UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filedby the Registrant
x
Filedby a Party other than the Registrant
..
Check the Appropriate Box:
.. Preliminary Proxy Statement
.. Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
.. Definitive Additional Materials
.. Soliciting Material Pursuant to (s) 240.14a-12
DARIOHEALTH CORP.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if otherthan the Registrant)
Payment of Filing Fee (Check the appropriatebox):
x No fee required.
.. Fee paid previously with preliminary materials
.. Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
DarioHealth Corp.
322 W. 57th St.
New York, New York 10019
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On Tuesday, June 25, 2024
You are cordially invited to attend a specialmeeting of the stockholders (the "
Meeting
") of DarioHealth Corp. (the "
Company
"), which will beheld at 9:00 a.m. at the Company's Israeli offices located at
5 Tarshish St. Caesarea Industrial Park 3088900, Israel 2
nd
Floor for the following purposes:
1. To approve, pursuant to Nasdaq listing rule 5635(a) and 5635(d), of the issuance of shares
of our Common Stock (as defined herein), upon the exercise of certain pre-funded warrants,
warrants and restricted stock units issued as part of our acquisition of Twill Inc., and the
re-pricing of certain warrants, all in excess of 20% of our Common Stock outstanding (the "
Nasdaq Rule 5635 Proposal
");
2. To consider and vote to
amend the Company's 2020
Equity Compensation Plan, as amended (the "
2020 Equity Incentive Plan
"); and
3. To transact any other
business as may properly come
before the Meeting or any
adjournments thereof.
All stockholders are cordiallyinvited to attend the Meeting. If your shares
are registered in your name, please bring the admission ticket attached to
yourproxy card. If your shares are registered in the name of a broker, trust,
bank or other nominee, you will need to bring a proxyor a letter from that
broker, trust, bank or other nominee or your most recent brokerage account
statement, that confirms that you arethe beneficial owner of those shares. If
you do not have either an admission ticket or proof that you own shares of the
Company, you willnot be admitted to the meeting.
The Board of Directors hasfixed the close of business on April 26, 2024, as
the record date for the Meeting. Only stockholders on the record date are
entitled tonotice of and to vote at the meeting and at any adjournment or
postponement thereof.
Your vote is important regardlessof the number of shares you own. The Company
requests that you complete, sign, date and return the enclosed proxy card
withoutdelay in the enclosed postage-paid return envelope, even if you now
plan to attend the Meeting. You may revoke your proxy atany time prior to its
exercise by delivering written notice or another duly executed proxy bearing a
later date to the Secretary of theCompany, or by attending the Meeting and
voting in person.
Important Notice Regarding the Availability of Proxy Materials for the Meeting
to be held on June 25, 2024
The proxy statement, proxy card and Annual Report are also available at
http://www.dariohealth.com/DH2024Proxy.pdf
Stockholders may also obtain additional paper or e-mail copies of these
materials at no cost by writing to DarioHealth Corp., 5 Tarshish Street,
Caesarea Industrial Park 3088900, Israel, Attention: Secretary.
Securities and Exchange Commissionrules allow us to furnish proxy materials to
our stockholders over the internet. You may also have access to the materials
for the Meetingby visiting the website: http://mydario.investorroom.com. You
may also cast your vote by visiting www.proxyvote.com if you hold your
sharesin "street name," or www.vstocktransfer.com/proxy if you are a
registered stockholder. You may also authorize a proxy to voteyour shares over
the internet. In order to vote over the internet you must have your
stockholder identification number, which is set forthin the Notice of Internet
Availability of Proxy Materials mailed to you. You may also request a paper
proxy card to submit your vote bymail. If you have any questions regarding the
completion of the enclosed proxy card or would like directions to the Meeting,
please call+(972)-(4) 770 6377. You may also find directions at http://mydario.i
nvestorroom.com/SECFilings.
By order of the Board of Directors
,
/s/ Erez Raphael
Erez Raphael
Chief Executive Officer
Caesarea, Israel
May 1, 2024
IMPORTANT: In order to secure a quorum andto avoid the expense of additional
proxy solicitation, please either vote by internet or sign, date and return
your proxy promptly inthe enclosed envelope even if you plan to attend the
meeting personally. Your cooperation is greatly appreciated.
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATIONOF HOW YOU WISH TO VOTE,
YOUR SHARES WILL BE VOTED IN FAVOR OF THE PROPOSAL.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS 1
THE SPECIAL MEETING 1
PROPOSAL 1 6
Nasdaq Rule 5635 Proposal
PROPOSAL 2 INCENTIVE PLAN PROPOSAL 9
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS 17
STOCKHOLDER PROPOSALS 18
HOUSEHOLDING OF MEETING MATERIALS 19
OTHER MATTERS 19
Annex A Third Amendment to Amended and Restated 2020 Equity Incentive Plan 21
PROXY STATEMENT
DARIOHEALTH
CORP.
SPECIAL MEETING OF STOCKHOLDERS
to be held at 9:00 a.m. on June 25, 2024
5 Tarshish St. 2
nd
Floor
Caesarea Industrial Park 3088900, Israel
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS
Why am I receiving this Proxy Statement?
This Proxy Statement describesthe proposals on which our Board of Directors
(the "
Board
") would like you, as a stockholder, to vote at a SpecialMeeting of the
Stockholders (the "
Meeting
"), which will take place at 9:00 a.m. on June 25, 2024, at the Company'sIsraeli
offices located at 5 Tarshish St. Caesarea Industrial Park 3088900, Israel 2
nd
Floor.
This Proxy Statement alsogives you information on these proposals so that you
can make an informed decision. We intend to mail this Proxy Statement and
accompanyingproxy card on or about May 6, 2024, to all stockholders of record
entitled to vote at the Meeting.
In this proxy statement, werefer to DarioHealth Corp. as the "Company", "we",
"us" or "our" or similar terminology.
Website addresses includedin this proxy statement are textual references only,
and the information in any website is not incorporated by reference into this
proxystatement.
How many shares must be present in order tohold the special meeting of
stockholders?
Our Bylaws provide that aquorum shall consist of the holders of thirty-three
and one-third (33 1/3
rd
) of the stock issued and outstanding and entitledto vote thereat, present in
person or represented by proxy at the Meeting. A quorum will be present if
stockholders holding at leastthirty-three and one-third (33 1/3
rd
) of the outstanding shares entitled to vote are present at the meeting in
person or representedby proxy. On April 26, 2024 (the "
Record Date
"), there were 29,666,750 shares of our common stock, $0.0001 par valueper
share (the "
Common Stock
"), 3,557 shares of Series A-1 Convertible Preferred Stock (convertible into
878,273 sharesof Common Stock), with a conversion price of $4.05 per share
(the "
Series A-1 Preferred Stock
"), 6,200 shares of SeriesB Convertible Preferred Stock (convertible into
1,860,000 shares of Common Stock), with a conversion price of $3.334 per share
(the "
SeriesB Preferred Stock
"), 7,946 shares of Series B-1 Convertible Preferred Stock (convertible into
2,383,800 shares of Common Stock),with a conversion price of $3.334 per share
(the "
Series B-1 Preferred Stock
"), 150 shares of Series B-2 ConvertiblePreferred Stock (convertible into
44,550 shares of Common Stock), with a conversion price of $3.37 per share
(the "
Series B-2Preferred Stock
"), 406 shares of Series B-3 Convertible Preferred Stock (convertible into
119,770 shares of Common Stock),with a conversion price of $3.392 per share
(the "
Series B-3 Preferred Stock
"), 17,307 shares of Series C ConvertiblePreferred Stock (convertible into
8,584,272 shares of Common Stock), with a conversion price of $2.02 per share
(the "
SeriesC Preferred Stock
"), 4,000 shares of Series C-1 Convertible Preferred Stock (convertible into
1,984,000 shares of Common Stock),with a conversion price of $2.02 per share
(the "
Series C-1 Preferred Stock
") and 1,115 shares of Series C-2 ConvertiblePreferred Stock (convertible into
521,820 shares of Common Stock), with a conversion price of $2.14 per share
(the "
Series C-2Preferred Stock
").
Each share of Common Stockand preferred stock, except for the Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series B-2 Preferred Stock and
Series C-1Preferred Stock, is entitled to one vote per share on an
as-converted basis. The Series A-1 Preferred Stock, Series B-1 Preferred
StockSeries B-2 Preferred Stock and Series C-1 Preferred Stock do not possess
any voting rights. Thus, the holders of the aggregate numberof 13,586,921
shares of Common Stock, inclusive of the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock,Series B-3 Preferred Stock, Series
C Preferred Stock and Series C-2 Preferred Stock (on an as-converted basis)
must be present in personor represented by proxy at the meeting to have a
quorum. If such quorum shall not be present or represented, the stockholders
entitledto vote thereat, present in person or represented by proxy, shall have
the power to adjourn the Meeting, without notice other than announcementat the
meeting, until a quorum shall be present or represented. Your shares will be
counted towards the quorum only if you submit a validproxy (or one is
submitted on your behalf by your broker, bank or other nominee) or if you vote
in person at the Meeting. Abstentionsmay be specified on all proposals.
