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 and those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. 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 ending December 31, 2025. These risks could cause our actual results to differ materially from any future performance suggested below.

Previous wording

We are a wearable medical robotics company, specializing in myoelectric braces, or orthotics, for people with neuromuscular disorders. We develop and market the MyoPro product line, which is a myoelectric-controlled upper limb brace, or orthosis. The orthosis is a rigid brace used for the purpose of supporting a patient’s weak or deformed arm to enable and improve functional activities of daily living, (“ADLs”) in the home and community. It is custom constructed by a trained professional during a custom fabrication process for each individual user to meet their specific needs. Our products are designed to help regain function in individuals with neuromuscular conditions due to brachial plexus injury, stroke, traumatic brain injury, spinal cord injury and other neurological disorders.

Current wording

We are a wearable medical robotics platform company, specializing in myoelectric braces, or orthotics, for people with neuromuscular disorders. We develop and market the MyoPro product line, which is a myoelectric-controlled upper limb brace, or orthosis. The orthosis is a rigid brace used for the purpose of supporting a patient’s weak or deformed arm to enable and improve functional activities of daily living (“ADLs”), in the home and community. It is custom constructed by a trained professional during a custom fabrication process for each individual user to meet their specific needs. Our products are designed to help regain function in individuals with neuromuscular conditions due to brachial plexus injury, stroke, traumatic brain injury, spinal cord injury and other neurological disorders.

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, should have the effect of offering 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. The assignment of the unique L-Codes, if followed by appropriate payment terms, should have the effect of offering greater access to the MyoPro for Medicare beneficiaries.

Previous 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.

Current wording

On November 1, 2023, CMS issued a final rule that resulted in a change in the benefit category associated with the 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 November 4, 2025 (“the Closing Date”), we entered into a Loan and Security Agreement with with Avenue Capital Management II, L.P., as administrative agent and collateral agent and Avenue Venture Opportunities Fund II, L.P., as a lender (together "Avenue"), which provides us $17.5 million in committed funding under two tranches. The first tranche of $12.5 million was funded on the Closing Date. The remaining $5.0 million becomes available at our discretion between 12 and 18 months from the Closing Date, subject to maintaining compliance with covenants. We are paying interest only on the term loan for a period of 18 months from the Closing Date, which could be extended to 24 months if we borrowed under the second tranche. After the expiration of the interest-only period, we will re-pay the principal balance in 24 equal monthly installments. The term loan matures on June 1, 2029. Proceeds from this loan were used to repay the outstanding borrowings under the credit facility with Silicon Valley Bank and to pay fees and expenses, with the remainder being used for general corporate purposes.

Current wording

On November 4, 2025 (“the Closing Date”), we entered into a Loan and Security Agreement with Avenue Capital Management II, L.P., as administrative agent and collateral agent and Avenue Venture Opportunities Fund II, L.P., as a lender (together "Avenue"), which provides us $17.5 million in committed funding under two tranches. The first tranche of $12.5 million was funded on the Closing Date. The remaining $5.0 million becomes available at our discretion between 12 and 18 months from the Closing Date, subject to maintaining compliance with covenants. We are paying interest only on the term loan for a period of 18 months from the Closing Date, which could be extended to 24 months if we borrowed under the second tranche. After the expiration of the interest-only period, we will re-pay the principal balance in 24 equal monthly installments. The term loan matures on June 1, 2029. Proceeds from this loan were used to repay the outstanding borrowings under the credit facility with Silicon Valley Bank and to pay fees and expenses, with the remainder being used for general corporate purposes.

Previous wording

We have been growing revenues while incurring net losses and negative cash flows from operations since inception and anticipate this to continue in 2026. Our financial performance in 2025 reflected our ability to be reimbursed by Medicare for providing the MyoPro to their beneficiaries, as well as challenges around marketing efficiency and patient acquisition which increased Cost Per Pipeline Add. Our plan for 2026 is to begin to pivot away from relying on direct to patient advertising to generate revenues and invest in generating revenues from recurring sources, including the MyoConnect referral program and from O&P providers in the U.S. and Germany, while implementing marketing initiatives to reduce Cost Per Pipeline Add in the direct billing channel and minimizing the growth of fixed expenses.

