MYOMO, INC.

Previous wording

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission filings. The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors”, “Cautionary Statement Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q. These risks could cause our actual results to differ materially from any future performance suggested below.

Current wording

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission filings. The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors”, “Cautionary Statement Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q and those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. These risks could cause our actual results to differ materially from any future performance suggested below.

Previous wording

We have relationships with physicians and therapists who generate patient referrals, and we utilize digital ads on various platforms as well as television ads to reach patients who are potential candidates for our product. Once the prospective patient contacts us or is referred to us, either our trained clinical staff or a trained Orthotics and Prosthetics (“O&P”) provider will evaluate the patient for their suitability as a candidate. Initial evaluations by our trained clinical staff are often conducted using telehealth techniques, followed by an in-person clinical evaluation of the candidate. Prior to delivering our device to a Medicare patient or obtaining authorizations from commercial insurance companies, the patient’s medical records are collected and reviewed to make sure the device is appropriate for their condition and a prescription is always obtained from a physician. Once these documents are obtained, a pre-authorization request is submitted to the patient’s commercial insurer. If we receive a pre-authorization, we proceed to measure the patient’s arm, a process we refer to as shape capture. For a Medicare patient, we will commence shape capture once we are in possession of all relevant medical records and have assessed that the patient meets our inclusion criteria. Arm measurements are being done in many cases using a digital measurement kit supplied to the patient. We then use those measurements to 3D print orthotic parts, which are used to fabricate the MyoPro, and then deliver it to the patient. Since we are directly providing the device to the patient and then billing insurance ourselves, we refer to this process as direct billing. We also call on O&P practices in the United States, Europe and Australia that provide our products to their patients as well as generate indirect sales. The MyoPro product line has been approved by the Veterans Administration (“VA”) for impaired veterans, and nearly 130 VA facilities have ordered devices for their patients.

Current wording

We utilize digital ads on various platforms as well as television ads to reach patients who are potential candidates for our product. Once the prospective patient contacts us or is referred to us, either our trained clinical staff or a trained Orthotics and Prosthetics (“O&P”) provider will evaluate the patient for their suitability as a candidate. Initial evaluations by our trained clinical staff are often conducted using telehealth techniques, followed by an in-person clinical evaluation of the candidate. Prior to obtaining authorizations from commercial insurance companies, the patient’s medical records are collected and reviewed to make sure the device is appropriate for their condition and a prescription is always obtained from a physician. Once these documents are obtained, a pre-authorization request is submitted to the patient’s insurer. If we receive a pre-authorization, we proceed to measure the patient’s arm. If the patient is covered by Medicare Part B, no pre-authorization is required and we can move directly to taking measurements of the patient's arm. This is done either in person, or in some cases using a digital measurement kit supplied to the patient. We then use those measurements to 3D print orthotic parts, which are used to fabricate the MyoPro, and then deliver it to the patient. Since we are directly providing the device to the patient and then billing insurance ourselves, we refer to this process as direct billing. We also call on O&P practices in the United States, Europe and Australia that provide our products to their patients as well as generate indirect sales. The MyoPro product line has been approved by the Veterans Administration (“VA”) for impaired veterans, and over 100 VA facilities have ordered devices for their patients.

Previous wording

In November 2018, we announced that the Centers for Medicare and Medicaid Services (“CMS”) had published two new codes (L8701, L8702) pursuant to our application for Healthcare Common Procedure Coding System (“HCPCS”) codes which become effective in early 2019. The assignment of unique L-Codes, if followed by appropriate payment terms, offers greater access to the MyoPro for Medicare beneficiaries.

Current wording

In November 2018, we announced that the Centers for Medicare and Medicaid Services, (“CMS”), had published two new codes (L8701, L8702) pursuant to our application for Healthcare Common Procedure Coding System (“HCPCS”) codes which become effective in early 2019.

Previous wording

On November 1, 2023, CMS issued a final rule that results in a change in the benefit category associated with products billed under the HCPCS codes for our products from durable medical equipment rental to a brace, which would permit reimbursement of MyoPro sales on a lump sum basis. The rule became effective on January 1, 2024. On February 29, 2024, CMS published final average payment determinations for the HCPCS codes describing our products of approximately $33,500 for L8701, the MyoPro Motion W, and approximately $65,900 for L8702, the MyoPro Motion G, which became effective on April 1, 2024. We are being paid by CMS at approximately 80% of the published fees, with the remaining 20% from either the patient directly or their supplemental insurance, if any.

Current wording

On November 1, 2023, CMS issued a final rule that resulted in a change in the benefit category associated with products billed under the HCPCS codes for our products from durable medical equipment rental to a brace, which would permit reimbursement of MyoPro sales on a lump sum basis. The rule became effective on January 1, 2024.

