Myomo, Inc.: Form 10-Q for the period ended Sep 30, 2025

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

Overview

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

We utilize digital ads on various platforms as well as television ads to reach patients who are potential candidates for our product. Once the prospective patient contacts us or is referred to us under our MyoConnect program, either our trained clinical staff or a trained Orthotics and Prosthetics (“O&P”) provider will evaluate the patient for their suitability as a candidate. Initial evaluations by our trained clinical staff are often conducted using telehealth techniques, followed by an in-person clinical evaluation of the candidate. Prior to obtaining authorizations from commercial insurance companies, the patient’s medical records are collected and reviewed to make sure the device is appropriate for their condition and a prescription is always obtained from a physician. Once these documents are obtained, a pre-authorization request is submitted to the patient’s insurer. If we receive a pre-authorization, we proceed to measure the patient’s arm. If the patient is covered by Medicare Part B, no pre-authorization is required and we can move directly to taking measurements of the patient's arm. This is done either in person, or in some cases using a digital measurement kit supplied to the patient. We then use those measurements to 3D print orthotic parts, which are used to fabricate the MyoPro, and then deliver it to the patient. Since we are directly providing the device to the patient and then billing insurance ourselves, we refer to this process as direct billing. We also call on O&P practices in the United States, Europe and Australia that provide our products to their patients as well as generate indirect sales. The MyoPro product line has been approved by the Veterans Administration (“VA”) for impaired veterans, and over 130 VA facilities have ordered devices for their patients.

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

Other historical milestones include:

• In 2012, we introduced the MyoPro. The primary business focus shifted from developing devices that were designed for rehabilitation therapy and sold to hospitals to providing an assistive device through O&P providers to patients who are otherwise impaired for use at home, work, and in the community that facilitates ADLs.
• During 2015, we extended our basic MyoPro for the elbow with the introduction of the MyoPro Motion W, a multi-articulated non-powered wrist and the MyoPro Motion G, which includes a powered grasp. The MyoPro Motion W allows the user to use their sound arm to adjust the device and then, for instance, open a refrigerator door, carry a shopping bag, hold a cell phone, or stabilize themselves to avoid a fall and potential injury. The MyoPro Motion G model allows users with severely weakened or clenched hands, such as seen in certain stroke survivors, to open and close their hands and perform a large number of ADLs.
• On June 9, 2017, we completed our initial public offering (“IPO”) and a private offering concurrent with the IPO, generating net proceeds of $6.9 million in the aggregate.
• On July 31, 2017, we met the criteria to apply the CE Mark for the MyoPro. This has enabled us to sell the MyoPro to individuals in the European Union (the “EU”).
• In November 2018, we announced that the Centers for Medicare and Medicaid Services (“CMS”) had published two new codes (L8701, L8702) pursuant to our application for Healthcare Common Procedure Coding System (“HCPCS”) codes which become effective in early 2019. The assignment of unique L-Codes, if followed by appropriate payment terms, offers greater access to the MyoPro for Medicare beneficiaries.
• In 2019, we transitioned our business to become a direct provider of the MyoPro to patients and bill insurance companies directly.
• In July 2021, we became accredited as a Medicare provider.
• In January 2022, we introduced MyoPro 2+ and began in-house fabrication of the device.
• On November 1, 2023, CMS issued a final rule that resulted in a change in the benefit category associated with the products billed under the HCPCS codes for our products from durable medical equipment rental to a brace, which would permit reimbursement of MyoPro sales on a lump sum basis. The rule became effective on January 1, 2024.
• On February 29. 2024, CMS published final payment determinations for the HCPCS codes describing our products which are L8701, for the MyoPro Motion W, and L8702, for the MyoPro Motion G, which became effective on April 1, 2024. These fees were subsequently updated to approximately $34,300 for the Motion W and approximately $67,500 for the Motion G, effective January 1, 2025. These fees are subject to annual inflationary adjustments.
• On April 30, 2025, we introduced an enhanced version of our flagship product, now known as the MyoPro 2x in the United States.

