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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 March 31, 2023
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 May 5, 2023, there were 80,523,932 shares of the registrant’s common stock outstanding.






MedAvail Holdings, Inc.
Form 10-Q
For the Three Months Ended March 31, 2023

TABLE OF CONTENTS

Page
PART I
Item 1.Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations and Comprehensive Loss
Condensed Consolidated Statements of Stockholders' Equity
Condensed Consolidated Statements of Cash Flows
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 within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, 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 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:

the impact of our decision to exit our pharmacy services business and related asset sales and reductions in force;
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;
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, the effect of inflationary pressure, including any impact of adverse developments affecting the financial services industry, such as those based on liquidity constraints or concerns 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. These forward-looking statements are 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 and in our Annual Report on Form 10-K filed
3


with the Securities and Exchange Commission, or SEC. 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.

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 this 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)


March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$18,796 $11,444 
Restricted cash676 676 
Accounts receivable207 404 
Inventories8,701 3,994 
Prepaid expenses and other current assets2,072 2,569 
Current assets from discontinued operations2,079 4,842 
Total current assets32,531 23,929 
Property, plant and equipment, net789 5,261 
Intangible assets, net425 451 
Right-of-use assets773 624 
Other assets30 30 
Long-term assets from discontinued operations1,166 2,837 
Total assets$35,714 $33,132 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Continued)
(Unaudited)
(in thousands, except share and per share amounts)

March 31, 2023December 31, 2022
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$898 $818 
Accrued liabilities592 552 
Accrued payroll and benefits1,240 1,379 
Deferred revenue275 152 
Current portion of lease obligations244 246 
Current liabilities from discontinued operations1,885 2,794 
Total current liabilities5,134 5,941 
Warrant liabilities 23,378  
Long-term debt, net1,428 4,798 
Long-term portion of lease obligations
590 441 
Long-term liabilities from discontinued operations1,015 1,128 
Total liabilities31,545 12,308 
Commitments and contingencies (Note 10)
Stockholders' equity:
Common shares ($0.001 par value, 300,000,000 shares authorized, 80,480,641 and 80,169,719 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively)
81 81 
Warrants
11,205 11,148 
Additional paid-in-capital256,847 256,229 
Accumulated other comprehensive loss(6,928)(6,928)
Accumulated deficit(257,036)(239,706)
Total stockholders' equity4,169 20,824 
Total liabilities and stockholders' equity$35,714 $33,132 


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

6


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


Three Months Ended March 31,
20232022
Revenue:
Hardware and subscription revenue$304 $165 
Service revenue316 100 
Total revenue620 265 
Cost of products sold and services:
Hardware cost of products sold245 81 
Service costs118 50 
Total cost of products sold and services363 131 
Other operating expenses:
General and administrative4,960 5,190 
Selling and marketing132 100 
Research and development176 258 
Total operating expense5,268 5,548 
Operating loss(5,011)(5,414)
Loss on issuance of warrants(10,424) 
Gain from change in fair value of warrant liabilities3,045  
Interest income1 1 
Interest expense(169)(251)
Net loss and comprehensive loss from continued operations(12,558)(5,664)
Discontinued operations:
Loss from discontinued operations(4,772)(7,358)
Net loss$(17,330)$(13,022)
Basic and diluted net loss per share:
Loss from continued operations$(0.16)$(0.17)
Loss from discontinued operations$(0.06)$(0.22)
Weighted average shares outstanding - basic and diluted80,270,49432,921,969

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

7


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

Common SharesWarrantsAdditional Paid-in-CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2022
80,169,719 $81 $11,148 $256,229 $(239,706)$(6,928)$20,824 
Net loss— — — — (17,330)— (17,330)
Shares issued for vested RSUs310,922 — — — — — — 
Warrants issued — — 57 — — — 57 
Share-based compensation— — — 618 — — 618 
Balance at March 31, 2023
80,480,641 $81 $11,205 $256,847 $(257,036)$(6,928)$4,169 
Balance at December 31, 2021
32,902,048$33 $1,373 $216,685 $(192,090)$(6,928)$19,073 
Net loss— — — (13,022)— (13,022)
Shares issued for vested restricted stock units6,874— — — — — — 
Share-based compensation— — 564 — — 564 
Balance at March 31, 2022
32,908,922$33 $1,373 $217,249 $(205,112)$(6,928)$6,615 

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



8


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net loss$(17,330)$(13,022)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant, and equipment671 286 
Amortization of intangible and leased assets213 312 
Loss on disposal of net assets from discontinued operations818 30 
Loss on issuance of warrants10,424  
Gain from change in fair value of warrants(3,045) 
Term loan discount amortization and interest accretion on debt67 70 
Share-based compensation expense618 564 
Changes in operating assets and liabilities:
Accounts receivable(103)(589)
Inventory2,887 (1,601)
Prepaid expenses and other current assets518 (914)
Accounts payable(472)935 
Accrued liabilities504 125 
Accrued payroll and benefits(946)645 
Deferred revenue123 24 
Operating lease liability due to cash payments(157)(129)
Net cash used in operating activities(5,210)(13,264)
Cash flows from investing activities:
Purchase of property, plant and equipment(17)(343)
Payment of security deposits (5)
Purchase of intangible assets and other assets (504)
Net cash used in investing activities(17)(852)
Cash flows from financing activities:
Proceeds from issuance of warrants in private placement15,999  
Payment of debt issuance costs(380) 
Repayment of debt(3,000) 
Payments on finance lease obligations
(40)(23)
Net cash provided by (used in) financing activities12,579 (23)
Net increase (decrease) in cash, cash equivalents and restricted cash7,352 (14,139)
Cash, cash equivalents and restricted cash at beginning of period12,120 20,089 
Cash, cash equivalents and restricted cash at end of period$19,472 $5,950 

