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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to_____
Commission File Number 001-36533

MEDAVAIL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware90-0772394
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
4720 East Cotton Gin Loop, Suite 220, Phoenix, Arizona
85040
(Address of principal executive offices)(Zip Code)
+1 (905) 812-0023
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareMDVLThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 8, 2022, there were 80,045,696 shares of the registrant’s common stock outstanding.
1





MedAvail Holdings, Inc.
Form 10-Q
For the Three and Nine Months Ended September 30, 2022

TABLE OF CONTENTS

Page
PART I
Item 1.Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations and Comprehensive Loss 6
Condensed Consolidated Statements of Shareholders' Equity 7
Condensed Consolidated Statements of Cash Flows 8
Notes to Condensed Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures about Market Risk
Item 4.Controls and Procedures
PART II
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures


2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
These forward-looking statements include, but are not limited to, statements about:
our plans to modify our current products, or develop new products;
the expected growth of our business and organization;
our expectations regarding the size of our sales organization and expansion of our sales and marketing efforts;
our ability to retain and recruit key personnel, including the continued development of a sales and marketing infrastructure;
our ability to obtain and maintain intellectual property protection for our products;
our ability to expand our business into new geographic markets;
our compliance with extensive Nasdaq requirements and government laws, rules and regulations both in the United States and internationally;
our estimates of expenses, ongoing losses, future revenue, capital requirements and our need for, or ability to obtain, additional financing;
our ability to identify and develop new and planned products and/or acquire new products;
the expectations regarding the impact of the COVID-19 pandemic on our business;
existing regulations and regulatory developments in the United States, Canada and other jurisdictions;
the impact of laws and regulations;
our financial performance;
the period over which we estimate our existing cash, cash equivalents and available-for-sale investments will be sufficient to fund our future operating expenses and capital expenditure requirements;
our anticipated use of our existing resources;
developments and projections relating to our competitors or our industry; and
the impact of general market and macroeconomic conditions, including inflation and events including the outbreak of war in Ukraine,
on our business.

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
3


You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to the Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

4


PART I
Item 1. Financial Statements
MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share amounts)

September 30,December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$27,196 $19,689 
Restricted cash676 400 
Accounts receivable (net of allowance for doubtful accounts of $186 thousand for September 30, 2022, $66 thousand for December 31, 2021)
2,262 1,189 
Inventories6,401 3,916 
Prepaid expenses and other current assets2,863 2,191 
Total current assets39,398 27,385 
Property, plant and equipment, net6,370 5,692 
Intangible assets, net1,580 2,300 
Right-of-use assets2,270 2,538 
Other assets233 228 
Total assets$49,851 $38,143 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$2,006 $2,477 
Accrued liabilities1,383 1,530 
Accrued payroll and benefits2,869 2,733 
Deferred revenue70 83 
Current portion of lease obligations728 682 
Total current liabilities7,056 7,505 
Long-term debt, net9,751 9,538 
Long-term portion of lease obligations
1,738 2,027 
Total liabilities18,545 19,070 
Commitments and contingencies
Stockholders' equity:
Common shares ($0.001 par value, 300,000,000 shares authorized, 80,045,696 and 32,902,048 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
80 33 
Warrants
11,148 1,373 
Additional paid-in-capital255,642 216,685 
Accumulated other comprehensive loss(6,928)(6,928)
Accumulated deficit(228,636)(192,090)
Total stockholders' equity31,306 19,073 
Total liabilities and stockholders' equity$49,851 $38,143 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per-share amounts)


Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue:
Pharmacy and hardware revenue$11,266 $5,659 $31,210 $14,165 
Service revenue195 133 549 684 
Total revenue11,461 5,792 31,759 14,849 
Cost of products sold and services:
Pharmacy and hardware cost of products sold10,113 5,539 28,827 13,744 
Service costs56 67 221 426 
Total cost of products sold and services10,169 5,606 29,048 14,170 
Operating expense:
Pharmacy operations4,392 3,750 11,970 9,428 
General and administrative6,087 5,320 18,729 16,733 
Selling and marketing2,126 1,909 6,738 5,056 
Research and development178 232 952 601 
Total operating expense12,783 11,211 38,389 31,818 
Operating loss(11,491)(11,025)(35,678)(31,139)
Other gain (loss), net 7  206 
Interest income 7 1 74 
Interest expense(315)(260)(845)(328)
Loss before income taxes(11,806)(11,271)(36,522)(31,187)
Income tax expense (2)(24)(2)
Net loss and comprehensive loss$(11,806)$(11,273)$(36,546)$(31,189)
Net loss per share - basic and diluted$(0.15)$(0.34)$(0.60)$(0.96)
Weighted average shares outstanding - basic and diluted80,045,99532,750,83160,947,51132,580,199

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
(in thousands, except per share amounts)

Common Shares
Preferred Shares (1)
WarrantsAdditional Paid-in-CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmountSharesAmount
Balance at June 30, 202270,609,972 $71  $ $8,876 $247,598 $(216,830)$(6,928)$32,787 
Net loss— — — — — — (11,806)— (11,806)
Issuance of common shares 9,411,765 9 — — — 9,751 — — 9,760 
Issuance of warrants — — — — 2,272 (2,272)— —  
Shares issued for vested restricted stock units23,959 — — — — — — — — 
Share-based compensation— — — — — 565 — — 565 
Balance at September 30, 2022
80,045,696 $80  $ $11,148 $255,642 $(228,636)$(6,928)$31,306 
Balance at December 31, 2021
32,902,048 $33   $1,373 $216,685 $(192,090)$(6,928)$19,073 
Net loss— — — — — — (36,546)— (36,546)
Issuance of common shares 47,058,820 47 — — — 46,914 — — 46,961 
Issuance of warrants — — — — 9,775 (9,775)— —  
Shares issued for vested restricted stock units30,833 — — — — — — — — 
Issuance of common shares under employee stock purchase plan53,995 — — — — 77 — — 77 
Share-based compensation— — — — — 1,741 — — 1,741 
Balance at September 30, 2022
80,045,696 $80  $ $11,148 $255,642 $(228,636)$(6,928)$31,306 
Balance at June 30, 202132,583,734$33 $ $1,485 $215,700 $(168,191)$(6,928)$42,099 
Net loss— — — — (11,273)— (11,273)
Exercise of warrants171,191— — (112)139 — — 27 
Share-based compensation— — — 365 — — 365 
Balance at September 30, 2021
32,754,925$33 $ $1,373 $216,204 $(179,464)$(6,928)$31,218 
Balance at December 31, 2020
31,816,02032  2,614 213,624 (148,275)(6,928)61,067 
Net loss— — — — (31,189)— (31,189)
Exercise of options144,101— — — 241 — — 241 
Exercise of warrants794,8041 — (1,241)1,391 — — 151 
Share-based compensation— — — 948 — — 948 
Balance at September 30, 2021
32,754,925$33 $ $1,373 $216,204 $(179,464)$(6,928)$31,218 

(1) $0.001 par value, 10,000,000 shares authorized for all periods presented.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net loss$(36,546)$(31,189)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant, and equipment891 928 
Amortization of intangible and leased assets2,141 877 
Bad debt and other non-cash receivables adjustments120 47 
Term loan discount amortization and interest accretion on debt213  
Impairment of lease asset(27) 
Share-based compensation expense1,741 948 
PPP loan forgiveness gain (161)
Changes in operating assets and liabilities:
Accounts receivable(1,193)398 
Inventory(3,354)(2,511)
Prepaid expenses and other current assets(672)772 
Accounts payable, accrued expenses and other liabilities(137)2,180 
Deferred revenue(13)42 
Operating lease liability due to cash payments(447)(505)
Net cash used in operating activities(37,283)(28,174)
Cash flows from investing activities:
Purchase of property, plant and equipment(804)(680)
Payment of security deposits(5)(45)
Purchase of intangible and other assets(1,088)(1,544)
Net cash used in investing activities(1,897)(2,269)
Cash flows from financing activities:
Proceeds from issuance of common shares, net46,961  
Proceeds from issuance of common shares upon exercise of options and warrants 392 
Proceeds from issuance of common shares upon exercise of employee stock purchase plan77  
Proceeds from debt 10,000 
Payment of debt issuance costs (624)
Repayment of debt (1,000)
Payments on finance lease obligations
(75)(46)
Net cash provided by financing activities46,963 8,722 
Net increase (decrease) in cash, cash equivalents and restricted cash7,783 (21,721)
Cash, cash equivalents and restricted cash at beginning of period20,089 57,996 
Cash, cash equivalents and restricted cash at end of period$27,872 $36,275 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8



MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended September 30,
20222021
Supplemental cash flow information:
    Cash paid for interest$603 $125 
Supplemental noncash investing and financing activities:
Inventory transferred to property, plant and equipment$869 $1,075 
Property, plant and equipment transferred to intangible assets$ $46 
Purchase of property, plant and equipment in accounts payable$21 $56 
Purchase of intangible assets in accounts payable$ $398 
Fair value of warrants issued upon closing of private placement$9,775 $ 
Lease liabilities arising from obtaining right of use assets:
Operating leases$206 $2,177 
Finance leases$73 $97 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9




MEDAVAIL HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
MedAvail Holdings, Inc., or MedAvail, or the Company, a Delaware corporation formerly known as MYOS RENS Technology, is a pharmacy technology and services company that has developed and commercialized an innovative self-service pharmacy, mobile application, and kiosk. The Company’s principal technology and product is the MedCenter, a pharmacist controlled, customer-interactive, prescription dispensing system akin to a “pharmacy in a box” or prescription-dispensing ATM. The MedCenter facilitates live pharmacist counseling via two-way audio-video communication with the ability to dispense prescription medicines under pharmacist control. The Company also operates SpotRx, or the Pharmacy, a full-service retail pharmacy utilizing the Company’s automated pharmacy technology.

NOTE 2 - GOING CONCERN
Relevant accounting standards require that management make a determination as to whether or not substantial doubt exists as to the Company's ability to continue as a going concern. If substantial doubt does exist, then management should determine if there are plans in place which alleviate that doubt. Since inception through September 30, 2022, the Company has continually incurred losses from operations which have been financed primarily by net cash proceeds from the sale of stock from private placements, the sale of redeemable preferred stock and debt. Net cash used in operating activities for nine months ended September 30, 2022 and 2021 was $37.3 million and $28.2 million, respectively. As of September 30, 2022, the Company had $27.2 million in cash and cash equivalents and an accumulated deficit of $228.6 million.

In April 2022, the Company completed a private placement, pursuant to which the Company received $40.0 million in gross proceeds, with an additional $10.0 million in gross proceeds received upon the second close that occurred on July 1, 2022, before deducting placement agent commissions and other offering expenses totaling $3.0 million. Additionally, the private placement included warrants, some of which may be callable at the Company’s option beginning on each of the 12 month and 24 month anniversaries of the warrant issuance dates and subject to the satisfaction of certain pricing conditions relating to the trading of the Company’s shares. See Note 11 for further information regarding the private placement warrants.

Due to the Company’s significant and ongoing cash requirements to fund operations, management determined that there is substantial doubt as to the Company’s ability to continue as a going concern. The Company added liquidity resources in 2021 through a senior secured term loan facility with Silicon Valley Bank as described in Note 8, pursuant to which the Company borrowed $10.0 million in aggregate initial term loans. Additionally, as referenced above, the Company raised $40.0 million and $10.0 million in gross proceeds through a private placement that closed in April 2022 and July 2022, respectively. There can be no assurance that the steps management is taking will be successful. If the Company is unable to raise additional capital in sufficient amounts or on acceptable terms, the Company may have to significantly reduce operations or delay, scale back or discontinue development and expansion plans. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s ultimate success will largely depend on continued development and deployment of MedCenter kiosks and SpotRx pharmacy operations and the ability to raise significant additional funding.

