News Press Releases

LabStyle Innovations Reports Third Quarter 2015 Results

DRIO | November 13, 2015

- 56% increase in sequential quarterly revenues - Net loss narrowed by 41% compared to Q3 2014 - Rapid market penetration and very favorable user experience reported in Australia and Canada - Results confirm LabStyle offers a new patient and user-centric model for how diabetes and other diseases are to be monitored in the age of mobile health apps

CAESAREA, Israel, Nov. 13, 2015 /PRNewswire/ -- LabStyle Innovations Corp. (OTCQB: DRIO), developer of the Dario™ Diabetes Management Solution, today reported financial and operational results for the three months ended September 30, 2015 and provided an outlook for the coming quarters.

"We are very pleased to report strong growth in revenues, product shipments, and software services, as well as a significant reduction in net and EBITDA loss. Users in markets including Australia and Canada have reported an exceedingly high level of satisfaction with the Dario when monitoring their daily glucose levels. This customer satisfaction rate corresponds with the Dario's rapid market penetration, strong consumer demand, and accelerating revenue growth in Australia where the Dario launched in March. The Canadian market, where we launched in June, is showing a similar pattern," stated Erez Raphael, LabStyle's President and Chief Executive Officer.

"Results in Australia and Canada are particularly encouraging because these markets are very similar in profile to the U.S. and may be predictive of the potential demand for the Dario in the world's largest market for glucose monitors. Early success in Australia and Canada is proof that our lean, digital, direct-to-consumer approach will be a crucial asset for the U.S. launch of the Dario."

"Technology, and particularly mobile technology, is transforming the multi-billion dollar medical device industry into one that is end-user driven. We have witnessed patients evaluating the benefits of mobile health solutions and they are willing to replace traditional meters with pure native mobile solutions. We believe our strategy of delivering user-friendly, patient-centric apps that also improve healthcare economics while providing caregivers and physicians with superior information, is a driver of our current and future success in this market. The Dario is our first product and we see clear opportunities to launch similar mobile healthcare apps for other indications," Mr. Raphael concluded.

Q3 2015 Highlights:

Sequential quarterly revenues grew 56% from $175,000 in Q2 2015 to $273,000 in Q3 2015.
Shipments to distribution partners and customers of products and software services increased 17% from $250,000 in Q2 2015 to $292,000 in Q3 2015.
Net loss narrowed by 41% and non-GAAP adjusted EBITDA narrowed by 39% in Q3 2015 as compared to Q3 2014.
LabStyle was granted a patent in the U.S. that expands its intellectual property rights to include the management of all chronic diseases using smart phones.
LabStyle signed new distribution agreements with market leaders, all of whom have followed the Dario digital marketing strategy and have opened e-commerce websites to promote on-line sales of the Dario Management Solution.
LabStyle received reimbursement status for the Dario Smart Meter and test strips in Canada through the majority of medical plans.
LabStyle presented clinical results at leading scientific conferences on diabetes and mHealth. Data show the Dario Diabetes Management solution not only meets new International Standards Organization (ISO) 2013 performance requirements for accuracy with 99% precision, it is also user friendly for patients, caregivers and physicians.
The advanced telecare unit of Maccabi Healthcare, Israel's leading HMO, has published positive patient performance results after one month of participation in the telemedicine partner program with the Dario™ Diabetes Management Solution.
LabStyle was featured in numerous U.S.-based media outlets including eHealth Radio, Mass Device, Personal Tech MD, and Boston Magazine.

Near-term outlook:

U.S. market launch expected in the next few months following anticipated FDA clearance for the Dario; the U.S. is the largest addressable market in the world.
Market launches expected in additional strategic territories.
Pursuing regulatory approval and reimbursement in additional markets.
Signing additional strategic deals with healthcare providers and HMOs to monetize cloud-based data services.

Summary of Financial Results

LabStyle's billings for the third quarter of 2015 amounted to approximately $292,000 compared to approximately $250,000 in the second quarter of 2015 and approximately $141,000 in the first quarter of 2015. This includes product shipments to distributors and direct customers, as well as services provided with respect to LabStyle's patient management software platform launch as part of the partnership with Israel's leading healthcare HMO, Maccabi Healthcare.

LabStyle's revenues for the third quarter of 2015 amounted to approximately $273,000 compared to approximately $175,000 in the second quarter of 2015 and $67,000 in the first quarter of 2015.

Deferred revenues for the third quarter of 2015 amounted to approximately $54,000 compared to approximately $78,000 in the second quarter of 2015 and $56,000 in the first quarter of 2015.

GAAP net loss, as detailed in the table below decreased by approximately $4,504,000 or 71% to approximately $1,829,000 for the third quarter of 2015, compared to approximately $6,333,000 GAAP net loss in the third quarter of 2014.

Non-GAAP adjusted EBITDA for the three months ended on September 30, 2015, as detailed in the table below, decreased by approximately $816,000 or 39% to approximately $1,265,000 for the third quarter of 2015, compared to approximately $2,081,000 Non-GAAP adjusted EBIDTA in the third quarter of 2014.

As of September 30, 2015 cash and cash equivalents amounted to approximately $1,908,000.

