DarioHealth(US:DRIO)2025-08-12 10:06PART 1 - FINANCIAL INFORMATION Item 1. Condensed Consolidated Interim Financial Statements (unaudited) This section presents DarioHealth Corp.'s unaudited condensed interim financial statements, including balance sheets, income, equity, and cash flow statements, highlighting continued net losses and going concern doubts Condensed Consolidated Interim Balance Sheets Balance Sheet Items (in thousands) | Balance Sheet Items (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $21,954 | $27,764 | | Total current assets | $32,170 | $40,529 | | Total assets | $108,325 | $118,884 | | Liabilities & Equity | | | | Total current liabilities | $9,754 | $16,635 | | Total liabilities | $44,339 | $46,865 | | Total stockholders' equity | $63,986 | $72,019 | - Total assets decreased from $118.9 million at the end of 2024 to $108.3 million as of June 30, 2025, primarily driven by a reduction in cash and cash equivalents and trade receivables16 Condensed Consolidated Interim Statements of Comprehensive Loss Income Statement (in thousands) | Income Statement (in thousands) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $5,369 | $6,255 | $12,121 | $12,013 | | Gross profit | $2,964 | $2,756 | $6,846 | $5,188 | | Total operating expenses | $12,164 | $18,947 | $25,455 | $39,234 | | Operating loss | $(9,200) | $(16,191) | $(18,609) | $(34,046) | | Net loss | $(12,990) | $(13,610) | $(22,217) | $(20,785) | | Basic and diluted loss per share | $(0.18) | $(0.08) | $(0.33) | $(0.27) | - Revenues for Q2 2025 decreased by 14.2% year-over-year, while operating expenses were significantly reduced by 35.8%, leading to a smaller operating loss compared to Q2 202422 Condensed Consolidated Interim Statements of Changes in Stockholders' Equity - Total stockholders' equity decreased from $72.0 million at the end of 2024 to $64.0 million as of June 30, 2025. The decrease was primarily driven by the net loss of $22.2 million for the six-month period, partially offset by capital raised from stock-based compensation and issuance of preferred stock24 Condensed Consolidated Interim Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,704) | $(24,473) | | Net cash used in investing activities | $(75) | $(8,881) | | Net cash provided by financing activities | $6,939 | $20,206 | - Cash used in operating activities for the first six months of 2025 was nearly halved compared to the same period in 2024, reflecting improved operational efficiency. Cash from financing activities decreased significantly, primarily due to lower proceeds from preferred stock issuance in 2025 compared to 202430 Notes to Condensed Consolidated Interim Financial Statements - The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of $423.0 million as of June 30, 2025. These conditions raise substantial doubt about its ability to continue as a going concern3536 - On April 30, 2025, the company refinanced its debt with a new credit agreement from Callodine Commercial Finance for up to $50 million, initially borrowing $32.5 million. This new facility matures in April 203076172 - As of June 30, 2025, the company did not meet one of the financial covenants under the new Callodine credit agreement and has notified the lender of its intention to utilize an equity cure to address the event of default8485 - Revenue from the Commercial B2B2C channel, a key strategic area, decreased to $3.5 million in Q2 2025 from $5.5 million in Q2 202455 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's whole-person digital health platform, analyzing Q2 and H1 2025 financial performance, noting decreased Q2 revenue, improved gross margin, reduced operating expenses, recent debt refinancing, and ongoing liquidity challenges Business Overview - DarioHealth operates as a global digital health company with a mission to deliver a comprehensive, whole-person health platform that integrates physical health (chronic conditions like diabetes, hypertension) and mental health needs159161162 - The company's business model targets four primary market segments: Direct-to-Consumer (D2C), medium-to-large employers, health plans, and pharmaceutical companies, with B2B channels now accounting for three-fourths of revenues166 Recent Developments - The company added 21 new clients in the first half of 2025, progressing towards its annual goal of 40 new clients171 - On May 1, 2025, DarioHealth closed a new debt financing facility for up to $50 million with Callodine, drawing an initial $32.5 million to refinance existing debt and provide operational flexibility172 - In June 2025, the company announced a strategic commercial agreement with GreenKey Health to expand its solutions into the sleep apnea market180 