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 June 30, 2023

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 August 2, 2023, the registrant has 21,100,568 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 and our financial statements for the period ended June 30, 2023 include disclosures regarding there being substantial doubt about our ability to continue as a going
concern.

•If the Center for Medicare and Medicaid Services ("CMS") does not allow coverage for the MyoPro, insurers offering Medicare Advantage insurance plans may no longer reimburse for the MyoPro, which could have an adverse effect on our business.

•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 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 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, delivery and billing of our products, and a failure to comply with such regulations could lead to withdrawal or recall of our products from the market.

•We depend on certain patents that are licensed to us. We do not control these patents and any loss of our rights to them could prevent us from manufacturing our products.

•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, including the establishment of coverage and payment policies for our reimbursement codes 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 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 June 30, 2023 and December 31, 2022 (audited)	1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	2
Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022	3
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	5
Notes to Condensed Consolidated Unaudited Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	23
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	42
Item 5. Other Information	42
Item 6. Exhibits	43
Signatures	44

Part 1. FINANCIAL INFORMATION

Item 1. Financial statements

MYOMO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2023			2022
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	6,006,283		$	5,345,967
Short-term investments		2,950,268			-
Accounts receivable, net		1,641,803			1,896,163
Inventories, net		1,337,353			1,399,865
Prepaid expenses and other current assets		694,641			573,462
Total Current Assets		12,630,348			9,215,457
Operating lease assets with right of use, net		299,118			508,743
Equipment, net		153,719			194,283
Investment in Jiangxi Myomo Medical Assistive Appliance Co. Ltd.		102,773			132,489
Other assets		111,034			111,034
Total Assets	$	13,296,992		$	10,162,006
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses		3,977,460			3,086,932
Current operating lease liability		181,783			353,701
Income taxes payable		177,187			140,650
Deferred revenue		747			20,653
Total Current Liabilities		4,337,177			3,601,936
Non-current operating lease liability		139,657			200,207
Deferred revenue, net of current portion		126			498
Total Liabilities		4,476,960			3,802,641
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;  21,092,029 and 7,750,635 shares issued as of June 30, 2023    and December 31, 2022, respectively; and 21,092,002 and 7,750,608    shares outstanding at June 30, 2023 and December 31, 2022, respectively		2,110			775
Additional paid-in capital		101,226,783			95,105,071
Accumulated other comprehensive income		39,292			43,227
Accumulated deficit		(92,441,689	)		(88,783,244	)
Treasury stock, 27 shares at cost		(6,464	)		(6,464	)
Total Stockholders’ Equity		8,820,032			6,359,365
Total Liabilities and Stockholders’ Equity	$	13,296,992		$	10,162,006

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						For the Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenue
Product revenue	$	4,243,624		$	3,677,575		$	7,690,332		$	6,545,501
License revenue		1,714,920			—			1,714,920			1,000,000
		5,958,544			3,677,575			9,405,252			7,545,501
Cost of revenue		1,677,488			1,276,444			2,816,594			2,567,149
Gross profit		4,281,056			2,401,131			6,588,658			4,978,352
Operating expenses:
Research and development		564,235			632,872			1,041,225			1,292,408
Selling, general and administrative		4,819,827			4,664,088			9,321,435			9,320,505
		5,384,062			5,296,960			10,362,660			10,612,913
Loss from operations		(1,103,006	)		(2,895,829	)		(3,774,002	)		(5,634,561	)
Other (income) expense, net
Interest income		(103,439	)		(13,845	)		(189,753	)		(14,026	)
Other (income) expense, net		5,631			165			5,631			293
Loss on equity investment		12,514			33,208			29,716			33,208
		(85,294	)		19,528			(154,406	)		19,475
Loss before income taxes		(1,017,712	)		(2,915,357	)		(3,619,596	)		(5,654,036	)
Income tax expense (benefit)		(3,562	)		(6,435	)		38,849			69,820
Net loss	$	(1,014,150	)	$	(2,908,922	)	$	(3,658,445	)	$	(5,723,856	)
Weighted average number of common shares outstanding:
Basic and diluted		27,992,928			6,923,799			26,000,216			6,904,966
Net loss per share attributable to common stockholders
Basic and diluted	$	(0.04	)	$	(0.42	)	$	(0.14	)	$	(0.83	)

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						For the Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net loss	$	(1,014,150	)	$	(2,908,922	)	$	(3,658,445	)	$	(5,723,856	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation (loss) gain		(71,357	)		41,583			(5,569	)		50,828
Unrealized gain on short-term investments		1,634			—			1,634			—
Other comprehensive (loss) income		(69,723	)		41,583			(3,935	)		50,828
Comprehensive loss	$	(1,083,873	)	$	(2,867,339	)	$	(3,662,380	)	$	(5,673,028	)

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 and Six Months Ended June 30, 2023 and 2022
	Common stock		Additional Paid-in	Accumulated Comprehensive	Accumulated	Treasury Stock		Total Stockholders’
	Shares	Amount	Capital	Income (Loss)	Deficit	Shares	Amount	Equity
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 gain on foreign currency	—	—	—	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
Common stock issued upon vesting of restricted stock units, net of 16,744 shares withheld for employee taxes	169,499	18	$(8,165)					(8,147)
Stock-based compensation			280,061					280,061
Unrealized loss on foreign currency				(71,357)				(71,357)
Unrealized gain on short-term investments				1,634				1,634
Net loss					(1,014,150)			(1,014,150)
Balance, June 30, 2023	21,092,029	$2,110	$101,226,783	$39,292	$(92,441,689)	27	$(6,464)	$8,820,032
Balance, January 1, 2022	6,869,753	$687	$93,537,807	$(60,677)	$(78,062,222)	27	$(6,464)	$15,409,131
Common stock issued upon vesting of restricted stock units	10,151	1	(1)	—	—	—	—	—
Stock-based compensation	—	—	266,270	—	—	—	—	266,270
Unrealized gain on foreign currency	—	—	—	9,245	—	—	—	9,245
Net loss	—	—	—	—	(2,814,934)	—	—	(2,814,934)
Balance, March 31, 2022	6,879,904	$688	$93,804,076	$(51,432)	$(80,877,156)	27	$(6,464)	$12,869,712
Common stock issued upon vesting of restricted stock units	97,158	10	(10)	—	—	—	—	—
Stock-based compensation	—	—	345,223	—	—	—	—	345,223
Unrealized gain on foreign currency	—	—	—	41,583	—	—	—	41,583
Net loss	—	—	—	—	(2,908,922)	—	—	(2,908,922)
Balance, June 30, 2022	6,977,062	$698	$94,149,289	$(9,849)	$(83,786,078)	27	$(6,464)	$10,347,596

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

4

MYOMO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the Six Months Ended June 30,	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,658,445	)	$	(5,723,856	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		100,622			94,645
Stock-based compensation		451,088			611,493
Bad debt expense		13,000			26,075
Loss on equity investment		29,716			33,208
Amortization of right-of-use assets		209,625			162,638
Other non-cash charges		(10,786	)		69,521
Changes in operating assets and liabilities:
Accounts receivable		235,877			602,033
Inventories		68,907			(496,529	)
Prepaid expenses and other current assets		(212,438	)		345,470
Other assets		—			(15,704	)
Accounts payable and accrued expenses		888,594			(542,597	)
Income taxes payable		34,774			56,600
Operating lease liabilities		(232,467	)		(195,244	)
Deferred revenue		(20,280	)		1,650
Net cash used in operating activities		(2,102,213	)		(4,970,597	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Jiangxi Myomo Medical Assistive Appliance Co. Ltd.		—			(199,000	)
Purchases of short-term investments		(3,198,634	)		—
Maturities of short-term investments		250,000			—
Purchases of equipment		(60,058	)		(102,672	)
Net cash used in investing activities		(3,008,692	)		(301,672	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock offering		3,708,045			—
Net settlement of vested restricted stock units to fund related employee statutory tax withholding		(8,147	)		—
Proceeds from sale of pre-funded warrants, net of offering costs		2,064,012			—
Net cash provided by financing activities		5,763,910			—
Effect of foreign exchange rate changes on cash		7,311			(16,195	)
Net increase (decrease) in cash and cash equivalents		660,316			(5,288,464	)
Cash and cash equivalents, beginning of period		5,345,967			15,524,378
Cash and cash equivalents, end of period	$	6,006,283		$	10,235,914
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING    AND FINANCING ACTIVITIES
Right of use assets obtained in exchange for lease liabilities	$	—		$	225,665
Deferred offering costs incurred in a prior period to additional paid-in capital	$	(91,952	)	$	—
Unrealized gain from mark to market on short-term investments	$	1,634

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 — Going Concern and Management’s Plan

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company had cash, cash equivalents and short-term investments of $8,956,600 as of June 30, 2023. The Company incurred a net loss of approximately $3,658,400 and $5,723,900 during the six months ended June 30, 2023 and 2022, respectively, and had an accumulated deficit of approximately $92.4 million at June 30, 2023. Cash used in operating activities was approximately $2,102,200 and $4,970,600 for the six months ended June 30, 2023 and 2022, respectively.

The Company has historically funded its operations through financing activities, including raising equity and debt. 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. See Note 7 - Common Stock and Warrants for further discussion. Financing activities, such as the recent public equity offering, are enabling the Company to sustain its operations. Considering the Company's cash balance as of June 30, 2023, cash used from operations over the last twelve months and expected cash requirements over the next twelve months and uncertainty of reimbursement, particularly from the Centers for Medicare and Medicaid Services ("CMS") for Medicare Part B beneficiaries, management believes there is substantial doubt regarding its ability to continue as a going concern.

Management's operating plans are primarily focused on growing its revenues and limiting operating expenses through focusing its clinical and reimbursement efforts on patients with insurers that have previously reimbursed for the MyoPro. The Company believes the growth in its patient pipeline during 2022 is helping to accelerate its revenue growth in 2023. The Company has stopped activities geared toward increasing the number of payers that will reimburse for its products until the Company receives reimbursement for its products provided to Medicare Part B beneficiaries from CMS, or CMS states its intention to reimburse for its products. As a result, the Company has undertaken cost reduction activities, including the reduction of approximately 12% of its workforce in January 2023. This reduction primarily impacted our employees in our customer service, clinical and reimbursement functions. This and other cost reduction efforts are expected to reduce its operating expense run-rate by approximately $2.0 million in 2023. With respect to CMS, the Company has filed claims with CMS' regional billing contractors referred to as the DME MAC's and they are currently under review as part of the process of individual consideration. In addition, in June 2023, CMS published a proposed rule that, if finalized and adopted as proposed, would reclassify the MyoPro as a brace and make it eligible to be reimbursed on a lump sum, rather than a rental basis. Management believes that reimbursement of MyoPro on a lump sum basis, if continued by third party payors and adopted by CMS, may result in faster recognition of upfront revenue upon the initial sale of a MyoPro to a patient rather than recognizing revenue over a longer rental period, as well as an expected lower working capital requirement to grow the business to the point of achieving cash flow breakeven. The Company's success is dependent upon reimbursement of its products by insurance companies and government-controlled health care plans such as Medicare and Medicaid in the United States and Statutory Health Insurance plans in Germany. Difficulties in obtaining reimbursement from these payers could prevent our revenues from growing to the level necessary to achieve cash flow breakeven.

The Company believes that it has access to capital resources through possible public or private equity offerings, exercises of outstanding warrants, additional debt financings, or other means; however, the Company may be unable to raise sufficient additional capital when it needs it or raise capital on favorable terms. As part of the Company's equity offering in January 2023, the Company agreed to not sell any shares of its common stock to Keystone Capital Partners ("Keystone") under the Common Stock Purchase Agreement (the "Purchase Agreement") or under its At-Market Sales Facility, or ATM Facility, for a period of one year from the closing of the offering. The Company has remaining capacity under its Purchase Agreement with Keystone of approximately 1.0 million shares and approximately $0.3 million under its ATM Facility. However, due to its public float, the amount of securities the Company may sell from time to time under the registration statement which registered the ATM Facility may be subject to the limitations imposed by General Instruction I.B.6 of Form S-3. Further, selling the full $5 million to Keystone available under the Purchase Agreement requires approval from shareholders to sell shares in excess of the exchange cap under the rules of the NYSE American. Should the Company consider debt financing, such a transaction may require the Company to pledge certain assets and enter into covenants that could restrict certain business activities or its ability to incur further indebtedness and may contain other terms that are not favorable to its stockholders or the Company.

6

If the Company is unable to obtain adequate funds on reasonable terms, the Company may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. There can be no assurance that the Company will be successful in implementing its 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 June 30, 2023 and for the three and six months ended June 30, 2023. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the fiscal year ending December 31, 2023, 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, 2022 and 2021 and for the years then ended, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year's presentation, which management does not consider to be material.

Comprehensive 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 or losses on short-term investments. There were no reclassifications out of accumulated other comprehensive loss in the three and six months ended June 30, 2023, and 2022, respectively.

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 the allowance for doubtful accounts, 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 short-term highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s short-term investments are classified and accounted for as available-for-sale. Cash equivalents are recorded at cost plus accrued interest, which is considered adjusted cost, and approximates fair value. Marketable debt securities are included in cash equivalents and short-term investments based on the maturity date of the security.

