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As filed with the Securities and Exchange Commission on September 2, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
MYOS RENS Technology Inc.
(Exact name of Registrant as specified in its charter)
Nevada283490-0772394
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
45 Horsehill Road, Suite 106
Cedar Knolls, New Jersey 07927
(973) 509-0444
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Joseph Mannello
Chief Executive Officer
45 Horsehill Road, Suite 106
Cedar Knolls, New Jersey 07927
(973) 509-0444
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
David N. Feldman, Esq.
Scott D. Woller, Esq.
Hiller P.C.
641 Lexington Avenue, 29th Floor
New York, NY 10022
(212) 319-4000
Ed Kilroy
Chief Executive Officer
MedAvail, Inc.
6665 Millcreek Drive, Suite 1
Mississauga, Ontario, Canada L5N 5M4
(647) 484-1001
Philip H. Oettinger, Esq.
Ethan Lutske, Esq.
Eric Hsu, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Security Being Registered(1)
Amount
to be
Registered(2)(3)
Proposed
Maximum
Offering Price
Per Share
Proposed
Maximum
Aggregate
Offering Price(4)
Amount of
Registration
Fee(5)
Common stock, $ 0.001 par value per share 363,087,178 N/A $70,196,854$9,112
(1)Subsequent to the consummation of the Merger (as defined below) described herein, MYOS RENS TECHNOLOGY INC., a Nevada corporation (“MYOS”) intends to effect a reincorporation, pursuant to which the Registrant’s jurisdiction of incorporation will be changed from the State of Nevada to the State of Delaware and the name of the Registrant will be changed to “MedAvail Holdings, Inc.”
(2)Relates to common stock, $ 0.001 par value per share, of MYOS, issuable to holders of capital stock, $0.001 par value per share, and warrants and options of MedAvail, Inc., a Delaware corporation (“MedAvail”), in the proposed Merger of Matrix Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of MYOS, with and into MedAvail, pursuant to that certain Agreement and Plan of Merger and Reorganization dated as of dated as of June 30, 2020 (the “Merger”). The number of shares of MYOS common stock to be registered is based on the estimated number of shares of MYOS common stock that are expected to be issued pursuant to the Merger, assuming an estimated exchange ratio of 0.982 shares of MYOS common stock for each outstanding share of MedAvail capital stock and for each option and warrant exercisable for shares of MedAvail capital stock, and without giving effect to a reverse stock split of MYOS common stock immediately prior to the Merger as described herein. The estimated exchange ratio calculation contained herein is based upon MYOS’s capitalization immediately prior to the date of this proxy statement/prospectus/information statement, and will be adjusted to account for the issuance of any additional shares of MYOS’s common stock prior to the consummation of the Merger.
(3)Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, reverse stock splits, stock dividends or similar transactions.
(4)Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) of the Securities Act of 1933, as amended, based upon the estimated book value of the MedAvail securities to be exchanged in the Merger, as of immediately prior to the Merger. MedAvail is a private company, and no market exists for its securities.
(5)This fee has been calculated pursuant to Section 6(b) of the Securities Act of 1933, as amended, at a rate equal to $129.80 per $1,000,000 of the proposed maximum aggregate offering price.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


The information in this proxy statement/prospectus/information statement is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus/information statement is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 2020
medavail-20200902_g1.jpg
medavail-20200902_g2.jpg
PROPOSED MERGER
YOUR VOTE IS VERY IMPORTANT
To the Equity Holders of MYOS RENS Technology Inc., and MedAvail, Inc.:
MYOS RENS Technology Inc., or MYOS, and MedAvail, Inc., or MedAvail, have entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, pursuant to which a wholly owned subsidiary of MYOS will merge with and into MedAvail, with MedAvail surviving as a wholly owned subsidiary of MYOS, or the Merger. The Merger will result in a healthcare technology company focused on developing and commercializing an innovative self-service pharmacy, mobile app, kiosk, and drive-thru solution.
At the effective time of the Merger, or the Effective Time: (a) each share of MedAvail’s capital stock outstanding immediately prior to the Effective Time, excluding any dissenting shares, will be automatically converted solely into the right to receive a number of shares of MYOS’s common stock, or MYOS Common Stock, equal to the exchange ratio described below; (b) each outstanding MedAvail stock option that has not previously been exercised prior to the Effective Time will be assumed by MYOS and will become an option to purchase shares of MYOS Common Stock; and (c) each outstanding warrant to acquire MedAvail capital stock that has not previously been exercised prior to the Effective Time will be assumed by MYOS and will become a warrant to purchase shares of MYOS Common Stock.
Prior to the Effective Time, MYOS will effectuate a reverse stock split of all outstanding shares of MYOS Common Stock at a reverse stock split ratio within the range of between one-for-two and one-for-fifteen, or the Reverse Stock Split, to be implemented prior to the consummation of the Merger as discussed in this proxy statement/prospectus/information statement.
Subsequent to the closing of the Merger, the post-Merger public company, or the Post-Merger Public Company, will be reincorporated from the State of Nevada to the State of Delaware, or the Reincorporation, and in connection therewith, change the name of the Post-Merger Public Company from “MYOS RENS Technology Inc.” to “MedAvail Holdings, Inc.”.
Prior to the Effective Time, MYOS will also implement a spin out transaction, or Spin Out Transaction, pursuant to which MYOS will contribute substantially all of its assets and liabilities to MYOS Corp., a Delaware corporation and a wholly owned subsidiary of MYOS, or Spin Out Sub, in exchange for all the outstanding shares of common stock of Spin Out Sub, and, on the business day following the closing date of the Merger, issue a pro rata dividend of all the outstanding shares of common stock of Spin Out Sub payable to the MYOS shareholders as of [●], the Record Date for the determination of shareholders entitled to notice of, and to vote at, the MYOS Special Meeting (as defined below), or the Pre-Merger MYOS Shareholders. Upon implementation of the Spin Out Transaction, the prior business of MYOS will be operated by Spin Out Sub as a privately owned company.
Under the exchange ratio formula in the Merger Agreement, as of immediately after the Merger, the former MedAvail security holders are expected to own approximately 96.5% of the aggregate number of fully-diluted shares of the MYOS Common Stock outstanding following the consummation of the Merger, or the Post-Closing Shares, and the Pre-Merger MYOS Shareholders are expected to own approximately 3.5% of the aggregate number of Post-Closing Shares, subject to the adjustments set forth in the Merger Agreement (in addition to receiving shares of Spin Out Sub pursuant to the Spin Out Transaction). This exchange ratio will be fixed prior to closing to reflect MYOS’s and MedAvail’s capitalization as of immediately prior to such time, and the percentage ownership figures are estimates.



Shares of MYOS Common Stock are currently listed on The Nasdaq Capital Market under the symbol “MYOS.” Prior to consummation of the Merger, MYOS intends to file an initial listing application for the Post-Merger Public Company with The Nasdaq Capital Market. In connection with the Merger, MYOS will be renamed “MedAvail Holdings, Inc.” and expects to trade on The Nasdaq Capital Market under the symbol “MDVL.” On [●], 2020, the last trading day before the date of this proxy statement/prospectus/information statement, the closing sale price of MYOS Common Stock was $[●] per share.
MYOS is holding a special meeting of shareholders, or the MYOS Special Meeting, on [●], at [●], Eastern Time, unless postponed or adjourned to a later date. The special meeting will be “virtual,” meaning that you can participate in the MYOS Special Meeting online at www.virtualshareholdermeeting.com/MYOS2020 at the appointed time and date by entering the control number included in the proxy card that you receive. MYOS shareholders are encouraged to access the MYOS Special Meeting before the start time. Please allow ample time for online check-in. MYOS shareholders will not be able to attend the MYOS Special Meeting in person. At the MYOS Special Meeting, MYOS will ask its shareholders to approve, among other matters, the following proposals: (i) the Merger, the Merger Agreement, and the transactions contemplated thereby or in connection therewith, including, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of MYOS Common Stock to MedAvail equity holders, or the Merger Proposal, (ii) the Reverse Stock Split as further discussed in this proxy statement/prospectus/information statement, including increasing the number of shares of MYOS Common Stock authorized under MYOS’s amended and restated articles of incorporation, or the Reverse Stock Split Proposal, (iii) effectuating the Spin Out Transaction, as further discussed in this proxy statement/prospectus/information statement, or the Spin Out Proposal, (iv) the Reincorporation, and in connection therewith, replacing the MYOS articles of incorporation and the MYOS bylaws and changing the name of the Post-Merger Public Company from “MYOS RENS Technology Inc.” to “MedAvail Holdings, Inc.”, all in accordance with the relevant provisions of the Delaware General Corporation Law and the Nevada Revised Statutes, or the Reincorporation Proposal, (v) the MedAvail Holdings, Inc. 2020 Equity Incentive Plan, or the Equity Incentive Plan Proposal, (vi) the MedAvail Holdings, Inc. 2020 Employee Stock Purchase Plan, or the Employee Stock Purchase Plan Proposal and (vii) to adjourn the MYOS Special Meeting, if necessary, to permit the solicitation of additional proxies in the event that there are insufficient votes on one or more of the proposals presented to MYOS shareholders, or the Adjournment Proposal, each as described in the accompanying proxy statement/prospectus/information statement.

As described in the accompanying proxy statement/prospectus/information statement, certain MedAvail stockholders who in the aggregate beneficially own or control approximately 90% of the outstanding shares of MedAvail common stock on an as converted to common stock basis, and certain MYOS shareholders who in the aggregate beneficially own or control approximately 46% of the outstanding shares of MYOS Common Stock, are parties to voting agreements with MedAvail and MYOS respectively, whereby such equity holders agreed to vote in favor of the adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, respectively, subject to the terms of the voting agreements. In addition, following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission and pursuant to the conditions of the Merger Agreement, the MedAvail stockholders who are party to the voting agreements will each execute an action by written consent of the MedAvail stockholders, referred to herein as the written consent, adopting the Merger Agreement and approving the Merger and the transactions contemplated by the Merger Agreement. No meeting of MedAvail stockholders to adopt the Merger Agreement and approve the Merger and related transactions will be held; however, all MedAvail stockholders will have the opportunity to elect to adopt the Merger Agreement, thereby approving the Merger and related transactions, by signing and returning to MedAvail a written consent.
After careful consideration, the MYOS and MedAvail boards of directors have approved the Merger Agreement and the respective proposals referred to above, and each of the MYOS and MedAvail boards of directors has determined that it is advisable to enter into the Merger. The board of directors of MYOS recommends that its shareholders vote “FOR” the proposals described in the accompanying proxy statement/prospectus/information statement, and the board of directors of MedAvail unanimously recommends that its stockholders sign and return the written consent indicating their approval of the Merger and adoption of the Merger Agreement and related transactions to MedAvail.
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More information about MYOS, MedAvail and the proposed transaction is contained in this proxy statement/prospectus/information statement. MYOS and MedAvail urge you to read the accompanying proxy statement/prospectus/information statement carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 38.
MYOS and MedAvail are excited about the opportunities the Merger and Spin Out Transaction bring to both MYOS and MedAvail equity holders, and thank you for your consideration and continued support.
Joseph MannelloEd Kilroy
Chief Executive OfficerChief Executive Officer
MYOS RENS Technology Inc.MedAvail, Inc.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus/information statement. Any representation to the contrary is a criminal offense.
The accompanying proxy statement/prospectus/information statement is dated [●], and is first being mailed to MYOS and MedAvail equity holders on or about [●].
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MYOS RENS TECHNOLOGY INC.
45 Horsehill Road, Suite 106
Cedar Knolls, NJ 07927
(973) 509-0444
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On [●], 2020
Dear Shareholders of MYOS:
On behalf of the board of directors of MYOS RENS Technology Inc., a Nevada corporation, or MYOS, MYOS is pleased to deliver this proxy statement/prospectus/information statement for the proposed merger, or the Merger, between MYOS and MedAvail, Inc., a Delaware corporation, or MedAvail, pursuant to which Matrix Merger Sub, Inc., a wholly owned subsidiary of MYOS, or Merger Sub, will merge with and into MedAvail, with MedAvail surviving as a wholly owned subsidiary of MYOS, along with a related spin out of the existing business of MYOS to a new privately owned company to be owned by the shareholders of MYOS prior to the Merger, or the Spin Out Transaction. The special meeting of shareholders of MYOS, or the MYOS Special Meeting, will be held virtually on [●] at [●], Eastern Time, unless postponed or adjourned to a later date. You can attend the MYOS Special Meeting via the internet, vote your shares electronically and submit your questions during the MYOS Special Meeting by visiting www.virtualshareholdermeeting.com/MYOS2020 at the appointed time and date by [●]. MYOS shareholders are encouraged to access the special meeting before the start time. Please allow ample time for online check-in. MYOS shareholders will not be able to attend the MYOS Special Meeting in person. The MYOS Special Meeting is being held, for the following purposes:
1.To consider and vote upon a proposal to approve the Merger and, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of MYOS’s common stock, or MYOS Common Stock, to MedAvail equity holders in connection with the Merger, pursuant to the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2020, by and among MYOS, Merger Sub and MedAvail, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus/information statement, or the Merger Proposal;
2.To consider and vote upon a proposal to approve the certificate of amendment of the amended and restated articles of incorporation of MYOS, a copy of which is attached as Annex E to the accompanying proxy statement/prospectus/information statement, to effect a reverse stock split of all outstanding shares of MYOS Common Stock at a reverse stock split ratio between, and including, one-for-two and one-for-fifteen as will be selected by the MYOS board of directors prior to the time of filing such certificate of amendment with the Nevada Secretary of State based upon the determination of MedAvail, or the Reverse Stock Split, and an increase in the number of shares authorized under MYOS’s amended and restated articles of incorporation, to be implemented prior to the consummation of the Merger as discussed in this proxy statement/prospectus/information statement, or the Reverse Stock Split Proposal;
3.To consider and vote upon a proposal to approve a spin out transaction, or the Spin Out Transaction, pursuant to which MYOS would contribute substantially all of the assets and liabilities of MYOS to MYOS Corp., a Delaware corporation and a wholly owned subsidiary of MYOS, or Spin Out Sub, in exchange for all the outstanding shares of common stock of Spin Out Sub, issue a pro rata dividend of all the outstanding shares of common stock of Spin Out Sub to the existing MYOS shareholders as of the Record Date (as defined below), or the Spin Out Proposal;
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4.To consider and vote upon a proposal to approve, subsequent to the effective time of the Merger, the reincorporation of MYOS from a Nevada corporation to a Delaware corporation, or the Reincorporation, and in connection therewith, replacing the MYOS articles of incorporation and the MYOS bylaws and changing the name of the company from “MYOS RENS Technology Inc.” to “MedAvail Holdings, Inc.”, or the Reincorporation Proposal;
5.To consider and vote upon a proposal to approve the MedAvail Holdings, Inc. 2020 Equity Incentive Plan, to be effective upon the Merger, or the Equity Incentive Plan Proposal;
6.To consider and vote upon a proposal to approve the MedAvail Holdings, Inc. 2020 Employee Stock Purchase Plan, to be effective upon the Merger, or the Employee Stock Purchase Plan Proposal; and
7.To consider and vote upon an adjournment of the MYOS Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of MYOS Proposal Nos. 1-6 or the Adjournment Proposal.
The board of directors of MYOS has fixed [●] as the record date for the determination of shareholders entitled to notice of, and to vote at, the MYOS Special Meeting and any adjournment or postponement thereof, or the Record Date. Only holders of record of shares of MYOS Common Stock at the close of business on the Record Date are entitled to notice of, and to vote at, the MYOS Special Meeting. At the close of business on the Record Date, MYOS had [●] shares of common stock outstanding and entitled to vote.
Prior to the date of this proxy statement/prospectus/information statement, MedAvail entered into a securities purchase agreement, or the Securities Purchase Agreement, with accredited investors, including certain healthcare focused retail and institutional investors, as well as certain existing investors in MedAvail, or the Subscribers, pursuant to which the Subscribers agreed to purchase, and MedAvail agreed to sell to the Subscribers, an aggregate of up to 5,834,597 shares, or Private Placement Shares, of MedAvail Common Stock, for a purchase price of $8.57 per share, to be exchanged for shares of MYOS Common Stock upon the closing of the Merger, in a private placement in which MedAvail expects to raise an aggregate of at least $50 million, less certain offering related expenses payable by MedAvail, or the Private Placement, and the Private Placement is expected to exceed the minimum private financing amount of $30 million that is a condition to the closing of the Merger. The Private Placement Shares, once exchanged for shares of MYOS Common Stock, will be identical to the shares of MYOS Common Stock that will be held by MYOS’s public shareholders, in both cases after taking into account all the transactions contemplated by the Merger Agreement, including the Reverse Stock Split and the Reincorporation. The closing of the sale of Private Placement Shares, or the Private Placement Closing, is anticipated occur no sooner than two (2) days prior the closing of the Merger and will be subject to customary conditions. The purpose of the sale of the Private Placement Shares is to raise additional capital for working capital following the consummation of the Merger and is a condition to closing of the Merger.
