MedAvail Holdings, Inc.

Peter Levy - President & COO Robert Ashton - Chief Medical Officer Joe DosSantos - CFO

Thank you and good morning. I want to welcome all of the participants to today's quarterly call.

I am pleased to have the opportunity to review the third quarter progress and address three main topics throughout the call. First, I'll briefly discuss the data from the University of Tampa Study and explain how we believe that provides a tremendous opportunity for MYOS and a basis for our shifting strategy.

Then I want to spend a few minutes on the significant progress we have made throughout the quarter preparing for our own proprietary portfolio of products using Fortetropin and finally I'll provide some background regarding the Cenegenics relationship and how that ties into our strategic shift with our distributor relationships. Our third quarter was marked by the most significant event in the history of MYOS.

The completion and the readout of the statistically significant clinical results of the study we conducted at the University of Tampa. What we learned from the study was extremely exciting and we believe absolutely game changing for key areas of our strategy.

Importantly, the study met its primary endpoint and demonstrated that Fortetropin increases lean body mass and muscle thickness in modestly resistant treadmills. This alone achieved the goal of the study.

The increasing interest in myostatin inhibition and lean muscle enhancement by the life science industry as well as by large consumer product companies and by the medical community demonstrates that MYOS is actively focusing on one of the most important spaces in health and wellness today. However, the positive news did not end here.

As the study generated additional exciting data. We also found that daily use of Fortetropin significantly decreases inflammatory cytokine levels and demonstrates promising anti-inflammatory biotherapeutic properties of Fortetropin, providing explanation for the reports from our consumers that Fortetropin reduces muscle pain and improves recovery after exercise.

These important observations were coupled with the fact that daily use of Fortetropin does not adversely affect cholesterol, HCL or triglycerides. These results were not only much more compelling than we had hoped for, but came earlier than we had ever expected.

Dr. Ashton will provide more detail in a few minutes.

We at MYOS have heard anecdotally week in and week out, sometimes even daily terrific testimonials and enthusiastic stories from consumers about the anti-inflammatory attributes of Fortetropin. The study with Dr.

Ashton will describe one thing is now certain. MYOS has a product that works.

That single statement is our biggest asset. Fortetropin delivers as promised.

We believe the data is key to advancing MYOS in the next stage of growth. We are now in a position to take important steps to aggressively grow our business.

let me share with you how MYOS intends to exploit these glitches. First through the product development efforts and launch preparation under leadership of our Chief Commercial Officer, Doug Weekes, MYOS is finalizing the development and launch of its very own proprietary branded product line using Fortetropin.

This allows us to expand our presence in the consumer market, which we believe will enable us to increase our revenue with important products addressing the needs of health conscious consumers. All of our products featuring Fortetropin at the clinically proven active dose and also include very high levels of protein and fiber that consumers increasingly demand in their nutritional products.

We feel that consumers will choose our products because they have the unique combination of providing a clinically proven benefit of building healthy lean muscle and anti-inflammatory agents. The first phase of the launch is planned for early in the first half of 2015 in the United States.

Our overarching goal is to implement a robust global commercialization strategy targeting key markets over the course of 2015. We are now in the final stages of development and production and we expect to formally announce the product in the coming months.

We have spent considerable time and effort developing a brand image and we believe that we uniquely positioned the MYOS product line as refreshingly bold and well above the noise of today's run of the mill competition. Finally, the clinical data has been the driving impetus behind MYOS' enhanced strategy to develop and expand strategic relationships with leading distributors outside of the sports nutrition arena.

Additionally, I would like to address details of the Cenegenics relationship that we've disclosed in our Form 10-Q as well as our current relationship with MHP. MYOS expects to seize the opportunity to position our products in the best light to leverage the tremendous clinical data and grow both topline revenues as well as profitability.

MYOS as an emerging growth company is a very different entity than it was when we first launched our initial myostatin inhibitor [propped] [ph] in 2012. At that time, establishing a distribution model was key to our success and was the most practical and the best way to enter the market was with a distributor in the sport nutrition arena MHP.

