10-Q 1 myo-20240331.htm 10-Q 10-Q
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4

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-38109

 

MYOMO, INC.

(Exact name of Registrant as Specified in its Charter)

 

 

Delaware

47-0944526

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

 

137 Portland St., 4th Floor, Boston, Massachusetts

02114

(Address of principal executive offices)

(Zip Code)

(617) 996-9058

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

MYO

NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

At May 3, 2024, the registrant has 28,814,637 shares of common stock, par value $0.0001 per share, outstanding.

 

 

 


Summary of the Material Risks Associated with Our Business

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.
Our strategy to maximize revenues by focusing our efforts on patients whose insurance has reimbursed for the MyoPro in the past has resulted in a concentration of revenues with patients covered by a particular insurer. Adverse changes in that insurer’s reimbursement policy regarding the MyoPro could have an adverse effect on our business.
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 achieve or maintain market acceptance.
We may not be able to obtain adequate levels of third-party payer reimbursement, including reimbursement by Medicare, for our products.
We depend on a single third-party to manufacture key subassemblies for the MyoPro, and a limited number of third-party suppliers for certain components of the MyoPro.
We sell to orthotics and prosthetics providers and distributors who are free to market products that compete with the MyoPro, and we rely on these distributors to market and promote our products in accordance with their U.S. Food and Drug Administration, or FDA, listings, select appropriate patients and provide adequate follow-on care.
The market for myoelectric braces is new and the rate of adoption is uncertain, and important assumptions about the potential market for our products may be inaccurate.
Defects in our products or the software that drives them could adversely affect the results of our operations.
We are subject to extensive governmental regulations relating to the design, development, manufacturing, labeling and marketing of our products, and a failure to comply with such regulations could lead to withdrawal or recall of our products from the market.
Our internal computer systems, or those of our customers, collaborators or other contractors, may be subject to cyber-attacks or security breaches, which could result in a material disruption of our product development programs.
Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our products.
The market price of our common stock has been and may continue to be volatile.
Since we sell products in several overseas markets, we are subject to foreign currency fluctuations in value, which may reduce our revenue per unit in dollars.

 

 


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q constitutes forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Quarterly Report on Form 10-Q, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

our ability to achieve reimbursement from third-party payers for our products;
our dependence upon external sources for the financing of our operations;
our ability to obtain and maintain our strategic collaborations and to realize the intended benefits of such collaborations;
our ability to effectively execute our business plan;
our ability to maintain and grow our reputation and to achieve and maintain the market acceptance of our products;
our expectations as to our clinical research program and clinical results;
our ability to improve our products and develop new products;
our ability to manage the growth of our operations over time;
our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual property rights of others;
our ability to gain and maintain regulatory approvals;
our ability to maintain relationships with existing customers and develop relationships with new customers;
our ability to compete and succeed in a highly competitive and evolving industry; and
other risks and uncertainties, including those listed under the captain “Risk Factors” in this Quarterly Report on Form 10-Q.

Although the forward-looking statements in this Quarterly Report on Form 10-Q, are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to re-issue this Quarterly Report on Form 10-Q, or otherwise make public statements updating our forward-looking statements.

 


TABLE of CONTENTS

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements (interim periods unaudited)

 

1

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 (audited)

1

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

2

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023

 

 

3

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

4

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

5

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

20

 

 

Item 4. Controls and Procedures

21

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

22

 

 

Item 1A. Risk Factors

22

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

41

 

 

Item 5 Other Information

 

 

41

 

 

 

 

Item 6. Exhibits

42

 

 

Signatures

 

 

43

 

 

 


 

Part 1. FINANCIAL INFORMATION

Item 1. Financial statements

MYOMO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,434,726

 

 

$

6,871,306

 

Short-term investments

 

 

5,523,664

 

 

 

1,994,662

 

Accounts receivable, net

 

 

1,683,414

 

 

 

2,382,658

 

Inventories, net

 

 

2,386,497

 

 

 

1,803,507

 

Prepaid expenses and other current assets

 

 

676,787

 

 

 

598,850

 

Total Current Assets

 

 

15,705,088

 

 

 

13,650,983

 

Operating lease assets with right of use, net

 

 

604,897

 

 

 

663,554

 

Equipment, net

 

 

205,917

 

 

 

175,794

 

Other assets

 

 

4,955

 

 

 

91,237

 

Total Assets

 

$

16,520,857

 

 

$

14,581,568

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

4,963,707

 

 

 

4,885,944

 

Current operating lease liability

 

 

421,514

 

 

 

486,143

 

Income taxes payable

 

 

171,280

 

 

 

96,461

 

Deferred revenue

 

 

 

 

 

8,510

 

Total Current Liabilities

 

 

5,556,501

 

 

 

5,477,058

 

Non-current operating lease liability

 

 

64,599

 

 

 

115,160

 

Total Liabilities

 

 

5,621,100

 

 

 

5,592,218

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock par value $0.0001 per share, 65,000,000 shares authorized;
 
28,789,823 and 27,135,061 shares issued as of March 31, 2024
   and December 31, 2023, respectively; and
28,789,796 and 27,135,034
   shares outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

2,881

 

 

 

2,715

 

Additional paid-in capital

 

 

111,522,270

 

 

 

105,840,239

 

Accumulated other comprehensive income

 

 

