DRIO DarioHealth Corporation

On November 27, 2019, the Company entered into subscription agreements (each, a “Subscription Agreement”) with accredited investors relating to an offering (the “Offering”) and the sale of an aggregate of 8,361 shares of newly designated Series A Preferred Stock and an aggregate of 5,200 shares of 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 $13.561 million.

In connection with the initial closing of 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 Company’s 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 was $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 with respect to the Series A Preferred or the approval of the holders at least 50.1% of the outstanding shares of Series A-1 Preferred with respect to the Series A-1 Preferred Stock; 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 together with the Common Stock as a single class on an as-converted basis on any matter presented to the shareholders of the Company and the Series A-1 Preferred Stock does not possess any voting rights with respect to such matters. Upon any liquidation, dissolution or winding-up of the Company, after the satisfaction in full of the debts of the Company and payment of the liquidation preference to the Senior Securities, holders of Series A Preferred Stock and Series A-1 Preferred Stock shall be entitled to be paid, on a pari passu basis with the payment of any liquidation preference afforded to holders of any Parity Securities, the remaining assets of the Company available for distribution to its stockholders. For these purposes, (i) “Parity Securities” means the Common Stock, Series A Preferred Stock, Series A-1 Preferred Stock and any other class or series of capital stock of the Company hereinafter created that expressly ranks pari passu with the Series A Preferred Stock or/and Series A-1 Preferred Stock; and (ii) “Senior Securities” shall mean any class or series of capital stock of the Company hereafter created which expressly ranks senior to the Parity Securities.

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 to act 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 is required to 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 Placement Agent Warrants 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 Subscription Agreements contains representations and warranties that the parties made to 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 agreements, 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 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. The securities have not been registered under the Securities Act and may not be resold 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 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 Registration Rights 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.