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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, 2021
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)
6665 Millcreek Dr. Unit 1, Mississauga ON Canada
L5N 5M4
(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 14, 2021, there were 32,520,833 shares of the registrant’s common stock outstanding.
1





MedAvail Holdings, Inc.
Form 10-Q
For the Three Months Ended March 31, 2021

TABLE OF CONTENTS

Page
PART I
Item 1.Financial Statements
Consolidated Condensed Balance Sheets
Consolidated Condensed Statements of Operations
Consolidated Condensed Statements of Comprehensive Loss
Consolidated Condensed Statements of Shareholders Equity (Deficit)
Consolidated Condensed Statements of Cash Flows
Notes to Consolidated Condensed 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;
our financial performance; and
developments and projections relating to our competitors or our industry.
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.
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.

3


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

March 31,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$47,582 $57,936 
Restricted cash61 60 
Accounts receivable (net of allowance for doubtful accounts of $0.03 million for March 31, 2021, $0.04 million for December 31, 2020)
1,404 1,520 
Inventories3,119 2,817 
Prepaid expenses and other current assets1,455 1,534 
Total current assets53,621 63,867 
Property, plant and equipment, net3,782 3,795 
Right-of-use assets1,318 1,239 
Other assets203 203 
Intangible assets614 227 
Total assets$59,538 $69,331 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities$3,802 $4,512 
Short-term debt2,000 2,161 
Contract liability262 275 
Current portion of lease obligations605 665 
Total current liabilities6,669 7,613 
Long-term portion of lease obligations
788 651 
Total liabilities7,457 8,264 
Stockholders' deficit:
Common shares ($0.001 par value, 100,000,000 shares authorized, 31,939,898 and 31,816,020 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)
32 32 
Warrants
2,579 2,614 
Additional paid-in-capital214,125 213,624 
Accumulated other comprehensive loss(6,928)(6,928)
Accumulated deficit(157,727)(148,275)
Total stockholders' equity52,081 61,067 
Total liabilities and stockholders' equity$59,538 $69,331 

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
4


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


Three Months Ended March 31,
20212020
Sales:
Pharmacy and hardware sales$3,781 $1,402 
Service sales246 10 
Total sales4,027 1,412 
Cost of sales:
Pharmacy and hardware cost of sales3,526 1,385 
Service cost of sales181 47 
Total cost of sales3,707 1,432 
Gross profit (loss)320 (20)
Pharmacy operations1,911 1,089 
General and administrative6,515 3,500 
Selling and marketing1,377 703 
Research and development168 215 
Operating loss(9,651)(5,527)
Other gain (loss), net161 8 
Interest income40 8 
Interest expense(2)(179)
Loss before income taxes(9,452)(5,690)
Income tax  
Net loss$(9,452)$(5,690)
Net loss per share - basic and diluted$(0.29)$(3.15)
Weighted average shares outstanding - basic and diluted32,439,9531,808,105

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

5


MEDAVAIL HOLDINGS, INC.
Consolidated Condensed Statement of Comprehensive Loss
(Unaudited)
(US Dollars in thousands, except per-share amounts)

Three Months Ended March 31,
20212020
Net loss$(9,452)$(5,690)
Other comprehensive loss:
Foreign currency translation adjustment (2)
Total comprehensive loss$(9,452)$(5,692)