Current wording

We have been growing revenues while incurring net losses and negative cash flows from operations since inception and anticipate this to continue in 2026. Our financial performance in 2025 reflected our ability to be reimbursed by Medicare for providing the MyoPro to their beneficiaries, as well as challenges around marketing efficiency and patient acquisition which increased cost per pipeline add. Our plan for 2026 is to begin to pivot away from relying on direct to patient advertising to generate revenues and invest in generating revenues from recurring patient sources, including the MyoConnect referral program and from O&P providers in the U.S. and Germany, while implementing marketing initiatives to reduce cost per pipeline add in the direct billing channel and minimizing the growth of fixed expenses.

Previous 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.

Current 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 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

We expect that our revenues will continue to grow in 2026, primarily as a result of investments to grow revenues from recurring sources, including generating patient referrals under our MyoConnect program, as well as from O&P practices in the U.S. and Germany, which we expect to increase operating leverage and reduce our dependence on advertising-driven direct-to-patient revenues.

Current wording

We expect that our revenues will continue to grow in 2026, primarily as a result of investments to grow revenues from recurring patient sources, including generating patient referrals under our MyoConnect program, as well as from O&P practices in the U.S. and Germany, which we expect to increase operating leverage and reduce our dependence on advertising-driven direct-to-patient revenues.

Previous wording

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

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

Gross margin was 68.2% for the three months ended March 31, 2026, compared to 67.2% for the three months ended March 31, 2025. The increase in gross margin was primarily due to a higher ASP and lower material costs, offset by higher clinical costs charged to cost of goods sold.

Current wording

Gross margin was 72.1% and 70.3% for the three and six months ended June 30, 2026, respectively, compared to 62.7% and 65.0% for the three and six months ended June 30, 2025, respectively. The increases in gross margin were primarily due to a higher average selling price and manufacturing cost reductions, partially offset by higher clinical costs allocated to cost of sales.

Previous wording

Research and development (“R&D”) expenses consist of costs for our engineering and 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 manage R&D expenses in 2026, while maintaining the pace of our R&D efforts as cash flows allow, as well as to fund a randomized control trial being conducted by the University of Utah.

Current wording

Research and development (“R&D”) expenses consist of costs for our engineering and 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 manage R&D expenses in 2026, while maintaining the pace of our R&D efforts as cash flows allow, as well as to fund a randomized controlled trial being conducted by the University of Utah.

Previous wording

R&D expenses decreased by approximately $0.2 million, or 9%, during the three months ended March 31, 2026, as compared to the same period in 2025. The decrease was primarily due to lower labor expense in project management, engineering, and research.

Current wording

R&D expenses decreased by approximately $0.3 million and $0.4 million, or 14% and 12%, during the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The decreases were primarily due to lower labor expense in project management, engineering, and research.

Previous wording

SC&M expenses increased by approximately $0.4 million or 10% during the three months ended March 31, 2026, as compared to the same period in 2025. The increase was primarily due to higher advertising expense and expenses associated with our new clinical sales personnel.

Current wording

SC&M expenses increased by less than $0.1 million and $0.5 million or 1% and 5%, during the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increases were primarily due to expenses associated with our new clinical sales personnel and higher incentive compensation, partially offset by higher clinical costs allocated to cost of revenues, and in the second quarter of 2026, lower advertising expense.

Previous wording

The following table sets forth our interest and other income, net for each of the periods presented:

Current wording

The following table sets forth our other income, net for each of the periods presented:

Previous wording

Other (income), net was income of approximately $334,400 for the three months ended March 31, 2026 compared to income of approximately $192,000 for the same period in 2025. The increase in other income, net was due to the change in fair value of derivative liabilities related to our term loan with Avenue, driven primarily by a decrease in our stock price and market volatility. This was offset higher interest expense due to our term loan with Avenue entered into in November 2025.