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


MEDAVAIL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Three Months Ended March 31,
20232022
Supplemental cash flow information:
Cash paid for interest$178 $184 
Supplemental noncash investing and financing activities:
Inventory transferred to property, plant and equipment$ $429 
MedCenter equipment from discontinued operations transferred to inventory for continuing operations (See Note 7)$4,651 $ 
Purchase of property, plant and equipment in accounts payable$ $122 
Purchase of intangible assets in accounts payable$ $326 
Lease liabilities arising from obtaining right of use assets:
Operating leases$ $205 
Finance leases$231 $73 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10




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, 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 also has the ability to facilitate live pharmacist counseling via two-way audio-video communication with the ability to dispense prescription medicines under pharmacist control.
Exit of Pharmacy Services and SpotRx
On January 19, 2023, the Company announced a plan to exit the pharmacy services business to focus on its pharmacy technology business. In connection with its decision to exit the pharmacy services business, the Company initiated a reduction in force, in which employees of the pharmacy services business, representing at that time approximately 75% of the Company’s full-time employees, were terminated, effective January 18, 2023. The Company initiated the reduction in force to preserve capital and use its limited resources to pursue the pharmacy technology business.

On January 20, 2023, the Company entered into an Asset Purchase and Sale Agreement, as amended, with German Dobson CVS, L.L.C., Garfield Beach CVS, L.L.C., Longs Drug Stores California, L.L.C., Woodward Detroit CVS, L.L.C. and Holiday CVS, L.L.C., or CVS, pursuant to which the Company agreed to sell to CVS certain assets, including pharmacy records, and inventory from SpotRx pharmacies located in Tucson and Phoenix, Arizona; Buena Park, Laguna Hills and San Fernando, California; Southfield, Michigan; and in Orlando and Tampa, Florida. The transaction closed on February 9, 2023, for a final purchase price of $2.9 million (subject to $0.1 million in fees and a $0.2 million indemnification holdback). Upon closing, the pharmacy records and inventory purchased by CVS were transferred from the SpotRx pharmacies to nearby CVS pharmacy locations.

For the year ended December 31, 2022, the pharmacy services business comprised approximately 97% of the Company’s total revenues. As of December 31, 2022, inventory from SpotRx pharmacies comprised approximately $3.0 million, or 9%, of total consolidated assets. Pharmacy service business assets that were not sold to CVS have been or are expected to be primarily reabsorbed or settled, or to a lesser extent, sold or abandoned. As of March 31, 2023, the Company substantially completed its exit from the pharmacy services business.

The accounting requirements for reporting the pharmacy services business as a discontinued operation were met during the three months ended March 31, 2023. Accordingly, the condensed consolidated financial statements and notes to the consolidated condensed financial statements reflect the results of the pharmacy service business as a discontinued operation for the periods presented. See to Note 13 for additional information.

NOTE 2 - LIQUIDITY
The condensed consolidated financial statements for the three months ended March 31, 2023 and the year ended December 31, 2022, were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business.

On March 9, 2023, the Company entered into a Securities Purchase Agreement, or private placement (the “Offering”), of securities with certain institutional investors, or the Investors. Upon close of the transaction the Company received gross proceeds from the Offering of approximately $16.0 million, before deducting offering expenses. The Company intends to use the net proceeds from this offering to fund one-time costs associated with restructuring, repay outstanding debt, and finance its growth initiatives related to its MedCenter technology business. Pursuant to the offering, the Company agreed to issue pre-funded warrants to purchase up to an aggregate of 49,813,198 shares of common stock at an exercise price of $0.001 per share, or Pre-Funded Warrants, and agreed to issue Series A warrants to purchase up to an aggregate of 49,813,198 shares of common stock at an exercise price of $0.38544 per share, or Series A Warrants, to be issued following stockholder approval of the issuance of the Series A Warrants.

As of March 31, 2023, the Company had $19.5 million in cash and cash equivalents, including restricted cash, and an accumulated deficit of $257.0 million. Furthermore, net cash used in operating activities for the three months ended March 31, 2023 and 2022 was $5.2 million and $13.3 million, respectively. Since inception through March 31, 2023, the Company has continually incurred losses from its operations, which have been financed primarily by net cash proceeds from sales of common stock and warrants in private placements, sales of redeemable preferred stock and debt.
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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 management should determine if there are plans in place which alleviate that doubt. As of December 31, 2021, and through the nine months ended September 30, 2022, the Company had identified substantial doubt as to the Company’s ability to continue as a going concern. During the first quarter of 2023, the Company raised capital in a private placement and reduced operating costs by exiting its pharmacy services business. As a result, after considering the Company's ongoing cash requirements to fund operations, management determined that the Company has sufficient financial resources to continue operations through the date of this report and one year from the date of the financial statement issuance date, with no substantial doubt as to the Company’s ability to continue as a going concern.

