Filed Pursuant to Rule 424(b)(3)
Registration No. 333-248566
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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 October 2, 2020, 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 October 8, 2020, the last trading day before the date of this proxy statement/prospectus/information statement, the closing sale price of MYOS Common Stock was $1.38 per share.
MYOS is holding a special meeting of shareholders, or the MYOS Special Meeting, on November 16, 2020 at 10:00 a.m. 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 40.
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 October 15, 2020, and is first being mailed to MYOS and MedAvail equity holders on or about October 16, 2020.
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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 November 16, 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 November 16, 2020 at 10:00 a.m. 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. 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 October 2, 2020 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 12,191,795 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 9,795,792 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 approximately $83.9 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 to 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
October 15, 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 273 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 November 3, 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 123 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 9,795,792 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 1.260 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 solutions. 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 9,795,792 shares of MedAvail Common Stock for gross proceeds of approximately $83.9 million, 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 October 2, 2020, the record date for the determination of shareholders
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entitled to 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 87.
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 87.
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 129.
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 126.
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 136.
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 November 16, 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 November 16, 2020 at 10:00 a.m., 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. 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 177 and “INFORMATION ABOUT MedAvail — MedAvail Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 208 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 82)
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 October 2, 2020, 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 95)
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 97)
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 97)
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 235)
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 $12,652,775.
Conditions to the Completion of the Merger (see page 98)
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 104)
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 104 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 105 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 111)
Either MYOS or MedAvail can terminate the Merger Agreement under certain circumstances, which would prevent the Merger from being consummated.
Termination Fee (see page 114)
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 116)
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 104 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 116)
In connection with the Merger, 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
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of or lend any shares of MYOS 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 parties subject to the lock-up have consented and agreed that (i) the release of shares of MYOS Common Stock issuable upon exchange of the Private Placement Shares, or the Private Placement Exchange Shares, from the lock-up restrictions by MYOS shall not be deemed a Triggering Release (as defined in such lock-up agreements) and (ii) the parties waive any right to a pro rata release for such party’s shares of MYOS Common Stock from the lock-up restrictions set forth in the lock up agreement solely with respect to the release of the Private Placement Exchange Shares from the lock-up restrictions by MYOS; provided, that the Private Placement Exchange Shares shall remain subject to lock-up and other restrictions substantially similar to those set forth in the lock-up agreement for a period of 45 calendar days after the Effective Time.
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 119)
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 $2.0 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 118)
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 9,795,792 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 approximately $83.9 million, less certain offering related expenses payable by MedAvail. The consummation of the Private Placement in such amount would 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.
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In connection with the Private Placement, the Subscribers entered into lock-up agreements, pursuant to which such Subscribers 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 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 either 46 days or 181 days following the Effective Time.
Certain Subscribers have also irrevocably appointed MedAvail (prior to the Merger) and MYOS (following the Merger) and certain persons designated in writing by MYOS as their proxies and attorneys-in-fact, to vote, in connection with any matters with respect to which stockholders of MedAvail or shareholders of MYOS, as applicable, cast votes of Private Placement Shares or MYOS common stock, as applicable, during such period, any and all Private Placement Shares or MYOS common stock, as applicable, held by such Subscribers that represent more than 9.99% of the consolidated voting power of all issued and outstanding Private Placement Shares or MYOS common stock, as applicable, held by all stockholders of MedAvail or shareholders of MYOS, as applicable, entitled to vote on such matters.
Interests of Certain Directors, Officers and Affiliates of MYOS and MedAvail (see pages 81 and 83)
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 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 October 8, 2020, the directors and executive officers of MYOS, together with their affiliates, owned approximately 22% 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.
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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 October 8, 2020, the directors and executive officers of MedAvail, together with their affiliates, owned approximately 84% 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 226)
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 87)
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 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
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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 87 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 129.”
Risk Factors (see page 40)
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;
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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 32)
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 32)
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 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 recapitalization 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
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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 for the years ended December 31, 2018 and December 31, 2019, and for the six months ended June 30, 2019 and June 30, 2020, and summary pro forma condensed combined financial data for MYOS and MedAvail for the year ended December 31, 2019 and the six month period ended June 30, 2020. The historical financial data is derived from the Audited Consolidated Financial Statements of MYOS and MedAvail for the years ended December 31, 2019 and 2018 and the Unaudited Interim Consolidated Financial Statements for the three and six months ended June 30, 2020 and 2019 of both MYOS and MedAvail, all of which are included or incorporated elsewhere in the registration statement. The pro forma condensed combined financial data is derived from the unaudited pro forma condensed combined financial statements included beginning on page 240 of the registration statement.
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 
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Selected Consolidated Balance Sheet Data:
(in thousands)
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)
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 Pro Forma Balance Sheet Data
(in thousands)
June 30,
2020
Current assets$89,912 
Total assets$94,427 
Current liabilities$22,882 
Total liabilities$23,540 
Accumulated deficit$(152,284)
Stockholders' equity$70,887 
Selected Pro Forma Statement of Operations Data
(in thousands, except for share and per share data)
Six Months Ended June 30,Year Ended December 31,
20202019
Sales$3,905 $3,771 
Cost of sales3,297 2,823 
Gross profit608 948 
Operating expenses8,159 15,420 
Selling, general and administrative expenses2,599 5,881 
Merger expenses— 354 
Share-based payments170 137 
Operating loss(10,320)(20,844)
Interest expense - net384 689 
Loss before income taxes(10,704)(21,533)
Income tax— — 
Net loss$(10,704)$(21,533)
Net loss per share - basic and diluted$(0.33)$(0.68)
Weighted average shares outstanding - basic and diluted31,969,01431,747,726
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Comparative Historical and Unaudited Pro Forma Per Share Data
MYOS
Six Months Ended June 30, 2020Year Ended December 31, 2019
Historical Per Common Share Data:
Basic and diluted net loss per share$(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)$(2.71)
MYOS AND MedAvail
Six Months Ended June 30, 2020Year Ended December 31, 2019
Combined Company Pro Forma Data:
Basic and diluted net loss per share$(0.33)$(0.68)
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 
Third Quarter$2.44 $1.18 
On October 6, 2020, the last reported sale price of MYOS Common Stock on The Nasdaq Capital Market was $1.35 per share. As of October 6, 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 95 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
42


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 87.
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
43


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 129.
Litigation against MYOS and MedAvail, or the members of the board of directors of MYOS or MedAvail, could prevent or delay the completion of the Merger or result in the payment of damages following completion of the Merger.
While MYOS and MedAvail believe that any claims that may be asserted by purported shareholder or stockholder plaintiffs related to the Merger would be without merit, the results of any such potential legal proceedings are difficult to predict and could delay or prevent the Merger from becoming effective in a timely manner. The existence of litigation related to the Merger could affect the likelihood of obtaining the required approval from MYOS shareholders or MedAvail’s stockholders. Moreover, any litigation could be time consuming and expensive, could divert MYOS’s and MedAvail’s management’s attention away from their regular business and, if any lawsuit is adversely resolved against either MYOS, MedAvail or members of the respective board of directors of MYOS or MedAvail (each of whom MYOS and MedAvail is respectively required to indemnify pursuant to indemnification agreements), could have a material adverse effect on MYOS’s or MedAvail’s financial condition.
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.
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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 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;
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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.
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.
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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.
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.
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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.
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
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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 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.
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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.
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.
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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.
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.
MedAvail may be required to pay significant penalties if it is not able to fulfill all of its registration requirements under an outstanding registration rights agreement.
Pursuant to the terms of the registration rights agreement that MedAvail entered into in connection with the Merger, the Post-Merger Public Company will be required to file a registration statement within a certain time period with respect to securities underlying the Post-Merger Public Company’s securities that will be held by certain MedAvail stockholders as a result of the Merger, have the registration statement declared effective within a certain time period and maintain the effectiveness of such registration statement. The failure to do so could result in the payment of liquidated damage by the Post-Merger Public Company, which could be as much as approximately $150,000 per month until the certain registration statement is declared effective. There can be no assurance that the Post-Merger Public Company will not incur damages with respect to such agreement.
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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.
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
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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.
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.
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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 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.
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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 significant market power, and it expects such trend to continue. For example, in November 2018 CVS acquired Aetna and in December 2018 Cigna acquired Express Scripts. As provider networks and managed care organizations consolidate, thereby decreasing the number of market participants, competition to provide products and services like ours will become more intense, and the importance of establishing relationships with key industry participants will become greater. In addition, industry participants may try to use their increased market power to negotiate price reductions for the company’s products and services. The company expects that market demand, government regulation, third party reimbursement policies and societal pressures will continue to cause the healthcare industry to evolve, potentially resulting in further business consolidations and alliances among the industry participants with whom it engages. If the company is forced to reduce prices as a result of either an imbalance of market power or decreased demand for its products, revenue would be reduced, and it could become significantly less profitable.
Each of the company’s segments operates in a highly competitive and evolving business environment; and gross margins in the industries in which it competes may decline.
The company operates in a highly competitive and evolving business environment. Specifically:
As competition increases in the geographies in which it operates, including competition from new entrants, a significant increase in price compression and/or reimbursement pressures could occur, and this could require it to reevaluate its pricing structures to remain competitive.
Its success is dependent on its ability to establish and maintain contractual relationships with network pharmacies as PBM clients evaluate adopting narrow or restricted retail pharmacy networks.
Its competitive advantage is dependent on its ability to establish and maintain contractual relationships with PBMs and other payors on acceptable terms as the payors’ clients evaluate adopting narrow or restricted retail pharmacy networks.
In addition, competitors in each of its businesses may offer services and pricing terms that it may not be willing or able to offer. Competition also may come from new entrants and other sources in the future. Unless it can demonstrate enhanced value to its clients through innovative product and service offerings in the rapidly changing health care industry, it may be unable to remain competitive.
Disruptive innovation by existing or new competitors could alter the competitive landscape in the future and require it to accurately identify and assess such alterations and make timely and effective changes to its strategies and business model to compete effectively. Consumers also are increasingly seeking to access consumer goods and health care products and services locally and through other direct channels such as mobile devices and websites. To compete effectively in the consumer-driven marketplace, it will be required to develop or acquire new capabilities, attract new talent and develop new service and distribution relationships that respond to consumer needs and preferences.
Changes in marketplace dynamics or the actions of competitors or manufacturers, including industry consolidation, the emergence of new competitors and strategic alliances, and decisions to exclude it from new restricted retail pharmacy networks could materially and adversely affect its businesses, operating results, cash flows and/or prospects.
The company’s results of operations are subject to the risks and uncertainties of fluctuations in pharmaceutical prices.
