Item 1.01 Entry into a Material Definitive Agreement.
PsyInnovations Acquisition
DarioHealth Corp., (the “Company”),
WF Merger Sub, Inc., a Delaware corporation and the Company’s wholly owned subsidiary (“Merger Sub”), PsyInnovations,
Inc. (dba wayForward), a Delaware corporation (“PsyInnovations”), and Jonathan Whitcher and Brian Branson, solely in their
capacity as the representatives of PsyInnovations’ stockholders and other equity holders (collectively, the “Holders”),
entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of May 15, 2021, pursuant to which (i) PsyInnovations
will merge with and into Merger Sub, with Merger Sub as the surviving company (the “Merger”), and (ii) the Company will pay
aggregate consideration (“Merger Consideration”) of (A) $6.0 million in cash and (B) up to $24.0 million in shares of Company
common stock, par value $0.0001 per share (the “Common Stock”), including up to $5.0 million structured as an earn-out (the
“Earn-Out”) payable in shares of Common Stock if behavioral health revenues from the Company exceed a certain threshold in
2022, subject to customary working capital and other adjustments as of the closing of the Merger (the “Closing”). $3.0 million
of the Merger Consideration, consisting of $2,750,000 in shares of Common Stock and $250,000 in cash, will be subject to a hold-back (“Hold-Back”)
for a minimum of eighteen (18) months to secure the indemnification obligations of the Holders. The Company will issue up to an aggregate
of approximately 1,138,000 shares Common Stock in the Merger, determined based on the 60-day volume weighted average share price (VWAP)
of $21.09 per share of the Common Stock traded on The Nasdaq Stock Market LLC that ended on May 13, 2021. The shares of Common Stock to
be issued to the Holders in the Merger will be issued in reliance upon exemptions from registration under Section 4(a)(2) of the Securities
Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated under
Regulation D of the Securities Act. Through the Merger, PsyInnovations will become a wholly-owned subsidiary of the Company.
The Merger is intended to qualify for federal income tax purposes as a “reorganization” within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended.
Upon the Closing, the Company,
through the surviving company in the Merger, will employ PsyInnovations’ founders Mr. Ritvik Singh and Dr. Navya Singh, as General
Manager, Head of Behavioral Health, and Chief Behavioral Science Officer, respectively. Mr. Singh’s offer letter provides for a
grant, effective at the Closing, of a non-qualified stock option to purchase 75,000 shares of the Common Stock pursuant to Nasdaq Listing
Rule 5635(c)(4), outside of the Company's existing 2020 Equity Incentive Plan. The option is intended to be granted as an inducement material
to Mr. Singh becoming an employee of the Company or its subsidiary, in accordance with Nasdaq Listing Rule 5635(c)(4). The option will
have an exercise price per share based on the closing price of the Common Stock on the Nasdaq Stock Market on the trading day prior to
the Closing date. 60,000 of the option shares will vest over a three-year period beginning on the date Mr. Singh begins employment, subject
to Mr. Singh's continued employment by the Company or its subsidiary on the applicable vesting date. The remaining 15,000 option shares
will vest upon the Company or its subsidiary meeting specified revenue targets on a rollout of the wayForward platform, subject to Mr.
Singh’s continued employment on the vesting date.
The Merger Agreement contains
customary representations and warranties and covenants. The Closing of the Merger Agreement is subject to the satisfaction or waiver of
various conditions set forth in the Merger Agreement, including, but not limited to (i) the accuracy of the representations and warranties
of each party contained in the Merger Agreement (subject to certain materiality qualifications), (ii) each party’s compliance with
or performance of the covenants and agreements in the Merger Agreement in all material respects, and (iii) approval of Holders receiving
not less than 95% of the Merger Consideration and delivery by such Holders (the “Consenting Holders”) of lock-up, release
and joinder agreements (the “Lock-up, Release and Joinder Agreements”).
Under the Lock-up, Release
and Joinder Agreements, the Consenting Holders will, among other things, (i) (i) agree to certain lock-up restrictions with respect to
the transfer of Common Stock received as consideration in the Merger, (ii) agree to the indemnification provisions in the Merger Agreement,
(iii) make customary representations and warranties in connection with the acquisition of shares of Common Stock in the Merger, and (iv)
release various parties, including PsyInnovations and the Company, from certain claims related to the Merger. The shares of Common Stock
issuable to the Consenting Holders at the Closing will be subject to a lock-up that will lapse in five (5) substantially equal installments
every three (3) months commencing on the date that is six (6) months after the date of the Closing and, to the extent any portion of the
Earn-Out becomes payable, then the shares of Common Stock so issuable will be subject to a lock-up that will lapse in five (5) substantially
equal installments every three (3) months commencing on the date that is six (6) months after the Earn-Out payment date.