DarioHealth Corp. — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. DarioHealth provides digital therapeutics and related devices, services and coaching for chronic conditions, and is shifting from direct-to-consumer sales toward business-to-business-to-consumer markets. Its platform covered diabetes, hypertension, weight management, musculoskeletal and behavioral health. Unless noted otherwise, financial figures below are in U.S. dollars.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $20.513 million | $7.576 million | Up about 171%; hardware and consumables were $17.793 million, services $2.720 million. |
| Gross profit / margin | $3.963 million / 19.3% | $2.513 million / 33.2% | Margin fell, primarily due to $4.106 million of acquired inventory step-up and intangible-asset amortization, lower product profitability and higher shipping costs. Excluding those amortizations, reported gross profit was $8.069 million, or 39.3% of revenue. |
| Operating expenses | $80.457 million | $32.416 million | Higher R&D, sales and marketing, and G&A spending, including expansion of the commercial team and acquisition-related costs. |
| Operating loss | $76.494 million | $29.903 million | Loss widened with increased operating investment. |
| Net loss | $76.761 million | $29.445 million | Net loss attributable to common stockholders was $78.766 million, including a $2.005 million deemed dividend; FY2020 comparable was $33.103 million. |
| Basic and diluted loss per share | $4.07 | $4.01 | Weighted-average common shares increased to 16.592 million from 5.963 million. |
| Cash and cash equivalents | $35.808 million | $28.590 million | Year-end cash; balance-sheet current assets were $45.605 million and current liabilities $14.376 million. |
| Operating cash flow | $(50.409) million | $(17.736) million | Greater cash use reflected increased marketing activity and consolidation of acquired businesses. |
| Investing cash flow | $(8.134) million | $(1.622) million | Included acquisition-related cash outflows. |
| Financing cash flow | $65.766 million | $27.548 million | Primarily net proceeds from the February 2021 stock offering. |
The balance sheet showed $85.549 million in stockholders’ equity and $222.014 million in accumulated deficit. Reported liabilities included an $825,000 earn-out liability and operating lease liabilities; the filing does not show conventional long-term borrowings in the balance-sheet summary. Contractual obligations totaled $13.036 million, including $12.190 million in purchase obligations, mostly due within one year. Stock-based compensation was $24.971 million in 2021, up from $11.102 million.
Material changes and business developments
- Revenue grew substantially year over year, while losses and operating cash use also increased as the company invested in R&D, marketing and enterprise sales.
- Dario reported 54 new business-to-business contracts during its first full year selling in that market, across employers, health plans and providers. Management said employer growth was strongest; two health-plan contracts were live at the time of the filing.
- The company acquired Upright in February 2021 and PsyInnovations (WayForward) in June 2021, expanding into musculoskeletal and behavioral health. The acquisitions contributed $41.640 million of goodwill and $12.460 million of net intangible assets at year-end. The filing reports total consideration of $33.578 million for Upright and $21.079 million for WayForward.
- Shares outstanding rose to 16.573 million at year-end from 8.119 million a year earlier. The company issued 3.279 million shares in its February 2021 offering and shares in connection with acquisitions, among other equity issuances.
Outlook, risks and unusual items
- Funding and runway: Management reported that FY2021 cash and the February 2022 registered direct offering—approximately $40 million gross and $38.026 million net—were expected to fund obligations for at least 12 months from issuance of the financial statements. The company nevertheless expects continued losses and may require further capital; additional financing could dilute shareholders or be unavailable on acceptable terms.
- Sanofi agreement: After year-end, Dario entered a five-year collaboration with Sanofi. Payments may total up to $30 million, comprising an upfront payment, annual development-cost compensation and contingent milestones. Amounts are subject to conditions, and the agreement includes revenue sharing with Sanofi on qualifying sales. The filing does not establish that the full amount will be received.
- Other subsequent events: The company agreed to acquire certain Physimax assets for up to 256,660 shares and $500,000 cash, and to assume approximately $1.020 million of liabilities, subject to closing conditions. The filing also describes additional employer and provider contracts expected to launch in 2022.
- Key risks: The business has a history of losses and negative operating cash flow and has not established recurring revenue sufficient to cover costs. Risks include customer adoption and contract conversion, intense competition, integration of acquisitions, dependence on third-party manufacturers and technology platforms, regulatory and reimbursement requirements, privacy and cybersecurity, clinical evidence, and operations in Israel. COVID-19 had slowed some prospective-partner discussions, while increasing interest from other parties; the company said its financial and operational impact remained uncertain.
- Unusual accounting items: Acquired inventory and technology amortization reduced reported gross margin. Stock-based compensation was substantial. The auditor identified revenue recognition estimates for bundled membership services and valuation of acquisition-related intangible assets as critical audit matters.
- Controls and audit: Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2021. WayForward’s internal controls were excluded from the year-end assessment while integration work continued. The independent auditor gave an unqualified opinion on the financial statements; it did not audit internal control effectiveness.
- Guidance: The filing does not provide a clear numerical revenue or earnings forecast for FY2022.
Investor verification priorities
- Confirm the timing, terms and revenue contribution of the 54 B2B contracts, and distinguish signed contracts from launched programs and enrolled members.
- Track quarterly cash burn against the reported cash balance and the February 2022 offering proceeds, including whether operations can be funded without further dilution.
- Verify the Sanofi agreement’s upfront and milestone payments, contingencies, sales thresholds, revenue-sharing economics and termination provisions.
- Assess whether revenue growth can translate into improved gross margin and lower losses after acquisition-related amortization and elevated sales and marketing costs.
- Review the assumptions supporting acquisition valuations, goodwill recoverability and the earn-out, as well as completion and integration of the Physimax transaction.
- Reconcile share-count changes, equity compensation and potential dilution from options, warrants, preferred shares and later offerings.