The Company considers investments with maturities greater than three months, but less than one year, to be short-term investments. Investments are reported at fair value with realized gains or losses reported in other income (expense), net and unrealized gains and losses reported as other comprehensive (loss) income until realized, at which time they are reclassified to other income (expense).

The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Expected credit losses are declines in fair value that are not expected to recover and are charged to other income (expense), net.

Cash, cash equivalents, and short-term investments measured on a fair value basis consist of the following:

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	June 30, 2023		December 31, 2022
Cash and cash equivalents
Cash		2,053,076		995,310
Money market funds		2,211,501		4,350,657
US government agency debt securities		248,250		—
Commercial paper		1,244,818		—
Corporate debt securities		248,638		—
	$	6,006,283	$	5,345,967
Short-term investments
US government agency debt securities	$	1,478,160	$	—
Commercial paper		1,472,108		—
	$	2,950,268	$	—

As of June 30, 2023, unrealized gain on short-term investments was approximately $1,600.

Accounts Receivable and Allowance for Doubtful Accounts

The Company reports accounts receivable at invoiced amounts less an allowance for doubtful accounts. The Company evaluates its accounts receivable on a continuous basis, and if necessary, establishes an allowance for doubtful accounts based on a number of factors, including current credit conditions and customer payment history. The Company does not require collateral or accrue interest on accounts receivable and credit terms are generally 30 days. At June 30, 2023, and December 31, 2022, the Company recorded an allowance for doubtful 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 is included in total assets on the condensed consolidated balance sheet. There was no impairment charge for the three and six months ended June 30, 2023, associated with this equity investment. The Company records its share of the JV Company’s earnings in its condensed consolidated statement of operations in other expense (income). The Company recorded a loss on equity investment of approximately $12,500 and $29,700 for the three and six months ended June 30, 2023, respectively. The Company recorded a loss on equity investment of approximately $33,200 for both the three and six months ended June 30, 2022, respectively.

Revenue Recognition

Revenues under ASC 606 and related amendments (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.

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

4)Allocation of the transaction price to the performance obligations in the contract

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, the Veterans Administration (“VA”) and distributors in Europe and Australia. 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.

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(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.

(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 53% and 34% of direct billing channel revenue during the three months ended June 30, 2023 and June 30, 2022, respectively. These insurers represented 57% and 41% of direct billing channel revenue during six months ended June 30, 2023 and June 30, 2022, 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 June 30, 2023 and 2022, the Company recognized revenue of approximately $403,900 and $1,651,900, respectively, and during the six months ended June 30, 2023 and 2022, the Company recognized revenue of approximately $1,898,200 and $1,284,200, respectively, from O&P providers or third-party payers for which costs related to the completion of the Company’s performance obligations were recorded in a prior period.

For revenues derived from O&P providers, the VA and rehabilitation hospitals, 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. In certain cases, the Company ships its products to O&P providers pending reimbursement from non-government, third-party payers. As a result of this arrangement, elements of the revenue recognition criteria have not been met upon shipment. In this instance, the Company recognizes revenue when the amount is estimable and the Company determines it is probable that payment will be received. In many cases, the Company is not able to recognize revenue in these situations until payment is received, as then all of the revenue recognition criteria have been met.

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, we entered into definitive agreements with Ryzur Medical to form a joint venture to manufacture and sell our current and future products in greater China, including Hong Kong, Macau and Taiwan (the “JV Agreements”). Under the JV Agreements, we are entitled to receive an upfront license fee of $2.7 million, of which $1.0 million was paid and recognized during the six months ended June 30, 2022. The Company received and recognized the remaining $1.7 million license fee during the three and six months ended June 30, 2023.

Contract Balances

The timing of revenue recognition may differ from the timing of payment by customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had approximately $900 and $21,200 of deferred revenue as of June 30, 2023 and December 31, 2022, respectively.

Disaggregated Revenue from Contracts with Customers

The following table presents revenue by major source:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Direct to patient	$	3,304,113	$	3,056,588	$	5,718,727	$	4,908,732
Clinical/Medical providers		939,511		620,987	$	1,971,605	$	1,636,769
License revenue		1,714,920		—		1,714,920		1,000,000
Total revenue from contracts with customers	$	5,958,544	$	3,677,575	$	9,405,252	$	7,545,501

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Geographic Data

The Company generated 63% of its total revenue from the United States, 29% from China, 8% from Germany and an immaterial amount from other international locations for the three months ended June 30, 2023. Excluding license revenue during the three months ended June 30, 2023, the Company generated 88% of its product revenue from the United States, 12% from Germany and an immaterial amount from other international locations. The Company generated 91% of its total and product revenue from the United States, 9% from Germany, and immaterial amounts from other international locations for the three months ended June 30, 2022.

During the six months ended June 30, 2023, the Company generated 70% of its total revenues from the United States, 18% from China 11% from Germany and 1% from other international locations. Excluding license revenue during the six months ended June 30, 2023, the Company generated 85% of its product revenues from the United States, 14% from Germany and 1% from other international locations. During the six months ended June 30, 2022, the Company generated 74% of its total revenues from the United States, 12% from Germany, 13% from China and 1% from other international locations. Excluding license revenue during the six months ended June 30, 2022, the Company generated 85% of its product revenues from the United States, 14% from Germany and 1% from other international locations.

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 and six months ended June 30, 2023, the Company recorded cost of goods sold of approximately $265,600 and $366,800, respectively, without corresponding revenue, respectively. For the three and six months ended June 30, 2022, the Company recorded cost of goods sold of $254,900 and $395,400 without corresponding revenue, respectively. 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 $846,400 and $1,036,200 for the three months ended June 30, 2023 and 2022, respectively, and approximately $1,537,900 and $1,989,600 during the six months ended June 30, 2023 and 2022, respectively.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiary, Myomo Europe GmbH, is the Euro. Net foreign currency losses during the three and six months ended June 30, 2023 were approximately $71,400 and $5,600, respectively, and included in accumulated other comprehensive income in the condensed consolidated balance sheet. Net foreign currency gains during the three and six months ended June 30, 2022 were approximately $41,600 and $50,800, respectively, and included in accumulated other comprehensive income in the condensed consolidated balance sheet. Transaction foreign exchange gains and losses are included in net loss. Foreign exchange translation gains and losses from the functional currency of Myomo Europe GmbH, which is the Euro, to U.S. dollars are captured in other comprehensive loss. The balance sheet is translated using the spot rate on the day of reporting and the condensed consolidated 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 and six months ended June 30, 2023 and 2022, and as a result, all potentially dilutive common shares are considered antidilutive for these periods.

Potential common shares issuable consist of the following at:

	June 30,
	2023		2022
Stock options		26,138		31,390
Restricted stock units		1,608,615		513,631
Other warrants		668,250		691,554
Total		2,303,003		1,236,575

Due to their nominal exercise price of $0.0001 per share, 6,830,926 pre-funded warrants are considered common stock equivalents and are included in weighted average shares outstanding in the accompanying condensed consolidated statement of operations as of the closing date of the Company's public equity offering in January 2023.

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Recently Adopted Accounting Standards

In September 2022, the Financial Accounting Standards Board (FASB) issued 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. Early adoption is permitted. The Company has adopted this new standard, which did not have a material impact on its financial position and results of operations.

Subsequent Events

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

Note 4 — Inventories

Inventories consist of the following at:

	June 30, 2023			December 31, 2022
Finished goods	$	295,869		$	512,028
Work in process		17,684			18,971
Rental units		-			51,694
Parts and subassemblies		1,228,197			903,581
		1,541,750			1,486,274
Less: reserves for parts, subassemblies and trial units		(204,397	)		(86,409	)
Inventories, net	$	1,337,353		$	1,399,865

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.

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The carrying amounts of the Company’s financial instruments such as cash and cash equivalents, short-term investments, accounts receivable and accounts payable, approximate fair value due to the short-term nature of these instruments. Cash equivalents are money market funds and other short-term, highly liquid investments with maturities less than three months.

Cash equivalents and short-term investments measured at fair value on a recurring basis at June 30, 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
Cash equivalents
Money market funds	$	2,211,501	$	—	$	—	$	2,211,501
US government agency debt securities		—		248,250		—		248,250
Commercial paper		—		1,244,818		—		1,244,818
Corporate debt securities		—		248,638		—		248,638
	$	2,211,501	$	1,741,706	$	—	$	3,953,207
Short-term investments
US government agency debt securities		—		1,478,160		—		1,478,160
Commercial paper		—		1,472,108		—		1,472,108
	$	—	$	2,950,268	$	—	$	2,950,268

Cash equivalents measured at fair value on a recurring basis at December 31, 2022 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	$	4,350,657	$	—	$	—	$	4,350,657

Note 6 - Accounts payable and accrued expenses:

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

	June 30, 2023		December 31, 2022
Trade payables	$	766,583	$	569,681
Accrued compensation and benefits		1,565,580		1,059,228
Accrued professional services		30,437		124,548
Warranty reserve		181,012		234,647
Customer deposits		843,772		753,232
Other		590,076		345,596
	$	3,977,460	$	3,086,932

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. Each pre-funded warrant is exercisable for one share of the Company's common stock at a nominal exercise price of $0.0001 per share. No pre-funded warrants have been exercised as of June 30, 2023.

On August 2, 2022, (the "Agreement Date") the Company entered into a Purchase Agreement with Keystone, establishing an equity line facility under which the Company, at its sole discretion, can direct Keystone to purchase up to $5.0 million of the Company's common stock (the "Maximum Amount") from time to time through delivery of a purchase notice ("Notice"). The purchase price is at the lesser of prevailing market prices of the Company’s common stock as defined in the Purchase Agreement, at a 10% discount. The Company can sell shares of common stock to Keystone up to the Maximum Amount, provided that the Company has agreed to issue no more than 1,399,334 shares of common stock (the "Minimum Shares"), representing 19.99% of the Company's outstanding shares on the Agreement Date (the "Exchange Cap"), of which 50,000 shares were issued to Keystone as a commitment fee after closing of the transaction. As of June 30, 2023, 1,008,458 remained to be sold under the Exchange Cap. During the twenty-four (24) month term of the Purchase Agreement, Keystone can

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purchase in excess of the Minimum Shares up to the Maximum Amount so long as (i) the price per share paid by Keystone for an applicable purchase is in excess of the greater of the closing price of the Company's common stock or book value per share on the trading day immediately prior to the date of the purchase notice, or (ii) the Company's shareholders vote in favor of permitting the Company to sell shares in excess of the Exchange Cap. Keystone's obligation to purchase shares of the Company's common stock is subject to the Company's ability to maintain an effective registration statement, continued listing on the NYSE American or other trading market and a minimum price per share of $0.50, among other conditions. Keystone's beneficial ownership of the common stock is limited to 4.99% of the Company's outstanding common stock during the Term. There were no sales under the Purchase Agreement during the three and six months ended June 30, 2023.

In June 2021, the Company entered into an ATM Facility with Alliance Global Partners ("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 and six months ended June 30, 2023. In conjunction with entering into the Purchase Agreement with Keystone, the Company reduced the amount available to sell under the ATM Facility to $0.3 million. This amount remains available for sale at June 30, 2023.

The Company issued warrants to investors as part of its public equity offering in February 2020. The warrants are being accounted for as equity. Each warrant entitles the holder to purchase one share of the Company's common stock at an exercise price of $7.50 per share. 688,250 warrants remain outstanding as of June 30, 2023. There were no exercises of these warrants during the three and six months ended June 30, 2023. The warrants expire on February 13, 2025.

In conjunction with the Company's public equity offering in January 2023, the Company agreed to not sell any shares of its common stock under the Purchase Agreement or its ATM Facility for a period of one year from the closing date.

During the three and six months ended June 30, 2023, 169,499 and 172,320 restricted stock units vested, respectively. During the three and six months ended June 30, 2022, 97,158 and 107,309 restricted stock units vested, respectively.

Note 8 — Stock Award Plans and Stock-based Compensation

Stock Option Awards

The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options. There was no income tax benefit recognized in the financial statements for share-based compensation arrangements for the three and six months ended June 30, 2023 and 2021.

There were no stock options granted during the three and six months ended June 30, 2023. 1,700 stock options were granted during the six months ended June 30, 2022.

As of June 30, 2023, there were 169,321 shares available for issuance under the Myomo, Inc. 2018 Stock Option and Incentive Plan (the “2018 Plan”). On January 1, 2023, the number of shares reserved and available for issuance under the 2018 Plan increased by 310,024 shares pursuant to a provision in the 2018 Plan that provides that the number of shares of common stock reserved and available for issuance under the 2018 Plan will be cumulatively increased each January 1 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.

On June 9, 2023, the Company's stockholders approved an increase of 1,100,000 shares of common stock reserved and available to grant 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 16,744 restricted stock units that were withheld as part of net share settlement transactions during the three and six months ended June 30, 2023. No stock awards were net share settled during the three and six months ended June 30, 2022, 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.

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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, restricted stock awards and restricted stock units to employees, non-employees and directors in the statements of operations as follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023			2022
Cost of goods sold	$	22,114	$	23,184	$	42,593		$	24,354
Research and development		34,308		29,573		(35,419	)		76,107
Selling, general and administrative		223,639		292,466		443,914			511,032
Total	$	280,061	$	345,223	$	451,088		$	611,493

As of June 30, 2023, there was approximately $41,300 of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted-average period of 1.99 years.