Abstentions and broker non-votes will be counted towards the quorum
requirement. Submitted proxieswhich are left blank will also be counted as
present for purposes of determining a quorum but are not counted for purposes
of determiningwhether a proposal has been approved in matters where the proxy
does not confer the authority to vote on such proposal, and thus haveno effect
on its outcome.
1
Who can vote at the special meeting of stockholders?
Stockholders who owned sharesof our Common Stock, Series B Preferred Stock,
Series B-3 Preferred Stock, Series C Preferred Stock and Series C-2 Preferred
Stock onthe Record Date may attend and vote at the Meeting. There were
29,666,750 shares of Common Stock, 6,200 shares of Series B ConvertiblePreferred
Stock (convertible into 1,860,000 shares of Common Stock), 406 shares of
Series B-3 Convertible Preferred Stock (convertibleinto 119,770 shares of
Common Stock), 17,307 shares of Series C Convertible Preferred Stock
(convertible into 8,584,272 shares of CommonStock), and 1,115 shares of Series
C-2 Convertible Preferred Stock (convertible into 521,820 shares of Common
Stock), outstanding on theRecord Date. All shares of Common Stock and the
preferred stock, except for the Series A-1 Preferred Stock, Series B-1
Preferred Stock,Series B-2 Preferred Stock and Series C-1 Preferred Stock,
have one vote per share and vote together as a single class. The Series
A-1Preferred Stock, Series B-1 Preferred Stock and Series C-1 Preferred Stock
do not possess any voting rights.
What is the proxy card?
The proxy card enables youto appoint Erez Raphael, our Chief Executive
Officer, and/or Zvi Ben-David, our Secretary, Treasurer and Chief Financial
Officer, as yourrepresentative at the Meeting. By completing and returning the
proxy card or voting online as described herein, you are authorizing
thesepersons to vote your shares at the Meeting in accordance with your
instructions on the proxy card. This way, your shares will be votedwhether or
not you attend the Meeting. Even if you plan to attend the Meeting, please
complete and return your proxy card before the Meetingdate just in case your
plans change. If a proposal comes up for vote at the Meeting that is not on
the proxy card, the proxies will voteyour shares, under your proxy, according
to their best judgment.
What am I voting on?
You are being asked to vote:
1. To approve, pursuant to Nasdaq listing rule 5635(a) and 5635(d), of the issuance of shares
of our Common Stock, upon the exercise of certain pre-funded warrants, warrants and
restricted stock units issued as part of our acquisition of Twill Inc., and the re-pricing
of certain warrants, all in excess of 20% of our Common Stock outstanding (the "
Nasdaq Rule 5635 Proposal
");
2. To consider and vote to amend the Company's
2020 Equity Incentive
Plan, as amended (the "
2020 Equity Incentive Plan
" and the "
Incentive Plan Proposal
"); and
3. To transact any other
business as may properly come
before the Meeting or any
adjournments thereof.
How does the Board recommend that I vote?
Our Board unanimously recommendsthat the stockholders vote
"FOR"
the Nasdaq Rule 5635 Proposal and the Incentive Plan Proposal.
What is the difference between holding sharesas a stockholder of record and as
a beneficial owner?
Most of our stockholders holdtheir shares in an account at a brokerage firm,
bank or other nominee holder, rather than holding share certificates in their
own name.As summarized below, there are some distinctions between shares held
of record and those owned beneficially.
2
Stockholder of Record
If, on the Record Date, yourshares were registered directly in your name with
our transfer agent, VStock Transfer LLC, you are a "stockholder of record"who
may vote at the Meeting, and we are sending these proxy materials directly to
you. As the stockholder of record, you have the rightto direct the voting of
your shares by returning the enclosed proxy card to us or to vote in person at
the Meeting. Whether or not youplan to attend the Meeting, please complete,
date and sign the enclosed proxy card to ensure that your vote is counted.
Beneficial Owner
If, on the Record Date, yourshares were held in an account at a brokerage firm
or at a bank or other nominee holder, you are considered the beneficial owner
of sharesheld "in street name," and these proxy materials are being forwarded
to you by your broker or nominee who is considered thestockholder of record
for purposes of voting at the Meeting. As the beneficial owner, you have the
right to direct your broker on howto vote your shares and to attend the
Meeting. However, since you are not the stockholder of record, you may not
vote these shares inperson at the Meeting unless you receive a valid proxy
from your brokerage firm, bank or other nominee holder. To obtain a valid
proxy,you must make a special request of your brokerage firm, bank or other
nominee holder. If you do not make this request, you can still voteby using
the voting instruction card enclosed with this proxy statement; however, you
will not be able to vote in person at the Meeting.
How do I vote?
(1) Youmay vote by mail.
You may vote by mail by completing, signing and dating your proxy card and
returning it in the enclosed, postage-paidand addressed envelope. If we
receive your proxy card prior to the Meeting and if you mark your voting
instructions on the proxy card,your shares will be voted:
. as you instruct, and
. according to the best judgment of the proxies if a proposal comes up for a vote at the Meeting that is not on the proxy card.
If you return a signed card, but do not providevoting instructions, your
shares will be voted:
. for the Nasdaq Rule 5635 Proposal;
. for the Incentive Plan Proposal; and
. according to the best judgment of either Mr. Raphael or Mr. Ben-David if a
proposal comes up for a vote at the Meeting that is not on the proxy card.
(2) Youmay vote in person at the Meeting.
We will pass out written ballots to anyone who wants to vote at the Meeting.
However, if youhold your shares in street name, you must bring to the Meeting
a valid proxy from the broker, bank or other nominee holding your sharesthat
confirms your beneficial ownership of the shares and gives you the right to
vote your shares. Holding shares in street name meansyou hold them through a
brokerage firm, bank or other nominee, and therefore the shares are not held
in your individual name. We encourageyou to examine your proxy card closely to
make sure you are voting all of your shares in the Company.
(3) Youmay vote online.
You may also have access to the materials for the Meeting by visiting the
website: http://mydario.investorroom.com.You may also cast your vote by
visiting www.proxyvote.com if you hold your shares in "street name," or
www.vstocktransfer.com/proxyif you are a registered stockholder.
What does it mean if I receive more than oneproxy card?
You may have multiple accountsat the transfer agent and/or with brokerage
firms. Please sign and return all proxy cards to ensure that all of your
shares are voted.
3
What if I change my mind after I return myproxy?
You may revoke your proxyand change your vote at any time before the polls
close at the Meeting. You may do this by:
. sending a written notice to Zvi Ben-David, our corporate Secretary,
stating that you would like to revoke your proxy of a particular date;
. signing another proxy card with a later date and
returning it before the polls close at the Meeting; or
. attending the Meeting and voting in person.
Please note, however, thatif your shares are held of record by a brokerage
firm, bank or other nominee, you must instruct your broker, bank or other
nominee thatyou wish to change your vote by following the procedures on the
voting form provided to you by the broker, bank or other nominee. If
yourshares are held in street name, and you wish to attend and vote at the
Meeting, you must bring to the Meeting a legal proxy from the broker,bank or
other nominee holding your shares, confirming your beneficial ownership of the
shares and giving you the right to vote your shares.
Will my shares be voted if I do not sign andreturn my proxy card?
If your shares are held instreet name or in your name and you do not sign and
return your proxy card, your shares will not be voted unless you vote in
person atthe Meeting.
How are votes counted?
You may vote "for," "against," or "abstain" on each of the proposals being
placed before our stockholders. Abstentions and brokernon-votes (
i.e.
, shares held by brokers on behalf of their customers, which may not be voted
on certain matters because the brokershave not received specific voting
instructions from their customers with respect to such matters) will be
counted solely for the purposeof determining whether a quorum is present at
the Meeting.
What are broker non-votes?