NOTE 3 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements as of March 31, 2023, and for the three months ended March 31, 2023 and 2022 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, 2022 was derived from the Company's audited consolidated financial statements but does not include all disclosures required by GAAP for audited financial statements.
The preparation of financial statements in accordance with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Actual results could differ from those estimates. The Company's critical accounting policies are those that are both most important to its financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company is not aware of any events or circumstances which would require update to its estimates or judgements as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
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, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission, or SEC on April 14, 2023.
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.

As noted in Note 2, as of March 31, 2023, the Company substantially completed its exit from the pharmacy services business. As a result, the Company has reported the operating results of its pharmacy services business in the loss from discontinued operations line in the condensed consolidated statements of operations for all periods presented. In addition, related assets and liabilities were reported as assets of discontinued operations and liabilities of discontinued operations in the condensed consolidated balance sheets for all periods presented. Unless otherwise noted, the discussion within these notes to the consolidated financial statements relates to continuing operations comprised of the pharmacy technology business. See Note 13 for additional information on discontinued operations.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards Not Yet Adopted

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
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”, or 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.

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

Recently Adopted Accounting Standards

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”, or ASU 2016-13, supplemented by ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses”, or 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, and for fiscal years beginning after December 15, 2022 for all other public business entities and private companies, with early adoption permitted. Effective January 1, 2023, the Company adopted ASU No. 2016-13. The impact of adoption of ASU 2016-13 was not material to its consolidated financial statements.

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 they were outstanding up to when they were exercised. After these warrants are exercised the related issued and outstanding common shares are included in weighted average shares outstanding:

SharesIssuance DateExercise Date
19,310November 18, 2020Outstanding
During the three months ended March 31, 2023 and 2022, there was no dilutive effect from stock options, restricted stock units, or RSUs, or other warrants due to the Company’s net loss position. As of March 31, 2023 and 2022, there were 80.2 million and 4.4 million shares of common stock, respectively, underlying outstanding options, RSUs and other warrants that were not included in the diluted shares calculation because their inclusion would have been antidilutive.

NOTE 6 - FAIR VALUE MEASUREMENTS
Fair value measurements are categorized in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for identical assets or liabilities include:
a.quoted prices for similar assets or liabilities in active markets;
b.quoted prices for identical or similar assets or liabilities in inactive markets;
c.inputs other than quoted prices that are observable for the asset or liability;
d.inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3- Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.
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Assets and liabilities measured at fair value on a recurring basis were as follows:
Fair Value Hierarchy
(in thousands)March 31, 2023Level 1Level 2Level 3
Liabilities:
Warrants liabilities$23,378 $ $ $23,378 
Total liabilities$23,378 $ $ $23,378 
As of December 31, 2022, there were no assets and liabilities accounted for at fair value on a reoccurring basis.
The carrying amount of the Company's term loan approximates fair value based upon market interest rates available to the Company for debt of similar risk and maturities. See Note 8, for further information regarding the Company’s term loan. The carrying amount of cash and cash equivalents and restricted cash approximates fair value. See Note 12, for further details regarding the Company's Warrants and fair value measurement of Warrant liabilities.

NOTE 7 - BALANCE SHEET AND OTHER INFORMATION
Restricted cash
The Company considers cash to be restricted when withdrawal or general use is legally restricted. In 2021 pursuant to a Loan and Security Agreement with Silicon Valley Bank (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. Due to the nature of the deposit, the balance is classified as restricted cash. Restricted cash is included in cash and cash equivalents presented in the statements of cash flows.
Accounts Receivable
Accounts receivable are primarily comprised of trade receivables presented net of allowance for doubtful accounts when estimatable and present. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of amounts owed by customers. The allowance consists of known specific troubled accounts as well as an amount based on overall estimated potential uncollectible accounts receivable based on historical experience. As of March 31, 2023, and December 31, 2022, based upon its historical collections experience, the Company had no credit risks balances which would require to be reserved as an allowance for doubtful accounts.

Inventory

The following table presents detail of inventory balances:
March 31,December 31,
(in thousands)20232022
Inventory:
MedCenter hardware$8,011 $3,331 
Spare parts690 663 
Total inventory$8,701 $3,994 
MedCenter hardware recognized in pharmacy and hardware cost of products sold was $0.2 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively. See Property, plant, and equipment below for additional details.

