DARIOHEALTH CORP. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)
Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements". You should review the "Risk Factors" section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We are a leading global DTx company revolutionizing the way people manage their health across the chronic condition spectrum to live a better and healthier life. Our mission is to transform how affected individuals manage their health and chronic conditions by empowering our customers to easily manage their conditions and take steps to improve their overall health. Most chronic conditions are driven by personal behaviors and the actions that are or are not taken. We believe that changing these behaviors can dramatically improve our customers' overall health and substantially reduce unnecessary health spending. However, behavioral change and habit formation are difficult, especially in managing chronic disease and related conditions. Our digital therapeutics endeavor to produce lasting behavior changes in our customers by applying a novel combination of AI-driven dynamic personalization and behavioral science at scale. This allows us to engage and support our customers, and offer them a complete virtual care solution, ideally resulting in improved health outcomes and reduced total cost of care. Our principal operating subsidiary,
LabStyle Innovation Ltd., is an Israeli company ("LabStyle") with its headquarters in Caesarea, Israel. We were formed on August 11, 2011, as a Delawarecorporation with the name LabStyle Innovations Corp.On July 28, 2016, we changed our name to DarioHealth Corp.We began our sales in the direct-to-consumer space, solving first for what we deemed the most difficult problems: how to engage users and support behavior 53
change to improve clinical outcomes in diabetes. Our most developed AI tools leverage the direct-to-consumer experience from over 150,000 members to drive superior engagement and outcomes. In early 2020, we broadened our solutions to include other medical conditions in addition to diabetes, and to serve business customers who seek to improve the health of their stakeholders. Presently, we have deployed solutions for diabetes, hypertension, and pre-diabetes, and through our acquisition of Upright, we now offer solutions for musculoskeletal ("MSK") conditions. We intend to deploy behavioral health and other condition solutions in 2021, which conditions will also be powered by our AI-driven behavior change platform. We are currently delivering B2B2C solutions for providers, employers, and pharmaceutical companies. We commenced a commercial launch of our free application in the
United Kingdomin late 2013 and commenced an initial soft launch of the full Dario solution (including the app and the Dario Blood Glucose Monitoring System) in selected jurisdictions in March 2014. We continued to scale up launch during 2014 in the United Kingdom, the Netherlandsand New Zealand, and during 2015 in Australia, Israeland Canada, with the goal of collecting customer feedback to refine our longer-term roll-out strategy. We are consistently adding new additional features and functionality in making Dario the new standard of care in diabetes data management. Through our Israeli subsidiary, Labstyle, and its subsidiary Upright, our plan of operations is to continue the development of our software and hardware offerings and related technology. During 2015, we successfully launched the Dario Smart Diabetes Management Solution according to plan and are currently expanding the launch to other jurisdictions. In 2016, we established our direct-to-consumer model in the U.S.to achieve higher and faster penetration into the market during the launch phase. We have invested in a robust digital marketing department with in-house platforms, experienced personnel and robust infrastructures to support expected growth of users and online subscribers in this market. During the third quarter of 2016 we expanded these efforts to include Australiaas well. In 2017, we expanded our direct-to-consumer marketing efforts in the United Kingdomin cooperation with our local distributor and launched similar marketing efforts in Germany. In support of these goals, we intend to utilize our funds for the following activities:
ramping up mass production, marketing and distribution, and sales efforts
? related to Dario smart diabetes management solution and DarioEngage
expand our customer care and telemarketing services to support the
? expect our revenue to grow and the number of users and service providers to grow
who will use our platform to better serve people with diabetes and improve
their clinical outcome;
ongoing product and software development and related activities (including
costs associated with application development and data storage capabilities
? as well as all necessary design modifications to the various elements of the Dario
Smart Diabetes Management Solution, the DarioEngage platform and the
tools and capabilities);
? continuing work on registering our patents worldwide;
? Regulatory and quality assurance issues;
? professional fees associated with being a publicly reporting company; and
? general and administrative matters.