Broker non-votes occur whena beneficial owner of shares held in "street name"
does not give instructions to the broker or nominee holding the sharesas to
how to vote on matters deemed "non-routine." Generally, if shares are held in
street name, the beneficial owner of theshares is entitled to give voting
instructions to the broker or nominee holding the shares. If the beneficial
owner does not provide votinginstructions, the broker or nominee can still
vote the shares with respect to matters that are considered to be
"routine,"but not with respect to "non-routine" matters. In the event that a
broker, bank, or other agent indicates on a proxy thatit does not have
discretionary authority to vote certain shares on a non-routine proposal, then
those shares will be treated as brokernon-votes. The Nasdaq Rule 5635 Proposal
and the Incentive Plan Proposal are non-routine proposals; therefore, your
broker, bank or otheragent is not entitled to vote your shares on the Nasdaq
Rule 5635 Proposal and the Incentive Plan Proposal without your instructions.
How many votes are required to approve the Nasdaq Rule 5635 Proposal?
The affirmative vote of amajority of the votes cast at the Meeting by the
holders of Common Stock represented in person or by proxy and entitled to vote
is requiredfor approval of the Nasdaq Rule 5635 Proposal. Abstentions are
considered present for purposes of establishing a quorum but will haveno
effect on the approval of the Nasdaq Rule 5635 Proposal. Broker non-votes will
not affect the outcome of the vote on this matter.
How many votes are required to approve the Incentive Plan Proposal?
The affirmative vote of amajority of the votes cast at the Meeting by the
holders of Common Stock represented in person or by proxy and entitled to vote
is requiredfor approval of the Incentive Plan Proposal. Abstentions are
considered present for purposes of establishing a quorum but will have
noeffect on the approval of the Incentive Plan Proposal. Broker non-votes will
not affect the outcome of the vote on this matter.
4
What happens if I don't indicate howto vote my proxy?
If you just sign your proxycard without providing further instructions, your
shares will be counted as a "for" vote for the Nasdaq Rule 5635 Proposaland
the Incentive Plan Proposal.
Is my vote kept confidential?
Proxies, ballots and votingtabulations identifying stockholders are kept
confidential and will not be disclosed except as may be necessary to meet
legal requirements.
Where do I find the voting results of the Meeting?
We will announce preliminaryvoting results at the Meeting and file a Current
Report on Form 8-K announcing the final voting results of the Meeting.
Who can help answer my questions?
You can contact our Secretary,Treasurer and Chief Financial Officer, Zvi
Ben-David, at +(972)-(4) 770 6377 or by sending a letter to Mr. Ben-David at
the officesof the Company at 5 Tarshish St. Caesarea Industrial Park 3088900,
Israel 2
nd
Floor, with any questions about proposals describedin this Proxy Statement or
how to execute your vote.
Who is paying for this proxy solicitation?
Wewill pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors and employees may alsosolicit proxies in
person, by telephone or by other means of communication. Directors and
employees will not be paid any additional compensationfor soliciting proxies.
In addition, we have retained Morrow Sodali LLC to assist in the solicitation
of proxies for a fee of $8,500
pluscustomary expenses.
No Right of Appraisal
None of Delaware law, ourCertificate of Incorporation or our Bylaws provides
for appraisal or other similar rights for dissenting stockholders in
connection withany of the proposals to be voted upon at this Meeting.
Accordingly, our stockholders will have no right to dissent and obtain
paymentfor their shares.
ALL PROXIES RECEIVED WILLBE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON
SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY
SPECIFICATIONIS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER
BUSINESSTHAT MAY COME BEFORE THE MEETING. THE BOARD UNANIMOUSLY RECOMMENDS A
VOTE FOR
THE Nasdaq Rule5635 Proposal and the incentive plan proposal.
5
PROPOSAL 1
NasdaqRule 5635 Proposal
At the Special Meeting, holdersof our Common Stock, and certain classes of our
preferred stock, will be asked to approve the issuance in excess of 20% of our
outstandingCommon Stock (i) upon the exercise of certain Pre-Funded Warrants,
the Consultant Warrants and the RSUs (each as defined below) issuedby us
pursuant to the Merger Agreement (as defined below) entered into on February
15, 2024, for purposes of compliance with Nasdaq ListingRule 5635(a) and as
required by the Merger Agreement, and (ii) for the Avenue Re-Pricing (as
defined below).
Background
As previously disclosed,on February 15, 2024, we, along with TWILL Merger Sub,
Inc. ("Merger Sub"), Twill, Inc. ("Twill") and Bilal Khan,solely in his
capacity as the representatives of Twill's stockholders and other equity
holders, entered into an Agreement and Planof Merger (the "Merger Agreement"),
dated February 15, 2024 (the "Closing Date"). Pursuant to the provisionsof the
Merger Agreement, on the Closing Date, (i) Merger Sub was merged with and into
Twill (the "Merger"), the separatecorporate existence of Merger Sub ceased and
Twill continued as the surviving company and a wholly owned subsidiary of the
Company, (ii)the Company paid to Twill's debt holders and equity holders
aggregate consideration ("Merger Consideration") of (A)$10.0 million in cash,
(B) pre-funded warrants (the "Pre-Funded Warrants") to purchase up to
10,000,400 shares (the "WarrantShares") of Company Common Stock, par value
$0.0001 per share (the "Common Stock"), issuable to a trust (the "Trust")formed
for the benefit of certain equity and debt holders of Twill, issuable in 4
equal tranches, and (C) stock options to purchase upto 2,963,459 shares of
Common Stock issued to employees of Twill as an inducement to their employment
with the Company, issued outsideof our equity compensation plans, pursuant to
Nasdaq Rule 5635(c)(4), with an exercise price of $2.55 per share. In
conjuncton with theexecution of the Merger Agreement, we also agreed to issue
a combination of warrants and restricted stock units ("RSUs")to acquire up to
1,766,508 shares of Common Stock issued to certain outgoing board members,
consultants and outgoing officers of Twill(all of such RSUs and warrants being
subject to the approval of the Company's stockholders, pursuant to Nasdaq Rule
5635).
TheMerger Agreement contains various customary representations, warranties and
covenants. As a result of the Merger, Twill will operateas one of our wholly
owned subsidiaries.
ThePre-Funded Warrants are subject to a non-waivable 19.99% ownership blocker
(the "Pre-Funded Warrant Cap") and the issuanceof any shares of Common Stock
underlying such warrants that are in excess of such amount shall be subject to
the approval of the Company'sstockholders. In addition, the Company, the Trust
and WhiteHawk Capital Partner LP (the "Beneficiary"), have executed a
LockUp/Leak Out Agreement (the "Leak Out Agreement"), pursuant to which until
such time as the Trust receives $10,600,000 in aggregatenet proceeds (the
"Leak Out Period"), (i) the Trust shall only be allowed to sell such Warrant
Shares at a rate of up to 10%of the average daily trading volume of the Common
Stock in a manner which will not negatively affect the share price, (ii) all
such salesshall be conducted pursuant to Rule 144 and (iii) that the
Beneficiary shall not cause the Trust to engage in any short selling of
suchWarrant Shares during the Leak-Out Period. The Company has agreed to seek
stockholder approval within 135 days following the closing ofthe Merger to
permit the full exercise of the Pre-Funded Warrants (the "Warrant Vote"). In
addition, the Company has enteredinto voting agreements with certain existing
stockholders of the Company to vote in favor of the Warrant Vote. The Company
has agreedto call a stockholder meeting each fiscal quarter thereafter to the
extent the Warrant Vote is not approved by the Company's stockholders.
Inaddition, we executed certain consulting agreements (the "Consulting
Agreements") with Ofer Leidner and Bilal Khan, each formerofficers of Twill.
Pursuant to the terms of the Consulting Agreements, the Company agreed to
retain the services of Messrs. Leidner andKhan for a period of at least 14
months and 6 months respectively, in exchange for monthly consulting fees of
$35,416 and $35,417, respectively.In addition, the Company agreed to issue to
Mr. Leidner warrants to purchase up to 1,032,946 shares of Common Stock, of
which 717,946are subject to time vesting and 315,000 are subject to certain
performance-based metrics (the "Consultant Warrants"), andto issue to Mr. Khan
350,000 fully vested RSUs (the "RSUs"), all of which shall vest subject to
stockholder approval.
6
The securities issued pursuantto the Merger Agreement as part of the Merger
Consideration were issued as "restricted stock" subject to the six-month
minimumhold period under Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act").
Avenue Warrants
In addition, o
n February 15,2024, we and our subsidiaries, PsyInnovations, Inc. and LabStyle
Innovation Ltd., entered into the First Amendment to Loan and SecurityAgreement
and Supplement (the "Avenue Amendment") with Avenue Venture Opportunities Fund
II, L.P. and Avenue Venture OpportunitiesFund, L.P., as lenders. Pursuant to
the Avenue Amendment, the parties agreed to include the Merger Sub and Twill
as parties to the Company'sexisting loan facility with the lenders. In
addition, the Avenue Amendment provides (i) that the Company will seek
stockholder approvalto reprice the warrants issued to the lenders on May 1,
2023 to permit an amendment to the exercise price of such warrants to the
"minimumprice" as defined by Nasdaq rules as of the closing of the Twill
Agreement, or $2.02 per share (the "Avenue Re-Pricing"),and (ii) permit the
lenders, subject to Nasdaq rules, to convert up to $2.0 million of the
principal amount of its loan to the Companyat a conversion price of
$4.001 per share.