NOTE 3 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for unaudited interim financial information and in accordance with the rules of the Securities and Exchange Commission ("SEC") applicable to interim reports of companies filing as a smaller reporting company. Accordingly, the unaudited interim condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company's audited consolidated financial statements but does not include all disclosures required by GAAP for audited financial statements. In the opinion of the Company's management, the interim information includes all adjustments, which include normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The footnote disclosures related to the interim financial information included herein are also unaudited. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, 2021 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission, or SEC on March 29, 2022, or the 2021 Form 10-K.
The preparation of financial statements in accordance with US GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Actual results could differ from those estimates. Estimates are used in accounting for,
10


among other things, revenue recognition, contract loss accruals, excess, slow-moving and obsolete inventories, product warranty accruals, loss accruals on service agreements, share-based compensation expense, allowance for doubtful accounts, depreciation and amortization and in-process research and development intangible assets, and impairment of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are deemed to be necessary.
Risks and uncertainties relating to COVID-19
The Company bases its estimates on the information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances including estimates of the impact of COVID-19. The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors, including but not limited to, the severity and duration of COVID-19, the extent to which it will impact the Company's clinic customers, employees, suppliers, vendors, and business partners. The Company assessed certain accounting matters that require consideration of estimates and assumptions in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s recoverability of, intangible and other long-lived assets including operating lease right-of-use assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s condensed consolidated financial statements in future reporting periods. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results could differ from these estimates and any such differences may be material to the Company’s financial statements.
Principles of consolidation
The unaudited condensed consolidated financial statements include the accounts of all entities controlled by MedAvail Holdings, Inc., which are referred to as subsidiaries. The Company's subsidiaries include MedAvail Technologies, Inc., MedAvail Technologies (US), Inc., MedAvail Pharmacy, Inc., and MedAvail, Inc. The Company has no interests in variable interest entities of which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated.
Reclassifications
During the fourth quarter of 2021, management reclassified certain operating expenses to reflect the costs attributable to pharmacy operations. Specifically, certain costs were reclassified from general and administrative expenses, to pharmacy operations expenses and selling and marketing expenses. This reclassification had no impact on the operating loss subtotal within the consolidated statements of operations and comprehensive loss. The effect of the reclassifications within the condensed consolidated statement of operations and comprehensive loss for 2021 are as follows (in thousands):
Three Months Ended September 30, 2021
Current presentationAs previously reportedChange
Pharmacy operations$3,750 $2,395 $1,355 
General and administrative5,320 6,805 (1,485)
Selling and marketing1,909 1,779 130 
$10,979 $10,979 $ 

Nine Months Ended September 30, 2021
Current presentationAs previously reportedChange
Pharmacy operations$9,428 $6,619 $2,809 
General and administrative16,733 19,941 (3,208)
Selling and marketing5,056 4,657 399 
$31,217 $31,217 $ 



11


NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Measurement of Credit Losses on Financial Statements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326)”- Measurement of Credit Losses on Financial Instruments”, (“ASU 2016-13”), supplemented by ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses”, (“ASU 2018-19”). The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 became effective for Public Business Entities who are SEC filers for fiscal years beginning after December 15, 2019, other than smaller reporting companies, all other public business entities and private companies, with early adoption permitted. ASU No. 2016-13 will be effective beginning in the first quarter of the Company's fiscal year 2023. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements and related disclosures.
In June 2022, the FASB issued ASU No. 2022-03, “Fair Value Measurement (Topic 820)”- Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, (“ASU 2022-03”). The amendments in this update clarify the guidance in Topic 820. ASU 2022-03 becomes effective for Public Business Entities who are SEC filers for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. ASU No. 2022-03 will be effective beginning in the first quarter of the Company's fiscal year 2024. The Company has not yet completed its evaluation of the impact of this new guidance on its consolidated financial statements.

Recently Adopted Accounting Standards
There was no recently issued and effective authoritative guidance that is expected to have a material impact on the Company’s condensed consolidated financial statements through the reporting date.

