MYOMO INC

Note 1 — Description of Business

Myomo Inc. (“Myomo” or the Company”) is a wearable medical robotics company that develops, designs, and produces myoelectric orthotics for people with neuromuscular disorders. The MyoPro ® myoelectric upper limb orthosis product is registered with the Food and Drug Administration as a Class II medical device. The Company provides the device to patients and bills their insurance companies directly, sometimes utilizing the clinical services of orthotics and prosthetics (“O&P”) providers for which they are paid a fee. The Company sells the product to O&P providers around the world and the Veterans Health Administration (“VA”). The Company was incorporated in the State of Delaware on September 1, 2004 and is headquartered in Burlington, Massachusetts.

Pursuant to an amended and restated certificate of incorporation, the Company is authorized to issue up to 75,000,000 shares of stock, consisting of 65,000,000 shares of common stock, par value $0.0001, and 10,000,000 shares of undesignated Preferred Stock, par value of $0.0001.

Liquidity

The Company incurred net losses of approximately $6.2 million and $8.1 million during the years ended December 31, 2024 and 2023, respectively, and has an accumulated deficit of approximately $103.1 million and $96.9 million at December 31, 2024 and 2023, respectively. Cash used in operating activities was approximately $3.3 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively.

The Company has historically funded its operations through financing activities, including raising equity and debt capital. On January 19, 2024, the Company completed a registered direct equity offering, pursuant to which it sold 1,354,218 shares of common stock and 224,730 pre-funded warrants at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million. On August 29, 2023, The Company completed a public equity offering, selling 5,413,334 shares of common stock and 1,920,000 pre-funded warrants at $0.60 per share, or at $0.5999 per pre-funded warrant, generating proceeds after fees and expenses of approximately $3.9 million. In January 2023, the Company completed a public equity offering pursuant to which it sold 13,169,074 shares of common stock and 6,830,926 pre-funded warrants at $0.325 per share, or $0.3249 per pre-funded warrant, generating proceeds after fees and expenses of approximately $5.7 million. (See Note 8 - Common Stock for further discussion regarding the equity offerings.) These financing activities have enabled the Company to sustain its operations.

The Company's balance of cash, cash equivalents and short-term investments was $24.9 million as of December 31, 2024. On December 6, 2024, we completed a public equity offering, selling 3,450,000 shares at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million. On July 11, 2024, we entered into a Loan and Security Agreement with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, which provides us the ability to borrow up to $4.0 million against eligible accounts receivable. The line of credit remains undrawn as of the issuance date of these financial statements. Availability under the line of credit is approximately $1.0 million based on eligible accounts receivable as of December 31, 2024. In February 2025, the Company entered into an amendment to the Loan and Security Agreement, which among other changes, provides for a $3 million term loan facility which is available to be drawn at any time before February 28, 2026. See Note 14-Subsequent Events for further discussion.

Management's operating plans are primarily focused on growing revenues in its direct billing channel, while working to grow revenues in its O&P channel. These plans include increasing advertising spending and adding headcount to support growth in its clinical, reimbursement and manufacturing capacity in order to serve a higher volume of patients in 2025. These investments are expected to result in negative cash flows for at least the first three quarters of 2025. In addition, the Company believes that it has access to capital resources through possible public or private equity offerings, debt financings, or other means. Debt financing may contain other terms that are not favorable to the Company or its stockholders.

Note 2 — Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Myomo Europe GmbH. All significant intercompany balances and transactions are eliminated.

Comprehensive Loss

Comprehensive loss includes all changes in equity during a period, except those resulting from investments by stockholders and distributions to stockholders, if any. The Company's comprehensive loss includes changes in foreign currency translation adjustments and unrealized gains and losses on short term investments. There was a reclassification which management does not consider to be material out of accumulated other comprehensive income (loss) to other (income) expense related to realized gains or losses on short-term investments in the year ending December 31, 2024. There were no reclassifications in the year ending December 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Actual results could differ from those estimates. The Company’s estimates include assertion of collectability with payers where we have no contracts as it relates to timing of revenue recognition and discount rate of leases.

Cash, Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist principally of deposit accounts and money market accounts at December 31, 2024 and 2023.

The Company considers all investments with an original maturity of greater than three months to be short-term investments. Short-term investments primarily consists of commercial paper and U.S. Treasury Bills and are carried on the consolidated balance sheets at fair value. Short-term investments as of December 31, 2024 and 2023 consist of U.S. Treasury Bills, which are classified as held-maturity, agency bonds and commercial paper totaling approximately $493,000 and $1,994,700 respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchases and evaluates the classification at the date of purchase. Unrealized gains and losses on short-term investments are recorded to accumulated other comprehensive (loss) income on the consolidated balance sheets and other gain (loss) on the consolidated statements of comprehensive loss. Once unrealized gains and losses become realized, they are reclassified from other comprehensive gains and losses to cost of goods sold.