147,511

 

 

 

83,669

 

Accumulated deficit

 

 

(100,766,441

)

 

 

(96,930,809

)

Treasury stock, 27 shares at cost

 

 

(6,464

)

 

 

(6,464

)

Total Stockholders’ Equity

 

 

10,899,757

 

 

 

8,989,350

 

Total Liabilities and Stockholders’ Equity

 

$

16,520,857

 

 

$

14,581,568

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1


 

MYOMO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

Product revenue

 

$

3,754,389

 

 

$

3,446,708

 

 

 

 

 

 

 

 

Cost of revenue

 

 

1,455,345

 

 

 

1,139,074

 

Gross profit

 

 

2,299,044

 

 

 

2,307,634

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

956,215

 

 

 

476,991

 

Selling, clinical and marketing

 

 

2,361,845

 

 

 

2,030,551

 

General and administrative

 

 

2,869,751

 

 

 

2,471,057

 

 

 

 

6,187,811

 

 

 

4,978,599

 

 

 

 

 

 

 

 

Loss from operations

 

 

(3,888,767

)

 

 

(2,670,965

)

 

 

 

 

 

 

 

Other (income) expense, net

 

 

 

 

 

 

Interest income, net

 

 

(135,293

)

 

 

(86,314

)

Other expense, net

 

 

 

 

 

31

 

Loss on equity investment

 

 

 

 

 

17,202

 

 

 

 

(135,293

)

 

 

(69,081

)

Loss before income taxes

 

 

(3,753,474

)

 

 

(2,601,884

)

Income tax expense

 

 

82,158

 

 

 

42,411

 

Net loss

 

$

(3,835,632

)

 

$

(2,644,295

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic and diluted

 

 

36,752,597

 

 

 

24,196,732

 

Net loss per share attributable to common stockholders

 

 

 

 

 

 

Basic and diluted

 

$

(0.10

)

 

$

(0.11

)

The accompanying notes are an integral part of the condensed consolidated financial statements.

2


 

MYOMO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(3,835,632

)

 

$

(2,644,295

)

Other comprehensive income, net of tax:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

63,842

 

 

 

65,788

 

Other comprehensive income

 

 

63,842

 

 

 

65,788

 

Comprehensive loss

 

$

(3,771,790

)

 

$

(2,578,507

)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3


 

MYOMO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

 

 

For the Three Month Period Ending March 31, 2024 and 2023

 

Common stock

Additional
Paid-in

Accumulated

Accumulated

Treasury Stock

Total
Stockholders’

 

Shares

Amount

Capital

Comprehensive Income

Deficit

Shares

Amount

Equity

Balance, January 1, 2024

27,135,061

$2,715

$105,840,239

$83,669

$(96,930,809)

27

$(6,464)

$8,989,350

Proceeds from sale of common stock in registered direct offering, net of offering costs of $547,257

1,354,218

135

4,598,636

4,598,771

Proceeds from sale of 224,730 pre-funded warrants in registered direct offering, net of offering costs of $90,814

 

 

763,138

 

 

 

 

763,138

Common stock issued upon vesting of restricted stock units

300,544

31

(31)

Stock-based compensation

320,288

320,288

Unrealized gains on foreign currency adjustments

63,842

63,842

Net loss

(3,835,632)

(3,835,632)

Balance, March 31, 2024

28,789,823

$2,881

$111,522,270

$147,511

$(100,766,441)

27

$(6,464)

$10,899,757

 

 

 

 

 

 

 

 

 

Balance, January 1, 2023

7,750,635

$775

$95,105,071

$43,227

$(88,783,244)

27

$(6,464)

$6,359,365

Common stock issued upon vesting of restricted stock units

2,821

Proceeds from sale of common stock in public offering, net of offering costs of $663,856

13,169,074

1,317

3,614,777

3,616,094

Proceeds from sale of 6,830,926 pre-funded warrants, net of offering costs of $155,356

2,064,012

2,064,012

Stock-based compensation

171,027

171,027

Unrealized gains on foreign currency adjustments

65,788

65,788

Net loss

(2,644,295)

(2,644,295)

Balance, March 31, 2023

20,922,530

$2,092

$100,954,887

$109,015

$(91,427,539)

27

$(6,464)

$9,631,991

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

4


 

MYOMO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

For the Three Months Ended March 31,

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(3,835,632

)

 

$

(2,644,295

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

Depreciation

 

 

29,685

 

 

 

48,632

 

Stock-based compensation

 

 

320,288

 

 

 

171,027

 

Accretion of discount on short-term investments

 

 

(49,053

)

 

 

 

Credit losses

 

 

 

 

 

13,000

 

Loss on equity investment

 

 

 

 

 

17,202

 

Amortization of right-of-use assets

 

 

58,658

 

 

 

101,829

 

Other non-cash charges

 

 

63,930

 

 

 

49,012

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

718,676

 

 

 

340,533

 

Inventories

 

 

(597,087

)

 

 

(157,148

)

Prepaid expenses and other current assets

 

 

6,897

 

 

 

(53,577

)

Accounts payable and accrued expenses

 

 

87,041

 

 

 

386,880

 

Income taxes payable

 

 

77,405

 

 

 

39,417

 

Operating lease liabilities

 

 

(115,191

)

 

 

(109,109

)

Deferred revenue

 