Current wording

Other expense (income), net was $1.7 million and $1.4 million for the three and six months ended June 30, 2026, respectively, compared to income of $0.1 million and $0.3 million for the same periods in 2025, respectively. The increase in other expense was due to the change in fair value of derivative liabilities related to our term loan with Avenue, driven primarily by an increase in our stock price and market volatility. This was offset higher interest expense due to our term loan with Avenue entered into in November 2025.

Previous wording

Income tax expense recorded during the three months ended March 31, 2026 and 2025 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, 2026 as a result of higher taxable income compared to the same period in 2025.

Current wording

Income tax expense recorded during the three and six months ended June 30, 2026 and 2025 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH. Income tax expense decreased by $0.1 million and $0.1 million in the three and six months ended June 30, 2026, respectively, as compared with the same periods in 2025 due to lower taxable income in each period.

Previous wording

We define Adjusted EBITDA as earnings before interest and other expense (income), taxes, depreciation and amortization adjusted for stock-based compensation.

Current wording

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization adjusted for, stock-based compensation and other unusual items.

Previous wording

Adjusted EBITDA does not include interest expense (income), net;

Current wording

Adjusted EBITDA does not include interest income;

Previous wording

Adjusted EBITDA does not include depreciation expense from fixed assets or amortization of leasehold improvements and software costs;

Current wording

Adjusted EBITDA does not include depreciation expense from fixed assets;

Previous wording

Adjusted EBITDA does not include the impact of change in fair value of derivative liabilities.

Current wording

Adjusted EBITDA does not include the impact of the change in fair value of derivative liabilities.

Previous wording

As of March 31, 2026, we had working capital of approximately $16.3 million and stockholders’ equity of approximately $9.0 million. We used approximately $2.2 million in cash for operating activities during the three months ended March 31, 2026.

Current wording

As of June 30, 2026, we had working capital of approximately $13.9 million and stockholders’ equity of approximately $5.8 million. We used approximately $4.4 million in cash for operating activities during the six months ended June 30, 2026.

Previous wording

We have historically funded our operations through financing activities, including raising equity and debt capital. On November 4, 2025, we entered into a Loan and Security Agreement with Avenue, which provides us $17.5 million in committed funding under two tranches. The first tranche of $12.5 million was funded on the Closing Date. The remaining $5.0 million becomes available at our discretion between 12 and 18 months from the Closing Date, subject to maintaining compliance with covenants. We are paying interest only on the term loan for a period of 18 months from the Closing Date, which could be extended to 24 months if we borrowed under the second tranche. After the expiration of the interest-only period, we will re-pay the principal balance in 24 equal monthly installments. The term loan matures on June 1, 2029. Proceeds from this loan were used to repay the outstanding borrowings under the credit facility with Silicon Valley Bank and to pay fees and expenses, with the remainder being used for general corporate purposes. Considering our cash balance, our debt service 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.

Current wording

We have historically funded our operations through financing activities, including raising equity and debt capital. On November 4, 2025, we entered into a Loan and Security Agreement with Avenue, which provides us $17.5 million in committed funding under two tranches. The first tranche of $12.5 million was funded on the Closing Date. The remaining $5.0 million becomes available at our discretion between 12 and 18 months from the Closing Date, subject to maintaining compliance with covenants. We are paying interest only on the term loan for a period of 18 months from the Closing Date, which could be extended to 24 months if we borrowed under the second tranche. After the expiration of the interest-only period, we will re-pay the principal balance in 24 equal monthly installments. The term loan matures on June 1, 2029. We have to meet certain debt covenants under the loan, including (i) a minimum cash balance of $2,500,000; (ii) minimum trailing three months revenue equal to 75% of budgeted revenues for such months, measured monthly; and (iii) maximum trailing six months cash burn equal to the greater of 150% of the budgeted cash burn for such months, or $2,000,000, measured quarterly. Non-compliance with covenants may impact access to liquidity. Proceeds from this loan were used to repay the outstanding borrowings under the credit facility with Silicon Valley Bank and to pay fees and expenses, with the remainder being used for general corporate purposes. Considering our cash balance, our debt service 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

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.