Our cash balances as of December 31, 2024 and 2023 consist of the following:

Accounts Receivable and Allowance for Credit Losses

The Company reports accounts receivable at invoiced amounts less an allowance for credit losses accounts. The Company evaluates its accounts receivable on a continuous basis, and if necessary, establishes an allowance for credit losses accounts based on a number of factors, including current credit conditions and customer payment history. The Company does not require collateral or accrue interest on accounts receivable and credit terms are generally 30 days. At December 31, 2024 and 2023, the Company recorded an allowance for credit losses of approximately $43,700 and approximately $28,400, respectively.

Inventories

Inventories are recorded at the lower of average cost or net realizable value. Average cost approximates valuation on a first-in, first-out basis. The Company reduces the carrying value of inventory for those items that are potentially excess, obsolete or slow-moving based on changes in customer demand, technology developments or other economic factors. In addition, the carrying value of units used by patients on a trial basis only includes the value of motor units that can be re-used. Orthotic components on trial units are expensed to cost of goods sold once consumed.

Equipment

Equipment is stated at historical cost, net of accumulated depreciation and is depreciated using the straight-line method over the estimated useful lives of the related assets, generally three years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life. Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred, and expenditures, which extend the economic life, are capitalized. When assets are retired, or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized.

Demonstration units are provided by the Company to certain O&P providers, certain VA hospitals and to its internal clinical and sales personnel for marketing and patient evaluation purposes. These units are manufactured by the Company and are capitalized as equipment on the Company’s consolidated balance sheet.

Prototype and validation units are provided to research and development staff to use in their development process and to end users who are provided units to act as testers so that research and development staff can evaluate and understand their use by patients. A primary objective of these units is to determine when and under what conditions they fail, at which time they are analyzed for cause of failure and then scrapped. These units are expensed in the statements of operations as part of research and development expense. During the year ended December 31, 2023 the Company charged to operations approximately $36,700 for these units.

Impairment of Long-Lived Assets

The Company assesses the recoverability of its long-lived assets, including equipment when there are indications that the assets might be impaired. When evaluating assets for potential impairment, the Company compares the carrying value of the asset to its estimated undiscounted future cash flows. If an asset’s carrying value exceeds such estimated undiscounted cash flows, the Company records an impairment charge for the difference. Based on its assessments, the Company didnot record any impairment charges for the years ended December 31, 2024 and 2023.

Leases

The Company accounts for leases under Accounting Standards Topic 842 (“ASC 842”). The Company assesses whether a contract is or contains a lease at inception of the contract and leases, recognizes right-of-use assets and corresponding lease liabilities at the lease commencement date, except for short-term leases, which are under one year, and leases of low value. For these leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.

Joint Venture

On March 28, 2022, the Company invested cash consideration of $199,000 for a 19.9%ownership stake in Jiangxi Myomo Medical Assistive Appliance Co., Ltd. (the “JV Company”), a company headquartered in China that is majority-owned by Beijing Ryzur Medical Investment Co., Ltd. (“Ryzur Medical”). In addition, the Company and the JV Company entered into a ten-year agreement to license the Company's intellectual property, including recently issued patents in China and Hong Kong, and purchase MyoPro Control System units from us. The JV Company will manufacture and sell the Company’s current and future products in greater China, including Hong Kong, Macau and Taiwan, and has begun limited operations. The Company accounts for its investment in the JV Company under the equity method because the Company exerts significant influence over its management. The investment was included in total assets on the consolidated balance sheet. As a result of recording its share of losses in the JV Company, the investment was written off as of December 31, 2023. The Company records its share of the JV Company’s earnings in its consolidated statement of operations in other expense (income). The Company will resume recording its share of losses of the JV Company to the extent there are other assets on the consolidated balance sheet from the JV Company. The Company recorded a loss on equity investment of approximately$169,500 for the year ended December 31, 2023.

Revenue Recognition

The Company accounts for revenue under ASC 606, “Revenue from Contracts with Customers” and all the related amendments (Topic 606). Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time,” depending on the facts and circumstances of the arrangement and are evaluated using a five-step model. Generally, the Company recognizes revenue at a point in time.

The Company recognizes revenue after applying the following five steps:

Identification of the contract, or contracts, with a customer,

Identification of the performance obligations in the contract, including whether they are distinct within the context of the contract

Determination of the transaction price, including the constraint on variable consideration

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of revenue when, or as, performance obligations are satisfied.

