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What changed in MYOMO, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MYOMO, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+371 added−426 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-13)

Top changes in MYOMO, INC.'s 2023 10-K

371 paragraphs added · 426 removed · 263 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+36 added−46 removed67 unchanged
Biggest changePotential New Products from O&P Manufacturers If our business grows, interest may develop among new or existing manufacturers of other O&P devices that compete with the MyoPro, which may or may not challenge the validity of our intellectual property. Some new products have been introduced that compete with the MyoPro from companies such as Vincent Systems and HKK in Germany.
Biggest changeSome new products have been introduced that compete with the MyoPro from companies such as Vincent Systems and HKK in Germany. Intellectual Property Our intellectual property efforts have focused on improvements to the patents that we licensed from MIT, which expired in 2023. Myomo has 24 of its own issued patents. These additional patents cover our MyoPro Motion G product.
The MyoPro’s control technology utilizes an advanced non-invasive human-machine interface based on non-invasive, patented electromyography, or EMG, control technology that continuously monitors and senses, but does not stimulate, the affected muscles. The patient self-initiates movement through his or her weakened muscle signals that indicate the intention to move.
The MyoPro’s control technology utilizes an advanced human-machine interface based on non-invasive, patented electromyography, or EMG, control technology that continuously monitors and senses, but does not stimulate, the affected muscles. The patient self-initiates movement through his or her weakened muscle signals that indicate the intention to move.
Many individuals recover from their related trauma with the exception of the ability to control their elbow and in some cases their hand. Nerve transfer surgery is often a solution; however, these procedures are not always restorative. In some cases, patients undergo amputation and receive myoelectric prosthetics rather than deal with a paralyzed arm.
Many individuals recover from their related trauma with the exception of the ability to control their elbow and/or hand. Nerve transfer surgery is often a solution; however, these procedures are not always restorative. In some cases, patients undergo amputation and receive myoelectric prosthetics rather than deal with a paralyzed arm.
In January 2022, we introduced the MyoPro2+, which is a lighter and more advanced version of the device, which includes 3D printed orthotics, software enhancements and a new design that facilitates easier donning and doffing of the device.
In January 2022, we introduced the MyoPro2+, which is a lighter and more advanced version of the device, which includes 3D printed orthotics capability, software enhancements and a new design that facilitates easier donning and doffing of the device.
In addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, or FCA.
In addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act, or FCA.
Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, CMS, the Office of Inspector General and Office for Civil Rights, other divisions of the Department of Health and Human Services, or HHS, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.
Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, CMS, other divisions of the Department of Health and Human Services, or HHS, such as the Office for Civil Rights or the Office of Inspector General, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.
MyoPro devices are typically reimbursed by the patient’s health insurance plan, which include government health programs in the United States such Medicare and Medicaid, commercial health insurers and managed care organizations.
MyoPro devices are typically reimbursed by the patient’s health insurance plan, which include government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations.
When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs; • the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies; • the Health Insurance Portability and Accountability Act, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payer (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.
When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs; 11 Table of Contents • the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies; • the Health Insurance Portability and Accountability Act, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payer (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.
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 significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, integrity and oversight agreements to resolve allegations of non-compliance, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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 12 Table of Contents significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, integrity and oversight agreements to resolve allegations of non-compliance, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We have been testing our planned pediatric device on children who have suffered this nerve damage to assess its ability to improve function in upper limbs, and this new version of the MyoPro, which we refer to as MyoPal, is expected to be available to these patients during calendar year 2024.
We have been testing our planned pediatric device on children who have suffered this nerve damage to assess its ability to improve function in upper limbs, and this new version of the MyoPro, which we refer to as MyoPal, is expected to be available to these patients during calendar year 2025.
Competition An individual with difficulty walking has a wide range of technology alternatives from canes and crutches to powered wheelchairs and exoskeleton suits. However, those with paralysis of the arm, wrist, and hand, whose physical challenges that we seek to address, have few options to regain function.
Competition An individual with difficulty walking has a wide range of technological alternatives from canes and crutches to powered wheelchairs and exoskeleton suits. However, those with paralysis of the arm, wrist, and hand, whose physical challenges that we seek to address, have few options to regain function.
