scr.zacks.com 111 North Canal Street, Chicago, IL (DRIO-OTCQB) UPDATE ZACKS ESTIMATES

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1 Small-Cap Research November 20, 2013 Jason Napodano, CFA scr.zacks.com 111 North Canal Street, Chicago, IL Labstyle Innovations Corp. DRIO: Soft Launch For Dario Device Expected Early Next Year Current Recommendation Buy Prior Recommendation Date of Last Change 05/14/2013 Current Price (11/20/13) $2.00 Target Price $5.00 (DRIO-OTCQB) UPDATE LabStyle Innovations (DRIO) plans the launch of its Dario Diabetes Management application software on the ios platform on December 12, The launch of the software App in the Android platform is expected during the first quarter The launching of the App is a prelude to the launching of the Dario device, also scheduled for the first quarter With the roll-out now finally nearing fruition, we expect better times ahead of the stocks. We remain big fans of both the Dario application and device, and despite recent deals and model revisions, we remain optimistic on the story. We believe the shares are cheap, and see $5 as realistic in 2014 if the company can execute on its business plan without the need for extensive new capital. SUMMARY DATA 52-Week High $ Week Low $2.00 One-Year Return (%) Beta Average Daily Volume (sh) 54,738 Shares Outstanding (mil) 20 Market Capitalization ($mil) $40 Short Interest Ratio (days) Institutional Ownership (%) 0 Insider Ownership (%) Annual Cash Dividend $0.00 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2013 Estimate P/E using 2014 Estimate Risk Level Type of Stock Industry ZACKS ESTIMATES, Med Instruments Revenue (in millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) A 0 A 0 A 0 A 0 A A 0 A 0 A 0 E 0 E E E Earnings per Share (EPS is operating earnings before non recurring items) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) $0.06 A -$0.07 A -$0.25 A -$0.08 A -$0.46 A $0.35 A -$0.29 A -$0.17 A -$0.21 E -$0.99 E $0.71 E 2015 $0.40 E Copyright 2013, Zacks Investment Research. All Rights Reserved.

2 WHAT S NEW The DARIO Device Launch On September 23, 2013, LabStyle Innovations Corp. (DRIO) announced the receipt of CE Mark approval to market the Dario smartphone-based diabetes management system in 32 countries across Europe as well as in certain other countries worldwide. The initial roll-out of the Dario device will take place in countries where management has signed distribution partners. This includes launching the device in The U.K., and Belgium under the company s exclusive distribution agreement with Farla Medical, Inc. in Italy under an exclusive distribution agreement with Harmonium Pharma, and in New Zealand with recent distribution partner, InnoMed Ltd. Management expects these launches to take place, along with a soft roll-out in New Zealand and Australia, in the first quarter Between the U.K., Belgium, and Italy, there are an estimated 7.5 million diabetics the company plans to target with the all-in-one Dario device. We estimate Australia and New Zealand account for another roughly 2.0 million diabetics that will have access to the Dario device under this initial roll-out phase. The goal of this initial soft launch of the product in the U.K., Belgium, and Italy is to collect customer feedback and then refine the longerterm roll-out strategy. Once the strategy has been refined, we are expecting new exclusive distribution agreements for large-market opportunity countries in Europe, including Germany and France, to be signed in The company is also actively pursuing third-party reimbursement in these key target geographies in Europe, which it expects to be in place for the soft launch to occur in the coming months. LabStyle also plans to accelerate its ongoing efforts to prepare and file with the U.S. FDA 510(k) application for marketing approval of the Dario device in the U.S., with additional regulatory filings planned for Asia and South America. We believe the U.S. 510(k) application is on track for filing before the end of the year. This application would include both the device and software application (Class-2 filing). We believe the company may also initiate a separate filing for just the software application (Class-1 filing) also before the end of the year. This creates two meaningful catalysts for the U.S. market in We ve made it pretty clear in previous reports that we think highly of the Dario device. Dario is of elegant design, with outstanding usability and accessibility by integrating a pocket-sized glucometer with a smartphone and mobile application. Dario combines a lancing mechanism, disposable strip cartridge, and glucose monitor with attached plug for insertion into a smartphone audio jack. It is the first and only product to date that we see that combines all three components, along with intuitive and valuable application software. We see the Dario glucometer and diabetes management system as revolutionary in design and function. Dario, along with sales of disposable test strips, mobile applications, and community and physician interaction software, represents a $500 million peak opportunity for LabStyle Innovations in each the U.S. and EU. Zacks Investment Research Page 2 scr.zacks.com