Previous wording

On January 19, 2024 we completed a registered direct equity offering, selling 1,354,218 shares of common stock and 224,730 pre-funded warrants to purchase common stock at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million. Net proceeds from the offering were used to hire 50 to 60 people through the second quarter of 2024 in order to increase our clinical, reimbursement and manufacturing capacity to serve a growing number of patients, including Medicare Part B beneficiaries. On August 29, 2023, we completed a public equity offering, selling 5,413,334 shares of common stock and 1,920,000 pre-funded warrants to purchase common stock at $0.60 per share, or at $0.5999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $3.9 million. In January 2023, we completed a public equity offering, whereby we sold 13,169,074 shares of common stock and 6,830,926 pre-funded warrants to purchase common stock at $0.325 per share, or $0.3249 per pre-funded warrant. Each pre-funded warrant in the above offerings entitles the holder to one share of common stock upon exercise at a nominal exercise price of $0.0001 per share. See section titled “Liquidity” for further discussion.

Current wording

On December 6, 2024, we completed a public offering, selling 3,450,000 shares of common stock at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million. Net proceeds from the offering are expected to be used to grow revenues in our direct billing channel through additional advertising spending and the addition of clinical, reimbursement and manufacturing headcount to support expected increasing demand, to increase R&D spending in order to accelerate the completion of sustaining and new product development activities, to fund systems and headcount to support growth in the O&P channel, to fund associated working capital requirements and general corporate purposes. On January 19, 2024 we completed a registered direct equity offering, selling 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. Each pre-funded warrant in the above offering entitles the holder to one share of common stock upon exercise at a nominal exercise price of $0.0001 per share. See section titled “Liquidity” for further discussion.

Previous wording

We derive revenue primarily from providing devices directly to patients and billing insurance companies or Medicare directly. We also sell our products to O&P providers in the United States, Europe and Australia, to the VA, and to rehabilitation hospitals. Though we increasingly provide devices directly to patients, we sometimes utilize the clinical services of O&P providers for which they are paid a fee.

Current wording

We derive revenue primarily from providing devices directly to patients and billing insurance companies directly. We also sell our products to O&P providers in the U.S, Europe and Australia, to the VA, and to rehabilitation hospitals. Though we increasingly provide devices directly to patients, we sometimes utilize the clinical services of O&P providers for which they are paid a fee.

Previous wording

Cost of revenue consists of direct costs for the manufacturing, printing of orthotic parts, fabrication and fitting of our products, changes in inventory and warranty reserves, and costs for our quality and fulfillment organizations.

Current wording

Cost of revenue consists of direct costs for the manufacturing, printing of orthotic parts, fabrication and fitting of our products, changes in inventory and warranty reserves and overhead costs allocated to cost of revenue.

Previous wording

Research and development (“R&D”) expenses consist of costs for our R&D personnel, including salaries, benefits, bonuses and stock-based compensation, product development costs, clinical studies, and the cost of certain third-party contractors and travel expense. R&D costs are expensed as they are incurred. We intend to enhance our existing products in 2024 and expect R&D costs to increase on an annual basis.

Current wording

Research and development (“R&D”) expenses consist of costs for our R&D personnel, including salaries, benefits, bonuses and stock-based compensation, product development costs, clinical studies, and the cost of certain third-party contractors and travel expense. R&D costs are expensed as they are incurred. We intend to accelerate our R&D efforts in 2025 and expect R&D costs to increase on an annual basis.

Previous wording

R&D expenses increased by approximately $531,600 and $1,453,800, or 74% and 83%, during the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to higher costs for payroll as we are adding headcount in order to accelerate our sustaining engineering and product development efforts as a result of coverage by Medicare.

Current wording

R&D expenses increased by approximately $0.8 million, or 87%, during the three months ended March 31, 2025, as compared to the same period in 2024. The increase was primarily due to higher costs for payroll and outside engineering services as we are accelerating our sustaining engineering and product development efforts.

Previous wording

Selling, clinical, and marketing (“SC&M”) expenses consist of costs for our field clinical staff, O&P channel managers, clinical training organization, and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions, costs of advertising, marketing and promotional events, corporate communications, product marketing and travel expenses. Variable compensation for personnel engaged in sales and marketing activities is generally earned and recorded as expense in the period in which the measurable work is performed. We expect SC&M expenses to increase in 2024 as we plan to add clinical capacity in support of serving Medicare Part B patients.