Revenue is recognized when control of these services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

Product Revenue

The Company derives the majority of its revenue from direct billing. The Company also derives revenue from the sale of its products to clinical consulting services of orthotics and prosthetics or "O&P" providers in the United States and internationally and the VA. Under direct billing, the Company recognizes revenue when all of the following criteria are met:

(i)

The product has been delivered to the patient, including completion of initial instruction on its use.

(ii)

Collection is deemed probable and it has been determined that a significant reversal of the revenue to be recognized is not deemed probable when the uncertainty associated with the variable consideration is resolved; and

(iii)

The amount to be collected is estimable using the “expected value” estimation techniques, or the “most likely amount” as defined in ASC 606.

For revenue derived from patients with Medicare Part B, the Company recognizes revenue upon delivery of the device to the patient based on the published fees by the Centers for Medicare & Medicaid Services ("CMS"). With respect to patients with Medicare Advantage or other commercial insurance, for payers where the Company either has a contract or in the absence of a contract, has demonstrated sufficient payment history, the Company will recognize revenue when it receives a pre-authorization from the insurance company and control passes to the patient upon delivery of the device in an amount that reflects the consideration the Company expects to receive in exchange for the device. During 2024 and 2023, the Company made such a determination for certain insurers. These insurers represented approximately 25% and 66% of direct billing channel revenue in 2024 and 2023, respectively. In cases where the Company is the direct provider and it does not have sufficient collection history with the payer, the Company recognizes revenue when payment is received, as then all of the revenue recognition criteria have been met.

Depending on the timing of product deliveries to customers, which is when cost of revenue must be recorded, and when the Company meets the criteria to record revenue, there may be fluctuations in gross margin on an ongoing basis. During the years ended December 31, 2024 and 2023, the Company recognized revenue of approximately $1,140,800 and $1,554,800, respectively, from third-party payers for which costs related to the completion of the Company’s performance obligations were recorded in a prior period.

For revenues derived from O&P providers in the U.S. and internationally and the VA, the Company recognizes revenue when control passes to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those services, which may be recognized upon shipment or upon delivery, depending on the terms of the arrangement, provided that persuasive evidence of an arrangement exists, there are no uncertainties regarding customer acceptance and collectability is deemed probable.

The Company has elected to record taxes collected from customers on a net basis and does not include tax amounts in revenue or cost of revenue.

License Revenue

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when the license is transferred to the customer, the customer is able to use and benefit from the license, and collectability is deemed probable.

On January 21, 2021, the Company entered into a Technology License Agreement (the “Agreement”) with the JV Company. Under the Agreement, the Company is entitled to receive an upfront license fee of $2.7 million, which has been paid in full, with the final payment amount recognized as licensee revenue during the year ended December 31, 2023. In addition, the Company is entitled to receive a guaranteed minimum payment for purchase of MyoPro Control Units for a period of ten years from the effective date of the Agreement. The Company will recognize revenue on these amounts upon invoicing to the JV Company so long as collectability is deemed to be assured.

Contract Balances

The timing of revenue recognition may differ from the timing of payment by customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had approximately $83,100 and $8,500 of deferred revenue as of December 31, 2024 and 2023, respectively.

Disaggregated Revenue from Contracts with Customers

The following table presents revenue by major source:

Geographic Data

The Company generated 86% of its revenue from the United States,13% from Germany and 1% from other international locations for the year ended December 31, 2024. The Company generated 73% of its revenue from the United States,16% from Germany,10% from China and 1% from other international locations for the year ended December 31, 2023.

Cost of Revenue

In conjunction with the adoption of ASC 606, there are certain cases in which the Company will expense costs when incurred as required by ASC 340-40-25, such as when the Company ships the MyoPro device to O&P providers, or provides the device directly to patients, pending reimbursement from certain third-party payers, which triggers revenue recognition. For the years ended December 31, 2024 and December 31, 2023, the Company recorded cost of goods sold of approximately $216,400 and $65,200, respectively, without corresponding revenue. The cost of clinical services by O&P providers for which they are paid a fee in conjunction with devices being sold directly to patients and billing their insurance companies directly are expensed as incurred as required by ASC 340-40-25, as a cost of obtaining a contract. These costs are recorded as sales and marketing expense, with the remaining costs associated with the patient being expensed to cost of revenue.

Shipping and Handling Costs

Shipping and handling costs paid by customers are netted against the related shipping costs we incur. The net cost is recorded in cost of revenues. Historically, such costs have not been material.