As of June 30, 2023, there was approximately $1,451,600 of unrecognized compensation expense related to unvested restricted stock units that is expected to be recognized over a weighted-average period of 1.55 years.

Note 9 — Commitments and Contingencies

Litigation

The Company is 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. While the Company disputes this claim, it believes that it is probable that a loss will be incurred for this matter and has recorded a loss contingency of $135,000 to accrued expenses as of June 30, 2023. The Company expects its insurance to cover the majority of the loss that may be incurred. 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, MA expiring in 2023. In conjunction with entering into a non-cancelable lease agreement for its manufacturing space in Boston, the Company agreed to enter into a lease for its corporate headquarters, which together with its leased office space in Fort Worth, TX, both expire in 2025. The Fort Worth, TX lease has the option to terminate early, which is available at the company’s discretion in 2023. Termination options were not included in the lease term 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 consolidated balance sheets. We recognize rent expense on a straight-line basis over the lease term.

As of June 30, 2023, operating lease assets were $299,118. The amount and the maturity of the Company’s operating lease liabilities as of June 30, 2023, are as follows:

	June 30, 2023
2023 (June 30 -December 31)	$	146,012
2024		159,872
2025		67,981
2026		—
2027		—
Thereafter		—
Total future minimum lease payments		373,865
Less imputed interest		52,425
Total operating lease liabilities	$	321,440
Included in the condensed consolidated balance sheet:
Current operating lease liabilities	$	181,783
Non-current operating lease liabilities		139,657
Total operating lease liabilities	$	321,440

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For the three and six months ended June 30, 2023 and 2022, the total lease cost is comprised of the following amounts:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease expense		125,650		125,293		251,299		241,904
Short-term lease expense		—		1,300		—		3,250
Total lease expense	$	125,650	$	126,593	$	251,299	$	245,154

The following summarizes additional information related to operating leases:

	June 30, 2023
Weighted-average remaining lease term (in years)		0.66
Weighted-average discount rate		20	%

Major Customers

For the three and six months ended June 30, 2023 and 2022, there were no customers which accounted for more than 10% of product revenues. For the three and six months ended June 30, 2023 a U.S. insurance payer represented 41% and 42% of product revenues, respectively. For the three and six months ended June 30, 2022 a U.S. insurance payer represented 28% and 31% of product revenues, respectively.

At June 30, 2023 and December 31, 2022, one insurance company and its affiliates accounted for approximately 63% and 62% of accounts receivable, respectively.

For the three and six months ended June 30, 2023, approximately 63% and 59% of the Company's product revenues, respectively, were derived from patients with Medicare Advantage insurance plans. For the three and six months ended June 30, 2022, approximately 71% and 63% of the Company’s product revenues were derived from patients with Medicare Advantage insurance plans, respectively.

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 three months ended June 30, 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 during the three months ended June 30, 2023 and will make nine equal payments of approximately $29,000 beginning in July 2023. No assets are pledged as security under this agreement.

Note 10 — Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued, and determined that, except as disclosed herein, there have been no other subsequent events that would require recognition in the financial statements or disclosure in the notes to the financial statements.

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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 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 restore function in individuals with neuromuscular conditions due to brachial plexus injury, stroke, traumatic brain injury, spinal cord injury and other neurological disorders.

We utilize digital advertisements on various platforms as well as television 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 screenings by our trained clinical staff are 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 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 remote 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 hospitals and O&P practices that provide our products to their patients. The MyoPro product line has been approved by the Veterans Administration (“VA”) system for impaired veterans, and over 70 VA facilities have already ordered devices for their patients.

Our myoelectric orthoses have been clinically shown in peer reviewed published research studies to help restore 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 and completed licensing of its technology from MIT in 2006.

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, or CMS, had published two new codes (L8701, L8702) pursuant to our application for Healthcare Common Procedure Coding System, or HCPCS codes, which become effective in early 2019. The assignment of unique L-Codes, if followed by appropriate payment terms (which are still pending), would offer 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.

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Recent Developments

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 JV, named Jiangxi Myomo Medical Assistive Appliance Co., Ltd., is held by Ryzur Medical and Wuxi Chinaleaf Medical Investment and Management Fund, a private fund that invests in growth opportunities in new technologies. We own a minimum 19.9% stake in the JV. Ryzur Medical and its partners have committed to invest a minimum of $8 million and up to $20 million in the JV 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 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. Under the Agreements, we are entitled to receive an upfront license fee of $2.7 million, of which the final $1.7 million was paid during the three months ended June 30, 2023. Pursuant to the Agreements, the JV 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.

Equity Line of Credit

On August 2, 2022, we entered into a Common Stock Purchase Agreement ("Purchase Agreement") with Keystone Capital Partners ("Keystone"), establishing an equity line facility. See the section titled "Liquidity and Capital Resources" for further discussion.

CMS Status

On June 29, 2023, CMS issued a proposed rule that results in a change in the benefit category associated with our HCPCS codes from durable medical equipment rental to a brace, which would permit reimbursement of MyoPro sales on a lump sum basis. The proposed rule must go through a public comment period before it is finalized. In addition, CMS stated in the proposed rule its intention to publish a fee for our HCPCS codes at an upcoming public meeting. If the proposed rule is finalized and lump-sum reimbursement becomes available for MyoPro, we believe this change in reimbursement approach may result in faster recognition of upfront revenue upon the initial sale of a MyoPro to a patient rather than recognizing revenue over a longer rental period. In addition, we expect that the working capital requirement to achieve cash flow breakeven will be lower if we are reimbursed on a lump sum basis. We cannot provide any assurance that the proposed rule will be finalized and adopted as proposed, or whether CMS will ultimately publish a fee for our HCPCS codes. In addition, there can be no assurance that fees for MyoPro to be reimbursed on a lump-sum basis, if published, will be sufficient to allow us to achieve cash flow breakeven.

Beginning March 2023, we started submitting claims to CMS' billing contractors, referred to as the DME MAC's. As of the filing date, a total of six claims have been submitted. Each of the submitted claims is currently under review as part of the process of individual consideration. We cannot provide any assurance as to when or if the submitted claims will be paid.

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.

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 June 30,		Period- to-Period Change		For the Six Months Ended June 30,		Period- to-Period Change
	2023	2022	$	%	2023	2022	$	%
Product revenue	$4,243,624	$3,677,575	$566,049	15%	$7,690,332	$6,545,501	$1,144,831	17%
License revenue	1,714,920	-	1,714,920	N/M	1,714,920	1,000,000	714,920	71%
Total revenue	5,958,544	3,677,575	2,280,969	62%	9,405,252	7,545,501	1,859,751	25%
Cost of revenue	1,677,488	1,276,444	401,044	31%	2,816,594	2,567,149	249,445	10%
Gross profit	$4,281,056	$2,401,131	$1,879,925	78%	$6,588,658	$4,978,352	$1,610,306	32%
Gross margin %	71.8%	65.3%		6.6%	70.1%	66.0%		4.1%

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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, to the VA, to rehabilitation hospitals, and through distributors. 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 $2,281,000 and $1,860,000 or 62% and 25% for the three and six months ended June 30, 2023 as compared to the same periods in 2022. The revenue increase for the three and six months ended June 30, 2023 was driven by receipt of the final license payment from our joint venture partner in China. Excluding license fees, product revenues increased 15% and 17% during the three and six months ended June 30, 2023, respectively, compared with the same periods in 2022. The increase during the three and six months ended June 30, 2023 was due to a higher number of revenue units partially offset by a lower average selling price, or ASP.

Gross margin

Cost of revenue consists of costs for the manufacturing and fabrication and delivery of our products, fixed costs, such for our quality and fulfillment organizations, changes in inventory reserves, warranty costs and royalties associated with licensed technologies.

Gross margin was 71.8% and 70.1% for the three and six months ended June 30, 2023, respectively, compared to 65.3% and 66.0% for the three and six months ended June 30, 2022, respectively. The increases in gross margin for the three and six months ended June 30, 2023 were due the receipt of the final license payment from our joint venture partner in China, which was recorded at 100% margin, partially offset by a lower ASP for our product sales, an inventory writedown and a higher warranty reserve requirement.

Operating expenses

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

	For the Three Months Ended June 30,		Period-to-Period Change		For the Six Months Ended June 30,		Period-to-Period Change
	2023	2022	$	%	2023	2022	$	%
Research and development	$564,235	$632,872	$(68,637)	(11)%	$1,041,225	$1,292,408	$(251,183)	(19)%
Selling, general and administrative	4,819,827	4,664,088	155,739	3%	9,321,435	9,320,505	930	-%
Total operating expenses	$5,384,062	$5,296,960	$87,102	2%	$10,362,660	$10,612,913	$(250,253)	(2)%

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 2023 and expect R&D costs to increase on an annual basis.

R&D expenses decreased by approximately $69,000 and $251,000, or 11% and 19% during the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The decreases were driven primarily by lower product development spending during the three months ended June 30, 2023 and by lower payroll, stock-based compensation and product development costs, offset by higher consultant spending during the six months ended June 30, 2023.

Selling, general and administrative

Selling expenses consist of costs for our field clinical staff, clinical training organization, and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions, costs of advertising, marketing and promotional events, corporate communications, product marketing and travel expenses. Variable compensation for personnel engaged in sales and marketing activities is generally earned and recorded as expense in the period in which the measurable work is performed. We expect sales and marketing expenses to be flat or decrease slightly in 2023 as a result of a reduction in force in January 2023 and efforts to reduce advertising spending while maintaining our existing lead generating activity.

General and administrative 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 slightly in 2023 as a result of increased compensation expense, offset by the effect of the reduction in force in January 2023.

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Selling, general and administrative expenses (“SG&A”) increased by approximately $156,000, or 3%, during the three months ended June 30, 2023, and were flat during the six months ended June 30, 2023, compared to the same periods in 2022. The increase during the three months ended June 30, 2023 was driven by a higher incentive compensation accrual and higher consultant spending, partially offset by lower advertising and travel expenses.

Other (income) expense, net

The following table sets forth our other (income) expense, net for each of the periods presented.

	For the Three Months Ended June 30,						Period-to-Period Change						For the Six Months Ended June 30,						Period-to-Period Change
	2023			2022			$			%			2023			2022			$			%
Interest income		(103,439	)		(13,845	)		(89,594	)	N/M				(189,753	)		(14,026	)		(175,727	)	N/M
Other expense, net		5,631			165			5,466		N/M				5,631			293			5,338		N/M
Loss on equity investment		12,514			33,208			(20,694	)		(62	)%		29,716			33,208			(3,492	)		(11	)%
Total other (income) expense, net	$	(85,294	)	$	19,528		$	(104,822	)	N/M			$	(154,406	)	$	19,475		$	(173,881	)	N/M
NM - Not Meaningful

Other income was approximately $85,300 and $154,400 during the three and six months ended June 30, 2023, respectively, compared with expense of approximately $19,500 for each of the same periods in 2022. The increase in other income was primarily due to an increase in interest income due to higher interest rates.

Income tax expense

Income tax expense recorded during the three and six months ended June 30, 2023 and 2022 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH. Income tax expense decreased in the three and six months ended June 30, 2023 as a result of lower taxable income compared to the same period in 2022.

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 and other income (expense), 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;

•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.

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
GAAP net loss	$	(1,014,150	)	$	(2,908,922	)	$	(3,658,445	)	$	(5,723,856	)
Adjustments to reconcile to Adjusted EBITDA:
Interest income		(103,439	)		(13,845	)		(189,753	)		(14,026	)
Depreciation expense		51,989			49,015			100,622			94,645
Stock-based compensation		280,061			345,223			451,088			611,493
Loss on investment in minority interest		12,514			33,208			29,716			33,208
Income tax (benefit) expense		(3,562	)		(6,435	)		38,849			69,820
Adjusted EBITDA	$	(776,587	)	$	(2,501,756	)	$	(3,227,923	)	$	(4,928,716	)

Liquidity and Capital Resources

Liquidity

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

	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	6,006,283	$	5,345,967
Short-term investments	$	2,950,268	$	-
Working capital	$	8,293,171	$	5,613,521

As of June 30, 2023, we had working capital of approximately $8.3 million and stockholders’ equity of approximately $8.8 million. We used approximately $2.1 million in cash for operating activities during the six months ended June 30, 2023.

We have historically funded our operations through financing activities, including raising equity and debt capital. In January 2023, we completed a public equity offering pursuant to which we sold 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. During the fourth quarter of 2022, we sold 692,914 shares of common stock under the Purchase Agreement with Keystone at a weighted average sales price of $0.683 per share, generating proceeds after fees and expenses of approximately $0.4 million. Proceeds from these financing activities are helping us to sustain our operations. Considering our balance of cash, cash equivalents and short-term investments as of June 30, 2023 and our cash used from operations over the last twelve months and uncertainty of reimbursement, particularly CMS for Medicare Part B beneficiaries, management believes there is substantial doubt regarding our ability to continue as a going concern.

