Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations (amounts in thousands except for share and share amounts)

Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2025. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." You should review the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The following financial data in this narrative are expressed in thousands, except for stock and stock data or as otherwise noted.

All information included herein relating to shares or price per share reflects the 20-for-1 reverse stock split effected by us on August 28, 2025.

We are a vertically integrated health intelligence platform with a mission to power the behavior changes that drive better health. Unlike software-only digital health platforms, Dario owns the complete chain of value in chronic care management - connected FDA-cleared hardware devices that generate continuous physiological data, AI built on that proprietary data, and a behavior change and coaching layer validated through over 100 peer-reviewed clinical studies. We are committed to transforming healthcare by delivering a comprehensive and highly engaging whole-person health platform, which enables us to create a future where healthy change is effortless and accessible to all.

At the core of our mission and vision is engagement. We believe that most existing digital health solutions in the market fail to deliver improved health outcomes because users are not engaged due to a lack of relevance, personalization, consumerization, and longitudinal data and information. We, and our acquired companies, first commercialized our digital behavioral health products in the direct-to-consumer ("D2C") marketplace, and we continue to use the D2C marketplace as a sandbox and laboratory for innovation. These consumers pay for these digital health products out of their own pockets and are therefore the most value-driven among all healthcare consumers. These consumers demanded that we deliver highly engaging user experiences that deliver strong clinical health outcomes for which consumers will pay. The bottom line is that if users are not engaged in digital solutions over a long period of time, they cannot change their behavior and they cannot get healthier - we first deliver engagement followed by sustained behavior change that then leads to measurable health outcomes and improvement. We believe that our D2C marketplace roots and continued focus delivers better user experiences, longer sustained engagement, stronger clinical outcomes, at the most affordable prices, that then delivers the highest return on investment ("ROI") in the industry.

Our whole-person health model includes the following five elements:

We have created our whole-person healthcare solution through both organic development and acquisitions of leading companies across several therapeutic areas. As a digital health consolidation leader, we have acquired companies that have spent over a decade and nearly $525 million, in combination with our own investment, to develop and deliver the most engaging whole-person health platform in the market to empower individuals to achieve their optimal health through data-driven, precision AI personalized care solutions that integrate the management of physical and mental health needs.

Leveraging advanced analytics, data-driven AI precision and personalization, a deep understanding of consumer behavior, user-centric technology, and a holistic approach, we provide tailored interventions that meet the unique needs of each user to deliver the health industry's highest levels of user activation and sustained engagement. Our digital self-care solutions ensure optimal levels of clinical outcomes with the highest levels of clinical efficacy by empowering users to overcome the psychological, social, and physical barriers to effective and sustainable behavior change.

With our whole-person digital health platform, we address a broad range of health needs, including chronic condition management (e.g., diabetes, hypertension, obesity, and musculoskeletal issues), behavioral health (e.g., stress, anxiety, and depression), and preventive care. By integrating digital therapeutics and well-being solutions with real-time data monitoring and access to professional care teams, we ensure an AI-driven adaptive and continuous care experience that combines digital self-care with virtual coaching and virtual clinical care. As of 2025, our eligible user base spans millions of individuals worldwide, supported by partnerships with employers, health plans, pharmaceutical companies, and providers.

We serve four primary market segments that drive our business model. Our historic roots, as well as those of our largest acquisition, Twill, Inc. ("Twill"), began in the D2C market. We continue to operate in the D2C market in the U.S. and select international markets and use it as an innovation laboratory. From our D2C origins, Dario and Twill expanded into B2B market segments such that these market segments now represent three-fourths of our current revenues. These B2B market segments include medium-to-large employers, national and regional health plans, and global pharmaceutical companies.

Our medium-to-large employer market segment is focused on employers with over 1,000 employees. We go to market through a direct sales force, consultants, brokers, and channel partners.

Our health plan customers include five of the nation's largest organizations where we provide our solutions to their members both nationally and regionally. We have specialized in providing our behavioral health offering to Medicare and Medicaid members.

