LabStyle Innovations Reports 2014 Second Quarter Results and Anticipated Milestones for the Remainder of the Year

CAESAREA, Israel, Aug. 15, 2014 /PRNewswire/ — LabStyle Innovations Corp. (OTCQB: DRIO), developer of the Dario™ Diabetes Management Solution, today reported its financial and operational results for the three and six months period ending June 30, 2014. The company also presented an overview of results of the Dario™ smart meter soft launch, recent corporate achievements and anticipated milestones for the remainder of 2014.

The initial launch of the Dario™ smart meter which has been underway since late March 2014 has  met with promising market demand demonstrated in the initial soft launch territories; the United Kingdom, Italy, and New Zealand.

The initial launch feedback includes the following:

• Dario™ has been well received with excellent feedback from users. This has resulted in over 20,000 thousand of Dario app downloads in the six month period only in the soft launch territories, and a higher than average pick up rate thus indicating the feasibility to convert downloads to users in an efficient and productive manner.
• Built a strong supportive community of people with diabetes using Dario™ for their diabetes management needs, primarily in the United Kingdom.
• Surpassed the accepted industry average pickup rate for new users. The current pick up rate of over 68% of these users is due to their very positive experience with Dario™.
• Number of Dario™ smart meter users has passed 2,000 and is growing. Reimbursement codes took longer than expected to be obtained and therefore, the number of users has been constrained and below expectations.  Now that reimbursement codes have been secured the user growth rate is expected to accelerate.

During the first half and the early third quarter of 2014, LabStyle believes that its roll out execution is on target as he following milestones were achieved:

• Commenced first shipments of the Dario™ Diabetes Management Solution to distributors in Italy, New Zealand, the United Kingdomand the Netherlands, collecting initial positive feedback from the market of people with diabetes.
• Received reimbursement status in England, Wales, Scotland and Northern Ireland for strips and lancets to be utilized together with the Dario™ smart meter (effective September 1, 2014).
• Received national and regional insurance reimbursement approval for the Dario™ Personalized Smart Meter in Italy. LabStyle is actively seeking reimbursement in other strategic territories.
• Received approval from Israel’s Ministry of Health to sell the Dario™ smart meter for diabetes in Israel.
• Released the Dario™ Diabetes Management App for Android smartphone users.  The mobile application has the same user interface and features as the iOS Dario™ Application and is currently available for download in select soft launch markets. The Android supported Dario smart meter will be released in early September.
• Received a Notice of Allowance from the U.S. Patent and Trademark Office for core patent claims covering the Dario™ personalized smart meter, which works in tandem with the novel and powerful Dario™ software application to form the overall Dario™ Diabetes Management Solution.
• Working with FDA towards potential clearance of the Dario™ smart meter in the U.S. following a 510K filing made in late December 2013.
• Partnered with FatSecret, a leading global nutrition data source, to integrate such data into the Dario™ Diabetes Management Solution.
• Raised $3.8 million in net proceeds from private placement which had its closing on February 2014.
• LabStyle’s business strategy and goals assuming adequate funding for the remainder of 2014 and into 2015 include: Expedite production of Dario™ personalized smart meters for both Android and iOS smartphone operating systems, in selected jurisdictions with maximum optimization and efficiency.
• Continue to enhance logistics and shipment process in order to ship and deliver Dario™ personalized smart meters and test strips in a timely and productive manner.
• Expand distributor network with purchase commitments from strategic markets.
• Increase awareness of Dario™ and sales penetration in key target markets.
• Facilitate reimbursement in key target markets.
• Continue to refine and enrich the cutting edge software component of the Dario™ Diabetes Management Solution.
• Obtain 510K FDA clearance for the Dario™ personalized smart meter by early 2015.
• Establish an online sales strategy.
• Utilize the information collected from customer feedback and strategic agile marketing techniques in the long-term roll-out strategy.
• Augment LabStyle’s intellectual property portfolio with additional potential patent approvals in the U.S. and globally.

“It was a very exciting quarter for LabStyle”, stated Erez Raphael, president and chief executive officer of LabStyle. “We closed the quarter with first shipments of Dario™ to distributors in Italy, New Zealand and the United Kingdom. We are delighted with the initial market demand that has been demonstrated in the UK and New Zealand where we have marketed the Dario™ smart meter. AlthoughItaly has lagged behind, we have been working very hard to increase market penetration in all the territories and to ensure customer supply and satisfaction. The soft launch has demonstrated product demand and the efficacy of our agile marketing techniques. Compared to the fourth quarter of 2013, our marketing and pre-production expenses have increased, as we prepared for the soft launch that began in March 2014, and we have reduced our research and development expenses and general and administrative spending during this quarter in order to preserve our resources for the ongoing commercialization efforts. The company will require additional funding and will continue to manage its capital resources by reducing the manufacturing costs and research and development expenses as we deal with market demand for the Dario™ smart meter.”