Voting Agreement
On February 15, 2024, concurrentlywith the execution of the Merger Agreement,
certain existing stockholders entered into voting agreements, pursuant to and
on the termsand subject to the conditions of which, among other things, each
such stockholder agreed to vote (or acted upon by written consent) allof such
stockholder's shares of Company Common Stock, in favor of the Warrant Vote.
As of the Record Date, the stockholder parties to the voting agreementowned
5,898,000 shares of Common Stock, representing approximately 19.9% of the
Common Stock issued and outstanding at such time.
Stockholder Approval Requirement
Our Common Stock is listedon the Nasdaq Capital Market under the symbol
"DRIO," and we are subject to the Nasdaq listing standards set forth in
itsMarketplace Rules. Nasdaq Marketplace Rule 5635(a) requires stockholder
approval prior to the issuance of securities in connection withthe acquisition
of the stock or assets of another company, including pursuant to an "earn-out"
or similar provision, wheredue to the present or potential issuance of Common
Stock (or securities convertible into or exercisable for Common Stock), other
thana public offering for cash, the Common Stock to be issued (a) constitutes
voting power in excess of 20% of the outstanding voting powerprior to the
issuance or (b) is or will be in excess of 20% of the outstanding Common Stock
prior to the issuance.
Prior to closing the Merger,we had 27,786,409 shares of Common Stock
outstanding. Therefore, potential issuance of our Common Stock upon the
exercise of the Pre-FundedWarrants, the exercise of the Consultant Warrants
and the issuance of the RSUs, would have constituted approximately 42.3% of
the sharesof Common Stock outstanding prior to giving effect to the Merger.
Consequently, the issuance of the 10,000,400 shares of Common Stockissuable
upon the exercise of the Pre-Funded Warrants, the issuance of 1,032,946 shares
of Common Stock issuable upon the exercise ofthe Consultant Warrants and the
issuance of 733,562 shares of Common Stock upon the vesting of the RSUs, would
be in excess of 19.99%of the shares of Common Stock outstanding on the date of
entry into the Merger Agreement, is subject to stockholder approval pursuantto
the Nasdaq Stock Market Rule 5635(a). As of the Record Date, the Pre-Funded
Warrants have not been exercised into shares of CommonStock.
In addition, pursuant to Nasdaq Rule 5635(d), we are required to seekstockholder
approval to
reprice the warrants issued to the lenders on May 1, 2023, to permit
anamendment to the exercise price of such warrants to the "minimum price" as
defined by Nasdaq rules as of the closing of theTwill Agreement, or $2.02 per
share.
Consequences of Not Approving this Proposal
If our stockholders do notapprove this proposal (i) the Pre-Funded Warrants
will only be convertible into up to the Pre-Funded Warrant Cap, (ii) the
ConsultantWarrants will not be exercisable, (iii) the RSUs will not vest and
the underlying shares of Common Stock will not be issuable and (iv)the Avenue
Re-Pricing will not occur.
7
Required Vote
The affirmative vote of theholders of a majority of the votes cast for or
against the proposal is required to approve, pursuant to Nasdaq listing rule
5635(a), theissuance of our Common Stock issuable pursuant to the Merger and,
pursuant to Nasdaq listing rule 5635(d), the Avenue Re-Pricing. Abstentionsand
broker non-votes will have no effect on the outcome of the vote on this
proposal.
Recommendation of the Board
THEBOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE Nasdaq Rule 5635(a)
Proposal.
8
PROPOSAL 2
incentiveplan Proposal
On April 16, 2024, the Board, upon the recommendation of the Board'sCompensation
Committee (the "
Compensation Committee
"), unanimously approved an amendment to the 2020 Equity IncentivePlan, as
previously amended (the "
Plan Amendment
"), subject to stockholder approval, which provides for a one-timeincrease of
the maximum number of shares of Common Stock issuable under the 2020 Equity
Incentive Plan by 3,000,000. In addition,the Plan Amendment increased the
number of shares of Common Stock available for grants of incentive stock
options ("
ISOs
")to persons subject to U.S. tax. The full text of the proposed Plan Amendment
is set out in
Annex A
to this Proxy Statement.The text of the proposed Plan Amendment is subject to
modification to include such changes as the Board deems necessary and
advisableto affect the increase in the number of shares of Common Stock
reserved and available for issuance under the 2020 Equity Incentive
Plan.Stockholders are being asked to approve the Plan Amendment.
Reasons for the Plan Amendment
The purpose of our 2020 Equity Incentive Plan is to attract and retaindirectors,
officers, consultants, advisors and employees whose services are considered
valuable, to encourage a sense of proprietorshipand to stimulate an active
interest of such persons in our development and financial achievements. We
also intend to use part of the increasednumber of shares that may become
available pursuant to the Plan Amendment to issue awards to directors,
employees, officers, consultants,advisors and service providers in lieu of
cash payments that are, or may be, owed, as a way to preserve our cash. Our
Board believes thatthe number of shares of Common Stock subject to the 2020
Equity Incentive Plan remaining available is insufficient to achieve the
purposeof the 2020 Equity Incentive Plan. Therefore, our Board believes the
Plan Amendment is necessary to increase the number of shares of CommonStock
available under the 2020 Equity Incentive Plan, which will allow flexibility
in granting awards to attract and retain key personneland to provide a means
for directors, officers, employees, consultants and advisors to preserve our
cash, to acquire and maintain an interestin us, which interest may be measured
by reference to the value of our Common Stock.
Effects of the Plan Amendment
As a result of the Plan Amendment,there will be an increase in the total
number of shares of Common Stock reserved for issuance under the 2020 Equity
Incentive Plan. Ofthe total additional reserve, 500,000 shares of Common Stock
will be treated as eligible for issuance as ISOs. This will provide us withthe
ability to grant more awards than are currently available under the 2020
Equity Incentive Plan to eligible recipients including employees,directors,
officers, consultants and advisors. The issuance in the future of awards under
the 2020 Equity Incentive Plan consisting offull value awards, options to
purchase shares of Common Stock and stock grants may have the effect of
diluting the earnings per shareand book value per share, as well as the stock
ownership and voting rights, of the holders of the currently outstanding
shares of CommonStock. The effective increase in the number of authorized but
unissued shares of Common Stock that may be issued as awards under the
2020Equity Incentive Plan may be construed as having an anti-takeover effect
by permitting the issuance of shares to purchasers who mightoppose a hostile
takeover bid or oppose any efforts to amend or repeal certain provisions of
our Certificate of Incorporation or Bylaws.Holders of the Common Stock have no
preemptive or other subscription rights.
Description of the 2020 Equity Incentive Plan
Shares Subject to the2020 Equity Incentive Plan
. The 2020 Equity Incentive Plan currently provides for 8,356,624 shares of
Common Stock reservedfor grant of awards, with an increase to such amount
for each of the calendar years ending on December 31,2024 and December 31,
2025 by an additional number of shares of Common Stock equal to 6% of the
number of shares of Common Stockissued and outstanding on a Fully Diluted
Basis on the immediately preceding December 31. For purposes of the
2020 EquityIncentive Plan
, the term "Fully Diluted Basis" means all issued and outstanding sharecapital
(where options shall be deemed outstanding share capital until exercised) and
all rights to acquire share capital including,without limitation, all
securities convertible or exercisable into shares of Common Stock being deemed
so converted and exercised, the
conversion of any convertible stockholder loans into share capital, with all
outstanding warrants, options or any other rightgranted by the Company to
receive shares of the Company's share capital being deemed exercised in full.
The foregoing notwithstanding,the maximum number of shares that may be subject
to ISOs
granted under the
2020 Equity IncentivePlan
shall be 3,000,000, subject to adjustment as provided in the
2020 Equity IncentivePlan
. To the extent that an award granted
under the 2020 Equity Incentive Plan
lapsesor is forfeited, the shares subject to such award will again become
available for grant under the terms of the
2020 Equity IncentivePlan.
9
As of the Record Date, 1,064,692 shares were available for futuregrants under
the 2020 Equity Incentive Plan for the fiscal year ending December 31, 2023.
If the proposal for the Plan Amendmentis approved, then the maximum number of
shares of Common Stock reserved for grant of awards under the 2020 Equity
Incentive Plan willbe subject to future increases
for the calendar years ending on December 31, 2024 and December 31,2025, as
set forth in the 2020 Equity Incentive Plan.