Equity Offerings

On December 6, 2024, we completed a public offering, selling 3,450,000 shares of common stock at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million. Net proceeds from the offering are expected to be used to grow revenues in our direct billing channel through additional advertising spending and the addition of clinical, reimbursement and manufacturing headcount to support expected increasing demand, to increase R&D spending in order to accelerate the completion of sustaining and new product development activities, to fund systems and headcount to support growth in the O&P channel, to fund associated working capital requirements and general corporate purposes. On January 19, 2024 we completed a registered direct equity offering, selling 1,354,218 shares of common stock and 224,730 pre-funded warrants at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million. Each pre-funded warrant in the above offering entitles the holder to one share of common stock upon exercise at a nominal exercise price of $0.0001 per share. See section titled “Liquidity” for further discussion.

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 for all of 2025. Our plan for the remainder of 2025 is to invest in increasing demand through paid advertising, the U.S. O&P channel and referral sources, while minimizing expenditures in order to reduce the cash burn.

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

Revenues

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

Revenue increased by approximately $0.9 million and $9.1 million, or 10% and 44%, for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024. Revenue increased due to a higher number of revenue units, driven by deliveries to Medicare Part B patients and O&P practices in the U.S. and Germany, and for the year-to-date period, a higher average selling price. Revenues generated through the direct billing channel were approximately $7.4 million and $22.6 million, or 73% and 76% of revenues in the three and nine months ended September 30, 2025, respectively, compared to approximately $7.4 million and $15.5 million or 81% and 76%, of revenues in the three and nine months ended September 30, 2024, respectively.

Cost of Revenue and Gross Margin

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

Gross margin was 63.8% and 64.6% for the three and nine months ended September 30, 2025 respectively, compared to 75.4% and 71.1% for the three and nine months ended September 30, 2024, respectively. The decreases in gross margin during the three and nine months ended September 30, 2025 were due primarily due to higher material costs, increased manufacturing overhead spending, including payroll and lease costs for our new headquarters and manufacturing facility, unfavorable changes in the amount of capitalized overhead to inventory in the periods and higher average selling price in the prior year due to timing of supplemental insurance payments.

Operating expenses

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

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 invest in enhancing our existing products in 2025 and expect R&D costs to increase on an annual basis, but at a lower rate of growth in the second half of the year as we focus on limiting the growth in operating expenses in general, while funding a randomized control trial to add to the existing body of research demonstrating the efficacy of the MyoPro for patients suffering from upper extremity impairment.

R&D expenses increased by approximately $0.3 million and $2.1 million, or 22% and 66%, during the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024. The increases were primarily due to higher costs for payroll and outside engineering services as we are investing in order to accelerate our sustaining engineering and product development efforts.

Selling, clinical and marketing

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

SC&M expenses increased by approximately $1.9 million and $6.3 million or 54% and 74%, during the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024. The increases were primarily due to higher payroll costs due to increased headcount in our clinical functions to support higher expected sales volume in 2025 and increases in advertising expense in an effort to overcome challenges in lead generation and lead quality during the first half of 2025 and to support future revenue growth. Going forward, we intend to implement alternative sources for lead generation, such as referrals under our MyoConnect program.

General and administrative

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

G&A decreased by approximately $0.1 and increased by approximately $1.8 million, representing a decrease of 2% and an increase of 20%, during the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024. The decrease in the three months ended September 30, 2025 was due primarily to a reduction in the incentive compensation accrual, and the increase in the nine months ended September 30, 2025 was primarily due to increased payroll costs for additional headcount, as well as higher expense related to stock-based compensation.

Other (income), net

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

Other expense (income), net was an expense of approximately $10,000 and income of approximately $288,800 for the three and nine months ended September 30, 2025 respectively, compared to other income of approximately $76,000 and $318,600 for the same periods in 2024, respectively. The decreases in other (expense) income, net during the three and nine months ended September 30, 2025 were due to interest expense on our revolving credit line and term loan, offset by higher interest income, related to a higher average investment balances compared to the prior year period.

Income tax expense

Income tax expense recorded during the three and nine months ended September 30, 2025 and 2024 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH. Income tax expense increased in the three and nine months ended September 30, 2025 as a result of higher taxable income compared to the same periods in 2024.