NOTE 5 - EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period.
The following table presents warrants included in weighted average shares outstanding due to their insignificant exercise price, during the period from the date of issuance to the exercise date. After these warrants were exercised the related issued and outstanding common shares are included in weighted average shares outstanding:
SharesIssuance DateExercise Date
118,228May 9, 2018May 10, 2021
309,698February 11, 2020May 10, 2021
84,911June 29, 2020May 10, 2021
39,208November 18, 2020May 10, 2021
19,310November 18, 2020Outstanding
During the three and nine months ended September 30, 2022 and 2021, there was no dilutive effect from stock options or other warrants due to the Company’s net loss position. As of September 30, 2022 and 2021, there were 4.5 million and 2.9 million, respectively, of option awards outstanding that were not included in the diluted shares calculation because their inclusion would have been antidilutive. As of September 30, 2022 and December 31, 2021, there were 24.3 million and 0.7 million, respectively, of unexercised warrants that were not included in the diluted shares calculation.

12


NOTE 6 - FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
Fair Value Hierarchy
(in thousands)September 30, 2022Level 1Level 2Level 3
Assets:
Cash and cash equivalents$27,196 $27,196 $ $ 
Restricted cash676 676   
Total assets$27,872 $27,872 $ $ 
Fair Value Hierarchy
(in thousands)December 31, 2021Level 1Level 2Level 3
Assets:
Cash and cash equivalents$19,689 $19,689 $ $ 
Restricted cash400 400   
Total assets$20,089 $20,089 $ $ 
The carrying amount of the Company's term loan approximates fair value based upon market interest rates available to us for debt of similar risk and maturities. Refer to Note 8, Debt, for further information.

NOTE 7 - BALANCE SHEET AND OTHER INFORMATION
Restricted cash

The Company considers cash to be restricted when withdrawal or general use is legally restricted. During the nine months ended September 30, 2022, the Company recovered the $0.1 million restricted cash balance outstanding at December 31, 2021, that was held as a guarantee for certain purchasing cards. During the same period, pursuant to a Loan and Security Agreement with Silicon Valley Bank dated June 7, 2021 (see Note 8), the Company issued letters of credit to secure certain operating leases, and the Company is required to maintain a $0.7 million balance with the bank to secure the outstanding letters of credit, of which $0.3 million was issued in February 2022. Due to the nature of the deposit, the balance is classified as restricted cash. Restricted cash is included in the balance for cash, cash equivalents and restricted cash presented in the statements of cash flows.

Inventory
The following table presents detail of inventory balances:
September 30,December 31,
(in thousands)20222021
Inventory:
MedCenter hardware$2,464 $1,201 
Pharmaceuticals3,275 2,150 
Spare parts662 565 
Total inventory$6,401 $3,916 
Pharmaceutical inventory was recognized in pharmacy and hardware cost of products sold at $9.3 million and $5.0 million during the three months ended September 30, 2022 and 2021, respectively, and $26.4 million and $12.2 million during the nine months ended September 30, 2022 and 2021, respectively. MedCenter hardware was recognized in pharmacy and hardware cost of products sold at $0.01 million and $0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $0.2 million and $0.5 million during the nine months ended September 30, 2022 and 2021, respectively.
13


Prepaid expenses and other current assets

The following table presents prepaid expenses and other current assets balances:
September 30,December 31,
(in thousands)20222021
Prepaid expenses and other current assets:
Prepaid MedCenter inventory$2,204 $1,050 
Prepaid insurance292 509 
Other367 632 
Total prepaid expenses and other current assets$2,863 $2,191 