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Prepaid expenses and other current assets

The following table presents prepaid expenses and other current assets balances:
March 31,December 31,
(in thousands)20232022
Prepaid expenses and other current assets:
Prepaid MedCenter inventory$1,146 $1,359 
Prepaid insurance690 921 
Other236 289 
Total prepaid expenses and other current assets$2,072 $2,569 
Property, plant and equipment
The following tables present property, plant and equipment balances:
Estimated useful livesMarch 31,December 31,
(in thousands)20232022
Property, plant and equipment:
MedCenter equipment
8 years
$1,531 $7,983 
IT equipment
1 - 3 years
2,002 1,908 
Leasehold improvementslesser of useful life or term of lease316 316 
General plant and equipment
5 - 8 years
373 373 
Office furniture and equipment
5 - 8 years
332 217 
Vehicles
5 years
38 36 
Construction-in-process5 5 
Total historical cost4,597 10,838 
Accumulated depreciation(3,808)(5,577)
Total property, plant and equipment, net$789 $5,261 
Depreciation expense of property and equipment was $0.7 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively. Depreciation expense included in pharmacy and hardware cost of products sold was $9.0 thousand and $26.0 thousand for the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, as part of its strategic realignment, the Company decommissioned MedCenters operating under its discontinued retail pharmacy services business, and reclassified out of property, plant, and equipment, and into inventory, for sale to customers, MedCenters with a net book value of $4.8 million, consisting of $6.7 million of gross book value partially offset by $1.9 million of accumulated depreciation.
Intangible assets

The following table presents intangible asset balances:
March 31,December 31,
(in thousands)20232022
Gross intangible assets:
Intellectual property$3,857 $3,857 
Software2,200 2,200 
Website and mobile application534 534 
Total intangible assets6,591 6,591 
Accumulated amortization:
Intellectual property(3,857)(3,857)
Software(1,775)(1,749)
Website and mobile application(534)(534)
Total accumulated amortization(6,166)(6,140)
Total intangible assets, net$425 $451 
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Amortization expense of intangible assets was $26.0 thousand and $2.0 thousand for the three months ended March 31, 2023 and 2022, respectively, and are included in operating expenses.

Lessee leases

Balance sheet amounts for lease assets and leases liabilities are as follows:
March 31,December 31,
(in thousands)20232022
Assets:
Operating$559$620
Finance2144
Total assets$773$624
Liabilities:
Operating:
Current$207 $241 
Long-term413 441 
Finance:
Current37 5 
Long-term177  
Total liabilities$834 $687 
The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s leases as follows:
March 31,December 31,
20232022
Finance leases:
Weighted-average remaining lease term (years)4.70.5
Weighted-average discount rate11.4 %6.0 %
Operating leases:
Weighted-average remaining lease term (years)3.53.6
Weighted-average discount rate6.2 %7.3 %
Maturities of operating leases liabilities are as follows:
(in thousands)
Remaining period in 2023$211 
2024148 
2025152 
2026157 
202737 
Total lease payments705 
Less: present value discount(85)
Total leases$620 
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Maturities of finance lease liabilities are as follows:
(in thousands)
Remaining period in 2023$47 
202458 
202558 
202658 
202758 
Total finance lease payments279 
Less: imputed interest(65)
Total leases$214 

Operating lease expense was $0.1 million for each of the three months ended March 31, 2023 and 2022, respectively.

NOTE 8 - DEBT
The following table presents debt balances:
March 31,December 31,
(in thousands)20232022
Term loan$2,002 $5,182 
Term loan issuance costs, net(574)(384)
Total debt, net1,428 4,798 
Less short term debt  
Long-term debt, net$1,428 $4,798 
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% (12.0% at March 31, 2023).
First Amendment, Consent and Default Waiver to Loan and Security Agreement
On February 10, 2023, the Company entered into the First Amendment, Consent and Default Waiver to Loan and Security Agreement or the Loan Amendment and Consent, with each of Silicon Valley Bank, a California corporation, and an authorized foreign bank under the Bank Act (Canada), and SVB Innovation Credit Fund VIII, L.P., a Delaware limited partnership, or together SVB. Among other matters, the Loan Amendment and Consent provides SVB’s consent to the sale of certain assets related to the Company’s pharmacy services business pursuant to the previously announced Asset Purchase Agreement. The Loan Amendment and Consent also provides that upon the closing of the asset sale, the Company would pay SVB $3.4 million, which includes $0.4 million of the Final Payment (as defined in the Loan Amendment and Consent) and prepayment of $3.0 million of Term Loan Advances (as defined in the Loan Amendment and Consent), with SVB waiving the prepayment premium due on all Term Loan Advances prepaid by the Company prior to February 10, 2023. The Loan Amendment and Consent also includes SVB's waiver of any legal action or enforcement of rights and remedies with respect to certain specified defaults arising prior to February 10, 2023.

On February 10, 2023, in connection with the Loan Amendment and Consent, the Company issued warrants, or the SVB Warrants, to SVB for the purchase of up to an aggregate of 200,366 shares of common stock at a per share exercise price of $0.3274, with an expiration date of February 10, 2035. The number of shares and the exercise price are subject to adjustment as set forth in the SVB Warrants. See Note 12.

SVB Letter Agreement

On March 10, 2023, SVB, based in Santa Clara, California, was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 10, 2023, the Federal Deposit Insurance Corporation (the “FDIC”) took control of SVB and created the National Bank of Santa Clara to hold the deposits of SVB after SVB was unable to continue their operations.