Summary of Financial Results

As evidenced by a reduction in expenses as detailed below, LabStyle’s management is working to focus the company’s resources on activities aimed at driving stockholder value.

LabStyle commenced its initial “soft” commercial launch of the Dario™ Smart Meter in late March 2014 with first shipments occurring during April 2014. However, no revenues could be recognized for the second quarter of 2014 since not all revenue recognition criteria according to US-GAAP were met.

As of June 30, 2014, LabStyle had approximately $1,819,000 in cash on hand. The company forecasts such funds will be sufficient to continue its activities into October 2014, and additional funding will be required to meet the company’s anticipated milestones.

Ramp up of manufacturing costs for the second quarter of 2014 were approximately $605,000 compared with none for the second quarter of 2013, and for the first half of 2014 were approximately $1,026,000 compared with none for the first half of 2013. The increase was due to the commencement of our initial commercial sales during March 2014 with first shipments occurring during April 2014.

Research and development expenses for the second quarter of 2014 were approximately $1,333,000 compared with approximately$1,416,000 for the second quarter of 2013, and for the first half of 2014 were approximately $2,440,000 compared with $2,091,000 for the first half of 2013. The increase was largely due to recruitment of new employees and progress in product development which resulted in our initial “soft” commercial launch.

Marketing and pre-production expenses were approximately $373,000 for the second quarter of 2014 compared with approximately$664,000 for the second quarter of 2013 and approximately $659,000 in the first half of 2014 compared with approximately $1,161,000for the first half of 2013. This decrease was largely due to pre-production costs which, during 2013, were allocated to marketing and pre-production costs and in 2014, since we commenced the initial commercial sales of our product, we allocated production costs to ramp up of manufacturing costs.

General and administrative expenses for the second quarter of 2014 were approximately $1,292,000 compared to approximately$1,516,000 for the second quarter of 2013 and approximately $2,146,000 for the first half of 2014 compared with approximately$3,420,000 for the first half of 2013. The decrease from 2013 was mainly due to non-cash stock based compensation and non-cash expenses related to the issuance of common stock and warrants granted to service provider during the first half of 2014 in the amount of approximately $1,199,000 and $0, respectively, compared to non-cash stock-based compensation expenses for the first half of 2013 of approximately $1,358,000 and $1,011,000, respectively.

Financing expenses for the second quarter of 2014 were mainly driven by gain of approximately $396,000 non-cash charge related to the revaluation of warrants, compared with a loss related to the revaluation of warrants of approximately $1,664,000 in the second quarter of 2013. Financing expenses for the first half of 2014 were mainly driven by a gain of approximately $538,000 non-cash charge related to the revaluation of warrants offset by a loss of approximately $489,000 from non-cash issuance costs related to warrants in the first half of 2014, compared with a loss related to the revaluation of warrants of approximately $3,800,000

The net loss for the second quarter of 2014 was approximately $3,254,000, or $0.14 per share, compared with a net loss of approximately $5,286,000, or $0.29 per share, for the second quarter of 2013. For the first six months of 2014 the net loss was approximately $6,238,000, or $0.28 per share, compared with a net loss of approximately $10,513,000, or $0.63 per share, for the first six months of 2013.

The non-GAAP adjusted loss for the second quarter of 2014 was approximately $2,753,000, or $0.11 per share, compared with a non-GAAP adjusted loss for the second quarter of 2013 of approximately $2,251,000, or $0.12 per share. The non-GAAP adjusted loss for the first half of 2014 was approximately $4,714,000, or $0.21 per share, versus a non-GAAP adjusted loss of approximately$3,497,000, or $0.21 per share, in the corresponding period in 2013.

LabStyle used approximately $4,418,000 in cash to fund operating activities during the first half of 2014. As of June 30, 2014, LabStyle had cash, cash equivalents, restricted cash and short-term bank deposits of approximately $1,985,000.

Note on 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:

About LabStyle Innovations

LabStyle Innovations Corp. (OTCQB:DRIO) develops and commercializes patent-pending technology providing consumers with laboratory-testing capabilities using smart mobile devices. LabStyle’s flagship product is the Dario™ Diabetes Management Solution.  Dario™ received CE mark certification in September 2013 and began a world rollout in select countries in December 2013.  LabStyle filed a Premarket Notification Application, also known as a 510(k), with the US Food and Drug Administration (FDA) for the Dario™ smart meter (Dario™ Blood Glucose Monitoring System) in December 2013. LabStyle is pursuing patent applications in multiple areas 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: www.mydario.com and http://mydario.investorroom.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 the Company’s commercial and regulatory plans for Dario™ as described herein) 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.

SOURCE LabStyle Innovations Corp.