 

(11,181

)

 

 

(20,093

)

Net cash used in operating activities

 

 

(3,245,564

)

 

 

(1,816,690

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchases of equipment

 

 

(59,808

)

 

 

(45,085

)

Maturities of short-term investments

 

 

2,000,000

 

 

 

 

Purchases of short-term investments

 

 

(5,482,757

)

 

 

 

Net cash used in investing activities

 

 

(3,542,565

)

 

 

(45,085

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Net proceeds from common stock offering

 

 

4,598,771

 

 

 

3,708,045

 

Proceeds from sale of pre-funded warrants, net of offering costs

 

 

763,138

 

 

 

2,064,012

 

Net cash provided by financing activities

 

 

5,361,909

 

 

 

5,772,057

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

 

(10,360

)

 

 

7,311

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(1,436,580

)

 

 

3,917,593

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

6,871,306

 

 

 

5,345,967

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

5,434,726

 

 

$

9,263,560

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


 

MYOMO, INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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 U.S. Food and Drug Administration as a Class II medical device. The Company sells its products directly to patients, to Orthotics and Prosthetics ("O&P") providers around the world, the Veterans Health Administration, and distributors in Europe and Australia. The Company was incorporated in the State of Delaware on September 1, 2004 and is headquartered in Boston, Massachusetts.

Note 2 — Liquidity

 

The Company incurred net losses of approximately $3,835,600 and $2,644,300 during the three months ended March 31, 2024 and 2023, respectively, and has an accumulated deficit of approximately $100,766,400 and $96,930,800 at March 31, 2024 and December 31, 2023, respectively. Cash used in operating activities was approximately $3,245,600 and $1,816,700 for the three months ended March 31, 2024 and 2023, respectively. The Company's historical losses and cash used in operations are indicators of substantial doubt regarding the Company's ability to continue as a going concern.

 

Based upon its current cash, cash and cash equivalents, and short-term investments, as well as the future expected cash flows, the Company believes that its available cash, cash equivalents, and short-term investments will fund its operations for at least the next twelve months from the issuance date of these financial statements.

 

The Company has historically funded its operations through financing activities, including raising equity and debt. On January 19, 2024, the Company 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. 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 to purchase common stock at $0.60 per share or at $0.5999 per pre-funded warrant, generating proceeds after fees and expenses of approximately $3.9 million. On January 17, 2023, the Company completed a public equity offering, selling 13,169,074 shares of common stock and 6,830,926 to 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. See Note 7 - Common Stock and Warrants for further discussion. Financing activities, such as the recent registered direct equity offering, are enabling the Company to sustain its operations.

 

Management's operating plans are primarily focused on increasing its clinical, reimbursement and manufacturing capacity in order to serve a higher volume of Medicare Part B patients in 2024. The Company believes that based on the final fees published by the Centers for Medicare and Medicaid Services (“CMS”) for the Company’s products, which became effective on April 1, 2024, if the Company is able to hire at least 50 to 60 additional employees during the first half of 2024 as planned to increase its clinical, reimbursement and manufacturing capacity, and its supply chain is able to meet its volume requirements without disruption, the Company believes it can achieve cash flow breakeven on a quarterly basis by the fourth quarter of 2024. In addition, the Company believes that it has access to capital resources through possible public or private equity offerings, exercises of outstanding warrants, debt financings, or other means. Debt financing may contain other terms that are not favorable to the Company or its stockholders. Based on the Company's latitude as to the timing and amount of certain expenses, its current cash position and operating plans, the Company believes that the substantial doubt is alleviated as of the issuance date of these financial statements. However, there can be no assurance that the Company will be successful in implementing its operating plans.

 

Note 3 — Summary of Significant Accounting Policies

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) that are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2024 and for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the fiscal year ending December 31, 2024, or any other period. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related disclosures of the Company as of December 31, 2023 and 2022 and for the years then ended, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

6


 

Basis of Consolidation

The condensed 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 Income (Loss)

Comprehensive loss includes all changes in equity during a period, except those resulting from investments by stockholders and distributions to stockholders. 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 three months ended March 31, 2024. There were no reclassifications in the three months ended March 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 these estimates. The Company’s significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations and reserves for slow-moving inventory.

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 March 31, 2024 and December 31, 2023.

The Company considers all investments with an original maturity of greater than three months but less than one year to be short-term investments. Short-term investments as of March 31, 2024 and December 31, 2023 consists of commercial paper and U.S. Treasury Bills, which are classified as held-to-maturity, and certificates of deposit totaling approximately $5,523,700 and $1,994,700 as of March 31, 2024, and December 31, 2023, respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchases and evaluates the classification at each balance sheet date. All of the Company's U.S. Treasury Bills mature within the subsequent twelve months from the date of purchase.

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 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 March 31, 2024, and December 31, 2023. The Company recorded an allowance for credit losses accounts which was immaterial to the condensed consolidated financial statements.

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”). The JV Company will manufacture and sell the Company’s current and future products in greater China, including Hong Kong, Macau and Taiwan. 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 fully written off as of December 31, 2023, due to the recording of the Company's share of the losses of the JV Company in prior periods, which were recorded to other expense (income) in the condensed consolidated statement of operations, the Company has no obligation to fund any losses incurred by the JV Company.