Property, plant and equipment, net
The following table presents property, plant and equipment balances:
Estimated useful livesSeptember 30,December 31,
(in thousands)20222021
Property, plant and equipment:
MedCenter equipment
8 years
$7,525 $5,875 
IT equipment
1 - 3 years
2,390 2,361 
Leasehold improvementslesser of useful life or term of lease980 880 
General plant and equipment
5 - 8 years
619 603 
Office furniture and equipment
5 - 8 years
538 394 
Vehicles
5 years
54 54 
Construction-in-process481 1,021 
Total historical cost12,587 11,188 
Accumulated depreciation(6,217)(5,496)
Total property, plant and equipment, net$6,370 $5,692 
Depreciation expense of property and equipment was $0.3 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively, and $0.9 million and $0.9 million for the nine months ended September 30, 2022 and 2021, respectively. Depreciation expense included in pharmacy and hardware cost of products sold was $0.03 million and $0.05 million for the three months ended September 30, 2022 and 2021, respectively, and $0.1 million and $0.1 million for the nine months ended September 30, 2022, and 2021, respectively.
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Intangible assets, net
The following table presents intangible asset balances:
September 30,December 31,
(in thousands)20222021
Gross intangible assets:
Intellectual property$3,857 $3,857 
Software5,321 4,475 
Website and mobile application583 583 
Total intangible assets9,761 8,915 
Accumulated amortization:
Intellectual property(3,857)(3,857)
Software(3,741)(2,175)
Website and mobile application(583)(583)
Total accumulated amortization(8,181)(6,615)
Total intangible assets, net$1,580 $2,300 
No intangible assets were purchased for the three months ended September 30, 2022. The Company purchased $0.7 million of intangible assets for the three months ended September 30, 2021, and $0.9 million and $1.9 million for the nine months ended September 30, 2022 and 2021, respectively.
Amortization expense of intangible assets was $1.3 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively, and are included in operating expenses.
The Company’s management team is evaluating its existing systems and software. If management were to determine that certain systems or software were to be replaced in order to achieve greater efficiencies, cost savings, or both, the estimated remaining useful life of some IT equipment and intangible assets may be reduced, resulting in higher depreciation and amortization expense, respectively.

Lessee leases
Balance sheet amounts for lease assets and leases liabilities are as follows:
September 30,December 31,
(in thousands)20222021
Assets:
Operating$2,110$2,376
Finance160162
Total assets$2,270$2,538
Liabilities:
Operating:
Current$632 $599 
Long-term1,673 1,947 
Finance:
Current96 83 
Long-term65 80 
Total liabilities$2,466 $2,709 
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The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s leases as follows:
September 30,December 31,
(in thousands)20222021
Operating leases:
Weighted-average remaining lease term (years)3.84.2
Weighted-average discount rate6.9 %6.9 %
Finance leases:
Weighted-average remaining lease term (years)1.81.5
Weighted-average discount rate8.6 %8.8 %
Maturities of operating leases liabilities as of September 30, 2022, are as follows, in thousands:
Remaining period in 2022$202 
2023755 
2024617 
2025534 
2026468 
202764 
Thereafter 
Total lease payments2,640 
Less: present value discount(335)
Total leases$2,305 
Maturities of finance lease liabilities as of September 30, 2022, are as follows, in thousands:
Remaining period in 2022$30 
202391 
202449 
20254 
Thereafter 
Total finance lease payments174 
Less: imputed interest(13)
Total leases$161 
Operating lease expenses were $0.2 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively, and $0.7 million and $0.7 million for the nine months ended September 30, 2022 and 2021, respectively.


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NOTE 8 - DEBT
The following table presents debt balances:
September 30,December 31,
(in thousands)20222021
Term loan10,162 10,070 
Term loan issuance costs, net(411)(532)
Total long-term debt, net$9,751 $9,538 
Term loan
The term loan bears interest at a floating rate equal to the greater of 7.25% or the Prime Rate plus 4.0% (10.25% at September 30, 2022). The term loan matures on April 1, 2026. Principal repayment will commence on May 1, 2024 in equal monthly installments of the outstanding loan balance through the maturity date.

NOTE 9 - INCOME TAXES
The Company incurred $0.02 million and zero of income tax expense for the nine months ended September 30, 2022, and 2021, respectively. The income taxes for the periods ended September 30, 2022, are primarily attributed to certain state taxes. The Company continues to be in a loss position as of September 30, 2022. The effective income tax rate in each period differed from the federal statutory tax rate of 21% primarily as a result of the ongoing losses.

As of September 30, 2022, the Company recorded a full valuation allowance against all of its net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the foreseeable future.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The Company has evaluated the impacts of this legislation to the financial statements but does not expect them to be material.