The company’s revenue and gross profit are subject to fluctuation based upon the timing and extent of manufacturer price increases. If the frequency or rate of pharmaceutical price increases slows, its results of operations could be adversely affected. In addition, its profitability is impacted by the utilization of prescription drugs. If utilization declines due to inflation in the price of drugs, particularly given the increased usage of high-
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deductible health insurance plans, its profitability could be adversely affected. Its gross profits are also subject to price deflation. If pharmaceutical price deflation occurs, its results of operations could be adversely affected.
Furthermore, increases in the amounts the company pays to procure pharmaceutical drugs, including generic drugs, could have material adverse effects on its results of operations. If it fails to offset such cost increases or modify its activities to reduce the impact, its results of operations could be materially adversely affected. The company’s expectations could be materially different than, and any future change in drug prices could be significantly different from, its expectations.
Legal Risks
The company is exposed to risks related to litigation and other legal proceedings.
The company operates in a highly regulated and litigious environment. It may become involved in legal proceedings, including litigation, arbitration and other claims, and investigations, inspections, audits, claims, inquiries and similar actions by pharmacy, healthcare, tax and other governmental authorities.
Legal proceedings, in general, and securities, derivative action and class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years.
Like other companies in the retail pharmacy, the company is subject to extensive regulation by national, state and local government agencies in the United States and other countries in which it may operate. There continues to be a heightened level of review and/or audit by regulatory authorities of, and increased litigation regarding, the company’s and the rest of the health care and related industry’s business, compliance and reporting practices. As a result, the company regularly is the subject of government actions of the types described above. In addition, under the qui tam or “whistleblower” provisions of the federal and various state false claims acts, persons may bring lawsuits alleging that a violation of the federal anti-kickback statute or similar laws has resulted in the submission of “false” claims to federal and/or state healthcare programs, including Medicare and Medicaid. After a private party has filed a qui tam action, the government must investigate the private party's claim and determine whether to intervene in and take control over the litigation. These actions may remain under seal while the government makes this determination.
The company cannot predict with certainty the outcomes of any legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur. As a result, it could from time to time incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could harm its reputation and have a material adverse effect on its results of operations in the period in which the amounts are accrued and/or its cash flows in the period in which the amounts are paid. In addition, as a result of governmental investigations or proceedings, the company may be subject to damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs. The outcome of some of these legal proceedings and other contingencies could require it to take, or refrain from taking, actions which could negatively affect its operations. Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources.
Risks Related to Government Regulation
If the company fails to comply with applicable laws and regulations, many of which are highly complex, it could be subject to significant adverse regulatory actions or suffer brand and reputational harm.
The company is subject to extensive regulation and oversight by state, federal and international governmental authorities. The laws and regulations governing its operations and interpretations of those laws and regulations are increasing in number and complexity, change frequently and can be inconsistent or conflict with one another. In general, these laws and regulations are designed to benefit and protect customers, members and providers rather than
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the company or its investors. In addition, the governmental authorities that regulate its businesses have broad latitude to make, interpret and enforce the laws and regulations that govern it and continue to interpret and enforce those laws and regulations more strictly and more aggressively each year. It also must follow various restrictions on certain of its businesses and the payment of dividends by certain of its subsidiaries put in place by certain state regulators.
The company is subject to:
the clinical quality, patient safety and other risks inherent in the dispensing, packaging and distribution of drugs and other health care products and services, including claims related to purported dispensing and other operational errors, and its failure to adhere to the laws and regulations applicable to the dispensing of drugs could subject it to civil and criminal penalties; and
federal and state anti-kickback and other laws that govern its relationship with drug manufacturers, customers and consumers.
The scope of the practices and activities that are prohibited by federal and state false claims acts is the subject of pending litigation. Claims under federal and state false claims acts can be brought by the government or by private individuals on behalf of the government through a qui tam or “whistleblower” suit. If the company is convicted of fraud or other criminal conduct in the performance of a government program or if there is an adverse decision against it under the federal False Claims Act, it may be temporarily or permanently suspended from participating in government health care programs, including Medicare Advantage, Medicare Part D, Medicaid, dual eligible and dual eligible special needs plan programs, and it also may be required to pay significant fines and/or other monetary penalties. Whistleblower suits have resulted in significant settlements between governmental agencies and health care companies. The significant incentives and protections provided to whistleblowers under applicable law increase the risk of whistleblower suits.
If the company fails to comply with laws and regulations that apply to government programs, it could be subject to criminal fines, civil penalties, premium refunds, prohibitions on marketing or active or passive enrollment of members, corrective actions, termination of its contracts or other sanctions which could have a material adverse effect on its ability to participate in Medicare Advantage, Medicare Part D, Medicaid, dual eligible, dual eligible special needs plan and other programs and on its operating results, cash flows and financial condition.
The company’s businesses, profitability and growth also may be adversely affected by (i) judicial and regulatory decisions that change and/or expand the interpretations of existing statutes and regulations, impose medical or bad faith liability, or (ii) other legislation and regulations.
Pharmacies and pharmacists must obtain federal and state licenses to operate, distribute and dispense pharmaceuticals and controlled substances. If it is unable to obtain and maintain its licenses, meet certain security and operating standards or comply with acts and regulations covering among other things, the sale, distribution and dispensing of controlled substances, or if states place burdensome restrictions or limitations on non-resident pharmacies, this could limit or affect its ability to operate in some states. In addition, each state has different laws passed by state legislatures and rules approved by state pharmacy boards governing the operation, distribution and dispensing of pharmaceuticals and there is no universal federal or international regulation. This lack of uniform laws and rules makes the costs of compliance significant and makes a violation of state laws and rules by the company more likely. Furthermore, the laws and rules relating to pharmacy technology are relatively new and evolving further adding to the cost of compliance and increasing the company’s risk of noncompliance. Federal and state regulatory authorities have broad enforcement powers, and are able to revoke licenses, seize or recall products and impose significant criminal, civil and administrative fines and sanctions for violations of such laws and regulations, any of which could have a material and adverse effect on our ability to do business.
Changes in healthcare regulatory environments may adversely affect the company’s businesses.
Political, economic and regulatory influences are subjecting the healthcare industry to significant changes that could adversely affect its results of operations. In recent years, the healthcare industry has undergone significant changes in an effort to reduce costs and government spending. These changes include an increased reliance on
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managed care; cuts in certain Medicare and Medicaid funding in the United States and the funding of governmental payers in foreign jurisdictions; consolidation of competitors, suppliers and other market participants; and the development of large, sophisticated purchasing groups. The company expects the healthcare industry to continue to change significantly in the future. Some of these potential changes, such as a reduction in governmental funding for certain healthcare services or adverse changes in legislation or regulations governing prescription drug pricing, healthcare services or mandated benefits, may cause customers to reduce the amount of its products and services they purchase or the price they are willing to pay for its products and services. The company expects continued governmental and private payer pressure to reduce pharmaceutical pricing. Changes in pharmaceutical manufacturers’ pricing or distribution policies could also significantly reduce its profitability.
In the United States, electoral results and changes in political leadership have generated uncertainty with respect to, and could result in, significant changes in legislation, regulation and government policy that could significantly impact its businesses and the health care and retail industries. There have been multiple attempts to repeal, modify or otherwise invalidate all, or certain provisions of, the Affordable Care Act, or ACA, which was enacted in 2010 to provide health insurance coverage to millions of previously uninsured Americans through a combination of insurance market reforms, an expansion of Medicaid, subsidies and health insurance mandates. The ACA and related healthcare reform laws, regulations and initiatives have significantly increased regulation of managed care plans and decreased reimbursement to Medicare managed care. The company cannot predict whether current or future efforts to modify these laws and/or adopt new healthcare legislation will be successful, nor can it predict the impact that such a development would have on its business and operating results. Future legislation or rulemaking or other regulatory actions or developments under the ACA or otherwise could adversely impact the number of Americans with health insurance and, consequently, prescription drug coverage, increase regulation of pharmacy services, result in changes to pharmacy reimbursement rates, and otherwise change the way it does business. The company cannot predict the timing or impact of any future legislative, rulemaking or other regulatory actions, but any such actions could have a material adverse impact on its results of operations.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030 unless additional congressional action is taken. The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law on March 27, 2020, and which is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020, through December 31, 2020, and extended the end date of the sequester by one year, through 2030, in order to offset the 2020 suspension. Moreover, there has recently been heightened governmental scrutiny over the manner in which pharmaceutical manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to drug pricing, to reform government program reimbursement methodologies for pharmaceutical products, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, mechanisms to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased interest by third party payors and governmental authorities in reference to pricing systems and publication of discounts and list prices, which may adversely affect the company’s revenue and financial condition.
Recently, in July 2020, the Trump administration announced four Executive Orders to lower drug prices, including, among others, allowing importation of certain drugs, changing how drug rebates are negotiated by middlemen, like pharmacy benefit managers, and directing such rebates to be passed to patients as point-of-sale discounts, and requiring Medicare to pay certain Part B drugs at the lowest price available in economically comparable countries. On September 13, 2020, President Trump revoked and expanded upon the fourth Executive Order on most-favored-nation drug payment models for Medicare Part B and Part D drugs, directing the Secretary of HHS to immediately take appropriate steps to the extent consistent with law. These Executive Orders do not provide the specifics for implementation and raise significant questions as to whether their directives are consistent with existing statutory and regulatory authority. How these executive orders will be implemented and their impact on the healthcare industry, in general, and pharmacy services specifically, remain uncertain. In September 2020, the FDA also issued a final guidance on importation of certain FDA-approved human prescription drugs and a final rule that
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sets forth requirements for an importation program for certain prescription drugs from Canada, allowing States, Indian Tribes, and, in certain circumstances, pharmacists and wholesalers, to submit proposals for importation for the FDA for review and authorization. Depending on the details of further administrative actions, these measures as well as other proposals could have significant impacts for drug manufacturers, pharmacies, and providers, which may significantly and adversely affect the business of the company’s customers as well as its ability to generate revenue and achieve profitability.
The company must comply with a variety of existing and future laws and regulations that could impose substantial costs on it and may adversely affect its business.
The scope of foreign investments in U.S. businesses was recently expanded by the Foreign Investment Risk Review Modernization Act of 2018, or FIRRMA, to include certain non-passive, non-controlling investments (including certain investments in entities that hold or process personal information about U.S. nationals) and transactions structured or intended to evade or circumvent the jurisdiction of the Committee on Foreign Investment in the United States, or CFIUS, and any transaction resulting in a “change in the rights” of a foreign person in a U.S. business if that change could result in either control of the business or a covered non-controlling investment.
CFIUS could intervene in the company’s previously completed fundraising rounds and require it to modify or amend the terms of those transactions, or terminate or unwind all or part of the transactions, if CFIUS determines that it is necessary to address U.S. national security concerns, without regard to whether the transaction was completed and operated in accordance with applicable law.