January 26, 2021, Dario, Labstyle, Upright Technologies Ltd., an Israeli limited company, Vertex C (C.I.) Fund L.P.(in its capacity as the representative of the Selling Shareholders), and all holders of Upright's outstanding securities (the "Selling Shareholders"), entered into a share purchase agreement (the "Upright Agreement") pursuant to which Dario, through Labstyle, acquired all of the outstanding securities of Upright. The agreement was consummated on February 1, 2021, and Upright now operates as a wholly owned subsidiary of the Company. As part of the acquisition, Dario issued the Selling Shareholders 1,687,612 shares of the Company's common stock, and agreed to assume options to purchase up to 100,193 shares of the Company's common stock, subject to certain escrow and indemnity provisions contained in the Upright Agreement (in the aggregate, the "Consideration Shares"). In addition, the shares issued are subject to the terms of a lock-up agreement, pursuant to which the Selling Shareholders (subject to certain exceptions) have agreed to restrict their ability to transfer their shares as follows: (i) shares representing
20% of their respective 54 Table of Contents Consideration Shares will be restricted from transfer for a period of one hundred and eighty (180) days from the date of the closing of the acquisition (the "Closing Date"), (ii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of two hundred and seventy (270) days from the Closing Date, (iii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of three hundred and sixty (360) days from the Closing Date and (iv) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of four hundred and fifty (450) days from the Closing Date. The Company has also agreed to file a registration statement covering the resale of the shares within ninety (90) days following the Closing Date. In addition, 30% of the Consideration Shares issuable to Upright's founder, Mr.
Oded Cohen, shall be held in a specific holdback retention mechanism, of which 50% shall be released at the lapse of twelve (12) months of retention following the Closing Date, and the balance of 50% shall be released at the lapse of eighteen (18) months of retention following the Closing Date. On February 1, 2021, the Company, through Labstyle, has also agreed to enter into an employment agreement with Mr. Cohen, pursuant to which he will serve as General Manager of MSK. In consideration for Mr. Cohen'sduties, he will be entitled to (a) a monthly salary of NIS 63,000, (b) an annual bonus of up to four times his monthly salary, and (c) up to 220,980 shares of restricted stock of the Company, subject to meeting certain key performance metrics. See "Management - Employment Agreements." Readers are cautioned that, according to our management's estimates, based on our budget and the initial launch of our commercial sales, we believe that we will have sufficient resources to continue our activity only into June 2021without raising additional capital. This includes an amount of anticipated inflows from sales of Dario through direct sales in the United Statesand through distribution partners. As such, we have a significant present need for capital. If we are unable to scale up our commercial launch of Dario or meet our commercial sales targets (or if we are unable to ramp up revenues), and if we are unable to obtain additional capital resources in the near term, we may be unable to continue activities, absent material alterations in our business plans, and our business might fail.
Critical accounting policies
Our consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in
the United States(" U.S.GAAP"). Our fiscal year ends December 31. This Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with U.S.GAAP. The preparation of these consolidated financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions. While all the accounting policies impact the consolidated financial statements, certain policies may be viewed to be critical. Our management believes that the accounting policies which involve more significant judgments and estimates used in the preparation of our consolidated financial statements, include revenue recognition, inventories, liability related to certain warrants, and accounting for production lines and its related useful life and impairment.
We derive our income mainly from:
selling our products, device-specific disposable test strip cartridges,
? lancets and our Dario Blood Glucose Monitoring System through distributors or
directly to end users;
? revenue from providing remote patient monitoring services to healthcare
suppliers via the DarioEngage platform; and
55 Table of Contents
revenue from ongoing membership programs, providing our users with
? diabetes management programs including lifestyle changes, healthy eating,
advanced tracking and live coaching.
Revenue is recognized under the five-step methodology in accordance with Accounting Standards Codification ("ASC") - ASC 606, which requires us to identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations identified, and recognize revenue when (or as) each performance obligation is satisfied.
Revenue from product sales is recognized in the period in which the products are supplied to customers. Revenue is recognized when control of promised products is transferred to customers, in an amount that reflects the consideration we expect to receive from patients.