Your vote is important. The affirmative vote of the holders of a majority of the shares of MYOS Common Stock having voting power present in person or represented by proxy at the MYOS Special Meeting, presuming a quorum is present, is required for approval of MYOS Proposal Nos. 1-6. The Merger cannot be consummated without the approval of Proposal No. 1. In addition, the parties may not be obligated to consummate the Merger without the approval of Proposal Nos. 2-6.
Regardless of whether you plan, or are unable, to attend the MYOS Special Meeting virtually, MYOS requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the MYOS Special Meeting.
If your shares are held in “street name” through a broker, trust, bank or other nominee, and you received the notice of the MYOS Special Meeting through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary to instruct them how to vote your shares or contact your broker or other intermediary directly in order to obtain a proxy issued to you by your nominee holder to attend the MYOS Special Meeting and vote at the MYOS Special Meeting. Failure to do so may result in your shares not being eligible to be voted by proxy at the MYOS Special Meeting.
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You may revoke a proxy at any time prior to its exercise at the MYOS Special Meeting by following the instructions in the enclosed proxy statement/prospectus/information statement.
THE MYOS BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, MYOS AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED EACH SUCH PROPOSAL. THE MYOS BOARD OF DIRECTORS RECOMMENDS THAT MYOS SHAREHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.
By Order of the MYOS Board of Directors,
Joseph Mannello
Chief Executive Officer
45 Horsehill Road, Suite 106
Cedar Knolls, New Jersey 07927
(973) 509-0444
[●], 2020
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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus/information statement incorporates important business and financial information about MYOS RENS Technology Inc., or MYOS, from other documents that MYOS has filed with the United States Securities and Exchange Commission, or the SEC, and that are contained in or incorporated by reference herein. For a listing of documents incorporated by reference herein, please see the section entitled “Where You Can Find More Information” beginning on page 268 of this proxy statement/prospectus/information statement. MYOS is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and accordingly files its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. As an electronic filer, MYOS’s public filings are also maintained on the SEC’s Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is https://www.sec.gov.
You may obtain any of the documents referred to above from the SEC, through the SEC’s website or from MYOS, without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibit to the registration statement of which this consent solicitation statement/prospectus forms a part, by requesting them in writing at the following address or email address:
MYOS RENS Technology, Inc.
Attn: Joseph Mannello
Morris Technical Center
45 Horsehill Road, Suite 106
Cedar Knolls, NJ 07927
Phone:  973-509-0444
Email:  jmannello@myoscorp.com
To receive timely delivery of the documents, your request must be received no later than [●], 2020. Please note that physical access to our office may be limited as a result of shelter in place guidance due to the COVID-19 pandemic or because of inclement weather. Therefore, it is suggested that you request such documents via email.
General information about MYOS, including its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through MYOS’s website at https://ir.myosrens.com/ as soon as reasonably practicable after MYOS files them with, or furnishes them to, the SEC. Information on MYOS’s website is not incorporated into this proxy statement/prospectus/information statement and is not a part of this proxy statement/prospectus/information statement.
MYOS, MedAvail, Inc., or MedAvail and Matrix Merger Sub, Inc., or Merger Sub, have not authorized anyone to give any information or make any representation about the Merger or the transactions contemplated thereby, MYOS, MedAvail or Merger Sub that is different from, or in addition to, the information contained in this proxy statement/prospectus/information statement or in any of the materials that have been incorporated by reference into this proxy statement/prospectus/information statement. Therefore, if anyone distributes any such information, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell or solicitations of offers to exchange or purchase the securities offered by this proxy statement/prospectus/information statement are not permitted, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus/information statement does not extend to you. The information contained in this proxy statement/prospectus/information statement speaks only as of the date of this proxy statement/prospectus/information statement or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. MYOS and MedAvail have both contributed to the information relating to the Merger or the transactions contemplated thereby contained in this proxy statement/prospectus/information statement.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus/information statement does not give effect to the proposed reverse stock split described in MYOS Proposal No. 2, beginning on page 119 in this proxy statement/prospectus/information statement.
The following section provides answers to frequently asked questions about the Merger. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.
Q:   Why am I receiving this proxy statement/prospectus/information statement?
A:   You are receiving this proxy statement/prospectus/information statement because you have been identified as an equity holder of MYOS RENS Technology, Inc., or MYOS or MedAvail, Inc., or MedAvail, as of the applicable record date, and you are entitled, as applicable, to vote at the special meeting of the shareholders of MYOS, or the MYOS Special Meeting, to approve among other things the Merger (as defined below) and the issuance of shares of MYOS’s common stock, or MYOS Common Stock, pursuant to the Merger Agreement (as defined below), or sign and return the MedAvail written consent to adopt the Merger Agreement and approve the Merger. This document serves as:
a proxy statement of MYOS used to solicit proxies for the MYOS Special Meeting;
a prospectus of MYOS used to offer shares of MYOS Common Stock in exchange for shares of MedAvail’s common stock, or MedAvail Common Stock, in the Merger and issuable upon exercise of MedAvail options and warrants; and
an information statement of MedAvail used to solicit the written consent of its stockholders for the adoption of the Merger Agreement and the approval of the Merger and related transactions.
Q:   What is the Merger?
A:   MYOS, and MedAvail have entered into an Agreement and Plan of Merger and Reorganization, dated as of June 30, 2020, or the Merger Agreement. The Merger Agreement contains the terms and conditions of the proposed business combination of MYOS and MedAvail. Under the Merger Agreement, Matrix Merger Sub, Inc., a wholly owned subsidiary of MYOS, or the Merger Sub, will merge with and into MedAvail, with MedAvail surviving as a wholly owned subsidiary of MYOS. This transaction is referred to as “the merger” or “the Merger.”
At the effective time of the Merger, or the Effective Time, and after taking into account the closing of the Private Placement financing into MedAvail, and the issuance of 5,834,597 Private Placement shares by MedAvail to the Subscribers (which Private Placement shares shall be converted into shares of MYOS Common Stock upon the closing of the Merger), then each share of MedAvail Common Stock outstanding immediately prior to the Effective Time (excluding certain MedAvail shares to be canceled pursuant to the Merger Agreement, and shares held by MedAvail stockholders who have exercised and perfected appraisal rights or dissenters’ rights as more fully described in “The Merger — Appraisal Rights and Dissenters’ Rights” below) will be converted into the right to receive a number of post-split shares of MYOS Common Stock equal to approximately 0.982 pre-split shares, as adjusted pursuant to the reverse stock split of MYOS Common Stock, in accordance with a ratio to be determined by mutual agreement of MYOS and MedAvail, subject to approval by the MYOS board of directors, or the MYOS Board, within a range of one share of MYOS Common Stock for every two to fifteen shares of MYOS Common Stock (or any number in between), or the Reverse Stock Split, to be implemented prior to the consummation of the Merger. As a result of the Merger, holders of MedAvail stock, options and warrants are expected to own in the aggregate approximately 96.5% of MYOS, and the MYOS shareholders and warrant holders are expected to own in the aggregate approximately 3.5% of MYOS (in addition to the shares of MYOS Corp., a Delaware corporation and a wholly owned subsidiary of MYOS, or Spin Out Sub, that the MYOS shareholders will receive as a dividend, as described below). The exchange ratio is determined pursuant to a formula
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described in more detail in the Merger Agreement and in this proxy statement/prospectus/information statement, and the pre-split figure and percentage ownership figures are estimates and subject to adjustment. In connection with the Merger, MYOS will change its corporate name to “MedAvail Holdings, Inc.” as required by the Merger Agreement.
Q:   Why are the two companies proposing to merge?
A:   Following the Merger, MYOS and MedAvail believe the post-Merger public company, or the Post-Merger Public Company, will be in a position to continue to develop and commercialize an innovative self-service pharmacy, mobile app, kiosk, and drive-thru solution. MYOS and MedAvail believe that the Post-Merger Public Company will have the following potential advantages: (i) a diversified, late-stage product development pipeline with important forthcoming milestones; (ii) an experienced management team; and (iii) the potential to access additional sources of capital. In addition, shareholders of MYOS prior to the merger, in addition to retaining their shares of MYOS, will receive ownership in Spin Out Sub, which will continue the existing business of MYOS as a private company. For a discussion of MYOS and MedAvail reasons for the Merger, please see the section entitled “The Merger — MYOS Reasons for the Merger” and “The Merger — MedAvail Reasons for the Merger” in this proxy statement/prospectus/information statement.
Q:   What will MedAvail stockholders, warrant holders and holders of MedAvail equity awards receive in the Merger?
A:   As a result of the Merger, MedAvail stockholders, warrant holders and holders of MedAvail equity awards will become entitled to receive shares of MYOS Common Stock, warrants and equity awards equal to approximately 96.5% of the fully-diluted shares of MYOS Common Stock outstanding following the consummation of the Merger. At the Effective Time, each share of MedAvail capital stock will be converted into the right to receive the number of shares of MYOS Common Stock calculated based on the exchange ratio determined in accordance with the Merger Agreement. MedAvail outstanding warrants, or MedAvail Warrants, to purchase shares of MedAvail equity securities not exercised at or prior to the Effective Time will be converted into warrants to purchase MYOS Common Stock, with the number of shares and exercise price being appropriately adjusted to reflect the exchange ratio between MYOS Common Stock and MedAvail Common Stock determined in accordance with the Merger Agreement.
At the Effective Time, each option to purchase MedAvail Common Stock, or MedAvail Options, that is outstanding and unexercised immediately prior to the Effective Time will be converted into and become an option to purchase MYOS Common Stock, with the number of shares and exercise price being appropriately adjusted to reflect the exchange ratio between MYOS Common Stock and MedAvail Common Stock determined in accordance with the Merger Agreement.
Immediately prior to the closing of the Merger, MedAvail will consummate the Private Placement in which it will sell to the Subscribers 5,834,597 shares of MedAvail Common Stock for gross proceeds of approximately $50,000,000, less certain offering-related expenses payable by MedAvail. Upon the closing of the Merger, the Private Placement shares will be exchanged for shares of MYOS Common Stock. Completing the Private Placement is a condition for MedAvail to consummate the Merger.
For a more complete description of what MedAvail stockholders, warrant holders and holders of MedAvail equity awards will receive in the Merger, please see the sections entitled “Market Price and Dividend Information” and “The Merger Agreement — Merger Consideration” in this proxy statement/prospectus/information statement.
Q:   What will MYOS shareholders and warrant holders receive in the Merger?
A:   MYOS shareholders and warrant holders will not receive anything as a result of the Merger, but will continue to hold the same amount of MYOS Common Stock and warrants to purchase MYOS Common Stock held immediately prior to the Merger, as appropriately adjusted for the Reverse Stock Split. Those who are MYOS shareholders as of [●], the record date for the determination of shareholders entitled to
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notice of, and to vote at, the MYOS Special Meeting, or the Record Date, also will receive a dividend of shares in the Spin Out Sub shortly after the closing of the Merger.
Q:   What will happen to MYOS’s outstanding equity awards?
A:   Prior to the Effective Time, MYOS will either terminate or cause Spin Out Sub to assume, each of MYOS’s employee benefit plans, including its outstanding equity incentive plans. In addition, prior to the Effective Time, MYOS will terminate each outstanding option to purchase MYOS Common Stock, and as of the Effective Time, there shall be no options to purchase MYOS Common Stock outstanding.
Q:   What will happen to MYOS if, for any reason, the Merger does not close?
A:   If, for any reason, the Merger does not close, the MYOS Board may elect to, among other things, attempt to complete another strategic transaction like the Merger, pursue a “going private” strategy, attempt to sell or otherwise dispose of the various assets of MYOS or continue to operate the business of MYOS.
Q:   What is required to consummate the Merger?
A:   To consummate the Merger, MYOS shareholders must approve the issuance of MYOS Common Stock pursuant to the Merger Agreement. In addition, the Merger Agreement anticipates that the MYOS shareholders will approve (i) the Reverse Stock Split Proposal and thereby, prior to the Effective Time, effectuating the Reverse Stock Split, (ii) the Spin Out Proposal and thereby, prior to the Effective Time, effectuating the Spin Out Transaction, with the issuance of a pro rata dividend of all the outstanding shares of common stock of Spin Out Sub on the business day following the closing date of the Merger to the shareholders of MYOS existing on the Record Date, (iii) the Reincorporation Proposal and thereby, subsequent to the Effective Time, effectuating the Reincorporation, (iv) the Equity Incentive Plan Proposal, thereby adopting the 2020 Equity Incentive Plan, effective as of the Effective Time, (v) the Employee Stock Purchase Plan Proposal, thereby adopting the 2020 Employee Stock Purchase Plan, effective as of the Effective Time and (vi) an adjournment of the MYOS Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of MYOS Proposal Nos. 1-6, or the Adjournment Proposal, each as described in the accompanying proxy statement/prospectus/information statement. Moreover, MedAvail stockholders must approve the Merger.
The approval of the Merger and the issuance of MYOS Common Stock pursuant to the Merger Agreement by the shareholders of MYOS requires the affirmative vote of the holders of a majority of the shares of MYOS Common Stock having voting power present in person or represented by proxy at the MYOS Special Meeting for the issuance of shares of MYOS Common Stock in the Merger, presuming a quorum is present at the meeting. The affirmative vote of the holders of a majority of shares of MYOS Common Stock having voting power outstanding on the Record Date are required to approve and adopt (i) the Merger, the Merger Agreement, and the transactions contemplated thereby or in connection therewith, including, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of MYOS Common Stock to MedAvail equity holders and other parties in connection with the Merger (the “Merger Proposal”), (ii) the Reverse Stock Split Proposal, (iii) the Spin Out Proposal, (iv) the Reincorporation Proposal, (v) the Equity Incentive Plan Proposal, (vi) the Employee Stock Purchase Plan Proposal and, (vii) the Adjournment Proposal. In addition, the Reverse Stock Split is necessary to ensure that the post-Merger trading price of MYOS Common Stock satisfies the initial listing requirements of The Nasdaq Capital Market or other national securities exchange applicable to the Post-Merger Public Company. Therefore, if the requisite shareholders of MYOS approve the Merger and the issuance of MYOS Common Stock pursuant to the Merger Agreement but do not approve the Reverse Stock Split, it is possible that the Merger may not be consummated.
The adoption of the Merger Agreement and the approval of the Merger and related transactions by the stockholders of MedAvail require the affirmative votes of the holders of (i) a majority of the outstanding MedAvail Common Stock and preferred stock, voting together as one class, on an as-converted basis, and (ii) at least sixty percent (60%) of the outstanding shares of MedAvail preferred stock, voting together as a single class on an as-converted basis. In addition to the requirement of obtaining such stockholder
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approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.
Certain MedAvail stockholders who in the aggregate beneficially own or control approximately 90% of the outstanding shares of MedAvail Common Stock on an as converted to common stock basis, and certain MYOS shareholders who in the aggregate beneficially own or control approximately 46% of the outstanding shares of MYOS Common Stock, are parties to voting agreements with MYOS and MedAvail, respectively, whereby such equity holders agreed to vote in favor of the adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, respectively, subject to the terms of the voting agreements. In addition, following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission and pursuant to the conditions of the Merger Agreement, MedAvail stockholders who are party to the voting agreements will each execute written consents approving the Merger and related transactions. Stockholders of MedAvail, including those who are parties to voting agreements, are being requested to execute written consents providing such approvals.
For a more complete description of the closing conditions under the Merger Agreement, you are urged to read the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.
Q:   Will the Post-Merger Public Company issue additional equity securities in connection with, or following, the Merger?