If relations between China and the U.S. deteriorate, the company may be materially and adversely affected.
Doing business internationally creates operational and financial risks for the company’s business. International operations entail a variety of other risks, including restrictions on foreign investors in the company, enhanced oversight by CFIUS, and substantial restrictions on, and scrutiny of, foreign investment – especially Chinese investment. The relationship between China and the U.S. is subject to periodic tension. Relations may also be compromised if the U.S pressures the PRC government regarding its monetary, economic, or social policies. Changes in political conditions in China and changes in the state of China-U.S. relations are difficult to predict and could adversely affect the operations or financial condition of the company. In addition, because of the company’s proposed involvement in the Chinese market, any deterioration in political or trade relations might cause a public perception in the U.S. or elsewhere that might cause its products to become less attractive. Furthermore, CFIUS has continued to apply a more stringent review of certain foreign investment in U.S. companies, including investment by Chinese entities. The company cannot predict what effect any changes in China-U.S. relations may have on its ability to access capital or effectively support the company.
Risks Related to MedAvail’s Relationships with Manufacturers, Providers, Suppliers and Vendors
Both the company and its vendors’ operations are subject to a variety of business continuity hazards and risks, any of which could interrupt its operations or otherwise adversely affect its performance and operating results.
The company and its vendors are subject to business continuity hazards and other risks, including natural disasters, utility and other mechanical failures, acts of war or terrorism, disruption of communications, data security and preservation, disruption of supply or distribution, safety regulation and labor difficulties. The occurrence of any of these or other events to the company or its vendors might disrupt or shut down its operations or otherwise adversely affect its operations. It also may be subject to certain liability claims in the event of an injury or loss of life, or damage to property, resulting from such events. Although it has developed procedures for crisis management and disaster recovery and business continuity plans and maintain insurance policies that it believes are customary and adequate for its size and industry, its insurance policies include limits and exclusions and, as a result, its coverage may be insufficient to protect against all potential hazards and risks incident to its businesses. In addition, the company’s crisis management and disaster recovery procedures and business continuity plans may not be effective. Should any such hazards or risks occur, or should its insurance coverage be inadequate or unavailable, its businesses, operating results, cash flows and financial condition could be adversely affected.
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The company outsources the manufacturing of its MedCenter Kiosks to a third party.
The company relies on a single third party manufacturer to make its MedCenter Kiosks. The company’s former manufacturer is no longer manufacturing the MedCenter Kiosks for the company and the company recently signed a new manufacturing and supply agreement with Kitron Technologies. There are risks associated with Kitron Technologies’s ability to qualify and ramp a new manufacturing line. As a result, additional MedCenter Kiosks may be delayed or stalled pending the qualification and ramping up of the new manufacturing line. Currently, the company anticipates the new units manufactured by Kitron Technologies to be available in early Q2 2021.
Risks Related to MedAvail’s Intellectual Property
If the company is unable to protect its intellectual property, it will suffer substantial harm.
The company’s success depends upon the protection of its software and hardware designs and other proprietary technology. The company relies on a combination of patent, copyright, trademark and trade secret laws, and confidentiality provisions in agreements with employees, contract manufacturers, consultants, customers and other third parties, to protect its intellectual property rights. Other parties may not comply with the terms of their agreements with us, and the company may not be able to enforce its rights adequately against these parties. In addition, unauthorized parties may attempt to copy or otherwise obtain and use its products or technology. Monitoring unauthorized use of its products is difficult, and the company cannot be certain that the steps the company has taken will prevent unauthorized use of its technology. If competitors are able to use the company’s technology, its ability to compete effectively could be harmed. For example, if a competitor were to gain use of certain of the company’s proprietary technology, it might be able to develop and manufacture similarly designed MedCenter Kiosks at a reduced cost, which would result in a decrease in demand for the company’s products. The company does not know whether any of its pending patent applications will result in the issuance of patents or whether the examination process will require the company to narrow its claims, and even if patents are issued, they may be contested, circumvented or invalidated over the course of its business. Moreover, the rights granted under any issued patents may not provide the company with proprietary protection or competitive advantages, and, as with any technology, competitors may be able to develop and obtain patents for technologies that are similar to or superior to its technologies. If that happens, the company may need to license these technologies and the company may not be able to obtain licenses on reasonable terms, if at all, thereby causing great harm to its business. In addition, if the company resorts to legal proceedings to enforce its intellectual property rights, the proceedings could become burdensome and expensive, even if it were to prevail.
Claims by others that the company infringe their intellectual property could cause the company to suffer substantial harm.
Many companies have significant patent portfolios and these companies and other parties may claim that the company’s products infringe their proprietary rights. The company expects that infringement claims may increase as the number of products and competitors in its market increases and overlaps occur. In addition, to the extent that the company gains greater visibility and market exposure as a public company, the company faces a higher risk of being the subject of intellectual property infringement claims. Any party asserting that the company’s products infringe their proprietary rights would force the company to defend itself, and possibly its customers, against the alleged infringement. These claims and any resulting lawsuit, if successful, could subject the company to significant liability for damages and invalidation of its proprietary rights. Such may also force the company to do one or more of the following:
stop selling, incorporating or using its products that use the challenged intellectual property;
obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all;
redesign those products that use any allegedly infringing technology, which may be costly and time-consuming; or
refund deposits and other amounts received for allegedly infringing technology or products.
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Any claim of infringement from a third party, even those without merit, could cause the company to incur substantial costs defending against such claims, and could distract its management from running its business. Even if the company prevails, the cost of such litigation could deplete its financial resources. Litigation is also time consuming and could divert management’s attention and resources away from its business. Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of its confidential information and its involvement in intellectual property litigation could materially and adversely affect its business. Some of its competitors may be able to sustain the costs of complex intellectual property litigation more effectively than the company can. In addition, any uncertainties resulting from the initiation and continuation of any litigation could significantly limit its ability to continue its operations.
IV.   RISKS RELATED TO OWNERSHIP OF THE POST-MERGER PUBLIC COMPANY’S SECURITIES
In determining whether you should vote approve the proposals contained in this proxy statement/prospectus/information statement, you should carefully read the following risk factors in addition to the risks described above.
The Post-Merger Public Company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.
The Post-Merger Public Company will require substantial additional funds to continue to expand the core business, develop and commercialize its self-service pharmacy. The Post-Merger Public Company’s future capital requirements will depend upon a number of factors, including the: cost to manufacture additional MedCenter kiosks, development of pharmacy self-service capabilities, expenses related to initiating operations in a new state or region, cost to hire pharmacy and corporate support staff, expenses related to leasing additional real estate space for pharmacy operations and or corporate services, cost of information technology infrastructure needed to support growth across new geographical markets, expenses for licensing technologies and other required legal, audit or outside services. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’ ownership interests or inhibit the Post-Merger Public Company’s ability to achieve its business objectives. If the Post-Merger Public Company raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely affect the rights of its common stockholders. Further, to the extent that the Post-Merger Public Company raises additional capital through the sale of common stock or securities convertible or exchangeable into common stock, its stockholders’ ownership interest in the Post-Merger Public Company will be diluted. In addition, any debt financing may subject the Post-Merger Public Company to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Post-Merger Public Company raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, the Post-Merger Public Company may have to relinquish certain valuable intellectual property or other rights to its products, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if the Post-Merger Public Company were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to the Post-Merger Public Company or its stockholders.
The market price of the Post-Merger Public Company’s common stock is expected to be volatile, and the market price of the common stock may drop following the Merger.
The market price of the Post-Merger Public Company’s common stock following the Merger could be subject to significant fluctuations. Market prices for securities of early-stage telehealth, pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of the Post-Merger Public Company’s common stock to fluctuate include:
the ability of the Post-Merger Public Company to obtain state board of pharmacy licenses and regulatory approvals, and delays or failures to obtain and maintain such licenses approvals;
failure of any of the Post-Merger Public Company’s products to achieve commercial success;
the impact of the COVID-19 pandemic and any other future pandemics on the company’s business;
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failure by the Post-Merger Public Company to maintain its existing third-party license and supply agreements;
failure by the Post-Merger Public Company or its licensors to prosecute, maintain, or enforce its intellectual property rights;
changes in laws or regulations applicable to the Post-Merger Public Company;
any inability to obtain adequate supply of the Post-Merger Public Company’s products or the inability to do so at acceptable prices;
adverse regulatory authority decisions;
introduction of new products, services or technologies by the Post-Merger Public Company’s competitors;
failure to meet or exceed financial and development projections the Post-Merger Public Company may provide to the public and the investment community;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by the Post-Merger Public Company or its competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters, and the Post-Merger Public Company’s ability to obtain patent protection for its technologies;
additions or departures of key personnel;
significant lawsuits, including patent or stockholder litigation;
changes in the market valuations of similar companies;
general market or macroeconomic conditions;
trading volume of the Post-Merger Public Company’s common stock;
announcements by commercial partners or competitors of new commercial products, significant contracts, commercial relationships or capital commitments;
adverse publicity generally, including with respect to other products and potential products in such markets;
the introduction of technological innovations that compete with potential products of the Post-Merger Public Company;
changes in the structure of health care payment systems;
period-to-period fluctuations in the Post-Merger Public Company’s financial results;
investors’ reactions to the prospects of the Post-Merger Public Company’s business and prospects following the closing of the Merger;
the effect of the Merger on the Post-Merger Public Company’s business and prospects following the closing of the Merger is not consistent with the expectations of financial or industry analysts; or
the possibility that the Post-Merger Public Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by stockholders or financial or industry analysts.
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Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the Post-Merger Public Company’s common stock.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm the Post-Merger Public Company’s profitability and reputation.
Additionally, a decrease in the stock price of the Post-Merger Public Company may cause the Post-Merger Public Company’s common stock to no longer satisfy the continued listing standards of Nasdaq. If the Post-Merger Public Company is not able to maintain the requirements for listing on Nasdaq, it could be delisted, which could have a materially adverse effect on its ability to raise additional funds as well as the price and liquidity of its common stock.
The Post-Merger Public Company will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.
The Post-Merger Public Company will incur significant legal, accounting and other expenses that MedAvail did not incur as a private company, including costs associated with public company reporting requirements. The Post-Merger Public Company will also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as applicable securities laws and rules and regulations implemented by the SEC and Nasdaq. These rules and regulations are expected to increase the Post-Merger Public Company’s legal and financial compliance costs and to make some activities more time consuming and costly. For example, the Post-Merger Public Company’s management team will consist of the executive officers of MedAvail prior to the Merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations also may make it difficult and expensive for the Post-Merger Public Company to obtain directors’ and officers’ liability insurance. As a result, it may be more difficult for the Post-Merger Public Company to attract and retain qualified individuals to serve on the Post-Merger Public Company’s board of directors or as executive officers of the Post-Merger Public Company, which may adversely affect investor confidence in the Post-Merger Public Company and could cause the Post-Merger Public Company’s business or stock price to suffer.