Our operating plans are primarily focused on growing our revenues and limiting operating expenses through focusing our clinical and reimbursement efforts on patients with insurers that have previously reimbursed for the MyoPro. We believe the growth in our patient pipeline during 2022 provides us an opportunity to achieve increased revenue in 2023 compared to 2022. We have stopped activities directed at increasing the number of payers that will reimburse for our products until CMS either begins to reimburse for the MyoPro. As a result, we have undertaken cost reduction activities, including the reduction of approximately 12% of our workforce in January 2023. This and other cost reduction efforts are expected to reduce our operating expense run rate by approximately $2.0 million in 2023.

With respect to CMS, on June 29, 2023 CMS issued a proposed rule that results in a change in the benefit category associated with our HCPCS codes from durable medical equipment rental to a brace, which is currently reimbursed on a lump sum basis. The proposed rule must go through a public comment period before it is finalized. In addition, CMS stated in the proposed rule its intention to publish a fee for our HCPCS codes at an upcoming public meeting. If the proposed rule is finalized and lump-sum reimbursement becomes available for MyoPro, we believe this change in reimbursement approach may result in faster recognition of upfront revenue upon the initial sale of a MyoPro to a patient rather than recognizing revenue over a longer rental period. In addition, we expect that the working capital requirement to achieve cash flow breakeven will be lower if we are reimbursed on a lump sum basis compared to being reimbursed as a rental. We cannot provide any assurance that the proposed rule will be finalized and adopted as proposed, or whether CMS will ultimately publish a fee for our HCPCS codes. In addition, there can be no assurance that fees for MyoPro to be reimbursed on a lump-sum basis, if published, will be sufficient to allow us to achieve cash flow breakeven. Beginning March 2023, we started submitting claims to CMS' billing contractors, referred to as the DME MAC's. As of June 30, 2023, a total of five claims have been submitted. Each of the submitted claims is currently under review as part of the process of individual consideration. We cannot provide any assurance as to when or if the submitted claims will be paid.

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 through potential public or private equity offerings, exercises of outstanding warrants, additional debt financings, or other means; however, we may be unable to raise sufficient additional capital when we need it or raise capital on favorable terms. As part of our equity offering in January 2023, we agreed to not sell any shares of our common stock to Keystone under the Purchase Agreement or under our ATM Facility for a period of one year from

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the closing of the offering. We have remaining capacity under our Purchase Agreement with Keystone of approximately 1.0 million shares and approximately $0.3 million under our ATM facility. However, we are subject to the limitations imposed by General Instruction I.B.6 of Form S-3, which limits the amount of securities that we may issue under our registration statement on Form S-3 to one-third of our public float in any 12-month period. Further, the amount of stock that we may sell to Keystone under the Purchase Agreement is limited to a total of 1,349,334 shares of common stock, pursuant to an exchange cap imposed by the rules of the NYSE American, unless we obtain approval from our stockholders to lift such cap. As of June 30, 2023, 1,008,458 million shares remain available to be issued, taking into account the limitations imposed by the exchange cap.

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. Should we consider debt financing, such a transaction may require us to pledge certain assets and enter into covenants that could restrict certain business activities or our ability to incur further indebtedness and may contain other terms that are not favorable to our stockholders or us. 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.

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. There can be no assurance we will be successful in implementing our plans to alleviate substantial doubt.

Cash Flows

	Six Months Ended June 30,
	2023			2022
Net cash used in operating activities	$	(2,102,213	)	$	(4,970,597	)
Net cash used in investing activities		(3,008,692	)		(301,672	)
Net cash provided by financing activities		5,763,910			—
Effect of foreign change rate changes on cash		7,311			(16,195	)
Net increase (decrease) in cash, cash equivalents and restricted    cash	$	660,316		$	(5,288,464	)

Operating Activities. The net cash used in operating activities for the six months ended June 30, 2023 was primarily used to fund a net loss of approximately $3.7 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.8 million and by approximately $0.8 million of cash generated net changes in the levels of operating assets and liabilities, primarily related to an increase in accounts payable and accrued expenses and a decrease in accounts receivable, offset by an increase in prepared expenses and other current assets.

The net cash used in operating activities for the six months ended June 30, 2022 was primarily used to fund a net loss of approximately $5.7 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.0 million, offset by approximately $0.2 million of cash generated by net changes in the levels of operating assets and liabilities, primarily related to decreases in accounts receivable and prepaid and other current assets, offset by an increase in inventory and a decrease in accounts payable and accrued expenses.

Investing Activities. During the six months ended June 30, 2023, our cash used in investing activities was primarily related to purchases of equipment and purchases of short-term investments. During the six months ended June 30, 2022, our cash used in investing activities was for our investment in the JV Company and the purchases of equipment.

Financing Activities. There was $5.8 million in cash generated from financing activities during the six months ended June 30, 2023. This was primarily due to the net proceeds from our public equity offering in January 2023. There was no cash generated from financing activities during the six months ended June 30, 2022.

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 the allowance for doubtful accounts, the valuation of our deferred tax asset, valuation of stock-based compensation, and reserves for slow moving inventory.

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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, 2022.

Recent Accounting Standards

Information regarding new accounting standards is included in Note 2 — Summary of Significant Accounting Policies 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer, our principal executive officer, and our Chief Financial Officer, our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company may be involved in legal proceedings, claims and assessments arising from the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There is no material litigation against the Company at this time that is required to be disclosed under Item 103 of Regulation S-K.

Item 1A. Risk Factors

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

Risks Associated with Our Business

Risks Related to Our Operating and Financial Results

If CMS does not allow coverage for the MyoPro, insurers offering Medicare Advantage insurance plans may no longer reimburse for the MyoPro, which would have an adverse effect on our business.

Revenues from patients who are covered by Medicare Advantage insurance plans are becoming an increasingly significant portion of our overall revenues. For the three and six months ended June 30, 2023, approximately 63% and 59% of our product revenues, respectively, were derived from patients with Medicare Advantage insurance plans. If CMS does not allow coverage for the MyoPro, or if such coverage is obtained and is subsequently retracted, insurers offering Medicare Advantage insurance plans may no longer reimburse for the MyoPro. As a result, our revenues and cash flows would be negatively impacted, which could have an adverse effect on our business. See “-Risks Related to our Reliance on Third Parties—We may not be able to obtain third-party payer reimbursement, including reimbursement by Medicare, for our products” for additional information about CMS coverage decisions.

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 single insurer. Adverse changes in that insurer’s reimbursement policy regarding the MyoPro could have an adverse effect on our business.

In order to maximize revenues and minimize cash used for operations, we focus our lead generation efforts in geographical areas of the country where insurers who have previously reimbursed for the MyoPro operate their businesses. Beginning in September 2021, a large insurer that has historically reimbursed for the MyoPro began denying claims after having granted a pre-authorization and after we delivered the devices to patients, and these post-service denials currently continue. Revenues from patients insured by this payer represented 41% and 42% of product revenues during the three and six months ended June 30, 2023, respectively. With a small number of exceptions, appeals filed with the payer requesting payment have been successful and these claims have ultimately been paid. This payer also continues to provide us with pre-authorizations to serve new patients. If this payer were to start regularly denying appeals on filed claims, reduce the number of MyoPro’s that it will authorize for its insured patients, or delays payments pending resolution of the denial and appeals process, our revenues and cash flows would be negatively impacted, which would have an adverse effect on our business.

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

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

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

•changes in the mix of products we sell;

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

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

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

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

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

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

•our ability to collect outstanding accounts receivable;

•the expiration or exhaustion of deferred tax assets such as net operating loss carry-forwards;

•increased product and price competition, due to the regulatory landscape, market conditions or other factors;

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

•market reception of our new or improved product offerings; and

•the loss of any significant customer.

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

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

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

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

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

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

•results of clinical studies relating to MyoPro or similar products;

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

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

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

•adverse regulatory or legal actions relating to MyoPro or similar products or technologies; and

•problems arising from the insourcing of our manufacturing capabilities, or our existing manufacturing and supply relationships with third parties, including shortages of raw materials..

Any factors that negatively impact sales of MyoPro would adversely affect our business, financial condition and operating results.

Risks Related to our Reliance on Third Parties

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

Sales of our device depend, in part, on the extent to which our products will be covered by third-party payers, such as government health programs, commercial insurance and managed healthcare organizations. See section titled “Business – Government Regulation – Health

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Insurance Reimbursement.” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report"). Third-party payers are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payers may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payer separately, with no assurance that coverage and adequate reimbursement will be obtained. Currently, we are almost entirely dependent on third parties to cover the cost of our products to patients and rely on our distributors’ ability to obtain reimbursement for the cost of our products. If the U.S. Department of Veterans Affairs, or the VA, health insurance companies and other third-party payers do not provide adequate coverage or reimbursement for our products, then our sales will be limited to clinical facilities and individuals who can pay for our devices without reimbursement. To our knowledge, slightly more than 30 units have been self-paid or funded by non-profit foundations since inception. Some commercial health insurance plans have published statements that they will not cover the cost of the MyoPro for their members. Starting in 2023, we no longer pursue sales to patients whose insurance payers have not previously reimbursed for the MyoPro. In the event we are unsuccessful in obtaining coverage and adequate reimbursement for our products from third-party payers, our sales will be significantly constrained. Currently, reimbursement for the cost of our products is obtained primarily on a case-by-case basis until such time, if any, we obtain broad coverage policies with Medicare and third-party payers. There can be no assurance that we will be able to obtain these broad coverage policies.

In connection with Medicare reimbursement, the Centers for Medicare and Medicaid Services, or CMS, had published two new codes pursuant to our application for HCPCS codes, which became effective on January 1, 2019. CMS placed the MyoPro device in a DME rental benefit category instead of lump sum, which is standard practice for other custom-fabricated orthotics and prosthetics. We submitted an appeal to change our benefit category to an orthotic, or brace, which was presented at a public meeting in June 2022. In June 2023, CMS published a proposed rule that changes the benefit category for our products to a brace and stated that they intend to publish a fee for our HCPCS codes at an upcoming public meeting. We cannot give any assurance that rule proposed by CMS will be finalized, that the DME MAC’s will cover the device on a case by case basis, or at all, or that the amount of reimbursement, if any, to be approved will be sufficient to provide a reasonable profit to us, that the receipt of these codes would result in appropriate coverage and payment terms or otherwise lead to any greater access to our products or reimbursement for such products.

While we continue to await the finalization of the proposed rule by CMS and publication of an allowable fee for the MyoPro, we have submitted several clams to the DME MAC's on behalf of Medicare Part B patients. There is no specific timetable or guarantee that CMS will in fact issue such coverage and payment guidelines, or that the proposed rule will be finalized. In addition, decisions by CMS or other governmental payers on whether and to what extent they would cover our products, as well as decisions on what basis they would cover our products, whether as outright purchases by patients or on a rental basis, may impact similar coverage decisions by private payers that may follow the decisions by governmental payers.

Reimbursement amounts, whether on a case-by-case basis or pursuant to broader coverage policies, which may be established in the future, may be insufficient to permit us to generate sufficient gross margins to allow us to operate on a profitable basis. Third-party payers also may deny coverage, limit reimbursement or reduce their levels of payment, or our costs of production may increase faster than increases in reimbursement levels. In addition, we may not obtain coverage and reimbursement approvals in a timely manner. Our failure to receive such approvals would negatively impact market acceptance of MyoPro.

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.

While we are the manufacturer of record with the U.S. Food and Drug Administration, or the FDA, for the MyoPro device we sell, we have contracted with Cogmedix, Inc., or Cogmedix, a contract manufacturer with expertise in the medical device industry, for the contract manufacture of all of our products and the sourcing of all of our components and raw materials. Pursuant to this contract, Cogmedix manufactures the MyoPro pursuant to our specifications at its facility in West Boylston, Massachusetts. As the manufacturer of the MyoPro, we ultimately remain responsible to the FDA for overseeing Cogmedix’s manufacturing activities to ensure that they conform with product specifications and applicable laws and regulations, including FDA’s good manufacturing practice requirements for medical devices. Any failure to effectively oversee the regulatory compliance of the product and contract manufacturing activities by Cogmedix can lead to potential enforcement actions, including civil or criminal liabilities, as well as recalls with the FDA. We may terminate our relationship with Cogmedix at any time upon sixty (60) days’ written notice. For our business strategy to be successful, Cogmedix must be able to manufacture our products in sufficient quantities, and to source raw materials and components, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Increases in our product sales, whether forecasted or unanticipated, or supply chain constraints that may arise for any number of reasons, could strain the ability of Cogmedix to manufacture an increasingly large supply of our current or future products in a manner that meets these various requirements. In addition, although we are not restricted from engaging an alternative manufacturer, the process of moving our manufacturing activities would be time consuming and costly, and may limit our ability to meet our sales commitments, which could harm our reputation and could have a material adverse effect on our business. Further, any new contract manufacturer would need to be compliant with FDA regulations and International Organization for Standardization, or ISO, standard 13485.