Revenue Recognition

 

The Company accounts for revenue under ASC 606, “Revenue from Contracts with Customers” and all of 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:

1)
Identification of the contract, or contracts, with a customer,
2)
Identification of the performance obligations in the contract, including whether they are distinct within the context of the contract,
3)
Determination of the transaction price, including the constraint on variable consideration,

7


 

4)
Allocation of the transaction price to the performance obligations in the contract, and
5)
Recognition of revenue when, or as, performance obligations are satisfied.

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

Product Revenue

Increasingly, the Company derives its revenue from direct billing. The Company also derives revenue from the sale of its products to O&P providers in the United States and internationally and the Veterans Administration (“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. As an example, the Company will record revenue if it is notified that insurance intends to pay and a payment amount is provided, 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 certain insurance companies where the Company has demonstrated sufficient payment history, the Company recognizes 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. These insurers represented 54% and 63% of direct billing channel revenue during the three months ended March 31, 2024 and 2023, respectively.

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. During the three months ended March 31, 2024 and 2023, the Company recognized revenue of approximately $963,400 and $1,683,800, respectively, from third-party payers for which costs related to the completion of the Company’s performance obligations were not recorded in the current period.

 

For revenues derived from O&P providers 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. Revenues 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 definitive agreement with Ryzur Medical to form the JV Company to manufacture and sell the Company's current and future products in greater China, including Hong Kong, Macau and Taiwan (the “JV Agreement”). Under the JV Agreement, the Company is entitled to receive an upfront license fee of $2.7 million. As of June 30, 2023, the final portion of the initial license fee has been paid in full and recognized as license revenue. 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 JV Agreement. The Company will recognize revenue on these amounts upon invoicing of the JV Company as long as the 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 no deferred revenue as of March 31, 2024, and approximately $8,500 of deferred revenue as of December 31, 2023.

8


 

 

Disaggregated Revenue from Contracts with Customers

The following table presents revenue by major source:

 

 

 

For the Three Months
Ended March 31,

 

 

 

2024

 

 

2023

 

Direct to patient

 

$

2,234,742

 

 

$

2,414,614

 

Clinical/Medical providers

 

 

1,519,647

 

 

 

1,032,094

 

Total revenue from contracts with customers

 

$

3,754,389

 

 

$

3,446,708

 

 

Geographic Data

The Company generated 75% of its total revenue from the United States, 22% from Germany, and 3% from other international locations for the three months ended March 31, 2024. The Company generated 80% of its total revenue from the United States, 17% from Germany, and 3% from other international locations, for the three months ended March 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. In certain cases, the Company ships the MyoPro device to O&P providers, or provides the device directly to patients, pending reimbursement from third-party payers, after which revenue is recognized. For the three months ended March 31, 2024 and 2023, the Company recorded cost of goods sold of approximately $112,100 and $199,800, respectively, without corresponding revenue. Direct billing fees paid to O&P providers for services they provide in conjunction with patient evaluations 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. Internal costs incurred and fees paid to O&P providers to measure, fit and deliver the device to patients are expensed to cost of revenue.

Advertising

The Company charges the costs of advertising to operating expenses as incurred. Advertising expense amounted to approximately $787,200 and $691,500 during the three months ended March 31, 2024 and 2023, respectively.

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 gain. The Company recorded gains of approximately $63,800 and $65,800 during the three months ended March 31, 2024 and 2023, respectively, which are included in accumulated other comprehensive income in the condensed consolidated balance sheet. Transaction and translation foreign exchange gains and losses from a foreign currency to the functional currency are included in cost of goods sold in the consolidated statements of operations. Such amounts were immaterial for the three months ended March 31, 2024 and 2023. The balance sheet is translated using the spot rate on the day of reporting and the statement of operations is translated monthly using the average rate for the month.

 

Net Loss per Share

Basic net 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, 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 three months ended March 31, 2024 and 2023, and as a result, all potentially dilutive common shares are considered antidilutive for these periods.

Potential dilutive common shares issuable consist of the following at:

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

 

23,929

 

 

 

28,327

 

Restricted stock units

 

 

1,197,626

 

 

 

681,884

 

Other warrants

 

 

668,250

 

 

 

668,250

 

Total

 

 

1,889,805

 

 

 

1,378,461

 

 

9


 

Due to their nominal exercise price of $0.0001 per share, a total of 8,496,249 and 6,830,926 outstanding pre-funded warrants as of March 31, 2024 and 2023 respectively are considered common stock equivalents and are included in weighted average shares outstanding in the accompanying condensed consolidated statements of operations as of the closing dates of the Company's public equity offerings in January 2023, August 2023, and January 2024 respectively.

 

Recently Adopted Accounting Standards

 

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”, that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding are effective for fiscal years, including interim periods, beginning after December 15, 2022, except for the requirement to disclose a rollforward of obligations outstanding will be effective for fiscal years beginning after December 15, 2023. The Company has adopted this new standard January 1,2024, which did not have a material impact on its financial position and results of operations.

 

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 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 will become effective for public companies as of December 15, 2024 and effective to all other companies as of December 15, 2025. The Company will adopt these new standards when they become effective, which is not expected to have a material impact on its financial position and results of operations.