In total, we had 165 customers in 2026.

We have provided our engagement platform services to a dozen global pharmaceutical companies across nearly as many medical conditions, delivering three value propositions: (1) Top of the Funnel education and awareness to help companies find new patients for their treatments, (2) Mental and physical health support to improve medication adherence, persistence, and compliance, and (3) Patient journey data analytics.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and March 31, 2025 (dollar amounts in thousands)

Revenues

Revenues for the three months ended March 31, 2026 amounted to $5,584, compared to revenues of $6,752 during the three months ended March 31, 2025, representing a decrease of 17.3%. The decrease in revenues was primarily attributable to a non-recurring revenue from a pharmaceutical partner recognized in the prior-year period. These declines were partially offset by growth in revenues from channel partners and an increase in direct-to-consumer sales.

Cost of Revenues

During the three months ended March 31, 2026, we recorded costs related to revenues in the amount of $2,384, compared to $2,870 during the three months ended March 31, 2025, representing a decrease of 16.9%. The decrease was primarily driven by lower amortization of technology and lower hosting and server expenses, which were partially offset by higher hardware and consumables expenses recorded in the cost of revenues.

Cost of revenues consists mainly of the cost of hardware and consumables production, employees' salaries and related overhead costs, stock-based compensation, depreciation of production lines and related cost of equipment used in production, amortization of technologies, hosting costs, shipping and handling costs, and inventory write-downs.

Gross Profit

Gross profit for the three months ended March 31, 2026 amounted to $3,200 (57.3% of revenues), compared to $3,882 (57.5% of revenues) during the three months ended March 31, 2025. The decrease in gross profit as a percentage of revenue for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, resulted mainly from the decrease in revenue and higher hardware and consumables expenses which were partially offset by lower amortization of technology and lower hosting and server expenses. Gross profit for the three months ended March 31, 2026, excluding amortization of acquired technology, stock-based compensation and depreciation, was $3,385 (60.6% of revenues) compared to $4,782 (70.8% of revenues) during the three months ended March 31, 2025.

Research and Development Expenses

Our research and development expenses decreased by $1,723, or 41.9%, to $2,385 for the three months ended March 31, 2026, compared to $4,108 for the three months ended March 31, 2025. The decrease in research and development expenses was mainly due to efficiencies and post-merger activities, resulting in a decrease in payroll expenses, subcontractors and consulting and stock-based compensation expenses partially offset by the impact of foreign currency fluctuations resulting from the strengthening of the New Israeli Shekel ("NIS") against the U.S. dollar, as certain expenses are denominated in NIS. Our research and development expenses, excluding stock-based compensation and depreciation, for the three months ended March 31, 2026 were $2,261 compared to $3,542 for the three months ended March 31, 2025.

Research and development expenses consist mainly of employees' salaries and related overhead costs involved in research and development activities, expenses related to (i) our solutions (ii) labor, stock-based compensation, contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development, and (iv) facilities expenses associated with and allocated to research and development activities.

Sales and Marketing Expenses

Our sales and marketing expenses decreased by $975, or 16.6%, to $4,898 for the three months ended March 31, 2026, compared to $5,873 for the three months ended March 31, 2025. The decrease was mainly a result of lower payroll expenses, lower stock-based compensation, partially offset by an increase in digital marketing expenses. Our sales and marketing expenses, excluding stock-based compensation, depreciation and amortization, for the three months ended March 31, 2026 were $4,466 compared to $4,747 for the three months ended March 31, 2025, a decrease of $281.

Sales and marketing expenses consist mainly of employees' salaries and related overhead costs, stock-based compensation, depreciation of customer relationship intangible asset, digital marketing campaigns, trade show expenses, and marketing consultants and subcontractors.