The Post-Merger Public Company’s certificate of incorporation and bylaws to be adopted, Delaware law and/or its agreements with certain stockholders may impede the ability of its stockholders to make changes to its board of directors or impede a takeover.
Certain provisions of the Post-Merger Public Company’s certificate of incorporation and bylaws to be adopted following consummation of the Merger, as well as provisions of the Delaware General Corporation Law, or the DGCL, following the Reincorporation, could make it difficult for stockholders to change the composition of the board of directors or discourage, delay, or prevent a merger, consolidation, or acquisitions that stockholders may otherwise consider favorable. These provisions include the authorization of the issuance of “blank check” preferred stock that could be issued by the board of directors, limitations on the ability of stockholders to call special meetings, and advance notice requirements for nomination for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. Following the Reincorporation, MedAvail also will be subject to the provisions of Section 203 of the DGCL, which will prohibit the Post-Merger Public Company, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets, or business combinations with any stockholder or group of stockholders who own 15% or more of our common stock.
While these provisions will not make the Post-Merger Public Company immune from takeovers or changes in the composition of the board of directors, and are intended to protect the Post-Merger Public Company’s stockholders from, among other things, coercive or otherwise unfair tactics, these provisions could have the effect of
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making it difficult for stockholders to change the composition of the board of directors or discouraging, delaying, or preventing a merger, consolidation, or acquisitions that stockholders may otherwise consider favorable.
There are a number of additional business risks that could materially and adversely affect the Post-Merger Public Company’s businesses and financial results.
Many other factors could materially and adversely affect the Post-Merger Public Company’s businesses and financial results, including:
its ability to establish effective advertising, marketing and promotional programs;
inflation, new or increased taxes, changes in market conditions or otherwise;
natural disasters, civil unrest, severe weather conditions, terrorist activities, global political and economic developments, war, health epidemics or pandemics or the prospect of these events;
liabilities or expense relating to the protection of the environment, related health and safety matters, environmental remediation or compliance with environmental laws and regulations, including those governing exposure to, and the management and disposal of, hazardous substances;
the long-term effects of climate change on general economic conditions and the pharmacy industry in particular, along with changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and delivery;
adverse publicity and potential losses, liabilities and reputational harm stemming from any public incident, whether occurring online, in social media, in our stores or other company facilities, or elsewhere, involving our company, our personnel or our brands, including any such public incident involving its customers, products, services, stores or other property, or those of any of its vendors or other parties with which MedAvail does business;
negative publicity, even if unwarranted, related to safety or quality, human and workplace rights, or other issues damaging its brand image and corporate reputation, or that of any of its vendors or strategic allies; and
technological innovation that changes delivery of healthcare resulting new modes of medication distribution.
MedAvail and MYOS do not anticipate that the Post-Merger Public Company will pay any cash dividends in the foreseeable future.
The current expectation is that the Post-Merger Public Company will retain its future earnings, if any, to fund the development and growth of the Post-Merger Public Company’s business. As a result, capital appreciation, if any, of the common stock of the Post-Merger Public Company is expected to be its stockholders’ sole source of gain, if any, for the foreseeable future.
An active trading market for the Post-Merger Public Company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.
Prior to the Merger, there had been no public market for MedAvail’s common stock. An active trading market for the Post-Merger Public Company’s shares of common stock may never develop or be sustained. If an active market for its common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.
Future sales of shares by existing stockholders could cause the Post-Merger Public Company’s stock price to decline.
If existing equity holders of MedAvail and MYOS sell, or indicate an intention to sell, substantial amounts of the Post-Merger Public Company’s common stock in the public market after legal restrictions on resale discussed in
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this proxy statement/prospectus/information statement lapse, the trading price of the common stock of the Post-Merger Public Company could decline. Neither MedAvail nor MYOS is able to predict the effect that sales may have on the prevailing market price of the Post-Merger Public Company’s common stock.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the Post-Merger Public Company, its business or its market, its stock price and trading volume could decline.
The trading market for the Post-Merger Public Company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect not to provide research coverage of the Post-Merger Public Company’s common stock after the completion of the Merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the Post-Merger Public Company will not have any control over the analysts, or the content and opinions included in their reports. The price of the Post-Merger Public Company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the Post-Merger Public Company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.
The Post-Merger Public Company will have broad discretion in the use of proceeds from the Private Placement and may invest or spend the proceeds in ways with which its stockholders do not agree and in ways that may not increase the value of their investments.
The Post-Merger Public Company will have broad discretion over the use of proceeds from the Private Placement. Its stockholders may not agree with the Post-Merger Public Company’s decisions, and its use of the proceeds may not yield any return on its stockholders’ investments. The Post-Merger Public Company’s failure to apply the net proceeds of the Private Placement effectively could compromise its ability to pursue its growth strategy and the Post-Merger Public Company might not be able to yield a significant return, if any, on its investment of these net proceeds. The Post-Merger Public Company’s stockholders will not have the opportunity to influence its decisions on how to use the net proceeds from the Private Placement.
If the Post-Merger Public Company fails to maintain proper and effective internal controls, its ability to produce accurate financial statements on a timely basis could be impaired.
The Post-Merger Public Company will be subject to the reporting requirements of the Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act and the rules and regulations of Nasdaq and the SEC. The Sarbanes-Oxley Act requires, among other things, that the Post-Merger Public Company maintain effective disclosure controls and procedures and internal control over financial reporting. The Post-Merger Public Company must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. As a private company, MedAvail has never been required to test its internal controls within a specified period or for an extended period of time. This will require that the Post-Merger Public Company incur substantial professional fees and internal costs to expand its accounting and finance functions and that it expends significant management efforts. The Post-Merger Public Company may experience difficulty in meeting these reporting requirements in a timely manner.
The Post-Merger Public Company may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. The Post-Merger Public Company’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If the Post-Merger Public Company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if it is unable to maintain proper and effective internal controls, the Post-Merger Public Company may
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not be able to produce timely and accurate financial statements. If that were to happen, the market price of its common stock could decline and it could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.
If the Post-Merger Public Company fails to attract and retain management and other key personnel, it may be unable to continue to successfully develop or commercialize its products or otherwise implement its business plan.
The Post-Merger Public Company’s ability to compete in the highly competitive healthcare industry depends on its ability to attract and retain highly qualified managerial, pharmacy technology, legal, sales and marketing and other personnel. The Post-Merger Public Company will be highly dependent on its management and pharmacy personnel. The loss of the services of any of these individuals could impede, delay or prevent the successful development of the Post-Merger Public Company’s product pipeline or acquisition of new assets and could impact negatively its ability to implement successfully its business plan. If the Post-Merger Public Company loses the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and its business could be harmed as a result. The Post-Merger Public Company might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among telehealth, biotechnology, pharmaceutical and other businesses competing for talent.
The Post-Merger Public Company is expected to take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result in its common stock being less attractive to investors.
Following the Merger, the Post-Merger Public Company is expected to have a public float of less than $250 million and therefore will qualify as a smaller reporting company under the rules of the SEC. As a smaller reporting company, the Post-Merger Public Company will be able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in its SEC filings. Decreased disclosures in the Post-Merger Public Company’s SEC filings due to its status as a smaller reporting company may make it harder for investors to analyze its results of operations and financial prospects. MedAvail and MYOS cannot predict if investors will find the Post-Merger Public Company’s common stock less attractive if it relies on these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile. The Post-Merger Public Company may take advantage of the reporting exemptions applicable to a smaller reporting company until it is no longer a smaller reporting company, which status would end once it has a public float greater than $250 million. In that event, the Post-Merger Public Company could still be a smaller reporting company if its annual revenues were below $100 million and it has a public float of less than $700 million.
COVID-19 and Pandemic Related Risk Factors
COVID-19 has and may continue to delay the company’s deployment of MedCenters into third-party owned Medicare-focused healthcare clinics. COVID-19 can limit the company’s access to the clinics where the SpotRx pharmacy is deployed and significantly impair its ability to acquire new customers. In addition, COVID-19has impacted and will continue to impact the company’s revenue growth. The impact of COVID-19 includes, but is not limited to, the following:
Fewer patients see their physicians and seek medical attention at clinics;
Some clinics have been closed and staffing at other clinics has been reduced affecting their ability to service their customers;
The company is dependent on its supply chain for purchasing medication. If demands spikes for certain medications it can impact its ability to acquire and resell the medication to serve its customers;
The company is dependent on its contract manufactures who assemble its MedCenter technology. Any disruption of their supply capability due to COVID-19 would impact its ability to deploy new sites as well as sell its solution to other new clients;
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The company outsources the majority of its hardware maintenance to third parties who repair MedCenters with technical issues as well as install new MedCenters as required. Any disruption to their ability to supply services to the company will impact both currently operating MedCenters as well as slow down deployment of new sites; and
The focus of the healthcare system is on treating COVID-19 and as a result resources are concentrated there as opposed to on other matter.
The existence and persistence of COVID-19 and other pandemics will negatively impact the company’s revenue and growth and may adversely affect its results of operations in the future.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus/information statement and the documents incorporated by reference into this proxy statement/prospectus/information statement contain forward-looking statements. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as MYOS and MedAvail cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “goal,” “strategy,” “future,” “likely,” “potential,” “possible,” “estimates,” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. For example, forward-looking statements include, but are not limited to statements about:
the expected benefits of and potential value created by the Merger for the equity holders of MYOS and MedAvail;
any statements of the plans, strategies and objectives of management for future operations, including the execution and timing of integration plans;
the likelihood of the satisfaction of certain conditions to the completion of the Merger and whether and when the Merger will be consummated;
statements of the plans, strategies and objectives of management with respect to the approval and closing of the Merger, and the ability of MYOS and MedAvail to solicit a sufficient number of proxies or written consents, as applicable, to approve matters related to the consummation of the Merger;
any statements concerning proposed new products, services or developments;
any statements regarding future economic conditions or performance; and
any statements of belief and any statement of assumptions underlying any of the foregoing.
For a discussion of the factors that may cause MYOS, MedAvail or the Post-Merger Public Company’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risk associated with the ability of MYOS and MedAvail to complete the Merger and the effect of the Merger on the business of MYOS, MedAvail and the Post-Merger Public Company, see “Risk Factors” beginning on page 40.
Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by MYOS. See “Where You Can Find More Information” beginning on page 273.
