After receiving approval for selling its device in the US, medical device company LabStyle Innovations Corp. (OTCQB: DRIO), seeks to raise capital, and to upgrade its stock from the Nasdaq OTC market. The company, which has developed and sells a device called Dario for monitoring blood sugar levels using a smartphone, has a market cap of $20 million, and seeks to raise $11.5 million. For the purposes of calculating commissions, the company stated in its prospectus the possibility of raising more than double that amount - $23.8 million - but its intention is to make do with $11.5 million. According to the prospectus filed by the company, it will raise the funds through an offering of shares and warrants. The underwriters are Rodman & Renshaw and Joseph Gunnar.
Caesarea-based LabStyle was founded in 2010. It became a public company in 2013 when it listed for over-the-counter trading, and later raised $10 million in the US at a valuation of $51 million. Since hitting a low in late 2014, the company's share price has jumped by more than 200%. Nevertheless, in comparison with the price when it listed on Nasdaq, the stock is down 97%.
The largest shareholder in LabStyle before the offering is former Psagot brokerage vice president David Edery's Dicilyon Consulting and Investment, with 26.9%; and Shmuel Farhi, with 18.4%. The other major shareholders in the company are mainly its senior managers, including CEO Oren Fuerst, CFO Zvi Ben-David, and director Prof. Richard Stone.
LabStyle has earmarked the funds to be raised for expanding its production capacity, further development of its software, and sales and marketing efforts in the US and other markets. A month ago, the company received FDA approval for selling its product in the US, in a fast-track procedure for approving medical devices. Among the investment risks that the company lists in its prospectus are its high dependence on a single product and on the acceptance of that product by the market, and competition from companies with much greater resources such as Abbott Laboratories, Bayer, Johnson & Johnson, Roche, and Sanofi.
At present, the company is still posting negative cash flow on its activity. At the end of the third quarter of 2015 it had $1.9 million cash, and its financial statements carried a going concern qualification. At the end of 2014 it started to post revenue, which totaled $515,000 in the first nine months of 2015. It made a net loss in that period of $5.5 million, compared with $9.3 million in the corresponding period of 2014.
Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2016
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