We now also provide a video game platform called MyoGames, which offers the patient an additional means to master the device.
We also provide a video game platform called MyoGames, which offers the patient an additional means to master the device.
We or the O&P provider will then refer the MyoPro user to a local therapist for continued training and practice with their new device, and we have a staff of occupational therapists and other qualified clinicians who train and support these therapists.
We or the O&P provider will also refer the MyoPro user to a local therapist for continued training and practice with their new device, and we have a staff of occupational therapists and other qualified clinicians who train and support these therapists.
To assess whether an individual is a medically-qualified candidate for a MyoPro, we and our distribution partners utilize a variety of techniques to evaluate patients, including tele-health video conference sessions, in-person screening days at various locations, and evaluations at clinical facilities where therapists and physicians refer patients for a 3 Table of Contents MyoPro, which requires a physician’s prescription to be reimbursed by insurance.
To assess whether an individual is a medically-qualified candidate for a MyoPro, we and our distribution partners utilize a variety of techniques to evaluate patients, including tele-health video conference sessions, in-person evaluations, screening days at various locations, and evaluations at clinical facilities where therapists and physicians refer patients for a MyoPro, which requires a physician’s prescription to be reimbursed by insurance.
Factors payers consider in determining reimbursement are based on whether the product is: a covered benefit under its health plan; safe, effective, and medically necessary; appropriate for the specific patient; cost effective, and neither experimental nor investigational. Our Patient Advocacy Team assists patients and O&P providers in developing and submitting this documentation for coverage of the prescribed MyoPro.
Factors payers consider in determining reimbursement are based on whether the product is: a covered benefit under its health plan; safe, effective, and medically necessary; appropriate for the specific patient; cost effective, and neither experimental nor investigational. Our Patient Advocacy Team assists patients in developing and submitting this documentation for coverage of the prescribed MyoPro.
In October 2017 we obtained our medical device license for Canada, enabling us to provide the MyoPro to patients in that country. We have entered into distribution agreements with O&P providers in the United Kingdom, Denmark, Germany, Italy and Australia, and have received a number of MyoPro orders from providers outside the United States in 2022.
In October 2017, we obtained our medical device license for Canada, enabling us to provide the MyoPro to patients in that country. We have entered into distribution agreements with O&P providers in the United Kingdom, Denmark, Germany, Italy and Australia, and have received a number of MyoPro orders from providers outside the United States in 2023, primarily from Germany.
Many stroke survivors are left with hemi-paresis, a partial paralysis of one side of the body, which impacts the ability to use their arm and/or hand. Occupational therapy is the common treatment recommended to regain native function for these individuals, and some do recover some movement of the upper limb.
Many stroke survivors are left with hemiparesis, a partial paralysis of one side of the body, which impacts the ability to use their arm and/or hand. Occupational therapy is the common treatment recommended to regain native function for these individuals, and some do recover some movement of the upper limb.
Finally, under our MyoCare program, a coach is assigned to each patient and follows and guides the patient for the first year of the patient’s journey with the MyoPro in order to maximize each patient’s outcomes with the device.
In addition, under our MyoCare program, a coach is assigned to each patient and follows and guides the patient for the first year of the patient’s journey with the MyoPro in order to maximize each patient’s outcomes with the device.
With approximately 70 million baby boomers headed into their retirement years, we believe that it is vital to keep beneficiaries in the lowest cost of care setting — the home.
With approximately 70 million baby boomers now in or headed into their retirement years, we believe that it is vital to keep beneficiaries in the lowest cost of care setting — the home.
These regulatory controls, as well as any changes in the policies of the FDA or comparable foreign agencies, can affect the time and cost associated with the development, introduction and continued availability of new products. We work to anticipate these factors in our product development processes.
These regulatory controls, as well as any changes in the policies of the FDA or comparable 10 Table of Contents foreign agencies, can affect the time and cost associated with the development, introduction and continued availability of new products. We work to anticipate these factors in our product development processes.