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We also rely on third-party suppliers, some of which contract directly with Cogmedix, to supply certain components of the MyoPro products. Cogmedix does not have long-term supply agreements with most of their suppliers and, in many cases, makes purchases on a purchase order basis. We do not have any long-term supply agreement directly with Cogmedix’s suppliers. Our ability and Cogmedix’s ability to secure adequate quantities of such products may be limited. Suppliers may encounter problems that limit their ability to manufacture components for our products, including financial difficulties or damage to their manufacturing equipment or facilities. In addition, forces beyond their or our control, including future pandemics, could disrupt the global supply chain and impact our or our third-party manufacturers’ ability to obtain raw materials or other products necessary to manufacture our product. For example, the residual impact of policies implemented in response the COVID-19 pandemic continue to be present in the form of higher prices for raw materials and longer lead times. If we, or Cogmedix, fail to obtain sufficient quantities of high-quality components to meet demand on a timely basis, or fail to effectively oversee the regulatory compliance of the supply chain, we could face regulatory enforcement, have to conduct recalls, lose customer orders, our reputation may be harmed, and our business could suffer.

Cogmedix generally uses a small number of suppliers for the MyoPro products. Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. If any one or more of our suppliers ceases to provide sufficient quantities of components in a timely manner or on acceptable terms, Cogmedix would have to seek alternative sources of supply. It may be difficult to engage additional or replacement suppliers in a timely manner. Failure of these suppliers to deliver products at the level our business requires would limit our ability to meet our sales commitments, which could harm our reputation and could have a material adverse effect on our business. Cogmedix also may have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of Cogmedix’s suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures or civil penalties. It could also require Cogmedix to cease using the components, seek alternative components or technologies and we could be forced to modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals. Any disruption of this nature or increased expenses could harm our commercialization efforts and adversely affect our operating results.

We also rely on a limited number of suppliers for components used by the MyoPro and do not maintain any long-term supply agreement with respect to components. If we fail to obtain sufficient quantities of components in a timely manner, our reputation may be harmed and our business could suffer.

While we currently believe we have sufficient inventory in our supply chain in the near term, if we, or any third parties in our supply chain for materials which are used in either the manufacture of our products are adversely impacted by infections or restrictions resulting from the coronavirus outbreak, or other factors, our supply chain may be disrupted and our ability to manufacture and ship our products may be limited. While many companies are experiencing shortages of certain electronic components, so far we and our contract manufacturing partners have been able to procure the electronic components necessary for the manufacture of our products, but we are dealing with longer lead times and delivery delays for certain critical components. There can be no assurance that such supplies will become less constrained in the future. In addition, as a result of shelter-in-place orders, workplace capacity restrictions, or other mandated travel restrictions, our on-site staff conducting sales and marketing and engineering activities may not be able to access our office or laboratory space, and these restrictions may adversely impact our contract manufacturing partners as well. Further, these core activities may be significantly limited or curtailed, possibly for an extended period of time.

Risks Related to Limited Operating History and Capital Requirements

We have a history of operating losses and our financial statements for the period ended June 30, 2023 include disclosures regarding there being substantial doubt about our ability to continue as a going concern.

We have a history of losses since inception. For the three and six months ended June 30, 2023, we incurred a net loss of $1.0 and $3.7 million, respectively. For the year ended December 31, 2022, we incurred a net loss of $10.7 million. At June 30, 2023, we had an accumulated deficit of approximately $92.4 million. We expect to continue to incur operating and net losses for the foreseeable future, though we have implemented measures to reduce our operating expenses through eliminating costs associated with activities to broaden the number of payers reimbursing for MyoPro. However, there can be no assurance that our cost reduction measures will be effective in reducing our operating expenses, or that these measures would not adversely affect our revenue-generating activities.

Our cash, cash equivalents and short-term investments at June 30, 2023 was approximately $9.0 million. In January 2023, we completed a follow-on offering of our common stock and pre-funded warrants, raising net proceeds of approximately $5.7 million. In addition, we entered into a Common Stock Purchase Agreement (the "Purchase Agreement") with Keystone Capital Partners ("Keystone") on August 2, 2022 to establish an equity line facility permitting the sale of up to $5.0 million of shares of common stock, subject to an exchange cap that limits the number of shares that we may sell to 1,349,334, unless stockholder approval were obtained to remove such cap. We also have an at-the-market facility with Alliance Global Partners (the “ATM Facility”), that permits us to sell up to $0.3 million of shares of common stock from time to time. Because the shares of common stock to be sold under the Purchase Agreement and the ATM Facility are registered under our registration statement on Form S-3, we are subject to the limitations imposed by General Instruction I.B.6 of Form S-3, which limits the amount of securities that we may issue under our registration statement on Form S-3 to one-third of our public float in any 12-month period. We have also

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agreed with the purchasers in our January 2023 financing not to sell shares under our Purchase Agreement and ATM Facility for a period of one year.

We believe that there is substantial doubt that our cash, cash equivalents and short-term investments at June 30, 2023 will be sufficient to fund our operations for the twelve months from the date of this report. Disclosure of this substantial doubt about our ability to continue operations in the future as a going concern, is disclosed in the notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023. Because our financial statements raise substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in our company.

Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.

Since inception through June 30, 2023, we have delivered more than 2,100 units for use by patients at home and at clinical facilities. Our latest product line, the MyoPro, was introduced to the market in fiscal year 2012 and we have delivered more than 1,800 units since such time. As a result, we have a limited operating history. It is difficult to forecast our future results based upon our historical data. Because of the uncertainties related to our limited historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses.

We may not have sufficient funds to meet our future capital requirements.

Our cash, cash equivalents and short-term investments at June 30, 2023 totalled approximately $9.0 million. In January 2023, we completed a follow-on offering of our common stock and pre-funded warrants, raising net proceeds of approximately $5.7 million. In addition, we entered into a Purchase Agreement with Keystone to establish an equity line facility permitting the sale of up to $5.0 million of shares of common stock, subject to an exchange cap that limits the number of shares that we may sell to 1,349,334, unless stockholder approval were obtained to remove such cap. We also have an ATM Facility, that permits us to sell up to $0.3 million of shares of common stock from time to time. Because the shares of common stock to be sold under the Purchase Agreement and the ATM Facility are registered under our registration statement on Form S-3, we are subject to the limitations imposed by General Instruction I.B.6 of Form S-3, which limits the amount of securities that we may issue under our registration statement on Form S-3 to one-third of our public float in any 12-month period. We have also agreed with the purchasers in our January 2023 financing not to sell shares under our ATM Facility for a period of one year. However, there can be no assurance that we will be able to sell any or all of the shares under the Purchase Agreement or the ATM Facility, or raise significant amounts of capital even if we do. If we cannot use these facilities to raise sufficient capital to operate our business, we may be required to utilize more costly and time-consuming means of accessing the capital markets.

Our condensed consolidated financial statements for the three and six months ended June 30, 2023 contain disclosures regarding substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to generate sufficient cash flows from operations or to raise additional capital to meet our obligations. Based on our historical cash burn, we do not anticipate that our existing cash and cash equivalents will be sufficient to enable us to maintain our currently planned operations for the next twelve months from the date of this report. We may be unable to obtain additional funds on reasonable terms, or at all. Our ability to secure financing and the cost of raising such capital are dependent on numerous factors, including general economic and capital markets conditions, credit availability from lenders, investor confidence and the existence of regulatory and tax incentives that are conducive to raising capital. Uncertainty in the financial markets has caused banks and financial institutions to decrease the amount of capital available for lending and has significantly increased the risk premium of such borrowings. In addition, such turmoil and uncertainty has significantly limited the ability of companies to raise funds through the sale of equity or debt securities. If we are unable to raise additional funds, we may need to delay, modify or abandon some or all of our business plans or cease operations. If we raise funds through the issuance of debt, the amount of any indebtedness that we may raise in the future may be substantial, and we may be required to secure such indebtedness with our assets and may have substantial interest expenses. If we default on any future indebtedness, our lenders could declare all outstanding principal and interest to be due and payable and our secured lenders may foreclose on the facilities securing such indebtedness. The incurrence of indebtedness could require us to meet financial and operating covenants, which could place limits on our operations and ability to raise additional capital, decrease our liquidity and increase the amount of cash flow required to service our debt. If we raise funds through the issuance of equity securities, such issuance could result in dilution to our stockholders and the newly issued securities may have rights senior to those of the holders of our common stock.

Rising inflation may materially impact our financial operations or results of operations.

Inflation has and is expected to remain elevated for the near future. Inflationary factors, such as increases in the cost of our raw materials, manufacturing, interest rates and overhead costs may adversely affect our operating results. The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor internally or at our third-party manufacturers could increase significantly due to regulation or inflationary pressures. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited due to political and economic issues. Although we

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do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future, especially if inflation rates continue to rise.

Risks Related to Competitors and Our Market

The industries in which we operate are highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.

Industrial and medical robotics is characterized by intense competition and rapid technological change, and we will face competition on the basis of product features, clinical outcomes, price, services and other factors. Competitors may include large medical device and other companies, some of which have significantly greater financial and marketing resources than we do, and firms that are more specialized than we are with respect to particular markets. Our competition may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, and have greater financial, marketing and other resources than we do or may be more successful in attracting potential customers, employees and strategic partners.

Our competitive position will depend on multiple complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory clearances or approvals, if necessary, for products under development and protect our intellectual property. In some instances, competitors may also offer, or may attempt to develop, alternative therapies for disease states that may be delivered without a medical device. The development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. The entry into the market of manufacturers located in low-cost manufacturing locations may also create pricing pressure, particularly in developing markets. Our future success depends, among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological advances, and upon our ability to successfully implement our marketing strategies and execute our research and development plans.

We sell to O&P providers and distributors who are free to market products that compete with the MyoPro, and we rely on these parties to market and promote our products in accordance with their FDA listings, select appropriate patients and provide adequate follow-on care.

We rely on our relationships with qualified O&P providers and our distribution arrangements to market and sell our products. We believe that a meaningful percentage of our sales will continue to be generated through these channels in the future. However, none of these partners are required to sell or provide our products exclusively. If a key independent O&P provider were to cease to distribute our products, our sales could be adversely affected. In such a situation, we may need to seek alternative independent providers or increase our reliance on our other independent providers or our direct field representatives, which may not prevent our sales from being adversely affected. Additionally, to the extent that we enter into additional arrangements with independent distributors to perform sales, marketing, or distribution services, the terms of the arrangements could cause our profit margins to be lower than if we directly marketed and sold our products.

If these independent O&P providers or distributors do not follow our inclusion/exclusion criteria for patient selection or do not provide adequate follow-on care, then our reputation may be harmed by patient dissatisfaction. This could also lead to product returns and adversely affect our financial condition. When issues with distributors have arisen in the past, we have supplied additional training and documentation and/or ended the distributor relationship.

The sales and marketing of medical devices is under increased scrutiny by the FDA and other enforcement bodies. If our sales and marketing activities fail to comply with FDA regulations, such as regulations for the labeling and advertising of our products, or other applicable laws, we may be subject to warnings or enforcement actions from the FDA or other enforcement bodies. For example, we are restricted from promoting our products for any use that is beyond the scope of their applicable FDA classification regulation. Such promotion could result in enforcement action by the FDA, which may include, but is not limited to untitled letters or warning letters, injunctions, recall or seizure of our products, and imposition of FDA’s premarket clearance or approval requirements.

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.

The market for myoelectric braces, or orthotics, is new and the rate of adoption is uncertain. Our estimates of market size are derived from statistics regarding the number of individuals with paralysis, but not necessarily limited to their upper extremities. Accordingly, it is difficult to predict the future size and rate of growth of the market. We cannot be certain whether the market will continue to develop or if orthotics will achieve and sustain a level of market acceptance and demand sufficient for us to continue to generate revenue and achieve profitability.

Limited sources exist to obtain reliable market data with respect to the number of mobility-impaired individuals and the occurrence of upper extremity paralysis in our target markets. In addition, there are no third-party reports or studies regarding what percentage of those with upper extremity paralysis would be able to use orthotics in general, or our current or planned future products in particular. In order to use our current products marketed to those with upper extremity paralysis, users must meet a set of inclusion criteria and not have a medical condition which disqualifies them from being an appropriate candidate. Future products for those with upper extremity paralysis may have the same or other

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restrictions. Our business strategy is based, in part, on our estimates of the number of upper extremity impaired individuals and the incidence of upper extremity injuries in our target markets and the percentage of those groups that would be able to use our current and future products. Our assumptions and estimates may be inaccurate and may change.

If the upper extremity orthotics market fails to develop or develops more slowly than we expect, or if we have relied on sources or made assumptions or estimates that are not accurate, our business could be adversely affected.

In addition, because we operate in a new market, the actions of our competitors could adversely affect our business. Adverse events such as product defects or legal claims with respect to competing or similar products could cause reputational harm to the market on the whole. Further, adverse regulatory findings or reimbursement-related decisions with respect to other products could negatively impact the entire market and, accordingly, our business.

Risks Related to Our Products

We may receive a significant number of warranty claims or our MyoPro may require significant amounts of service after sale.

Sales of MyoPro products generally include a three-year warranty for parts and labor, other than for normal wear and tear. As the number and complexity of the features and functionalities of our products increase, we may experience a higher level of warranty claims. If product returns or warranty claims are significant or exceed our expectations, we could incur unanticipated expenditures for parts and services, which could have a material adverse effect on our operating results.

Defects in our products or the software that drives them could adversely affect the results of our operations.