A:   The Post-Merger Public Company may enter into equity financings in addition to the Private Placement in connection with, or following, the Merger, with its affiliates or any third parties if the Post-Merger Public Company determines that the issuance of additional equity is necessary or desirable for the Post-Merger Public Company. Any equity issuances could result in dilution of the relative ownership interest of the non-redeeming public shareholders. As the amount of any such equity issuances is not currently known, if any, the Post-Merger Public Company cannot provide specific information as to percentage ownership that may result therefrom. If the Post-Merger Public Company enters into a binding commitment in respect of any such additional equity financing, the Post-Merger Public Company will file a Current Report on Form 8-K with the Securities and Exchange Commission, or the SEC, to disclose details of any such equity financing.
Q:   Who will be the directors of MYOS following the Merger?
A:   Immediately following the Merger, the MYOS Board is expected to be composed of seven directors, all of whom are to be designated by MedAvail. Such directors are identified in the table below.
NameCurrent Principal Affiliation
Ed KilroyChief Executive Officer, MedAvail
Rob FaulknerManaging Director of Redmile Group, MedAvail Director
Gerald GradwellSenior Vice President, Investor Relations & Special Projects of Walgreens Boots Alliance, MedAvail Director
Gerard van Hamel PlaterinkManaging Director of Redmile Group, MedAvail Director
Helen CiesielskiPrincipal of Lewis & Clark Ventures, MedAvail Director
Glen StettinChief Innovation Officer of Express Scripts, MedAvail Director
Michael KramerMedAvail Director
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Q:   Who will be the executive officers of MYOS immediately following the Merger?
A:   Immediately following the Merger, the executive management team of MYOS is expected to be composed solely of the members of the MedAvail executive management team prior to the Merger as set forth below:
NameTitle
Ed KilroyPresident and Chief Executive Officer
Ryan FergusonChief Financial Officer, Treasurer, Secretary
Fraser MackayChief Information Officer
Will MisloskiChief Marketing Officer
David RawlinsChief Commercial Officer
Neil PreziosoChief Pharmacy Officer
Q:   What will happen in the Spin Out Transaction?
A:   The Merger Agreement contemplates that MYOS shall effectuate a spin out transaction, or the Spin Out Transaction, whereby MYOS will (i) prior to the Merger, enter into an assignment and assumption agreement providing for the contribution of substantially all its assets and liabilities to Spin Out Sub, in exchange for all the outstanding shares of common stock of Spin Out Sub, (ii) prior to the Merger, consummate the contribution of substantially all of MYOS’s assets and liabilities to Spin Out Sub pursuant to the terms of the assignment and assumption agreement; and (iii) prior to the Merger declare, and following and conditioned upon the Merger, issue a pro rata dividend of all the outstanding shares of common stock of Spin Out Sub to the shareholders of MYOS existing on the Record Date. MYOS and Spin Out Sub shall cause the Spin Out Transaction to comply with all applicable legal requirements. For additional information on assignment and assumption agreement, please see the section entitled Spin Out Transaction.
If the proposal to approve the Spin Out Transaction, or the Spin Out Proposal, is approved, and the Merger closes then, pursuant to the Merger Agreement, at 12:01 A.M. pacific time (or as soon as reasonably practicable thereafter) on the business day following the closing date of the Merger, MYOS shall issue the dividend of outstanding shares of Spin Out Sub to the record holders of MYOS Common Stock as of the Record Date. The Spin Out Transaction shall not result in any liability to the MedAvail, the Post-Merger Public Company, or MYOS.
Q:   What will happen if the Reverse Stock Split Proposal is approved?
A:   If the proposal to approve the Reverse Stock Split, or the Reverse Stock Split Proposal, is approved, MYOS will effect the Reverse Stock Split with a ratio between one-for-two to and one-for-fifteen with respect to the issued and outstanding MYOS Common Stock as of prior to the Merger, thereby reducing the total number of outstanding shares of MYOS Common Stock from approximately 11,846,795 shares to between approximately 5,923,398 shares and 789,786. To the extent that the Reverse Stock Split would result in any shareholders of the Post-Merger Public Company otherwise owning a fractional share of the Post-Merger Public Company’s common stock, or the Post-Closing Shares, such share will be rounded down to the nearest whole share, and any such holder who would otherwise be entitled to receive a fraction of a share of the Post-Closing Shares (after aggregating all fractional shares of the Post-Closing Shares issuable to such holder) will, in lieu of issuance of such fraction of a share, be paid in cash the equivalent dollar amount (rounded up to the nearest whole cent) for such fractional share by the Post-Merger Public Company. The Reverse Stock Split will affect all shareholders of MYOS uniformly and will not change any shareholder’s percentage ownership interest in MYOS as of immediately prior to the Merger, except to the extent that the Reverse Stock Split would result in the rounding down of fractional shares. Unless otherwise set forth herein or unless the context indicates otherwise, all share amounts in this proxy statement/prospectus/information statement do not give effect to the Reverse Stock Split. You are encouraged to review the proposed amendments to the articles of incorporation of MYOS, a copy of which is included in this joint proxy and proxy statement/prospectus/information statement as Annex E.
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Q:   What is the Reincorporation?
A:   In connection with the Merger, MedAvail are also asking you to approve the proposal to reincorporate the Post-Merger Public Company, or the Reincorporation Proposal, whereby MYOS would reincorporate from the State of Nevada to the State of Delaware, and in connection therewith, replace the MYOS articles of incorporation and the MYOS bylaws and changing the name of the company from “MYOS RENS Technology Inc.” to “MedAvail Holdings, Inc.”, or collectively, the Reincorporation. The Reincorporation will be effected following the Merger upon such time as the Post-Merger Public Company causes a certificate of conversion to be executed, acknowledged and filed with the Secretary of State of the State of Delaware and articles of conversion to be executed and filed with the Secretary of State of the State of Nevada to effect MYOS’s conversion from a Nevada corporation to a Delaware corporation in accordance with the relevant provisions of the Delaware General Corporation Law and the Nevada Revised Statutes.
At the effective time of the Reincorporation: (i) the articles of incorporation of MYOS will be replaced with the certificate of incorporation substantially in the form attached as Annex B; and (ii) the bylaws of MYOS will be replaced with the bylaws substantially in the form attached as Annex C.
The principal effects of the Reincorporation, if approved by MYOS’s shareholders and effected, will be that:
The affairs of the Post-Merger Public Company will cease to be governed by the corporate laws of the state of Nevada and will become subject to the corporate laws of the state of Delaware.
Following the Reincorporation and after taking into account the effects of the Merger, the resulting Post-Merger Public Company following the Reincorporation, or the Reincorporated Entity, will be deemed the same entity as currently incorporated in the state of Nevada (after taking into account the effects of the Merger), or the Pre-Reincorporated Entity, and will continue with all of the rights, privileges and powers of such, will possess all of the properties of the Pre-Reincorporated Entity, will continue with all of the debts, liabilities and obligations of the Pre-Reincorporated Entity and will continue with the same officers and directors of the Pre-Reincorporated Entity, as further described in the section of this proxy statement/prospectus/information statement entitled “Reincorporation”.
If and when the Reincorporation becomes effective, all of the issued and outstanding shares of common stock of the Pre-Reincorporated Entity will be automatically converted into issued and outstanding shares of common stock of the Reincorporated Entity, without any action on the part of our shareholders. The Reincorporated Entity will continue to file periodic reports and other documents with the SEC. The Reincorporation will not change the respective positions of the Pre-Reincorporated Entity or its shareholders under federal securities laws. Shares of the Pre-Reincorporated Entity’s common stock that are freely tradable prior to the Reincorporation will continue to be freely tradable after the Reincorporation, and shares of the Pre-Reincorporated Entity’s common stock that are subject to restrictions prior to the Reincorporation will continue to be subject to the same restrictions after the Reincorporation. For purposes of computing compliance with the holding period requirement of Rule 144 under the Securities Act, shareholders will be deemed to have acquired the Reincorporated Entity’s common stock on the date they acquired their shares of the Pre-Reincorporated Entity’s common stock.
Q:   Why is MYOS reincorporating?
A:   The MYOS Board has approved the Reincorporation because the corporate laws of the State of Delaware are more comprehensive, widely-used and extensively interpreted than the corporate laws of other states, including Nevada. The state of Delaware is recognized for adopting comprehensive, modern and flexible corporate laws, which are amended periodically to respond to the changing legal and business needs of corporations. As a result of the flexibility and responsiveness of the Delaware corporate laws to the legal and business needs of corporations, many major corporations are incorporated in Delaware or have changed their corporate domiciles to Delaware. Delaware, unlike Nevada, has established a specialized court, the Court of Chancery, that has exclusive jurisdiction over matters relating to the Delaware General
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Corporation Law, or DGCL. The Delaware judiciary has become particularly familiar with corporate laws and corporate matters, and a substantial body of court decisions has developed construing the DGCL, thus providing greater clarity and predictability with respect to corporate legal and governance affairs. MYOS and MedAvail both believe this will assist the Reincorporated Entity’s board of directors and management in making corporate decisions and taking corporate actions with greater assurance as to the validity and consequences of those decisions and actions. The Reincorporation may also make it easier to attract future candidates willing to serve of the board of directors because many such candidates are familiar with Delaware law, including provisions of the DGCL relating to fiduciary duties and director indemnification, from their past business experience. Additionally, underwriters and other members of the financial services industry may be more willing and better able to assist in capital-raising programs for Delaware corporations due to the anticipated greater flexibility afforded by the DGCL. Certain investment funds, sophisticated investors and brokerage firms may be more comfortable and more willing to invest in a Delaware corporation than in a corporation incorporated in another U.S. jurisdiction whose corporate laws may be less understood or perceived to be unresponsive to shareholder rights. For these and other reasons, MYOS believes that the Reincorporation will directly benefit the Reincorporated Entity’s shareholders following the Merger.
Q:   What are the potential material U.S. federal income tax consequences of the Merger to MedAvail stockholders?
A:   Each of MYOS and MedAvail intends the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. However, completion of the Merger is not conditioned upon receipt of an opinion from counsel that the Merger qualifies as a reorganization, and the Merger will occur even if the Merger does not qualify as a reorganization.
Assuming the Merger qualifies as a reorganization, in general, the material U.S. federal income tax consequences to U.S. Holders (as defined herein) of MedAvail Common Stock (other than any such holders exercising dissenters’ rights) are expected to be as follows:
Each MedAvail stockholder should not generally recognize gain or loss upon the exchange of MedAvail Common Stock for MYOS Common Stock pursuant to the Merger, except to the extent of cash received in lieu of a fractional share of MYOS Common Stock as described below; and
Each MedAvail stockholder should recognize gain or loss to the extent any cash received in lieu of a fractional share of MYOS Common Stock exceeds or is less than the basis of such fractional share.
Tax matters are very complicated, and the tax consequences of the Merger to a particular MedAvail stockholder will depend on such stockholder’s circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws. For more information, please see the section entitled “The Merger — Considerations with Respect to U.S. Federal Income Tax Consequences of the Merger” beginning on page 83.
Q:    What are the potential material U.S. federal income tax consequences of the Merger to MYOS shareholders?
A:   U.S. holders of MYOS Common Stock will retain such shares of MYOS Common Stock in the transactions. Accordingly, MYOS shareholders will not recognize gain or loss for U.S. federal income tax purposes as a result of the Merger, although MYOS shareholders may be subject to tax with respect to the Spin Out Transaction (as discussed below).
Tax matters are very complicated, and the tax consequences of the Merger to a particular MYOS shareholder will depend on such shareholder’s circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws. For more information,
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please see the section entitled “The Merger — Considerations with Respect to U.S. Federal Income Tax Consequences of the Merger” beginning on page 83.
Q:   What are the potential material U.S. federal income tax consequences of the Spin Out Transaction to MYOS shareholders?
A:   Although the position is not free from doubt, each of MYOS and MedAvail intends the Spin Out Transaction to be treated as a distribution pursuant to Section 301(a) of the Code and would therefore be considered a dividend for U.S. federal income tax purposes to the extent of MYOS’s current year or accumulated earnings and profits as determined under U.S. federal income tax principles, or E&P, and any amount not characterized as a dividend will be applied against and reduce the tax basis of a MYOS shareholder’s common stock, with any excess treated as gain from the sale or exchange of property.
Tax matters are very complicated, and the tax consequences of the Spin Out Transaction to a particular MYOS shareholder will depend on such shareholder’s circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the Spin Out Transaction to you, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws. For more information, please see the section entitled “Matters Being Submitted to Vote of MYOS Shareholders – MYOS Proposal No. 3 – Approval of the Spin Out Transaction – Material U.S. Federal Income Tax Considerations of the Spin Out Transaction” beginning on page 125.
Q:   What are the material U.S. federal income tax consequences of the Reverse Stock Split to MYOS shareholders?
A:   Each of MYOS and MedAvail intends the Reverse Stock Split described in MYOS Shareholder Proposal No. 2 to constitute a recapitalization for U.S. federal income tax purposes that qualifies as a reorganization within the meaning of Section 368(a)(1)(E) of the Code. As a result, a U.S. Holder of MYOS Common Stock generally should not recognize gain or loss upon such Reverse Stock Split, except with respect to cash received in lieu of a fractional share of MYOS Common Stock. For more information, please see the section entitled “Matters Being Submitted to a Vote of MYOS Shareholders—MYOS Proposal No. 2: Approval of the Amendment and Restatement of the Amended and Restated Articles of Incorporation of MYOS Authorizing the Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page 122.
Q:   What are the material U.S. federal income tax consequences of the Reincorporation to MYOS shareholders?
A:   Each of MYOS and MedAvail intends the Reincorporation described in MYOS Shareholder Proposal No. 4 to constitute a mere change in place of organization for U.S. federal income tax purposes that qualifies as a reorganization within the meaning of Section 368(a)(1)(F) of the Code. As a result, each holder of MYOS Common Stock after the Merger generally should not recognize gain or loss upon such Delaware Reincorporation. For more information, please see the section entitled “Matters Being Submitted to a Vote of MYOS Shareholders—MYOS Proposal No. 4: Approval of Reincorporation to Delaware —Material U.S. Federal Income Tax Consequences of the Delaware Reincorporation” beginning on page 132.
Q:   As a MYOS shareholder, how does the MYOS Board recommend that I vote?
A:   After careful consideration, the MYOS Board unanimously recommends that MYOS shareholders vote:
“FOR” Proposal No. 1 to approve the Merger and the issuance of shares of common stock of MYOS in the Merger;
“FOR” Proposal No. 2 to approve Reverse Stock Split;
“FOR” Proposal No. 3 to approve Spin Out Transaction;
“FOR” Proposal No. 4 to approve the Reincorporation;
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“FOR” Proposal No. 5 to approve the 2020 Equity Incentive Plan;
“FOR” Proposal No. 6 to approve the 2020 Employee Stock Purchase Plan;
“FOR” Proposal No. 7 to approve adjourn the MYOS Special Meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1-6.
Q:   As a MedAvail stockholder, how does the MedAvail board of directors recommend that I vote?
A:   After careful consideration, the MedAvail board of directors, or the MedAvail Board, unanimously recommends that MedAvail stockholders execute the written consent indicating their vote in favor of the adoption of the Merger Agreement and the approval of the Merger and the transactions contemplated thereby.
Q:   What risks should I consider in deciding whether to vote in favor of the Merger or to execute and return the written consent, as applicable?
A:   You should carefully review the section of this proxy statement/prospectus/information statement entitled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the Post-Merger Public Company’s business will be subject, and risks and uncertainties to which each of MYOS and MedAvail, as an independent company, is subject.
Q:   When do you expect the Merger to be consummated?
A:   The Merger is anticipated to occur promptly after the MYOS Special Meeting to be held virtually on [●], 2020. For more information, please see the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.
Q:   What do I need to do now?
A:   MYOS and MedAvail urge you to read this proxy statement/prospectus/information statement carefully, including its annexes, and to consider how the Merger affects you.
If you are a shareholder of MYOS, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may also provide your proxy instructions via the Internet or telephone by following the instructions on your proxy card or voting instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Special Meeting of MYOS shareholders.
If you are a stockholder of MedAvail, you may execute and return your written consent to MedAvail in accordance with the instructions provided.
Q:   What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?
A:   If you are a MYOS shareholder, the failure to return your proxy card or vote virtually at the special meeting of shareholders of MYOS or otherwise provide proxy instructions will reduce the aggregate number of votes required to approve MYOS Proposals Nos. 1-7 and will have the same effect as voting against MYOS Proposal Nos. 1-7, and your shares will not be counted for purposes of determining whether a quorum is present at the MYOS Special Meeting.
Q:   May I vote in person at the special meeting of shareholders of MYOS?
