Ladies and gentlemen, thank you for standing by. Welcome to the DarioHealth Corporation's Second Quarter 2017 Earnings Conference Call. All participants are presently in listen-only mode, following management's prepared remarks instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. By now you should have received all the company's press release. If you have not received it, please visit the Investor Relations section of DarioHealth website at www.mydario.com or contact the Investor Relations team of Hayden IR. I would now like to turn the call over to Stephen Hart of Hayden IR. Mr. Hart, would you please begin.

Thank you, operator. I'd like to welcome everyone to DarioHealth’s second quarter 2017 earnings call. Hosting the call today are Erez Raphael, Chief Executive Officer, and Zvi Ben-David, Chief Financial Officer. Before I turn the call over to management, I’d like to remind everyone that this conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. DarioHealth does not assume any obligation to update that information. Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand and the competitive nature of DarioHealth’s industry as well as other risks identified in the documents that are filed with the SEC. In addition, certain non-GAAP financial measures will be discussed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company’s current performance. Management believes the presentation of these non-GAAP financial measures are useful to investors understanding and assessment of the company’s ongoing core operations and prospects for the future. And with that, I’d like to now introduce Erez Raphael, Chief Executive Officer. Erez, the call is yours.

Thanks, Stephen. Good morning everyone and welcome to DarioHealth’s second quarter 2017 earnings call. Thank you all for joining us this morning. During the second quarter we were managing to deliver record quarterly revenue of $1.2 million and we are proud that we managed to achieve a milestone that we will plan to achieve in this quarter. We managed to ramp up our consumable by 70% to 75% of the quarterly revenue delivered by the company. The gross profit is 29.8%. It is as a result mainly of consumable sales. We managed also to reduce the burn rate. It was very important for us to show the investors that we can in parallel to growing the revenue by 20% we also managed to reduce the burn rate by 11%, by almost $350,000 and this is despite the fact that we had to put some budget into a clinical study that was done in order to achieve the clearance of the Android by the FDA. In addition, we managed also to get few agreements with third parties that helped us get insurance coverage in the States. It means that in addition to the Android clearance and the insurance coverage our ability to access users in the U.S. is much higher than what we had in the last few quarters. So practically we have much more access to users as of the next few months. So the clearance of the Android happened a few weeks ago we announced on that and by early September we are going to start to ship products to Android users in the U.S. So I think that these two milestones of insurance and the Android clearance will help us accelerate the growth in the revenues and in addition the launch that we are planning in Germany would…

Thank you, Erez and good morning to all our guests on the call. During the second quarter we sold more than 8000 Dario glucose monitoring systems in the U.S. Revenue for the three months ended June 30, 2017 was $1,210,000 an 81% increase over the $669,000 for the three months ended June 30, 2016 and 20% sequential increase from the first quarter of 2017. The increase in revenues is mainly a result of continuous market penetration into the U.S. and Australia. Revenues were derived mainly from the sales of Dario Components, including the smart meter as well as direct sales to consumers located mainly in the U.S. and Australia through our online store and through distributors. Gross profit of $360,000 was recorded in the second quarter offended June 30, 2017 an increase of $517,000 compared to a gross loss of $157,000 in the second quarter of 2016. This represents a gross profit of [29.8%] [ph] as a result of the increase in quantities sold and higher average sale prices. Research and development expenses increased by $700,000 or 127% to $1.2 million for the three months ended June 30, 2017 compared to $500,000 for the three months ended June 30, 2016. This increase was mainly due to increase in salaries, stock-based compensation and costs associated with clinical trials that Erez mentioned earlier. Sales and marketing expenses increased by $1.1 million, or 93%, to $2.2 million for the three months ended June 30, 2017 compared to $1.1 million for the three months ended June 30, 2016. These increases were mainly due to our sales and marketing activities in the United States and Australia, an increase in costs of online marketing campaigns, the cost related to marketing consultants and the costs associated with subcontractors, employee payroll and stock-based compensation. Operating loss for the…