General and Administrative Expenses

Our general and administrative expenses decreased by $84, or 2.5%, to $3,226 for the three months ended March 31, 2026, compared to $3,310 for the three months ended March 31, 2025. The decrease was mainly due to lower expenses

relates to corporate activities such as investor relations, and insurance expenses, and lower accounting and legal fees which were partially offset by an increase in stock-based compensation expenses and the impact of foreign currency fluctuations resulting from the strengthening of the ("NIS") against the U.S. dollar, as certain expenses are denominated in NIS. Our general and administrative expenses, excluding stock-based compensation, share-based payments and depreciation, for the three months ended March 31, 2026 were $2,002 compared to $2,304 for the three months ended March 31, 2025, a decrease of $302.

Our general and administrative expenses consist mainly of employees' salaries and related overhead costs, stock-based compensation, insurance costs, legal and accounting fees, acquisition-related costs, and expenses related to investor relations.

Financial Expenses (Income), net

Our financial expenses (income), net for the three months ended March 31, 2026 were $883, compared to $(204) for the three months ended March 31, 2025. The decrease in our financial income was mainly due to financial income resulting from the revaluation of pre-funded warrants in the first quarter of 2025 which were fully exercised in February 2026.

Financial income, net primarily consists of credit facility interest expense, interest income from cash balances, revaluation of warrants and pre-funded warrants, bank charges, lease liability and foreign currency translation differences.

Income tax

Income tax expenses were $57 for the three months ended March 31, 2026, compared to $22 for the three months ended March 31, 2025. Income tax expenses for the three months ended March 31, 2026 were primarily comprised of sales tax and state tax.

Net loss

Net loss decreased by $978, or 10.6%, to $8,249 for the three months ended March 31, 2026, compared to a net loss of $9,227 for the three months ended March 31, 2025. The decrease in net loss was mainly due to decrease in operating expenses.

The factors described above resulted in net loss attributable to common stockholders for the three months ended March 31, 2026 of $8,249, compared to net loss attributable to common stockholders of $14,066 for the three months ended March 31, 2025.

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP within this Quarterly Report on Form 10-Q, management provides certain non-GAAP financial measures ("NGFM") of the Company's financial results, including such amounts captioned "Non-GAAP Adjusted Loss," as presented herein below. The NGFM measures captioned "Non-GAAP Adjusted Loss" are not recognized terms under U.S. GAAP, and as such, they are not a substitute for, considered superior to, considered separately from, nor as an alternative to, U.S. GAAP and/or the most directly comparable U.S. GAAP financial measures.

Such NGFM are presented with the intent of providing greater transparency of information used by us in our financial performance analysis and operational decision-making. We believe these NGFM provide meaningful information to assist investors, shareholders, and other readers of our unaudited condensed consolidated financial statements in making comparisons to our historical financial results, and analyzing the underlying financial results of our operations. We believe the NGFM provide useful information by isolating certain expenses, gains, and losses which are not necessarily indicative of our operating financial results and business outlook.

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A reconciliation to the most directly comparable U.S. GAAP measure to NGFM, as discussed above, is as follows:

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Liquidity and Capital Resources

As of March 31, 2026, we had approximately $14,977 in cash and cash equivalents and $5,035 in short term deposits compared to $21,803 and $4,214 on December 31, 2025.

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We have experienced cumulative losses of $460,327 since inception (August 11, 2011) through March 31, 2026, and have stockholders' equity of $62,380 as of March 31, 2026. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future.

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Since inception, we have financed our operations primarily through private placements and public offerings of our Common Stock and warrants to purchase shares of our Common Stock, receiving aggregate net proceeds totaling $307,133 through March 31, 2026, and a credit facility, net in the amount of $25,795 as of March 31, 2026.

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On April 30, 2025, we entered into a Credit Agreement (the "Credit Agreement"), by and among us as borrower, the financial institutions party thereto from time to time as lenders, and Callodine Commercial Finance, LLC (in its capacity as agent for all lenders, "Agent", and collectively with other lenders, "Lenders" and each a "Lender"). Under the terms of the Credit Agreement, each Lender agreed to make a multi-draw term loan to us of up to $50,000 (each a "Term Loan") in which we borrowed $32,500 at the time of closing on April 30, 2025 (the "Callodine Loan Facility"). The Callodine Loan Facility has a five-year term maturing in April 2030, with principal repayments not due until May 2028. The outstanding principal balance bears interest at SOFR plus 7.75%. In addition, we may draw up to an additional $17,500 subject to certain conditions. As of March 31, 2026, the outstanding balance under the Callodine Loan Facility was $30,931.