A:  The special meeting of the shareholders of MYOS will be held virtually. You will not be able to attend the MYOS Special Meeting in person but you will be able to attend the MYOS Special Meeting virtually as described below.
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Q:   When and where is the MYOS Special Meeting being held?
A:   MYOS is holding a special meeting of shareholders to obtain the shareholder approvals necessary to complete the Merger and related matters on [●] at [●], Eastern Time, unless postponed or adjourned to a later date. The special meeting will be “virtual,” meaning that you can participate in the MYOS Special Meeting online at www.virtualshareholdermeeting.com/MYOS2020 at the appointed time and date by [●]. MYOS shareholders are encouraged to access the special meeting before the start time. Please allow ample time for online check-in. MYOS shareholders will not be able to attend the MYOS Special Meeting in person.
Q:   Do MYOS shareholders have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the MYOS Special Meeting?
A.   No. MYOS shareholders do not have any dissenters’ or appraisal rights under Nevada law in connection with the proposed Merger or with respect to any of the matters to be voted on at the MYOS Special Meeting.
Q:   If my MYOS shares are held in “street name” by my broker, will my broker vote my shares for me?
A:   Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your shares of MYOS Common Stock on matters requiring discretionary authority without instructions from you. Brokers are not expected to have discretionary authority to vote for MYOS Proposals No.1-6. To make sure that your vote is counted, you should instruct your broker to vote your shares, following the procedures provided by your broker.
Q:   May I change my vote after I have submitted a proxy or provided proxy instructions?
A:   MYOS shareholders of record, other than MYOS shareholders who have signed voting agreements, may change their vote at any time before their proxy is voted at the MYOS Special Meeting in one of three ways. First, a shareholder of record of MYOS can send a written notice to the Secretary of MYOS stating that it would like to revoke its proxy. Second, a shareholder of record of MYOS can submit new proxy instructions either on a new proxy card or via the Internet or telephone. Third, a shareholder of record of MYOS can attend the MYOS Special Meeting and vote in person. Attendance alone will not revoke a proxy. If a MYOS shareholder of record or a shareholder who owns MYOS shares in “street name” has instructed a broker to vote its shares of MYOS Common Stock, the shareholder must follow directions received from its broker to change those instructions.
Q:   Who is paying for this proxy solicitation?
A:   MYOS and MedAvail will share equally the cost of printing and filing of this proxy statement/prospectus/information statement and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of MYOS Common Stock for the forwarding of solicitation materials to the beneficial owners of MYOS Common Stock. MYOS will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.
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Q:   Who can help answer my questions?
A:   If you are a MYOS shareholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact:
MYOS RENS Technology, Inc.
Attn: Joseph Mannello
Morris Technical Center
45 Horsehill Road, Suite 106
Cedar Knolls, NJ 07927
Phone:  973-509-0444
Email:  jmannello@myoscorp.com
If you are a MedAvail stockholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact:
MedAvail, Inc.
6665 Millcreek Dr. Unit 1,
Mississauga ON Canada
L5N 5M4
1.905.812.0023
Attn: Ryan Ferguson, Chief Financial Officer
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PROSPECTUS SUMMARY
This summary highlights selected information from this proxy statement/prospectus/information statement and may not contain all of the information that is important to you. To better understand the Merger, the proposals being considered at the MYOS Special Meeting and the MedAvail stockholder actions that are the subject of the written consent, you should read this entire proxy statement/prospectus/information statement carefully, including the Merger Agreement and the other annexes to which you are referred herein. For more information, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.
The Companies
MYOS RENS Technology Inc.
MYOS RENS Technology, Inc., or MYOS, is an emerging company focused on the discovery, development and commercialization of nutritional ingredients, functional foods, and other technologies aimed at maintaining or improving the health and performance of muscle tissue.
MYOS was incorporated in the State of Nevada on April 11, 2007. On March 17, 2016, MYOS merged with its wholly-owned subsidiary and changed its name from MYOS Corporation to MYOS RENS Technology Inc. As used in this proxy statement/prospectus/information statement, “MYOS” refers to MYOS RENS Technology Inc. and its wholly-owned subsidiary, unless the context indicates otherwise.
MYOS’s executive offices are currently located at 45 Horsehill Road, Suite 106, Cedar Knolls, New Jersey 07927 and its telephone number is (973) 509-0444. MYOS’s corporate website address is http://www.myosrens.com and its product websites are http://www.yolked.com and http://www.myospet.com. The information on MYOS’s current or future websites is not, nor shall such information be deemed to be, a part of this proxy statement/prospectus/information statement or incorporated in filings MYOS makes with the Securities and Exchange Commission.
MedAvail, Inc.
MedAvail, Inc., or MedAvail, a Delaware corporation, was originally incorporated in 2012 in Delaware under the name DashRx, Inc. MedAvail is an emerging health-care technology company that has developed and commercialized an innovative telehealth pharmacy platform that brings access to pharmacy services and pharmacists directly into the provider clinic. 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’s principal executive offices are located at 6665 Millcreek Drive, Suite 1, Mississauga, Ontario Canada L5N 5M4, its telephone number is (905) 812-0023, and its website is located at www.medavail.com or for SpotRx, the website is www.spotrx.com. Information on or accessed through MedAvail’s websites are not incorporated into this proxy statement/prospectus/information statement.
Additional information about MedAvail can be found in the sections titled “MedAvail Business” beginning on page 173 and “INFORMATION ABOUT MedAvail — MedAvail Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 203 and MedAvail’s financial statements included elsewhere in this joint proxy and consent solicitation statement/prospectus.
Matrix Merger Sub, Inc.
Matrix Merger Sub, Inc., or Merger Sub, is a wholly owned subsidiary of MYOS and was formed solely for the purposes of carrying out the Merger. Merger Sub is a Delaware corporation incorporated on June 25, 2020. Its address is the same as MYOS, 45 Horsehill Road, Suite 106, Cedar Knolls, New Jersey 07927 and its telephone number is the same as MYOS, (973) 509-0444.
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The Merger (see page 68)
If the Merger is completed, Merger Sub will merge with and into MedAvail, with MedAvail surviving as a wholly owned subsidiary of MYOS.
Immediately after the Merger, subject to adjustments to reflect certain events that could occur prior to closing of the Merger, MedAvail security holders will own approximately 96.5% of the aggregate number of fully-diluted shares of MYOS’s common stock, or MYOS Common Stock, outstanding following the consummation of the Merger, or the Post-Closing Shares, with MYOS shareholders as of [●], the record date for the determination of shareholders entitled to notice of, and to vote at, the MYOS Special Meeting, or the Pre-Merger MYOS Shareholders, holding approximately 3.5% of the Post-Closing Shares. The exchange ratio is determined pursuant to a formula described in more detail in the Merger Agreement and in this proxy statement/prospectus/information statement, and the percentage ownership figures are estimates. The foregoing percentages assume that the exchange ratio is not adjusted, as described in “The Merger — Merger Consideration and Adjustment” below.
For a more complete description of the Merger exchange ratio, please see the section entitled “The Merger Agreement” in this proxy statement/prospectus/information statement.
The closing of the Merger will occur no later than two business days after the last of the conditions to the Merger has been satisfied or waived, or at another time as MYOS and MedAvail agree. MYOS and MedAvail anticipate that the consummation of the Merger will occur promptly after the MYOS Special Meeting. However, because the Merger is subject to a number of conditions, neither MYOS nor MedAvail can predict exactly when the closing will occur or if it will occur at all.
Reasons for Approval by the MYOS Board (see page 24)
After consideration and consultation with its senior management and its financial and legal advisors, at a meeting held on June 27, 2020, the MYOS board of directors, or the MYOS Board determined that the Merger Agreement, the Spin Out Transaction and the other transactions described in this proxy statement/prospectus/information statement were fair to and in the best interests of MYOS and its shareholders and approved the Merger Agreement and the transactions, upon the terms and subject to the conditions set forth therein.
Reasons for Approval by the MedAvail Board (see page 24)
The MedAvail board of directors, or the MedAvail Board has unanimously approved the Merger Agreement and the Merger. The MedAvail Board reviewed several factors in reaching its decision and believe that the Merger Agreement and the Merger are in the best interests of, and fair to, MedAvail and its stockholders.
Overview of the Merger Agreement and Agreements Related to the Merger Agreement
Merger Consideration and Exchange Ratio(see page 91)
At the effective time of the Merger, or the Effective Time, each share of MedAvail capital stock outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to the Merger Agreement and excluding dissenting shares but including any shares of MedAvail capital stock issued pursuant to the Private Placement as per the Merger Agreement) will be automatically converted solely into the right to receive a number of shares of MYOS Common Stock equal to the Exchange Ratio (as described below).
No fractional shares of MYOS Common Stock will be issuable pursuant to the Merger to MedAvail stockholders. Instead, each MedAvail stockholder who would otherwise be entitled to receive a fraction of a share of MYOS Common Stock, after aggregating all fractional shares of MYOS Common Stock issuable to such stockholder, will be entitled to receive in cash the dollar amount, rounded down to the nearest whole cent, without interest, determined by multiplying such fraction by the average of the closing prices of a share of MYOS Common Stock as quoted on The Nasdaq Capital Market (or, if MYOS Common Stock is not listed on The Nasdaq Capital Market, the applicable over-the-counter-market) for the ten consecutive trading days ending with the second to last trading day immediately preceding the effective time of the Merger.
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The exchange ratio is calculated using a formula intended to allocate to the existing MedAvail security holders 96.5% of the Post-Merger Public Company and the Pre-Merger MYOS Shareholders 3.5% of the Post-Merger Public Company (each, on a fully diluted basis), subject to certain adjustments based on the proceeds raised by MedAvail in the anticipated Private Placement (or other pre-closing financing) and the implied post-money valuation of MedAvail following the Private Placement (or other pre-closing financing).
There will be no adjustment to the total number of shares of MYOS Common Stock that MedAvail stockholders will be entitled to receive for changes in the market price of MYOS Common Stock. Accordingly, the market value of the shares of MYOS Common Stock issued pursuant to the Merger will depend on the market value of the shares of MYOS Common Stock at the time the Merger closes, and could vary significantly from the market value on the date of this proxy statement/prospectus/information statement.
Treatment of MedAvail Options (see page 93)
At the Effective Time, each option to purchase MedAvail common stock, each a MedAvail Option, whether vested or not vested, will be converted into an option to purchase MYOS Common Stock, each a MYOS Option, and each MYOS Option may be exercised solely for shares of MYOS Common Stock. MYOS will assume the MedAvail stock option plans and shares of MedAvail common stock reserved but unissued thereunder. The number of shares of MYOS Common Stock subject to each MedAvail Option will be determined by multiplying (i) the number of shares of MedAvail common stock that were subject to the underlying MedAvail Option by (ii) the exchange ratio, with the resulting number rounded down to the nearest whole number of shares of MYOS Common Stock. The per share exercise price for the MYOS Common Stock subject to such MYOS Option will be determined by dividing (i) the per share exercise price of the underlying MedAvail Option by (ii) the exchange ratio, with the resulting number rounded up to the nearest whole cent.
Any restrictions on the exercise of assumed MedAvail Options will continue in full force and effect following the conversion and the term, exercisability, vesting schedules, status as an “incentive stock option” under Section 422 of the Code, if applicable, and other provisions of the assumed MedAvail Options will generally remain unchanged; provided, that any MedAvail Options assumed by MYOS may be subject to adjustment to reflect changes in MYOS’s capitalization after the Effective Time and that the MYOS Board or any committee thereof will succeed to the authority of the MedAvail Board with respect to each assumed MedAvail Option.
Treatment of MedAvail Warrants (see page 93)
At the Effective Time, MedAvail warrants, or MedAvail Warrants, to purchase shares of MedAvail equity securities not exercised at or prior to the effective time of the Merger, will be converted into warrants to purchase shares of MYOS Common Stock, or MYOS Warrants and each MYOS Warrant may be exercised solely for shares of MYOS Common Stock. The number of shares of MYOS Common Stock subject to each MYOS Warrant will be determined by multiplying (i) the number of shares of MedAvail Common Stock that were subject to the underlying MedAvail Warrant by (ii) the exchange ratio, with the resulting number rounded down to the nearest whole number of shares of MYOS Common Stock. The per share exercise price for the MYOS Common Stock subject to such MYOS Warrant will be determined by dividing (i) the per share exercise price of the underlying MedAvail Warrant by (ii) the exchange ratio, with the resulting number rounded up to the nearest whole cent.
Any restrictions on the exercise of assumed MedAvail Warrants will continue in full force and effect following the conversion and the term, exercisability, and other provisions of the assumed MedAvail Warrants will otherwise remain unchanged; provided, that any MedAvail Warrants assumed by MYOS may be subject to adjustment to reflect changes in MYOS’s capitalization after the Effective Time.
Treatment of MedAvail Convertible Promissory Notes (see page 230)
The outstanding principal and accrued but unpaid interest of outstanding convertible promissory notes issued by MedAvail prior to the Private Placement shall be converted into shares of MedAvail Common Stock in connection
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with the closing of the Private Placement at a price per share equal to $8.57. The aggregate principal amount of such notes as of the date hereof is $8,428,405.
Conditions to the Completion of the Merger (see page 94)
The Merger Agreement requires the parties to consummate the Merger after all of the conditions to the consummation of the Merger contained in the Merger Agreement are satisfied or waived, including the adoption of the Merger Agreement by the stockholders of MedAvail and the approval by the MYOS shareholders of MYOS Proposals Nos. 1-7. The Merger will become effective upon the filing of the articles of merger with the Secretary of State of the State of Nevada and the certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed by MYOS and MedAvail and specified in the articles of merger and the certificate of merger. Neither MYOS nor MedAvail can predict the exact timing of the consummation of the Merger.
No Solicitation (see page 100)
Each of MYOS and MedAvail agreed that, except as described below, MYOS and MedAvail will not, and shall cause their respective subsidiaries and any of their respective controlled affiliates, officers, directors, employees, partners, attorneys, accountants, advisors, agents or representatives of such parties or of any such party’s subsidiaries or other controlled affiliates not to, directly or indirectly:
solicit, initiate, knowingly encourage, induce or facilitate the making, submission or announcement of any “acquisition proposal,” (as defined on page 100 of this proxy statement/prospectus/information statement), or take any action that would reasonably be expected to lead to an acquisition proposal;
furnish any nonpublic information regarding it to any person in connection with or in response to an acquisition proposal or an inquiry or indication of interest that could lead to an acquisition proposal;
engage in discussions or negotiations with any person with respect to any acquisition proposal;
approve, endorse or recommend an acquisition proposal; or
enter into any letter of intent or similar document or any agreement contemplating or otherwise relating to an acquisition transaction.
However, before obtaining the applicable MYOS or MedAvail equity holder approvals required to adopt the Merger Agreement, each party may furnish nonpublic information regarding such party and its respective subsidiaries to, may enter into discussions with, or facilitate or cooperate with the submission of an acquisition proposal made by any person in response to any such acquisition proposal, that after consultation with a financial advisor and outside legal counsel, such party’s board of directors determines in good faith is, or would reasonably be expected to result in a “superior offer” (as defined in on page 101 of this proxy statement/prospectus/information statement), (and is not withdrawn) if:
such acquisition proposal did not result from a breach of the no solicitation provisions of the Merger Agreement described above;
such party’s board of directors concludes in good faith, after having taken into account the advice of its outside legal counsel, that such action is required in order for the board of directors to comply with its fiduciary duty obligations to its equity holders under applicable legal requirements;
at least two business days prior to furnishing any information or entering into discussions with a third party, such party must (i) give the other party written notice of the identity of the third party, the terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) made thereby and of that party’s intention to furnish information to, or enter into discussions with such third party and (ii) such party must receive from the third party an executed confidentiality agreement on terms no less favorable to such party than those in the confidentiality agreement between MYOS and MedAvail, with such new confidentiality agreement to contain customary
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limitations on the use and disclosure of all nonpublic written and oral information furnished to such third party on or behalf of such party; and
substantially contemporaneous with furnishing of any information to a third party, such party furnishes the same information to the other party to the extent not previously furnished. Notwithstanding the non-solicitation provisions of the Merger Agreement described above, MedAvail is permitted to take, or refrain from taking, any action described above to the extent any such action is taken in connection with or view a view towards consummating a pre-closing financing, and no such action or omission will be deemed a violation of the non-solicitation provisions of the Merger Agreement.
Termination of the Merger Agreement (see page 107)
Either MYOS or MedAvail can terminate the Merger Agreement under certain circumstances, which would prevent the Merger from being consummated.
