MYOMO, INC.

Current report

Except as set forth below, there have been no material changes to our risk factors from those disclosed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current report

Changes made by direct to consumer advertising companies in how they reach prospective patients could adversely impact our lead generation efforts, resulting in higher advertising cost per addition to our patient pipeline and have an adverse effect on revenues.

Current report

We rely on a variety of direct-to-consumer advertising companies to help us reach and educate prospective patients, their caregivers and families regarding the potential benefits of the MyoPro. These companies are subject to various privacy laws and regulations regarding the use of protected patient health and other identifying information in advertising activities. Changes in the algorithms and other methods used by these companies to remain in compliance with these laws and regulations, which we do not control, nor have input into, may adversely affect our lead generation, our advertising cost per addition to our patient pipeline, which we refer to as cost per pipeline add, and our revenues. For instance, in the first quarter of 2025, a social media advertising company we utilize made a change to the algorithm they use to target prospective patients. This change resulted in decreased lead generation for the first half of the first quarter and a higher cost per pipeline add in the first quarter, which is also expected to negatively impact our revenue growth in the second quarter of 2025. Methods and algorithms used by media companies are continually evolving and we cannot provide any assurance that future changes will not impact our revenues and results of operations.

Current report

Significant political, trade, and regulatory developments, and other circumstances beyond our control, could have a material adverse effect on our financial condition or results of operations.

Current report

We sell our products in countries throughout the world. Significant political, trade, or regulatory developments in the jurisdictions in which we sell our products, such as those stemming from the change in U.S. federal administration, are difficult to predict and may have a material adverse effect on us. These developments may include tariffs or changes in reimbursement policies for Medicaid and Medicare. For example, in April 2025, the United States imposed broad tariffs on imports from virtually all countries, with particularly high tariffs on imports from China. Since this announcement, most tariffs for countries other than China have been suspended temporarily. In response to tariffs, some countries have implemented retaliatory tariffs on U.S. goods, while others seek to negotiate agreements regarding U.S. imposed tariffs. Historically, tariffs have led to increased trade and political tensions and, to date, the outcome of the negotiations between the United States and the various countries is not yet clear. While we estimate that tariffs on imports, if fully implemented as announced in April 2025, are expected to have less than a 100 basis point (1%) impact on gross margin in 2025, we cannot provide any assurance that changes in political, trade, regulatory, or economic conditions, including U.S. trade policies, will not have a material adverse effect on our financial condition or results of operations.

Previous report

The following important factors, among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from time to time. Investors should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are not material may also significantly impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment.

Previous report

Risks Associated with Our Business

Previous report

We have a history of operating losses. Factors both within and outside of our control could result in a delay in our ability to achieve cash flow breakeven on a quarterly basis.

Previous report

We have a history of losses since inception. For the three and nine months ended September 30, 2024, we incurred net losses of $0.9 million and $5.9 million, respectively. For the year ended December 31, 2023, we incurred a net loss of $8.1 million. At September 30, 2024, we had an accumulated deficit of approximately $102.8 million. The extent and duration of future operating and net losses will depend on our ability to grow our revenues and absorb the headcount and additional clinical, reimbursement and manufacturing capacity we added in the first half of 2024, the ability of our supply chain to meet our volume requirements without disruption and our ability to compensate for additional advertising expenditures in the second half of 2024. Additionally, our expected payments must be received and our days sales outstanding in accounts receivable must not increase. Under these assumptions, we believe it is achievable to be operating cash flow breakeven on a quarterly basis in the fourth quarter of 2024. However, there can be no assurance that we can cost effectively grow our revenues without requiring additional capital.

Previous report

Our cash, cash equivalents and restricted cash at September 30, 2024 were approximately $6.9 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 (“Silicon Valley Bank”), 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 $0.9 million as of September 30, 2024. On January 19, 2024, we completed a registered direct offering of our common stock and pre-funded warrants, generating net proceeds of approximately $5.4 million. We believe that our existing cash, cash equivalents, and short-term investments at September 30, 2024 will be sufficient to fund our operations for the twelve months from the date of this report. If we encounter obstacles such as those that have been referred to above, the timing of our ability to achieve operating cash flow breakeven could extend beyond the fourth quarter of 2024 and additional capital may be required.