With MHP, we easily reached the body building and fitness community and that was our early intention. Body builders are living laboratories.

These individuals cannot only see immediate changes in their health and in their well being, but they are diligent in measuring their results from any change in training or in diet. Using MHP as a distributor was a sound strategy for raising immediate awareness and becoming a rapid and true presence, in GNC, vitamin shop and bodybuilding.com.

This type of distribution served our purpose. However, the profitability, the control over our marketing message advertising and promotion were all in the hands of MHP.

At this stage MYOS needs to now leverage the key initiatives that we had envisioned as they've come to fruition, namely our scientifically significant clinical results have confirmed what we have believed and heard anecdotally, thus proving we had a differentiable product that had a competitive advantage in the world of muscle health and building lean muscle. We were awarded the U.S.

patent for the process of producing our flagship product Fortetropin. In order to put MYOS in a position to succeed, the distribution model and sales strategy needed to change.

While we intend to continue using distributors in those markets that best serve our customers, the pricing and quantity sold by distributors requires us to expand beyond current distributors so that we can capitalize on a product that is both revolutionary and unique in its attributes and reaps the financial benefits of our clinical trial results. In the short term, there was a cost which must be borne in order to capture the greater markets through an overarching distribution channel.

Our relationship with Cenegenics was always intended as a pilot distribution agreement in the space known as age management. Cenegenics allowed us to strategically enter our markets to test how Fortetropin will be received as a product that builds lean muscle.

The feedback and consumer interest proved what we had hoped namely that Fortetropin is a superb product to sell in the age management community. We intend to continue in the age management space.

We believe it represents an excellent opportunity for us and MYOS intends to be at the forefront of muscle health. MYOS is confident and we believe that the Cenegenics relationship will be resolved with the best results for our shareholders and the best results that our shareholders could have hoped given the dispute.

The bottom line is that finding strategic direction is an important part of building a sustainable business. By ensuring the feature distribution partners recognize the value of patented proprietary myostatin inhibition, a product with unique and clinically proven results allow MYOS to create a model that uses better control of the distribution, increase revenues, increase profits and the strength of our product line sold both through distributors and now directly to consumers under our MYOS brand.

Importantly, we see tremendous opportunity for growth moving forward. We believe with a growing valley of clinical data, distribution strategy and the anticipated launch of our product portfolio of products that MYOS is now poised to further execute on our business plan to establish the company's leadership in muscle health.

Our vision is to introduce what we believe is a revolutionary product Fortetropin to broader clinical use in exciting, virtually untapped markets. We are increasing our activity and visibility in age management and the treatment of nutritional issues in chronic diseases such as sarcopenia, frailty syndrome and other medically relevant markets.

We truly believe that MYOS is well poised for an exciting 2015 and beyond. And with that I will turn the call over to Dr.

Robert Ashton, our Chief Medical Officer, to elaborate on the clinical results of the biotherapeutics development program. Rob?

Thank you, Peter. Good morning, everyone.

I am excited to have this opportunity to review our important research developments at MYOS. I would like to remind you from our last call that Fortetropin is the world's first bionutritional product, which is clinically proven to reduce serum myostatin levels.

It is a proprietary proteolipid complex of over 300 proteins, peptides and lipids manufactured to maintain the bioactivity of these important molecules. Fortetropin has been showing the reduced serum myostatin levels, increase muscle size and lean body mass in human subjects.

It has been available and used commercially for over two years with an extraordinary safety profile in human use. The University of Tampa is well recognized as leading center for their clinical study of muscle physiology and exercise.

This study was designed to evaluate Fortetropin in a population, which represented average adult men. This study examined the effects of Fortetropin and modest resistant training in a carefully prescreened population of average males and was a randomized double blind placebo controlled trial conducted over a three month period.