The design, manufacture and marketing of the MyoPro products involve certain inherent risks. Manufacturing or design defects, unanticipated use of the MyoPro, or inadequate disclosure of risks relating to the use of MyoPro products can lead to injury or other adverse events. In addition, because the manufacturing of our products is outsourced to Cogmedix, we may not always be aware of manufacturing defects that could occur and corrective or preventive actions implemented by Cogmedix may not be effective at resolving such defects. Such adverse events could lead to recalls or safety alerts relating to MyoPro products (either voluntary or required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of MyoPro products from the market. A recall could result in significant costs. To the extent any manufacturing defect occurs, our agreement with Cogmedix contains a limitation on Cogmedix’s liability, and therefore we could be required to incur the majority of related costs. A defect in connection with the fabrication of our products may result in significant costs in connection with lawsuits or refunds. Product defects or recalls could also result in negative publicity, damage to our reputation or, in some circumstances, delays in new product approvals.

MyoPro users may not use MyoPro products in accordance with safety protocols and training, which could enhance the risk of injury. Any such occurrence could cause delay in market acceptance of MyoPro products, damage to our reputation, additional regulatory filings, product recalls, increased service and warranty costs, product liability claims and loss of revenue relating to such hardware or software defects.

The medical device industry has historically been subject to extensive litigation over product liability claims. We have not been subject to such claims to date, but we may become subject to product liability claims alleging defects in the design, manufacture or labeling of our products in the future. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs and high punitive damage payments. Although we maintain product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. Additionally, we may be unable to maintain our existing product liability insurance in the future at satisfactory rates or in adequate amounts.

While there is long-term clinical data supporting the safety of our existing MyoPro products, updates to our products inherently have uncertain safety risks as they enter the market.

While clinical data have established the safety of MyoPro products, our products undergo periodic updates for various reasons, including performance and reliability improvements and cost reductions. For example, in January 2022, we announced the availability of MyoPro2+. Because MyoPro users generally do not have feeling in their upper extremities, they may not immediately notice adverse effects from updates to the MyoPro, which could exacerbate their impact. If MyoPro products are shown to present new risks or to be unsafe or cause such unforeseen effects in the future, our business and reputation could be harmed, including through field corrections, withdrawals, removals, mandatory product recalls, suspension or withdrawal of FDA registration, significant legal liability or harm to our business reputation.

Risks Related to Collaborations and Licensing Agreements

We may enter into collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products or the generation of significant future revenues.

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In the ordinary course of our business, in the future we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships to develop the MyoPro and to pursue new markets. We are selling the MyoPro in several European countries, as well as Australia. In January 2021, we announced that we had entered into a JV with Ryzur Medical to manufacture and sell the products containing our technology in China, Hong Kong, Taiwan and Macau. In December 2021, we entered into a technology license agreement and a trademark license agreement with the JV Company, under which we received a license fee of $2.7 million and the JV Company will commit to purchase a minimum of $10.75 million of MyoPro control units over the next ten years. The JV Company paid the remaining $1.7 million of the upfront license fee in April 2023. This and any other of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, proposing, negotiating and implementing collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships may be a competitive lengthy and complex process. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products. Any delays in entering into new strategic partnership agreements related to our products could delay the development and commercialization of our products in certain geographies, which would harm our business prospects, financial condition and results of operations.

If we pursue collaborations, additional licensing arrangements and joint ventures, strategic alliances or partnerships, we may not be able to consummate them, or we may not be in a position to exercise sole decision decision-making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators. Our collaborators may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. Any such disputes could result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements.

Risks Related to Our Business Operations and Management

If we fail to properly manage our anticipated growth, including in international markets, our business could suffer.

As we expand the number of locations which provide the MyoPro products, including future planned international distribution, we expect that it will place significant strain on our management team and on our financial resources. Failure to manage our growth effectively could cause us to misallocate management or financial resources and result in losses or weaknesses in our infrastructure, systems, processes and controls, which could materially adversely affect our business. Additionally, our anticipated growth will increase the demands placed on our suppliers, resulting in an increased need for us to manage our suppliers and monitor for quality assurance.

Moreover, there are significant costs and risks inherent in selling our products in international markets, including: (a) time and difficulty in building a widespread network of distribution partners; (b) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (c) potentially lower margins in some regions; (d) longer collection cycles in some regions; (e) compliance with foreign laws and regulations; (f) compliance with anti-bribery, anti-corruption, and anti-money laundering laws, such as the Foreign Corrupt Practices Act and the Office of Foreign Assets Control regulations, by us, our employees, and our business partners; (g) currency exchange rate fluctuations and related effects on our results of operations; (h) economic weakness, including inflation, or political instability in foreign economies and markets; (i) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (j) workforce uncertainty in countries where labor unrest is more common than in the United States; (k) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, typhoons, floods and fires; and (l) other costs and risks of doing business internationally, such as new tariffs which may be imposed. For example, in January 2021, we announced that we had entered into a joint venture with Ryzur Medical to manufacture and sell the products containing the Company’s technology in China, Hong Kong, Taiwan and Macau. In connection with this joint venture, we may encounter challenges in working with our joint venture partners, including with respect to compliance with local laws and domestic laws related to foreign operations.

These and other factors could harm our ability to implement planned international operations and, consequently, harm our business, results of operations, and financial condition. Further, we may incur significant operating expenses as a result of our planned international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We may also encounter difficulty expanding into international markets because of limited brand recognition, leading to delayed or limited acceptance of our products by patients in these markets. Accordingly, if we are unable to expand internationally or manage our international operations successfully, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed.

We depend on the knowledge and skills of our senior management.

We have benefited substantially from the leadership and performance of our senior management and other key employees. We do not carry key person insurance. Our success will depend on our ability to retain our current management and key employees. Competition for these key persons in our industry is intense and we cannot guarantee that we will be able to retain our personnel. The loss of the services of certain

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members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives or divert management’s attention to seeking qualified replacements.

We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could have a material adverse effect on our business, financial condition and operating results.

From time to time, we may consider opportunities to acquire other products or technologies that may enhance our products or technology or advance our business strategies. Potential acquisitions involve numerous risks, including:

•problems assimilating the acquired products or technologies;

•issues maintaining uniform standards, procedures, controls and policies;

•unanticipated costs associated with acquisitions;

•diversion of management’s attention from our existing business;

•risks associated with entering new markets in which we have limited or no experience; and

•increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters.

We have no current commitments with respect to any acquisition and no current plans to seek acquisitions; however, depending on industry and market conditions, we may consider acquisitions in the future. If we do proceed with acquisitions, we do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.

Our recent organizational changes and cost cutting measures may not be successful.

In January 2023, we implemented reduction-in-force affecting approximately 12% of our workforce. The objective of this workforce reduction was to realign our workforce to meet our needs and to improve operating efficiency in our direct billing channel and reduce our cash burn. However, these restructuring and cost cutting activities may yield unintended consequences and costs, such as attrition beyond our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk we may not achieve the anticipated benefits of such reduction-in-force measure, all of which may have an adverse effect on our results of operations or financial condition. In addition, while positions have been eliminated, certain functions necessary to our reduced operations remain, and we may be unsuccessful in distributing the duties and obligations of departed employees among our remaining employees. We may also discover the reductions in workforce and cost cutting measures will make it difficult for us to resume development activities we have suspended or pursue new initiatives, requiring us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses. As a result of the loss of services of substantially all of our personnel, including several of our executive officers, we may be unable to continue our operations and meet our ongoing obligations. Any of these unintended consequences may have a material adverse impact on our business, financial condition, and results of operations.

Risks Related to Government Regulation

Risks Related to Healthcare Industry

We are subject to extensive governmental regulations relating to the design, development, manufacturing, labeling and marketing, delivery and billing of our products, and a failure to comply with such regulations could lead to withdrawal or recall of our products from the market.

Our products are regulated as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or FFDCA, as implemented and enforced by the FDA. Under the FFDCA, medical devices are classified into one of three classes–Class I, Class II or Class III–depending on the degree of risk associated with the medical device, what is known about the type of device, and the extent of control needed to provide reasonable assurance of safety and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among other things, the necessity and type of FDA pre-market review. This determination is required prior to marketing the device. See “Business — Government Regulation” in our 2022 Annual Report.

In 2012, we listed the MyoPro device as a Class I, 510(k)-exempt, limb orthosis with the FDA. From time to time, the FDA may disagree with the classification regulation under which a registrant lists their device. For example, the FDA may disagree with a registrant’s determination to classify their device as a Class I medical device. Instead, the FDA may determine the device to be a Class II or Class III device requiring the submission of a premarket notification, or 510(k), or a premarket approval, or PMA, application for premarket clearance or approval. As the FDA is now giving more attention to the differentiated performance of myoelectric controlled orthotics, we elected to change our device listing to be under a Class II classification regulation for biofeedback devices. Under the classification regulation, we believe our device remains

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510(k)-exempt as a prescription battery powered external limb orthosis that is indicated for functional improvement, a device which is generally 510(k)-exempt under the classification regulation. In the event that the FDA determines that our devices, whether by functionality or marketing claims, exceed the limitations on 510(k)-exemption such that premarket clearance or approval is required (i.e., that our device is intended for a use different from the intended use of a legally marketed device in the generic type of device under the applicable classification regulation or that our modified device operates using a different fundamental scientific technology than such a legally marketed device), should be classified as Class II devices or Class III devices requiring premarket clearance or approval, or should FDA decide to reclassify our device as a Class II or Class III device requiring premarket clearance or approval, we could be precluded from marketing our devices for clinical use within the U.S. for months or longer depending on the requirements of the classification. Obtaining premarket clearance or approval could significantly increase our regulatory costs, including expense associated with required pre-clinical (animal) and clinical (human) trials, more extensive mechanical and electrical testing and other costs.

We are registered with the FDA as a manufacturer for medical devices. We are also subject to regulation by foreign governmental agencies in connection with international sales. The agencies enforce laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of our medical device products. Following the introduction of a product, the governmental agencies will periodically review our product development methodology, quality management systems, and product performance. We are under a continuing obligation to ensure that all applicable regulatory requirements, such as the FDA’s medical device good manufacturing practice / Quality System Regulation, or QSR, requirements and the FDA’s medical device reporting requirements for certain device-related adverse events and malfunction, continue to be met. Our facilities are subject to periodic and unannounced inspection by U.S. and foreign regulatory agencies to audit compliance with the QSR, and comparable foreign regulations.

The process of complying with the applicable QSR, medical device reporting, and other requirements can be costly and time consuming, and could delay or prevent the production, manufacturing or sale of the MyoPro. If the FDA determines that we fail to comply with applicable regulatory requirements, they may issue an inquiry or an untitled or warning letter with one or more citations of non-compliance. These inquiries or letters, if not closed promptly, can result in fines, delays or suspensions of regulatory clearances, closure of manufacturing sites, seizures or recalls of products and damage to our reputation. Similarly, if we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Recent changes in enforcement practice by the FDA and other agencies have resulted in increased enforcement activity, which increases the compliance risk that we and other companies in our industry are facing.

In addition, governmental agencies of the United States or other countries may impose new requirements regarding registration, labeling or prohibited materials that may require us to modify or re-register the MyoPro once it is already on the market or otherwise impact our ability to market the MyoPro in the US or other countries. The process of complying with these governmental regulations can be costly and time consuming, and could delay or prevent the production, manufacturing or sale of the MyoPro. For instance, the FDA may issue mandates, known as 522 orders, requiring us to conduct post-market surveillance studies of our devices. Failure to comply could result in enforcement of the FFDCA against us or our products including an agency request that we recall our MyoPro products.

Our relationships with healthcare providers and physicians and third-party payers will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

We are subject to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through which we sell, market and distribute our products. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry (e.g., healthcare providers, physicians and third-party payers), are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. We are also subject to patient information and privacy and security regulation by both the federal government and the states and foreign jurisdictions in which we conduct business. See section entitled “Business – Government Regulation – Healthcare Privacy Laws and Regulations.” in our 2022 Annual Report.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies often scrutinize interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.

The failure to comply with any of these laws or regulatory requirements subject entities to possible legal or regulatory action. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities, could, despite efforts to comply, be subject to challenge under one or more of such laws. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. Depending on the circumstances, failure to meet applicable

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regulatory requirements can result in civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in federal and state funded healthcare programs, contractual damages, reputational harm and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Any action for violation of these laws, even if successfully defended, could cause us to incur significant legal expenses and divert management’s attention from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. In addition, the commercialization of any of our products outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

If we or our third-party manufacturers or key suppliers fail to comply with the FDA’s Quality System Regulation, our manufacturing operations could be interrupted.

We and our third-party manufacturers and key suppliers are also required to comply with the FDA’s QSR which covers the methods and documentation of the production, control, quality assurance, labeling, packaging, storage and shipping of our products. We, Cogmedix, our electromechanical kit manufacturer, and other key suppliers are also subject to the regulations of foreign jurisdictions regarding the manufacturing process with respect to the market for our products abroad.