We have working relationships with rehabilitation facilities in the U.S., including the Mayo Clinic, Cleveland Clinic, Spaulding Rehabilitation Hospital, Loma Linda University Medical Center, Kennedy Krieger Institute, and numerous VA Medical Centers, and we have developed an appropriate set of inclusion criteria to determine which persons that are affected by stroke would be medically qualified for the intervention.
We have working relationships with rehabilitation facilities in the United States, including the Mayo Clinic, Cleveland Clinic, Spaulding Rehabilitation Hospital, Loma Linda University Medical Center, Kennedy Krieger Institute, and numerous VA Medical Centers, and we have developed an appropriate set of inclusion criteria to determine which persons that are affected by stroke would be medically qualified for the intervention.
Rehabilitation Therapy Rehabilitation therapy is the standard of care for upper extremity paralysis and a prerequisite to qualifying for a myoelectric orthosis such as the MyoPro. After a stroke or other traumatic injury, a large portion of survivors regain 8 Table of Contents much or all of their function.
Rehabilitation Therapy Rehabilitation therapy is the standard of care for upper extremity paralysis and a prerequisite to qualifying for a myoelectric orthosis such as the MyoPro. After a stroke or other traumatic injury, a large portion of survivors regain much or all of their function.
We also have 4 pending U.S. patent applications and 11 foreign applications under examination. We plan to continue to file additional patent applications over time. The longest term of our patents extends intellectual property rights until 2039. In terms of trademarks, the terms Myomo, MyoPro, MyoPal and MyoCare are registered as trademarks with the U.S. Patent & Trademark Office.
We also have 3 pending U.S. patent applications and 8 foreign applications under examination. We plan to continue to file additional patent applications over time. The longest term of our patents extends intellectual property rights until 2039. In terms of trademarks, the terms Myomo, MyoPro, MyoPal and MyoCare are registered as trademarks with the U.S. Patent & Trademark Office.
According to the American Orthotics and Prosthetics Association, there are more than 2,000 member O&P facilities located in the U.S. Additionally, the VA has been a pioneer in O&P. In fact, the design of the MyoPro Motion G powered grasp product is rooted in research conducted at the Boston-area VA in the 1990s.
According to the American Orthotics and Prosthetics Association, there are more than 2,000 member O&P facilities located in the United States. Additionally, the VA has been a pioneer in O&P. In fact, the design of the MyoPro Motion G powered grasp product is rooted in research conducted at the Boston-area VA in the 1990s.
HITECH also created tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to HHS, under the Open Payments Program, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the licensure of sales representatives; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018); state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the 12 Table of Contents same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
HITECH also created tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to HHS, under the Open Payments Program, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the licensure of sales representatives; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018); state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
During this fitting, the device will be calibrated to the user’s individual muscle signal profile using our proprietary software, and minor adjustments to the brace can be made to optimize comfort. • The patient will be provided with initial training and a set of take-home tasks to practice with the brace donned.
During this fitting, the device will be calibrated to the user’s individual muscle signal profile using our proprietary software, and adjustments to the brace can be made to optimize fit. • The patient is provided with initial training and a set of take-home tasks to practice with the brace donned.
In addition to our recent 7 Table of Contents geographic expansion to serve more areas in the United States, we are entering international markets via local partnerships and distribution arrangements to meet the large global need that we believe exists for individuals with upper limb paralysis.
In addition to our recent geographic expansion to serve more areas in the United States, we are entering international markets via local partnerships and distribution arrangements to meet the large global need that we believe exists for individuals with upper limb paralysis.
Vehicular and Workplace Accidents One of the most straightforward applications for the MyoPro is to support the weak arm and help regain arm function to individuals who have suffered peripheral nerve injuries. A common outcome of vehicular and workplace accidents is damage to the nerves in the shoulder known as the brachial plexus.
Vehicular and Workplace Accidents One application for the MyoPro is to support the weak arm and help regain arm function to individuals who have suffered peripheral nerve injuries. A common outcome of vehicular and workplace accidents is damage to the nerves in the shoulder known as the brachial plexus.
The 11 Table of Contents FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery.
The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery.
Under direct billing, we may evaluate, measure and fit the MyoPro devices using our own clinical staff or utilize the clinical consulting services of orthotics and prosthetics, or O&P, professionals, for which they are paid a fee.