Current wording

Operating Activities. The net cash used in operating activities for the six months ended June 30, 2026 was primarily used to fund a net loss of approximately $7.0 million, adjusted for non-cash expenses in the aggregate amount of approximately $3.6 million and by approximately $0.7 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to increases in prepaid expenses and accounts receivable, partially offset by an increase in accounts payable and accrued expenses, due primarily to an increase in incentive compensation during the six months ended June 30, 2026.

Previous wording

Operating Activities. The net cash used in operating activities for the three months ended March 31, 2026 was primarily used to fund a net loss of approximately $3.0 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.5 million use of cash and a source of approximately $0.3 million of cash by net changes in the levels of operating assets and liabilities, primarily related to decrease in prepaid expenses and other current assets and in accounts payable and accrued expenses, offset by an increase in accounts receivable.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 was primarily used to fund a net loss of approximately $8.1 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.8 million and by approximately $5.3 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts receivable due primarily to a payment hold by CMS, increases in inventory and prepaid expenses and other current assets, and a decrease in accounts payable and accrued expenses, due primarily to the payment of incentive compensation during the three months ended June 30, 2025.

Previous wording

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Materially different results can occur if circumstances change and additional information becomes known. Actual results may differ from these estimates. Refer to Note 3 - Summary of Significant Accounting

Current wording

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Materially different results can occur if circumstances change and additional information becomes known. Actual results may differ from these estimates. Refer to Note 3 - Summary of Significant Accounting Policies. Our most critical accounting estimates include the timing and amount of revenue recognition based on assertions, revenue recognition based on transaction pricing estimated from payments from certain insurance payers and valuation of derivative liabilities

Previous wording

The timing and amount of revenue recognized is determined based on certain estimates. For revenue derived from patients with Medicare Part B, we determined we had sufficient payment history in order to recognize revenue upon delivery of the device to the patient based on the published fees by CMS. With respect to patients with Medicare Advantage or other commercial insurance, except for a small number of payers, we do not have contracts to establish pricing or provide evidence of an arrangement, however we are able to rely on a history of payments after receiving an insurance authorization, delivery of the device and submission of a claim as evidence of an arrangement. For these payers, payment history is also used to estimate how much we expect to be paid upon delivery of our device and submission of an insurance claim, which determines how much revenue we recognize. The transaction pricing for these providers is based on the expected value method, based on previous history. For the majority of Medicare Advantage and other commercial insurance payers, we have determined that we do not have sufficient collection history with the payer to assert evidence of an arrangement and collectability. For these payers, revenue is recognized at payment, which is when we can determine how much we will be paid for the device.

Current wording

The timing and amount of revenue recognized is determined based on certain estimates. For revenue derived from patients with Medicare Part B, we determined we had sufficient payment history in order to determine transaction price and recognize revenue upon delivery of the device to the patient based on the published fees by CMS. With respect to patients with Medicare Advantage or other commercial insurance, except for a small number of payers, we do not have contracts to establish pricing or provide evidence of an arrangement, however we are able to rely on a history of payments after receiving an insurance authorization, delivery of the device and submission of a claim as evidence of an arrangement. For these payers, payment history is also used to estimate how much we expect to be paid upon delivery of our device and submission of an insurance claim, which determines how much revenue we recognize. The transaction pricing for these providers is based on the expected value method, based on previous history. For the majority of Medicare Advantage and other commercial insurance payers, we have determined that we do not have sufficient collection history with the payer to assert evidence of an arrangement and collectability. For these payers, revenue is recognized at payment, which is when we can determine how much we will be paid for the device.