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
6


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

Three Months Ended March 31, 2021
Common SharesPreferred Shares *WarrantsAdditional Paid-in-CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity (Deficit)
SharesAmountSharesAmount
Balance at December 31, 202031,816,020 $32 — $— $2,614 $213,624 $(148,275)$(6,928)$61,067 
Net loss— — — — — — (9,452)— (9,452)
Shares issued for options exercises120,924 — — — — 201 — — 201 
Exercise of warrants2,954 — — — (35)40 — — 5 
Share-based compensation— — — — — 260 — — 260 
Balance at March 31, 202131,939,898 $32 — $— $2,579 $214,125 $(157,727)$(6,928)$52,081 
Three Months Ended March 31, 2020
Common SharesPreferred Shares *WarrantsAdditional Paid-in-CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Deficit
SharesAmountSharesAmount
Balance at December 31, 20191,504,251$8 10,500,440$93,484 $698 $30,829 $(121,230)$(6,950)$(3,161)
Net loss— — — — (5,690)— (5,690)
Issuance of preferred shares— 102,777788 — — — — 788 
Shares issued for options exercises17,160— — — 27 — — 27 
Share-based compensation— — — 84 — — 84 
Warrants issued — — 435 (11)— — 424 
Cumulative translation adjustment— — — — — (2)(2)
Balance at March 31, 20201,521,411$8 10,603,217$94,272 $1,133 $30,929 $(126,920)$(6,952)$(7,530)

* $0.001 par value, 10,000,000 shares authorized at March 31, 2021 and December 31 2020. $0.001 par value, 14,539,330 shares authorized at March 31, 2020.

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



7


MEDAVAIL HOLDINGS, INC.
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(US Dollars in thousands)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net loss$(9,452)$(5,690)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant, and equipment295 204 
Amortization of intangible and leased assets207 188 
Bad debt and other non cash receivables adjustments15  
Interest accretion on debt and finance leases2 179 
Unrealized foreign currency (loss) gain (2)
Stock compensation expense260 84 
PPP loan forgiveness gain(161) 
Warrant expense 22 
Changes in operating assets and liabilities:
Change in accounts receivable101 (118)
Change in inventory(360)(242)
Change in prepaid expenses and other current assets79 (50)
Change in accounts payable, accrued expenses and other liabilities(639)(331)
Change in contract liability(13)(6)
Change in operating lease liability due to cash payments(164)(137)
Net cash used in operating activities(9,830)(5,899)
Cash flows from investing activities:
Purchase of property, plant and equipment(260)(154)
Payment of security deposits (44)
Purchase of intangible assets and other assets(452)(5)
Net cash used in investing activities(712)(203)
Cash flows from financing activities:
Issuance of common shares upon exercise of options and warrants206 27 
Issuance of preferred shares 788 
Payments on finance lease obligations
(17) 
Net cash provided by financing activities189 815 
Net decrease in cash, cash equivalents and restricted cash(10,353)(5,287)
Cash, cash equivalents and restricted cash at beginning of period57,996 8,849 
Cash, cash equivalents and restricted cash at end of period$47,643 $3,562 
Supplemental noncash investing and financing activities:
Inventory transferred to property, plant and equipment$58 $591 
Property, plant and equipment transferred to intangible assets$36 $ 
Conversion of other liability amount into warrants$ $402 
Lease liabilities arising from obtaining right of use assets:
Operating leases$279 $425 
Finance leases$ $23 
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
8




MEDAVAIL HOLDINGS, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
MedAvail Holdings, Inc., MedAvail, or the Company, a Delaware corporation is a telehealth-enabled pharmacy technology company that has developed and commercialized an innovative self-service pharmacy, mobile application, kiosk and drive-thru solution. MedAvail'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 counselling via two-way audio-video communication with the ability to dispense prescription medicines under pharmacist control. MedAvail also operates SpotRx, or the Pharmacy, a full-service retail pharmacy utilizing the Company’s automated pharmacy technology.

NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements as of March 31, 2021 and for the three months ended March 31, 2021 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for unaudited interim financial information. Accordingly, the unaudited interim consolidated condensed financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The consolidated condensed balance sheet as of December 31, 2020 was derived from the Company's audited consolidated condensed 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 includes 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, 2020 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 31, 2021, or the 2020 Form 10-K.
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. Estimates are used in accounting for, 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, impairment of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated condensed financial statements in the period they are deemed to be necessary.
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 our 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 March 31, 2021 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 consolidated condensed 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 may differ.
Principles of consolidation
The unaudited consolidated condensed 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.
9


NOTE 3 - 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. This ASU will be effective beginning in the first quarter of our fiscal year 2023. The Company is currently evaluating the impact that this new guidance will have on its consolidated condensed financial statements and related disclosures.
Recently Adopted Accounting Standards
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of our fiscal year 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. MedAvail assessed the impact of the new accounting standard on its consolidated condensed financial statements to facilitate its required adoption of the new standard on January 1, 2021. The adoption of ASU 2019-12 did not result in a material change to our consolidated condensed financial statements.
Debt with Conversion and Other Options
In August 2020, the FASB issued ASU No. 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting For Convertible Instruments and Contracts in an Entity's Own Equity” (“ASU 2020-06”). The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. MedAvail assessed the impact of the new accounting standard on its consolidated condensed financial statements to facilitate its early adoption of the new standard on January 1, 2021. The adoption of ASU 2020-06 did not result in a material change to our consolidated condensed financial statements.
There were no recently issued and effective authoritative guidance that is expected to have a material impact on the Company’s consolidated condensed financial statements through the reporting date.

NOTE 4 - EARNINGS (LOSS) PER SHARE
Basic earnings 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 per share is computed by dividing net income 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:
SharesIssuance Date
118,228May 9, 2018
309,698February 11, 2020
84,911June 29, 2020
58,518November 18, 2020
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During the three months ended March 31, 2021 and 2020, there was no potential dilution from stock options or other warrants due to the Company’s net loss position. Weighted average shares for historical periods have been adjusted for the effect of the 1.26 for 1 split on November 17, 2020. The following table sets forth the computation of basic and diluted earnings per share.
Three Months Ended March 31,
20212020
Net loss - basic and diluted$(9,452)$(5,690)
Weighted average shares - basic and diluted32,439,9531,808,105
Net loss per share - basic and diluted$(0.29)$(3.15)
As of March 31, 2021 and 2020, there were 2.5 million and 2.4 million, respectively, of option awards outstanding that were not included in the diluted shares calculation because their inclusion would have been antidilutive.

NOTE 5 - FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
Fair Value Hierarchy
March 31, 2021Level 1Level 2Level 3
Assets:
Cash and cash equivalents$47,582 $47,582 $ $ 
Restricted cash61 61   
Total assets$47,643 $47,643 $ $ 
Fair Value Hierarchy
December 31, 2020Level 1Level 2Level 3
Assets:
Cash and cash equivalents$57,936 $57,936 $ $ 
Restricted cash60 60   
Total assets$57,996 $57,996 $ $ 