If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the results of MYOS, MedAvail or the Post-Merger Public Company could differ materially from the forward-looking statements. All forward-looking statements in this proxy statement/prospectus/information statement are current only as of the date on which the statements were made. MYOS and MedAvail do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events.
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THE SPECIAL MEETING OF MYOS SHAREHOLDERS
Date, Time and Place
The MYOS Special Meeting will be held virtually on November 16, 2020 commencing at 10:00 a.m., 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. 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. MYOS is sending this proxy statement/prospectus/information statement to its shareholders in connection with the solicitation of proxies by the MYOS Board for use at the MYOS Special Meeting and any adjournments or postponements of the MYOS Special Meeting. This proxy statement/prospectus/information statement is first being furnished to shareholders of MYOS on or about October 15, 2020.
Purposes of the MYOS Special Meeting
The purposes of the MYOS Special Meeting are:
1.To consider and vote upon the Merger Proposal to approve the Merger and, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of MYOS Common Stock to MedAvail equity holders in connection with the Merger, pursuant to the Merger Agreement, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus/information statement;
2.To consider and vote upon the Reverse Stock Split Proposal to approve the amendment of the amended and restated articles of incorporation of MYOS to effect the Reverse Stock Split, including the increase in the number of shares of MYOS Common Stock authorized under its 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;
3.To consider and vote upon the Spin Out Proposal to approve the Spin Out Transaction and to 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;
4.To consider and vote upon the Reincorporation Proposal to approve 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.”;
5.To consider and vote upon the Equity Incentive Plan Proposal to approve the MedAvail Holdings, Inc. 2020 Equity Incentive Plan;
6.To consider and vote upon the Employee Stock Purchase Plan Proposal to approve the MedAvail Holdings, Inc. 2020 Employee Stock Purchase Plan;
7.To consider and vote upon the Adjournment Proposal for the 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.
Recommendation of the MYOS Board
The MYOS Board has determined and believes that the Merger and the issuance of shares of MYOS Common Stock pursuant to the Merger and the other proposals are in the best interests of, MYOS and its shareholders and has approved such items. The MYOS Board recommends that MYOS shareholders vote “FOR” MYOS Proposals Nos. 1-6.
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Record Date and Voting Power
Only holders of record of MYOS Common Stock at the close of business on the Record Date, October 2, 2020, are entitled to notice of, and to vote at, the MYOS Special Meeting. At the close of business on the Record Date, 12,191,795 shares of MYOS Common Stock were issued and outstanding. Each share of MYOS Common Stock entitles the holder thereof to one vote on each matter submitted for shareholder approval. See the section entitled “Principal Shareholders of MYOS” in this proxy statement/prospectus/information statement for information regarding persons known to the management of MYOS to be the beneficial owners of more than 5% of the outstanding shares of MYOS Common Stock.
Voting and Revocation of Proxies
The proxy accompanying this proxy statement/prospectus/information statement is solicited on behalf of the MYOS Board for use at the MYOS Special Meeting.
If you are a shareholder of record of MYOS as of the Record Date referred to above, you may vote virtually at the MYOS Special Meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to virtually attend the MYOS Special Meeting, MYOS urges you to vote by proxy to ensure your vote is counted. You may still attend the MYOS Special Meeting and vote in person if you have already voted by proxy. As a shareholder of record, you have the right:
to vote virtually online at the MYOS Special Meeting, please visit at www.virtualshareholdermeeting.com/MYOS2020 at the appointed time and date and you will be able to vote by ballot. To ensure that your shares of MYOS capital stock are voted at the MYOS Special Meeting, the MYOS recommends that you submit a proxy even if you plan to virtually attend the MYOS Special Meeting. MYOS shareholders will not be able to attend the MYOS Special Meeting in person;
to vote using the proxy card, simply mark, sign and date your proxy card and return it promptly in the postage-paid envelope provided. If you return your signed proxy card to MYOS before the MYOS Special Meeting, MYOS will vote your shares as you direct; or
to vote on the Internet, go to the website on the proxy card or voting instruction form to complete an electronic proxy card. You will be asked to provide the company number and unique control number from the enclosed proxy card. Your vote must be received by November 13, 2020, 5:00 p.m. Pacific Time to be counted.
If your MYOS shares are held by your broker as your nominee, that is, in “street name,” the enclosed voting instruction card is sent by the institution that holds your shares. Please follow the instructions included on that proxy card regarding how to instruct your broker to vote your MYOS shares. If you do not give instructions to your broker, your broker can vote your MYOS shares with respect to “discretionary” items but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of The Nasdaq Capital Market on which your broker may vote shares held in “street name” in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the MYOS shares will be treated as broker non-votes. It is anticipated that each of MYOS Proposals No. 1-6 will be a non-discretionary item.
All properly executed proxies that are not revoked will be voted at the MYOS Special Meeting and at any adjournments or postponements of the MYOS Special Meeting in accordance with the instructions contained in the proxy. If a holder of MYOS Common Stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” MYOS Proposals No. 1-6; to adjourn the MYOS Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of MYOS Proposals Nos.1-6 in accordance with the recommendation of the MYOS Board.
MYOS shareholders of record, other than those MYOS shareholders who have executed support 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 the shareholder would like to revoke its proxy. Second, a shareholder of record of MYOS can submit new proxy
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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 virtually and vote online. Online attendance alone at the virtual meeting 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.
Required Vote
The presence, in person or represented by proxy, at the MYOS Special Meeting of the holders of a majority of the shares of MYOS Common Stock outstanding and entitled to vote at the MYOS Special Meeting is necessary to constitute a quorum at the MYOS Special Meeting. Abstentions and broker non-votes will be counted towards a quorum. Approval of MYOS Proposals Nos. 1-7 requires the affirmative vote of holders of a majority of the MYOS Common Stock having voting power outstanding on the Record Date for the MYOS Special Meeting. 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 No. 2-6.
Votes will be counted by the inspector of election appointed for the MYOS Special Meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total for each proposal and will have the same effect as “AGAINST” votes. Broker non-votes will have the same effect as “AGAINST” votes for MYOS Proposal Nos. 1-6.
As of October 2, 2020, the directors and executive officers of MYOS owned 23.1 percent of the outstanding shares of MYOS Common Stock entitled to vote at the MYOS Special Meeting. The directors and executive officers of MYOS owning these shares are subject to voting agreements. Each shareholder that entered into a voting agreement has agreed to vote all shares of MYOS Common Stock owned such shareholder as of the Record Date in favor of the Merger and the issuance of MYOS Common Stock in the Merger pursuant to the Merger Agreement, the adoption of the Merger Agreement if submitted for adoption, the approval of any proposal to adjourn or postpone the MYOS Special Meeting to a later date, if there are not sufficient votes for the Merger and the issuance of MYOS Common Stock in the Merger pursuant to the Merger Agreement on the date on which such meeting is held, and any other matter necessary to consummate the transactions contemplated by the Merger Agreement that are considered and voted upon by MYOS’s shareholders and against any acquisition proposal. As of October 2, 2020, MYOS is not aware of any affiliate of MedAvail owning any shares of MYOS Common Stock entitled to vote at the MYOS Special Meeting.
Solicitation of Proxies
In addition to solicitation by mail, the directors, officers, employees and agents of MYOS may solicit proxies from MYOS shareholders by personal interview, telephone, telegram or otherwise. 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.
Other Matters
As of the date of this proxy statement/prospectus/information statement, the MYOS Board does not know of any business to be presented at the MYOS Special Meeting other than as set forth in the notice accompanying this proxy statement/prospectus/information statement. If any other matters should properly come before the MYOS Special Meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.
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THE MERGER
This section and the section entitled “The Merger Agreement” in this proxy statement/prospectus/information statement describe the material aspects of the Merger, including the Merger Agreement. While MYOS and MedAvail believe that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus/information statement for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement, and the other documents to which you are referred herein. See the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.
Background of the Merger
For several years, MYOS has contemplated ways to reduce the financial burdens and use of resources required of a public company with shares traded on a national stock exchange, including by consummating transactions that would result in MYOS becoming a private, rather than public, corporation. MYOS has believed, and continues to believe, that transitioning to a private corporation will permit MYOS to focus its resources on the continued expansion of its client base and product line without the significant cost of being a public company.
On April 17, 2020, during a conference call between representatives of H.C. Wainwright & Co., LLC, MYOS’s financial advisor (“HCW”) and Joe Mannello, MYOS’s President and Chief Executive Officer, HCW informed Mr. Mannello about a private company that was considering several go-public scenarios, including an initial public offering and a reverse merger with a public company. HCW suggested to Mr. Mannello that MYOS consider a reverse merger with this private company. The private company referenced by HCW during this call was MedAvail.
On April 19, 2020, HCW sent an email introducing Mr. Mannello to Dr. Frank Litvack, then a member of MedAvail’s board of directors (the “MedAvail Board”) and also a member of the committee of the MedAvail Board established to pursue various paths to finance MedAvail (the “MedAvail Finance Committee”), regarding a potential reverse merger transaction between MYOS and MedAvail.
On April 20, 2020, an introductory call was held among representatives of HCW, Mr. Mannello, and Dr. Litvack. During this call, the parties discussed in general terms the outlines of a potential transaction between MYOS and MedAvail and the execution of a non-disclosure Agreement to enable MYOS and MedAvail to exchange information about their respective businesses. Ryan Ferguson, MedAvail’s Chief Financial Officer, and Gerard van Hamel Platerink, a member of the MedAvail Board and the MedAvail Finance Committee, then contacted Wilson Sonsini Goodrich & Rosati, P.C. (“WSGR”) to discuss the proposed reverse merger transaction with MYOS as well as a variety of financing alternatives.
On April 21, 2020, MYOS and MedAvail entered into a mutual non-disclosure agreement.
On April 22, 2020, Ed, Kilroy, MedAvail’s Chief Executive Officer, and Mr. Ferguson contacted WSGR to further discuss and evaluate the proposed reverse merger transaction and other potential sources of financing through a merger with a special purpose acquisition company, or SPAC, a conventional initial public offering and a reverse merger with a public shell company combined with a private investment in a public company, or PIPE financing. It was noted by Mr. Kilroy and Mr. Ferguson that in earlier discussions MedAvail had with a couple of SPACs, the conclusion was that the fees associated with the process were significant and the equity dilution substantial.
On April 23, 2020, MedAvail provided a company presentation to a financial sponsor in order to explore merging MedAvail into a public shell company unrelated to MYOS.
On April 23, 2020, representatives of HCW and Mr. Mannello participated in a phone call with Dr. Litvack, Mr. Kilroy, and Mr. Ferguson. During the call, the parties discussed the outlines of a potential transaction between MYOS and MedAvail, including the economic terms and other deal considerations. Mr. Kilroy, Mr. Ferguson, and members of the MedAvail Finance Committee then held a call to review findings on various financing paths. They determined that the reverse merger would result in the best path forward and prepared to recommend this path to the MedAvail Board.