Revenues from ongoing membership programs and Remote Patient Monitoring services are recognized for each individual performance obligation when delivery has occurred, by fulfillment of product and service to the customer. Our revenues are recognized in the period in which services and related products are provided to customers and are recorded either at a point in time for the sale of products, or over the fixed service period for membership. The fee paid in upfront, fixed or determinable, the allocation of the transaction price to each performance obligations product and service based on the best estimate of selling price which is established considering several internal factors including, but not limited to, historical sales, pricing practices and geographies in which we offer our products.
Inventory write-down is measured as the difference between the cost of the inventory and net realized value based upon assumptions about future demand, and is charged to the cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. If there were to be a sudden and significant decrease in demand for our products or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, we could be required to increase our inventory write-downs and our gross margin could be adversely affected. Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility, to help ensure competitive lead times with the risk of inventory obsolescence.
During the year ended
Production Lines Capitalization of Costs. We capitalize direct incremental costs of third-party manufacturers related to the equipment in our production lines. We cease construction cost capitalization relating to our production lines once they are ready for its intended use and held available for occupancy. All renovations and betterments that extend the economic useful lives of assets and/or improve the performance of the production lines are capitalized. Useful Lives of Assets. We are required to make subjective assessments as to the useful lives of our production lines for purposes of determining the amount of depreciation to record on an annual basis with respect to our construction of the production lines. These assessments have a direct impact on our net income (loss). Production lines are usually depreciated on a straight-line basis over a period of up to seven years, except any renovations and betterments which are depreciated over the remaining life of the production lines. Impairment of production lines. We are required to review our production lines for impairment in accordance with ASC 360, "Property, Plant and Equipment," whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. 56 Table of Contents Results of Operations
Comparison of the year ended
Turnover for the year ended
Revenues generated during the year ended
December 31, 2021were derived mainly from the sales of the hardware and services, through direct sales to consumers located mainly in the United Statesthrough our on-line store and through distributors, and from the offering of our membership services to our customers located mainly in the United States.
During the years ended
December 31, 2021and 2020, we recorded costs related to revenues in the amount of $16,550,000and $5,063,000, respectively. The increase in cost of revenues was mainly due to higher costs related to shipping of inventory, and amortization of inventory step up and acquired technology in the amount of $4,106,000as a result of the acquisition of Upright and WayForward.
Revenue cost mainly includes the production cost of devices, employee salaries and related overheads, production line depreciation and related cost of equipment used in production, technology depreciation, hosting charges, shipping and handling charges, and inventory write-downs.
Gross profit for the year ended
December 31, 2021, amounted to $3,963,000(19.3% of revenues) compared to $2,513,000(33.2% of revenues) for the year ended December 31, 2020. The decrease in gross profit as a percentage of revenue for the year ended December 31, 2021, compared to the year ended December 31, 2020, is mainly as a result of amortization of inventory step up and acquired technology following the acquisition of Upright and WayForward amounting to $4,106,000, decrease in profitability generated from products and higher shipping costs of inventory. Gross profit excluding these amortizations was $8,069,000(39.3% of revenues).
Research and development costs
Our research and development expenses increased by
$12,786,000to $17,219,000for the year ended December 31, 2021compared to $4,433,000for the year ended December 31, 2020. This increase was mainly due to the increase in our activities during the year ended December 31, 2021. Our research and development expenses, excluding stock-based compensation and depreciation, for the year ended December 31, 2021, were $13,272,000compared to $3,584,000for the year ended December 31, 2020, an increase of $9,688,000. This increase is mainly as a result of an increase in salaries and software development expenses. Research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, expenses related to: (i) our solutions including our Dario Smart Diabetes Management Solution, DarioEngage platform, Dario Movesolution and our digital behavioral health solution, (ii) labor contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development, (iv) clinical trials performed in the United Statesto satisfy the FDA product approval requirements and (v) facilities expenses associated with and allocated to research and development activities.