NOTE 6 - BALANCE SHEET AND OTHER INFORMATION
Inventories
The following table presents detail of inventory balances:
March 31,December 31,
20212020
Inventories:
MedCenter hardware$1,576 $1,655 
Pharmacy1,150 837 
Spare parts393 325 
Total inventories$3,119 $2,817 
During the three months ended March 31, 2021 and 2020, $3.4 million and $1.3 million, respectively, of pharmacy inventory was recognized in pharmacy and hardware cost of sales. During the three months ended March 31, 2021 and 2020, $0.2 million and zero, respectively, of MedCenter inventory was recognized in pharmacy and hardware cost of sales.
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Property, plant and equipment
The following tables present property, plant and equipment balances:
Estimated useful livesMarch 31,December 31,
20212020
Property, plant and equipment:
MedCenter equipment
5 years
$4,690 $4,622 
IT equipment
1 - 3 years
2,071 1,999 
Leasehold improvementslesser of useful life or term of lease810 799 
General plant and equipment
5 - 8 years
354 353 
Office furniture and equipment
5 - 8 years
329 329 
Vehicles
5 years
54 54 
Construction-in-process219 90 
Total historical cost8,527 8,246 
Accumulated depreciation(4,745)(4,451)
Total property, plant and equipment, net$3,782 $3,795 
Depreciation expense of property and equipment was $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. Depreciation expense included in pharmacy and hardware cost of sales was $0.05 million for the three months ended March 31, 2021 and 2020, respectively.
Intangible assets
The following table presents intangible asset balances:
March 31,December 31,
20212020
Gross intangible assets:
Intellectual property$3,857 $3,857 
Software2,235 1,815 
Website and mobile application583 583 
Total intangible assets6,675 6,255 
Accumulated amortization:
Intellectual property(3,857)(3,857)
Software(1,621)(1,588)
Website and mobile application(583)(583)
Total accumulated amortization(6,061)(6,028)
Total intangible assets, net$614 $227 
Amortization expense of intangible assets was $0.03 million and $0.04 million for the three months ended March 31, 2021 and 2020, respectively, and are included in operating expenses.
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Lessee leases
Balance sheet amounts for lease assets and leases liabilities are as follows:
March 31,December 31,
20212020
Assets:
Operating$1,202$1,108
Finance116131
Total assets$1,318$1,239
Liabilities:
Operating:
Current$554 $612 
Long-term722 572 
Finance:
Current51 53 
Long-term66 79 
Total liabilities$1,393 $1,316 
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,
20212020
Finance leases:
Weighted-average remaining lease term (years)2.22.4
Weighted-average discount rate6.0 %6.0 %
Operating leases:
Weighted-average remaining lease term (years)3.02.5
Weighted-average discount rate6.0 %6.0 %
Maturities of operating leases liabilities are as follows:
Remaining period in 2021$505 
2022373 
2023226 
2024167 
202598 
202636 
Thereafter 
Total lease payments1,405 
Less: present value discount(129)
Total leases$1,276 
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Maturities of finance lease liabilities are as follows:
Remaining period in 2021$41 
202257 
202327 
2024 
2025 
2026 
Thereafter 
Total finance lease payments125 
Less: imputed interest(8)
Total leases$117 
Operating lease expense was $0.23 million and $0.20 million for the three months ended March 31, 2021 and 2020, respectively.

NOTE 7 - DEBT
The following table presents debt balances at March 31, 2021 and December 31, 2020:
March 31,December 31,
20212020
Short-term note due May 2021$1,000 $1,000 
Short-term note due November 20211,000 1,000 
PPP loan 161 
Total debt2,000 2,161 
Less short term debt(2,000)(2,161)
Long-term debt$ $ 
Short-term notes
The notes do not accrue interest and may be repaid early without penalty. On May 14, 2021 we repaid $1.0 million on the Short-term note in accordance with the maturity schedule.
PPP loan
MedAvail received forgiveness approval of the loan on March 30, 2021 in accordance with the terms of the CARES Act.

NOTE 8 - INCOME TAXES
The Company did not incur income tax expense for the three months ended March 31, 2021, and 2020, respectively, due to ongoing losses. 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, 2021, 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.
On March 11, 2021, the U.S. federal government enacted the American Rescue Plan Act of 2021, which did not have a material impact on our benefit for income taxes.
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NOTE 9 - 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 comprise 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 are without merit, and believe that the Form S-4 Registration Statement disclosed all material information concerning the Merger and no supplemental disclosure is 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. The remainder of the Litigation remains outstanding. MYOS and MAI specifically deny all allegations in the Litigation and/or that any additional disclosure was or is required