There were pre study of placebo one and two doses of Fortetropin, a single dose of 6.6 grams and a triple dose of 19.8 grams delivered orally once a day. The primary end point was direct measurement of skeletal muscle hypotrophy using ultrasound.

The secondary end point was a measure of lean body mass and that mass by DEXA. Tertiary end point were strength and power measurements conducted by exercise physiologists.

The subjects were carefully controlled by a nutritionist so that all individuals maintain equal amounts of protein, carbohydrates and fat. Results demonstrated that both the treatment arms, the 6.6 gram and 19.8 grams of Fortetropin had significant increases in muscle mass measured by ultrasound and lean body by DEXA as compared to placebo group.

Interestingly, the 19.8 grams dose also had significant decrease in stat mass compared to placebo. In light of the fact that these were healthy males with normal body habitus, this is a very exciting finding with implications to grow B2B management that needs to be explored further.

All arms had significant increases in measurements of both power and strength compared to their weight by measurements. This is important because it demonstrates that the increase in muscle mass was accompanied by functional gains of muscle resulting in the high functioning muscle.

No adverse events were noted in this study. As Peter briefly mentioned we've found additional key findings from the dataset, which we believe are important and anti-inflammatory biotherapeutic property and lack of adverse effect on serum and cholesterol levels.

And serum biomarkers from subjects in the clinical trial reveal that daily use of Fortetropin significantly decreases inflammatory cytokine levels which demonstrates Fortetropin's promising anti-inflammatory biotherapeutic properties. We're closely monitored the consumer experience with Fortetropin, particularly in the sport nutrition and bodybuilding communities and I've been struck by the high frequency of reports of improvement of symptoms associated with chronic inflammatory conditions.

We're greatly encouraged by this in treating clinical data revealing a significant reduction in interferon-gamma cytokine levels resulting from daily use of Fortetropin. We believe this data has important implications for potential treatment options in treating diseases in many inflammatory conditions.

The effects on inflammatory markers demonstrates that Fortetropin may have additional effects on those factors affecting sarcopenia and cachexia. This new data may represent a secondary mechanism through which our product may improve MYOS' therapeutic area of focus.

The broader implications of orally active product, which builds muscle and reduce inflammation will be the focus of our ongoing research. Sample collection was completed for all subjects during the 12-week period.

The study divided the participant into placebo 6.6 and 19.8/ grams of Fortetropin daily. After 12 weeks of daily consumption of both low and high dose of Fortetropin, there was no change in participant lipid profiles.

The source of active proteins and lipids in Fortetropin is fertilized chicken egg yolk, which is well known as one of the most nutritionally dense natural foods available. There have been numerous published nutrition and serum lipid studies confirming that daily dietary consumption of eggs does not change lipid profiles, but unfortunately this still remains controversial.

We specifically study serum lipid profiles study to continue to built on the growing body of evidence that demonstrates that the consumption of age derived products does not raise cholesterol levels. As we participate -- as we anticipated the study serum panel showed that Fortetropin had no adverse effects on participants lipid profiles at the conclusion of the study.

We couldn’t be more pleased with the results of this study and believe that these results have the potential to creatively expand the commercial and clinical opportunities in the near and long term for MYOS. We will continue to conduct further studies to demonstrate the clinical effectiveness of Fortetropin in 2015.

In conclusion, we're excited to continue to leverage our deepening expertise in muscle biology and the regulation of myostatin to build our biotherapeutic pipeline. At the same time, we're continuing our clinical program to demonstrate the wide therapeutic use of Fortetropin in many disease space.

With that, I will hand it over to Joe DosSantos, our Chief Financial Officer.

Thank you, Rob. Good morning, everyone.

Before I begin the review of our financial results for the third quarter, I would like to point out that we filed our 10-Q yesterday afternoon. please refer to our 10-Q for details of our operating results and financial condition as of September 30, 2014.

The company will issue its press release summarizing the third quarter 2014 results this morning. The 10-Q is available on the company's website.