Termination Fee (see page 110)
If the Merger Agreement is terminated under certain circumstances, (i) MYOS will be required to pay MedAvail a termination fee of $0.5 million, (ii) MedAvail will be required to pay MYOS a termination fee of $0.75 million, or, (ii) MYOS or MedAvail will be required in some circumstances, to reimburse the other party for expenses incurred in connection with the Merger, up to a maximum of $0.5 million.
Voting Agreements (see page 112)
Certain MedAvail directors, officers and certain security holders of MedAvail who beneficially own or control approximately 90%, collectively, of MedAvail’s outstanding capital stock on an as-converted to common stock basis as of the date of the Merger Agreement entered into voting agreements in favor of MedAvail pursuant to which, among other things, each of these security holders agreed, solely in its capacity as a security holder, to vote all of its shares of MedAvail capital stock, if any, in favor of the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated by the Merger Agreement, and any other matter that is reasonably necessary to facilitate the consummation of the Merger and the other transactions contemplated by the Merger Agreement, against any acquisition proposal (as defined in on page 100 of this proxy statement/prospectus/information statement) (other than a pre-closing financing), and against any other matter that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Merger or any of the transactions contemplated by the Merger Agreement. These voting agreements will expire upon the earliest occurrence of (A) the Effective Time, (B) the date and time of the valid termination of the Merger Agreement in accordance with its terms, (C) upon such time as the MedAvail Board withdraws or modifies its recommendation for the MedAvail stockholders to approve the Merger, and (D) such date and time as may be designated by MedAvail in a written notice to the counter party to such voting agreement.
Certain MYOS executive officers and directors who beneficially own or control approximately 46%, collectively, of the outstanding shares of MYOS Common Stock the date of the Merger Agreement entered into voting agreements in favor of MYOS pursuant to which, among other things, each of these persons agreed, solely in his or her capacity as a security holder, to vote all of his or her shares of MYOS capital stock, if any, in favor of the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated by the Merger Agreement, and any other matter that is reasonably necessary to facilitate the consummation of the Merger and the other transactions contemplated by the Merger Agreement, against any acquisition proposal, and against any other matter that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Merger or any of the transactions contemplated by the Merger Agreement.
Lock-Up Agreements (see page 112)
MedAvail’s officers, directors and certain other stockholders of MedAvail entered into lock-up agreements, pursuant to which such security holders agreed not to, except in limited circumstances, (i) offer, pledge, sell, contract to sell, sell any option or contract purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend any shares of MYOS
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Common Stock or securities convertible into, exercisable or exchangeable for or that represent the right to receive MYOS Common Stock whether then owned or thereafter acquired, or the Securities, (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, (iii) make any demand for or exercise any right with respect to the registration of any MYOS Common Stock or any security convertible into or exercisable or exchangeable for MYOS Common Stock or (iv) publicly disclose the intention to do any of the foregoing.
The lock-up restrictions set forth above automatically terminate with respect the Securities on the date that is 181 days following the Effective Time.
Spin Out Transaction and Promissory Note (see page 115)
The Merger Agreement contemplates that prior to the Merger, MYOS shall (i) enter into an assignment and assumption agreement providing for the contribution of substantially all its assets and liabilities to MYOS Corp., a Delaware corporation and a wholly owned subsidiary of MYOS, or Spin Out Sub, in exchange for all the outstanding shares of common stock of Spin Out Sub, (ii) consummate the contribution of substantially all of MYOS’s assets and liabilities to Spin Out Sub pursuant to the terms of the assignment and assumption agreement; and (iii) declare a pro rata dividend of all the outstanding shares of common stock of Spin Out Sub to the shareholders of MYOS existing on the Record Date. MYOS and Spin Out Sub shall cause the Spin Out Transaction to comply with all applicable legal requirements. The Spin Out Transaction shall not result in any liability to MedAvail, MYOS or the post-Merger public company, or the Post-Merger Public Company.
On the closing date of the Merger, in addition to providing to Spin Out Sub a cash payment of $2.0 million, MedAvail will issue Spin Out Sub a promissory note of $3.0 million, or the Promissory Note, payable in three installments within one year of the closing date, with the first $1.0 million being paid upon the closing of the Merger pursuant to the terms of the Promissory Note as a result of both of the following events having occurred on or prior to such payment: (i) the closing of the Merger and (ii) MYOS’s entry into a settlement and release agreement with Ren Ren, such that immediately following the closing of the Merger, Spin Out Sub shall receive a total of $3 million in cash from MedAvail, and the Promissory Note shall have an outstanding balance of $2 million Following the closing, MYOS shall be entitled to reduce the outstanding principal amount of the Promissory Note by the amount of losses MYOS (and MYOS’s subsidiaries and affiliates and their respective officers, directors, and employees) are entitled to in respect of indemnification claims for (i) any acquired asset or assumed liability of Spin Out Sub as a result of the Spin Out Transaction, (ii) the conduct or operation of the business of Spin Out Sub or any subsidiary thereof, or (iii) the conduct or operation of the business of MYOS prior to the Effective Time.
Private Placement (see page 114)
Prior to the date of this proxy statement/prospectus/information statement, MedAvail entered into the Securities Purchase Agreement with the Subscribers pursuant to which the Subscribers agreed to purchase, and MedAvail agreed to sell to the Subscribers, an aggregate of 5,834,597 Private Placement Shares for a purchase price of $8.57 per share, in the Private Placement in which MedAvail expects to raise an aggregate of at least $50 million, less certain offering related expenses payable by MedAvail, and the Private Placement is expected to exceed the minimum private financing amount of $30 million that is a condition to the closing of the Merger. The Private Placement Shares will be exchanged for shares of MYOS Common Stock that are identical to the shares of MYOS Common Stock that will be held by MYOS’s public shareholders at the time of the closing of the Merger. The closing of the Private Placement will be contingent upon the substantially concurrent consummation of the Merger. The Private Placement closing will occur no sooner than two days prior to the closing of the Merger.
Interests of Certain Directors, Officers and Affiliates of MYOS and MedAvail (see pages 77 and 79)
When considering the recommendation of the MYOS Board, you should be aware that certain MYOS’s executive officers and directors have interests in the Merger that are different from, or in addition to, your interests as a shareholder. The MYOS Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the shareholders of MYOS. For example, MYOS previously entered into an employment agreement with
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Joseph Mannello that provides him with cash payments intended to cover certain health insurance costs and the acceleration of outstanding equity awards in the event his employment is terminated without cause following a change of control of MYOS. In addition, certain of MYOS’s directors and executive officers have MYOS Options and MYOS restricted stock units, or MYOS RSUs, which MYOS Options and MYOS RSUs shall vest immediately prior to the consummation of the Merger. Further, the MYOS Board has also approved the grant and issuance of 180,000 shares of MYOS Common Stock to Mr. Mannello and 165,000 shares of MYOS Common Stock to certain MYOS employees prior to the consummation of the Merger and prior to the Record Date, which shares will be fully vested upon their issuance. None of MYOS’s directors and executive officers are expected to continue with the Post-Merger Public Company following the Merger and each of the equity awards will be terminated upon the closing of the Merger. All of MYOS’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement and coverage pursuant to insurance policies maintained by MYOS.
As of September 2, 2020, the directors and executive officers of MYOS, together with their affiliates, owned approximately 23% of the outstanding shares of MYOS Common Stock, and each of the MYOS directors and executive officers has entered into a voting agreement in connection with the Merger. The voting agreement is discussed in greater detail in the section entitled “Agreements Related to the Merger — Voting Agreements” in this proxy statement/prospectus/information statement.
In considering the recommendation of the MedAvail Board with respect to approving the Merger and related transactions by written consent, MedAvail stockholders should be aware that certain members of the board of directors and executive officers of MedAvail have interests in the Merger that may be different from, or in addition to, interests they have as MedAvail stockholders. For example, certain of MedAvail’s directors and executive officers have MedAvail Options and MedAvail restricted stock, subject to vesting, which MedAvail Options and MedAvail restricted stock will be converted into and become MYOS Options and MYOS restricted stock. MedAvail’s directors and executive officers are expected to become directors and executive officers of MYOS upon the closing of the Merger and all of MedAvail’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement.
As of September 2, 2020, the directors and executive officers of MedAvail, together with their affiliates, owned approximately 87% of the outstanding shares of MedAvail capital stock, on an as converted to common stock basis. MedAvail officers and directors, and certain major stockholders of MedAvail, have also entered into a voting agreement in connection with the Merger. The voting agreements are discussed in greater detail in the section entitled “Agreements Related to the Merger — Voting Agreements” in this proxy statement/prospectus/information statement.
Management Following the Merger (see page 221)
Effective as of the closing of the Merger, MYOS’s executive officers are expected to be the current MedAvail management team:
NameTitle
Ed Kilroy
President and Chief Executive Officer
Ryan Ferguson
Chief Financial Officer, Treasurer, Secretary
Fraser Mackay
Chief Information Officer
Will Misloski
Chief Marketing Officer
David Rawlins
Chief Commercial Officer
Neil Prezioso
Chief Pharmacy Officer
Considerations with Respect to U.S. Federal Income Tax Consequences of the Transactions (see page 83)
Each of MYOS and MedAvail intends the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Assuming the Merger qualifies as a reorganization, in general, and subject to the qualifications and limitations set forth in the section entitled “The
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Merger — Considerations with Respect to U.S. Federal Income Tax Consequences of the Merger,” the material U.S. federal income tax consequences to U.S. Holders (as defined herein) of MedAvail Common Stock should be as follows:
MedAvail stockholder should not recognize gain or loss upon the exchange of MedAvail Common Stock for MYOS Common Stock pursuant to the Merger, except to the extent of cash received in lieu of a fractional share of MYOS Common Stock as described below;
MedAvail stockholder’s aggregate tax basis for the shares of MYOS Common Stock received in the Merger (including any fractional share interest for which cash is received) should equal the stockholder’s aggregate tax basis in the shares of MedAvail Common Stock surrendered upon completion of the Merger;
the holding period of the shares of MYOS Common Stock received by a MedAvail stockholder in the Merger should include the holding period of the shares of MedAvail Common Stock surrendered in exchange therefor provided the surrendered MedAvail Common Stock is held as a capital asset (generally, property held for investment) at the time of the Merger; and
MedAvail stockholder who receives cash in lieu of a fractional share of MYOS Common Stock in the Merger should recognize capital gain or loss in an amount equal to the difference between the amount of cash received instead of a fractional share and the stockholder’s tax basis allocable to such fractional share.
Completion of the Merger, however, is not conditioned upon a receipt of an opinion from counsel that the Merger qualifies as a reorganization, and the Merger will occur even if the Merger does not qualify as a reorganization and MedAvail stockholders are fully taxed on the shares of MYOS Common Stock they receive in the Merger. Moreover, the tax opinions received by MedAvail and MYOS are based on representation letters delivered by MedAvail and MYOS as to factual matters and on certain factual assumptions, including with respect to the number of MedAvail shares held by, and the amount of consideration payable to, MedAvail stockholders, if any, that exercise dissenters’ rights. These representation letters will be delivered as of the effective date of this registration statement. If any of the representations or assumptions on which the tax opinions are based proves incorrect, including because there is a change in facts or law between the date of the representation letters and the closing date of the Merger, the U.S. federal income tax consequences of the Merger described above may be adversely affected.
U.S. Holders of MYOS Common Stock will retain such shares of MYOS Common Stock in the transactions. Accordingly, MYOS shareholders will not recognize gain or loss for U.S. federal income tax purposes as a result of the Merger, although MYOS shareholders may be subject to tax with respect to the Spin Out Transaction (as discussed below). The holding period of such MYOS shareholders in their MYOS Common Stock will remain unchanged.
Although the position is not free from doubt, each of MYOS and MedAvail intends the Spin Out Transaction to be treated as a distribution pursuant to Section 301(a) of the Code and would therefore be considered a dividend for U.S. federal income tax purposes to the extent of E&P (as defined below), and any amount not characterized as a dividend will be applied against and reduce the tax basis of a MYOS shareholder’s MYOS Common Stock, with any excess treated as gain from the sale or exchange of property.
Tax matters are very complicated, and the tax consequences of the Merger or the Spin Out Transaction to a particular MedAvail or MYOS shareholder, as applicable will depend on such shareholder’s circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the transactions to you, including the applicability and effect of federal, state, local and non-U.S. income and other tax laws. For more information, please see the sections entitled “The Merger — Considerations with Respect to U.S. Federal Income Tax Consequences of the Merger” beginning on page 83 and “Matters Being Submitted to Vote of MYOS Shareholders – MYOS Proposal No. 3 – Approval of the Spin Out Transaction – Material U.S. Federal Income Tax Considerations” beginning on page 125.”
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Risk Factors (see page 38)
Both MYOS and MedAvail are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective equity holders, including the following risks:
The exchange ratio is not adjustable based on the market price of MYOS Common Stock so the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed;
Failure to complete the Merger may result in MYOS and MedAvail paying a termination fee or expenses to the other and could harm the stock price of MYOS Common Stock and the future business, liquidity and operations of each company;
If the conditions to the Merger are not met, the Merger may not occur;
The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes;
Some MYOS and MedAvail executive officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests;
The market price of the Post-Merger Public Company’s common stock may decline as a result of the Merger;
MYOS and MedAvail equity holders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger;
During the pendency of the Merger, MYOS and MedAvail may not be able to enter into a business combination with another party at a favorable price (subject to certain exceptions) because of restrictions in the Merger Agreement, which could adversely affect their respective businesses;
Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement; and
Because the lack of a public market for MedAvail shares makes it difficult to evaluate the fairness of the Merger, the stockholders of MedAvail may receive consideration in the Merger that is less than the fair market value of the MedAvail shares or MYOS may pay more than the fair market value of the MedAvail shares.
These risks and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement/prospectus/information statement. MYOS and MedAvail both encourage you to read and consider all of these risks carefully.
Regulatory Approvals (see page 31)
In the United States, MYOS must comply with applicable federal and state securities laws and the rules and regulations of The Nasdaq Capital Market in connection with the issuance of shares of MYOS Common Stock and the filing of this proxy statement/prospectus/information statement with the Securities and Exchange Commission. As of the date hereof, the registration statement of which this proxy statement/prospectus/information statement is a part has not become effective.
National Securities Exchange Listing (see page 31)
Prior to consummation of the Merger, MYOS intends to file an initial listing application for the Post-Merger Public Company with The Nasdaq Capital Market or another national securities exchange. If such application is accepted, MYOS anticipates that the Post-Merger Public Company’s common stock will be listed on The Nasdaq
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Capital Market or such other national securities exchange following the closing of the Merger under the trading symbol “MDVL.”
Anticipated Accounting Treatment (see page 32)
The Merger will be treated by MYOS as a reverse merger under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States. For accounting purposes, MedAvail is considered to be acquiring MYOS in the Merger.
Appraisal Rights and Dissenters’ Rights (see page 32)
Holders of MYOS Common Stock are not entitled to appraisal rights in connection with the Merger. If MedAvail stockholders approve the Merger Agreement and the Merger is consummated, MedAvail stockholders who do not vote or act by written consent in favor of the Merger, and who satisfy certain other conditions, will be entitled to appraisal rights in connection with the Merger under Delaware law. For more information about such rights, see the provisions of Section 262 of the Delaware General Corporation Law, or the DGCL, attached hereto as Annex D, and the section entitled “The Merger — Appraisal Rights and Dissenters’ Rights” in this proxy statement/prospectus/information statement.
Comparison of Stockholder Rights (see page 32)
MYOS is incorporated under the laws of the State of Nevada, and MedAvail is incorporated under the laws of the State of Delaware. If the Merger is completed, MedAvail stockholders will become shareholders of MYOS, and, assuming Proposal No. 4 is approved by MYOS shareholders at the MYOS Special Meeting, following the reincorporation of the Post-Merger Public Company from the State of Nevada to the State of Delaware, or the Reincorporation, the rights of the shareholders of the resulting Post-Merger Public Company following Reincorporation, or the Reincorporated Entity, will be governed by the DGCL, in addition to the bylaws and the certificate of incorporation of the Reincorporated Entity attached to this proxy statement/prospectus/information statement as Annex B and Annex C, respectively. The rights of MYOS shareholders contained in the amended and restated articles of incorporation and bylaws of MYOS and the rights of MedAvail stockholders under the amended and restated certificate of incorporation and bylaws of MedAvail differ from the rights of the Reincorporated Entity’s shareholders under the certificate of incorporation and bylaws of the Reincorporated Entity, as more fully described under the section entitled “Comparison of Rights of Holders of MYOS Stock and MedAvail Stock” in this proxy statement/prospectus/information statement.