Current wording

Selling, clinical, and marketing (“SC&M”) expenses consist of costs for our field clinical staff, clinical training organization, and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions, costs of advertising, marketing and promotional events, corporate communications, product marketing and travel expenses. Variable compensation for personnel engaged in sales and marketing activities is generally earned and recorded as expense in the period in which the measurable work is performed. We expect SC&M expenses to increase in 2025 as we increase our advertising spending and clinical capacity to grow revenues in our direct billing channel.

Previous wording

SC&M expenses increased by approximately $1,014,100 and $1,850,600 or 42% and 28%, during the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to higher payroll costs due to increased headcount in our clinical functions to support higher expected sales volume in 2024, higher advertising and travel costs and the effect on payroll costs from a headcount decrease in the first quarter of 2023.

Current wording

SC&M expenses increased by approximately $2.0 million or 86% during the three months ended March 31, 2025, as compared to the same period in 2024. The increase was primarily due to higher payroll costs due to increased headcount in our clinical functions to support higher expected sales volume in 2025 and higher advertising expense.

Previous wording

General and administrative (“G&A”) expenses consist primarily of costs for administrative, reimbursement, and finance personnel, including salaries, benefits, bonuses and stock-based compensation, professional fees associated with legal matters, consulting expenses, costs for pursuing insurance reimbursements for our products and costs required to comply with the regulatory requirements of the SEC, as well as costs associated with accounting systems, insurance premiums and other corporate expenses. We expect that general and administrative expenses will increase in 2024 as we plan to add headcount in our human resources and reimbursement functions in support of serving Medicare Part B patients.

Current wording

General and administrative (“G&A”) expenses consist primarily of costs for administrative, reimbursement, and finance personnel, including salaries, benefits, bonuses and stock-based compensation, professional fees associated with legal matters, consulting expenses, costs for pursuing insurance reimbursements for our products and costs required to comply with the regulatory requirements of the SEC, as well as costs associated with accounting systems, insurance premiums and other corporate expenses. We expect that G&A expenses will increase in 2025 as a result of increasing our reimbursement capacity in order to grow revenue in the direct billing channel.

Previous wording

G&A increased by approximately $844,200 and $1,351,200, or 35% and 18%, during the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to increased payroll costs due to increased headcount in our clinical, reimbursement and human resource functions as part of our plan to increase our reimbursement capacity in 2024 in order to serve Medicare Part B patients, and the effect on payroll costs from a headcount decrease in the first quarter of 2023, as well as increases in legal fees and other outside services.

Current wording

G&A increased by approximately $1.1 million or 37%, during the three months ended March 31, 2025, as compared to the same period in 2024. The increase was primarily due to increased payroll costs due to increased headcount in our reimbursement and human resource functions as part of our plan to increase our reimbursement capacity in 2025 in order to serve Medicare Part B patients, as well as higher incentive compensation accrual due to the increased head count.

Previous wording

Income tax expense recorded during the three and nine months ended September 30, 2024 and 2023 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH. Income tax expense increased in the three and nine months ended September 30, 2024 as a result of higher taxable income compared to the same periods in 2023.

Current wording

Income tax expense recorded during the three months ended March 31, 2025 and 2024 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH. Income tax expense increased in the three months ended March 31, 2025 as a result of higher taxable income compared to the same period in 2024.

Previous wording

Adjusted EBITDA does not include depreciation expense from fixed assets;

Current wording

Adjusted EBITDA does not include depreciation expense from fixed assets; and

Previous wording

As of September 30, 2024, we had working capital of approximately $7.8 million and stockholders’ equity of approximately $9.3 million. We used approximately $6.7 million in cash for operating activities during the nine months ended September 30, 2024. Our historical losses and cash used in operations are indicators of substantial doubt regarding our ability to continue as a going concern. Considering our balance of cash and cash equivalents, as of September 30, 2024 and our plans to grow our revenues by serving Medicare Part B beneficiaries and availability under our line of credit, we believe there is sufficient cash and cash equivalents to fund our operations and capital expenditures for the next 12 months from the date of this report.

Current wording

As of March 31, 2025, we had working capital of approximately $19.5 million and stockholders’ equity of approximately $21.7 million. We used approximately $2.7 million in cash for operating activities during the three months ended March 31, 2025.

Previous wording

We have historically funded our operations through financing activities, including raising equity and debt capital. 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 is undrawn as of the issuance date of this Quarterly Report on Form 10-Q and availability under the line was approximately $0.9 million as of September 30, 2024. In January 2024, we completed a registered direct equity offering, pursuant to which we sold 1,354,218 shares of common stock and 224,730 pre-funded warrants to purchase common stock at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million. In August 2023, we completed a public equity offering pursuant to which we sold 5,413,334 shares of common stock and 1,920,000 pre-funded warrants to purchase common stock at $0.60 per share, or at $0.5999 per warrant, generating proceeds after fees and expenses of approximately $3.9 million. In January 2023, we completed an equity offering under which we sold 13,169,074 shares of common stock and 6,830,926 pre-funded warrants to purchase common stock at $0.325 per share, or at $0.3249 per pre-funded warrant, generating proceeds after fees and expenses of approximately $5.7 million.