 

Note 4 — Inventories

Inventories consist of the following at:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Finished goods

 

$

800,018

 

 

$

321,484

 

Work in process

 

 

111,192

 

 

 

6,589

 

Parts and subassemblies

 

 

1,475,287

 

 

 

1,475,434

 

Inventories, net

 

$

2,386,497

 

 

$

1,803,507

 

 

 

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 Measurement” (“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.

10


 

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 consist of money market funds that limit their investments to only short-term U.S. Treasury Securities and repurchase agreements related to these securities. Short-term investments primarily consists of commercial paper and U.S. Treasury Bills and are carried on the condensed consolidated balance sheets at amortized cost which approximates fair value.

Cash equivalents and short-term investments measured at fair value on a recurring basis at March 31, 2024 were as follows:

 

 

 

In Active
Markets for
Identical Assets
or Liabilities
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total

 

Money market funds

 

$

3,825,615

 

 

 

 

 

 

 

 

$

3,825,615

 

Commercial paper

 

$

 

 

$

1,598,452

 

 

 

 

 

$

1,598,452

 

Short-term investments

 

$

 

 

$

5,523,664

 

 

$

 

 

$

5,523,664

 

 

Cash equivalents and short-term investments measured at fair value on a recurring basis at December 31, 2023 were as follows:

 

 

 

In Active
Markets for
Identical Assets
or Liabilities
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total

 

Money market funds

 

$

4,893,387

 

 

 

 

 

 

 

 

$

4,893,387

 

Commercial paper

 

 

 

 

$

746,762

 

 

 

 

 

$

746,762

 

Short-term investments

 

 

 

 

$

1,994,662

 

 

 

 

 

$

1,994,662

 

 

 

Note 6 - Accounts Payable and Other Accrued Expenses

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

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Trade payables

 

$

828,873

 

 

$

1,073,405

 

Accrued compensation and benefits

 

 

2,249,006

 

 

 

1,964,487

 

Accrued professional services

 

 

45,832

 

 

 

52,202

 

Warranty reserve

 

 

224,424

 

 

 

231,108

 

Customer deposits

 

 

1,497,016

 

 

 

1,114,979

 

Other

 

 

118,556

 

 

 

449,763

 

 

 

$

4,963,707

 

 

$

4,885,944

 

 

Note 7 — Common Stock and Warrants

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. As of March 31, 2024, 6,351,519 pre-funded warrants remain exercisable. 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 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 19, 2024, the Company 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 at $3.7999 per pre-funded warrant, generating proceeds after fees and expenses of approximately $5.4 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.

 

11


 

No pre-funded warrants from any of the aforementioned offerings were exercised during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 there were 8,496,249 pre-funded warrants outstanding.

 

On August 2, 2022, the Company entered into an ATM Facility with Alliance Global Partners on (“AGP”). Under the ATM Facility, the Company may sell up to an aggregate of $15 million of the Company’s common stock from time to time and shall pay to AGP cash commissions of 3.0% of the gross proceeds of sales of common stock under the ATM Facility. There were no sales under the ATM Facility during the three months ended March 31, 2024 and 2023, respectively. In conjunction with the public equity offering in August 2023, the Company reduced the amount available to sell under the ATM Facility to $1,000. This amount remains available for sale at March 31, 2024.

No shares of common stock were issued through the exercise of stock options during the three months ended March 31, 2024 and March 31, 2023, respectively.

 

During the three months ended March 31, 2024 and 2023, 300,544 and 2,821 restricted stock units vested, respectively.

 

Note 8 — Stock Award Plans and Stock-Based Compensation

As of March 31, 2024, there were 1,119,624 shares available for issuance under the Myomo, Inc. 2018 Stock Option 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, 1,085,401 shares were added to the share reserve under the 2018 Plan.

 

 

Recipients of awards of restricted stock units typically sell shares in the open market to cover their individual tax liabilities and remit the proceeds to the Company, which offsets withholding taxes paid by the Company. In certain circumstances, stock awards 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. In such instances, these payments of employee withholding taxes are presented in the statements of cash flows as a financing activity. There were no stock awards that were net share settled during the three months ended March 31, 2024 and 2023, respectively.

Share-Based Compensation Expense

The Company accounts for stock awards to employees and non-employees 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.

The Company attributes the value of stock-based compensation to operations on the straight-line method such that the expense associated with awards is evenly recognized over the vesting period.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cost of goods sold

 

$

23,387

 

 

$

20,479

 

Research and development

 

 

24,245

 

 

 

(69,727

)

Selling, clinical, and marketing

 

 

46,121

 

 

 

41,855

 

General and administrative

 

 

226,535

 

 

 

178,420

 

Total

 

$

320,288

 

 

$

171,027

 

 

As of March 31, 2024, there was approximately $19,216 of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted-average period of 1.24 years.

As of March 31, 2024, there was approximately $583,370 of unrecognized compensation expense related to unvested restricted stock units that is expected to be recognized over a weighted-average period of 1.44 years.

12


 

Note 9 — Commitments and Contingencies

Litigation

 

The Company may be involved from time to time 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 who was terminated in 2021 brought an age discrimination claim against the Company. During the fourth quarter of 2023, the Company settled the claim with the former employee. The Company deemed it probable that its insurance company would 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 settlement was paid and all insurance proceeds were received during the three months ended March 31, 2024. There is no other material litigation against the Company at this time.