Income Taxes

The Company accounts for income taxes under Accounting Standards Codification ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

ASC 740 requires that the tax effects of changes in tax laws or rates be recognized in the financial statements in the period in which the law is enacted.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

The Company files income tax returns in federal, state and foreign jurisdictions and is no longer subject to examinations by tax authorities for years prior to 2021. Currently, there are no income tax audits in process. To the extent the Company has tax attribute carryforwards the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state of foreign tax authorities to the extent utilized in a future period.

Stock-Based Compensation

The Company accounts for stock awards to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiary, Myomo Europe GmbH, is the Euro. Foreign exchange translation gains and losses from the Euro to U.S. dollars are included in other comprehensive (loss)/gain. The Company recorded a comprehensive loss of approximately $98,000 and comprehensive income of approximately $41,200 duringthe years ended December 31, 2024 and 2023, respectively, which are included in accumulated other comprehensive (loss) income in the consolidated balance sheets. Transactional foreign exchange gainsand losses from a foreign currency to the functional currency are included in cost of sales, in the consolidated statement of operations. Such amounts were immaterial for the years ended December 31, 2024 and 2023. The balance sheet is translated using the spot date on the day of reporting and the income statement is translated monthly using the average rate for the month.

Net Loss per Share

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus potentially dilutive common shares. Restricted stock units, stock options and warrants are excluded from the diluted net loss per share calculation when their impact is antidilutive. The Company reported a net loss for the years ended December 31, 2024 and 2023, respectively, and as a result, all potentially dilutive common shares are considered antidilutive for these periods.

Potentially common shares issuable at December 31, 2024 and 2023 consist of:

Due to their nominal exercise price of $0.0001 per share, a total of 7,061,519 and 8,271,519 outstanding pre-funded warrants as of December 31, 2024 and 2023, respectively are considered common stock equivalents and are included in weighted average shares outstanding in the accompanying consolidated statements of operations as of the closing dates of the Company's public equity offerings in January 2023 and August 2023, respectively.

Advertising

The Company charges the costs of advertising to operating expenses as incurred. Advertising expense amounted to approximately $3,484,800 and $3,216,100 in 2024 and 2023, respectively.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and development costs primarily consist of salaries and benefits, prototyping materials, facility and overhead costs, and outsourced research activities.

Recent Accounting Standards

In October 2023, the FASB issued ASU 2023-06, , “Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative”, that adds 14 of the 27 identified disclosure or presentation requirements to the Codification, each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation from its existing regulations by June 30, 2027. The Company currently complies with these disclosure requirements as applicable under Regulation S-X or Regulation S-K and will adopt these new standards depending on timing of when they become effective, which is not expected to have a material impact on its financial position and results of operations.

In November 2023, the FASB issued ASU 2023-07 “Segmented Reporting - Improvements to Reportable Segment Disclosures”. ASU 2023-07 focuses on the requirements to disclose its significant segment expense categories and amounts for each reportable segment. ASU 2023-07 and became effective for the calendar year 2024 year-end financial statements. The Company has adopted these new standards, which did not have a material impact on its financial position and results of operations.

In December 2023, the FASB issued ASU 2023-09, “Accounting standards update, Income Taxes (Topic 740: Improvements to Income Tax Disclosures”. ASU 2023-09 focuses on income tax disclosures around effective tax rates and cash income taxes paid. This amendment in the ASU became effective for public companies as of

December,15 2024 and will be effective for all other companies one year later. The Company will adopt these new standards when they become effective, which we do not believe will have a material impact on its financial position and results of operations.

Subsequent Events

The Company evaluates whether there have been subsequent events through the date the financial statements were issued and determines whether subsequent events exist that would require recognition in the financial statements or disclosure in the notes of the financial statements.

Note 3 — Inventories

Inventories consist of the following at December 31:

Note 4 — Equipment, net

Equipment consists of the following at December 31:

Depreciation expense was approximately $205,900 and $164,300 for the years ended December 31, 2024 and 2023, respectively.

Note 5 — Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and establishes disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

•

Level 1 — Quoted prices available in active markets for identical assets or liabilities.

•

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quotable prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

The carrying amounts of the Company’s financial instruments such as cash and cash equivalents, accounts receivable and accounts payable, approximate fair value due to the short-term nature of these instruments. Cash equivalents consists of a money market fund that limits its investments to only short-term U.S. Treasury securities and repurchase agreements related to these securities.

The Company considers all investments with an original maturity of greater than three months to be short-term investments. Short-term investments primarily consists of commercial paper and U.S. Treasury Bills and are carried on the consolidated balance sheets at fair value. Short-term investments as of December 31, 2024 and 2023 consisted of U.S. Treasury Bills, which are classified as held-maturity, agency bonds and commercial paper totaling approximately $493,000 and $1,994,700, respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchase and evaluates the classification at the date of purchase. Unrealized gains and losses on short-term investments are recorded to accumulated other comprehensive income on the consolidated balance sheets and other gain (loss) on the consolidated statements of comprehensive loss. Once unrealized gains and losses become realized, they are reclassified from other comprehensive gains and losses to cost of goods sold.