Purpose and EligibleIndividuals
. The purpose of the 2020 Equity Incentive Plan is to retain the services of
valued key employees, officers, directors,consultants and advisors of ours and
our affiliates (each, a "
Participant
"), thereby strengthening their incentiveto achieve the objectives of our
stockholders, to serve as an aid and inducement in the hiring of new employees
and to provide an equityincentive to consultants and other persons selected by
the Compensation Committee. In addition, we intend to use part of the
increasednumber of shares available under the 2020 Equity Incentive Plan to
issue awards to board members, employees, consultants, advisors andservice
providers in lieu of cash payments that are, or may be, owed, as a way to
preserve our cash. Finally, we believe we will needto issue equity incentive
to potential new employees in the coming fiscal years as we continue to ramp
up our Business-to-Business-to-Consumergo-to market strategy.
Administration
.Unless the Board provides otherwise, a committee of our Board consisting of
not less than 2 outside members of the Board, and/or not lessthan 2
non-employee directors, in accordance with Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the
"ExchangeAct
") or the rules of the applicable trading market on which the Common Stock is
then traded, has the authority to administerthe 2020 Equity Incentive Plan.
Our Compensation Committee is performing that function and thus has the power,
among other things, to(a) determine terms and conditions of any option or
stock right granted, including the exercise price and the vesting schedule,
(b) selectpersons who are to receive options, (c) interpret the 2020 Equity
Incentive Plan and prescribe rules and regulations for itsadministration and
(d) delegate to a subcommittee any of the administrative powers the
Compensation Committee is authorized to exercise,subject, however, to such
resolutions, not inconsistent with the provisions of the 2020 Equity Incentive
Plan, as may be adopted fromtime to time by the Board.
Stock Options
.The Compensation Committee may grant ISOs, nonqualified stock options or
options under Section 102 or 3(i) of the Israeli TaxOrdinance (New Version)
1961 ("
OTI
") (collectively referred to as "
Options
"). The Compensation Committeedetermines the number of shares of Common Stock
subject to each Option, provided that the aggregate fair market value of the
shares ofCommon Stock with respect to which ISOs are exercisable for the first
time by a Participant during any calendar year shall not exceed$100,000. The
Compensation Committee determines the exercise price of an Option, its
duration and the manner and time of exercise. However,in no event shall an
Option be exercisable more than 10 years following the grant date thereof. A
stockholder with more than 10% of thetotal combined voting power of our stock
shall not be granted an ISO unless the exercise price of such ISO is at least
110% of the fairmarket value of the Common Stock at the date of grant and such
ISO is not exercisable after the expiration of 5 years from the date ofgrant.
ISOs may be issued only to employees of the Company or of a corporate
subsidiary of ours, and the exercise price must be at leastequal to the fair
market value of the Common Stock as of the date the Option is granted.
The Compensation Committee,in its discretion, may provide the vesting terms of
any Option. The vesting of one or more outstanding Options may be accelerated
by theBoard at such times and in such amounts as it shall determine in its
sole discretion.
The exercise price of an Optionmay be paid in any form or method authorized by
the Board and permitted by the option agreement and 2020 Equity Incentive Plan.
Awards under the 2020 EquityIncentive Plan generally may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law
or otherwise)other than by will or by applicable laws of descent and
distribution.
10
Stock Grants
.The Compensation Committee may award shares of Common Stock to a Participant
without restrictions or may award shares of Common Stock(restricted stock)
subject to such conditions and restrictions as the Compensation Committee may
determine. Restrictions could includeconditions that require the Participant
to forfeit the shares in the event that the Participant ceases to provide
services to us or anyof our affiliates thereof before a stated time.
Any period of restriction,the number of shares of Common Stock awarded, the
purchase price, if any, and such other conditions and/or restrictions as the
CompensationCommittee may establish will be set forth in an award agreement.
After all conditions and restrictionsapplicable to restricted shares have been
satisfied or have lapsed, shares of restricted stock will become freely
transferable, as determinedby the Compensation Committee and stated in the
award agreement.
Effect of Certain CorporateTransactions
. If a recapitalization or similar transaction occurs that does not alter the
existing proportionate ownership ofthe Common Stock, appropriate adjustments
shall be made in the exercise price, the purchase price, if any, and number of
outstanding awards.In the case of a change of control (as defined in the 2020
Equity Incentive Plan), such as a merger, acquisitive transaction,
reorganization,liquidation or other transaction (a "
Major Transaction
") that does alter such proportionate ownership, vested awardsgenerally may be
exercised before such transaction and persons owning Common Stock as a result
of awards made under the 2020 Equity IncentivePlan will participate on the
same basis as other owners of Common Stock. Alternatively, the Board may
determine in the case of a MajorTransaction that awards will continue in
effect on a basis similar to that in effect prior to such Major Transaction,
including with respectto vesting, except that such rights shall apply with
respect to the surviving entity or shall be assumed by the surviving or
acquiringcorporation (in accordance, as applicable, with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended(the "
Code
"), or Section 424 of the Code. The Board may, in its discretion, accelerate
vesting in whole or inpart in connection with a Major Transaction. The 2020
Equity Incentive Plan also provides that outstanding awards may be liquidated
fora cash payment.
Further Amendments tothe 2020 Equity Incentive Plan
. The Board or the Compensation Committee may, at any time, modify, amend or
terminate the 2020Equity Incentive Plan or modify or amend awards granted
under the 2020 Equity Incentive Plan, including, without limitation, such
modificationsor amendments as are necessary to maintain compliance with
applicable laws. However, the Board or the Compensation Committee may
not,without approval of our stockholders: (1) increase the total number of
shares covered by the 2020 Equity Incentive Plan, except byadjustments upon
certain changes in capitalization; (2) change the class of persons eligible
to receive awards under the 2020 EquityIncentive Plan; or (3) make other
changes in the 2020 Equity Incentive Plan that require stockholder approval
under applicable law(including any rules of any applicable stock exchange or
stock quotation system of which our shares of Common Stock are traded).Except
as otherwise provided in the 2020 Equity Incentive Plan or an award agreement,
no amendment will adversely affect outstanding awardswithout the consent of
the Participant. Any termination of the 2020 Equity Incentive Plan will not
terminate awards then outstanding,without the consent of the Participant.
Term of the 2020 EquityIncentive Plan
. Unless sooner terminated by the Board, the 2020 Equity Incentive Plan will
terminate on the day prior to the 10
th
anniversary of its adoption by the Board, or September 2, 2030. No award may
be granted after such termination or during any suspensionof the 2020 Equity
Incentive Plan.
U.S. Tax Treatment
. The following description of thefederal income tax consequences of awards is
general and does not purport to be complete.
Incentive Stock Options
Generally, a Participant incursno federal income tax liability on either the
grant or the exercise of an ISO, although a Participant will generally have
taxable incomefor alternative minimum tax purposes at the time of exercise
equal to the excess of the fair market value of the shares subject to
theOption over the exercise price. Provided that the shares are held for at
least 1 year after the date of exercise of the Option and atleast 2 years
after its date of grant, any gain realized on a subsequent sale of the shares
will be taxed as long-term capital gain. Ifthe shares are disposed of within a
shorter period of time, the Participant will recognize ordinary income in an
amount equal to the differencebetween the fair market value of the shares on
the date of exercise (or the sale price of the shares sold, if less) over the
exerciseprice.
11
We receive no tax deductionon the grant or exercise of an ISO, but we may be
entitled to a tax deduction if the Participant recognizes ordinary income on
accountof a premature disposition of shares acquired on exercise of an ISO, in
the same amount and at the same time as the Participant recognizesincome. A
3.8% Additional Medicare tax may be due with respect to net investment income,
including dividends on and capital gainsarising from the sale or disposition
of shares, to the extent total adjusted income exceeds applicable thresholds.
Nonqualified Stock Options
A Participant realizes notaxable income when a nonqualified stock option is
granted. Instead, the difference between the fair market value of the shares
acquiredpursuant to the exercise of the Option and the exercise price paid is
taxed as ordinary compensation income (subject to employment taxesand
withholding) when the Option is exercised. The difference is measured and
taxed as of the date of exercise, if the shares are notsubject to a
"substantial risk of forfeiture," or as of the date or dates on which the risk
terminates in other cases. A Participantmay elect (as described under
Restricted Stock below) to be taxed on the difference between the exercise
price and the fair market valueof the shares on the date of exercise, even
though some or all of the shares acquired are subject to a substantial risk of
forfeiture.Once ordinary compensation income is recognized, gain on the
subsequent sale of the shares is taxed as short-term or long-term capitalgain,
depending on the holding period after exercise. A 3.8% Additional Medicare tax
may be due with respect to net investment income,including dividends on and
capital gains arising from the sale or disposition of shares, to the extent
total adjusted income exceeds applicablethresholds.