Sales and Marketing
Our sales and marketing expenses increased by
$24,479,000to $39,706,000for the year ended December 31, 2021compared to $15,227,000for the year ended December 31, 2020. This increase was mainly due to the increases in our digital marketing, payroll related expenses, stock-based compensation during the year ended December 31, 2021. Our sales and marketing expenses, excluding stock-based compensation, depreciation and amortization, for the year ended December 31, 2021were $33,55557 Table of Contents ,000 compared to $12,452,000for the year ended December 31, 2020, an increase of $21,103,000. This increase was due to an increase in our digital marketing, and payroll related expenses, as a result of hiring our sales and marketing team in the U.S.to lead the penetration into the B2B2C market.
Sales and marketing expenses primarily include personnel expenses, online marketing campaigns of our service offering, trade show expenses, customer support expenses, and marketing consultants and contractors.
General and administrative expenses
Our general and administrative expenses increased by
$10,776,000to $23,532,000for the year ended December 31, 2021compared to $12,756,000for the year ended December 31, 2020. The increase was mainly due to an increase in our stock-based compensation, investor relations, insurance expenses and the costs related with the acquisitions performed during the year ended December 31, 2021. Our general and administrative expenses, excluding stock-based compensation, acquisition costs and depreciation, for the year ended December 31, 2021were $8,150,000compared to $5,239,000for the year ended December 31, 2020, an increase of $2,911,000. This increase was due to an increase in insurance, consulting services, legal expenses and investor relations expenses.
Our general and administrative expenses primarily include salary and stock-based compensation expenses for management, employees, directors and consultants, legal and accounting fees, patent registration, investors, as well as our office rent and related expenses.
Financial income (expenses), net
Our financial expenses, net, increased by
Financial expense (income), net, mainly includes bank charges, interest income, rental debt and currency translation differences.
Income tax charges have been
Net loss for the year ended
December 31, 2021was $76,761,000. Net loss for the year ended December 31, 2020was $29,445,000. The increase from 2020 was mainly due to the increase in our operating expenses.
Net operating losses carried forward
December 31, 2021, we and WayForward had a U.S.federal net operating loss carryforward of approximately $37,910, of which $7,491were generated from tax years 2011-2017 and can be carried forward and offset against taxable income, which expires during the years 2031 to 2037. On December 22, 2017, the U.S.Tax Cuts and Jobs Act of 2017 (the "TCJA") modified the rules regarding utilization of net operating loss and net operating losses generated subsequent to the TCJA can only be used to offset 80% of taxable income with an indefinite carryforward period for unused carryforwards (i.e., they should not expire). During 2018 - 2021, we generated additional $30,419,000of net operating losses carryforwards which are not subject to the annual limitation described above. Our Israeli subsidiaries, Labstyle and Upright, have accumulated net operating losses for Israeli income tax purposes as of December 31, 2021in the amount of approximately $133,960,000. The net operating losses may be carried forward and offset against taxable income in the future for an indefinite period. 58
In accordance with
U.S.GAAP, it is required that a deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount which is more likely than not to be realized. As a result, we recorded a valuation allowance with respect to our deferred tax asset. Under Sections 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a "loss corporation" (as defined in the Internal Revenue Code), there are annual limitations on the amount of the net operating loss and other deductions which are available to us.
The factors described above resulted in a net loss attributable to common shareholders of
and 2020, respectively.
Non-GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with
U.S.GAAP within this Annual Report on Form 10-K, management provides certain non-GAAP financial measures ("NGFM") of the Company's financial results, including such amounts captioned: "net loss before interest, taxes, depreciation, and amortization" or "EBITDA," and "Non-GAAP Adjusted Loss," as presented herein below. Importantly, we note the NGFM measures captioned "EBITDA" and "Non-GAAP Adjusted Loss" are not recognized terms under U.S.GAAP, and as such, they are not a substitute for, considered superior to, considered separately from, nor as an alternative to, U.S.GAAP and /or the most directly comparable U.S.GAAP financial measures. Such NGFM are presented with the intent of providing greater transparency of information used by us in our financial performance analysis and operational decision-making. Additionally, we believe these NGFM provide meaningful information to assist investors, shareholders, and other readers of our consolidated financial statements, in making comparisons to our historical financial results, and analyzing the underlying financial results of our operations. The NGFM are provided to enhance readers' overall understanding of our current financial results and to provide further information to enhance the comparability of results between the current year period and the prior year period. We believe the NGFM provide useful information by isolating certain expenses, gains, and losses, which are not necessarily indicative of our operating financial results and business outlook. In this regard, the presentation of the NGFM herein below, is to help the reader of our consolidated financial statements to understand the effects of the non-cash impact on our ( U.S.GAAP) unaudited statement of operations of the revaluation of the warrants and the expense related to stock-based compensation, each as discussed herein above.