As Peter discussed, our third quarter results reflect the series of important decisions made my MYOS' management based in large part on the results of the critical, clinical study, which provide a compelling evidence of the muscle building and anti-inflammatory activity and safety of Fortetropin and the resulting unique opportunity to shift our commercial and product development strategies. MYOS' management believes that the results from clinical and basic research conducted thus far position the company to move towards establishing additional distribution relationships, which will significantly increase the significance of our products in sports nutrition and other markets earlier than originally anticipated.

Although these moves have a short term effect on topline revenues, the company believes that it will help accelerate the commercial side of the business, build important product and brand awareness and set the stage for the introduction of a range of new products, which can serve other markets including medical foods. Net sales in the third quarter decreased $811,000 to $107,000, compared to $918,000 in the prior year period.

We anticipate a period of uncertain topline revenues as we launch new more aggressive commercial strategy and position our own core branded products to be launched early in the first half of 2015. We remain confident that our commercial strategy will enable us to deliver meaningful, sustainable, topline revenues.

Gross margin for the third quarter was a loss of $125,000, compared to a profit of $490,000 in the prior year period. Included in the current year period were inventory reserve and write-off charges of $166,000.

Excluding these charges, gross profit for the third quarter of 2014 was $41,000 or 38% of net sales, which compared to the prior year period was 15% lower primarily due to higher indirect overhead cost in the current year period. Turning to operating expenses, on a non-GAAP basis, operating expenses were $1,500,000 for the quarter, compared to $945,000 in the prior year period.

R&D expenses increased due to higher cost associated with our clinical and basic research programs. SG&A expenses increased primarily due to bad debt expense of $390,000 recorded against Cenegenics' outstanding receivables as well as higher professional and consulting and personnel cost.

On a non-GAAP basis, net loss for the third quarter of 2014 was $1,625,000, compared to $454,000 for the third quarter of 2013 and $523,000 for the second quarter of 2014. Non-GAAP net loss per share was $0.56 for the third quarter of 2014, compared to $0.20 for the third quarter of 2013 and $0.18 for the second quarter of 2014.

Non-GAAP net loss excludes stock-based compensation and certain special charges. Please refer to the financial tables contained in our press release for a complete reconciliation of our GAAP to non-GAAP net loss.

Turning to the balance sheet, we ended the quarter with cash of $638,000, total assets of $6,424,000 and short-term borrowings of $220,000, compared to cash of $451,000, total assets of $3,836,000 and no outstanding borrowings at year end. Working capital increased by $2,334,000 compared to year end.

The increase in working capital was primarily due to increases in inventories, accounts receivable and cash, partially offset by $220,000 of short-term borrowings under our revolving loan agreement. The increase in inventories was primarily due to our ongoing production campaign to build inventories in anticipation of launching our own core branded products in 2015.

Accounts receivable increased as a result of sales to Cenegenics. Based on our ongoing credit evaluation, we expect to fully collect the remaining Cenegenics net receivable.

With that, I would like to turn the call back over to Peter.

Thank you, Joe. I hope we provided all of you with a thorough business overview and our outlook for the future of MYOS.

I want to mention some near-term milestones that we believe will continue to build significant momentum for MYOS. First we expect to complete initial production and launch of the MYOS branded portfolio of products in the U.S.

Second, we expect to sign additional strategic agreements with leading distributors. Third, we expect to announce further basic science and clinical data at prestigious scientific conferences and fourth, we intend to expand the launch of MYOS branded products in key markets outside the United States.

We believe that the next 12 to 18 months will be exceptional for MYOS and we look forward to updating you on our progress. With that, I would like to turn the call over to our operator for our Q&A session.

Yes, good morning guys. Can I interpret this news as evidence that the clinical data was so good that the companies can negotiate better deals for a lot of distributors?

And the second follow-up question to that is does that mean that you plan to brand our own product in first quarter, second quarter of 2015?

This is Dr. Robert Ashton.

Thank you for the question.

You're welcome, Rob.