On March 13, 2023, the Company was informed by SVB that the Company was still bound by the terms, conditions, and covenants of the Company’s Loan and Security Agreement with SVB, or the Loan Agreement, and the Loan Amendment and Consent. On March 29, 2023, the
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Company entered into a Letter Agreement, or Letter Agreement, with each of (a) Silicon Valley Bank, a Division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), or SVB Successor, in its capacity as administrative agent and collateral agent, (b) SVB Successor, as a lender, and (c) SVB Innovation Credit Fund VIII, L.P., or SVB Capital, as a lender, and obtained a waiver for any event of default occurring prior to March 29, 2023, to include the year ended December 31, 2022. The Letter Agreement also amends the Loan Agreement to provide that the Company is only required to maintain on deposit at SVB Successor or its affiliates, at least 50% of the aggregate dollar value of all of the Company accounts at all financial institutions.

As of March 31, 2023, the Company had approximately $9.8 million on deposit with SVB Successor and $9.7 million on deposit with another financial institution and was in compliance with all required covenants of the Loan Agreement. The Company continues to monitor the circumstances surrounding SVB and does not anticipate such circumstances will have a material impact on the Company's financial condition, operations, or on the Loan Agreement with SVB Successor. As of the date of filing this Quarterly Report on Form 10-Q, the Company has full access to and control over all of its cash, and cash equivalents across all financial institutions.

NOTE 9 - INCOME TAXES
The Company incurred minimal income tax expense for the three months ended March 31, 2023 and 2022, due to ongoing losses and minimum state income tax obligations. 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 March 31, 2023 and December 31, 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 future.

NOTE 10 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company is and, from time to time may in the future become, involved in legal proceedings, claims and litigation in the ordinary course of business. The Company has become subject to certain demands, and claims from former employees relating to the reduction in force the Company implemented in connection with the restructuring of the company and the disposition of its pharmacy services business. The Company intends to vigorously defend itself against such pending and threatened actions. The Company cannot determine a reasonable estimate of the maximum possible loss or range of loss for pending or threatened matters given that they are at various stages of the litigation process and each case is subject to the inherent uncertainties of litigation. In management’s opinion, based on currently available information, any potential loss resulting from the resolution of these matters is not expected to have a material adverse effect on the Company’s results of operations, financial position, or cash flows.

NOTE 11 - SHARE-BASED COMPENSATION
Share-based compensation
The following table presents the Company's expense related to share-based compensation, in thousands:
Three Months Ended March 31,
20232022
Share-based compensation $618 $564 
Expense remaining to be recognized for unvested option awards from the 2012, 2018, 2020 and 2022 plans as of March 31, 2023, was $1.8 million, which will be recognized on a weighted average basis over the next 2.6 years. Expense remaining to be recognized for unvested RSU awards as of March 31, 2023, was $1.6 million, which will be recognized on a weighted average basis over the next 1.9 years.
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The following table presents the Company's outstanding option awards activity during the three months ended March 31, 2023:
(in thousands, except for share and per share amounts)Number of AwardsWeighted Average Exercise PriceWeighted Average Fair ValueWeighted Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding, beginning of period4,399,741 $1.88 $1.14 $ 
Granted    
Exercised/Released    
Expired    
Forfeited(66,302)1.37 0.83  
Outstanding, end of period4,333,439 $1.89 $1.15 8.05$ 
Vested and exercisable, end of the period2,079,894 2.23 1.22 7.03 
Vested and unvested exercisable, end of the period2,079,894 2.23 1.22 7.03 
Vested and expected to vest, end of the period4,180,949 1.91 1.15 8.02 
The following table present outstanding RSU awards activity during the three months ended March 31, 2023:

Number of AwardsWeighted Average Exercise PriceWeighted Average Grant Date Fair ValueWeighted Average Remaining Contractual Life (Years)
Unvested outstanding, beginning of period2,376,554 $ $1.31 
Granted $ $ 
Exercised/Released $ $ 
Cancelled/Forfeited(763,380)$ $0.87 
Expired $ $ 
Unvested outstanding, end of period1,613,174 $ $1.40 14.14
Vested, outstanding shares $ $ 

As of March 31, 2023 and December 31, 2022, there was an aggregate of 2.7 million and 2.3 million shares of common stock, respectively, available for grant under the 2020 Plan. As of March 31, 2023 and December 31, 2022, there was an aggregate of 1.1 million and 0.2 million shares of common stock, respectively, available for grant under the 2022 Inducement plan.

NOTE 12 - WARRANTS
Equity Warrants
During the twelve months ended December 31, 2022, 18.8 million warrants were issued at the first closing of a private placement in April 2022 with a fair value of $9.2 million, a 5 years term and an exercise price per share of $1.25. An additional 4.7 million warrants were issued at a second closing of the private placement in July 2022 with a fair value of $4.5 million, a 5 years term and an exercise price per share of $1.25.
No warrants were exercised or expired during the three months ended March 31, 2023, or twelve months ended December 31, 2022. These warrants met the equity classification requirements and therefore are classified in our stockholders' equity.
SVB warrants
During the three months ended March 31, 2023, as part of the First Amendment to the Loan and Security Agreement with Silicon Valley Bank (see Note 8), the Company issued 200,366 common stock warrants to the lenders. Upon grant date, the fair value of the warrants was $57 thousand, measured using the Black Scholes Option Pricing model. There was no material change in fair value of these warrants through March 31, 2023.