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All obligations under the Credit Agreement are guaranteed by our subsidiaries (each a "Grantor"). All obligations under the Credit Agreement, and the guarantees of those obligations, are secured by substantially all of our and the Grantors' assets. In the event of a default set forth in the Credit Agreement, the Agent may apply all or any part of the proceeds as collateral to the payment of the obligations in the order and priority as determined by the Agent in its sole discretion.

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The outstanding principal balance under the loan shall bear interest at a per annum rate of interest equal to (i) the Term SOFR Rate (as defined in the Credit Agreement) plus (ii) seven and three-quarters of one percent (7.75%). Upon maturity and/or upon an event of default (or upon any acceleration), interest shall automatically accrue without notice to us at a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate (as defined in the Credit Agreement), or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulations until paid. We will pay certain fees with respect to the Term Loan, including a closing fee, an exit fee, and an agent fee. Voluntary prepayments of the Term Loan prior to the third anniversary of the closing are also subject to certain pre-payment penalties.

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The Credit Agreement contains customary events of default, including with respect to nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key person events and change of control.

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The Credit Agreement also contains a number of customary representations, warranties and covenants that, among other things, will limit or restrict our ability and the ability of our subsidiaries to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material documents; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements.

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In connection with the funding of the closing amount, we agreed to issue for each Lender a warrant to purchase 105,707 shares of our Common Stock, with an exercise price of $16.56, which shall have a term of seven years from the issuance date. In addition, up to $2,500 of the loaned amount can be converted into shares of our Common Stock at a price of $19.87 per share.

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On August 15, 2025, the Company did not meet one of the financial covenants under the Credit Agreement. Upon an Event of Default (as defined in the Credit Agreement) under the Credit Agreement, interest shall accrue to at a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate (as defined in the Credit Agreement), or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulations, until paid. The Company notified Callodine of its intention to utilize an Equity Cure (as defined in the Credit Agreement) to address the event of default. Callodine waived the event of default, subject to the successful implementation of an Equity Cure no later than October 3, 2025.

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On November 5, 2025, we entered into an Amendment to the Credit Agreement with the Lenders. Among other things, the amendment (i) resets financial covenants and waives financial-covenant testing for the second and third quarters of 2025; (ii) replaces the minimum cash covenant with a $10,000 minimum consolidated unencumbered liquid assets covenant; (iii) adds monthly 13-week cash-flow reporting when liquidity is below certain amount (subject to an EBITDA exception); (iv) clarifies that Tranche B is uncommitted and at lender discretion; and (v) increases the exit fee by $150 (waived if a change-of-control prepayment fee is triggered).

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In connection therewith, the Company repriced the Warrant to purchase up to 105,707 shares of Common Stock issued to the lenders on April 30, 2025, at an exercise price $16.56 per share, to permit an amendment to the exercise price of such Warrants to $15.35. In addition, conversion right of the lender in the amount of $2,500 was amended to a conversion price of $15.35 per share.