We continue to monitor our quality management, as well as that of our third-party manufacturers and suppliers to improve our overall level of compliance. Our facilities and those of our third-party manufacturers and key suppliers are subject to periodic and unannounced inspection by U.S. and foreign regulatory agencies to audit compliance with the QSR and comparable foreign regulations. If our facilities or the facilities of our third-party manufacturers and suppliers are found to be in violation of applicable laws and regulations, or if we or our third-party manufacturers and suppliers fail to take satisfactory corrective action in response to an adverse inspection, the regulatory authority could take enforcement action, including any of the following sanctions:

•untitled letters, warning letters, Form 483 findings (results from quality system inspections), fines, injunctions, consent decrees and civil penalties;

•customer notifications or repair, replacement or refunds;

•detention, recalls or seizure of our products;

•operating restrictions or partial suspension or total shutdown of production;

•withdrawing our FDA registration;

•refusing to provide certificates to foreign governments with respect to exports; and

•pursuing criminal prosecution.

Any of these sanctions could impair our ability to produce the MyoPro in a cost-effective and timely manner in order to meet our customers’ demands and could have a material adverse effect on our reputation, business, results of operations and financial condition. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business, financial condition and results of operations.

We face risks in connection with the Affordable Care Act or its possible replacement or modifications and other ongoing healthcare legislative and regulatory reform measures.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could affect our ability to profitably sell our products. Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to

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product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Payers, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare costs and those methods are not always specifically adapted for new technologies. In the United States, there have been and continue to be a number of legislative and regulatory initiatives and judicial challenges to contain healthcare costs. See section titled “Business – Government Regulations – Current and Future Legislation.” in our 2022 Annual Report.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for our products. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payers, including Medicare Advantage plans, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our products. Litigation and legislative efforts to change or repeal the ACA are likely to continue, with unpredictable and uncertain results. It is not clear how these developments, or other future potential changes to the ACA, will change the reimbursement model and market outlook for O&P devices such as the MyoPro. We intend to monitor industry trends relative to the ACA to assist in our determination of how the MyoPro can fit into patient care protocols with providers such as rehabilitation hospitals and surgery centers. If reimbursement policies change significantly, the demand for MyoPro products may be impacted.

Risks Related to Cybersecurity and Data Protection

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.

Despite the implementation of security measures, our internal computer systems and those of our customers, collaborators and other contractors are vulnerable to damage from computer viruses and unauthorized access. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber-attacks also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient. A material cyber-attack or security breach could cause interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation or a loss of revenues.

In the ordinary course of our business, we collect and store sensitive data, including, among other things, personally identifiable information about our employees and patients, intellectual property, and proprietary business information. Any cyber-attack or security breach that leads to unauthorized access, use or disclosure of personal or proprietary information could harm our reputation, cause us not to comply with federal and/or state breach notification laws and foreign law equivalents and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. In addition, we could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company and our vendors, including personal information of our employees, and company and vendor confidential data. In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in order to gain access to our data and/or systems. If a material breach of our information technology systems or those of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed and our reputation and credibility could be damaged.

We could be required to expend significant amounts of money and other resources to respond to these threats or breaches and to repair or replace information systems or networks and could suffer financial loss or the loss of valuable confidential information. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely and there can be no assurance that any measures we take will prevent cyber-attacks or security breaches that could adversely affect our business.

In the United States, states have recently become to be rather active in privacy. Leading efforts has been California which has recently enacted the California Consumer Privacy Act, or CCPA, a comprehensive measure that creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information. The CCPA went into effect on January 1, 2020 and the California State Attorney General became empowered to commence enforcement actions against violators as of July 1, 2020. Further, also in California, as of January 1, 2023, the California Privacy Rights Act (CPRA), will create additional obligations with

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respect to processing and storing personal information that are scheduled to take effect on January 1, 2023. We will continue to monitor developments related to the CPRA and anticipate additional costs and expenses associated with CPRA compliance. While the CCPA and CPRA contain an exception for certain activities involving PHI under HIPAA, we cannot yet determine the impact the CCPA, CPRA or other such future laws, regulations and standards may have on our business.

Certain other state laws impose similar privacy obligations and we also anticipate that more states will increasingly enact legislation similar to the CCPA and the CPRA. For example, on March 2, 2021, Virginia enacted the Consumer Data Protection Act, or CDPA. The CDPA became effective January 1, 2023. The CDPA regulates how businesses (which the CDPA refers to as “controllers”) collect and share personal information. While the CDPA incorporates many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of controllers. The new law will impact how controllers collect and process personal sensitive data, conduct data protection assessments, transfer personal data to affiliates, and respond to consumer rights requests.

Also, on July 8, 2021, Colorado’s governor signed the Colorado Privacy Act, or CPA, into law. The CPA is rather similar to Virginia’s CDPA, but also contains additional requirements. The new measure applies to companies conducting business in Colorado or who produce or deliver commercial products or services intentionally targeted to residents of the state that either: (1) control or process the personal data of at least 100,000 consumers during a calendar year; or (2) derive revenue or receive a discount on the price of goods or services from the sale of personal data and process or control the personal data of at least 25,000 consumers.

With the CPA, Colorado became the third state to enact a comprehensive privacy law. A number of additional other states have proposed bills for comprehensive consumer privacy laws and it is quite possible that certain of these bills will pass. The existence of comprehensive privacy laws in different states in the country, if enacted, will add additional complexity, variation in requirements, restrictions and potential legal risk, may require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data, and has resulted in and may result in further increased compliance costs and/or changes in business practices and policies.

European data collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.

The collection and use of personal health data in the European Union is governed by the provisions of the General Data Protection Regulation, or GDPR and applicable data protection laws in effect in the member states of the European Union. The GDPR imposes a broad range of strict requirements on companies subject to the GDPR, such as including requirements relating to having legal bases for processing personal data relating to identifiable individuals and transferring such information outside the European Economic Area, or EEA, including to the U.S., providing details to those individuals regarding the processing of their personal data, implementing safeguards to keep personal data secure, having data processing agreements with third parties who process personal data, providing information to individuals regarding data processing activities, responding to individuals’ requests to exercise their rights in respect of their personal data, obtaining consent of the individuals to whom the personal data relates, reporting security and privacy breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up to €20,000,000 or 4% of total annual global revenue, whichever is greater. In addition, further to the UK’s exit from the EU on January 31, 2020, the GDPR ceased to apply in the UK at the end of the transition period on December 31, 2020. However, as of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to certain UK specific amendments) into UK law, referred to as the UK GDPR. The UK GDPR and the UK Data Protection Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the EU’s data protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher. Although the UK is regarded as a third country under the EU’s GDPR, the European Commission (“EC”) has now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted. Like the EU GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK as providing adequate protection. The UK government has confirmed that personal data transfers from the UK to the EEA remain free flowing.

To enable the transfer of personal data outside of the EEA or the UK, adequate safeguards must be implemented in compliance with European and UK data protection laws. On June 4, 2021, the EC issued new forms of standard contractual clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EU/EEA (and not subject to the GDPR). The new standard contractual clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection Directive. The UK is not subject to the EC’s new standard contractual clauses but has published a draft version of a UK-specific transfer mechanism, which, once finalized, will enable transfers from the UK. We will be required to implement these new safeguards when conducting restricted data transfers under the EU and UK GDPR and doing so may require significant effort and additional cost.

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Risks Related to Our Intellectual Property

We depend on certain patents that are licensed to us. We do not control these patents and any loss of our rights to them could prevent us from manufacturing our products.

We rely on licenses to two core patents that are material to our business, including the development of the MyoPro, which expire in November 2023 and December 2023, respectively. We have entered into the MIT License for those certain patents that cover (i) a powered orthotic device worn on a patient’s elbow or other joint, that senses relatively low level signals in the vicinity of the joint generated by a patient having spinal cord or other nerve damage and (ii) a method of providing rehabilitation movement training for a person suffering from nerve damage, stroke, spinal cord injury, neurological trauma or neuromuscular disorder in attempt to move a body part with a powered orthotic device. Our rights to use these patents will be subject to the continuation of and our compliance with the terms of those licenses.

We have certain revenue obligations, or Revenue Obligations under the MIT License. Our revenue exceeded $750,000 for the fiscal year ended December 31, 2022 and for the six months ended June 30, 2023, which satisfied the Revenue Obligations for each of those fiscal years. The Revenue Obligations are a continuing requirement of the MIT License. MIT has the right to terminate the MIT License upon any future uncured material breach of the agreement or if we fail to make any payments due under the agreement. If the MIT License is terminated for any reason, our business will be harmed. Specifically, if we were to lose access to these licenses, we may be unable to manufacture the MyoPro or develop new products until we obtained access to a comparable technology.

We may not control the prosecution, maintenance or filing of the patents to which we now hold or in the future intend to acquire licenses. Enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents may be subject to the control or cooperation of our licensors. We cannot be certain that our licensors will prosecute, maintain, enforce and defend the licensed patent rights in a manner consistent with the best interests of our business. We also cannot be certain that drafting or prosecution of the licensed patents and patent applications by the relevant licensors have been or will be conducted in compliance with applicable law.

Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our products.

Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our products. We seek to protect our intellectual property through a combination of patents, trademarks, confidentiality and assignment agreements with our employees and certain of our contractors and confidentiality agreements with certain of our consultants, scientific advisors and other vendors and contractors. In addition, we rely on trade secrets law to protect our proprietary software and product candidates or products in development.

The patent position of myoelectric orthotic inventions can be highly uncertain and involves many new and evolving complex legal, factual and technical issues. Patent laws and interpretations of those laws are subject to change and any such changes may diminish the value of our patents or narrow the scope of protection. In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology or products or enforce our patents due to lack of information about the exact use of technology or processes by third parties. Also, we cannot be sure that any patents will be granted in a timely manner or at all with respect to any of our patent pending applications or that any patents that are granted will be adequate to protect our intellectual property for any significant period of time or at all.

Litigation to establish or challenge the validity of patents, or to defend against or assert against others infringement, unauthorized use, enforceability or invalidity claims, can be lengthy and expensive and may result in our patents being invalidated or interpreted narrowly and our not being granted new patents related to our pending patent applications. Even if we prevail, litigation may be time consuming and force us to incur significant costs, and any damages or other remedies awarded to us may not be valuable and management’s attention could be diverted from managing our business. In addition, U.S. patents and patent applications may be subject to interference proceedings, and U.S. patents may be subject to re-examination and review in the U.S. Patent and Trademark Office. Foreign patents may also be subject to opposition or comparable proceedings in the corresponding foreign patent offices. Any of these proceedings may be expensive and could result in the loss of a patent or denial of a patent application, or the loss or reduction in the scope of one or more of the claims of a patent or patent application.

In addition, we seek to protect our trade secrets, know-how and confidential information that is not patentable by entering into confidentiality and assignment agreements with our employees and certain of our contractors and confidentiality agreements with certain of our consultants, scientific advisors and other vendors and contractors. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. Enforcing a claim that a third-party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. We also have taken precautions to initiate reasonable safeguards to protect our information technology systems. However, these measures may not be adequate to safeguard our proprietary information, which could lead to the loss or impairment thereof or to expensive litigation to defend our rights against competitors who may be better funded and have superior resources. In addition, unauthorized parties may attempt to copy or reverse engineer certain aspects of our products that we consider proprietary or our proprietary information may otherwise become known or may be independently developed by our competitors or other third parties. If other parties are able to use our proprietary technology or information, our ability to compete in the market could be harmed. Further, unauthorized use of our intellectual property may have occurred, or may occur in the future, without our knowledge.

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If we are unable to obtain or maintain adequate protection for intellectual property, or if any protection is reduced or eliminated, competitors may be able to use our technologies, resulting in harm to our competitive position.

We are not able to protect our intellectual property rights in all countries.

Filing, prosecuting, maintaining and defending patents on each of our products in all countries throughout the world would be prohibitively expensive, and thus our intellectual property rights outside the United States are currently limited to selected countries in the European Union, China, Hong Kong, and Japan. In addition, the laws of some foreign countries, especially developing countries, do not protect intellectual property rights to the same extent as federal and state laws in the United States. Also, it may not be possible to effectively enforce intellectual property rights in some countries at all or to the same extent as in the United States and other countries. Consequently, we are unable to prevent third parties from using our inventions in all countries, or from selling or importing products made using our inventions in the jurisdictions in which we do not have (or are unable to effectively enforce) patent protection. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop, market or otherwise commercialize their own products, and we may be unable to prevent those competitors from importing those infringing products into territories where we have patent protection, but enforcement is not as strong as in the United States. These products may compete with our products and our patents and other intellectual property rights may not be effective or sufficient to prevent them from competing in those jurisdictions. Moreover, competitors or others in the chain of commerce may raise legal challenges against our intellectual property rights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. Proceedings to enforce our patent rights in the United States or foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights in the United States and around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license from third parties.

We may be subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our current and future products.

The medical device industry is characterized by competing intellectual property and a substantial amount of litigation over patent rights. In particular, our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, have been issued patents and filed patent applications with respect to their products and processes and may apply for other patents in the future. The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

Determining whether a product infringes a patent involves complex legal and factual issues and the outcome of patent litigation is often uncertain. Even though we have conducted research of issued patents, no assurance can be given that patents containing claims covering our products, technology or methods do not exist, have not been filed or could not be filed or issued. In addition, because patent applications can take years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware and may result in issued patents which our current or future products infringe. Also, because the claims of published patent applications can change between publication and patent grant, published applications may issue with claims that potentially cover our products, technology or methods.