Adjusted EBITDA

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

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

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

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

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

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

Liquidity and Capital Resources

Liquidity

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

As of September 30, 2025, we had working capital of approximately $13.7 million and stockholders’ equity of approximately $14.6 million. We used approximately $13.4 million in cash for operating activities during the nine months ended September 30, 2025. Considering our current cash, and cash equivalents, and our operating plans discussed below, we believe there is sufficient cash, cash equivalents, and short-term investments to fund our operations and capital expenditures for the next 12 months from the date of this report.

We have historically funded our operations through financing activities, including raising equity and debt capital. In December 2024, we completed a public equity offering, pursuant to which we sold 3,450,000 shares of common stock at $5.00 per share, generating net proceeds after fees and expenses of approximately $15.8 million. In January 2024, we completed a registered direct equity offering, pursuant to which we sold 1,354,218 shares of common stock and 224,730 pre-funded warrants at $3.80 per share, or $3.7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million. In July 2024, we entered into a Loan and Security Agreement with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, which provides us the ability to borrow up to $4.0 million against eligible accounts receivable. We amended the Loan and Security Agreement in February 2025 to provide for, among other changes, a $3.0 million term loan facility, which is available to be drawn at any time until February 28, 2026. As of September 30, 2025, we had outstanding borrowings under the revolving credit line and term loan facilities of $1.0 million and $3.0 million, respectively. Our ability to borrow under these facilities is subject to various covenants. We are in compliance with these covenants as of September 30, 2025.

On November 4, 2025 (the “Closing Date”), we entered into a Loan and Security Agreement (the “Loan and Security Agreement”), with Avenue Capital Management II, L.P., as administrative agent and collateral agent (the “Agent”) and Avenue Venture Opportunities Fund II, L.P., as a lender (the “Lender”). Also on November 4, 2025, we entered into a Supplement to the Loan and Security Agreement (the “Supplement” and together with the Loan and Security Agreement, the “Loan Agreement”) with the Agent and the Lender.

The Loan Agreement provides for committed term loans in an aggregate principal amount of up to $17.5 million with (a) $12.5 million funded on the Closing Date (“Tranche 1”) and (b) up to $5.0 million to be funded at any time at our discretion between November 4, 2026 and May 4, 2027, so long as no default or event of default has occurred and is continuing. Upon the mutual agreement of us and the Lender, the Lender may make additional term loans of up to an additional $10.0 million (the “Discretionary Tranche 3” and collectively with Tranche 1 and Tranche 2, the “Loans”), to be funded between January 1, 2027 and December 31, 2027, as we and the Lenders may mutually agree. The Loans bear interest at an annual rate equal to the sum of 4.75% and the prime rate as reported in The Wall Street Journal, subject to a prime floor equal to The Wall Street Journal prime rate on Closing Date. The maturity date of the Loans is June 1, 2029 (the “Maturity Date”).

We will make interest only payments on the Loans until the 18-month anniversary of the Closing Date, subject to a 6-month extension if the funding of Tranche 2 has occurred. The Loan principal is repayable in equal monthly installments from the end of interest only period to the Maturity Date.

We may, at our option at any time, prepay the Loans in their entirety by paying the then outstanding principal balance and all accrued and unpaid interest on the Loans, subject to a prepayment fee equal to(i) 3.0% of the principal amount outstanding if the prepayment occurs on or prior to the first anniversary following the Closing Date, (ii) 2.0% of the principal amount outstanding if the prepayment occurs after the first anniversary following the Closing Date, but on or prior to the second anniversary following the Closing Date, and (iii) 1.0% of the principal amount outstanding if the prepayment occurs after the second anniversary following the Closing Date. A final payment fee of 3.25% of the principal amount of the Loans (subject to certain reductions), is also due upon the Maturity Date or earlier date of prepayment of the Loans. The Loan is secured by a lien upon and security interest in all of our assets, including intellectual property, in which the Agent is granted senior secured lien.