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On April 24, 2020, HCW and MYOS prepared a draft Term Sheet for a potential transaction between MYOS and MedAvail based upon the terms discussed during the previous day’s telephone call with representatives of MedAvail. The MedAvail Board convened to discuss MedAvail’s financing strategies and alternatives. Mr. Kilroy, Mr. Ferguson and members of the MedAvail Finance Committee recommended to the MedAvail Board that MedAvail pursue a term sheet for the reverse merger transaction with MYOS.
On April 25, 2020, HCW sent the draft Term Sheet to MedAvail.
On April 25, 2020, the financial sponsor also presented a term sheet for a merger of MedAvail into a public shell company as an alternative to the Merger with MYOS. From April 25, 2020 to April 29, 2020, the financial sponsor and MedAvail negotiated the alternative term sheet.
On April 26, 2020, MedAvail sent the Term Sheet to WSGR for review and discussion.
On April 27, 2020, Mr. Kilroy, Mr. Ferguson and members of the MedAvail Finance Committee conferred with WSGR to discuss the term sheet from MYOS. Thereafter, WSGR sent a revised draft of the Term Sheet to MedAvail for review.
On April 28, 2020, Dr. Litvack sent the revised Term Sheet to HCW and MYOS. Mr. Kilroy and WSGR held a conversation with the financial sponsor to further discuss the option of merging MedAvail into a public shell company followed by a PIPE.
On April 29, 2020, a meeting of the board of directors of MYOS (the “MYOS Board”) was held by teleconference. All directors except Ren Ren were present, constituting a majority of the members of the MYOS Board and a quorum of the MYOS Board for purposes of the meeting. Also in attendance were attorneys from Ellenoff Grossman and Schole LLP, MYOS’s corporate counsel (“EGS”). During the meeting, the MYOS Board approved MYOS entering into the Term Sheet and approved the creation of a special committee of the MYOS Board (the “MYOS Transaction Committee”) to oversee due diligence for the proposed transaction with MedAvail.
On April 30, 2020, HCW sent an executed copy of the Term Sheet to MedAvail and members of the MedAvail Finance Committee. MedAvail sent a copy of the executed Term Sheet to WSGR for further review. The MedAvail Finance Committee held a conference call with Mr. Kilroy, Mr. Ferguson and WSGR, to discuss the Term Sheet and also evaluate the proposed transaction with MYOS as well as the other financing alternatives under consideration. The MedAvail Finance Committee also discussed the need to engage investment bankers as financial advisors for the Merger and a financing.
On May 1, 2020, Mr. Kilroy discussed matters relating to the Merger with the MedAvail Finance Committee and requested a meeting for the MedAvail Board to discuss the Term Sheet and the proposed transaction with MYOS.
On May 4, 2020, the MedAvail Board held a meeting with Mr. Ferguson, David Rawlins, MedAvail’s Chief Commercial Officer, and WSGR, to, among other matters, review the Term Sheet and the engagement of investment bankers to assist MedAvail with financing. Members of the MedAvail Finance Committee recommended that MedAvail pursue the reverse merger transaction with MYOS. The MedAvail Board approved MedAvail’s execution of the Term Sheet subject to further negotiation by the management team and the MedAvail Finance Committee with respect to certain terms as discussed at the MedAvail Board meeting. Afterwards, MedAvail management, members of the MedAvail Finance Committee and WSGR discussed additional revisions to the Term Sheet.
On May 5, 2020, MedAvail sent revised Term Sheet to HCW and MYOS. The MedAvail Finance Committee determined that the alternative of merging with a public shell company presented more financing and execution risk than the Merger with MYOS.
On May 5, 2020, the MYOS Board held a telephonic meeting, during which Mr. Mannello updated the MYOS Board on the status of the negotiations and status of the Term Sheet with MedAvail. All directors except Ren Ren were present, constituting a majority of the members of the MYOS Board and a quorum of the MYOS Board for purposes of the meeting. Also in attendance were attorneys from EGS.
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On May 6, 2020, MYOS and MedAvail executed the Term Sheet thereby triggering the start of an exclusivity period as set forth in the Term Sheet.
On May 7, 2020, the MedAvail Finance Committee held a conference call with MedAvail management and WSGR to discuss the MYOS transaction, the commercial terms and next steps. The MedAvail Finance Committee also instructed management to contact bankers and select one to act as the financial advisor for MedAvail and to assist with MedAvail’s fundraising efforts.
On May 9, 2020, MedAvail initiated contact with several bankers, including Cowen and Company, LLC (“Cowen”), regarding the proposed reverse merger transaction with MYOS and began negotiations on the terms of Cowen’s services.
On May 13, 2020, HCW introduced Hiller, P.C. (“Hiller”) to WSGR as the respective counsels involved in the transaction.
On May 14, 2020, the MedAvail Finance Committee, along with members of MedAvail Management, held a call to select a banker and recommended Cowen to the MedAvail Board.
Between May 16, 2020 and May 18, 2020, MYOS and its representatives and advisors were granted access to MedAvail’s virtual data room in order to allow them to begin conducting due diligence.
On May 17, 2020 Cowen sent MedAvail its engagement letter which the parties negotiated until May 21, 2020.
From and after approximately May 18, 2020 to the date the Merger Agreement was executed, the parties conducted their confirmatory legal, financial and technical due diligence on each other.
On May 18, 2020, a working group call was held with representatives of MedAvail, MedAvail’s attorneys from WSGR, representatives of MYOS, representatives of HCW, and MYOS’s attorneys from Hiller (collectively, the “Matrix Working Group”). The parties to the call discussed, among other things, drafting the Merger Agreement and other transaction documents, deal structure, filings with the Securities and Exchange Commission (“SEC”), procedures for advancing the transaction, and other deal-related matters. WSGR emailed Hiller an initial due diligence request list.
On May 19, 2020, MYOS granted MedAvail and MedAvail’s representatives and advisors access to MYOS’s virtual data room. In addition, the MedAvail Finance Committee held a call to discuss the terms of Cowen’s engagement letter with MedAvail.
On May 21, 2020, the Term Sheet’s exclusivity period was extended until June 19, 2020 by letter agreement between MYOS and MedAvail. Also on May 21, 2020, Mr. Kilroy emailed the final engagement letter with Cowen to the MedAvail Finance Committee and MedAvail Board. Later that day, Mr. Kilroy entered into the engagement letter with Cowen to act as MedAvail’s financial advisor for the Merger and to assist with fundraising efforts.
On May 26, 2020, the Matrix Working Group had a conference call to discuss the status of the Merger Agreement.
On May 27, 2020, MYOS, its attorneys from Hiller and representatives of HCW had a conference call with representatives of the accounting firm Marcum LLP to discuss tax issues related to the Merger and related transactions, including the Spin Out Proposal.
On May 29, 2020, MYOS received an initial draft of the Merger Agreement from MedAvail’s attorneys, WSGR.
On June 1, 2020, MYOS, its attorneys from Hiller and representatives of HCW had a conference call with attorneys from Lowenstein Sandler LLP (“Lowenstein”) regarding certain tax issues related to the Merger and related transactions, including the Spin Out Proposal, and discussed retaining Lowenstein to advise MYOS on the tax aspects of the Merger and Spin Out Proposal.
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On June 2, 2020, representatives of HCW and MedAvail had a conference call to review MedAvail’s bridge financing.
On June 4, 2020, MYOS, its attorneys from Hiller and representatives of HCW had a conference call with Lowenstein during which Lowenstein provided an update on certain tax issues being reviewed by Lowenstein. The MedAvail Board met to discuss the Merger Agreement and related agreements and issues related thereto.
On June 5, 2020, MYOS, its attorneys from Hiller and representatives of HCW held a video conference to discuss the draft Merger Agreement provided by MedAvail.
On June 6, 2020, Hiller provided comments in a revised Merger Agreement to WSGR.
From and after June 6, 2020 to June 29, 2020, MYOS and MedAvail, with and through their respective representatives and advisors, negotiated the terms of the Merger Agreement, Promissory Note, Voting Agreements, and other deal-related agreements and documents, including the Assignment and Assumption Agreement and other documents related to the Spin Out Proposal.
On June 8, 2020, MYOS received Lowenstein’s analysis of tax issues related to the Merger and the Spin Out Proposal.
On June 9, 2020, MYOS, its attorneys from Hiller and representatives of HCW had a conference call with Lowenstein to discuss Lowenstein’s tax analysis.
In addition, on June 9, 2020, the Matrix Working Group held a conference call to discuss Hiller’s comments to the draft Merger Agreement.
On June 10, 2020, representatives from Lowenstein had a conference call with MedAvail’s tax attorneys from WSGR to discuss tax matters with respect to the Merger and the Spin Out Proposal.
In addition, on June 10, 2020, representatives of HCW had a conference call with representatives of MedAvail to discuss certain deal terms in connection with the Merger.
On June 15, 2020, MYOS, its attorneys from Hiller, representatives of HCW, and James Forte, MYOS’s litigation counsel from Saiber LLC, had telephone conference regarding then-pending litigation between MYOS and its board member, Ren Ren, and Ren Ren’s company, RENS Technology Inc. (together, “RENS”) (the “RENS Litigation”). The Matrix Working Group also discussed and negotiated the Merger Agreement and related documents.
In addition, on June 15, 2020, MYOS, its attorneys from Hiller, representatives of HCW and Mr. Forte had a conference call with MedAvail and MedAvail’s attorneys from WSGR to discuss Mr. Ren’s status as a MYOS Board member and discussed resolving the RENS Litigation.
On June 17, 2020, MYOS’s tax counsel from Lowenstein had a conference call with MedAvail’s tax attorneys from WSGR and MedAvail’s tax advisor to discuss the structuring of the Merger and the Spin Out Proposal.
In addition, on June 17, 2020, WSGR and the MedAvail Finance Committee, consisting of directors Dr. Litvak, Mr. van Hamel Platerink and Robert Faulkner, met to discuss the Merger Agreement and then sent a revised Merger Agreement to Hiller.
On June 18, 2020, the Matrix Working Group held a conference call to discuss a checklist of outstanding items requiring completion before execution of the Merger Agreement. Following the conference call, the Term Sheet’s exclusivity period was extended by letter agreement until June 26, 2020 between MYOS and MedAvail.
In addition, on June 18, 2020, representatives of HCW had a conference call with MedAvail and representatives from Cowen, MedAvail’s investment banker, regarding indemnification issues in connection with the Merger.
On June 19, 2020, the Matrix Working Group held a conference call to discuss the latest draft of the Merger Agreement and Hiller sent a revised Merger Agreement to WSGR later in the day.