The SVB Warrants met equity classification requirements under ASC 815 - Derivative and Hedging, specifically due to the warrants having a limit on the number of shares the entity will be required to deliver upon exercise and the warrants not including cash-settled top-off or make-
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whole provisions, as well as, other conditions. As such, the SVB warrants met the equity classification requirements and are classified in the Company's shareholder' equity.

The key input assumptions utilized in the valuation of the SVB Warrants were as follows:
Grant dateMarch 31, 2023
Market price$0.32$0.29
Exercise price$0.32$0.32
Term (Years)1211.7
Volatility85%85%
Risk Free Rate3.68%3.60%

Liability warrants

The following table presents liability warrants:
March 31,December 31,
(in thousands)20232022
Pre-Funded Warrants14,295  
Series A Warrants9,083  
23,378  
Private placement
On March 9, 2023, the Company entered into a Securities Purchase Agreement for a private placement of securities with certain institutional investors, or the Investors. Pursuant to the terms of the Offering, the Company agreed to issue Pre-Funded Warrants upon closing at a price of $0.3212 per underlying share, and Pre-Funded Warrants are exercisable into shares of common stock at an exercise price of $0.001 per share. The number of Pre-Funded Warrants exercisable is limited by the Nasdaq 19.99% cap based on the shares of Common Stock outstanding; until the Company's stockholders approve issuing Common Stock in excess of the Nasdaq 19.99% cap at the Company's annual shareholder meeting to be held June 14, 2023. Additionally, the Company provided the Investors with Series A Warrants with an exercise price of $0.385440 per share, that are not exercisable until the stockholders approve the Company to issue Common Stock in excess of the Nasdaq 19.99% cap.
The Pre-Funded Warrants and Series A Warrants do not meet the equity classification requirements under ASC 815 - Derivative and Hedging, specifically the Company did not have a sufficient amount of Common Stock available to be issued to settle the warrants upon grant and through March 31, 2023, due to the Nasdaq 19.99% cap that limits the Company's ability to issue Common Stock to settle the Series A Warrants and Pre-funded Warrants. Consequently, the Pre-Funded Warrants and Series A Warrants were classified as liabilities.
The Pre-Funded Warrant shares are exercisable for an aggregate of up to 49,813,198 shares of common stock, and the Series A Warrants will be exercisable for an aggregate of up to 49,813,198 shares of common stock. Upon close of the transaction on March 13, 2023, the Company received gross proceeds from the Offering of approximately $16.0 million, before deducting Offering expenses. The Company intends to use the net proceeds from the Offering to fund costs associated with restructuring, repay outstanding debt, and finance its growth initiatives related to its MedCenter technology business.

Upon grant, the fair value of the Pre-Funded Warrants and Series A Warrants was $15.9 million and $10.5 million, respectively. The Company recorded the $10.4 million difference between the Offering proceeds and grant date fair value as a loss on issuance of warrants in the statement of operations and comprehensive loss. The fair values of the awards were measured using the Black Scholes Option Pricing model as of the grant date.
The key input assumptions utilized in the valuation of the Pre-funded Warrants were as follows:
Grant dateMarch 31, 2023
Market price$0.32$0.29
Exercise price$0.001$0.001
Term (Years)1211.7
Volatility85%85%
Risk Free Rate3.70%3.67%
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The key input assumptions utilized in the valuation of the Series A Warrants were as follows:
Grant dateMarch 31, 2023
Market price$0.32$0.29
Exercise price$0.39$0.39
Term (Years)54.9
Volatility85%85%
Risk Free Rate3.68%3.60%
The fair values of the Pre-Funded Warrants and Series A Warrants decreased $1.6 million and $1.4 million, respectively, during the three months ended March 31, 2023; which is included in the gain from change in fair value of warrants on the statement of operations and comprehensive loss.

NOTE 13 - DISCONTINUED OPERATIONS
As discussed in Note 1 – Nature of Operations – the exit of our pharmacy services business was substantially completed as of March 31, 2023. The pharmacy services business was previously a reportable segment and the exit represents a strategic shift in the Company going forward. Accordingly, with the sale or disposition of its retail pharmacy assets and exit of the pharmacy services business, this transaction meets the accounting requirements for reporting as discontinued operations under ASC 205-20-50 for all periods presented.