We receive no tax deductionon the grant of a nonqualified stock option, but
may be entitled to a tax deduction when a Participant recognizes ordinary
compensationincome on or after exercise of the Option, subject in the case of
certain executives to limitations on the deductibility of compensationunder
Section 162(m) of the Code, in the same amount as the income recognized by the
Participant.
Stock Grants
With respect to stock grantsunder our 2020 Equity Incentive Plan that are made
without any restrictions, a Participant generally recognizes ordinary
compensationincome equal to the excess of the fair market value of the shares
received over the amount paid (if any). We generally will be entitledto a
deduction in an amount equal to the ordinary compensation income recognized by
a Participant, subject in the case of certain executivesto limitations on the
deductibility of compensation under Section 162(m) of the Code.
When the stock is subsequentlysold, the Participant generally will recognize
capital gain or loss (short-term or long-term, as applicable) equal to the
difference betweenthe amount realized upon the sale of the shares and his or
her tax basis (generally the amount paid plus any ordinary compensation
incomerecognized). A 3.8% Additional Medicare tax may be due with respect to
net investment income, including dividends on and capital gainsarising from
the sale or disposition of shares, to the extent total adjusted income exceeds
applicable thresholds.
Restricted Stock
If stock is awarded subjectto restrictions, a Participant generally will not
recognize income at the time of the award, but will instead recognize ordinary
compensationincome equal to the excess of the fair market value of the shares
received over the amount paid (if any) when restrictions on transferabilityor
that otherwise constitute a substantial risk of forfeiture lapse.
A Participant may elect tobe taxed at the time of the receipt of the shares,
rather than upon the lapse of restrictions on transferability or substantial
risk offorfeiture, but if the Participant subsequently forfeits such shares,
the Participant would not be entitled to any tax deduction for theamount of
previously recognized ordinary compensation income (he or she will be entitled
to a capital loss for the amount paid (if any)for the shares). The Participant
must file a so-called Section 83(b) election with the Internal Revenue Service
within 30 daysof the receipt of the shares.
12
We generally will be entitledto a deduction at the time, subject in the case
of certain executives to limitations on the deductibility of compensation
under Section 162(m) ofthe Code, and in an amount equal to, the ordinary
compensation income is recognized by the Participant.
When the stock is subsequentlysold, the Participant generally will recognize
capital gain or loss (short-term or long-term, as applicable) equal to the
difference betweenthe amount realized upon the sale of the shares and his or
her tax basis (generally the amount paid plus any ordinary compensation
incomerecognized). A 3.8% Additional Medicare tax may be due with respect to
net investment income, including dividends on and capital gainsarising from
the sale or disposition of shares, to the extent total adjusted income exceeds
applicable thresholds.
Dividends
A Participant will generallynot receive the benefit of dividends prior to the
exercise of an Option. Unless an election under Section 83(b) of the Codehas
been made, the full amount of dividends or other distributions of property
made with respect to stock awards before the lapse of anyapplicable
restrictions (restricted stock) will constitute ordinary compensation income,
and we are generally entitled to a deduction,subject in the case of certain
executives to limitations on the deductibility of compensation under Section
162(m) of the Code,at the same time and in the same amount as the income is
realized by the Participant.
Section 162(m) of the Code
Historically, and as a resultof Section 162(m) of the Code, the Company's
deduction for certain equity awards was limited to the extent that the
ChiefExecutive Officer and the 3 other most highly compensated executive
officers, but not including our principal financial officer, receivedcompensatio
n in excess of $1.0 million a year (other than performance-based compensation
that otherwise met the requirements of Section 162(m) ofthe Code). In the case
of options, the performance-based exception was satisfied if, in addition to
other requirements, the plan underwhich the options were granted was approved
by stockholders, the grants were made by a committee of outside directors and
the amount ofcompensation a person could receive was based solely on an
increase in the value of the stock after grant.
The Tax Cuts and Jobs Actof 2017 (the "
TCJA
") modified the group of individuals to whom payments of compensation in
excess of $1,000,000 inany year is not deductible to generally include the
principal executive officer, the principal financial officer and the 3 other
mosthighly compensated executive officers, and provided that each person
covered by Section 162(m) of the Code for a particularyear after 2016 will
remain subject to this limit in subsequent years, even if not included in that
group for the year. It also eliminatedafter 2017 the performance-based
compensation exception, which may have applied to one or more of our
outstanding options or other formsof equity awarded prior to adoption of the
2020 Equity Incentive Plan. As a result, it is expected that certain of our
compensation arrangementswill result in non-deductible compensation when the
total exceeds $1.0 million, except certain historical awards that meet
transitionrules for continued deductibility under the TCJA.
Nevertheless, the deductibilityof compensation is but one of the critical
factors in the design and implementation of any compensation arrangement, and
the CompensationCommittee and our Board reserve the right to pay nondeductible
compensation when appropriate.
Israeli Tax Treatment
.The following is a summary of the Israeli income tax consequences of certain
transactions under the 2020 Equity Incentive Plan with regardto the granting
of awards to Israeli Participants. It is general and does not purport to be
comprehensive.
Generally, the 2020 EquityIncentive Plan provides for the granting of awards
to employees, directors and consultants under either Section 102 or Section
3(i) ofthe ITO. The awards granted under the 2020 Equity Incentive Plan to
employees and officeholders, who are not controlling shareholders(as defined
in the ITO) are subject to the "capital gains tax route" under Section 102 of
the ITO (the "
CapitalGains Tax Route
"), and the awards granted to Participants in the 2020 Equity Incentive Plan
who do not qualify to receive awardsunder the Capital Gains Tax Route,
including consultants, service providers and controlling shareholders, are
subject to Section 3(i) ofthe ITO.
13
The Capital Gains Tax Routegenerally provides for a reduced tax rate of 25% on
gains realized upon the sale of the award's underlying shares, subject to
thefulfillment of certain procedures and conditions including the deposit of
such awards (or shares issued upon their exercise or sharesin case restricted
stock was granted) for a requisite period of time with a trustee approved by
the Israeli Tax Authority (currently,24 months from the date of grant).
Notwithstanding the above, in any event where the exercise price of the
underlying shares subject tothe awards is less than the fair market value of
the underlying shares at the time of grant of the awards (calculated as the
average valueof a company's shares on the 30 trading days preceding the date
of grant), such amount will be deemed ordinary income of the award
holder,taxed at the applicable marginal tax rate (up to 50% in 2016) together
with health insurance and social security insurance payments, onthe date of
sale of the underlying shares and/or the date of the release of such
underlying shares from trust. In the event the requirementsof Section 102 of
the ITO for the allocation of awards according to the Capital Gains Tax Route
are not met, the benefit attributedto the award holder as a result of the
grant of such awards will be taxed as ordinary work income at applicable
marginal income tax rates(together with health insurance and social security
insurance payments). For as long as the restricted stock or the shares issued
uponexercise of awards are registered in the name of the trustee, the voting
rights with respect to such shares will remain with the trustee.Under the
Capital Gains Tax Route, a company, or its Israeli subsidiary, as the case may
be, is generally not entitled to recognize adeduction for Israeli tax purposes
on the gain recognized by the award holder upon sale of the shares underlying
the awards (except forsuch amount that will be deemed ordinary income of the
award holder as explained above). Our Israeli subsidiary will be required to
withholdapplicable tax (and social security and national health insurance
charges, if applicable) at source on behalf of the award holder andmay be
required to pay social security and national health insurance charges.
Generally, with respect toa holder of an award under Section 3(i) of the ITO
that is not registered for trade, the taxable event shall take place on
thedate of exercise of the award into shares, and the income will be
classified as regular employment or work income subject to marginaltax rates
(if the Participant is an individual) or corporate tax rates (if the
Participant is a corporation).
Equity Compensation Arrangements
14
The following table providesinformation as of December 31, 2023, with respect
to options outstanding under the 2020 Equity Incentive Plan and our other
equitycompensation arrangements.
Number of
securities
to be Weighted-average
issued upon
exercise exercise Number of
of price of securities
outstanding outstanding remaining
options, options, available
Plan Forfeited warrants warrants for future
category shares (7) and rights and rights issuance
Equity compensation plans 143,946 1,987,896 $ 9.59 1,650,197
approved by security holders
Equity compensation plans not 433 $ 2,502.00 -
approved by security holders (1)
Equity compensation plans not 112,500 $ 8.41 -
approved by security holders (2)
Equity compensation plans not 50,000 $ 5.75 -
approved by security holders (3)
Equity compensation plans not 20,000 $ 18.62 -
approved by security holders (4)
Equity compensation plans not 200,000 $ 5.97 -
approved by security holders (5)
Equity compensation plans not 180,000 3.93 -
approved by security holders (6)
Total 143,946 2,550,829 1,650,197
In March 2013, our Board adopted anon-employee director's remuneration policy.