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In addition, on June 19, 2020, the MYOS Board held a telephonic meeting, at which a majority of the members of the MYOS Board were present, constituting a quorum of the MYOS Board for purposes of the meeting. Also in attendance were attorneys from EGS. During the meeting, Mr. Mannello updated the MYOS Board on the status of the proposed transaction with MedAvail. In addition, members of the MYOS Transaction Committee overseeing due diligence discussed the status of their review and expressed their support for the proposed transaction.
Also, on June 19, 2020, representatives of HCW had a conference call with representatives of Cowen to discuss Lock-Up Agreements. After the call, there were a series of calls between Mr. Mannello and Mr. Kilroy to discuss the RENS Litigation and a potential settlement offer. In addition, Mr. Mannello and Mr. Kilroy agreed that cash portion of the consideration to be paid by MedAvail to MYOS upon consummation of the Merger would be reduced from $3,000,000 to $2,000,000, and the Promissory Note to be given to MYOS by MedAvail would be increased from $2,000,000 to $3,000,000, pending the execution of a final settlement agreement between RENS and MYOS resolving the RENS Litigation.
On June 23, 2020, MYOS’s tax counsel from Lowenstein held a conference call with MedAvail’s tax attorneys from WSGR, and MedAvail’s tax advisor to further discuss tax issues related to the Merger and the Spin Out Proposal.
On June 24, 2020, the Matrix Working Group had a conference call to discuss timing for finalizing the Merger Agreement and other transaction documents, and reviewed the list of open issues that needed to be completed. Also on June 24, 2020 the MedAvail Finance Committee met to discuss the status of the Merger Agreement and issues related thereto.
On June 25, 2020, MYOS’s attorneys from Hiller and MedAvail’s attorneys from WSGR held a conference call regarding the status of the Merger Agreement and other outstanding documents and agreements. Hiller sent a revised Merger Agreement to WSGR later in the day. WSGR returned a revised Merger Agreement to Hiller the same day.
On June 26, 2020, the Term Sheet’s exclusivity period was further extended by letter agreement between MYOS and MedAvail until June 29, 2020. In addition, the MedAvail Board met to discuss the near final version of the Merger Agreement and related documents on June 26, 2020.
On June 28, 2020, the MYOS Board held a special telephonic meeting to consider the Merger Agreement, the documents annexed as exhibits to the Merger Agreement, and the Merger and other contemplated transactions, including the Spin Out Proposal. All MYOS Board members, except for Mr. Ren, were in attendance. Also in attendance were MYOS’s attorneys from Hiller and Ellenoff Grossman & Schole LLP. All Board members in attendance approved the Merger Agreement, the exhibits to the Merger Agreement, and the Merger and the related transactions, including the Spin Out Proposal.
On June 29, 2020, the MedAvail Board unanimously approved the Merger Agreement and related documents by written consent. Throughout the day on June 29, 2020, MYOS’s attorneys from Hiller had numerous conversations with MedAvail’s attorneys from WSGR regarding the execution and exchange of documents and final open issues. Also on June 29, 2020, the full Matrix Working Group had a call to discuss investor communications and a press release following the execution of the Merger Agreement.
On June 29, 2020, members of the MYOS Board in their capacity as MYOS shareholders, except for Mr. Ren, entered into Voting Agreements by which they agreed to vote their MYOS shares in favor of the Merger when MYOS shareholders are asked to vote on the Merger.
On June 30, 2020, MYOS, MedAvail, and Matrix Merger Sub executed the Merger Agreement.
MYOS’s Reasons for the Contemplated Transactions and Recommendation of the MYOS Board of Directors
In the course of reaching its decision to approve the Merger, the Merger Agreement, the Spin Out Transaction and the transactions contemplated thereby, or the Contemplated Transactions, the MYOS Board consulted with its
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senior management, investment bankers and legal counsel, reviewed a significant amount of information, and made its determination after considering the following factors:
The opportunity to reduce compliance costs and transition MYOS’s current operating business into a private company;
MYOS’s historical performance and its business and financial prospects, as well as risks of continuing to operate as a public company as compared with moving all of its assets and liabilities into a private company and operating its business as a private company going forward;
The perceived benefits of operating as a private company as compared with a publicly-traded company, including, but not limited to, the potential reduction in, among other things, (i) the costs associated with legal and regulatory compliance; (ii) expenses and burdens of financial and periodic reporting; (iii) regulatory scrutiny and oversight; (iv) the uncertainty of stock trading prices and volume; and (v) potential shareholder litigation;
MYOS’s ability to maintain the listing of MYOS Common Stock on Nasdaq;
The cash being paid by MedAvail to Spin Out Sub in connection with the Merger, to help fund MYOS’s continuing operations and business opportunities;
The MYOS Board’s belief that it will be easier and more efficient for MYOS to raise future capital as a private company;
The MYOS Board’s belief that the historical business of MYOS will have greater financial, sales, research and development, and marketing resources to improve and expand MYOS’s business following the Merger and Spin Out Transaction relative to the resources available to MYOS if it continued to operate as a public company;
That MYOS’s current shareholders will receive the Spin Out Dividend and therefore continue their ownership interests in MYOS’s historical business through Spin Out Sub as a private company;
The opportunity for MYOS’s current shareholders to participate in the value and growth of the Post-Merger Public Company through continued ownership of freely tradable shares of the Post-Merger Public Company’s common stock;
The expectation that if MYOS recognizes a gain for U.S. federal income tax purposes on the distribution of the stock of Spin Out Sub, the gain will be offset by either current year losses of the Post-Merger Public Company or net operating loss carryforwards as a result of built in gains under Section 382 of the Code;
The expectation that the distribution of the stock of Spin Out Sub will not be taxable as a dividend for U.S. federal income tax purposes and, as a result, MYOS’s current shareholders will be entitled to take into consideration the basis in their current MYOS Common Stock to limit or eliminate gain from such distribution;
The likelihood that MedAvail could meet its conditions to closing the Merger, including raising at least $30.0 million in the Private Placement financing;
The belief that the terms of the Merger Agreement, including MedAvail’s representations, warranties and covenants, and the conditions to their respective obligations, were reasonable for a transaction of this nature;
MYOS’s right under the Merger Agreement to consider certain unsolicited competing proposals under certain circumstances should MYOS receive a superior proposal;
The Voting Agreements delivered by stockholders of MedAvail in connection with execution of the Merger Agreement; and
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The likelihood that the Merger will be consummated on a timely basis.
The MYOS Board also considered the following uncertainties and risks in its deliberations concerning the Merger and Contemplated Transactions by the Merger Agreement:
The possibility that the Merger might not be completed on a timely basis or at all, and the potential adverse effect of the public announcement of entering into the Merger Agreement on MYOS’s business and reputation;
The ability of MYOS to obtain financing to continue operating as a public company if the Merger were not completed;
The termination fee of $0.5 million payable by MYOS to MedAvail upon the termination of the Merger Agreement under certain circumstances;
The possible volatility, at least in the short term, of the trading price of MYOS Common Stock resulting from the announcement of the Merger;
The expenses to be incurred in connection with the Merger and Contemplated Transactions;
The risk that MedAvail will be unable to raise $30.0 million, which is a necessary condition to consummation of the Merger;
The risk that MYOS’s shareholders might not approve the Merger;
The risk that the Internal Revenue Service will take a position on the tax treatment of the Merger and Contemplated Transactions to MYOS and MYOS’s shareholders that differs from the tax treatment expected by the MYOS Board;
The risk that MedAvail will default on its $3.0 million Promissory Note to be delivered to Spin Out Sub upon closing of the Merger;
The risk that a MYOS shareholder will institute litigation to block the Merger and the Contemplated Transactions;
The risks associated with the effects of general competitive, economic, political, and market conditions, including challenges affecting the global economy resulting from the COVID-19 pandemic; and
Various other risks associated with the Merger and Contemplated Transactions, including the risks described in the section titled “Risk Factors” in this proxy statement/prospectus/information statement.
The MYOS Board concluded that the potential uncertainties and risks associated with the proposed Merger and Contemplated Transactions were outweighed by the potential benefits of completing the Merger and Contemplated Transactions. Accordingly, the MYOS Board approved the Merger Agreement, the Merger and the Contemplated Transactions.
The foregoing discussion of the information and factors considered by the MYOS Board is not intended to be exhaustive, but includes the material positive and negative factors considered by the Board. The MYOS Board did not make any specific determination as to the relative importance of any particular factor or factors in coming to it decision to approve the Merger Agreement, the Merger, or the Contemplated Transactions, but based its determination on the totality of the information presented.
MedAvail Reasons for the Merger
In the course of reaching its decision to approve the Merger, the Merger Agreement and the transactions contemplated thereby and to recommend that the MedAvail stockholders approve the Merger, adopt the Merger Agreement and approve the other transactions contemplated by the Merger Agreement, the MedAvail Board
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consulted with MedAvail’s senior management, financial advisor and legal counsel, reviewed a significant amount of information and considered a number of factors, including, among others:
the expectation that a merger with MYOS would be a more time- and cost-effective means to access capital than other options considered, including attempting its own initial public offering, merging with a SPAC or a public shell company, each of which MedAvail had considered pursuing;
the potential to provide its current stockholders with greater liquidity by owning stock in a public company;
the view that the Merger with MYOS would provide MedAvail stockholders with a greater potential opportunity to realize a return on their investment than any other alternative reasonably available to MedAvail and its stockholders including the strategic alternatives to the proposed merger with MYOS, remaining an independent standalone private company, conducting its own initial public offering, entering into a business combination transaction with another company or entering into a strategic partnership;
that the shares of MYOS Common Stock issued to MedAvail stockholders will be registered pursuant to a Form S-4 registration statement by MYOS, of which this proxy statement/prospectus/information statement forms a part, and will become freely tradable (subject to the terms of applicable lock-up agreements) for MedAvail’s stockholders who are not affiliates of MedAvail;
the Post-Merger Public Company’s ability to maintain its listing on The Nasdaq Capital Market;
the ability to procure the additional financing (which would not be made available except in the context of MedAvail being a public-company and having MedAvail Common Stock listed on The Nasdaq Capital Market);
MYOS has delivered voting agreements from its officers, all of its directors and certain of its affiliated stockholders, representing approximately 46% of MYOS outstanding capital stock, in which each such individual or entity has agreed to vote in favor of the Merger Agreement and the related transactions;
the likelihood that the Merger will be consummated on a timely basis;
the terms and conditions of the Merger Agreement including the following:
the determination that an exchange ratio that is fixed and not subject to adjustment based on trading prices is appropriate to reflect the expected relative percentage ownership of MYOS security holders and MedAvail security holders, in the judgment of the MedAvail Board;
the expectation that the MedAvail security holders will own approximately 96.5% of the Post-Merger Public Company, subject to adjustment as provided in the Merger Agreement;
the expectation that the Merger should be treated as a reorganization for U.S. federal income tax purposes, with the result that the MedAvail stockholders generally will not recognize taxable gain or loss for U.S. federal income tax purposes;
the view that the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances;
the limited number and nature of the conditions of the obligation of MYOS to consummate the Merger and the limited risk of non-satisfaction of such conditions;
the rights of MedAvail under the Merger Agreement to consider certain unsolicited acquisition proposals under certain circumstances should MedAvail receive a superior proposal; and
the conclusion of the MedAvail Board that the potential termination fee of $0.75 million, or in some situations the reimbursement of certain transaction expenses incurred in connection with the Merger of up to $0.5 million, payable by MYOS to MedAvail and the circumstances when such fee may be payable, were reasonable.