A reconciliation with the most directly comparable data
Year Ended December 31, (in thousands) 2021 2020 $ Change Net Loss Reconciliation Net loss - as reported
$ (76,761) $ (29,445) $ (47,316)Adjustments Depreciation expense 282 190 92 Inventory step up amortization 1,140 -
Amortization of acquired technology 3,035 -
Other financial expenses (income), net 235 (458) 693 Income Tax 32 - 32 EBITDA (72,037) (29,713) (42,324) Acquisition costs 880 - 880 Revaluation of earn-out (503) - (503) Stock-based compensation expenses 24,971 11,102 13,869 Non-GAAP adjusted loss
$ (46,689) $ (18,611) $ (28,078)59 Table of Contents
Cash and capital resources
We have experienced cumulative losses of
$222,014,000from inception ( August 11, 2011) through December 31, 2021and have a stockholders' equity of $85,549,000at December 31, 2021. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future.
From inception, we have funded our operations primarily through private placements and public offerings of our common stock and warrants to purchase shares of our common stock, receiving total net proceeds totaling
February 28, 2018and March 6, 2018, we closed two concurrent private placements offerings consisting of 113,110 shares of our common stock at $28.00per share, 61,704 shares of our Series C Convertible Preferred Stock at $56.00per share and warrants to purchase up to 189,218 shares of common stock for aggregate gross proceeds of approximately $6,623,000. On September 13, 2018and September 26, 2018, we closed two concurrent private placements offerings consisting of 213,340 shares our common stock at $18.00per share, 94,513 shares of our Series D Convertible Preferred Stock at $72.00per share and warrants to purchase up to 473,114 shares of common stock, for aggregate gross proceeds of approximately $10,645,000.
November 27, 2019, we entered into subscription agreements with accredited investors relating to an offering with respect to the sale of an aggregate of 8,361 shares of newly designated Series A Convertible Preferred Stock and an aggregate of 5,200 shares of newly designated Series A-1 Convertible Preferred Stock, at a purchase price of $1,000for each share of Series A Preferred Stock and Series A-1 Preferred Stock, for aggregate gross proceeds to the Company of $13,560,000. The initial closing of the offering took place on November 27, 2019. On December 3, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 1,915 shares of newly designated Series A-2 Preferred Stock, at a purchase price of $1,000per share, for aggregate gross proceeds to the Company of $1,915,000. On December 4, 2019, we into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 3,808 shares of newly designated Series A-3 Preferred Stock, at a purchase price of $1,000per share, for aggregate gross proceeds to the Company of $3,808,000. On December 5, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 745 shares of newly designated Series A-4 Preferred Stock, at a purchase price of $1,000per share, for aggregate gross proceeds to the Company of $745,000. On December 19, 2019, we entered into subscription agreements with accredited investors relating to an offering and the sale of an aggregate of 1,346 shares of newly designated Series A-3 Preferred Stock, at a purchase price of $1,000per share, for aggregate gross proceeds to the Company of $1,346,000. The total aggregate gross proceeds of the offering described above, together with gross proceeds from the closing of the offering of Series A Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4 Preferred Stock was $21,375,000. On July 28, 2020, we entered into subscription agreements with accredited investors relating to an offering with respect to the sale of an aggregate of (i) 2,969,266 shares of our common stock, at a purchase price of $7.47per share, and (ii) pre-funded warrants to purchase 824,689 shares of common stock, at a purchase price of $7.4699per pre-funded warrant. In addition, on July 30, 2020, we entered into a subscription agreement with an accredited investor for the purchase of 31,486 shares of our common stock at a purchase price per share of $7.94per share. The aggregate gross proceeds were approximately $28,591,000. 