(1) On May 2014, our Board approved the
grant of non-plan options to the
Company's Scientific Advisory
Board ("SAB"). These options have
an exercise price of $2,502.00
vest in 4 quarterly installments
in arrears, have a cashless exercise
feature and a ten-year term.
(2) In January 2020, our Board approved the grant of non-plan options as a
material inducement for employment, in accordance with Nasdaq Listing Rule
5635(c)(4), to our newly hired President and General Manager for North
America. The options have an exercise price of $8.41 per share. 90,000
options are time based and vest over a three-year period. One third vests
after one year and the balance vests over eight quarterly installments
after the first anniversary; these options have a cashless exercise
feature and a six-year term. An additional 90,000 options are performance
based, and vest over a three-year period. One third vest after one year
and the balance vest over eight quarterly installments after the first
anniversary; these options have a cashless exercise feature and a six-year
term. 22,500 options will commence vesting every calendar year for the
next four years, commencing in 2021, and only if certain performance
milestones were met in the immediately preceding year. 22,500 of these
options have expired on each of January 1, 2021, January 1, 2022, January
1, 2023 and January 1, 2024 as the performance milestones were not met.
(3) In March 2020, our Board approved
the grant of certain non-plan
options as a material inducement
for employment, in accordance
with Nasdaq Listing Rule 5635(c)(4),
to our newly hired Chief
Medical Officer. The options
have an exercise price of
$5.75 per share, and vest over
a three-year period with one
third vesting after one year and
the balance vesting over eight
quarterly installments after
the first anniversary; these
options have a cashless exercise
feature and a six-year term.
(4) In July 2021, our Board approved
the grant of certain non-plan
options as a material inducement
for employment, in accordance
with Nasdaq Listing Rule 5635(c)(4),
to our newly hired Special
Vice President of Market Access.
The options have an exercise
price of $18.62 per share, and
vest over a three-year period with
one third vesting after one year
and the balance vesting over
eight quarterly installments after
the first anniversary; these
options have a cashless exercise
feature and a ten-year term.
15
(5) In January 2023, our Board approved the grant of certain non-plan
options as a material inducement for employment, in accordance
with Nasdaq Listing Rule 5635(c)(4), to our newly hired Senior
Vice President of Growth. The options have an exercise price
of $5.97 per share, 100,000 options are time based and vest over
a three-year period. One third vests after one year and the
balance vests over eight quarterly installments after the first
anniversary; these options have a cashless exercise feature and a
ten-year term. An additional 100,000 options are performance based,
and vest over a three-year period. 50,000 performance options
will vest upon achieving 2023 or 2024 revenue targets upon the
release by the corporation of its annual consolidated financial
statements according to GAAP, and 50,000 additional performance
options will vest upon achieving 2024 revenue targets. The
entire 100,000 performance options will vest upon achieving 2024
revenue targets if the 2023 revenue target was not achieved.
(6) In April 2023, our Board approved the grant of certain
non-plan options as a material inducement for
employment, in accordance with Nasdaq Listing
Rule 5635(c)(4), to our newly hired Chief Product
Officer. The options have an exercise price of $3.93
per share, 100,000 options are time based and
vest over a three-ear period. One third vests
after one year and the balance vests over eight
quarterly installments after the first anniversary;
these options have a cashless exercise feature
and a ten-year term. An additional 80,000 options
are performance based, and vest upon achieving
personal objective that were set up within sixty
days from commencement of employment. The
performance-based options expired on January 1,
2024 as the performance milestones were not met.
(7) 143,946 restricted shares of common stock
issued to certain of our employees
were forfeited, as they were not vested
upon certain employee departures.
Required Vote
The affirmative vote of amajority of the votes cast at the Meeting by the
holders of Common Stock and Preferred Stock (voting together as a single
class) representedin person or by proxy and entitled to vote is required for
approval of the Incentive Plan Proposal. Abstentions are considered presentfor
purposes of establishing a quorum but will have no effect on the approval of
the Incentive Plan Proposal. Broker non-votes will notaffect the outcome of
the vote on this matter.
Recommendation of the Board
THE BOARD RECOMMENDS THATTHE STOCKHOLDERS VOTE "FOR" THE INCENTIVE PLAN
PROPOSAL.
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BENEFICIALOWNERSHIP OF PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS
The following table sets forthinformation regarding the beneficial ownership
of our Common Stock as of April 16, 2024, by each person known by us to be the
beneficialowner of more than 5% of our outstanding shares of Common Stock,
each of our named executive officers and directors; and all of our
executiveofficers and directors as a group.
Thefollowing table shows the amount of our Common Stock beneficially owned as
of April 16, 2024 by (i) each person or group as those termsare used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, believed by us to beneficially ownmore than 5% of our Common
Stock, (ii) each of our named executive officers and directors, and (iii) all
our executive officers and directorsas a group. Except as otherwise noted,
each person named in the table has sole voting and investment power with
respect to all sharesshown as beneficially owned by them, subject to
applicable community property laws.
Percent of
Shares of Common
Common Stock
Beneficially Beneficially
Name of Beneficial Owner Stock Owned Owned
(1)
Officers and Directors
Erez Raphael 1,517,413 5.1 %
(2)
Zvi Ben David 568,982 1.9 %
(3)
Richard Anderson 787,405 2.6 %
(4)
Tomer Ben Kiki 345,018 1.1 %
(5)
Dennis McGrath 96,509 *
(6)
Jon Kaplan 43,910 *
(7)
Hila Karah 161,999 *
(8)
Yoav Shaked 208,981 *
(9)
Adam Stern 797,452 2.6 %
(10)
Dennis Mathies 175,804 *
(11)
All Executive Officers and Directors as a group (10 persons) 4,703,473 15.7 %
5% Stockholders
Nantahala Capital Management LLC 2,959,011 9.9 %
(12)
* Less than 1%
(1) Percentage ownership is based on 29,666,750 shares of our Common Stockoutstanding as of April 26, 2024 and, for each person or
entity listed above, warrants or options to purchase shares of our Common Stockwhich exercisable within 60 days of such date.
(2) Includes 234 vested options to purchase Common Stock and 1,046,492 vested restricted shares. Also includes
37,876 shares of our CommonStock, held by Dicilyon Consulting and Investment Ltd. Erez Raphael is the natural
person with voting and dispositive power over our securitiesheld by Dicilyon Consulting and Investment Ltd.
The address of Dicilyon Consulting and Investment Ltd. is 10 Nataf St., Ramat Hasharon4704063, Israel.
(3) Includes 27,827 vested options to purchase Common Stock and 399,562 vested restricted shares. Includes 1,786 shares owned by
his spouse,for which Mr. Ben David disclaims beneficial ownership except to the extent of his pecuniary interest therein.
(4) Includes 693,527 vested options to purchase Common Stock and 78,696
vested restricted shares. Excludes 693,125 options which are notvested.
(5) Includes 345,018 vested options to purchase Common Stock. Excludes 672,929 options which are not vested.
(6) Includes 98 vested options to purchase Common Stock and 96,411 vested restricted shares.
(7) Includes 35,000 vested restricted shares.
(8) Includes 112,856 vested restricted shares.
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(9) Includes 107,234 vested restricted shares. Includes 1,667 shares owned by his spouse, for which
Mr. Shaked disclaims beneficial ownershipexcept to the extent of his pecuniary interest therein.
(10) Includes 115,517 vested restricted shares. Includes warrants exercisable into 409,535
shares of Common Stock, subject to a contractualbeneficial ownership limitation of 4.99%.
(11) Includes 43,334 vested options to purchase Common Stock and 52,620
vested restricted shares. Excludes 11,666 options which have notvested.
(12) Based solely on information contained in Form 13G/A filed with theSEC
on February 14, 2024, and data provided by the holder. Includes
222,258 pre-funded warrants to purchase Common Stock issued in
May2019, subject to a contractual beneficial ownership limitation
of 9.99% and excludes preferred shares convertible into 4,737,198
sharesof Common Stock, 55,288 pre-funded warrants issued on
May 24, 2019, 386,129 pre-funded warrants issued on July 31, 2020,
and 619,117 pre-fundedwarrants issued on February 28, 2022.