NOTE 10 - SHARE-BASED COMPENSATION AND WARRANTS
Share-based compensation
The following table presents the Company's expense related to share-based compensation:
Three Months Ended March 31,
20212020
Share-based compensation$260 $84 
Expense remaining to be recognized for unvested awards as of March 31, 2021 was $2.3 million, which will be recognized on a weighted average basis over the next 3.0 years.
The following table present the Company's outstanding option awards activity during the three months ended March 31, 2021:
Number of AwardsWeighted Average Exercise PriceWeighted Average Share Price on Date of ExerciseWeighted Average Fair ValueWeighted Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding, beginning of period2,439,020 $1.59 USD$0.77 USD$31,174,927 USD
Granted200,047 $14.75 USD$8.04 USD$ USD
Exercised/Released(120,905)$1.69 USD$15.05 USD$0.85 USD$1,619,138 USD
Cancelled/Forfeited(1,909)$1.66 USD$0.84 USD$23,917 USD
Outstanding, end of period2,516,253 $2.63 USD$1.34 USD8.1$28,802,808 USD
Vested and exercisable, end of the period1,695,084 $1.64 USD$0.79 USD7.7$20,956,155 USD
Vested and unvested exercisable, end of the period1,695,084 $1.64 USD$0.79 USD7.7$20,956,155 USD
Vested and expected to vest, end of the period2,453,394 $2.55 USD$1.30 USD8.1$28,255,632 USD
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During the three months ended March 31, 2021, the Company granted 50,922 restricted stock units or RSUs to employees with a weighted average fair value of $15.15 per RSU and total aggregate intrinsic value of 0.7 million. None of the RSUs were vested as of March 31, 2021, and they had a weighted average remaining contractual life of 3.0 years.
As of March 31, 2021 and December 31, 2020, there was an aggregate of 4.8 million and 5.0 million shares of common stock, respectively, available for grant under the 2020 Plan.
Warrants
During the three months ended March 31, 2021 no warrants were issued.
On May 10, 2021, warrants were exercised in exchange for issuing 465,496 shares of the Company's common stock, with total cash proceeds of $90 thousand.

NOTE 11 - REVENUE AND SEGMENT REPORTING
Operating segments are the individual operations that the chief operating decision maker ("CODM"), who is our chief executive officer, reviews for purposes of assessing performance and making resource allocation decisions. The CODM currently receives the monthly management report which includes information to assess performance. The retail pharmacy services and pharmacy technology operating segments both engage in different business activities from which they earn revenues and incur expenses.
The Company has the following two reportable segments:
Retail Pharmacy Services Segment
Retail pharmacy services segment revenue consists of products sold directly to consumers at the point of sale. MedAvail recognizes retail pharmacy sales revenue, net of taxes and expected returns, at the time it sells merchandise or dispenses prescription drugs to the customer. The Company estimates revenue based on expected reimbursements from third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies) for dispensing prescription drugs. The estimates are based on all available information including historical experience and are updated to actual reimbursement amounts.
Pharmacy Technology Segment
The pharmacy technology segment consists of sales and subscriptions of MedPlatform systems to customers. These agreements include providing the MedCenter prescription dispensing kiosk, software, and maintenance services. This generally includes either an initial lump sum payment upon installation of the MedCenter with monthly payments for software and services following, or monthly payments for the MedCenter along with monthly payments for software and maintenance services for subscription agreements.
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The following table presents sales and costs of sales by segment:
Retail Pharmacy ServicesPharmacy TechnologyTotal
Three Months Ended March 31, 2021
Sales:
Pharmacy and hardware sales:
Retail pharmacy sales$3,418 $ $3,418 
Hardware 241 241 
Subscription sales 122 122 
Total pharmacy and hardware sales3,418 363 3,781 
Service sales:
Software 33 33 
Maintenance and support 31 31 
Installation 16 16 
Professional services and other 166 166 
Total service sales 246 246 
Total sales3,418 609 4,027 
Cost of sales3,329 378 3,707 
Gross profit$89 $231 $320 
Retail Pharmacy ServicesPharmacy TechnologyTotal
Three Months Ended March 31, 2020
Sales:
Pharmacy and hardware sales:
Retail pharmacy sales$1,297 $ $1,297 
Hardware   
Subscription sales 105 105 
Total pharmacy and hardware sales1,297 105 1,402 
Service sales:
Software   
Maintenance and support 10 10 
Installation   
Professional services and other   
Total service sales 10 10 
Total sales1,297 115 1,412 
Cost of sales1,338 94 1,432 
Gross profit$(41)$21 $(20)
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The following table presents assets and liabilities by segment:
Retail Pharmacy ServicesPharmacy TechnologyCorporateTotal
March 31, 2021
Assets$6,852 $5,414 $47,272 $59,538 
Liabilities$2,374 $2,300 $2,783 $7,457 
December 31, 2020
Assets$6,012 $5,547 $57,772 $69,331 
Liabilities$2,203 $3,422 $2,639 $8,264 
The following table presents long-lived assets, which include property, plant, and equipment and right-of-use-assets by geographic region, based on the physical location of the assets:
March 31,December 31,
20212020
Long-lived assets:
United States$4,844 $4,533 
Canada256 $501 
Total long-lived assets$5,100 $5,034 

