivalents | $4,585 | $10,997 | - The company has experienced cumulative losses of $102,817 thousand from inception through September 30, 2019, and had stockholders' equity of $3,907 thousand[130] - These conditions raise substantial doubt about the company's ability to continue as a 'going concern' without establishing a stable recurring revenue source or obtaining additional financing[130][138] - Since inception, operations have been financed primarily through private placements and public offerings of common stock and warrants, raising aggregate net proceeds of $77,737 thousand as of September 30, 2019[132] Cash Flows This section analyzes the company's cash flow activities, highlighting increased cash usage in operations and investing, and decreased cash provided by financing activities for the nine months ended September 30, 2019, compared to the prior year Net cash used in operating activities Net cash used in operating activities increased by 60% to $12,873 thousand for the nine months ended September 30, 2019, primarily due to a higher operating loss and a decrease in trade payables and other accrued expenses Net Cash Used in Operating Activities (in thousands) | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(12,873) | $(8,031) | - The increase in cash used in operations was due to an increase in operating loss and a decrease in trade payables, other accounts payables, and accrued expenses[141] Net cash used in investing activities Net cash used in investing activities increased significantly by 585% to $97 thousand for the nine months ended September 30, 2019, mainly due to increased investments in property and equipment, and restricted cash and lease deposits Net Cash Used in Investing Activities (in thousands) | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in investing activities | $(97) | $20 | - The increase in cash used for investing activities was mainly due to investments in property and equipment and investments in restricted cash and lease deposits[143] Net cash provided by financing activities Net cash provided by financing activities decreased by 58% to $6,558 thousand for the nine months ended September 30, 2019, primarily due to a lower amount of funds raised from the sale of equity securities compared to the prior year Net Cash Provided by Financing Activities (in thousands) | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by financing activities | $6,558 | $15,720 | - The decrease was due to a lower amount of funds raised from the sale of equity securities[144] Off-Balance Sheet Arrangements As of September 30, 2019, DarioHealth Corp. did not have any off-balance sheet arrangements as defined by SEC regulations - The company did not have any off-balance sheet arrangements as of September 30, 2019[145] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, DarioHealth Corp. is not required to provide quantitative and qualitative disclosures about market risk in this Form 10-Q - DarioHealth Corp. is a smaller reporting company and is therefore not required to provide market risk disclosures[146] Item 4. Control and Procedures This section details the evaluation of the company's disclosure controls and procedures, reporting their effectiveness, and confirms no material changes in internal control over financial reporting, while also acknowledging inherent limitations of internal controls Evaluation of Disclosure Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were designed at a reasonable assurance level and were effective as of September 30, 2019 - As of September 30, 2019, the Certifying Officers evaluated and concluded that the company's disclosure controls and procedures were designed at a reasonable assurance level and were effective[147][148] Changes in Internal Control over Financial Reporting There were no changes in the company's internal control over financial reporting during the quarter ended September 30, 2019, that materially affected or are reasonably likely to materially affect it - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2019[149] Limitations on the Effectiveness of Internal Controls Management cautions that internal control systems, regardless of design, can only provide reasonable, not absolute, assurance against fraud and material error due to inherent limitations - Management acknowledges that disclosure controls and internal control over financial reporting provide only reasonable, not absolute, assurance and may not prevent all fraud and material error[150] - Inherent limitations mean that no control system can provide absolute assurance, and controls may become inadequate over time due to changing conditions or deteriorating compliance[150] PART II - OTHER INFORMATION This part includes disclosures on unregistered sales of equity securities, a list of exhibits, and the report's official signatures Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2019, the company issued 82,560 shares of common stock to service providers as compensation, claiming exemption from registration under Section 4(a)(2) of the Securities Act - In Q3 2019, 82,560 shares of common stock were issued to service providers as compensation in lieu of cash[154] - These transactions were exempt from registration under Section 4(a)(2) of the Securities Act of 1933[154] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from principal officers and XBRL formatted financial statements - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2)[155] - The financial statements for the quarter ended September 30, 2019, are filed in XBRL format (101.1)[155] SIGNATURES This section confirms that the report was duly signed on behalf of DarioHealth Corp. by its Chief Executive Officer and Chief Financial Officer on October 28, 2019 - The report was signed on October 28, 2019, by Erez Raphael (Chief Executive Officer) and Zvi Ben David (Chief Financial Officer, Secretary and Treasurer)[153][160]