Subsequent to September 30, 2015 LabStyle entered into a warrant replacement agreement with certain holders of warrants, which are accounted for as a liability in LabStyle's financial statements, pursuant to which 4,257,067 outstanding warrants were replaced by warrants to acquire an aggregate of 4,682,772 shares of Common Stock. The warrants replacement agreement allows LabStyle to remove the liability of the warrants being replaced from its balance sheet as a result of the replacement of warrants that contain a net settlement cash feature and liquidated damages penalties.

Note on Non-GAAP Measures

Readers should note that LabStyle has, in certain disclosures above and in the schedule below, supplemented its GAAP net loss with a Non-GAAP measure of adjusted EBITDA. Management believes that this Non-GAAP financial measure provides useful supplemental information to management and investors regarding LabStyle's performance, facilitates a more meaningful comparison of results for the current period with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of Non-GAAP adjusted EBIDTA to GAAP net loss, the most directly comparable GAAP measure is provided in the schedule below.

There are limitations in using this Non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from Non-GAAP financial measures used by other companies. This Non-GAAP financial measure should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider Non-GAAP financial measures only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP and the reconciliations of the Non-GAAP financial measure provided in the schedule below:

Unaudited
(US Dollars in thousands, except stock and stock data)
	Three months ended September 30,		Nine months ended September 30,
	2015	2014	2015	2014

Net loss as reported	$ (1,829)	$ (6,333)	$ (5,624)	$ (12,571)
Adjustments:
Depreciation	85	103	248	461
Revaluation of warrants	(753)	(2,606)	(377)	(3,144)
Other finance expense (income)	35	3,176	11	3,681
Deemed dividend related to warrants exchange agreement	-	-	154	-
Deemed dividend related to exchange agreement	-	279	-	279
Deemed dividend related to Series A Preferred Stock	-	2,977	-	2,977

EBITDA	$ (2,462)	$ (2,404)	$ (5,588)	$ (8,317)

Stock-based compensation and Common Stock	1,197	323	1,439	1,522

Non-GAAP adjusted EBITDA	$ (1,265)	$ (2,081)	$ (4,149)	$ (6,795)
Weighted average number of Common Stock used in computing basic net loss per share	37,433,188	9,610,160	29,835,891	6,179,981
Non-GAAP adjusted EBITDA per share	$ (0.03)	$ (0.22)	$ (0.14)	$ (1.10)

About LabStyle Innovations

LabStyle Innovations Corp. (OTCQB: DRIO) develops and commercializes patent-pending technology providing consumers with laboratory-testing capabilities using smart mobile devices. LabStyle's flagship product is the Dario^™ personalized smart meter. Dario^™ received CE mark certification in September 2013 and began a world rollout in select countries in December 2013. LabStyle filed a Premarket Notification Application, also known as a 510(k), with the US Food and Drug Administration (FDA) for the Dario™ smart meter (Dario^™ Blood Glucose Monitoring System) in December 2013. LabStyle is pursuing patent applications in multiple areas covering the specific processes related to blood glucose level measurement as well as more general methods of rapid tests of body fluids using mobile devices and cloud-based services. For more information: www.mydario.com and http://mydario.investorroom.com.

Cautionary Note Regarding Forward-Looking Statements

This news release and the statements of representatives and partners of LabStyle Innovations Corp. (the "Company") related thereto contain or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "plan," "project," "potential," "seek," "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. For example, the Company is using forward-looking statements in this press release when the Company discusses the potential demand for the Dario in the U.S. market, its anticipated U.S. launch of the Dario, its current and future success in this market, its anticipated FDA clearance, opportunities to launch similar mobile healthcare apps and the Company's near term outlook. Readers are cautioned that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this news release. Factors that may affect the Company's results include, but are not limited to, regulatory approvals, product demand, market acceptance, impact of competitive products and prices, product development, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks, and the risks associated with the adequacy of existing cash resources. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements include, but are not limited to, those risks discussed in the Company's filings with the U.S. Securities and Exchange Commission. Readers are cautioned that actual results (including, without limitation, the timing for and results of the Company's commercial and regulatory plans for Dario™ as described herein) may differ significantly from those set forth in the forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands


	September 30,	December 31,
	2015	2014
	Unaudited

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$ 1,908	$ 1,453
Restricted cash	10	-
Short-term bank deposits	69	83
Inventories	315	234
Other accounts receivable and prepaid expenses	419	286