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AND DATA
The following tables present summary historical financial data for MYOS and MedAvail, summary unaudited pro forma condensed combined financial data for MYOS and MedAvail, and comparative historical and unaudited pro forma per share data for MYOS and MedAvail.
Selected Historical Consolidated Financial Data of MYOS
Year Ended
December 31,
Six Months Ended
June 30,
2019201820202019
(unaudited)
Net revenues$1,032 $360 $619 $303 
Cost of revenues397 248 330 142 
Gross profit635 112 289 161 
Operating expenses:
Selling, marketing and research1,276 894 429 612 
Personnel and benefits1,897 1,718 833 890 
General and administrative1,680 1,829 644 788 
Total operating expenses4,853 4,441 1,906 2,290 
Operating loss(4,218)(4,329)(1,617)(2,129)
Other expense:
Other expense (2)(20)(21)
Interest expense(40)(16)  
Total other expense(40)(18)(20)(21)
Loss before income taxes(4,258)(4,347)(1,637)(2,150)
Income tax benefit 1,124   
Net loss$(4,258)$(3,223)$(1,637)$(2,150)
Net loss per share attributable to common shareholders:
Basic and diluted$(0.46)$(0.45)$(0.15)$(0.23)
Weighted average number of common shares outstanding:
Basic and diluted8,803,581 7,139,312 10,562,389 9,170,658 
Selected Consolidated Balance Sheet Data:
(in thousands, except for share and per share data)
June 30,December 31,
202020192018
(unaudited)
Current assets$3,028 $1,758 $2,903 
Total assets$4,072 $3,038 $4,455 
Current liabilities$802 $1,712 $1,634 
Total liabilities$1,244 $1,858 $1,634 
Accumulated deficit$(40,962)$(39,325)$(35,067)
Total stockholders' equity$2,828 $1,180 $2,821 
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Selected Historical Consolidated Financial Data of MedAvail
Consolidated Statements of Operations Data:
(in thousands, except for share and per share data)
Year Ended December 31,Six Months Ended June 30,
2019201820202019
(unaudited)
Sales$3,771 $4,665 $3,905 $1,384 
Cost of sales2,823 2,077 3,297 899 
Gross profit948 2,588 608 485 
Operating expenses15,420 11,983 8,159 6,964 
Selling, general and administrative expenses5,881 5,581 2,599 2,912 
Merger related expenses  1,283  
Share-based compensation354 1,362 170 193 
Goodwill write-off137    
Operating loss(20,844)(16,338)(11,603)(9,584)
Interest expense - net689 667 441 359 
Loss before income taxes(21,533)(17,005)(12,044)(9,943)
Income tax    
Net loss$(21,533)$(17,005)$(12,044)$(9,943)
Net loss per share - basic and diluted$(16.85)$(12.78)$(8.03)$(7.83)
Weighted average shares outstanding - basic and diluted1,278,1071,330,9071,499,3951,269,808
Selected Consolidated Balance Sheet Data:
(in thousands, except for share and per share data)
June 30,December 31,
202020192018
(unaudited)
Current assets$12,462 $14,088 $10,152 
Total assets$16,977 $18,003 $12,784 
Current liabilities$29,930 $7,675 $7,463 
Total liabilities$30,588 $21,164 $19,733 
Temporary equity$94,272 $93,484 $68,533 
Accumulated deficit$(133,274)$(121,230)$(99,697)
Total stockholders' deficit$(107,883)$(96,645)$(75,482)
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Selected Unaudited Pro Forma Condensed Combined Financial Data of MYOS and MedAvail
Balance Sheet
(in thousands, except for share and per share data)
June 30,
2020
(unaudited)
Current assets$54,862 
Total assets$59,377 
Current liabilities$10,036 
Total liabilities$10,694 
Accumulated deficit$(148,884)
Stockholders' equity$48,683 
Selected Statement of Operations
(in thousands, except for share and per share data)
Six Months Ended June 30,Year Ended December 31,
20202019
(unaudited)
Sales$3,905 $3,771 
Cost of sales3,297 2,823 
Gross profit608 948 
Operating expenses8,159 15,420 
Selling, general and administrative expenses2,599 5,881 
Merger expenses 354 
Share-based payments170 137 
Operating loss(10,320)(20,844)
Interest expense - net14 (45)
Loss before income taxes(10,334)(20,799)
Income tax  
Net loss$(10,334)$(20,799)
Net loss per share - basic and diluted$(0.47)$(1.00)
Weighted average shares outstanding - basic and diluted22,043,60320,838,788

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Comparative Historical and Unaudited Pro Forma Per Share Data
MYOS
Six Months Ended June 30, 2020Year Ended December 31, 2019
Historical Per Common Share Data:
Basic and diluted net loss per share$(0.15)$(0.46)
Tangible book value per share$0.24 $0.13 
MedAvail
Six Months Ended June 30, 2020Year Ended December 31, 2019
Historical Per Common Share Data:
Basic and diluted net loss per share$(8.03)$(16.85)
Tangible book value per share$(11.28)$(2.71)
MYOS AND MedAvail
Six Months Ended June 30, 2020Year Ended December 31, 2019
Combined Company Pro Forma Data:
Basic and diluted net loss per share$(0.47)$(1.00)
Tangible book value per share$3.50 $(0.20)
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MARKET PRICE AND DIVIDEND INFORMATION
Market Information
MYOS’s common stock, or MYOS Common Stock, trades under the symbol “MYOS” on The Nasdaq Capital Market equities market. The following table sets forth the high and low sale prices for MYOS Common Stock in each full quarterly period within the three most recent fiscal years.
Sales Price
HighLow
Year Ended December 31, 2017
First Quarter$6.98 $1.02 
Second Quarter$2.91 $1.69 
Third Quarter$2.38 $1.19 
Fourth Quarter$2.35 $1.12 
Year Ended December 31, 2018
First Quarter$2.33 $1.03 
Second Quarter$1.90 $1.20 
Third Quarter$2.50 $1.13 
Fourth Quarter$1.99 $1.04 
Year Ended December 31, 2019
First Quarter$2.02 $1.35 
Second Quarter$1.78 $1.15 
Third Quarter$1.80 $1.30 
Fourth Quarter$1.62 $1.20 
Year Ended December 31, 2020
First Quarter$1.77 $0.74 
Second Quarter$1.79 $0.84 
On September 1, 2020, the last reported sale price of MYOS Common Stock on The Nasdaq Capital Market was $1.33 per share. As of September 1, 2020, MYOS had approximately 131 record holders of MYOS Common Stock. The number of beneficial owners is substantially greater than the number of record holders because a large majority of the outstanding MYOS Common Stock is held of record through brokerage firms in “street name.”
Dividend Policy
MYOS has never declared or paid any cash dividends on MYOS Common Stock and does not anticipate declaring or paying any cash dividends on MYOS Common Stock in the foreseeable future. MYOS expects to retain all available funds and any future earnings to support operations and fund the development and growth of its business.
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RISK FACTORS
The Post-Merger Public Company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of MYOS Common Stock or whether to sign the written consent approving the Merger as a MedAvail stockholder. In addition, you should read and consider the risks associated with the business of MYOS because these risks may also affect the Post-Merger Public Company following the Merger—these risks can be found in MYOS’s Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC. You should also read and consider the other information in this proxy statement/prospectus/information statement. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.
I.   RISKS RELATED TO THE MERGER
The exchange ratio is not adjustable based on the market price of MYOS Common Stock so the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.
The Merger Agreement has set the exchange ratio for the MedAvail capital stock, and the exchange ratio is only adjustable upward or downward under certain circumstances as described in “The Merger Agreement — Exchange Ratio.” Any changes in the market price of MYOS Common Stock before the completion of the Merger will not affect the number of shares MedAvail security holders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of MYOS Common Stock declines from the market price on the date of the Merger Agreement, then MedAvail security holders could receive Merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of MYOS Common Stock increases from the market price on the date of the Merger Agreement, then MedAvail security holders could receive Merger consideration with substantially more value for their shares of MedAvail capital stock than the parties had negotiated for in the establishment of the exchange ratio. Because the exchange ratio does not adjust as a result of changes in the value of MYOS Common Stock, for each one percentage point that the market value of MYOS Common Stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to MedAvail security holders.
Failure to complete the Merger may result in MYOS and MedAvail paying a termination fee or expenses to the other party and could harm the common stock price of MYOS and future business and operations of each company.
If the Merger is not completed, MYOS and MedAvail are subject to the following risks:
if the Merger Agreement is terminated under certain circumstances, MYOS will be required to pay MedAvail a termination fee of $0.5 million;
if the Merger Agreement is terminated under certain circumstances, MedAvail will be required to pay MYOS a termination fee of $0.75 million; and
the price of MYOS stock may decline and remain volatile, which may result in MYOS being de-listed from The Nasdaq Capital Market.
In addition, if the Merger Agreement is terminated and the MYOS Board or MedAvail Board determines to seek another business combination, there can be no assurance that either MYOS or MedAvail will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger.
If the conditions to the closing of the Merger are not met, the Merger may not occur.
Even if the change of control and related share issuance are approved by the shareholders of MYOS and the Merger is approved by the MedAvail stockholders, specified conditions must be satisfied or waived to complete the
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Merger. These conditions are set forth in the Merger Agreement and described in the section entitled Conditions to the Completion of the Merger. MYOS and MedAvail cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and MYOS and MedAvail each may lose some or all the intended benefits of the Merger.
The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.
In general, either MYOS or MedAvail can refuse to complete the Merger if there is a material adverse change affecting the other party between the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on MYOS or MedAvail, which are set forth in more detail in the Merger Agreement and, include, but are not limited to:
any effect, change, event, circumstance or development in the conditions generally affecting the industries in which MedAvail and MYOS operate or the United States or global economy or capital markets as a whole;
any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation of worsening thereof;
any failure by MYOS or MedAvail to meet internal projections or forecasts or third party revenue or earnings predictions;
any changes in GAAP or applicable legal requirements; or
with respect to MYOS, any change in the price or trading volume of MYOS Common Stock.
If adverse changes occur and MYOS and MedAvail still complete the Merger, the Post-Merger Public Company’s stock price may suffer. This in turn may reduce the value of the Merger to the shareholders of MYOS, MedAvail or both.
Some executive officers and directors of MYOS and MedAvail have interests in the Merger that are different from the respective equity holders of MYOS and MedAvail and that may influence them to support or approve the Merger without regard to the interests of the respective equity holders of MYOS and MedAvail.
Some officers and directors of MYOS and MedAvail are parties to arrangements that provide them with interests in the Merger that are different from the respective equity holders of MYOS and MedAvail, including, among others, service as an officer or director of the Post-Merger Public Company following the closing of the Merger, severance and retention benefits, the acceleration of equity award vesting, and continued indemnification. For more information regarding the interests of the MYOS and MedAvail executive officers and directors in the Merger, see the sections entitled “Interests of the MYOS Directors and Executive Officers in the Merger” and “Interests of Certain MedAvail Directors, Executive Officers and Affiliates in the Merger” of this proxy statement/prospectus/information statement.
MYOS security holders, and to a lesser extent MedAvail security holders, will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the Post-Merger Public Company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.
After the completion of the Merger, the current security holders of MYOS and MedAvail will own a smaller percentage of the Post-Merger Public Company than their ownership in their respective companies prior to the Merger. Immediately after the Merger, it is currently estimated that MedAvail equity holders as of immediately prior to the Merger (after taking into account the treatment of the Private Placement Shares pursuant to the terms of the Merger Agreement) will own approximately 96.5% of the capital stock of the Post-Merger Public Company, with MYOS equity holders as of immediately prior to the Merger, whose shares of MYOS Common Stock will remain outstanding after the Merger, will own approximately 3.5% of the common stock of the Post-Merger Public
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Company on a fully-diluted pro forma basis including after giving effect to (i) the Private Placement financing by MedAvail immediately prior to the effective time of the Merger, and (ii) conversion of any convertible notes. These estimates are based on the anticipated Exchange Ratio and are subject to adjustment as provided in the Merger Agreement. For a more complete description of the Merger and the potential adjustments in the exchange ratio, please see the section titled “The Merger Agreement — Exchange Ratio” beginning on page 91 of this proxy statement/prospectus/information statement. In addition, the board of directors and the officers of the Post-Merger Public Company will initially consist only of individuals with affiliations with MedAvail. Consequently, security holders of MedAvail and MYOS will be able to exercise less influence over the management, the board of directors and policies of the Post-Merger Public Company following the closing of the Merger than they currently exercise over the management, the board of directors and policies of their respective companies.
The market price of MYOS Common Stock following the Merger may decline as a result of the Merger.
The market price of MYOS Common Stock may decline as a result of the Merger for a number of reasons including if:
investors react negatively to the prospects of the Post-Merger Public Company’s business and prospects from the Merger;
the effect of the Merger on the Post-Merger Public Company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
the Post-Merger Public Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.
MYOS may be targeted by securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Merger from being completed.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on MYOS’s liquidity and financial condition. In addition, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, or from being completed within the expected timeframe, which may adversely affect MYOS’s and MedAvail’s respective businesses, financial positions and results of operation. Currently, neither MYOS nor MedAvail is aware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the Merger.
MYOS and MedAvail equity holders may not realize a benefit from the Merger and Spin Out Transaction commensurate with the ownership dilution they will experience in connection with the Merger.
If the Post-Merger Public Company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, MYOS and MedAvail equity holders will have experienced dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the Post-Merger Public Company, or, with respect to MYOS shareholders, the Spin Out Sub following the Merger, is able to realize only part of the strategic and financial benefits currently anticipated from the Merger and Spin Out Transaction.
During the pendency of the Merger, MYOS and MedAvail may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.
Covenants in the Merger Agreement impede the ability of MYOS and MedAvail to make acquisitions, subject to certain exceptions relating to fiduciaries duties, as set forth below, or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is
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in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third party, subject to certain exceptions described below. These restrictions apply even if such transactions could be favorable to such party’s equity holders.
Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.
The terms of the Merger Agreement prohibit each of MedAvail and MYOS from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith, after consultation with its independent financial advisor, if any, and outside counsel, that an unsolicited competing proposal constitutes, or would reasonably be expected to result in, a superior competing proposal and that failure to take such action would result in a breach of the fiduciary duties of the board of directors.
Because the lack of a public market for MedAvail’s capital stock makes it difficult to evaluate the fairness of the Merger, the shareholders of MedAvail may receive consideration in the Merger that is less than the fair market value of MedAvail’s capital stock and/or MYOS may pay more than the fair market value of MedAvail’s capital stock.
The outstanding capital stock of MedAvail is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of MedAvail’s capital stock. Because the percentage of MYOS equity to be issued to MedAvail stockholders was determined based on negotiations between the parties, it is possible that the value of the MYOS Common Stock to be received by MedAvail stockholders will be less than the fair market value of MedAvail’s capital stock, or MYOS may pay more than the aggregate fair market value for MedAvail’s capital stock.
If the Merger does not qualify as a tax-free reorganization, the receipt of MYOS Common Stock pursuant to the Merger could be fully taxable to all MedAvail stockholders.
Each of MYOS and MedAvail intends the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. However, completion of the Merger is not conditioned upon receipt of an opinion from counsel dated as of the closing date that the Merger qualifies as a reorganization. The tax opinions received by MedAvail and MYOS as of the effective date of this proxy statement/prospectus/information statement are based on representation letters delivered as of such date by MedAvail and MYOS pertaining to factual matters and on certain factual assumptions, including with respect to the number of MedAvail shares held by, and the amount of consideration payable to, MedAvail stockholders, if any, that exercise dissenters’ rights. If any of these assumptions or representations proves incorrect, for example, if there is a change in applicable law or if consideration paid to MedAvail stockholders exercising dissenters’ rights is significant, the Merger could be fully taxable to all MedAvail stockholders. If the transactions were to fail to so qualify, then each holder of MedAvail common stock generally would recognize gain or loss, as applicable, equal to the difference between (1) the sum of the fair market value of the shares of MYOS common stock received by such U.S. holder of MedAvail stock in the Merger and the amount of cash received for fractional shares by such U.S. holder of MedAvail stock in the Merger and (2) its adjusted tax basis in the shares of MedAvail common stock surrendered in exchange therefor. The consequences of the Merger to any particular MedAvail stockholder will depend on that stockholder’s particular situation. We strongly urge you to consult your own tax advisor to determine the particular tax consequences of the Merger to you. See the section entitled “The Merger — Considerations with Respect to U.S. Federal Income Tax Consequences of the Merger” beginning on page 83.