Thanks, Zvi. So as you can see and if you remember previous calls that we were communicating with the market. We put some objectives to get clearances, to get insurance coverage, clearances by the FDA. We achieved the milestones, it’s very important for us to build this relationship with our investors and to show that we are executing on what we are promising. So, I am glad that the recent quarter and the last few weeks were successful with the insurance coverage, the Android, and I also am very happy about the growth in the sales and also in the reduction in the burn rate. Over time, we went to decrease our dependency on fund raising as much as we can and to be able to create a sustained business. In parallel I think that the opportunity that we’re going to have also on the B2B side especially in the U.S. is very exciting. Just after the Android clearance we got a lot of additional leads, so I think it will be possible for us to close more deals with partners that will use our platform to implement their coaching and capabilities. So I do see a lot of opportunity in delivering and overall disease management platform and not just selling device and consumables which is our overall objective to take the market to overall disease management. I just want to give you some kind of few numbers on the overall macro of digital health. In the first half of 2017 the overall investment into digital health was $8.68 billion. Just it is almost 90% of the overall investment that was done in overall 2016. The overall investment into digital health in 2016 was $9.5 billion. And I think that it tells the whole story about the industry. We are…

Thank you. The floor is now open for questions. [Operator Instructions] And we have our first question from Ben Haynor from Aegis Capital.

Good morning, gentlemen, thanks for taking the questions. First from me, congrats on the U.S. FDA clearance for Android. I guess the question is have you gotten that out there yet and any commentary you can provide on what the reception has been if so?

Yes, thanks Ben for the question. We just got the clearance. We are working on the labeling and the packaging of the solution according to the FDA requests. So the launch is going to be early September, so we don’t have the feedback from users yet. However, I want to remind you that we are already selling an Android solution in Australia, Canada, UK, Italy. So, we do know that we have a very good solution, very stable solution. We do know the behavior of Android users in comparison to Apple users, so we know what to expect and we also know about a lot of users that have approached us in the last year since we launched the Apple in the states, so we also have significant amount of leads that are waiting for the solutions. So, the real feedback from the U.S. market will not happen before September when we launch.

Okay, that’s definitely helpful. And then it sounds like R&D ticked up as you are gone here for the Android approval, should we expect that to fall back down to similar levels that you saw in Q1 and perhaps throughout last year?

So, speaking about the numbers of the FDA approvals for the Android including the insurance and so on, it’s going to be reflected partially in Q3, but fully in Q4 and into next year. So, you know if you are looking on the overall growth in sales quarter-over-quarter we have much more access, so I think we can be even more aggressive in terms of growing the revenues percentage wise as we move forward to Q4 and Q1 next year.

Okay and then do you expect the research and development expense to drop down after the step up in Q2, now that you have the Android clearance?

Yes, I think in general we invested in the last two years a lot into clinical studies. The clinical studies were done separately for Android and for iOS, it was done also for Australia and France, so the company invested significant amount of money through R&D and we are going to see a drop in these expenses as we move forward. Also, we don’t have too much to invest into hardware which is relatively expensive, so we are just investing into R&D for the software side which is comparing to clinical studies and hardware is much more cheaper. So practically I think that it makes sense that investors will see a reduction in the R&D expenses.

Okay, great, thank for taking the questions gentlemen.

Thanks, Ben.

[Operator Instructions] Our next question comes from Mark Lanier with Pegasus Capital. Mark state your question.

Congratulations on the quarter. I have two questions. One, could you discuss a little bit more the challenge and opportunity you’re dealing with insurance companies in the United States? And what the relative concentration is in terms of lives covered and what your thoughts are on how you extend the successes you've had so far to more insurance coverage in the United States? That would be helpful, thank you.

