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Item 1.01
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Entry into a Material Definitive Agreement.
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On November 27, 2019,
DarioHealth Corp. (the “Company”) entered into subscription agreements (each, a “Subscription Agreement”)
with accredited investors relating to an offering (the “Offering”) with respect to the sale of an aggregate of 8,361
shares of newly designated Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and an aggregate of
5,200 shares of newly designated Series A-1 Convertible Preferred Stock (the “Series A-1 Preferred Stock”), at a purchase
price of $1,000 for each share of Series A Preferred Stock and Series A-1 Preferred Stock, for aggregate gross proceeds to the
Company of $13.56 million. The initial closing of the Offering took place on November 27, 2019.
In connection with
the Offering, on November 27, 2019 (the “Effective Date”), the Company filed the Certificate of Designation of Preferences,
Rights and Limitations of the Series A Preferred Stock and the Certificate of Designation of Preferences, Rights and Limitations
of the Series A-1 Preferred Stock with the Secretary of State of the State of Delaware (the “Series A Certificate of Designation”
and the “Series A-1 Certificate of Designation,” respectively). Each share of Series A Preferred Stock and Series A-1
Preferred Stock is convertible at the option of the holder, subject to certain beneficial ownership limitations as set forth in
each of the Series A Certificate of Designation and Series A-1 Certificate of Designation, into such number of shares of the Company’s
common stock, par value $0.0001 (the “Common Stock”) equal to the number of Series A Preferred Shares to be converted,
multiplied by the stated value of $1,000 (the “Stated Value”), divided by the conversion price in effect at the time
of the conversion (the initial conversion price will be $4.05, subject to adjustment in the event of stock splits, stock dividends,
and similar transactions). In addition, the Series A Preferred Stock and the Series A-1 Preferred Stock will automatically convert
into shares of Common Stock, subject to certain beneficial ownership limitations, on the earliest to occur of (i) upon the approval
of the holders at least 50.1% of the outstanding shares of Series A Preferred; or (ii) the 36-month anniversary of the Effective
Date. The holders of Series A Preferred Stock will also be entitled dividends payable as follows: (i) a number of shares of Common
Stock equal to ten percent (10%) of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock
then held by such Holder on the 12-month anniversary of the Effective Date, (ii) a number of shares of Common Stock equal to fifteen
percent (15%) of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such
Holder on the 24-month anniversary of the Effective Date and (iii) a number of shares of Common Stock equal to twenty percent (20%)
of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such Holder on the 36-month
anniversary of the Effective Date.
The Series A Preferred
Stock will vote on an as-converted basis with the Company’s Common Stock and the Series A-1 Preferred Stock do not possess
any voting rights. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred
Stock and Series A-1 Preferred Stock will be entitled to (i) first receive distributions out of the Company’s assets in an
amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions
shall be made on any shares of Common Stock (after the payment to any senior security, if any) and (ii) second, on an as-converted
basis alongside the Common Stock.
The Company and the
investors in the Offering also executed a registration rights agreement (the “Registration Rights Agreement”), pursuant
to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock and Series A-1 Preferred Stock within sixty days following the closing of the Offering.
The Company entered
into a Placement Agency Agreement (the “Placement Agency Agreement”) with a registered broker dealer, which acted as
the Company’s exclusive placement agent (the “Placement Agent”) for the Offering. Pursuant to the terms of the
Placement Agency Agreement, in connection with the initial closing of the Offering, the Company paid the Placement Agent an aggregate
cash fee of $1,056,100, non-accountable expense allowance of $406,830 and will issue to the Placement Agent or its designees warrants
(the “Placement Agent Warrants”) to purchase 485,688 shares of Common Stock at an exercise price of $4.05 per share. The
warrants provide for a cashless exercise feature and are exercisable for a period of five years from the date of closing. The Company
also granted the Placement Agent the right of first refusal, for a twelve (12) month period after the final closing of the Offering,
to serve as the Company’s lead or co-placement agent for any proposed private placement of the Company’s securities
(equity or debt) that is proposed to be consummated to investors in the United States with the assistance of a registered broker
dealer. In addition, the Company agreed to grant the Placement Agent the right, for three (3) years, to appoint one (1) representative
to serve as a member of the Company’s Board of Directors upon the closing of at least $10 million in the Offering.
The securities to be
issued in the Offering are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”) pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder because,
among other things, the transaction did not involve a public offering, the investors are accredited investors, the investors are
taking the securities for investment and not resale and the Company took appropriate measures to restrict the transfer of the securities,
and pursuant to Regulation S of the Securities Act to non-U.S. investors. The securities have not been registered under the Securities
Act and may not be sold in the United States absent registration or an exemption from registration. This Current Report on Form
8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these Securities
in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction.
The Subscription Agreements
contains representations and warranties that the parties made to, and solely for the benefit of, the others in the context of all
of the terms and conditions of that agreement and in the context of the specific relationship between the parties. The provisions
of such agreement, including the representations and warranties contained therein, are not for the benefit of any party other than
the parties to such agreement and are not intended as documents for investors and the public to obtain factual information about
the current state of affairs of the parties to that agreement. Rather, investors and the public should look to other disclosures
contained in the Company’s filings with the U.S. Securities and Exchange Commission.
The forgoing description
of the Series A Certificate of Designation and Series A-1 Certificate of Designation are qualified in their entirety by reference
to the full text of such document, copies of which are filed as exhibits 3.1 and 3.2 to this Current Report on Form 8-K, respectively.
The forgoing descriptions of the Placement Agency Agreement, the Placement Agent Warrants and the Subscription Agreement are qualified
by reference to the full text of these documents, copies of each of which will be filed in the Company’s next periodic report
due to be filed under the Exchange Act.