The amount of the Spin Out Transaction that may be characterized as a dividend is uncertain.
As further discussed below, assuming the Spin Out Transaction will be treated as a taxable distribution for U.S. federal income tax purposes pursuant to Section 301(a) of the Code, the distribution of Spin Out Sub common stock will be considered a dividend for U.S. federal income tax purposes to the extent of MYOS’s E&P (as defined below). The process of determining E&P requires a comprehensive review and analysis of MYOS's and MedAvail's history, and requires a final determination of the 2019 and 2020 fiscal year results and a review of other future
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events and factors. The determination will be based in part on factors that are outside of the control of either company and which cannot be ascertained at this time, including the closing date of the Merger and the financial results of MYOS and MedAvail through the end of MedAvail's tax year in which the Merger occurs. The determination of E&P is not binding on the Internal Revenue Service, or the IRS, and it is possible that the IRS will take a different view. See “Matters Being Submitted to Vote of MYOS Shareholders – MYOS Proposal No. 3 – Approval of the Spin Out Transaction – Material U.S. Federal Income Tax Considerations of the Spin Out Transaction” beginning on page 125.
II. RISKS RELATED TO MYOS
Risks Related to MYOS’s Business
You should read and consider the risk factors specific to MYOS’s business that will also affect the Post-Merger Public Company and Spin Out Sub after the Spin Out Transaction and the Merger. These risks are described in MYOS’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which is incorporated by reference into this document, and in other documents that are incorporated by reference into this document. See the section entitled “Where to Obtain More Information” for the location of information incorporated by reference in this document.
Risks Related to Spin Out Transaction
The Spin Out Transaction may expose MYOS, Spin Out Sub and the Post-Merger Public Company to a number of risks and uncertainties. These risk and uncertainties include the potential failure to retain, attract or strengthen our relationships with key personnel, current and potential customers, suppliers, and partners which may cause them to terminate, or not to renew or enter into, arrangements with Spin Out Sub, and exposure to potential litigation in connection with the Spin Out Transaction, any of which could adversely affect Spin Out Sub’s business, financial condition and results of operations.
In addition, MYOS shareholders receiving shares, or Dividend Shares, of Spin Out Sub in the dividend of such shares to be declared, may not be able to sell, liquidate or transfer such Dividend Shares, which will not be publicly tradable. The Dividend Shares will only be able to be sold or transferred if they are registered for sale with the Securities and Exchange Commission, or if an exemption from registration applies.
In addition, while Spin Out Sub will indemnify the Post-Merger Public Company for any pre-Merger obligations of MYOS and Spin Out Sub, we can provide no assurance that such indemnification will be made upon demand or that the Post-Merger Public Company would be made whole in connection with any such indemnification demand.
III.   RISKS RELATED TO MEDAVAIL AND THE POST-MERGER PUBLIC COMPANY
MYOS and MedAvail anticipate that following the Merger and the Spin Out Transaction, the business of the Post-Merger Public Company will be the business conducted by MedAvail immediately prior to the Merger. References to the company in this section refer to MedAvail and the Post-Merger Public Company.
Risks Related to MedAvail’s Business and Operations
The company is an early-stage company with a history of net losses, and expects to incur operating losses in the future and may not be able to achieve or sustain profitability. The company has a limited history operating as a commercial company.
The company has incurred net losses since its inception in 2012. For the years ended December 31, 2019 and 2018, it had a net loss of $21.5 million, and $17.0 million, respectively, and the company expects to continue to incur additional losses in the future. As of December 31, 2019, the company had an accumulated deficit of $121.2 million. To date, the company has financed its operations primarily through equity and debt financings and from deployments of its MedCenter kiosk solution and the operation of its full-service retail pharmacy platform. The losses and accumulated deficit have primarily been due to the substantial investments that the company has made to
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develop its products, as well as for costs related to general research and development, including clinical and regulatory initiatives to obtain marketing approval, sales and marketing efforts and infrastructure improvements.
The company began commercializing its products in the United States in 2016 and therefore does not have a long history operating as a commercial company. Over the next several years, the company expects to continue to devote a substantial amount of its resources to, among other matters, expand commercialization efforts and increase adoption for its products and develop additional products. In addition, as a public company, the company will incur significant legal, accounting and other expenses that it did not incur as a private company. Accordingly, the company expects to continue to incur operating losses for the foreseeable future and it cannot assure you that we will achieve profitability in the future or that, if the company becomes profitable, that it will sustain profitability. The company’s failure to achieve and sustain profitability in the future will make it more difficult to finance its business and accomplish its strategic objectives, which would have a material adverse effect on the company’s business, financial condition and results of operations and cause the market price of its common stock to decline. In addition, failure of the company’s products to significantly penetrate the target markets would negatively affect its business, financial condition and results of operations.
The company’s core technology the MedCenter has been in market since 2015 at limited volume. Over the past two years the company opened its own retail pharmacy, SpotRx Pharmacy, which focuses on the Medicare Provider market. This new focus which comprise a substantial portion of its current revenue, and thus the model has a limited operating history; this makes it difficult to predict its future operating results.
MedAvail was incorporated in May 2012 and began shipping its first products in 2015. Given the constantly evolving market for retail pharmacy, regulatory changes to government healthcare programs and the constant competitive pressures in this market, its limited operating history with this market provides a limited basis upon which to evaluate its ability to accomplish its business objectives. The company is in the early stages of deployment, and there are many risks associated with the rapidly changing retail pharmacy and Medicare market. The company may not be successful in addressing these risks; and its limited operating history adds to the difficulty in forecasting its future revenue and planning expenses accordingly and, therefore, predicting its future operating results.
The company faces risks relating to the availability, pricing and safety profiles of prescription drugs that it purchases and sells.
The company’s path to profitability is dependent upon the utilization of prescription drug products. It dispenses significant volumes of brand name and generic drugs. Its revenues, operating results and cash flows may decline if physicians cease writing prescriptions for drugs or the utilization of drugs is reduced due to:
increased safety risk profiles or regulatory restrictions;
manufacturing or other supply issues;
certain products being withdrawn by their manufacturers or transitioned to over-the-counter products;
future FDA rulings restricting the supply or increasing the cost of products;
the introduction of new and successful prescription drugs or lower-priced generic alternatives to existing brand name products; or
inflation in the price of brand name drugs.
In addition, increased utilization of generic drugs, which normally yield a higher gross profit rate than equivalent brand name drugs, has resulted in pressure to decrease reimbursement payments to the company and pharmacies in general for generic drugs, causing a reduction in its margins on sales of generic drugs. Consolidation within the generic drug manufacturing industry and other external factors may enhance the ability of manufacturers to sustain or increase pricing of generic drugs and diminish its ability to negotiate reduced generic drug acquisition costs. Any inability to offset increased brand name or generic prescription drug acquisition costs or to modify its activities to lessen the financial impact of such increased costs could have a significant adverse effect on its operating results.
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The company purchases a significant amount of prescription drugs from a limited number of wholesalers . The loss of any of these relationships could disrupt its business and adversely impact its revenues for one or more fiscal quarters.
The loss of any of these relationships, the failure by the suppliers to fulfill its purchase orders on a timely basis or at all, or a contractual dispute could significantly disrupt its business and adversely impact its revenues for one or more fiscal quarters. In the event of a contractual dispute, it could become involved in litigation, the outcome of which may be uncertain or difficult to predict and could result in its incurrence of substantial costs regardless of the outcome.
The company’s business could also be harmed by any governmental enforcement actions, regulatory proceedings, inquiries and investigations, or similar actions, or similar private proceedings, that would alter how drug manufacturers promote or sell products and services.
The specialty pharmacy and PBM industries are highly litigious and future litigation or other proceedings could subject the company to significant monetary damages or penalties or require the company to change its business practices, which could impair its reputation and result in a material adverse effect on its business.
The company is subject to risks relating to litigation, enforcement actions, regulatory proceedings, government inquiries and investigations, and other similar actions in connection with its business operations. While the company is currently not subject to any material litigation of this nature, such litigation is not unusual in its industry. Further, while certain costs are covered by insurance, the company may incur uninsured costs related to the defense of such proceedings that could be material to its financial performance. In addition, as a public company, any material decline in the market price of its common stock may expose it to purported class action lawsuits that, even if unsuccessful, could be costly to defend or indemnify (to the extent not covered by insurance) and a distraction to management. The results of legal proceedings are often uncertain and difficult to predict, and the company could from time to time incur judgments, enter into settlements, materially change its business practices or technologies or revise its expectations regarding the outcome of certain matters. In addition, the costs incurred in litigation can be substantial, regardless of the outcome. If one or more of these proceedings or any future proceeding has an unfavorable outcome, the company cannot provide any assurance it would not have a material adverse effect on its business and results of operations, including its ability to attract and retain clients as a result of any negative reputational impact of such an outcome.
The company’s products, both hardware and software, are complex and require precision in design and manufacturing. Any errors in product performance could result in significant harm to its reputation and its business.
The development and production of new products with high technology content, such as the company’s MedCenter Kiosk, is complicated and often involves problems with software, components and manufacturing methods. The company’s products have contained and may continue to contain one or more undetected errors, defects or security vulnerabilities. Some errors in its products may only be discovered after a product has been installed and used by consumers. The company suspects that errors, including potentially serious errors, may be found from time to time in its products. The company’s MedCenter Kiosk may suffer degradation of performance and reliability over time. Furthermore, because it outsources the manufacturing of almost all of the key hardware components of its MedCenter Kiosk, the company may also be subject to product performance problems as a result of the acts or omissions of these third parties.
If reliability, quality or other problems develop, a number of negative effects on the company’s business could result, including:
costs associated with fixing or replacing products;
reduced orders from existing customers; and
declining interest from potential customers.
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Reduced access to payer networks would have significant impact to the company’s business.
Access to payer networks which reimburse the company’s pharmacy upon dispense is renewed on an annual basis. Any inability to renew in a network would exclude the company from filling prescriptions for those Medicare patients and impact its ability to operate.
The company has experienced significant growth, and if it is unable to manage its administrative and operational infrastructures in view of this growth, then it will suffer significant harm.
The company will require further expansion of its infrastructure and headcount if it is to achieve planned expansion of its product offerings and planned increases in its customer base. Its growth has placed, and is expected to continue to place, a significant strain on its administrative and operational infrastructure. The company’s ability to manage its operations and growth will require it to continue to refine its operational, financial and management controls, human resource policies, and reporting systems and procedures.
The company may not be able to implement improvements to its management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. If it is unable to manage future expansion, its ability to provide high quality products and services could be harmed, which would damage its reputation and brand and substantially harm its business and results of operations.
The company depends on access to clinics and needs to maintain good working relationships with the clinics in order to continue to grow its business.
The company is dependent upon access to clinics to acquire customers and runs its MedCenter Kiosks at sites where treatment is rendered and prescriptions generated. The company needs to continue to have access to clinics in order to acquire new customers to grow its business. It must maintain good working relationships with the managers of those clinics. In the event that the company does not maintain those relationships it may lose access to clinics and that may have a material and adverse relationship on its ability to grow and will negatively impact its results of operations as a result.
The company’s business results depend on its ability to successfully manage ongoing organizational change and business transformation and achieve cost savings and operating efficiency initiatives.
If the company is unable to continually obtain productivity improvements, while continuing to invest in business growth, or if the volume and nature of change overwhelms available resources, its business operations and financial results could be materially and adversely impacted. Its ability to successfully manage and execute these initiatives and realize expected savings and benefits in the amounts and at the times anticipated is important to its business success. Any failure to do so, which could result from its inability to successfully execute organizational change and business transformation plans, changes in global or regional economic conditions, competition, changes in the industries in which it competes, unanticipated costs or charges, loss of key personnel and other factors described herein, could have a material adverse effect on its businesses, financial condition and results of operations.
The company faces significant competition in attracting and retaining talented employees. Further, managing succession for, and retention of, key executives is critical to its success, and its failure to do so could adversely affect its businesses, operating results and/or future performance.
The company’s ability to attract and retain qualified and experienced employees is essential to meet its current and future goals and objectives. There is no guarantee it will be able to attract and retain such employees or that competition among potential employers will not result in increased compensation and/or benefits costs. In addition, the company’s success is highly dependent on the continued services of key members of our executive management team and others in key management positions. Any of the company’s employees may terminate their employment with the company at any time. If the company loses one or more key employees,is unable to retain existing employees or attract additional employees, or it experiences an unexpected loss of leadership, then the company may experience difficulties in competing effectively, developing its technologies, or implementing its business strategy, and, as a result, the company could experience a material adverse effect on its businesses, operating results and/or future performance.
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In addition, its failure to adequately plan for succession of senior management and other key management roles or the failure of key employees to successfully transition into new roles could have a material adverse effect on its businesses, operating results and/or future performance. The succession plans it has in place and its employment arrangements with certain key executives do not guarantee the services of these executives will continue to be available to it.
If the company or the businesses it interacts with do not maintain the privacy and security of sensitive customer and business information, it could damage the company’s reputation and the company could suffer a loss of revenue, incur substantial additional costs and become subject to litigation and regulatory scrutiny.
The protection of customer, employee, and company data is critical to the company’s businesses. Cybersecurity and other information technology security risks, such as a significant breach of customer, employee, or company data, could create significant workflow disruption, attract a substantial amount of media attention, damage the company’s customer relationships, reputation and brand, and result in lost sales, fines or lawsuits. Throughout the company’s operations, it receives, retains and transmits certain personal information that its customers and others provide to purchase products or services, fill prescriptions, enroll in promotional programs, participate in its customer loyalty programs, register on the company websites, or otherwise communicate and interact with the company. In addition, aspects of its operations depend upon the secure transmission of confidential information over public networks. Like other global companies, the company and businesses it interacts with have experienced threats to data and systems, including by perpetrators of random or targeted malicious cyber-attacks, computer viruses, worms, bot attacks or other destructive or disruptive software and attempts to misappropriate customer information, including credit card information, and cause system failures and disruptions. Any compromise of its data security systems or of those of businesses with whom it interacts, which results in confidential information being accessed, obtained, damaged or used by unauthorized or improper persons, could harm its reputation and expose it to regulatory actions, customer attrition, remediation expenses, and claims from customers, financial institutions, payment card associations and other persons, any of which could materially and adversely affect its business operations, financial condition and results of operations. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may not immediately produce signs of intrusion, it may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, a security breach could require that it expend substantial additional resources related to the security of information systems and disrupt its businesses.
The company depends on and interacts with the information technology networks and systems of third-parties for many aspects of its business operations, including payers, strategic partners and cloud service providers. These third parties may have access to information it maintains about the company or its operations, customers, employees and vendors, or operating systems that are critical to or can significantly impact its business operations. Like the company, these third-parties are subject to risks imposed by data breaches and cyber-attacks and other events or actions that could damage, disrupt or close down their networks or systems. Any expansion of information technology outsourcing, including through arrangements with its strategic partners, may increase vulnerabilities and weaknesses relating to cybersecurity and data management. Security processes, protocols and standards that it has implemented and contractual provisions requiring security measures that it may have sought to impose on such third-parties may not be sufficient or effective at preventing such events, which could result in unauthorized access to, or disruptions or denials of access to, or misuse of, information or systems that are important to its business, including proprietary information, sensitive or confidential data, and other information about its operations, customers, employees and suppliers, including personal information.