3 The App Emerges With respect to the Dario software application, the App has been available for beta-test download on the ios platform in Europe since April Only a handful of diabetes KOL s, technology experts, and focus groups have been using the App to date. This has allowed management to refine the App for success once it is officially made available to all users. In that regard, management expects to kick-off a formal launch of the Dario ios App on December 12, The free download will be available in the U.K., Australia, and New Zealand in December, with Italy and Belgium coming online in the first quarter The App will also be available on the Android platform in the first quarter The company has been talking more and more lately about its software application. LabStyle seems to be shifting from a pure device play with an all-in-one glucometer to a combination platform that includes both hardware and software. We believe this makes sense, and this business model has been validated by behemoths in technology such as Apple (AAPL) and Microsoft (MSFT) i.e. provide users with a sleek and elegant device, and then enhance the user experience by providing intuitive and engaging software. Above we note our affinity for the Dario device, but investors should keep in mind that software is where the userinterface and the Dario advantage really shines compared to dumb glucometers. The App is intended to be a fully customizable diabetes management platform aimed at promoting compliance and a more confident, advantageous and enjoyable way of living for people with diabetes. It is designed to capture the complete diabetic landscape from monitoring to therapy. In speaking to management for the preparation of this article, we got the sense that the company believes the App is going to be beneficial in the management of disease for diabetics that it alone can help control a patient s glucose level (A1c) by providing more effective management tools, food intake monitoring, and advice and recommendations on insulin dosing. Using the mobile App, customers will be able to easily, instantly and in real-time, check blood sugar levels using their smartphone and gain useful insights and views regarding what to do next. The software fully integrates with the stylish, all-in-one, pocket-sized, Dario blood glucose monitoring device, which comes complete with lancet, strips and a meter that connects to a smartphone, and a website application enabling patients, medical professionals and caregivers to access data and as a result drives proactive intervention. Over the longer term, the platform is expected to be able to integrate with insulin delivery and other diabetes devices. LabStyle s goal is to create an artificial diabetes brain as a springboard of services and products leading to a healthier and better life of diabetics worldwide. LabStyle s ADB will be an all-in-one mobile and cloud based diabetes management system with a glucose measurement device, data capture and analytics, sharing, and social features. We are eagerly awaiting new products and services here. For example, in April 2013, the company signed a non-binding memorandum of understanding with a large, multispecialty academic medical center to advance the development of clinical diagnostics utilizing smartphones. Under the framework agreed to in the memorandum, LabStyle and the academic center will leverage respective expertise to advance the development of medical Zacks Investment Research Page 3 scr.zacks.com

4 devices and software utilizing smartphones for the personal monitoring of blood glucose and blood coagulation. The center will bring biomedical, clinical and commercialization expertise. LabStyle will bring intellectual property, software development and business development expertise. Back in May 2013, we noted that the company was pursuing new patent applications related to the monitoring of blood glucose coupled with a smartphone application and cloud-based data collection and storage services. We believe the company is looking to expand beyond blood glucose monitoring into things like urine and saliva as well. Beyond diabetes, potential applications include detection of infectious diseases (such as HIV), or measuring things like triglycerides or cholesterol levels. We expect patent applications in this regard shortly....the Ecosystem... LabStyle plans to make the App available for free download. The goal is to provide a better diabetes management platform for insulin-dependent and non-dependent diabetics, and bring these patients into what we refer to as the Dario ecosystem. Once within the ecosystem, patients generate revenue by add-on services under the typical freemium business model most software applications apply, or by converting a percent of the free App downloaders over to full Dario device users. Once a patient gets the Dario device and comes on the fully-integrated Dario platform, revenues are generated by the sale of test-stripes or software enhancements. Management at LabStyle expects to sign licensing agreements with insurance companies and diabetes healthcare providers to help drive both users to the App and device, but also generate revenues outside of just selling test stripes alone. Besides the elegant design and convenience of the Dario device and sales that we expect the company to be able to generate from its proprietary test strips, we believe the ecosystem that LabStyle seeks to create around Dario models what Apple has done with itunes. The Dario application, free with the device, is superior to almost all other diabetes applications we've seen. It offers the ability to rapidly assess results, sync and log the data, share with physicians, pharmacists, family and seamlessly move between smartphone, tablet and PC. The App even provides feedback on diet and exercise, as well as provides personalized recommendations for insulin dosing. Similar to users embracing the ios, Android, or Windows platform for their PC or smartphone experience, we believe once a user embraces the Dario ecosystem, LabStyle will be able to monetize each patient and revenues turn into annuity payments. All the while that Dario is measuring blood glucose and providing personalized recommendations back to the user, the application is capturing, analyzing and storing important related information for potential use by patients, physicians, clinical investigators and pharmaceutical companies. Shortly after the launch, we believe LabStyle will have the ability to collect and analyze blood glucose monitoring data from hundreds of thousands of patients with real-world experience. The impact here should not be ignored. With data comes power, and the ability to monetize data through commercial or clinical partnerships provides a meaningful opportunity to the company. We can see LabStyle partnering with biopharmaceutical companies running Phase 2 or Phase 3 clinical trials on new therapeutic agents, or with clinical research organizations (CROs) managing trials for pharma or medical device companies, or with food or nutrition companies making claims on their products. Each partnership provides a revenue opportunity to LabStyle through engaging software application licenses or by placing Dario devices and selling test stripes or both! Zacks Investment Research Page 4 scr.zacks.com