Results of Operations Metric (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $5,369 | $6,255 | -14.2% | | Gross Profit | $2,964 | $2,756 | +7.5% | | Gross Margin | 55.2% | 44.1% | +11.1 ppt | | Operating Expenses | $12,164 | $18,947 | -35.8% | | Net Loss | $(12,990) | $(13,610) | -4.6% | - The decrease in Q2 2025 revenue was primarily due to a decline in revenues from the pharma channel182 - Operating expenses across R&D, Sales & Marketing, and G&A all saw significant year-over-year decreases, attributed mainly to efficiency and post-merger integration activities resulting in lower payroll and consulting expenses187189191 Non-GAAP Financial Measures Non-GAAP Adjusted Loss (in thousands) | Non-GAAP Adjusted Loss (in thousands) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss - as reported | $(12,990) | $(13,610) | $(22,217) | $(20,785) | | Non-GAAP adjusted loss | $(6,363) | $(10,671) | $(12,174) | $(19,749) | - The Non-GAAP adjusted loss, which excludes items like stock-based compensation and revaluation of warrants, showed significant improvement, decreasing by 39% for the second quarter and 38% for the first six months of 2025 compared to the prior year periods203 Liquidity and Capital Resources - As of June 30, 2025, the company had $22.0 million in cash and cash equivalents, down from $27.8 million at the end of 2024204 - Management has concluded that the current cash on hand is insufficient to fund projected operating requirements for the next twelve months, which raises substantial doubt about the company's ability to continue as a going concern235 - The company has a significant present need for capital and may be unable to continue activities without material alterations to its business plan if additional funding is not secured235 Cash Flows Cash Flow (in thousands) | Cash Flow (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(12,704) | $(24,473) | | Cash used in investing activities | $(75) | $(8,881) | | Cash provided by financing activities | $6,939 | $20,206 | - Net cash used in operating activities decreased by 48.1% in the first half of 2025 compared to the same period in 2024, mainly due to a decrease in operating expenses from efficiency and post-merger integration activities238 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the quarter - The company's CEO and CFO concluded that as of June 30, 2025, disclosure controls and procedures were effective at a reasonable assurance level242 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting243 PART II - OTHER INFORMATION Item 1A. Risk Factors This section highlights key risks, including revenue concentration, geopolitical risks from Israel operations, substantial doubt about going concern due to insufficient cash, potential debt covenant breaches, and extreme stock price volatility with Nasdaq delisting risk - A major customer accounted for 16.4% of accounts receivable and 9.3% of revenue in Q2 2025, posing a significant concentration risk249 - The company's current cash on hand is not sufficient to fund projected operating requirements for the next year, raising substantial doubt about its ability to continue as a going concern255 - As of June 30, 2025, the company was not in compliance with a financial covenant under its Credit Agreement and is pursuing an equity cure, the success of which is not guaranteed259 - The company is not in compliance with Nasdaq's minimum bid price requirement of $1.00 per share and has until September 15, 2025, to regain compliance or face delisting264 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company issued 525,000 common shares to service providers as compensation, claiming exemption from registration under Section 4(a)(2) of the Securities Act - In Q2 2025, the company issued 525,000 shares of common stock to certain service providers as compensation in lieu of cash, claiming exemption from registration under Section 4(a)(2) of the Securities Act268 Item 5. Other Information On August 8, 2025, following stockholder approval, the company increased its authorized common stock from 160 million to 400 million shares by filing a Certificate of Amendment - On August 8, 2025, the company increased its authorized common stock from 160 million to 400 million shares after receiving stockholder approval269270 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including amendments to the Certificate of Incorporation, preferred stock designations, officer certifications, and XBRL data files - The report includes several filed exhibits, such as the Certificate of Amendment to increase authorized shares, various amended certificates for preferred stock, and required officer certifications under Sarbanes-Oxley274