Cash equivalents, which are measured at fair value, were as follows At December 31, 2024:

Cash equivalents and short-term investments, which are measured at fair value, were as follows at December 31, 2023:

Note 6 – Accounts Payable and Other Accrued Expenses

Accounts Payable and Other Accrued Expenses consists of the following at December 31:

Note 7 — Line of Credit

On July 11, 2024 (the “Effective Date”), the Company, entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank.

The Loan Agreement provides for a revolving line of credit whereby the Company may borrow up to $4,000,000 (the “Revolving Line”), which Revolving Line may be increased to $5,500,000 at Silicon Valley Bank’s sole discretion upon the occurrence of certain events. Amounts advanced by Silicon Valley Bank are based on 80% of “eligible accounts”, which includes all receivables in the United States, reduced by aged amounts and customers and insurance payers with concentrations in excess of defined limits, among other deductions. The outstanding principal amount of any advance shall accrue interest at a floating rate per annum equal to the greater of (i)8.50% and (ii) the “prime rate” as published in The Wall Street Journal for the relevant period plus one-half percent (0.50%). The Revolving Line is secured on a first priority basis by all of Company’s assets other than intellectual property and certain customary exceptions. Any newly formed or acquired subsidiary of the Company or any guarantor under the Loan Agreement, will either join the Loan Agreement as a co-borrower or become a guarantor under the Loan Agreement, as determined by Silicon Valley Bank in its sole discretion. The Company intends to use the Revolving Line for working capital and general business purposes.

The Revolving Line terminates, and any outstanding principal amount of all advances made thereunder, and any accrued and unpaid interest thereon, become immediately due and payable on the two year anniversary of the Effective Date. The Company must also pay Bank (i) a commitment fee of $20,000, (ii) an “Anniversary Fee” of 0.50% of the Revolving Line and (iii) an “Unused Revolving Line Facility Fee” of 0.50% per annum of the average unused portion of the Revolving Line. In addition, upon termination of the Loan Agreement or the Revolving Line prior to the two year anniversary of the Effective Date, the Company must pay a termination fee of 1.00% of the Revolving Line, subject to certain exceptions.

The Company recorded approxima tely $199,500 in debt origination costs during the year ended December 31, 2024 in conjunction with entering into the Loan Agreement, which includes thecommitment fee and the Anniversary Fee. The Company capitalized the debt origination costs and is amortizing them into interest expense using the interest rate method, which approximates straight-line amortization over the term of the Loan Agreement. As of December 31, 2024, the balance of debt origination costs was approximately $158,000, which is included in other long-term assets on the consolidated balance sheet. The Company amortized $41,600 of debt origination costs to interest expense during the year ended December 31, 2024.

Approximately $1.0 million was available to be drawn under the Loan Agreement based on eligible accounts receivable as of December 31, 2024. No amounts were drawn under the Loan Agreement as of December 31, 2024.

On February 18, 2025, the Company entered into an amendment to the Loan Agreement. See Note 14 -Subsequent Events.

Note 8 — Common Stock

On December 6, 2024, the Company completed a public equity offering, selling 3,450,000 shares at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million.

On January 19, 2024, the Company completed a registered direct equity offering, pursuant to which it sold 1,354,218 shares of common stock and 224,730 pre-funded warrants at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million.

On August 29, 2023, the Company completed a public equity offering, selling 5,413,334 shares of common stock and 1,920,000 pre-funded warrants at $0.60 per share, or at $0.5999 per warrant, generating proceeds after fees and expenses of approximately $3.9 million. Each pre-funded warrant is exercisable for one share of the Company’s common stock at a nominal exercise price of $0.0001 per share.

On January 17, 2023, the Company completed a public equity offering, selling 13,169,074 shares of common stock and 6,830,926 pre-funded warrants at $0.325 per share or at $0.3249 per warrant, generating proceeds after fees and expenses of approximately $5.7 million. Each pre-funded warrant is exercisable for one share of the Company’s common stock at a nominal exercise price of $0.0001 per share.

No shares of common stock were issued through the exercise of stock options during the years ended December 31, 2024 and 2023.

During the years ended December 31, 2024 and 2023, the Company issued 1,004,288 and 339,355 shares of common stock, respectively, upon the vesting of restricted stock units.