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited historical consolidated condensed financial statements for the year ended December 31, 2020, which are included in the Annual Report on Form 10-K, filed with the SEC on March 31, 2021, and our unaudited consolidated condensed financial statements for the three months ended March 31, 2021 included elsewhere in this Quarterly Report on Form 10-Q. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. 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 below or 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 the 2020 Form 10-K for the year ended December 31, 2020. 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 retail pharmacy company that is transforming full-service pharmacy. 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 prescription drug dispensing to occur directly to a patient while still providing real-time supervision by a pharmacist. Although its technology platform has broad application, we are currently focused on serving high-value Medicare members in the United States of America, or U.S.
We currently deploy the MedCenter solution through two distinct commercialization channels. First, we own and operate a full retail pharmacy business in the U.S. under the name SpotRx™, or SpotRx. The SpotRx pharmacy business is structured as a hub-and-spoke model where a central pharmacy supports and operates MedCenter kiosks embedded in medical clinics, usually in close proximity to the central pharmacy. The second commercialization channel is a direct ‘sell-to’ model, whereby we sell the MedCenter technology and subscriptions for the associated software directly to large healthcare providers and retailers for use within their own pharmacy operations.
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 or free, next day home delivery. Supporting its 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, which allows connection to our supporting team of pharmacists and kiosk administrators.
Our kiosks come in two models: the M4 MedCenter and the M5 MedCenter. The M4 MedCenter kiosk is designed to fit in waiting rooms, hallways, and lobbies. The M5 MedCenter is a larger kiosk designed as a full pharmacy replacement with the ability to serve 3-4 customers simultaneously. It can also to be configured for drive through dispensing, similar to bank ATM drive through lanes.
Traditional retail pharmacies are built around a physical store front. In order to dispense medication, these stores must have a pharmacist onsite for all hours of operation. Most pharmacies have reduced hours of operation based on customer purchasing patterns in order to contain labor cost, which results in further reduced consumer access. Furthermore, retail pharmacy wait times are typically 30 to 60 minutes or more, causing substantial delays for the consumer. During the COVID-19 pandemic, most people are looking to minimize the amount of physical contact that can lead to further disease contraction, especially for those most vulnerable, such as the elderly or those with compromised immune systems. Consequently, some patients are foregoing filling their prescribed medications, leading to declining health, increased healthcare costs and increased morbidity.
Components of Operating Results for the Three Months Ended March 31, 2021
We have never been profitable and have incurred operating losses in each year since inception. Our net losses were $9.5 million and $5.7 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $157.7 million. Substantially all of our operating losses resulted from expenses incurred in connection with building out our retail pharmacy services operating footprint and from general and administrative costs associated with our operations.
We expect to incur significant additional expenses and operating losses for at least the next two years as we initiate and continue the technology development, deployment of our MedCenter technology and adding personnel necessary to operate as a public company with rapidly growing retail pharmacy operations in the United States. In addition, operating as a publicly traded company involves the hiring of additional financial and other personnel, upgrading our financial information systems and incurring costs associated with operating as a public company. We expect
19