The following table summarizes the major income and expense line items from discontinued operations as reported in the condensed consolidated statements of operations and comprehensive loss:

Three Months Ended March 31,
(in thousands)20232022
Revenue:
Pharmacy revenue$3,834 $8,849 
Total revenue3,834 8,849 
Cost of products sold and services:
Pharmacy cost of products sold3,581 8,481 
Total cost of products sold and services3,581 8,481 
Operating expense:
Pharmacy operations1,726 3,720 
General and administrative570 1,563 
Selling and marketing845 2,205 
Research and development 235 
Total operating expense3,141 7,723 
Operating loss(2,888)(7,355)
Loss from sale and disposition of net assets, and reorganization expenses, net(1,885) 
Interest expense1 (3)
Loss from discontinued operations$(4,772)$(7,358)

Cash provided by operating activities by the pharmacy services business totaled $3.5 million and $0.1 million for the three months ended March 31, 2023 and March 31, 2022, respectively. Cash used in investing activities from the pharmacy services business totaled totaled $0.02 million and $0.35 million for the three months ended March 31, 2023 and March 31, 2022, respectively. Cash used in financing activities from the pharmacy services business totaled totaled $0.03 million and $0.02 million for the three months ended March 31, 2023 and March 31, 2022, respectively. Depreciation and amortization expense of the pharmacy services business totaled totaled $0.75 million and $0.48 million for the three months ended March 31, 2023 and March 31, 2022, respectively. The condensed consolidated statements of cash flows included $0.8 million loss on disposal of net assets from discontinued operations, which comprised of losses related to net realizable value adjustments to right of use assets related to leases and prepaid assets, and abandonment of certain property, plant, and equipment related to our discontinued operations.
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The following table summarizes the major classes of assets and liabilities of the retail pharmacy business as reported on the condensed consolidated balance sheets:
(in thousands)March 31, 2023December 31, 2022
Carrying amounts of major classed of assets included as part of discontinued operations:
Accounts receivable, net$2,065 $1,804 
Prepaid expenses and other current assets14 95 
Inventories 2,943 
Total current assets from discontinued operations$2,079 $4,842 
Intangible assets, net$ $14 
Property plant and equipment, net 1,194 
Right-of-use assets998 1,461 
Other assets168 168 
Total long-term assets from discontinued operations$1,166 $2,837 
Total long-term assets from discontinued operations
Accounts payable$290 $857 
Accrued liabilities1,105 642 
Accrued payroll and benefits28 834 
Current portion of lease obligations462 461 
Total current liabilities from discontinued operations$1,885 $2,794 
Long-term portion of lease obligations$1,015 $1,128 
Total long-term liabilities from discontinued operations$1,015 $1,128 

NOTE 14 - SUBSEQUENT EVENTS
Reduction in Force
On April 27, 2023, the Company completed an additional reduction in force, in which approximately 27% of the Company’s full-time employees at that time, were terminated, effective April 28, 2023. The Company notified the employees of their termination on April 27, 2023. The reduction in force is in connection with the Company’s continued efforts to streamline operations and achieve cost savings while focusing on its pharmacy technology business. The Company may incur additional expenses not currently contemplated due to events associated with the reduction in force. The changes that the Company expects to incur in connection with the reduction in force are estimates and subject to a number of assumptions, and actual results may differ materially.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited historical condensed consolidated financial statements for the year ended December 31, 2022 which are included in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 14, 2023, and our unaudited condensed consolidated financial statements and accompanying footnotes for the three months ended March 31, 2023, included Part I, Item 1., of this Quarterly Report on Form 10-Q.

This quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains statements that are forward-looking regarding future events and our future results subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and similar expressions are used to identify forward-looking statements.

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed above and elsewhere in this Quarterly Report on Form 10-Q. See Part II, Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q, and Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2022. Unless otherwise indicated or the context otherwise requires, references herein to “MedAvail,” “MedAvail Holdings,” “we,” “us,” “our,” and the “Company” refers to MedAvail Holdings, Inc. and its subsidiaries.
Overview
We are a technology-enabled pharmacy technology services company, and have developed and commercialized an innovative self-service pharmacy, mobile application, and kiosk. Through our full-stack pharmacy technology platform, and personal one-on-one service, we bring pharmacy-dispensing capability to the point of care, resulting in lower costs, higher patient satisfaction, improved medication adherence, and better health outcomes.
We offer a unique, pharmacy technology solution which is anchored around our core technology called the MedAvail MedCenter™, or the MedCenter. The MedCenter enables on-site pharmacy in medical clinics, retail store locations, employer sites with and without onsite clinics, and any other location where onsite prescription dispensing is desired. The MedCenter establishes an audio-visual connection to a live pharmacist enabling remote prescription drug dispensing to occur directly to a patient while still providing real-time supervision by a pharmacist.
Currently, our primary and only commercialization channel is the direct ‘sell-to’ model, whereby we sell or lease the MedCenter hardware technology and provide recurring, one-time, or on demand services related to the MedCenter directly to large healthcare providers and retailers for use within their own pharmacy operations. We deploy the MedCenter solution currently to locations to include, but not limited to, urgent care and emergency medical facility locations, in clinic locations of large healthcare providers, and University campuses.