Under direct billing, we evaluate, measure and fit the MyoPro devices using our own clinical staff or as circumstances dictate, utilize the clinical consulting services of orthotics and prosthetics, or O&P, professionals, for which they are paid a fee.
Our Solutions Although commercial products for powered prosthetics have been available since the 1970s, we believe that powered orthotics have been held back by issues related to weight, comfort, and the technological capability of microprocessors and software. The MyoPro is known in the medical community as a custom fabricated limb orthosis.
Our Solutions Although commercial products for powered prosthetics have been available since the 1970s, we believe that powered orthotics have been held back by issues related to weight, comfort, and the technological capability of microprocessors and software. The MyoPro is a custom fabricated limb orthosis.
Current and Future Legislation 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 MyoPro.
Current and Future Legislation 13 Table of Contents 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 MyoPro.
Under the FFDCA, medical devices are classified as Class I, Class II or Class III, depending on the degree of risk associated with the device, what is known about the type of device, and the extent of control needed to provide reasonable assurance of safety and effectiveness.
Under the Federal Food, Drug, and Cosmetic Act, or FFDCA, medical devices are classified as Class I, Class II or Class III, depending on the degree of risk associated with the device, what is known about the type of device, and the extent of control needed to provide reasonable assurance of safety and effectiveness.
The product is worn to support the dysfunctional joint and as a functional aid for reaching and grasping and has also been shown to have therapeutic benefits for some users to increase motor control.
The product is worn to support the arm and hand and as a functional aid for reaching and grasping and has also been shown to have therapeutic benefits for some users to increase motor control.
The Motion G product, which allows for the movement of multiple joints as compared to a single joint, which is the technology that underlies the patents licensed from MIT. The Motion G generated 97% of our product revenue for the year ended December 31, 2022.
The Motion G product, which allows for the movement of multiple joints as compared to a single joint, which is the technology that underlies the patents previously licensed from MIT. The Motion G generated 96% of our product revenue for the year ended December 31, 2023.
We also sell our products through various other sales channels, including through O&P providers, the Veterans Administration, or VA, and to our distributors in certain accounts and geographic markets outside the United States.
We also sell our products through various other sales channels, including through O&P providers, the Veterans Administration, or VA, and to our distributors in certain accounts and geographic markets outside the United States. We operate as one business segment.
In addition, our Code of Business Conduct and Ethics and Charters of our Audit, Compensation Lead Independent Director and Nominating and Corporate Governance Committees are available on our website and are available in print to any stockholder who requests such information.
In addition, our Code of Business Conduct and Ethics and Charters of our Audit Committee, Compensation Committee, Technology, Quality, and Regulatory Committee, Nominating and Corporate Governance Committee and Lead Independent Director are available on our website and are available in print to any stockholder who requests such information.
One of the leading medical facilities in the U.S. for treating brachial plexus injuries is the Mayo Clinic. We have been working with surgeons at the Mayo Clinic who have incorporated the MyoPro into their surgical post-operative treatment protocol to help improve function in upper limbs.
One of the leading medical facilities in the United States for treating brachial plexus injuries is 4 Table of Contents the Mayo Clinic. We have been working with surgeons at the Mayo Clinic who have incorporated the MyoPro into their surgical post-operative treatment protocol to help improve function in upper limbs.
The addressable market in the United States for products directed at all individuals with upper extremity paralysis, such as our MyoPro, is substantial, based on an estimated prevalence population of 3 million existing cases of upper extremity paralysis and our estimate that up to 10% of such individuals may be medically qualified candidates for a MyoPro whose insurance may reimburse for the device.
The addressable market in the United States for products directed at all individuals with upper extremity paralysis, such as our MyoPro, is based on an estimated prevalence population of 3 million existing cases of upper extremity paralysis and our estimate that up to 20% of such individuals may be medically qualified candidates for a MyoPro whose insurance may reimburse for the device, which now includes Medicare Part B beneficiaries.
In a cost-conscious healthcare environment, we believe that the use of the MyoPro is compelling since it enables functional improvement that can help users improve their ability to perform ADL’s, which may allow them to return to work or improve their ability to be independent and remain at home.