Current wording

We have historically funded our operations through financing activities, including raising equity and debt capital. In December 2024, we completed a public equity offering, pursuant to which we sold 3,450,000 shares of common stock at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million. In January 2024, we completed a registered direct equity offering, pursuant to which we 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 approximately2 $5.4 million. In July 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 $216,600 based on eligible accounts receivable as of March 31, 2025. We amended the Loan and Security Agreement in February 2025 to provide for, among other changes, a $3.0 million term loan facility, which is available to be drawn at any time until February 28, 2026. Considering our cash balance and availability under our debt arrangements as of March 31, 2025 and our operating plans discussed below, we believe there will be sufficient cash to fund our operations and capital expenditures for the next 12 months from the date of this report.

Previous wording

Our business is dependent upon reimbursement of our products by insurance companies and government-controlled health care plans such as Medicare and Medicaid in the United States and by Statutory Health Insurance plans in Germany, which could prevent our revenues from growing to the level necessary to achieve operating cash flow breakeven. We believe that we have access to capital resources, if necessary, through usage of our line of credit, potential public or private equity offerings, exercises of outstanding warrants, debt financings, or other means. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. We may also explore strategic alternatives for the purpose of maximizing stockholder value. There can be no assurance we will be successful in implementing our plans to sustain our operations and continue to conduct our business.

Current wording

Our business is dependent upon reimbursement of our products by insurance companies and government-controlled health care plans such as Medicare and Medicaid in the United States and by statutory health insurance plans in Germany, which could prevent our revenues from growing to the level necessary to return to cash flow breakeven and remain that way on a sustaining basis. We believe that we have access to capital resources, if necessary, through potential public or private equity offerings, debt financings, or other means. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. We may also explore strategic alternatives for the purpose of maximizing stockholder value. There can be no assurance we will be successful in implementing our plans to sustain our operations and continue to conduct our business.

Previous wording

Operating Activities. The net cash used in operating activities for the nine months ended September 30, 2024 was primarily used to fund a net loss of approximately $5.9 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.8 million and by approximately $1.8 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to an increase in accounts receivable, inventory and prepaid expenses and other current assets, offset by an increase in accounts payable and accrued expenses.

Current wording

Operating Activities. The net cash used in operating activities for the three months ended March 31, 2025 was primarily used to fund a net loss of approximately $3.5 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.0 million and by approximately $0.2 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts receivable, inventory and prepaid expenses and other current assets, offset by an increase in accounts payable and accrued expenses.

Previous wording

The net cash used in operating activities for the nine months ended September 30, 2023 was primarily used to fund a net loss of approximately $5.7 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.3 million and by approximately $0.6 million of cash generated by net changes in the levels of operating assets and liabilities, primarily related to an increase in accounts payable and accrued expenses, partially offset by an increases in accounts receivable and prepaid expenses and other current assets.

Current wording

The net cash used in operating activities for the three months ended March 31, 2024 was primarily used to fund a net loss of approximately $3.8 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.4 million, offset by approximately $0.2 million of cash generated by net changes in the levels of operating assets and liabilities, primarily related to a decrease in accounts receivable and an increase in accounts payable and accrued expenses, offset by an increase in inventory.

Previous wording

Investing Activities. During the nine months ended September 30, 2024, and 2023, cash provided by investing activities was $1.6 million and used in investing activities was $4.3 million respectively. These amounts were impacted by the net difference between maturities and purchases of short term investments, in addition to purchases of equipment.

Current wording

Investing Activities. During the three months ended March 31, 2025 and 2024, our cash used in investing activities of approximately $1.9 million and $3.5 million, respectively, was primarily related to our purchase of short-term investments and purchases of equipment.

Previous wording

Financing Activities. There was $5.4 million and $9.7 million in cash generated from financing activities during the nine months ended September 30, 2024 and 2023, respectively, due entirely to the net proceeds from our equity offerings in January 2024, January 2023 and August 2023.

Current wording

Financing Activities. There was less than $0.1 million in cash used by financing activities and $5.4 million in cash generated from financing activities during the three months ended March 31, 2025 and 2024, respectively, 2024. Cash used during the three months ended March 31, 2025 was due to payment of issuance costs associated with the amendment to our line of credit agreement with Silicon Valley Bank. Cash generated by financing activities in the three months ended March 31, 2024 was due entirely to the net proceeds from our equity offering in January 2024.