Previous report

Our direct billing revenues are concentrated with a small number of payers, including CMS. Adverse changes in the reimbursement policies of these payers regarding the MyoPro could have an adverse effect on our business.

Previous report

Revenues from providing the MyoPro directly to patients, a sales channel we refer to as direct billing, represented 81% and 76% of revenues for the three and nine months ended September 30, 2024, respectively. In 2024, we began providing the MyoPro to Medicare Part B patients. Revenues from the Centers for Medicare & Medicaid Services (“CMS”) represented 68% and 58% of direct billing revenues (55% and 44% of total revenues) for the three and nine months ended September 30, 2024, respectively. In order to maximize revenues and minimize cash used for operations, we focus on patients with commercial insurers who have previously reimbursed for the MyoPro. Beginning in September 2021, a large insurer that has historically reimbursed for the MyoPro began denying claims after having granted a pre-authorization and after we delivered the devices to patients, and these post-service denials currently continue. Revenues from patients insured by this payer represented 24% and 29% of direct billing revenues (19% and 22% of total revenue) during the three and nine months ended September 30, 2024, respectively. With a small number of exceptions, appeals filed with the payer have been successful and these claims have ultimately been paid.

Previous report

This payer also continues to provide us with pre-authorizations to serve new patients, however denials are increasing with this payer, as with other Medicare Advantage plans. If CMS were to change their coverage criteria for the MyoPro, or the aforementioned commercial payer were to continue to regularly deny appeals on filed claims, reduce the number of MyoPro’s that it will authorize for its insured patients, or delays payments pending resolution of the denial and appeals process, our revenues and cash flows would be negatively impacted, which would have an adverse effect on our business.

Previous report

We may experience significant fluctuations in our quarterly and annual results.

Previous report

Fluctuations in our quarterly and annual financial results have resulted and will continue to result from numerous factors, including:

Previous report

timing, number and dollar value of reimbursements of our products by insurance payers;

Previous report

changes in the mix of products we sell;

Previous report

strategic actions by us, such as acquisitions of businesses, products, or technologies;

Previous report

effects of domestic and foreign economic conditions and exchange rates on our industry and/or customers;

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the divestiture or discontinuation of a product line or other revenue generating activity;

Previous report

the relocation and integration of manufacturing operations and other strategic restructuring;

Previous report

regulatory actions which may necessitate recalls of our products or warning letters that negatively affect the markets for our products;

Previous report

costs incurred by us in connection with the termination of contractual and other relationships, including distributorships;

Previous report

our ability to collect outstanding accounts receivable;

Previous report

the expiration or exhaustion of deferred tax assets such as net operating loss carryforwards;

Previous report

increased product and price competition, due to reimbursement of our products by Medicare, the regulatory landscape, market conditions or other factors;

Previous report

technology changes to enhance individual data privacy that could negatively impact our ability to market our products to prospective candidates and could result in increased advertising costs;

Previous report

market reception of our new or improved product offerings; and

Previous report

the loss of any significant customer.

Previous report

These factors, some of which are not within our control, may cause the price of our common stock to fluctuate substantially. If our quarterly operating results fail to meet or exceed the expectations of securities analysts or investors, our stock price could drop suddenly and significantly. We believe quarterly comparisons of our financial results are not always meaningful and should not be relied upon as an indication of our future performance.

Previous report

Sales of our device depend, in part, on the extent to which our products are covered by third-party payers, such as government health programs, commercial insurance and managed healthcare organizations. See section titled “Business Section – Government Regulation – Health Insurance Reimbursement”, in our December 31, 2023 annual report on Form 10-K. Third-party payers are increasingly challenging the prices charged, examining the medical necessity and creating additional restrictions on coverage, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payers may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication. In addition, CMS may issue local or national coverage determinations which could result in more restrictive coverage for our products. The coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payer separately, with no assurance that coverage and adequate reimbursement will be obtained. In addition, the absence of in-network contracts with Medicare Advantage plans or commercial insurers could result in utilization management for out-of-network patients. Currently, we are almost entirely dependent on third parties to cover the cost of our products to patients and rely on their reimbursement for the cost of our products. If CMS, the U.S. Department of Veterans Affairs (the “VA”) health insurance companies and other third-party payers do not provide adequate coverage or reimbursement for our products, then our sales will be limited to clinical facilities and individuals who can pay for our devices without reimbursement. To our knowledge, from inception through September 30, 2024, fewer than 50 units have been self-paid or funded by non-profit foundations. Some commercial health insurance plans have published statements that they will not cover the cost of the