Pursuant to the Loan Agreement, we are subject to certain financial covenants requiring us to (i) maintain at all times $2.5 million in unrestricted cash, (ii) achieve at least 75% of its trailing three-month projected revenue and (iii) achieve cash burn for the trailing six months of no more than the greater of 150% of its projected cash burn or $2.0 million. The Loan Agreement contains customary representations, warranties and covenants and provides for events of default customary for term loans of this type.

Pursuant to the Loan Agreement, the Lender also has the right to convert up to $3.0 million of the outstanding principal of Tranche 1 and up to $1.0 million of the outstanding principal of Tranche 2 into shares of our common stock (the “Conversion Securities”) at a price per share equal to 120% of the exercise price of the Warrant (further discussed below) at any time while the Loans are outstanding, subject to certain terms and conditions, including ownership limitations.

In addition, subject to applicable law, the Lender may participate in certain of our equity financing transactions in an aggregate amount of up to $1.0 million on the same terms, conditions and pricing offered by the Company to other investors participating in such financing transaction (such right, the “Participation Right”). The Participation Right terminates upon the earlier of the Maturity Date and the repayment in full of all of the obligations under the Loan Agreement.

On the Closing Date and pursuant to the funding of Tranche 1 under the Loan Agreement, we issued to the Lender a warrant to purchase up to $1,312,500 worth of shares of our common stock (the “Warrant”). The Warrant expires on November 4, 2030 (the “Expiration Date”) and has an exercise price per share equal to the lesser of (i) $0.96 and (ii) the price per share of our next bona fide round of equity financing before June 30, 2026 for the purposes of raising capital. In addition, upon a change of control, the Lender is entitled to receive the shares of common stock underlying the Warrant without payment of the exercise price.

The Lender may exercise the Warrant at any time, or from time to time up to and including the Expiration Date, by making a cash payment equal to the exercise price multiplied by the quantity of shares. The Lender may also exercise the Warrant on a cashless basis by receiving a net number of shares calculated pursuant to the formula set forth in the Warrant. The Warrant is subject to anti-dilution adjustments for stock dividends, stock splits, and reverse stock splits.

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

Cash Flows

24

Operating Activities. The net cash used in operating activities for the nine months ended September 30, 2025 was primarily used to fund a net loss of approximately $11.8 million, adjusted for non-cash expenses in the aggregate amount of approximately $3.1 million and by approximately $4.7 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts receivable, inventory, prepaid expenses and other current assets and a decrease in accounts payable and accrued expenses.

The net cash used in operating activities for the nine months ended September 30, 2024 was primarily used to fund a net loss of approximately $5.9 million, adjusted for non-cash expenses in the aggregate amount of approximately $0.8 million and by approximately $1.6 million of cash used by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts receivable, inventory and prepaid expenses and other current assets, offset by an increase in accounts payable and accrued expenses.

Investing Activities. During the nine months ended September 30, 2025 we used $2.5 million in cash for investing activities During the nine months ended September 30, 2024, $1.6 million in cash was provided from investing activities. These amounts were impacted by the net difference between maturities and purchases of short term investments, purchases of furniture and leasehold improvements for our new headquarters facility, software development, and manufacturing and providing demo units of our new MyoPro2x to our field clinicians and to O&P practices in the U.S,.

Financing Activities. There was $3.9 million and $5.2 million in cash generated from financing activities during the nine months ended September 30, 2025 and 2024, respectively. In the nine months ended September 30, 2025, this primarily represents borrowings under our credit facilities. In the nine months ended September 30, 2024, this represents the net proceeds from our equity offering in January 2024.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Actual results could differ from those estimates. Our significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations and reserves for credit losses and slow-moving inventory.

Other

There have been no material changes to our critical accounting policies from those described in our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Standards

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

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 September 30, 2025. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of such date at the reasonable assurance level due to the material weakness in the design of effective information technology general controls over our enterprise reporting system described below.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness as of December 31, 2024 related to a lack of design and maintenance of effective information technology general controls due to privileged access rights for two individuals, lack of formal processes for user provisioning, periodic user access review and change management for financial reporting system and lack of formal reviews of key third party service provider SOC reports. The deficiencies could allow for inappropriate financial transactions to be recorded that would not be detected by our other manual controls, rendering them ineffective. This material weakness has not resulted in any identified misstatements to our financial statements.