5 Conclusion In November 2013, LabStyle reported financial results for the third quarter Net loss in the quarter totaled $3.5 million, or $0.17 per share. However, we note operating burn in the quarter totaled only $2.5 million, as the company record several non-cash expenses, including depreciation expense, revaluation of outstanding warrant liability and stock-based compensation. LabStyle exited the September quarter with $4.5 million in cash and cash equivalents. Management believes the current cash position is enough to fund operations into March The plan is to get initial feedback from the soft commercial launch of Dario in the U.K, Belgium, Italy, and then refine the strategy for a full launch in Europe later in the year. We believe additional capital is required to execute on this plan. We believe LabStyle has developed a novel platform for diabetes management that includes the most advanced and elegant all-in-one glucometer on the market paired with cutting-edge integrated software that provides multiple opportunities for revenue generation over the next few years. These opportunities include the sale of proprietary diabetes test stripes that work only with the Dario device, enhanced services and solutions with the software application, licensing of the technology to major players in diabetes care, including insurance and biopharmaceutical companies, and partnerships that take advantage of the Dario ecosystem. We see LabStyle as attractively valued given the sizable revenue opportunity and number of catalysts on the near-term horizon. Catalysts include the filing of the U.S. 510(k) application before the end of the year, and launching of the App and device in Europe in the first quarter Zacks Investment Research Page 5 scr.zacks.com

6 PROJECTED INCOME STATEMENT LabStyle Innovations Corp. Income Statement LabStyle Innovations Corp A Q1 A Q2 A Q3 A Q4 E 2013 E 2014 E 2015 E DARIO Revenues $0 $0 $0 $0 $0 $0 $20.9 $75.9 YOY Growth Other Revenues $0 $0 $0 $0 $0 $0 $0 $0 YOY Growth Total Revenues $0 $0 $0 $0 $0 $0 $20.9 $75.9 YOY Growth 100.0% CoGS $0 $0 $0 $0 $0 $0 $4.4 $16.4 Product Gross Margin % 78% R&D $1.5 $0.7 $1.4 $1.1 $1.2 $4.4 $6.0 $7.5 % R&D % 10% SG&A $2.5 $2.4 $2.2 $2.2 $3.0 $9.7 $30.2 $44.0 % SG&A % 58% Operating Income ($4.0) ($3.1) ($3.6) ($3.2) ($4.2) ($14.1) ($19.7) $8.0 Operating Margin Interest & Other Income ($1.7) ($2.2) ($1.7) ($0.2) $0.0 ($4.1) $2.0 $4.0 Pre-Tax Income ($5.7) ($5.2) ($5.3) ($3.5) ($4.2) ($18.2) ($17.7) $12.0 Taxes & Other $0 $0 $0 $0 $0 $0 $0 $0 Tax Rate 0% 0% 0% 0% 0% 0% 0% 0% Net Income ($5.7) ($5.2) ($5.3) ($3.5) ($4.2) ($18.2) ($17.7) $12.0 Net Margin Reported EPS ($0.46) ($0.35) ($0.29) ($0.17) ($0.21) ($0.99) ($0.71) $0.40 YOY Growth Basic Shares Outstanding Source: Zacks Investment Research, Inc. Jason Napodano, CFA Copyright 2013, Zacks Investment Research. All Rights Reserved.

7 HISTORICAL ZACKS RECOMMENDATIONS DISCLOSURES The following disclosures relate to relationships between Zacks Investment Research ( ZIR ), Zacks & Company (ZCO ) and Zacks Small-Cap Research ( Zacks SCR ) and the issuers covered by the Zacks SCR analysts in the Small-Cap Universe. ZIR or Zacks SCR Analysts do not hold or trade securities in the issuers which they cover. Each analyst has full discretion on the rating and price target based on their own due diligence. Analysts are paid in part based on the overall profitability of Zacks SCR. Such profitability is derived from a variety of sources and includes payments received from issuers of securities covered by Zacks SCR for non-investment banking services. No part of analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in any report or blog. ZIR and Zacks SCR do not make a market in any security nor do they act as dealers in securities. Zacks SCR has never received compensation for investment banking services on the small-cap universe. Zacks SCR does not expect received compensation for investment banking services on the small-cap universe. Zacks SCR has received compensation for non-investment banking services on the small-cap universe, and expects to receive additional compensation for non-investment banking services on the small-cap universe, paid by issuers of securities covered by Zacks SCR. Non-investment banking services include investor relations services and software, financial database analysis, advertising services, brokerage services, advisory services, investment research, and investment management. Additional information is available upon request. Zacks SCR reports are based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed by Zacks SCR Analysts are subject to change. Reports are not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. ZCO and Zacks SCR are separate legal entities. ZCO is U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments through ZCO. Zacks SCR uses the following rating system for the securities it covers. Buy/Outperform: The analyst expects that the subject company will outperform the broader U.S. equity market over the next one to two quarters. Hold/Neutral: The analyst expects that the company will perform in line with the broader U.S. equity market over the next one to two quarters. Sell/Underperform: The analyst expects the company will underperform the broader U.S. Equity market over the next one to two quarters. The current distribution of Zacks Ratings is as follows on the 1028 companies covered: Buy/Outperform- 15.3%, Hold/Neutral- 77.2%, Sell/Underperform 6.3%. Data is as of midnight on the business day immediately prior to this publication. Copyright 2013, Zacks Investment Research. All Rights Reserved.