LabStyle Innovations Reports Second Quarter Results and Provides Business Update

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LabStyle Innovations Reports Second Quarter Results and Provides Business Update

RAMAT GAN, Israel--(BUSINESS WIRE)-- LabStyle Innovations Corp. (OTCQB/OTCBB:DRIO), developer of the Dario™ smartphone-based medical device and diabetes management system, today reported its financial and operational results for the three and six months ended June 30, 2013 and provided a business update.


Highlights of the first half of 2013 and recent weeks included:

  • Commencement of trading in the company's common stock on the OTCQB Marketplace and the OTC Bulletin Board under the symbol "DRIO" in April.
  • Closed a private placement offering in May, raising gross proceeds of $10.0 million through the sale of an aggregate of 4.0 million shares of common stock and warrants to purchase an additional 2.0 million shares.
  • Continued progress towards obtaining CE mark clearance to market Dario in Europe, which the company continues to expect in the near term.
  • Continued to work with existing contract manufacturers and other suppliers to prepare for the anticipated initial soft launch of Dario in certain countries in Europe.
  • Engaged Farla Medical as exclusive distributor for Dario in the U.K. and Belgium.
  • Engaged Harmonium Pharma as exclusive distributor for Dario in Italy.
  • Undertaking internal senior management changes aimed at preparing the company to move from research and development stage to commercial stage.

As of June 30, 2013, LabStyle had $7,025,282 in cash on hand, which the company believes provides sufficient resources to finalize and implement its initial launch strategy for Dario during the remainder of 2013, assuming receipt of CE mark clearance as anticipated. LabStyle believes that it has made all required submissions to achieve CE mark clearance for Dario and therefore continues to anticipate such approval in the near term.

Management Commentary

"The first half of the year has been very productive for our company as we finalized our CE mark regulatory submission for Dario and continued to refine the hardware and software elements of the product in anticipation of initial soft launch in certain countries in Europe," said Dr. Oren Fuerst, LabStyle's Executive Chairman. "In addition, we have continued our close working relationships with our manufacturing partners, secured two distribution agreements covering significant populations in Europe and continued our important intellectual property programs."

Financial Results

From October 2011 through June 30, 2013 LabStyle raised nearly $16 million in investor funding. LabStyle believes that its financial results demonstrate the targeted deployment during the company's pre-revenue stage of a portion of these funds to advance its business goals, particularly in the areas of research and development, manufacturing and personnel expansion.

Research and development expenses for the second quarter of 2013 were $1,415,805 compared with $449,148 for the second quarter of 2012, and for the first half of 2013 were $2,091,219 compared with $620,818 for the first half of 2012. The increase was largely due to recruitment of new employees and progress in product development.

Marketing and pre-production expenses were $664,063 for the second quarter of 2013 and $1,161,091 for the first half of 2013 as LabStyle prepared for the expected soft launch of Dario in Europe. These expenses included, among others, approximately $877,000 invested in LabStyle's manufacturing equipment during the first half of 2013. There were no marketing and pre-production expenses in the second quarter or first half of 2012.

General and administrative expenses for the second quarter of 2013 were $1,516,206 and included non-cash stock-based compensation expenses of $279,607 and non-cash expenses of $618,500 related to the issuance of common stock and warrants to a service provider. General and administrative expenses for the second quarter of 2012 were $417,201 and included non-cash stock-based compensation expense of $166,211.

General and administrative expenses for the first half of 2013 were $3,419,931 and included non-cash stock-based compensation expenses of $1,358,540 and non-cash expenses of $1,011,370 related to the issuance of common stock and warrants to a service provider. General and administrative expenses for the first half of 2012 were $740,277 and included non-cash stock-based compensation expense of $292,804.

Financing expenses for the second quarter of 2013 were mainly driven by a $1,663,980 non-cash charge related to the revaluation of warrants, compared with a gain related to the revaluation of warrants of $5,322 for the second quarter of 2012. Financing expenses for the first half of 2013 were mainly driven by a $3,799,977 non-cash charge related to the revaluation of warrants, compared with a gain related to the revaluation of warrants of $26,440 offset by a loss of $101,263 from non-cash issuance costs related to warrants for the first half of 2012.

The net loss for the second quarter of 2013 was $5,286,472, or $0.29 per share, compared with a net loss of $867,230, or $0.07 per share, for the second quarter of 2012. For the first six months of 2013 the net loss was $10,513,341, or $0.63 per share, compared with a net loss of $1,438,113, or $0.13 per share, for the first six months of 2012.

The non-GAAP adjusted loss for the second quarter of 2013 was $2,249,997, or $0.12 per share, compared with a non-GAAP adjusted loss for the second quarter of 2012 of $591,983, or $0.05 per share. The non-GAAP adjusted loss for the first half of 2013 was $3,496,299, or $0.21 per share, versus a non-GAAP adjusted loss of $958,633, or $0.08 per share, in the corresponding period in 2012.

LabStyle used $3,021,454 in cash to fund operating activities during the first half of 2013. As of June 30, 2013, LabStyle had cash, cash equivalents, restricted cash and short-term bank deposits of $7,153,094.