Note 9 — Stock Award Plans and Stock-Based Compensation

Equity Incentive Plan

On June 19, 2018, the Company’s Shareholders and Board of Directors (the “Board of Directors”) approved the Myomo, Inc. 2018 Stock Options and Incentive Plan (the “2018 Plan”). On January 1 of each year, the number of shares of common stock reserved and available for issuance under the 2018 Plan will cumulatively increase by 4% of the number shares of common stock outstanding on the immediately preceding December 31 or such lesser number of shares of common stock determined by management in consultation with members of the Board of Directors, including the compensation committee of the Board of Directors.

On January 1, 2024 and 2023, the number of shares reserved and available for issuance under the 2018 Plan increased by 1,085,401 and 310,024 shares, respectively. At December 31, 2024, there were 484,470 shares available for future grant under the 2018 Plan.

Under the terms of the 2018 Plan, incentive stock options (“ISOs”) may be granted to officers and employees and non-qualified stock options and awards may be granted to directors, consultants, officers and employees of the Company. The exercise price of ISOs cannot be less than the fair market value of the Company’s Common Stock on the date of grant. The options vest over a period determined by the Board of Directors, ranging from immediate tofour years, and expire not more thanten years from the date of grant.

Stock Option Awards

Stock option activity under the Stock Option Plans during the years ended December 31, 2024 and 2023 is as follows:

The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options. There wasno income tax benefit recognized in the financial statements for share-based compensation arrangements for the years ended December 31, 2024 and 2023, respectively. There were no stock options granted during the years ended December 31, 2024 and 2023, respectively.

Restricted Stock Units

Restricted stock unit “RSU” activity for the years ended December 31, 2024 and 2023 is summarized below:

In 2024 and 2023, the Company granted an aggregate of 780,390 and 1,450,445 RSUs to employees, respectively, of which 303,000 and 608,000 RSUs were granted to executive officers, respectively, which vest over a period ofthree years andtwo years, respectively. In 2024 and 2023, the Company granted 60,170 and 239,952 RSUs respectively, to independent members of the board of directors, which vest in four equal quarterly installments.

The Company determined the fair value of these grants based on the closing price of the Company’s common stock on the respective grant dates. The compensation expense is being amortized over the respective vesting periods.

Awards of RSUs may be net share settled upon vesting to cover the required employee statutory withholding taxes and the remaining amount is converted into shares based upon their share-value on the date the award vests. These payments of employee withholding taxes, if made, are presented in the statements of cash flows as a financing activity.

Share-Based Compensation Expense

The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees and non-employees and time-based and performance-based restricted stock units to employees and directors, and restricted stock units to employees in the consolidated statements of operations as follows:

As of December 31, 2024, there was approximately $5,800 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a weighted-average period of 0.6 years.

As of December 31, 2024, there was approximately $2,226,000 of unrecognized compensation cost related to unvested restricted stock unit awards which is expected to be recognized over a weighted-average period of 2.3 years.

Note 10 — Warrants

The following table presents the Company’s common stock warrant activity for the years ended December 31, 2024 and 2023:

Due to their nominal exercise price of $0.0001 per share, a total of 7,061,519 and 8,271,519 outstanding pre-funded warrants as of December 31, 2024 and 2023, respectively are considered common stock equivalents and are included in weighted average shares outstanding in the accompanying consolidated statements of operations as of the closing dates of the Company's public equity offerings in January 2024, August 2023 and January 2023, respectively. A total of 1,434,730 and 479,407 pre-funded warrants were exercised during the years ended December 31, 2024 and 2023, respectively. The pre-funded warrants have no maturity date. The weighted average remaining contractual life of warrants outstanding and exercisable, excluding pre-funded warrants at December 31, 2024 was 0.1 years.

Note 11 — Commitments and Contingencies

Litigation

The Company may be involved in legal proceedings, claims and assessments arising from the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. During 2022, a former employee that was terminated in 2021 brought an age discrimination claim against the Company. During the fourth quarter of 2023, the Company settled the claim with its former employee. At that time, the Company deemed it probable that its insurance company will pay its share of the claim. As a result of this assumed gain contingency, the Company reduced its accrual to an amount that is not expected to be covered by insurance, and recorded a liability of approximately $55,000 for severance and legal expenses as of December 31, 2023. The Company and its insurer paid their respective amounts due under the settlement during the year ended December 31, 2024. There is no other material litigation against the Company at this time.