The regulatory environment surrounding data security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements across businesses and geographic areas. The company is required to comply with increasingly complex and changing data security and privacy regulations in the United States and in other jurisdictions in which it operates that regulate the collection, use and transfer of personal data, including the transfer of personal data between or among countries. In the United States, for example, HIPAA imposes extensive privacy and security requirements governing the transmission, use and disclosure of health information by covered entities in the health care industry, including health care providers such as pharmacies. In addition, the California Consumer Privacy Act, which went into effect on January 1, 2020, imposes stringent requirements on the use and treatment of “personal information” of California residents, which term is broadly defined to include, among other
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things, information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked to a consumer or household. Other U.S. states have enacted, or are proposing similar laws related to the protection of personal data. In addition, the U.S. federal government is considering federal privacy legislation. Outside the United States, many of its business units operate in countries with stringent data protection regulations, and these laws continue to change. For example, the European Union’s General Data Protection Regulation, which became effective in May 2018, greatly increased the jurisdictional reach of European Union data protection laws and added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and provides for greater penalties for noncompliance. Other countries have enacted or are considering enacting data localization laws that require certain data to stay within their borders. Complying with changing regulatory requirements requires the company to incur substantial costs and may require changes to its business practices in certain jurisdictions, any of which could materially and adversely affect its business operations and operating results. It may also face audits or investigations by one or more domestic or foreign government agencies relating to its compliance with these regulations. Compliance with changes in privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes. If the company or those with whom it shares information fail to comply with these laws and regulations or experience a data security breach, its reputation could be damaged and it could be subject to additional litigation and regulatory risks, particularly to the extent the breach relates to sensitive data. The company’s security measures may be undermined due to the actions of outside parties, employee error, malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to its data systems and misappropriate business and personal information. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to its reputation and credibility, and potentially have a material adverse effect on its business operations, financial condition and results of operations.
The company’s business success and operating results depend in part on effective information technology systems and on continuing to develop and implement improvements in technology. Pursuing multiple initiatives simultaneously could make this continued development and implementation significantly more challenging.
Many aspects of the company’s operations are dependent on its information systems and the information collected, processed, stored, and handled by these systems. The company relies heavily on its computer systems to manage its ordering, pricing, point-of-sale, pharmacy fulfillment, inventory replenishment, claims processing, customer loyalty and subscription programs, finance and other processes. Throughout the company’s operations, it collects, processes, maintains, retains, evaluates, utilizes and distributes large amounts of confidential and sensitive data and information, including personally identifiable information and protected health information, that its customers, members and other constituents provide to purchase products or services, enroll in programs or services, register on its websites, interact with its personnel, or otherwise communicates with the company. In addition, for these operations, the company depends in part on the secure transmission of confidential information over public networks.
The company has many different information and other technology systems supporting its businesses. Its businesses depend in large part on these systems to adequately price its products and services; accurately establish reserves, process claims and report operating results; and interact with providers, employer plan sponsors, customers, members, consumers and vendors in an efficient and uninterrupted fashion. In addition, recent trends toward greater consumer engagement in health care require new and enhanced technologies, including more sophisticated applications for mobile devices. Certain of its technology systems, including software, are older, legacy systems that are less flexible, less efficient and require a significant ongoing commitment of capital and human resources to maintain, protect and enhance them and to integrate them with its other systems. The company must re-engineer and reduce the number of these systems to meet changing consumer and vendor preferences and needs, improve its productivity and reduce its operating expenses. The company also needs to develop or acquire new technology systems, contract with new vendors or modify certain of its existing systems to support the consumer-oriented and transformation products and services its developing, operating and expanding and/or to meet current and developing industry and regulatory standards, including to keep pace with continuing changes in information processing technology and emerging cybersecurity risks and threats. If it fails to achieve these objectives, the company’s ability to profitably grow its business and/or its operating results may be adversely affected.
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In addition, information technology and other technology and process improvement projects frequently are long-term in nature and may take longer to complete and cost more than the company expects and may not deliver the benefits it projects once they are complete. If the company does not effectively and efficiently secure, manage, integrate and enhance its technology portfolio, including vendor sourced systems, it could, among other things, have problems determining health care and other benefit cost estimates and/or establishing appropriate pricing, meeting the needs of customers, consumers, providers, members and vendors, developing and expanding its consumer-oriented products and services or keeping pace with industry and regulatory standards, and its operating results may be adversely affected.
The company could be adversely affected by product liability, product recall, personal injury or other health and safety issues.
The company could be adversely impacted by the supply of defective or expired products, including the infiltration of counterfeit products into the supply chain, errors in re-labeling of products, product tampering, product recall and contamination or product mishandling issues. Errors in the dispensing and packaging of pharmaceuticals, including related counseling could lead to serious injury or death. Product liability or personal injury claims may be asserted against the company with respect to any of the products or pharmaceuticals it sells or services it provides. For example, from time to time, the FDA issues statements alerting patients that products in the company’s and other pharmacies supply chains may contain impurities or harmful substances, and claims relating to the sale or distribution of such products may be asserted against the company or arise from these statements. Should a product or other liability issue arise, the coverage limits under its insurance programs and third-party indemnification amounts available to it may not be adequate to protect the company against claims and judgments. The company also may not be able to maintain this insurance on acceptable terms in the future.
Changes in economic conditions could adversely affect consumer buying practices.
The company’s performance has been, and may continue to be, adversely impacted by changes in global, national, regional or local economic conditions and consumer confidence. These conditions can also adversely affect its key vendors and customers. External factors that affect consumer confidence and over which the company exercises no influence include the impact of COVID-19 and any future pandemics, unemployment rates, inflation, levels of personal disposable income, levels of taxes and interest and global, national, regional or local economic conditions, as well as acts of war or terrorism. Changes in economic conditions and consumer confidence could adversely affect consumer preferences, purchasing power and spending patterns, which could lead to a decrease in overall consumer spending as well as in prescription drug and health services utilization and which could be exacerbated by the increasing prevalence of high-deductible health insurance plans and related plan design changes.
The company could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters.
Generally Accepted Accounting Principles, or GAAP, and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to the company’s businesses, including, but not limited to, revenue recognition, asset impairment, impairment of goodwill and other intangible assets, inventories, equity method investments, vendor rebates and other vendor consideration, lease obligations, self-insurance liabilities, pension and postretirement benefits, tax matters, unclaimed property laws and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change the company’s reported or expected financial performance or financial condition. For example, changes in accounting standards and the application of existing accounting standards particularly related to the measurement of fair value as compared to carrying value for the company’s reporting units, including goodwill, intangible assets and investments in equity interests, may have an adverse effect on the company’s financial condition and results of operations. Factors that could lead to impairment of goodwill and intangible assets include significant adverse changes in the business climate and declines in the financial condition of a reporting unit. Factors that could lead to impairment of investments in equity interests of the companies in which the company invested include a prolonged period of decline in their operating performance or adverse changes in the economic, regulatory and legal environments of the countries in which they operate.
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New accounting guidance also may require changes to the company’s processes, accounting systems and internal controls that could increase its operating costs and/or significantly change its financial statements. For example, in February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. This ASU, which became effective for the company beginning on September 1, 2019 (fiscal year 2020), seeks to increase the transparency and comparability of organizations by recognizing operating lease assets and operating lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption approach for these accounting standards affect the comparability of the company’s consolidated financial statements. Implementing new accounting guidance may require the company to make significant changes to and investments in its accounting systems and processes, which could result in significant adverse changes to its financial statements.
Risks Related to Insurance and Payments and Pricing and Reimbursement Plans
Significant and increasing pressure from third-party payers to limit reimbursements could materially and adversely impacts the company’s profitability, results of operations and financial condition.
The continued efforts of health maintenance organizations, managed care organizations, pharmacy benefit managers, or PBMs, government programs (such as Medicare, Medicaid and other federal and state funded programs), and other third-party payers to limit pharmacy reimbursements, as well as litigation and other legal proceedings or governmental regulation related to how drugs are priced, may adversely impact its profitability. While manufacturers have increased the price of drugs, payers have generally decreased reimbursement rates as a percentage of drug cost.
Pharmacy Benefit Managers:
The company derives a significant portion of its sales from prescription drug sales reimbursed through prescription drug plans administered by a limited number of PBM companies and health plans. PBM companies typically administer multiple prescription drug plans that expire at various times and provide for varying reimbursement rates, and often limit coverage to specific drug products on an approved list, known as a formulary, which might not include all of the approved drugs for a particular indication. Reimbursements received from PBMs are determined pursuant to agreements. Should PBMs seek to negotiate reduced reimbursement rates or to adjust reimbursement rates downward, or change products covered under their formulary, this could negatively impact the company’s profitability. In addition, PBMs may not be willing to accept or otherwise restrict the company’s participation in networks of pharmacy providers to comply with PBM demands. The company may elect not to continue or enter into participation in a pharmacy provider network if reimbursements are too low. Should it exit a pharmacy provider network and later resume participation, it may not achieve the same level of business and clients or the PBMs may not choose to include it again in the pharmacy network for their plans. In such events, it may incur increased marketing and other costs to offset these client losses through other strategic initiatives. As a result, it may lose sales, and if it is unable to replace any such lost sales, its operating results could be materially and adversely affected.
Medicare and Medicaid:
Reimbursement from government programs is subject to a myriad of requirements, including but not limited to statutory and regulatory, administrative rulings, interpretations, retroactive payment adjustments, governmental funding restrictions, and changes to, or introduction of, legislation, all of which may materially affect the amount and timing of reimbursement payments to the company. These changes may reduce its revenue and profitability on services provided to Medicare and Medicaid patients and increase its working capital requirements.
The utilization of Medicare Part D by cash and state Medicaid customers, with established pharmacy network payments based on actual acquisition cost, has resulted in increased utilization and decreased pharmacy gross margin rates. In addition, changes to Medicare Part D, such as the elimination of the tax deductibility of the retiree drug subsidy payment received by sponsors of retiree drug plans, could result in the company’s PBM clients deciding to discontinue providing prescription drug benefits to their Medicare-eligible members. To the extent this occurs, the adverse effects of increasing customer migration into Medicare Part D may outweigh the benefits the company realize from the growth of its Medicare Part D business.
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Given the significant competition in the industry, the company has limited bargaining power to counter payer demands for reduced reimbursement rates. If the company is unable to negotiate for acceptable reimbursement rates or replace unfavorable contracts with new business on acceptable terms, its revenues and business could be adversely affected. Should it experience a loss of sales as a result of reduced reimbursement rates and be unable to appropriately adjust staffing levels in a timely and efficient manner, this may negatively impact its financial condition or results of operations.
There have been multiple executive, congressional and judicial attempts to modify or repeal the Health Reform Laws. The company cannot predict the success or effect any modification or repeal and any subsequent legislation would have on reimbursement levels. Furthermore, a third-party payer may not be able to pay timely, or may delay payment of, amounts owed to it due to budgetary constraints or deterioration of financial condition. Recent or future changes in prescription drug reimbursement policies and practices may materially and adversely affect its results of operations.
The amount of DIR fees charged by PBMs, as well as the timing of assessing such fees and the methodology in calculating such fees, may have a material adverse impact on the company’s financial performance and, to the extent such fees are material, may limit its ability to provide accurate financial guidance for future periods.
Some PBMs charge certain direct and indirect remuneration, or DIR, fees, often calculated and charged several months after adjudication of a claim, which adversely impacts its profitability. DIR fees is a term used by The Centers for Medicare & Medicaid Services, or CMS, to address price concessions that ultimately may impact the prescription drug costs of Medicare Part D plans, but are not captured at the point of sale. Further, the timing of assessments, changes in the manner in which DIR fees are assessed and methodology in computing DIR fees may materially impact its ability to provide accurate financial guidance to investors and analysts, and may result in a future change in the estimated DIR fees it has recognized. In addition, as reimbursement pressure increases throughout the industry and as the company’s business grows, the amount of DIR fees assessed may increase, which could have an adverse impact on its revenues and results of operations.
Shifts in pharmacy mix toward lower margin drugs could negatively impact the company’s financial condition.
A shift in the mix of pharmacy prescription volume towards lower margin drugs could negatively impact its financial condition. If its prescription volume shifts towards lower margin drugs or drugs with lower reimbursement rates and the company is not able to generate additional prescription volume or other business that is sufficient to offset the impact of lower margin or reimbursement rates decline from current levels in future years, its financial condition could be materially and adversely affected.
Industry pricing benchmarks may change, negatively impacting the revenue the company derives from product sales.
It is possible that the pharmaceutical industry or regulators may evaluate and/or develop an alternative pricing reference to replace average wholesale price, or AWP, which is the pricing reference used for many pharmaceutical purchase agreements, retail network contracts, specialty payer agreements and other contracts with third party payers in connection with the reimbursement of specialty drug payments. Future changes to the use of AWP or to other published pricing benchmarks used to establish pharmaceutical pricing, including changes in the basis for calculating reimbursement by federal and state health programs and/or other payers, could negatively impact its pricing arrangements. The effect of these possible changes on its business cannot be predicted at this time.
Programs funded in whole or in part by the U.S. federal government account for a significant portion of the company’s revenues, and it expects that percentage to increase over time.
Programs funded in whole or in part by the U.S. federal government account for a significant portion of its revenues, and the company expects that percentage to increase. As its government funded businesses grow, its exposure to changes in federal and state government policy with respect to and/or regulation of the various government funded programs in which it participates also increases.
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The company’s revenues from government funded programs are dependent on annual funding by the federal government and/or applicable state or local governments. Funding for these programs is dependent on many factors outside its control, including general economic conditions, continuing government efforts to contain health care costs and budgetary constraints at the federal or applicable state or local level and general political issues and priorities.
An extended federal government shutdown or a delay by Congress in raising the federal government’s debt ceiling also could lead to a delay, reduction, suspension or cancellation of federal government spending and a significant increase in interest rates that could, in turn, have a material adverse effect on the value of the company’s investment portfolio, its ability to access the capital markets and its businesses, operating results, cash flows and liquidity.
The company could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procure prescription drugs.
The profitability of the company’s pharmacy businesses depends upon the utilization of prescription drugs. Utilization trends are affected by, among other factors, the introduction of new and successful prescription drugs as well as lower-priced generic alternatives to existing brand name drugs. Inflation in the price of drugs also can adversely affect utilization, particularly given the increased prevalence of high-deductible health insurance plans and related plan design changes. New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically results in relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs or generics successfully introduced, delays in their introduction, or a decrease in the utilization of previously introduced prescription drugs, could materially and adversely affect its results of operations.
In addition, if it experiences an increase in the amounts it pays to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effect on its results of operations. The company’s gross profit margins would be adversely affected to the extent it is not able to offset such cost increases. Any failure to fully offset any such increased prices and costs or to modify its activities to mitigate the impact could have a material adverse effect on its results of operations. Additionally, any future changes in drug prices could be significantly different than its expectations.
Risks Related to MedAvail’s Industry
The industries in which the company operates are highly competitive and constantly evolving. New entrants to the market, existing competitor actions or other changes in market dynamics could adversely impact it.
The market for retail medication pharmacy is highly competitive and rapidly evolving. The market is subject to changing technology trends, shifting customer needs and expectations and frequent introduction of new products. The company expects competition to persist and intensify in the future as the market for retail pharmacy grows and new and existing competitors devote considerable resources to introducing and enhancing products and services. It faces competition from several of the world’s largest providers that provide alternatives, including Genoa, which was acquired by OptumRx, as well as major chains such as Walgreens, CVS, Walmart and Rite Aid.
The company’s current and potential competitors may have significantly greater financial, technical, marketing and other resources than it does and may be able to devote greater resources to the development, promotion, sale and support of their products. In addition, many of its competitors have more extensive customer relationships than it does, and, therefore, its competitors may be in a stronger position to respond quickly to new technologies and may be able to market or sell their products more effectively. Moreover, further consolidation in the retail pharmacy market could adversely affect its customer relationships and competitive position. MedAvail’s services may not continue to compete favorably. It may not be successful in the face of increasing competition from new products and services introduced by existing competitors or new companies entering the markets in which it operates.
The level of competition in the retail pharmacy industry is high. Changes in market dynamics or actions of competitors or manufacturers, including industry consolidation and the emergence of new competitors and strategic alliances, could materially and adversely impact the company. Disruptive innovation, or the perception of potentially
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disruptive innovation, by existing or new competitors could alter the competitive landscape in the future and require it to accurately identify and assess such changes and if required make timely and effective changes to its strategies and business model to compete effectively. The company faces intense competition including other drugstore and pharmacy chains, independent drugstores and pharmacies, mail-order pharmacies and various other retailers such as grocery stores, convenience stores, mass merchants, online and omni-channel pharmacies and retailers, warehouse clubs, dollar stores and other discount merchandisers, some of which are aggressively expanding in markets it serves. Competition may also come from other sources in the future.
The company also could be adversely affected if it fails to identify or effectively respond to changes in market dynamics. As technology, consumer behavior, omni-channel and differential retail models, and market conditions continue to evolve in the United States, it is important that it maintains the relevance of its brand and product and service offerings to customers and patients.
Consolidation in the healthcare industry could materially adversely affect its business, financial condition and results of operations.
Many healthcare industry participants are consolidating to create integrated healthcare delivery systems with signif