Operating Leases

 

The Company has a non-cancelable sublease agreement for its corporate headquarters in Boston, Massachusetts, which expires in January 2025 and a lease agreement for office space in Fort Worth, TX. which expires in December 2025. Termination options are either not included, or have expired, for the Company’s 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 condensed consolidated balance sheets. We recognize rent expense on a straight-line basis over the lease term.

 

As of March 31, 2024, operating lease assets were approximately $604,900. The amount and the maturity of the Company’s operating lease liabilities as of March 31, 2024, are as follows:

 

 

 

 

 

 

 

 

 

March 31, 2024

 

2024

 

 

 

 

 

 

 

$

433,830

 

2025

 

 

 

 

 

 

 

 

102,841

 

2026

 

 

 

 

 

 

 

 

 

2027

 

 

 

 

 

 

 

 

 

Thereafter

 

 

 

 

 

 

 

 

 

Total future minimum lease payments

 

 

 

 

 

 

 

 

536,671

 

Less imputed interest

 

 

 

 

 

 

 

 

50,558

 

Total operating lease liabilities

 

 

 

 

 

 

 

$

486,113

 

Included in the condensed consolidated balance sheet:

 

 

 

 

 

 

 

 

 

Current operating lease liabilities

 

 

 

 

 

 

 

$

421,514

 

Non-current operating lease liabilities

 

 

 

 

 

 

 

 

64,599

 

Total operating lease liabilities

 

 

 

 

 

 

 

$

486,113

 

 

For the three months ended March 31, 2024 and 2023, the total lease cost is comprised of the following amounts:

 

 

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

2024

 

 

2023

 

Operating lease expense

 

 

 

 

 

$

89,496

 

 

$

125,650

 

Short-term lease expense

 

 

 

 

 

 

-

 

 

 

-

 

Total lease expense

 

 

 

 

 

$

89,496

 

 

$

125,650

 

 

The following summarizes additional information related to operating leases:

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Weighted-average remaining lease term (in years)

 

 

 

 

 

 

1.0

 

 

 

1.2

 

Weighted-average discount rate

 

 

 

 

 

 

23.3

%

 

 

23.3

%

Major Customers

For the three months ended March 31, 2024 and 2023, there were no customers which accounted for more than 10% of product revenues. For the three months ended March 31, 2024 and 2023, a U.S. insurance payer represented 32% and 44% of product revenues, respectively.

 

13


 

At March 31, 2024 and December 31, 2023, one insurance company and its affiliates accounted for approximately 26% and 38% of accounts receivable, respectively.

 

For the three months ended March 31, 2024 and 2023, approximately 38% and 53% of the Company's product revenues, respectively, were derived from patients with Medicare Advantage insurance plans.

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 new financing arrangement, the Company made a down payment of approximately $29,000 during the three months ended June 30, 2023 and is making nine equal monthly payments of approximately $27,000, starting in July 2023. Changes in the Company's supplier finance obligations were as follows:

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Opening January 1

 

$

142,217

 

 

$

56,603

 

Payments

 

 

 

 

 

(128,692

)

Expensed

 

 

80,109

 

 

 

132,988

 

Ending

 

$

62,108

 

 

$

52,307

 

 

No assets are pledged as security under this arrangement.

 

Note 10 — Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued, and determined that there have been no subsequent events that would require recognition in the financial statements or disclosure in the notes to the unaudited condensed consolidated financial statements.

14


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Overview

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.

 

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 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. Beginning in 2022, this is being done 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 nearly 100 VA facilities have ordered devices for their patients.

 

Our myoelectric orthoses have been clinically shown in peer reviewed published research studies to help regain the ability to complete functional tasks by supporting the affected joint and enabling individuals to self-initiate and control movement of their partially paralyzed limbs by using their own muscle signals. Our technology was originally developed at MIT in collaboration with medical experts affiliated with Harvard Medical School. Myomo was incorporated in 2004.

Other historical milestones include:

In 2012, we introduced the MyoPro. The primary business focus shifted from developing devices that were designed for rehabilitation therapy and sold to hospitals to providing an assistive device through O&P providers to patients who are otherwise impaired for use at home, work, and in the community that facilitates ADLs.
During 2015, we extended our basic MyoPro for the elbow with the introduction of the MyoPro Motion W, a multi-articulated non-powered wrist and the MyoPro Motion G, which includes a powered grasp. The MyoPro Motion W allows the user to use their sound arm to adjust the device and then, for instance, open a refrigerator door, carry a shopping bag, hold a cell phone, or stabilize themselves to avoid a fall and potential injury. The MyoPro Motion G model allows users with severely weakened or clenched hands, such as seen in certain stroke survivors, to open and close their hands and perform a large number of ADLs.
On June 9, 2017, we completed our initial public offering (“IPO”) and a private offering concurrent with the IPO, generating net proceeds of $6.9 million in the aggregate.
On July 31, 2017, we met the criteria to apply the CE Mark for the MyoPro. This has enabled us to sell the MyoPro to individuals in the European Union (the “EU”).
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.
In 2019, we transitioned our business to become a direct provider of the MyoPro to patients and bill insurance companies directly.
In July 2021, we became accredited as a Medicare provider.
In January 2022, we introduced MyoPro 2+ and began in-house fabrication of the device.