Non-GAAP Measures

Readers should note that LabStyle has, in the schedule below, supplemented its GAAP net income (loss) with a non-GAAP measure of adjusted EBITDA. Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding LabStyle's performance, facilitates a more meaningful comparison of results for current periods with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of non-GAAP adjusted EBITDA to GAAP net income (loss) in the most directly comparable GAAP measure is provided in the schedule below.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. This non-GAAP financial measure should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP and the reconciliations of the non-GAAP financial measure provided in the schedule below:

      
Three months endedSix months ended
June 30June 30
2013   20122013   2012
 
Net income (loss) as reported$(5,286,472)$(867,230)$(10,513,341)$(1,438,113)
Adjustments:
Depreciation196,1052,178313,7023,681
Revaluation of warrants1,663,980(5,322)3,799,977(26,440)
Other finance expenses 26,418  6,203  41,123  103,458 
 
EBITDA$(3,399,969)$(864,171)$(6,358,539)$(1,357,414)
 
Stock-based compensation531,472272,1881,850,870398,781
Expenses related to Issuance of common stock and warrants to service provider 618,500  -  1,011,370  - 
 
Non-GAAP adjusted income (loss)$(2,249,997)$(591,983)$(3,496,299)$(958,633)
Weighted average number of common stock used in computing basic and diluted net income (loss) per share18,327,38711,957,59316,590,42311,435,406
Non-GAAP adjusted income (loss) per share$(0.12)$(0.05)$(0.21)$(0.08)
 

About LabStyle Innovations

LabStyle Innovations Corp. (OTCQB/OTCBB: DRIO) is developing and commercializing a patent-pending technology that seeks to bring rapid diagnostic capabilities to consumers in a distinctive and easy-to-use way through the use of smartphones such as iPhones, Androids and other mobile devices. LabStyle's initial product is Dario™, an integrated medical device and software system addressing the market for diabetic self monitoring of blood glucose (SMBG), a market which is estimated to exceed $10 billion worldwide. Dario is a comprehensive, patent-pending system that combines an all-in-one medical device consisting of an integrated lancet (to obtain a blood sample), a device-specific disposable test strip cartridge and a smartphone-driven glucose reader adaptor, together with a smartphone app and cloud-based data services. LabStyle is pursuing patent applications in multiple jurisdictions covering the specific processes related to blood glucose level measurement as well as more general methods of rapid tests of body fluids using mobile devices and cloud-based services. For more information, please visit www.mydario.com.

Cautionary Note Regarding Forward-Looking Statements

This news release and the statements of representatives and partners of LabStyle Innovations Corp. (the "Company") related thereto contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "plan," "project," "potential," "seek," "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. Readers are cautioned that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this news release. Factors that may affect the Company's results include, but are not limited to, regulatory approvals, product demand, market acceptance, impact of competitive products and prices, product development, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks, and the risks associated with the adequacy of existing cash resources. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements include, but are not limited to, those risks discussed in the Company's filings with the U.S. Securities and Exchange Commission. Readers are cautioned that actual results (including, without limitation, the timing for and results of regulatory review of Dario and the Company's commercial plans for Dario) may differ significantly from those set forth in the forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

 
LABSTYLE INNOVATIONS CORP. AND ITS SUBSIDIARY
(A Development-Stage Company)
 
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars        
 
June 30,December 31,
20132012
Unaudited
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents

$

7,025,282

$1,230,034
Restricted cash-13,422
Short-term bank deposits127,81221,566
Other accounts receivable and prepaid expenses 654,306 401,522
 

Total current assets

 7,807,400 1,666,544
 
LEASE DEPOSIT 107,610 31,545
 
PROPERTY AND EQUIPMENT, NET 1,486,426 617,364
 

Total assets

$9,401,436$2,315,453
 
 
LABSTYLE INNOVATIONS CORP. AND ITS SUBSIDIARY
(A Development-Stage Company)
 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars
      
June 30,December 31,
20132012
Unaudited
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
CURRENT LIABILITIES:
Trade payables$660,628$250,352
Other accounts payable and accrued expenses 666,289  316,403 
 

Total current liabilities

 1,326,917  566,755 
 
LIABILITY RELATED TO WARRANTS (Note 4) 6,232,553  2,817,741 
 
 
COMMITMENTS AND CONTINGENT LIABILITIES
 
STOCKHOLDERS' EQUITY (DEFICIT) (Note 5):
Common Stock of $0.0001 par value -
Authorized: 45,000,000 shares at March 31, 2013 and December
31, 2012; Issued: 19,965,079 (unaudited) and 14,547,689
shares at June 30, 2013 and December 31, 2012, respectively;
Outstanding: 19,965,079 (unaudited) and 14,547,689 shares at
June 30, 2013 and December 31, 2012, respectively1,9961,454
Preferred Stock of $0.0001 par value -
Authorized: 5,000,000 shares at March 31, 2013 and December 31,
2012; Issued: None at June 30, 2013 and December 31, 2012;
Outstanding: None at June 30, 2013 and December 31, 2012--
Additional paid-in capital18,425,2335,001,425
Deficit accumulated during the development stage (16,585,263) (6,071,922)
 

Total stockholders' equity (deficit)

 1,841,966  (1,069,043)
 

Total liabilities and stockholders' equity (deficit)

$

9,401,436

 $2,315,453 
 
 
LABSTYLE INNOVATIONS CORP. AND ITS SUBSIDIARY
(A Development-Stage Company)
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars
 
   Three months ended   Six months ended
June 30June 30
2013   20122013   2012
UnauditedUnaudited
Operating expenses:      
Research and development$1,415,805$449,148$2,091,219$620,818
Marketing and pre-production costs664,063-1,161,091-
General and administrative 1,516,206  417,201  3,419,931  740,277 
 
Total operating income (loss) (3,596,074) (866,349) (6,672,241) (1,361,095)
 
Revaluation of warrants1,663,980(5,322 Read Full Story

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