Operating Leases

The Company had a lease agreement for its corporate headquarters in Boston, Massachusetts, which expired in January 2025 and has a lease agreement for office space in Fort Worth, TX. which expires in December 2025. In August 2024, the Company entered into a lease agreement for a new corporate headquarters and manufacturing facility in Burlington, Massachusetts. The Company began relocating operations in December 2024 and completed the move in January 2025. The term of the lease is 88 months following the rent commencement date, which will be May 11, 2025. The Company has the option to extend the new lease for an additional five years, subject to certain conditions being satisfied. Under the new lease, the Company provided a security deposit to the landlord in the form of a letter of credit for $375,000. The Company has collateralized the letter of credit with cash in a separate bank account, which is accounted for as long-term restricted cash on the consolidated balance sheet. Termination options are either not included, or have expired, for the Company’s other existing operating leases. Certain arrangements have discounted rent periods or escalating rent payment provisions. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheets. We recognize rent expense on a straight-line basis over the lease term.

As of December 31, 2024, operating lease assets were approximately $7,584,700 and operating lease liabilities were approximately $8,106,200, which includes a liability for a tenant improvement allowance paid to the Company by the landlord for approximately $516,300 as of December 31, 2024, which will be amortized on a straight-line basis and recorded as a reduction to rental expense over the term of the rental payments. The maturity of the Company's operating lease liabilities as of December 31, 2024, were as follows:

For the twelve months ended December 31, 2024, the total lease cost comprised of the following amounts:

The Company paid cash of approximately $582,700 and $550,600 for its operating leases for the years ended December 31, 2024 and 2023, respectively.

The following summarizes additional information related to operating leases:

If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.

Licensing Agreement

During 2006, the Company entered into an exclusive licensing agreement (the “MIT License”) with Massachusetts Institute of Technology (“MIT”) for access to certain patent rights that require the payment of royalties, which vary based on the level of the Company’s net sales and whether the customer is located in the United.States, or in an international location. As part of the agreement, the Company was required to pay to MIT a nonrefundable annual license maintenance fee which could have been credited to any royalty amounts due in that same year. The MIT license expired in November 2023. The royalty charge for the year ended December 31, 2023 was approximately $244,900, and is included as a component of cost of revenue in the consolidated statement of operations.

Warranty Liability

The Company accrues an estimate of their exposure to warranty claims based on historical warranty costs incurred and the number units under warranty to estimate future warranty costs to be insured. Most of the Company’s current product sales include athree-year warranty. The Company assesses the adequacy of their recorded warranty liability annually and adjusts the amount as necessary.

Changes in warranty liability were as follows:

Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. The Company attempts to maintain its operating cash within federally insured limits. Its cash equivalents, including money market funds, are invested in instruments that are off the balance sheets of its operating banks. Its short term investments are held in high quality instruments issued by large companies, government agencies and U.S. Treasury Bills. Its cash equivalents and short-term investments, to the extent that there are balances in excess of federally insured limits, are with major financial institutions that management believes are financially sound and have minimum credit risk. The Company has not experienced any losses in such accounts and believes credit risks related to its cash, cash equivalents and short-term investments are limited based upon the creditworthiness of the financial institutions holding these funds.

Supplier Finance Program Obligations

The Company finances its directors and officers insurance policy, which requires the Company to make a down payment, followed by equal payments over a defined term. During the year ended December 31, 2023, the Company completed its payment obligation associated with its 2022-2023 policy and entered into a new policy covering the twelve-month period ending June 2024. Under this financing arrangement, the Company made a down payment of approximately $29,000 during the three months ended June 30, 2023 and made nine equal monthly payments of approximately $27,000, starting in July 2023. During the year ended December 31, 2024, the Company completed its payment obligation associated with its 2023-2024 policy and entered into a new policy covering the twelve-month period ending June 2025. Under this new financing arrangement, the Company made a down payment of approximately $39,000 during the three months ended June 30, 2024, and is making nine equal monthly payments of approximately $39,000, starting in July 2024. Changes in the Company's supplier finance obligations were as follows:

Note 12 — Income Taxes

Income (loss) before provision for income taxes was as follows:

The income tax provision (benefit) for the years ended December 31, 2024 and 2023 consists of the following:

The reconciliation between the U.S statutory federal income tax rate and the Company’s effective rate for the years ended December 31, 2024 and 2023 is as follows:

The significant components of the Company’s deferred tax assets are as follows:

As of December 31, 2024 and 2023, the Company had approximately $79,060,000 and $77,360,000 of Federal NOLs and $63,502,000 and$61,239,000 of state NOLs, respectively, available to offset future taxable income. The Federal NOLs incurred prior to 2018 of approximately $6,425,000, if not utilized, begin expiring in the year 2026. The Federal NOLs incurred after 2017 of approximately $52,635,000 have an indefinite carryforward period. The state NOL's if not utilized begin to expire in toexpire in 2025 through 2045.