that our operating losses will lessen and turn positive as we execute our growth strategies within each of our operating segments. If our management accelerates deployment into new states, operating losses could increase in the near-term, as the we grow and scale our operations in new states; we expect operating performance to turn positive once each state reaches sufficient scale in sales volume.
As of March 31, 2021, we had cash and cash equivalents of $47.6 million. We will continue to require additional capital to continue our technology development and commercialization activities and build out our pharmacy operations to serve our growing customer base. Accordingly, in November 2020 we completed the sale of additional equity through a private placement funding, where the we raised $83.9 million. Although we believe the proceeds from the private placement represents sufficient funding to execute our current growth plan, due to market risks (as outlined in the "Risk Factors" section of this Quarterly Report on Form 10-Q), we may need to raise additional capital to continue to fund our operations. The amount and timing of our 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.
We have two reportable segments: Retail Pharmacy Services and Pharmacy Technology. These reportable segments are generally defined by how we execute our go-to-market strategy to sell products and services.
Overview of Retail Pharmacy Services Segment
The Retail Pharmacy Services operating segment operates as SpotRx, or the Pharmacy, a full-service retail pharmacy utilizing our automated pharmacy technology, primarily servicing Medicare patients in the United States. In operating SpotRx, we employ the pharmacy team, purchase the medications, and deploy our proprietary technology, the MedCenter, directly into the Medicare-focused clinics. This is an end-to-end turnkey solution.
Overview of Pharmacy Technology Segment
MedAvail Technologies develops and commercializes the MedCenter for direct sale or 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.
Results of Operations
Sales – Retail Pharmacy and Hardware and Service
Retail pharmacy and hardware sales
Retail pharmacy sales from the retail pharmacy services segment are derived from sales of prescription medications and over-the-counter products to patients. Medications are sold and delivered by various methods including dispensing product directly from the MedCenter, patient pick up at MedAvail’s SpotRx pharmacy locations or home delivery of medications to patient residences. Hardware sales from the pharmacy technology segment are derived from either the sales or subscription of the MedCenter to customers.
Service sales
Services sales from the pharmacy technology segment are derived from installation and support services.
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Sales
Three Months Ended March 31,2021 vs. 2020
20212020Amount Change% Change
Pharmacy and hardware sales:(in thousands)
Retail pharmacy sales$3,418 $1,297 $2,121 164 %
Hardware241 — 241 — %
Subscription sales122 105 17 16 %
Total pharmacy and hardware sales3,781 1,402 2,379 170 %
Service sales:
Software33 — 33 — %
Maintenance and support31 10 21 210 %
Installation16 — 16 — %
Professional services and other166 — 166 — %
Total service sales246 10 236 2360 %
Total sales$4,027 $1,412 $2,615 185 %
During the three months ended March 31, 2021, retail pharmacy and hardware sales increased $2.4 million to $3.8 million compared to the same period in 2020. The increase was primarily due to volume growth in prescription sales at existing sites in Arizona, as well as growth from newly launched sites in Arizona, California and Michigan.
During the three months ended March 31, 2021, services sales increased $0.24 million to $0.25 million compared to the same period in 2020. The increase was due to the related increase in pharmacy and hardware sales, and professional services associated with contracted software integration work enabling a large health system customer to fully integrate their backend pharmacy management system with our back-end MedPlatform® Enterprise Software.
Cost of Sales – Pharmacy and Hardware and Service
Pharmacy and hardware cost of sales
Cost of sales consists primarily of prescription medications, and other over-the-counter health products; and costs incurred to manufacture MedCenters sold to third-party customers.
Service cost of sales
Cost of sales consists primarily of costs incurred to install and maintain MedCenters at third-party customer locations.