15


 

 

China Joint Venture

 

On January 21, 2021, we entered into a definitive agreement with Beijing Ryzur Medical Investment Co., Ltd. (“Ryzur Medical”), a medical device manufacturer based in Beijing, to form a joint venture (the “JV”) to manufacture and sell our current and future products in greater China, including Hong Kong, Macau and Taiwan (the “JV Agreement”).

 

Majority ownership in the joint venture, named Jiangxi Myomo Medical Assistive Appliance Co., Ltd., (the "JV Company") is held by Ryzur Medical with minority ownership by Wuxi Chinaleaf Investment Management Limited Partnership, a private fund that invests in growth opportunities in new technologies. We own a minimum 19.9% stake in the JV Company. Ryzur Medical and its partners have committed to invest a minimum of $8 million and up to $20 million in the JV Company over five years.

 

The JV Company was established on August 12, 2021. On December 29, 2021, we entered into an amendment to the JV Agreement, as well as a Technology License Agreement and a Trademark License Agreement (collectively, the “Agreements”). Under the Agreements, we and the JV Company have entered into a ten-year agreement to license our intellectual property, including recently issued patents in China and Hong Kong, and purchase MyoPro Control System units from us. Pursuant to the Agreements, the JV Company has agreed to an escalating purchase commitment for a minimum of $10.75 million in MyoPro Control System Units during the next ten years, subject to receipt of regulatory approvals necessary to permit sales of the product in the greater China territory.

Recent Developments

 

Equity Offerings

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 are expected to be 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.

 

CMS Status

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. When reimbursed by CMS we will be paid at approximately 80% of the published fees, with the remaining 20% from either the patient directly or their secondary insurance.

Beginning January 1, 2024, we began deliveries to Medicare Part B patients for lump sum reimbursement under the brace benefit category. During the three months ended March 2024, we delivered 33 devices to Medicare Part B beneficiaries, and we were paid by CMS on a lump sum basis for 16 deliveries as of March 31, 2024.

 

Results of Operations

 

We have been growing revenues while incurring net losses and negative cash flows from operations since inception and anticipate this to continue as we focus our efforts on continuing to expand our sales and marketing efforts by increasing the breadth of our marketing activities, increasing our investment in the German and other international markets, investing in development of the pediatric version of the MyoPro, the MyoPal, and the funding of resources focused on obtaining reimbursement from insurance companies.

16


 

The following table sets forth our revenue, cost of revenue, gross profit and gross margin for each of the periods presented.

 

 

For the Three Months
Ended March 31,

Period-
to-Period
Change

 

2024

2023

$

%

Product revenue

$3,754,389

$3,446,708

$307,681

9%

Cost of revenue

1,455,345

1,139,074

316,271

28%

Gross profit

$2,299,044

$2,307,634

$(8,590)

(0)%

Gross margin %

61.2%

67.0%

 

-5.8%

 

Revenues

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.

Total revenue increased by approximately $307,700, or 9%, for the three months ended March 31, 2024, as compared to the same period in 2023. Higher product revenues in the three months ended March 31, 2024 were due to a higher number of revenue units, which offset a lower average selling price.

Cost of Revenue and Gross margin

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, costs for our quality and fulfillment organizations and royalties associated with licensed technologies.

Gross margin was 61.2% for the three months ended March 31, 2024, compared to 67.0% for the three months ended March 31, 2023. The decrease in gross margin was primarily due to a lower average selling price, increased manufacturing overhead as we are adding capacity in support of planned revenue growth in 2024 and a higher number of deliveries to patients, which is when cost of goods sold is recorded than units recognized as revenue.

Operating expenses

The following table sets forth our operating expenses for each of the periods presented.

 

 

 

For the Three Months
Ended March 31,

 

Period-to-Period
Change

 

 

2024

 

2023

 

$

 

%

Research and development

 

$956,215

 

$476,991

 

$479,224

 

100%

Selling, clinical and marketing

 

2,361,845

 

2,030,551

 

331,294

 

16%

General and administrative

 

2,869,751

 

2,471,057

 

398,694

 

16%

Total operating expenses

 

$6,187,811

 

$4,978,599

 

$1,209,212

 

24%

 

Research and development

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.

R&D expenses increased by approximately $479,200, or 100%, during the three months ended March 31, 2024, as compared to the same period in 2023. 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 as a result of coverage by Medicare, and a recovery of stock-based compensation expense in the prior year period which did not recur.

Selling, clinical and marketing

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

17


 

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.

SC&M expenses increased by approximately $331,300 or 16% during the three months ended March 31, 2024, as compared to the same period in 2023. The increase was primarily due to higher payroll costs due to increased headcount in our clinical functions to support higher expected sales volume in 2024, higher advertising expense and the effect on payroll costs from a headcount decrease in the first quarter of 2023.

General and administrative

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.

G&A increased by approximately $398,700 or 16%, during the three months ended March 31, 2024, as compared to the same period in 2023. The increase was 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.