Additionally, the Company has U.S. federal and state research and development tax credits of $662,000 and $263,000, respectively, which will begin to expire in the year 2026 and 2033, respectively.

NOL carryforwards may face limitations caused by changes in ownership under Section 382 of the Internal Revenue Code. During 2023, the Company experienced an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986. The ownership change has and will continue to subject the Company’s pre-ownership change net operating loss carryforwards to an annual limitation, which will significantly restrict its ability to use them to offset taxable income in periods following the ownership change. The annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. As a result of these ownership changes, the Company is limited to an approximately $64,000 annual limitation on its ability to utilize pre-change NOLs during the carryforward period and has determined that approximately $20,000,000 and $48,000,000 of the Company’s pre-change Federal and State NOLs, respectively, will expire unutilized. As of the issuance date of these financials, the Company has not undertaken a study to determine if its equity offerings in August 2023, January 2024 and December 2024 constituted ownership changes under Section 382.

ASC 740 , “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2024 and 2023. For the years ended December 31, 2024 and 2023, the change in valuation allowance was a increase of approximately $2,540,000 and a decrease of ($6,042,000), respectively.

The Company recognizes interest and penalties relating to unrecognized tax benefits on the income tax expense line in the statement of operations. There areno tax penalties and interest on the consolidated statement of operations as of December 31, 2024 and 2023, respectively. The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities. The Company is subject to examination by U.S. tax authorities beginning with the year ended December 31, 2021. To the extent the Company has tax attribute carryforwards the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state of foreign tax authorities to the extent utilized in a future period.

There wereno accrued interest and penalties at December 31, 2024 and 2023, respectively.

Note 13 — Segment Reporting and Major Customers

Segment Reporting

ACS 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about products, business segments, and major customers in financial statements. The Company conducts its business in one operating segment, and sells products in one family, which are versions of the MyoPro. While the Company has several sales channels and operates in different geographies, the Chief Executive Officer, who is the Company's chief operating decision-maker, and is responsible for allocating resources and assessing the performance of the Company, manages the Company's business on a consolidated basis, focusing on revenue, gross margin, certain operating expenses, loss from operations, other expenses (income), Income Tax, and Net loss. The Chief Executive Officer reviews the consolidated balance sheet with relation to consolidated Assets. The Chief Executive Officer does not review any additional or more disaggregated level.

All other segment operating expenses include: Product Development, Software Expense, Travel and Entertainment, Outside Services, Consultants, and Legal Fees.

Major Customers

For the years ended December 31, 2024 and 2023, there were no customers which accounted for more than 10% of revenues. For the year ended December 31, 2024, CMS and a U.S. commercial insurance payer repres ented 49% and 18%, respectively, of product revenues. For the year ended December 31, 2023, a U.S insurance payer represented 38% of product revenues.

For the year ended December 31, 2024. CMS and a U.S. commercial insurer and its affiliates, accounted for approximately 36%and 19% of accounts receivable, respectively. For the year ended December 31, 2023, a U.S. commercial insurer and its affiliates, accounted for approximately 71%of accounts receivable.

For the year ended December 31, 2024 and 2023, approximately 25% and 57% of the Company's product revenues were derived from patients with Medicare Advantage insurance plans, respectively.

Note 14 — Subsequent Events

On February 18, 2025, the Company entered into a First Amendment (the “Amendment”) to the Loan and Security Agreement (the “Loan Agreement”), dated July 11, 2024, by and between the Company and Silicon Valley Bank. The Amendment provides for, among other things, a new term loan facility (the “Term Loan”) to the Company of up to $3,000,000, available to the Company until February 28, 2026. Advances under the Term Loan (collectively, the “Term Loan Advances”) will be payable in 36 equal monthly installments of principal plus interest, commencing on March 1, 2026, and to the extent not paid, all remaining obligations will become due and payable on February 1, 2029. Term Loan Advances shall accrue interest at a floating rate per annum equal to the greater of (a)5.0% or (b) the “prime rate,” as published from time to time in the money rates section of the Wall Street Journal, minus 1.0%. At the Company’s option, the Company may prepay all outstanding borrowings under the Term Loan, plus accrued and unpaid interest thereon, subject to a prepayment premium ranging from 1.0% to 3.0%, depending on the year of prepayment. The Term Loan also provides for an end of term charge equal to 2.50% of the aggregate principal amount of any loans prepaid or repaid, as applicable.

The Amendment also makes certain changes to the Company’s revolving line of credit under the Loan Agreement, including (i) increasing the defined limit for concentration of Medicare receivables that may be included as “eligible accounts” under the Loan Agreement, and (ii) increasing the permitted aggregate maximum balance that may be maintained in the Company’s German subsidiary.