Notwithstanding the material weaknesses in our internal control over financial reporting, our management has concluded that our condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q fairly present in all material respects the financial condition, results of operations and cash flows of the Company and have been prepared in accordance with generally accepted accounting principles. Our Chief Executive Officer and Chief Financial Officer have certified that, based on each such officer’s knowledge, the financial statements, as well as the other financial information included in this Quarterly Report on Form 10-Q, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report on Form 10-Q.

Management’s Plan for Remediation of the Material Weakness

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management, with the oversight of the Audit Committee of the Board of Directors, is committed to maintaining a strong internal control environment. In response to the material weakness identified above, we have put in place several compensating controls to remediate the material weakness in internal control over financial reporting by formalizing our process and review of user provisioning to enable only the appropriate personnel to have access, including giving rights to provision access to our financial reporting system to an individual outside our finance organization, and formalizing change management processes and review of key third party service provider SOC reports.

As of September 30, 2025, we have implemented both new and modified controls around the provisioning of access rights and our change management processes, however, the material weakness will not be considered fully remediated until the design of these controls are determined to operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. As we continue to evaluate operating effectiveness and monitor improvements to our internal control over financial reporting, we may take additional measures to address control deficiencies or modify the remediation plan described above.

We believe the new controls implemented and changes in the design of certain of our existing controls are sufficient to remediate the material weakness once testing of the operation these controls has been finalized.

Management’s Report on Internal Control over Financial Reporting

Our management assessed the effectiveness of our internal controls over financial reporting as of September 30, 2025. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on our assessment, and as a result of the material weakness described above, we believe that as of September 30, 2025, our internal control over financial reporting was not effective at the reasonable assurance level. However, after giving full consideration to this material weakness, our management has concluded that our condensed consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with generally accepted accounting principles.

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 September 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

Risks Related to Our Operating and Financial Results

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

We have a history of losses since inception. For the three and nine months ended September 30, 2025, we incurred net losses of $3.7 million and $11.8 million, respectively. For the year ended December 31, 2024, we incurred a net loss of $6.2 million. At September 30, 2025, we had an accumulated deficit of approximately $114.9 million. The extent and duration of future operating and net losses will depend on our ability to increase revenues, increase the number of patients entering our pipeline at a lower advertising cost per pipeline addition, our ability to manage fixed costs associated with clinical, reimbursement and manufacturing capacity, and our ability to compensate for additional R&D spending expected in 2025. However, there can be no assurance that we can cost effectively grow our revenues without requiring additional capital.

Our cash, and cash equivalents at September 30, 2025 were approximately $12.6 million. On January 19, 2024, we completed a registered direct offering of our common stock and pre-funded warrants, generating net proceeds of approximately $5.4 million. On December 6, 2024, we completed a public offering of our common stock, generating net proceeds of approximately $15.8 million. On July 11, 2024, we entered into a Loan and Security Agreement with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“Silicon Valley Bank”), which provides us the ability to borrow up to $4.0 million against eligible accounts receivable. We borrowed $2.5 million under the line of credit during the three months ended June 30, 2025. In February 2025, we entered into an amendment to the Loan and Security Agreement, which among other things, provided for a $3 million term loan facility which could be drawn at any time until February 28, 2026. As of September 30, 2025, we have borrowings of $3.0 million against the term loan facility and $1.0 million on the line of credit. We believe that our existing cash, cash equivalents, short-term investments and restricted cash at September 30, 2025 will be sufficient to fund our operations for the twelve months from the date of this report. If we encounter obstacles such as those that have been referred to above, we may not be able to return to operating cash flow breakeven on a quarterly basis, and additional capital may be required.

If CMS amends, restricts, or retracts coverage requirements, its billing contractors and insurers offering Medicare Advantage insurance plans may restrict what they reimburse for the MyoPro, which would have an adverse effect on our business.