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Costs of sales
Three Months Ended March 31,2021 vs. 2020
20212020Amount Change% Change
Retail pharmacy and hardware cost of sales:(in thousands)
Prescription drugs$3,060 $1,274 $1,786 140 %
Shipping270 63 207 329 %
Hardware150 — 150 — %
Depreciation46 48 (2)(4)%
Total retail pharmacy and hardware cost of sales3,526 1,385 2,141 155 %
Service cost of sales:
Professional services142 — 142 — %
Maintenance and support services28 34 (6)(18)%
Installation services11 13 (2)(15)%
Total service cost of sales181 47 134 285 %
Total cost of sales$3,707 $1,432 $2,275 159 %
During the three months ended March 31, 2021, retail pharmacy and hardware cost of sales increased $2.1 million to $3.5 million compared to the same period in 2020. The increase was primarily due to costs associated with volume growth in prescription sales at existing sites and additional sites launched in the remaining period in 2020 and 2021 in Arizona, California and Michigan. Shipping costs, related to our home delivery service via third-party courier, increased $0.2 million compared to the same period in 2020. This increase is due to increased utilization of the service due to higher telehealth clinic visits caused by the Covid-19 pandemic.
During the three months ended March 31, 2021, service cost of sales increased $0.1 million to $0.2 million compared to the same period in 2020. The increase was due primarily to costs associated with contracted software integration work enabling a large health system customer to fully integrate their backend pharmacy management system with our MedPlatform® Enterprise Software.
Pharmacy operations
Pharmacy operations costs consist of costs incurred to operate retail pharmacies including pharmacy labor costs, rent and utilities, and pharmacy license fees. Wages and salaries consist of compensation costs incurred for all pharmacy operations related employees and contractors including bonuses, health plans, severance, and contractor costs.
Depreciation of property, plant and equipment includes depreciation on MedCenters, IT equipment, leasehold improvements, general plant and equipment, software, office furniture and equipment and vehicles. Amortization of intangible assets consists of amortization of intellectual property, website and mobile applications and software.
Three Months Ended March 31,2021 vs. 2020
20212020Amount Change% Change
Pharmacy operations expenses:(in thousands)
Wages and salaries$1,448 $835 $613 73 %
Other pharmacy operations expenses221 60 161 268 %
Depreciation of property, plant and equipment208 157 51 32 %
Amortization of intangible assets34 37 (3)(8)%
Total pharmacy operations expenses$1,911 $1,089 $822 75 %
During the three months ended March 31, 2021, pharmacy operations expenses increased $0.8 million to $1.9 million compared to the same period in 2020. This increase was primarily due to the opening of four additional central pharmacy locations in the remaining period in 2020, including three in California and one in Michigan. Additionally, volume growth continued to ramp at existing pharmacy locations in Arizona, increasing pharmacy personnel and supplies during the remaining period in 2020 and 2021, resulting in increased operating costs.

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General and administrative
General and administrative expenses consist of personnel costs, facility expenses and expenses for outside professional services, including legal, audit and accounting services. Personnel costs consist of salaries, benefits and share-based compensation. Facility expenses consist of rent and other related costs. Corporate insurance, office supplies and technology expenses are also captured within general and administrative expenses. We incurred and expect to incur additional expenses as a result of becoming a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.
We have a stock option plan whereby awards are granted to certain of our employees. The fair value of the stock options and restricted stock units granted by us to our employees is recognized as compensation expense on a straight-line basis over the applicable vesting period. We measure the fair value of the stock options using the Black-Scholes option pricing model as of the grant date/measurement date. Shares issued upon the exercise of stock options and vesting of restricted stock units are new shares. We estimate forfeitures based on historical experience and expense related to awards is adjusted over the term of the awards to reflect their probability of vesting. All fully vested awards are fully expensed.
Three Months Ended March 31,2021 vs. 2020
20212020Amount Change% Change
General and administrative expenses:(in thousands)
Wages and salaries$3,756 $2,088 $1,668 80 %
Professional services1,045 158 887 561 %
Rent and utilities