Other (income), net

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

 

 

 

For the Three Months
Ended March 31,

 

 

Period-to-Period
Change

 

 

 

2024

 

 

2023

 

 

$

 

 

%

 

Interest income, net

 

$

(135,293

)

 

$

(86,314

)

 

$

(48,979

)

 

 

57

%

Other expense, net

 

 

-

 

 

 

31

 

 

 

(31

)

 

 

(100

)%

Loss on equity investment

 

 

-

 

 

 

17,202

 

 

 

(17,202

)

 

N/M

 

Total other income, net

 

$

(135,293

)

 

$

(69,081

)

 

$

(66,212

)

 

N/M

 

Other (income) expense, net was income of approximately $135,300 for the three months ended March 31, 2024, compared to income of approximately $69,100 for the same period in 2023. The increase in other income was due primarily to higher interest income as a result of higher interest rates and a higher average investment balance compared to the prior year period.

Income tax expense

 

Income tax expense recorded during the three months ended March 31, 2024 and 2023 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, 2024 as a result of higher taxable income compared to the same period in 2023.

Adjusted EBITDA

We believe that the presentation of Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional information about our financial results. Adjusted EBITDA is an important supplemental measure used by our board of directors and management to evaluate our operating performance from period-to-period on a consistent basis and as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations.

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

Adjusted EBITDA is not in accordance with, or an alternative to, measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. As a non-GAAP measure, Adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. In particular:

 

Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;

18


 

Adjusted EBITDA does not include interest income;
Adjusted EBITDA does not include depreciation expense from fixed assets;
Adjusted EBITDA does not include the impact of stock-based compensation;
Adjusted EBITDA does not include the loss on investment in minority interest;

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures including net income (loss) and our financial results presented in accordance with U.S. GAAP.

The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the periods indicated:

 

 

 

For the Three Months
Ended March 31,

 

 

 

2024

 

 

2023

 

GAAP net loss

 

$

(3,835,632

)

 

$

(2,644,295

)

Adjustments to reconcile to Adjusted EBITDA:

 

 

 

 

 

 

Interest income, net

 

 

(135,293

)

 

 

(86,314

)

Depreciation expense

 

 

29,685

 

 

 

48,632

 

Stock-based compensation

 

 

320,288

 

 

 

171,027

 

Loss on investment in minority interest

 

 

 

 

 

17,202

 

Income tax expense

 

 

82,158

 

 

 

42,411

 

Adjusted EBITDA

 

$

(3,538,794

)

 

$

(2,451,337

)

 

Liquidity and Capital Resources

Liquidity

We measure our liquidity in a number of ways, including the following:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Cash and cash equivalents

 

$

5,434,726

 

 

$

6,871,306

 

Short-term investments

 

 

5,523,664

 

 

 

1,994,662

 

Total

 

 

10,958,390

 

 

 

8,865,968

 

Working capital

 

$

10,148,587

 

 

$

8,865,968

 

 

As of March 31, 2024, we had working capital of approximately $10.1 million and stockholders’ equity of approximately $10.9 million. We used approximately $3.2 million in cash for operating activities during the three months ended March 31, 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 cash, cash equivalents, and short-term investment balances as of March 31, 2024 and our plans to grow our revenues in 2024 by serving Medicare Part B beneficiaries, we believe there is sufficient cash, cash equivalents, and short-term investments to fund our operations and capital expenditures for the next 12 months from the date of this report.

 

We have historically funded our operations through financing activities, including raising equity and debt capital. 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.

 

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 cash flow breakeven. We believe that we have access to capital resources, if necessary, through 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.

 

19


 

Our operating plans are primarily focused on increasing our clinical, reimbursement and manufacturing capacity in order to serve a higher volume of Medicare Part B patients in 2024. Based on the final fees published for our products by CMS, we believe that if we are able to hire at least 50 to 60 additional employees during the first half of 2024 as we have planned to increase our clinical, reimbursement and manufacturing capacity, and our supply chain is able to meet our volume requirements without disruption, we believe we can achieve cash flow breakeven on a quarterly basis by the fourth quarter of 2024. Based on our latitude as to the timing and amount of certain expenses, our current cash position and operating plans, we believe that the substantial doubt is alleviated as of the issuance date of these financial statements.

Cash Flows

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net cash used in operating activities

 

$

(3,245,564

)

 

$

(1,816,690

)

Net cash used in investing activities

 

 

(3,542,565

)

 

 

(45,085

)

Net cash provided by financing activities

 

 

5,361,909

 

 

 

5,772,057

 

Effect of foreign change rate changes on cash

 

 

(10,360

)

 

 

7,311

 

Net increase (decrease) in cash, cash equivalents and restricted
   cash

 

$

(1,436,580

)

 

$

3,917,593

 

 

Operating Activities. 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 and 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.

The net cash used in operating activities for the three months ended March 31, 2023 was primarily used to fund a net loss of approximately $2.6 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.4 million, offset by approximately $0.3 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.

Investing Activities. During the three months ended March 31, 2024, our cash used in investing activities of $3.5 million was primarily related to our purchase of short-term investments and purchases of equipment. During the three months ended March 31, 2023, our cash used in investing activities was for our investment in the JV Company and the purchases of equipment.

Financing Activities. There was $5.4 million and $5.8 million in cash generated from financing activities during the three months ended March 31, 2024 and 2023, respectively, due entirely to the net proceeds from our equity offerings in January 2024 and January 2023.

Critical Accounting Policies and Estimates

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. Our significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations and reserves for credit losses and slow-moving inventory.

Other

There have been no material changes to our critical accounting policies from those described in our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Standards

Information regarding new accounting standards is included in Note 3 — Recently Adopted Accounting Standards to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to us as a smaller reporting company.

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