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MedAvail does not foresee any meaningful synergies with MYOS’s business or technology, and does not intend to continue MYOS’s business. Accordingly, MedAvail does not consider the opportunity to combine its operations with MYOS’s business as a reason for seeking the Merger.
The MedAvail Board also considered a number of uncertainties and risks in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement, including the following:
the time, effort and substantial costs involved in connection with entering into the Merger Agreement and completing the Merger and the related disruptions to the operation of MedAvail’s business, including the risk of diverting management’s attention from other strategic priorities to the Merger and of becoming a public company, and the risk that the operations of MedAvail would be disrupted by employee concerns or departures or by changes to or termination of MedAvail’s relationships with its customers, suppliers, independent sales representatives and distributors following the public announcement of the Merger;
the possibility that the Merger might not be completed in a timely manner or at all, and the potential adverse effect of the public announcement of the Merger on the reputation of MedAvail and the ability of MedAvail to obtain financing in the future in the event the Merger is not completed;
the risk that, if the Merger is not consummated, MedAvail’s management would have devoted substantial time and resources to the combination at the expense of attending to and growing MedAvail’s business or pursuing other business opportunities or financing alternatives;
the restrictions on the conduct of MedAvail’s business during the pendency of the Merger, which may delay or prevent MedAvail from undertaking potential business opportunities that may arise or may negatively affect MedAvail’s ability to attract, retain and motivate key personnel;
the termination fee of $0.75 million payable by MedAvail to MYOS upon the occurrence of certain events, and the potential effect of such termination fee in deterring other potential acquirers from proposing an alternative transaction that may be more advantageous to MedAvail’s stockholders;
the risk that MYOS stockholders may fail to approve the Merger;
the fact that certain of MedAvail’s officers and directors may have interests in the Merger and the transactions contemplated thereby that are different from, or in addition to, those of MedAvail’s other stockholders (for additional information see “The Merger – Interests of MedAvail Directors and Executive Officers in the Merger” beginning on page 83 of this proxy statement/prospectus/information statement);
the transaction expenses and operating expenses to be incurred in connection with the Merger;
the additional public company expenses and obligations that MedAvail’s business will be subject to following the Merger that it has not previously been subject to;
the possibility that the anticipated benefits of the Merger may not be realized or that they may be lower than expected;
the trading price of the Post-Merger Public Company’s common stock may be subject to significant fluctuations and volatility;
the potential adverse impact on the resale of additional shares of the Post-Merger Public Company’s capital stock into the stock market after the closing of the Merger, which could have the effect of putting downward pressure on the trading price of the Post-Merger Public Company’s common stock;
the risks associated with the effects of the general economic, political and market conditions, including challenges affecting the global economy resulting from the COVID-19 pandemic; and
various other risks associated with the Post-Merger Public Company and the Merger, including the risks described in the section entitled “Risk Factors” in this proxy statement/prospectus/information statement.
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The MedAvail Board concluded that the potential uncertainties and risks associated with the proposed merger were outweighed by the potential benefits of completing the Merger. Accordingly, the MedAvail Board approved the Merger, the Merger Agreement, and the transactions contemplated thereby.
The foregoing information and factors considered by the MedAvail Board are not intended to be exhaustive but are believed to include all of the material factors considered by the MedAvail Board. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the MedAvail Board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the MedAvail Board may have given different weight to different factors. The MedAvail Board conducted an overall analysis of the factors described above, including discussions with, and questioning of, MedAvail’s management and MedAvail’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.
Consideration to be Paid in the Merger
At 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 financing 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.
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 existing MYOS security holders 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). For more information, see “The Merger Agreement —Exchange Ratio.”
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.
Interests of the MYOS Directors and Executive Officers in the Merger
In considering the recommendation of the MYOS Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that MYOS’s directors and executive officers have interests in the Merger that are different from, or in addition to, those of MYOS’s shareholders generally. 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 MYOS’s shareholders.
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Severance, Equity Vesting and Bonus Payments
Material Severance Terms Pertaining to Named Executive Officers
On August 24, 2017, MYOS entered into an employment agreement with Joseph Mannello to serve as MYOS’s permanent Chief Executive Officer, effective immediately. Pursuant to the terms of the agreement with Mr. Mannello, if Mr. Mannello’s employment is terminated by MYOS for cause or as a result of death or disability, or if Mr. Mannello terminates his employment without good reason, Mr. Mannello will be entitled to receive any accrued and unpaid base salary, any unreimbursed reasonable business expenses and employee benefits up to the date of termination, as well as retain any previously-vested stock option.
In the event Mr. Mannello’s employment is terminated by MYOS for any reason other than cause, death or disability, or if Mr. Mannello terminates his employment for good reason, he will be entitled to receive any accrued and unpaid base salary and employee benefits up to the date of termination as well as vested stock options. In addition, Mr. Mannello will be entitled to receive all applicable COBRA-related health insurance continuation rights to the extent provided for under applicable law or based on MYOS’s practice and an amount equal to 100% of the COBRA premiums for him and his family for twelve months following the date of termination.
In the event Mr. Mannello’s employment is terminated by MYOS without cause and in connection with, or as a result of, a change of control, or if Mr. Mannello terminates his employment for good reason following a change in control, he will also be entitled to retain his stock options, and the unvested portion of the stock option will vest as of the date of the consummation of the change in control.
Notwithstanding the foregoing, prior to the Effective Date, 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. As a result, as of the Effective Time, the terms of any severance benefits to Mr. Mannello will not include options to purchase MYOS Common Stock.
Bonus Shares and Employee Shares
The MYOS Board has 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. These shares were issued October 1, 2020.
Potential Benefits upon Change in Control of MYOS
The following table summarizes the benefits for the MYOS named executive officers.
Officer
Employment Agreement
Joseph MannelloCashNone
BenefitsAll accrued employee benefits, all applicable COBRA-related health insurance continuation rights, and 100% of the COBRA premiums for twelve months following the date of termination.
EquityNone
MYOS does not have any severance agreements with its management team that could be triggered by the Merger.
Defined Terms for Purposes of Executive Employment Agreement
Under the employment agreement with Mr. Mannello:
“Cause” generally means: (i) the gross and willful misconduct on the part of Mr. Mannello in connection with the performance of his duties and responsibilities; (ii) the breach by Mr. Mannello of any material provision of the agreement, which breach remains uncured for thirty (30) days after receipt of written notice of breach; (iii)
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commission by Mr. Mannello of fraud, embezzlement, misrepresentation or an act of dishonesty in connection with his duties; (iv) the commission of a felony or a misdemeanor involving more turpitude and materially adversely impacting the business or reputation of MYOS; (v) willful and repeated refusal or failure to follow specific, lawful and reasonable written directions of the MYOS Board, and the failure to remedy any such refusal within thirty (30) days of receipt of notice thereof; or (vi) the material violation by Mr. Mannello of any statutory or common law duty of loyalty to MYOS as determined in a final, non-appealable judgment by a court of competent jurisdiction.
“Good reason” generally means: (i) the breach by MYOS of any material provision of the Agreement, which breach remains uncured for thirty (30) days after receipt of written notice of breach; (ii) the relocation of employment outside the 50-mile radius from MYOS’s principal office; (iii) any material dilution in Mr. Mannello’s title, position, duties, responsibilities or compensation or benefits, without prior written consent; (iv) any material reduction or adverse change in director and officer insurance coverage or indemnification rights without prior written consent; or (v) upon a Change of Control, if there is: (A) any material diminution in Mr. Mannello’s title, position, duties or responsibilities, or (B) any material reduction in the compensation or benefits due the executive, except across-the-board salary reductions up to 10% similarly affecting all executives.
“Change of Control” generally means: (i) the sale, conveyance or disposition of all or substantially all of the stock or assets of MYOS, or (ii) a consolidation or merger of MYOS with or into any other corporation or corporations
Settlement Agreement with Ren Ren and RENS Technology Inc.
On July 13, 2020, MYOS entered into a settlement agreement, or Settlement Agreement, with RENS Technology Inc. (“RENS”), Ren Ren and Mr. Mannello to settle and dismiss all claims in connection with all pending litigation matters between the parties. In exchange, Mr. Ren agreed to resign as MYOS’s Global Chairman and as a member of MYOS’s Board. In addition, RENS and Mr. Ren agreed to: (i) vote all of their shares of MYOS Common Stock in favor of the Merger Agreement and transactions contemplated thereby; and (ii) waive and forfeit any right to receive any ownership interest in the Spin Out Sub.
Indemnification of the MYOS Officers and Directors
From and after the Effective Time, MYOS will fulfill and honor in all respects the obligations of MYOS which exist prior to the Effective Time to indemnify MYOS’s present and former directors and officers and their heirs, executors and assigns. After the Effective Time, any provisions relating to the indemnification and elimination of liability for monetary damages set forth in the articles of incorporation or bylaws of MYOS, as amended, will not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, at the Effective Time, were directors, officers, employees or agents of MYOS.
In addition, the Post-Merger Public Company will indemnify and hold harmless the current directors of MYOS in connection with the approval by the current MYOS Board of the MedAvail Holdings, Inc. 2020 Equity Incentive Plan and the MedAvail Holdings, Inc. 2020 Employee Stock Purchase Plan.
Effective as of the Effective Time, MYOS will maintain either a directors and officers liability insurance policy or an equivalent “tail” policy on MYOS’s existing directors for a period of six (6) years.
Interests of Certain MedAvail Directors, Executive Officers and Affiliates in the Merger
In considering the recommendation of the MedAvail Board with respect to adopting the Merger Agreement, 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 may have as MedAvail stockholders. The MedAvail Board was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Merger Agreement and the Merger, and to recommend, that the MedAvail stockholders sign and return the written consent as contemplated by this proxy statement/prospectus/information statement.