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On December 16, 2024, we and certain purchasers that were holders of our Series B and C Preferred Stock executed lock up agreements (the "Lock Up Agreement"), pursuant to which we agreed to issue, subject to stockholder approval, up to forty percent (40%) of the shares of Common Stock conversion shares of the preferred stock held by such purchaser, including dividend shares of Common Stock due upon conversion of these shares into shares of Common Stock, over the course of twelve (12) months (the "Additional Shares"). Each holder shall be entitled to receive 10% of the Additional Shares for each three (3) month period each holder agrees not to transfer or otherwise sell (subject to certain limitations) the shares of Common Stock issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock and the dividend shares of Common Stock due upon conversion. Between May 23, 2025 and May 28, 2025, the Company and holders that previously entered into Lock-Up Agreements, entered into an Amended and Restated Lock-Up Agreement (the "A&R Lock-Up Agreement") pursuant to which the holders agreed to extend the restrictive period previously provided in the Lock-Up Agreements until February 21, 2026 (the "Lock Up Period") for the right to receive an additional 10% of the Common Stock underlying the Series B Preferred Stock and the Series C Preferred Stock held by the holders. On October 20, 2025, we and holders that previously entered into the Lock-Up Agreement and the A&R Lock-Up Agreement entered into a Second Amended and Restated Lock-Up Agreement (the "Second A&R Lock-Up Agreement") pursuant to which the Lock-Up Period shall automatically terminate, and all share consideration shall be accelerated and immediately be issued by us in full (to the extent not already issued) upon (A) any merger or consolidation

of our with or into another individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization, (B) any sale of all or substantially all of our assets in one transaction or a series of related transactions, or (C) any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

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On March 30, 2026, we entered into the Sales Agreement with A.G.P./Alliance Global Partners, pursuant to which we may offer and sell, from time to time, up to an aggregate of $20.0 million of shares of our common stock under the ATM Program. Sales of shares under the Sales Agreement, if any, may be made by any method permitted by law that is deemed to be an "at the market offering" under Rule 415(a)(4) under the Securities Act, or in negotiated transactions or as principal pursuant to a separate terms agreement. We have no obligation to sell any shares under the ATM Program and may suspend offers thereunder or terminate the Sales Agreement at any time, subject to its terms.

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We intend to use any net proceeds from the ATM Program for commercial, sales and marketing activities, research and development, potential mergers and acquisitions, repayment of outstanding indebtedness and related interest under the Callodine Loan Facility, and for general corporate and working capital purposes.

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The Sales Agreement provides that the Agent is entitled to a commission of 3.0% of the gross sales price of shares sold under the ATM Program. We have also agreed to reimburse certain reasonable and documented expenses of the Agent, including legal fees and other customary expenses, subject to specified caps. The Sales Agreement contains customary representations, warranties, covenants, indemnification obligations and termination provisions.

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As of March 31, 2026, no shares had been sold under the ATM Program. Subsequent to March 31, 2026 and through the date of this Quarterly Report on Form 10-Q, we sold an aggregate of 7,252 shares under the ATM Program for gross proceeds of approximately $54 and net proceeds of approximately $53, after deducting commissions and offering expenses.

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There are no assurances that we will be able to obtain an adequate level of financial resources that are required for the long-term development and commercialization of our product offerings.

As such, we have a significant present need for capital. If we are unable to scale up our commercial launch of our products or meet our commercial sales targets (or if we are unable to generate any revenue at all), and if we are unable to obtain additional capital resources in the near term, we may be unable to continue activities absent material alterations in our business plans and our business might fail.

Based on the Company's updated cash flow projections as of the date of these financial statements, and the conditions noted above, we believe that our current cash on hand will not be sufficient to fund our projected operating requirements for a period of one year from the issuance of these financial statements. These conditions raise substantial doubt about our ability to continue as a going concern.

Additionally, readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected.

Cash Flows

The following table sets forth selected cash flow information for the periods indicated:

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Net cash used in operating activities

Net cash used in operating activities was $6,025 for the three months ended March 31, 2026, a decrease of 9.7% compared to $6,673 used in operations for three months ended March 31, 2025. Cash used in operations decreased mainly due to the decrease in our operating expenses.

Net cash used in investing activities

Net cash used in investing activities was $826 for the three months ended March 31, 2026, compared to $31 net cash used in investing activities during the same period in 2025. The increase is due to investments in short term bank deposit, compared to the same period in 2025.

Net cash provided from financing activities

There were no financing activities during the three months ended March 31, 2026, compared to $6,815 net cash derived from financing activities during the same period in 2025. The 2025 amount was mainly attributable to proceeds from the issuance of shares of preferred stock.

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