Infringement actions and other intellectual property claims brought against us, with or without merit, may cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management and harm our reputation. We cannot be certain that we will successfully defend against any allegations of infringement. If we are found to infringe another party’s patents, we could be required to pay damages. We could also be prevented from selling our products that infringe, unless we could obtain a license to use the technology covered by such patents or could redesign our products so that they do not infringe. A license may be available on commercially reasonable terms or none at all, and we may not be able to redesign our products to avoid infringement. Further, any modification to our products could require us to conduct clinical trials and revise our filings with the FDA and other regulatory bodies, which would be time consuming and expensive. In these circumstances, we may not be able to sell our products at competitive prices or at all, and our business and operating results could be harmed.

We rely on trademark protection to distinguish our products from the products of our competitors.

We rely on trademark protection to distinguish our products from the products of our competitors. We have registered the trademarks “MyoPro” (Registration No. 4,532,331), “MYOMO” (Registration No. 4,451,445), “MyoPal” (Registration No. 6,086,533) and “MyoCare” (Registration No. 6,579,736) in the United States. The MyoPro mark is registered in Canada and in selected European Union, or EU, countries with pending registration. In jurisdictions where we have not yet registered our trademark and are using it, and as permitted by applicable local law, we seek to rely on common law trademark protection where available. Third parties may oppose our trademark applications, or otherwise challenge our use of the trademarks, and may be able to use our trademarks in jurisdictions where they are not registered or otherwise protected by law. If our trademarks are successfully challenged or if a third-party is using confusingly similar or identical trademarks in particular jurisdictions before we do, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to

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devote additional resources to marketing new brands. If others are able to use our trademarks, our ability to distinguish our products may be impaired, which could adversely affect our business. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks.

We may be subject to damages resulting from claims that our employees or we have wrongfully used or disclosed alleged trade secrets of their former employers.

Some of our employees were previously employed at other medical device companies, including our competitors or potential competitors, and we may hire employees in the future that are so employed. We could in the future be subject to claims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. If we fail in defending against such claims, a court could order us to pay substantial damages and prohibit us from using technologies or features that are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. If any of these technologies or features are important to our products, this could prevent us from selling those products and could have a material adverse effect on our business. Even if we are successful in defending against these claims, such litigation could result in substantial costs and divert the attention of management.

Risks Related to our Securities

Risks Related to Ownership of Our Securities

Our stockholders will experience significant dilution upon the issuance of common stock if the shares of our common stock underlying our warrants, are exercised or converted.

We have a significant number of securities convertible into, or allowing the purchase of, our common stock. Investors could be subject to increased dilution upon the conversion or exercise of these securities. For example, in January 2023, we issued 6,830,926 pre-funded warrants in conjunction with our follow-on equity offering. Each pre-funded warrant is exercisable for one share of common stock at the nominal exercise price of $0.0001 per share. As of June 30, 2023, we had 668,250 shares issuable upon the exercise of other warrants, with a weighted-average exercise price of $7.50 per share and 1,608,615 restricted stock units outstanding. In addition, there are 26,138 shares issuable upon the exercise of stock options under our equity incentive plans, with a weighted-average exercise price of $39.51 per share.

We may not be able to maintain a listing of our common stock on the NYSE American.

We must meet certain financial and liquidity criteria to maintain such listing. If we fail to meet any of the NYSE American’s listing standards, our common stock may be delisted. In addition, our board may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the NYSE American may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. A delisting of our common stock could significantly impair our ability to raise capital.

There is no public market for our warrants or pre-funded warrants to purchase common stock.

There is no established public trading market for our warrants or pre-funded warrants and we do not expect a market to develop. In addition, we do not intend to apply for listing of such warrants on any securities exchange. Without an active market, the liquidity of such warrants will be limited.

Holders of our warrants and pre-funded warrants have no rights as a common stockholder until such holders exercise their warrants and acquire our common stock.

Until holders of our warrants and pre-funded warrants exercise such warrants, they will have no rights with respect to the shares of our common stock underlying such warrants. Upon exercise of such warrants, the holders thereof will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

The market price of our common stock has been and may continue to be volatile.

The stock market in general, and the market price of our common stock in particular will likely be subject to fluctuation, whether due to, or irrespective of, our operating results, financial condition and prospects. For example, from June 9, 2017 to June 30, 2023, the high and low sales price of our common stock on the NYSE American has fluctuated from a low of $0.37 to a split adjusted high of $695.88 per share. During the period from July 1, 2023 to the date of the filing of this report, our stock price has ranged from $0.56 to $0.94.

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Our financial performance, our industry’s overall performance, changing consumer preferences, technologies, government regulatory action, tax laws and market conditions in general could have a significant impact on the future market price of our common stock. Some of the other factors that could negatively affect our share price or result in fluctuations in our share price include:

•actual or anticipated variations in our periodic operating results;

•increases in market interest rates that lead purchasers of our common stock to demand a higher investment return;

•changes in earnings estimates;

•changes in market valuations of similar companies;

•actions or announcements by our competitors;

•adverse market reaction to any increased indebtedness we may incur in the future;

•additions or departures of key personnel;

•actions by stockholders;

•speculation in the media, online forums, or investment community; and

•our intentions and ability to maintain our common stock on the NYSE American.

We do not expect to declare or pay dividends in the foreseeable future.

We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common stock will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

Any trading market for our common stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not have any control over these analysts. We currently have limited research coverage by securities industry analysts and we may be unable to maintain analyst coverage or have analysts initiate coverage on us. If securities industry analysts cease coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage on us, the market price and market trading volume of our common stock could be negatively affected.

Future issuances of our common stock or equity-related securities could cause the market price of our common stock to decline and would result in the dilution of your holdings.

Future issuances of our common stock or securities convertible into our common stock could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our common stock or securities convertible into our common stock on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our common stock, or other securities convertible into our common stock, could occur, could adversely affect the market price of our common stock.

Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect our common stock price.

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred securities in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return they may be able to achieve from an investment in our common stock.

If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.

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The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on the NYSE American or another national securities exchange and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change in control or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:

•authorize our board of directors to issue preferred stock, without further stockholder action and with voting liquidation, dividend and other rights superior to our common stock;

•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees;

•establish that our board of directors is divided into three classes, with directors in each class serving three-year staggered terms;

•require the approval of holders of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or amend or repeal the provisions of our certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action by written consent or call a special meeting;

•prohibit cumulative voting in the election of directors; and

•provide that vacancies on our board of directors may be filled only by the vote of a majority of directors then in office, even though less than a quorum or by the holders of at least sixty-six and two-thirds percent (66 2/3%) of the issued and outstanding shares of common stock.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your common stock in an acquisition.

As a result of sales of shares of our Common Stock pursuant to our equity line of credit, our existing stockholders will experience immediate dilution and our stock price may decrease.

Pursuant to the Purchase Agreement, we may sell up to $5,000,000 of shares of our common stock at our discretion to Keystone, subject to satisfaction of certain conditions and limitations contained in the equity line facility. Because the purchase price under the facility includes a discount to prevailing market prices, the sale of shares of our common stock pursuant to the Purchase Agreement will have a dilutive impact on our existing stockholders. Keystone may resell some or all of the shares we issue to it under the Purchase Agreement and such sales could cause the market price of our common stock to decline, and such decline could be significant.

Risks Related to Internal Controls

We are a "smaller reporting company” under the reporting rules set forth under the Exchange Act. For so long as we remain a “smaller reporting company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “smaller reporting companies”.

We are a “smaller reporting company,”. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “smaller reporting companies,” including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (so long as we remain a

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non-accelerated filer) and reduced disclosure obligations regarding executive compensation in the Annual Report on Form 10-K and our periodic reports and proxy statements.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We are obligated to develop and maintain a system of effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may harm investor confidence in our company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in the annual and quarterly reports we file with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. However, our auditors are not required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer a “smaller reporting company” as set forth under the Exchange Act.

We will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. As we continue to grow as a public company, we may need to add additional finance staff. We may not be able to remediate any future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal controls when they are required to issue such opinion, investors could lose confidence in the accuracy and completeness of our financial reports, which could harm our stock price.

The preparation of our financial statements involves the use of estimates, judgments and assumptions, and our financial statements may be materially affected if such estimates, judgments or assumptions prove to be inaccurate.

Financial statements prepared in accordance with accounting principles generally accepted in the United States typically require the use of estimates, judgments and assumptions that affect the reported amounts. Often, different estimates, judgments and assumptions could reasonably be used that would have a material effect on such financial statements, and changes in these estimates, judgments and assumptions may occur from period to period over time. Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of assets and the timing and amount of cash flows from assets. These estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong, we would face the risk that charges to income or other financial statement changes or adjustments would be required. Any such charges or changes could harm our business, including our financial condition and results of operations and the price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our financial statements and our business.

We are incurring increased costs as a public company and our management team is required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer a “small reporting company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE American and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

Risks Related to Tax Laws

We may be subject to adverse legislative or regulatory changes in tax laws that could negatively impact our financial condition.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the U.S. Internal Revenue Service, or IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us. In recent years, many such changes have been made and changes are likely to occur in the future. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.

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Our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations.

As of December 31, 2022, we had U.S. federal and state net operating loss, or NOL, carryforwards of $72.7 million and $64.7 million, respectively, which begin to expire in the year 2028 and 2023 through 2043, respectively. Additionally, we had U.S. federal and state research and development tax credits, or tax credits, of $0.3 million and $0.1 million, respectively, which begin to expire in the year 2027 and 2036, respectively. These NOL and tax credit carryforwards could expire unused and be unavailable to offset future taxable income or tax liabilities, respectively. In addition, in general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the code, and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOL carryforwards or tax credits, or NOLs or credits, to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. We have determined that such ownership changes have occurred in prior years. The result of these ownership changes is that we have a $281,000 annual limitation on our ability to utilize pre-ownership change NOL’s and that approximately $437,000 of our NOL’s will expire unutilized. We believe that we may have experienced an ownership change as a result of our follow-on equity offering in January 2023. As of the date of this report, we have not determined the extent of any further limitations on our ability to utilize our NOL’s. We may undergo an ownership change in connection with future changes in our stock ownership (many of which are outside of our control), whereby our ability to utilize NOLs or credits could be further limited by Sections 382 and 383 of the Code or under corresponding provisions of state law. Furthermore, our ability to utilize our NOLs or tax credits is conditioned upon our attaining profitability and generating U.S. federal and state taxable income. As described above under “Risk factors— Risks Associated with Our Business,” we have incurred net losses since our inception and anticipate that we will continue to incur losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOLs or tax credits that are subject to limitation by Sections 382 and 383 of the Code. Under current law, U.S. federal NOL carryforwards generated in taxable years beginning after December 31, 2017 will not be subject to expiration, but the amount of such NOL carryforwards that we are permitted to deduct in a taxable year beginning after December 31, 2020 will be limited to 80% of our taxable income in each such year to which the NOL carryforwards are applied.

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

(a) Recent Sales of Unregistered Securities

None

(b) Use of Proceeds from Registered Securities

None

Issuer Purchases of Equity Securities

None

Item 5. Other Information

On June 7, 2023, at our 2023 annual meeting of stockholders (the “Annual Meeting”), our stockholders approved the Amendment No. 2 to the Myomo 2018 Stock Option and Incentive Plan ("Amended 2018 Plan"), which increases the shares available to grant under the Amended 2018 Plan by 1,100,000. A copy of the Amended 2018 Plan was filed as Exhibit 99.3 to the Registration Statement on Form S-8 (File No. 333-272982) filed with the SEC on June 28, 2023.

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Item 6. Exhibits

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibits Index, which is incorporated by reference.

Exhibits Index

Exhibit No.	Exhibit Description
3.1	Eighth Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 2.3 contained in the Registrant’s Form 1-A filed on January 6, 2017)
3.2	Amended and Restated Bylaws (Incorporated by reference to Exhibit 2.4 contained in the Registrant’s Form 1-A filed on January 6, 2017)
3.3	Certificate of Amendment to the Eighth Amended and Restated Certificate of Incorporation, as amended, of Myomo, Inc., filed with the Secretary of the State of Delaware on January 30, 2020 (Incorporated by reference to Exhibit 3.1 contained in the Registrant’s Form 8-K filed on January 30, 2020)
3.4	Second certificate of Amendment to the Eighth Amended and Restated Certificate of Incorporation, as amended, of Myomo, Inc., filed with the Secretary of the State of Delaware on June 10, 2021 (Incorporated by reference to Exhibit 3.1 contained in the Registrant’s Form 8-K filed on June 15, 2021)
10.1	Amendment No. 2 to the Myomo, Inc. 2018 Stock Option and Incentive Plan (incorporated by reference to Exhibit 99.3 contained in the Registrant’s Form S-8 filed on June 28, 2023).
31.1*	Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101   104	The following materials from the Company’s Quarterly Report Form 10-Q for the three and six months ended June 30, 2023, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows and (iv) Condensed Consolidated Statements of Stockholders’ Equity and (v) Notes to Condensed Consolidated Unaudited Financial Statements. The cover page from the Company’s Quarterly Report on From 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL.

* Filed herewith.

+ The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. Such certification will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date August 9, 2023

Myomo, Inc.

/s/ David A. Henry

David A. Henry

Chief Financial Officer

(Principal Financial and Accounting Officer)

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