Yes, so hi Mark. Yes, so there are two paths here when talking about payers, one is insurance companies and here we signed the agreement with the three third parties that are getting us coverage. So, we are not fully covered in the states yet, but we have access to 30% to 50% of the insurance companies in the U.S. through the third party. So, practically these insurers are looking and are covering the test strips for their patients. So this is one path. The other path that is under payers is what we are calling self insured employers or those that have their interest or the incentive to provide the patient a solution that is much long term. It is the solution that helped improve clinical outcomes and are very interested in a very cost effective solution because for employers and having a solution that will prevent for their employees cardiovascular diseases and progress of their clinical condition this is something that is extremely important for them. And this is a second opportunity. And this opportunity at the moment we are doing it with a partner. The first partner that we signed an agreement with is CCS Connect where we are going to approach together employers and that Dario is going to provide the API, the platform, the device, the test strips and CCS Connect are going to provide the coaching services and in combination of coaching services on the fully digital platform plus the device and the test strips you’re going to get a solution that is, that is very, very value driven for the employers. And we think that the first opportunity of insurance is a good opportunity, but the second one of self insured employers and those that are looking into solutions that are more value driven, this is where we have also an opportunity, even bigger opportunity and we already have in our pipeline at least another three partners that we are planning to sign an agreement with in order to be able to approach these employers. And practically DarioHealth we're trying to operate in a lean approach, so we don't have a whole navy of sales reps that will be able to approach all the payers in the States and this is why we’re working with partners at this stage.

That's very helpful. My next question has to do with the challenge and difficulty of trying to look at 2018 gross margins given the transition the company is going through in terms of multiple markets and launch as well as reduced R&D revenues, hardware and clinical trials, they don’t all have to do with gross margin, but there's a lot of transition anticipated in the company over the course of the next six to twelve months. How should we be thinking about gross margin in 2018, what are reasonable ranges and what the non-obvious key factors are that might influence gross margin?

Yes, so in practice the company has got I think significant experience in how to earn the B2C, how to sell directly to users and through digital marketing and so in practice we think that we are very predictable aligning this business model. And I think that given the fact that we have more access and we are running also on android now with also ability to provide users the consumable and the insurance coverage we can be even more predictable and we think that we're going to continue the grow this year, so if I need to plan the sales for 2018 we feel very comfortable with the B2C and the continuous growth even in a more aggressive way. The B2B is something that we just signed the first contract, but we have a lot of faith that will help us also increase the sale in this area. On top of all that when looking on the overall profitability and the gross margins, I think that also already in this quarter we show that we, once we are ramping up the sales of test strips we are improving the margins. Practically and we're not just counting on the test strips and the consumables. In order to get really good gross margins we need also to sell the other elements on top of the platform. Number one is the coaching that is the first stage it's being done with partners, but also partners are paying for licensing and API. So if I would have to think about us purely as a device company was consumables then the growth of the margins will go up, but not in the way that DarioHealth would like to see it. But given the fact that we have the platform and we're going to provide the APIs and we're going to provide the coaching services and we're going to provide also insight that will help our users by content and what we are calling premium on top of the applications, this is where investors will be able to see that the user base that we built in a combination with additional up-sell that some of them are digital will help improve the gross margins of the company. And this is why I'm always telling investors that DarioHealth is a software company that operate as a company that has a medical device as opposed to a medical device company that develop software and I think it makes a very big difference.

Finally if I may slip in one last question which has to do what you've seen or particularly want to note on the competitive front over the last three months or the development of further attention to personalize self controlled diabetic and data, but as you look at the landscape, both competitively in terms of as well as key markers or influencing factors over the last three months what would you highlight?

I'd highlight the fact that an application company was acquired for $100 million by [indiscernible]. I'd highlight the fact that we've seen another company that have 100% data capturing and I think that Dario and this company one of the only in the market that capture 100% in real time and so this company raises even significant amount of money and they’re managing to roll their sales in a very nice way. So I think that this is something that emphasize the potential of transforming the market from pure monitoring into disease management. I think that a lot of digital health companies are talking about personalization. I think that in a lot of cases also the big players are talking about personalization and I think that a lot of companies are forgetting that the first step to personalization goes through a very good user centric solution and very good engaging solution. And for most of them they don't have a user centric solution so, they can tell, that they cannot talk about personalization. I think that we are doing the right things and I think that we also need to move forward very fast and capture all the opportunities out there.

Thank you and good luck.

Thanks Mark.

[Operator Instructions] And there appears to be no further questions. I'll turn back the call to Erez Raphael.

I would like to thank everyone for attending this call today and I’m looking forward to meet you again in November in our Q3 results. Thanks.

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.