Previous report

MyoPro for their members. In the event we are unsuccessful in obtaining additional coverage and adequate reimbursement for our products from third-party payers, our sales will be significantly constrained. Currently, reimbursement for the cost of our products is obtained primarily on a case-by-case basis until such time, if any, we obtain broad coverage policies with Medicare and third-party payers. There can be no assurance that we will be able to obtain these broad coverage policies or that Medicare or its local administrative billing contractors will not establish more restrictive coverage requirements for the MyPro in the future (for example, in the form of a local or national coverage determination). See section titled“Business Section – Government Regulation – Health Insurance Reimbursement”, in our December 31,2023 annual report on Form 10-K.

Previous report

In connection with Medicare reimbursement, in November 2023 CMS reclassified the MyoPro from the durable medical equipment benefit to the brace benefit category effective January 1, 2024, thereby allowing for lump sum reimbursement. Such lump sum reimbursements based on the fees posted by CMS, are now being made. CMS published final average payment determinations for the MyoPro Motion W (L8701) of approximately $33,500 and the MyoPro Motion G (L8702) of approximately $65,900, effective April 1, 2024. Our claims can be reviewed on a case-by-case basis at any time by CMS.

Previous report

There can be no assurance that the final fees will be sufficient to permit us to generate gross margin required to allow us to operate on a profitable basis. Third-party payers also may continue to deny or limit coverage, limit reimbursement or reduce their levels of payment, or our costs of production may increase faster than increases in reimbursement levels. In addition, we may not obtain coverage and reimbursement approvals in a timely manner. Our failure to operate profitably could negatively impact market acceptance of MyoPro.

Previous report

We currently rely, and in the future will rely, on sales of our MyoPro products for our revenue, and we may not be able to expand market acceptance or grow revenues in the orthotics and prosthetics channel.

Previous report

We currently rely, and in the future will rely, on sales of our MyoPro products for our revenue. MyoPro products are relatively new products, and continuing market acceptance and adoption will depend on educating people with limited upper extremity mobility and healthcare providers as to the distinct features, ease-of-use, improved quality of life and other benefits of MyoPro systems compared to alternative technologies and treatments. Our products may not be perceived to have sufficient potential benefits compared with these alternatives, which include rehabilitation therapy or amputation with a prosthetic replacement. Also, healthcare providers such as orthotics and prosthetics ("O&P") practices and the VA want to see good outcomes for their patients and certainty of third-party reimbursement. Accordingly, healthcare providers may not recommend the MyoPro until there is sufficient evidence to convince them to alter the treatment methods they typically recommend. This evidence may include prominent healthcare providers or other key opinion leaders in the upper extremity paralysis community recommending the MyoPro as effective in providing identifiable immediate and long-term health benefits, and the publication of additional peer-reviewed clinical studies demonstrating its value. Additionally, because the MyoPro is a prescription device, patients require the prescription of a healthcare provider to access our products and to have the device reimbursed by insurance.

Previous report

Expanding market acceptance of MyoPro products could be negatively impacted by many other factors, including, but not limited to:

Previous report

patient outcomes not meeting expectations;

Previous report

lack of sufficient evidence supporting the benefits of MyoPro over competitive products or other available treatment, or lifestyle management to accommodate the disability;

Previous report

patient resistance to wearing an external device or making required insurance co-payments;

Previous report

limitations on the ability of patients to complete evaluations and fittings, including adverse changes in their health, or other environmental, social and economic barriers to patient access;

Previous report

results of clinical studies relating to MyoPro or similar products;

Previous report

claims that MyoPro, or any component thereof, infringes on patent or other intellectual property rights of third parties;

Previous report

perceived risks associated with the use of MyoPro or similar products or technologies;

Previous report

the introduction of new competitive products or greater acceptance of competitive products;

Previous report — wording carried elsewhere

We may not be able to obtain third-party payer reimbursement, including reimbursement by Medicare, for our products.