60 Table of Contents In September 2020, we and an existing warrant holder entered into an agreement pursuant to which we agreed to lower the exercise price of certain warrants issued in September 2018, from $25.00to $13.00per share. As a result, the warrant holder exercised warrants to purchase 88,889 shares of our common stock, resulting in aggregate gross proceeds of approximately $1,156,000. On January 26, 2021, we entered into securities purchase agreements with institutional accredited investors relating to an offering with respect to the sale of an aggregate of 3,278,688 shares of the Company's common stock at a purchase price of $21.35per share, for aggregate gross proceeds of $70,000,000. The closing of the offering was consummated on February 1, 2021. The purchase price per share represents the "Minimum Price" of the Company's Common Stock pursuant to Nasdaq Rule 5635(d) as of the date of execution of each respective securities purchase agreement. The Company and the investors participating in the offering also executed a registration rights agreement pursuant to which the Company agreed to file a registration statement covering the resale of the shares within sixty (60) days following the final closing of the offering. On February 28, 2022, we entered into securities purchase agreements with institutional accredited investors relating to a registered direct offering with respect to the sale of an aggregate of 4,674,454 shares of our common stock and pre-funded warrants to purchase an aggregate of 667,559 shares of our common stock, at a purchase price of $7.49per share. The aggregate gross proceeds were approximately $40,000,000. Readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected. Should this occur, we will need to seek additional capital earlier than anticipated in order to fund (1) further development and, if needed (2) expenses which will be required in order to expand manufacturing of our products, (3) sales and marketing efforts and (4) general working capital. Such funding may be unavailable to us on acceptable terms, or at all. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to the failure of our company. This would particularly be the case if we are unable to commercially distribute our products and services in the jurisdictions and in the timeframes we expect.
The following tables sets forth selected cash flow information for the periods indicated:
December 31, 20212020 $ $
Cash flows used in operating activities: (50,409,000) (17,736,000) Cash flows used in investing activities: (8,134,000) (1,622,000) Cash flows from financing activities: 65 766,000 27,548,000
Net cash used in operating activities
Net cash used in operating activities was
$50,409,000for the year ended December 31, 2021compared to $17,736,000used in operations for the same period in 2020. Cash used in operations increased mainly due to the increase in our marketing activities and the consolidation of each of Upright and WayForward, which we acquired in 2021.
Net cash used in investing activities
Net cash used for investing activities was
$8,134,000for the year ended December 31, 2021compared to cash used in investing activities of $1,622,000for the year ended December 31, 2020. Cash used in investing activities increased mainly due to the repayment of a loan we made to Upright, the acquisition of WayForward and cash acquired as part of the acquisition of each of Upright and WayForward.
Net cash provided by financing activities
Net cash provided by financing activities was
$65,766,000for the year ended December 31, 2021compared to $27,548,000for the year ended December 31, 2020. During the year ended December 31, 2021, we raised net proceeds in an amount of approximately $65,766,000mainly through our January 2021offering. 61 Table of Contents Contractual Obligations
Set forth below is a summary of our current obligations as of
December 31, 2021to make future payments due by the period indicated below, excluding payables and accruals. We expect to be able to meet our obligations in the ordinary course. Operating lease obligations are for motor vehicle and real property leases which we use in our business. Purchasing obligations consists of outstanding purchase orders for materials and services from our vendors. Payments due by period (In U.S. dollars thousands) Contractual Obligations Total Less than 1 year 1-3 years Over 4 years Operating Lease Obligations $ 846$ 495 $ 351$ - Purchasing Obligations 12,190 12,190 - - Total contractual cash obligations $ 13,036$ 12,685 $ 351$ - Contingencies
We account for our contingent liabilities in accordance with ASC 450 “Contingencies”. A provision is recognized when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Currently, we are not a party to any ligation that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.
Recently issued and adopted accounting pronouncements
September 2016, the Financial Accounting Standards Board(the "FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. For the Company, the amendments in the update were originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non- SECreporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.
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