Revenues from patients who are covered by Medicare Advantage insurance plans have historically been a significant portion of our overall revenues. However, Medicare Advantage plans have been reducing or delaying the number of authorizations for the MyoPro since the second half of 2024, which is negatively impacting our revenues. Approximately 18% and 24% of our revenues were derived from patients with Medicare Advantage insurance plans for the three months ended September 30, 2025 and 2024, respectively. CMS published reimbursement amounts for the MyoPro in February 2024, and were effective in April 2024. Revenues from Medicare Part B patients represented 54% of total revenue for the three months ended September 30, 2025. If CMS amends, restricts, or retracts its November 2023 rule classifying MyoPro as a brace, amends or retracts any published fees, or establishes more restrictive inclusion criteria for coverage, our Medicare revenues could be negatively impacted and insurers offering Medicare Advantage insurance plans may no longer cover or adequately reimburse for the MyoPro. Further, continued utilization management efforts by Medicare Advantage plans could result in further decreases in authorizations. As a result of these factors, our overall 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.

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

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

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

We sell our products in countries throughout the world and import materials into the United States. Significant political, trade, or regulatory developments in the jurisdictions in which we may sell our products, such as those stemming from the change in U.S. federal administration, are difficult to predict and may have a material adverse effect on us. These developments may include export controls, tariffs or changes in reimbursement policies for Medicaid and Medicare. For example, on February 1, 2025, the U.S. imposed a 25% tariff on imports from Canada and Mexico, which were subsequently suspended for a period of one month. The U.S. has also imposed significant tariffs on imports from China and other countries, and these tariffs may continue to escalate, depending on the status of trade negotiations. Historically, tariffs have led to increased trade and political tensions. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. While we estimate that tariffs assessed on our imports are expected to have less than a 100 basis point (1%) impact on gross margin in 2025, we cannot provide any assurance that final tariffs actually imposed, changes in political, trade, regulatory, and economic conditions, including U.S. trade policies, will not have a material adverse effect on our financial condition or results of operations.

Risks Related to Limited Operating History and Capital Requirements

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

Our cash, and cash equivalents September 30, 2025 was approximately $12.6 million. On January 19, 2024, we completed a registered direct offering of our common stock and pre-funded warrants, generating net proceeds of approximately $5.4 million. On December 6, 2024, we completed a public offering of our common stock, generating net proceeds of approximately $15.8 million. On July 11, 2024, we entered into a Loan and Security Agreement with Silicon Valley Bank, which provides us the ability to borrow up to $4.0 million against eligible accounts receivable under a revolving credit line. In February 2025, we entered into an amendment to the Loan and Security Agreement, which among other things, provided for a $3.0 million term loan facility which could be drawn at any time until February 28, 2026. We borrowed $3.0 million under the term loan facility and $1.0 million under the revolving credit line during the three months ended September 30, 2025. On November 4, 2025, we entered into a Loan and Security Agreement with Avenue Capital Management II, L.P., as administrative agent and collateral agent and Avenue Venture Opportunities Fund II, L.P., as a lender, which provides us $17.5 million in committed funding under two tranches. The first tranche of $12.5 million was funded at closing on November 4, 2025. Proceeds from this loan were used to repay the outstanding borrowings under the facility with Silicon Valley Bank and to pay fees and expenses, with the remainder to be used for general corporate purposes.

Our ability to grow our business is dependent on our ability to generate sufficient cash flows from operations or to raise additional capital to meet our obligations, if necessary. We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations for the next twelve months from the issuance date of this Quarterly Report on Form 10-Q. If additional capital is required to achieve operating cash flow breakeven, 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. 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. Usage of our line of credit and term loan facility requires us to meet financial and operating covenants, which could place limits on our operations, 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.

The terms of our Loan and Security Agreement with Avenue Capital Management II, L.P. and the lenders listed therein require us to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