NOTE 10 - COMMITMENTS AND CONTINGENCIES
Legal
Following MYOS Rens Technology Inc.’s, or MYOS’s and MedAvail, Inc.’s, or MAI's, announcement of the execution of the Merger Agreement on June 30, 2020, MYOS received separate litigation demands from purported MYOS stockholders on September 16, 2020 and October 20, 2020, respectively seeking certain additional disclosures in the Form S-4 Registration Statement filed with the Securities and Exchange Commission on September 2, 2020, collectively, the Demands. Thereafter, on September 23, 2020, a complaint regarding the transactions contemplated within the Merger Agreement was filed in the Supreme Court of the State of New York, County of New York, captioned Faasse v. MYOS RENS Technology Inc., et. al., Index No.: 654644/2020 (NY Supreme Ct., NY Cnty., September 23, 2020), or the New York Complaint. On October 12, 2020, a second complaint regarding the transactions was filed in the District Court of Nevada, Clark County Nevada, captioned Vigil v. Mannello, et. al., Case No. A-20-822848-C, or the Nevada Complaint, and together with the New York Complaint, the Complaints, and collectively with the Demands, the Litigation.
The Demands and the Complaints that comprised the Litigation generally alleged that the directors of MYOS breached their fiduciary duties by entering into the Merger Agreement, and MYOS and MAI disseminated an incomplete and misleading Form S-4 Registration Statement. The New York Complaint also alleged MedAvail aided and abetted such breach of fiduciary duties.
MYOS and MAI believe that the claims asserted in the Litigation were without merit, and believe that the Form S-4 Registration Statement disclosed all material information concerning the Merger and no supplemental disclosure was required under applicable law. However, in order to avoid the risk of the Litigation delaying or adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, MYOS determined to voluntarily supplement the Form S-4 Registration Statement as described in the Current Report on Form 8-K on November 2, 2020. Subsequently, the Nevada Complaint and the New York Complaint were voluntarily dismissed. MYOS and MAI specifically deny all allegations in the Litigation and/or that any additional disclosure was or is required, and none of the Litigation remains currently pending.

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NOTE 11 - EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
On June 14, 2022, the Company’s stockholders approved an Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001, from 100 million shares to a new total of 300 million shares. The Restated Certificate was effective upon filing the Restated Certificate with the Secretary of State of the State of Delaware on June 15, 2022.
Private Placement
On March 30, 2022, the Company entered into a Securities Purchase Agreement, or Purchase Agreement, with certain purchasers thereto, or the Investors. Pursuant to the Purchase Agreement, the Company agreed to issue and sell to the Investors in a private placement, or the Private Placement, up to 47.1 million shares, or the Shares, of the Company’s common stock, and to issue warrants, or the Warrants, to purchase up to 23.5 million shares of common stock, or Warrant Shares. The Shares and the Warrants were sold at two closings as further described below, at a price per share of $1.0625.
Each Investor purchasing Shares in the Private Placement was issued a Warrant to purchase that number of Warrant Shares equal to 50% of the number of Shares purchased under the Purchase Agreement by such Investor. The Warrants have a per share exercise price of $1.25 and will be exercisable by the holder at any time on or after the issuance date of the Warrant for a period of five years. If the Warrants were exercised in full immediately after issuance by the Investors, the Company would receive additional gross proceeds of up to $29.4 million. In addition, the Warrant terms provide the Company with a call option to force the Warrant holders to exercise up to two-thirds of the warrant shares subject to each Warrant, with one-third of the Warrant Shares being callable beginning on each of the 12 month and 24 month anniversaries of the Warrant issuance dates, in each case until the expiration of the Warrants, and subject to the satisfaction of certain pricing conditions relating to the trading of the Company’s shares. If the Company were to exercise the contingent call options immediately after issuance, approximately $19.6 million in gross proceeds could be raised.
On April 4, 2022, the first closing of the Private Placement occurred, in which 37.6 million shares of common stock for $40.0 million in gross proceeds, before deducting placement agent commissions and other offering expenses, and Warrants exercisable for up to