Stockholder Communications
Stockholders wishing to communicatewith the Board may direct such
communications to the Board c/o the Company, Attn: Zvi Ben-David. Mr.
Ben-David will present a summaryof all stockholder communications to the Board
at subsequent Board meetings. The directors will have the opportunity to
review the actualcommunications at their discretion.
Additional Information
In addition, we are subjectto certain informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other informationwith the SEC. Such reports, proxy statements and other
information are available on the SEC's website at
www.sec.gov
. Stockholderswho have questions in regard to any aspect of the matters
discussed in this Proxy Statement should contact Zvi Ben-David, Chief
FinancialOfficer of the Company, at 5 Tarshish St. Caesarea Industrial Park
3088900, Israel 2
nd
Floor.
STOCKHOLDER PROPOSALS
Proposals of stockholdersintended to be included in the Company's proxy
statement and form of proxy for use in connection with the Company's 2024
AnnualMeeting of Stockholders must be received by the Company's Secretary at
the Company's principal executive offices at 8 HaTokhenStreet, Caesarea
Industrial Park 3088900, Israel, not less than 90 days nor more than 120 days
prior to the annual meeting of stockholders,and must otherwise satisfy the
procedures contained in the Company's Bylaws or as prescribed by Rule 14a-8
under the Exchange Act.
Stockholder proposals withrespect to director nominees for use in connection
with the Company's 2024 Annual Meeting of Stockholders must be received by
theCompany's Secretary at the Company's principal executive offices at not
less than 60 days before the date of the annual meetingof stockholders. A
stockholder wishing to formally nominate an individual for election to the
Board must do so by following the notice,information and consent provisions
described in the Company's Bylaws. In that regard, the stockholder must set
forth the (a) thename, age, business address and the primary legal residence
address of each nominee proposed in such notice, (b) the principal
occupationor employment of such nominee, (c) the number of shares of capital
stock of the Company which are owned directly or indirectly of recordand
directly or indirectly beneficially owned by the nominee and each of its
affiliates (within the meaning of Rule 144 under the SecuritiesAct of 1933, as
amended), including any shares of the Company owned or controlled via
derivatives, hedged positions and other economicand voting mechanisms, (d) any
material agreements, understandings or relationships, including financial
transactions and compensation,between the nominating stockholder and the
proposed nominees and € such other information concerning each such
nominee as would berequired, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies in a contested election
ofsuch nominees. The Board will use the same evaluation criteria and process
for director nominees recommended by stockholders as it usesfor other director
nominees. There has been no change to the procedures by which stockholders may
recommend nominees to our Board.
It is suggested thatany such proposals be submitted by certified mail, return
receipt requested.
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If we do not receive noticeof a stockholder proposal within this timeframe,
our management will use its discretionary authority to vote the shares they
represent,as the Board may recommend. We reserve the right to reject, rule
out of order, or take other appropriate action with respect toany proposal
that does not comply with these requirements.
HOUSEHOLDING OF MEETING MATERIALS
Some banks, brokers and othernominee record holders may be participating in
the practice of "householding" proxy statements and annual reports. Thismeans
that only one copy of our proxy statement or annual report may have been sent
to multiple stockholders in your household. We will promptly deliver a
separate copy of either document to you if you call or write us at the address
shown on the first page of thisproxy statement. If you want to receive
separate copies of the annual report and any proxy statement in the future or
if you arereceiving multiple copies and would like to receive only one copy
for your household, you should contact your bank, broker, or other
nomineerecord holders, or you may contact us at the address shown on the first
page of this proxy statement or by phone at +(972)-(4) 7706377.
OTHER MATTERS
As of the date of this proxystatement, our management knows of no matter not
specifically described above as to any action which is expected to be taken at
the Meeting.The persons named in the enclosed proxy, or their substitutes,
will vote the proxies, insofar as the same are not limited to the contrary,in
their best judgment, with regard to such other matters and the transaction of
such other business as may properly be brought at theMeeting.
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IF YOU HAVE NOT VOTED BYINTERNET, PLEASE DATE, SIGN AND RETURN THE PROXY CARD
AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. A PROMPT
RETURNOF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF
FURTHER MAILINGS.
By order of the Board of Directors
,
/s/ Erez Raphael
Erez Raphael
Chief Executive Officer
Caesarea, Israel
May 1, 2024
20
Annex A
THIRD AMENDMENT TO
AMENDED AND RESTATED
2020 EQUITY INCENTIVE PLAN
WHEREAS
, DarioHealthCorp. (the "Company") maintains the DarioHealth Corp.'s 2020
Equity Incentive Plan (the "Incentive Plan");
WHEREAS
, the Boardof Directors (the "Board") and the Compensation Committee of the
Board has determined that it is in the best interests ofthe Company to amend
the Incentive Plan to increase the maximum number of shares of the Company's
common stock (the "CommonStock") authorized to be issued under the Incentive
Plan by 3,000,000, from 8,356,624 to 11,356,624; and
WHEREAS
,
pursuantto Section 13 of the Incentive Plan, an amendment that materially
increases the aggregate number of shares that may be issued underthe Incentive
Plan generally must be approved by a majority of votes cast by the
stockholders of the Company in accordance with applicablestock exchange rules.
NOW, THEREFORE
, effectiveas of the date of approval by a majority of votes cast by the
stockholders of the Company in accordance with applicable stock exchangerules,
the Incentive Plan is hereby amended in the following particulars:
1. Section 4(a) of the Incentive
Plan is deleted in
its entirety and replaced
with the following:
Share Reserve.
The Committee is authorized to grant Awards to acquire an aggregate number of shares of Common
Stock, with the current amount of such shares equal to an aggregate of 11,356,624 shares
of Common Stock and an increase to such amount for each of the calendar years ending on December
31, 2024 and December 31, 2025, by an additional number of shares of Common Stock equal
to six percent (6%) of the number of shares of Common Stock issued and outstanding on a Fully
Diluted Basis on the immediately preceding December 31. For purposes of this Section 4(a),
the term "Fully Diluted Basis" means all issued and outstanding share capital (where options
shall be deemed outstanding share capital until exercised) and all rights to acquire
share capital including, without limitation, all securities convertible or exercisable
into shares of Common Stock being deemed so converted and exercised, the conversion of any
convertible stockholder loans into share capital, with all outstanding warrants, options or
any other right granted by the Company to receive shares of the Company's share capital being
deemed exercised in full. Notwithstanding the foregoing, the maximum number of shares that
may be subject to Incentive Stock Options granted under the Plan shall be 3,000,000, subject
to adjustment as provided in Section 11. Shares of Common Stock with respect to which Awards
may be granted hereunder are subject to adjustment as set forth in Section 11 herein.
2. In all other respects the
Incentive Plan shall
remain unchanged and in
full force and effect.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARDOF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS
,EREZ RAPHAEL AND ZVI BEN-DAVID,
AND EACH OF THEM, AS PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTEALL THE SHARES OF COMMON STOCK (OR EQUIVALENT) OF
DARIOHEALTH CORP. HELD OF RECORD BY THE UNDERSIGNED ON APRIL 26, 2024
,AT THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 25, 2024 AT 9 AM
EST, AT 5 TARSHISH St., CaESAREA 3088900, ISRAEL, 2
ND
FLOOR, OR ANY ADJOURNMENT THEREOF.
1./////////////Toapprove, pursuant to Nasdaq listing rule 5635(a) and 5635(d),
of the issuance of shares of our Common Stock, upon the exercise of
certainpre-funded warrants, warrants and restricted stock units issued as part
of our acquisition of Twill Inc., and the re-pricing of certainwarrants, all
in excess of 20% of our Common Stock outstanding.
¨ ¨ ¨
FOR AGAINST ABSTAIN
2./////////////Toconsider and vote to amend the Company's 2020 Equity
Compensation Plan.
¨ ¨ ¨
FOR AGAINST ABSTAIN
In their discretion, upon the transaction of anyother matters which may
properly come before the meeting or any adjournment thereof.
The shares representedby this proxy, when properly executed, will be voted as
specified by the undersigned stockholder(s). If this card contains no
specificvoting instructions, the shares will be voted
FOR
each of the proposals described on this card.
Signature of Stockholder(s)
Date
Please sign exactly as thename appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trusteeor guardian, please give full title as such. If a corporation, please
sign the corporate name by the president or other authorized officer.If a
partnership, please sign in the partnership name by an authorized person.
VOTE BY INTERNET- if a registered holderby visiting www.vstocktransfer.com/proxy
; if a beneficial holder by visiting www.proxyvote.com
Use the Internet to transmityour voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
meeting date.Have your proxy card in hand when you access the web site and
follow the instructions to obtain your records and to create an electronicvoting
instruction form.
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