On November 4, 2025, we entered into a Loan and Security Agreement with Avenue Capital Management II, L.P., as administrative agent and collateral agent and Avenue Venture Opportunities Fund II, L.P., as a lender (collectively, “Avenue”) (the “Loan and Security Agreement”) that is secured by a lien on all of our assets. Pursuant to the Loan and Security Agreement, we are subject to certain financial covenants requiring us to (i) maintain at all times $2.5 million in unrestricted cash, (ii) achieve at least 75% of our trailing three-month projected revenue and (iii) achieve cash burn for the trailing six months of no more than (A) 150% of our projected cash burn from the closing date of the Loan and Security Agreement through December 31, 2026 and (B) the greater of 150% of our projected cash burn or $2.0 million beginning January 1, 2027. The Loan and Security Agreement also contains customary affirmative and negative covenants and events of default for financings of this type, including covenants restricting us from transferring any part of our business or intellectual property, incurring additional indebtedness, engaging in mergers or acquisitions, repurchasing shares, paying dividends or making other distributions, making investments, and creating other liens on our assets, including our intellectual property, in each case subject to customary exceptions. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility. These restrictions may include, among other things, limitations on the incurrence of additional debt and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments. If we default under the terms of the Loan and Security Agreement, Avenue may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we were to be liquidated, Avenue’s right to repayment would be senior to the rights of the holders of our common stock. Avenue could declare an event of default upon the occurrence of any circumstance that could reasonably be expected to result in what they interpret as a material adverse effect as defined under the Loan and Security Agreement. Any declaration by Avenue of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

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 are covered by third-party payers, such as government health programs, commercial insurance and managed healthcare organizations. See section titled “Business Section – Government Regulation – Health Insurance Reimbursement”, in our Annual Report on Form 10-K for the year ended December 31, 2024. Third-party payers are increasingly challenging the prices charged, examining the medical necessity and creating additional restrictions on coverage, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. During the three months ended June 30, 2025, CMS's billing contractors in two out of four billing regions began pre-payment audits of claims for MyoPro to determine if medical necessity had been appropriately documented. As of date of this Quarterly Report on Form 10-Q, Forty-three (43) claims have been selected for audit. The audit of 4 claims is currently in process. Of the remaining 39 claims with determinations, 31 have been paid and 8 are in the appeals process. Seven (7) claims have completed the appeals process, and all have been paid. We believe the majority of these claims will be reimbursed upon appeal. While the outcome of these appeals are unknown, we believe these claims are likely to be reimbursed.

Third-party payers may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication. In addition, CMS may issue local or national coverage determinations which could result in more restrictive coverage for our products. The coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payer separately, with no assurance that coverage and adequate reimbursement will be obtained. In addition, the absence of in-network contracts with Medicare Advantage plans or commercial insurers could result in utilization management for out-of-network patients. Currently, we are almost entirely dependent on third parties to cover the cost of our products to patients and rely on their reimbursement for the cost of our products. If CMS, the U.S. Department of Veterans Affairs (the “VA”) health insurance companies and other third-party payers do not provide adequate coverage or reimbursement for our products, then our sales will be limited to clinical facilities and individuals who can pay for our devices without reimbursement. To our knowledge, from inception through September 30, 2025, fewer than 50 units have been self-paid or funded by non-profit foundations. Some commercial health insurance plans have published statements that they will not cover the cost of the MyoPro for their members. In the event we are unsuccessful in obtaining additional coverage and adequate reimbursement for our products from third-party payers, our sales will be significantly constrained. Currently, reimbursement for the cost of our products is obtained primarily on a case-by-case basis until such time, if any, we obtain broad coverage policies with Medicare and third-party payers. There can be no assurance that we will be able to obtain these broad coverage policies or that Medicare or its local administrative billing contractors will not establish more restrictive coverage requirements for the MyoPro in the future (for example, in the form of a local or national coverage determination). See section titled “Business Section – Government Regulation – Health Insurance Reimbursement”, in our Annual Report on Form 10-K for the year ended December 31, 2024.

In connection with Medicare reimbursement, in November 2023 CMS reclassified the MyoPro from the durable medical equipment benefit to the brace benefit category effective January 1, 2024, thereby allowing for lump sum reimbursement. Such lump sum reimbursements based on the fees posted by CMS, are now being made. CMS published final payment determinations for the MyoPro Motion W (L8701) and the MyoPro Motion G (L8702), effective April 1, 2024. These fees were subsequently updated to approximately $34,300 for the Motion W and approximately $67,500 for the Motion G, effective January 1, 2025. The fees are subject to annual inflationary adjustments. Our claims can be reviewed on a case-by-case basis at any time by CMS.

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