The MedCenter kiosk works in tandem with our Remote Dispensing System®, or the Remote Dispensing System, which consists of customer-facing software for remote ordering of medications for pick-up at a MedCenter. Supporting our MedCenter kiosks and Remote Dispensing System is our back-end MedPlatform® Enterprise Software, or the MedPlatform Enterprise Software, which controls dispensing and MedCenter monitoring, and supporting Pharmacy Management System software.
Our kiosks come in one model: the M4 MedCenter. The M4 MedCenter is designed to fit in waiting rooms, hallways, and lobbies.
Discontinued Operations
On January 19, 2023, we announced our plan to exit the retail pharmacy services business, or the “Pharmacy Services Business”, to focus on our Pharmacy Technology services. In connection with our exit from the Pharmacy Services Business, we hired a broker and negotiated the sale of certain related pharmacy assets. Our operations following the exit from the Pharmacy Services Business consist solely of our Pharmacy Technology services. On April 6, 2023, we announced that we had completed the transactions contemplated by the Asset Purchase Agreement, including the disposition of the specific assets therein, on February 10, 2023. As of March 31, 2023, we have substantially completed our exit from the Pharmacy Services Business.
Prior to Discontinued Operations, during the three months ended March 31, 2023, we had two reportable segments: retail pharmacy services and pharmacy technology services. As a result of the retail pharmacy services business exit, the Company met the requirements of ASC 205-20, to report the results of the retail pharmacy services business as a discontinued operation. Accordingly, the operating results for the retail pharmacy services business have therefore been reclassified as a discontinued operation within these condensed consolidated financial statements. As such, unless otherwise noted, the discussion of our operating results, Results of Operations, and Liquidity relate to continuing operations comprised of only our pharmacy technology business for all periods presented.

Components of Operating Results for the Three Months Ended March 31, 2023

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We have never been profitable and have incurred operating losses each year since inception. Our net losses were $17.3 million and $13.0 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $257.0 million. Substantially all of our operating losses resulted from expenses incurred in connection general and administrative costs associated with our operations

We expect to incur additional expenses and operating losses as we continue our technology development, redeployment of our MedCenters and right size expenses necessary to operate as a public company. We expect that our operating losses will decrease and turn positive as we execute our growth strategies and focus on our Med Center technologies. If our management accelerates deployment into new states, operating losses could increase in the near-term, as we grow and scale our operations.

As of March 31, 2023, we had cash and cash equivalents of $18.8 million. We will continue to require additional capital to continue our pharmacy technology development and commercialization activities to serve our growing customer base. In April and July 2022, and March 2023, we completed the sale of additional equity through private placement financings, where we raised $40.0 million and $16.0 million in gross proceeds, respectively. Additionally, in June 2021 we added to our liquidity resources through a senior secured term loan with Silicon Valley Bank, or SBV, of $10.0 million, of which we have repaid $8.0 million. As of March 31, 2023, we have an outstanding principal balance of $2.0 million under the term loan. The amount and timing of future funding requirements will depend on many factors, including the pace and results of our growth strategy and capital market conditions. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop product candidates.

Results of Operations for the Three Months Ended March 31, 2023
Pharmacy technology revenue
Hardware revenue
We develop and commercialize the MedCenter for direct sale or subscription lease to third-party customers, including some of the world’s largest healthcare providers and systems, as well as large retail chains that provide full retail-pharmacy services using our technology. Hardware revenue is derived from either sales or subscription leases of the MedCenter to customers.

Service revenue

Service revenue is derived from recurring subscription revenue from software licensing, platform and software hosting, and software and hardware maintenance; and one-time or on demand service revenue from initial installations, and professional services such as training, pharmacy set-up, and consulting services.

Revenue
Three Months Ended March 31,2023 vs. 2022
20232022Amount Change% Change
(in thousands)
Hardware and subscription revenue:
Hardware revenue$256 $56 $200 357 %
Subscription revenue48 109 (61)(56)%
Total hardware and subscription revenue304 165 139 84 %
Service revenue:
Software94 48 46 96 %
Maintenance and support56 32 24 75 %
Installation67 61 1017 %
Professional services and other99 14 85 607 %
Total service revenue316 100 216 216 %
Total revenue$620 $265 $355 134 %
During the three months ended March 31, 2023, hardware and subscription revenue increased $0.1 million to $0.3 million compared to the same period in 2022. The $0.1 million increase was primarily due to a $0.2 million increase MedCenter sales whereby 3 more MedCenters were sold over the same prior year period, partially offset by $0.1 million decrease in subscription lease revenue.
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During the three months ended March 31, 2023, service revenue increased $0.2 million to $0.3 million compared to the same period in 2022 primarily due to increased services provided as a result of increased MedCenter sales during the three months ended March 31, 2023, compared to the same prior year period..
As a result of the pharmacy services business exit, the Company met the requirements of ASC 205-20, to report the results of the retail pharmacy services business as a discontinued operation. Accordingly, the revenue results for the pharmacy services business have therefore been reclassified as a discontinued operations within these condensed consolidated financial statements.

Pharmacy technology cost of products sold and services

Hardware costs of products
Hardware cost of products sold consists primarily of costs associated with building and customization of MedCenters sold to third-party customers.

Service costs

Service costs consists primarily of installation, integration, relocation, consumable, and maintenance cost of MedCenters at third-party customer locations, as well as related hosting and software costs.

Costs of Products sold and Services
Three Months Ended March 31,2023 vs. 2022
20232022Amount Change% Change
(in thousands)
Hardware cost of products sold:
Hardware$210 $56 $154 275 %
Depreciation35 25 10 40 %
Total Hardware cost of products sold245 81 164 202 %
Service costs:
Professional services14 — 14 — %
Maintenance and support services62 47 15 32 %
Installation services42 39 1300 %
Total service costs118 50