Total current assets	2,721	2,056

LEASE DEPOSITS	33	47

PROPERTY AND EQUIPMENT, NET	796	978

Total assets	$ 3,550	$ 3,081

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


	September 30, 2015	December 31, 2014
	Unaudited
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Trade payables	$ 879	$ 708
Deferred revenues	54	24
Other accounts payable and accrued expenses	594	884
Total current liabilities	1,527	1,616
LIABILITY RELATED TO WARRANTS	3,626	4,003
COMMITMENTS AND CONTINGENT LIABILITIES
CONVERTIBLE PREFERRED SHARES:
Series A Preferred Stock of $0.0001 par value - Authorized: 60,000 shares at September 30, 2015 (unaudited) and December 31, 2014; Issued and Outstanding: 35,600 and 41,652 shares at September 30, 2015 (unaudited) and December 31, 2014, respectively; Aggregate liquidation preference of $3,560 and $4,165 at September 30, 2015 (unaudited) and December 31, 2014, respectively	2,357	2,757
STOCKHOLDERS' DEFICIENCY
Common Stock of $0.0001 par value - Authorized: 160,000,000 and 80,000,000 shares at September 30, 2015 (unaudited) and December 31, 2014, respectively; Issued and Outstanding: 42,768,309 and 16,233,430 shares at September 30, 2015 (unaudited) and December 31, 2014, respectively	4	2
Preferred Stock of $0.0001 par value - Authorized: 4,940,000 shares at September 30, 2015 (unaudited) and December 31, 2014; Issued and Outstanding: None at September 30, 2015 (unaudited) and December 31, 2014	-	-
Additional paid-in capital	37,718	30,761
Accumulated deficit	(41,682)	(36,058)
Total stockholders' deficiency	(3,960)	(5,295)
Total liabilities and stockholders' deficiency	$ 3,550	$ 3,081

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except stock and stock data)


	Three months ended September 30		Nine months ended September 30
	2015	2014	2015	2014
	Unaudited		Unaudited

Revenues	$ 273	$ -	$ 515	$ -
Cost of revenues and ramp up of manufacturing	404	585	1,111	1,611

Gross loss	131	585	596	1,611

Operating expenses:
Research and development	$ 667	$ 769	$ 1,991	$ 3,209
Sales, marketing and pre-production costs	417	252	931	911
General and administrative	1,332	901	2,318	3,047

Total operating expenses	2,416	1,922	5,240	7,167

Operating loss	2,547	2,507	5,836	8,778

Financial expenses (income), net:
Revaluation of warrants	(753)	(2,606)	(377)	(3,144)
Other financial expense (income), net	35	3,176	11	3,681

Total financial expenses (income), net	(718)	(570)	(366)	537

Net loss	$ 1,829	$ 3,077	$ 5,470	$ 9,315

Deemed dividend related to warrants exchange agreement	$ -	$ -	$ 154	$ -
Deemed dividend related to exchange agreement	$ -	$ 279	$ -	$ 279
Deemed dividend related to Series A Preferred Stock	$ -	$ 2,977	$ -	$ 2,977
Net loss attributable to holders of Common Stock	$ 1,829	$ 6,333	$ 5,624	$ 12,571

Net loss per share

Basic loss per share	$ (0.05)	$ (0.66)	$ (0.19)	$ (2.03)
Weighted average number of Common Stock used in computing basic net loss per share	37,433,188	9,610,160	29,835,891	6,179,981

Diluted loss per share	$ (0.05)	$ (0.66)	$ (0.19)	$ (2.23)
Weighted average number of Common Stock used in computing diluted net loss per share	37,433,188	9,610,160	29,835,891	6,194,418

CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands


	Nine months ended September 30,
	2015	2014
	Unaudited
Cash flows from operating activities:
Net loss	$ (5,470)	$ (9,315)
Adjustments required to reconcile net loss to net cash used in operating activities:
Stock-based compensation and Common Stock	1,439	1,522
Issuance cost related to warrants to investors and service provider	-	533
Depreciation	248	461
Decrease (increase) in other accounts receivable and prepaid expenses	(120)	117
Increase in inventories	(81)	(109)
Increase in trade payables	183	367
Increase in deferred revenues	30	-
Increase (decrease) in other accounts payable and accrued expenses	(58)	276
Increase (decrease) in fair value of warrants	(377)	(3,144)
Consideration granted to the February 2014 investors from exchange agreement	-	3,124
Capital loss from disposal of fixed assets	(8)	-
	(4,214)	(6,168)
Net cash used in operating activities

Cash flows from investing activities:
Proceeds of maturities of short-term bank deposit	333	230
Investment in short-term bank deposits	(330)	(130)
Investment in restricted cash	(10)	-
Maturity of (investment in) lease deposits	12	(6)
Purchase of property and equipment	(70)	(219)

Net cash used in investing activities
	(65)	(125)
Cash flows from financing activities:
Proceeds from issuance of Common Stock and warrants, net of issuance cost	1,956	3,754
Proceeds from issuance of Common Stock and warrants, net of issuance cost	2,325	-
Proceeds from issuance of Series A Preferred Stock and warrants, net of issuance cost	-	4,096
Proceeds from exercise of warrants into Common Stock, net of issuance cost	453	-
Proceeds from exercise of options and warrants into Common Stock	(*) -	350

Net cash provided by financing activities	4,734	8,200

Increase in cash and cash equivalents	455	1,907
Cash and cash equivalents at the beginning of the period	1,453	2,263

Cash and cash equivalents at the end of the period	$ 1,908	$ 4,170

Non-cash investing and financing activities:
Purchase of property and equipment	$ 26	$ 323
Conversion of Series A Preferred Stock into Common Stock	$ 400	$ -
Conversion of liability related to warrants to Common Stock	$ -	$ 9
Payment for executives and directors under Salary Program	$ 232	$ -