So the question was how does our data affect our ability to improve our distribution for both size and pricing? This is important because it differentiates us from a number of things in the market.

There were many claims by many companies on their products and what they do. We have a clinical study that was done at an independent university demonstrating the effectiveness of our products.

So therefore we believe this is something that will differentiate us moving forward for all of our branded products.

Great. And going into 2015, do you plan to like vertically integrate into your branding or first quarter, second.

Let me address that. This is Peter Levy.

Hi Mr. Levy.

How are you? I would like to comment on that and tell you that we're very excited that 2015 will bring the launch of our own product line.

This gives us another weapon in our artillery. In every regard, we expect to continue using distributor relationships.

What we will have is an exciting and I really think a refreshing and bold approach to launching a different type of product in our entire product line under the MYOS name. We will be giving details on that in the future and elaborating on that, but we've got a number of exciting products that will be launched in early first half of 2015.

Does that answer your question.

Yes, it does. Thank you.

Hi. Good morning.

This is [David] [ph]. I am filling in for Jason this morning.

So I just wanted to talk a little bit about the third quarter revenue numbers. I understand the company is going through a little bit of a shifting strategy right now, but if you could elaborate little bit more why there was such a big drop in revenue from this quarter?

Yes hi. Thanks for the question.

This is Joe DosSantos, Chief Financial Officer. The question is with respect to our third quarter revenues, why the drop?

So we made it clear that we're shifting our commercial strategy and unfortunately that, the third quarter is a consequence of that shift. So Cenegenics, who is our distributor and age management did not take delivery of the product that we had scheduled for delivery in Q3.

So we didn't recognize revenue in connection with Cenegenics. We continue to use distributors and sport nutrition and as we seek to launch our own direct to consumer brands in 2015, I think that it's possible that we will have a period of uncertainty with respect to our topline revenues, but that's to be expected as you launch a new product in a consumer product setting.

Okay. Are you going to continue working with MHP or are you in the process of ending that relationship?

We're evaluating all our alternatives. So we're not ruling anything out at this point.

So was this quarter may be a function of MHP not pushing the product at all?

Obviously they recognize that we are developing our own core brand products. I don't know what your intentions are and we don't want to speak for them, but obviously they would like to keep the product in their portfolio and so you can sort of figure out what that would mean.

Okay. Is there any…

So the other thing I would like to point out to you is that in the sports nutrition space, we are speaking to other distributors, leading distributors and obviously that could result in a meaningful change to our sports nutrition market strategy going forward.

David, this is Peter. Let me just elaborate on everything that Joe just said.

You have to realize the other things that when we started three years ago, the initial theme was to prove in the value of myostatin inhibition and grow awareness. What subsequently happened and happened faster than we could have hoped for, is that we have statistically significant data that now allows us to make claims and market this product very differently than the initial distributor relationships.

We're going to be able to put forth something that gets us above the noise, above the commoditization that's currently in the marketplace. I think that you're going to see that as we publish this data, it's going to give us a leg up on the competition.

Okay. And actually follow-up to that is what exactly do you allow to put on a label in regards to the data that you have?

This is Dr. Robert Ashton.

We can put on that we have a clinically proven product that builds both lean body mass and muscle size. That was done in an objective randomized controlled study.

So we can put that on the label. Does that answer your question?

Yes. Okay.

And my last question is about the new product line that's going to be coming out next year. Where is the product going to be available?

Is it going to be the same sports nutrition stores or are there going to be additional outlets?

This is Dr. Robert Ashton.

This will be in additional outlets beyond just sports and nutrition getting into general wellness, age management and we're speaking with the distributors in all of those markets and also direct to consumer opportunity.

Okay. Great.

Well thanks for taking my questions.

Well this is Peter Levy and I would like to just thank everybody for participating in the call. We very much appreciate your support and we very much appreciate your listening in on management's discussion here today.

We look forward to giving you more information in the future and thank you all very much. Have a wonderful weekend.