We believe that the use of the MyoPro is compelling since it enables functional improvement that can help users improve their ability to perform ADLs, which may allow them to return to work or improve their ability to be independent and remain at home.
Market Opportunity: Common Causes of Arm Paralysis Stroke According to the Centers for Disease Control and Prevention, or the CDC, stroke is one of the leading causes of disability in the U.S. affecting approximately 800,000 people per year.
We are headquartered in Boston, Massachusetts. Market Opportunity: Common Causes of Arm Paralysis Stroke According to the Centers for Disease Control and Prevention, or the CDC, stroke is one of the leading causes of disability in the United States affecting approximately 800,000 people per year.
In August 2011, the Budget Control Act of 2011, among other things, resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and, due to subsequent legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken.
In August 2011, the Budget Control Act of 2011, among other things, resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and, due to subsequent legislative amendments, will remain in effect until 2032.
Our strategy is to establish ourselves as the market leader in myoelectric limb orthotics, and to build a set of products, software applications, and value-added services based upon our patented technology platform, sized for adults, adolescents and children. We expect to introduce our MyoPal device for pediatric use during calendar year 2024.
Our strategy is to establish ourselves as the market leader in myoelectric limb orthotics, and to build a set of products, software applications, and value-added services based upon our patented technology platform, sized for adults, adolescents and children.
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, including compensation of physicians with stock or stock options to serve on our Scientific Advisory Board could, despite efforts to comply, be subject to challenge under one or more of such laws.
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.
The process usually requires obtaining a pre-authorization of the MyoPro for the patient, and if the authorization request is initially denied by the payer, we support the patient, or the O&P provider as the case may be, in appealing the decision.
For payers other than CMS, the reimbursement process usually requires obtaining a pre-authorization for the MyoPro from the patient's insurer, and if the authorization request is initially denied by the payer, we may provide support to the patient, or the O&P provider as the case may be, in appealing the decision.
In addition, approximately 250,000 new patients are added to the prevalence population each year in the United States as a result of strokes, brachial plexus injuries and other afflictions, although not all of these new chronic patients are suitable for a MyoPro.
In addition, approximately 250,000 new patients are added to the prevalence population each year in the United States as a result of strokes, brachial plexus injuries and other afflictions. Though not all these new chronic patients are suitable for a 3 Table of Contents MyoPro, we believe that between 25,000-50,000 of these patients per year could be.
However, after 6-12 months of therapy, many patients plateau and continued therapy will not likely result in further improvement. These chronic patients then 4 Table of Contents enter the prevalence population and become potential candidates for the MyoPro, which we believe is the most cost-effective alternative for regaining function for these individuals.
However, after a period of therapy, many patients plateau and continued therapy does not tend to result in significant further improvement. These chronic patients then enter the prevalence population and become potential candidates for the MyoPro, which we believe is the most effective alternative for regaining function for these individuals.
If the volume and geographic reach of our sales expand, we may seek additional sources for manufacturing and custom fabrication of the devices as our needs may require. Employees and Human Capital As of December 31, 2022, we employed a total of 100 full time employees and 6 part time employees. In January 2023 we reduced our headcount by 12%.
If the volume and geographic reach of our sales expand further, we may seek additional sources for manufacturing and custom fabrication of the devices as our needs may require, or expand our manufacturing space and capacity. Employees and Human Capital As of December 31, 2023, we employed a total of 101 full time employees and 5 part time employees.
This research demonstrated that it is technically feasible to design a myoelectric elbow-hand orthosis; however, we believe that the product was not commercially practical until we were able to incorporate recent technological developments such as improved microprocessors and software, lightweight materials and motors, and smaller batteries to create an acceptable orthosis for users.
This research demonstrated that it is technically feasible to design a myoelectric elbow-hand orthosis; however, we believe that the product was not commercially practical until we were able to incorporate recent technological developments such as improved microprocessors and software, lightweight materials and motors, and smaller batteries to create an acceptable orthosis for users. 5 Table of Contents The MyoPro can enable individuals to self-initiate and control movements of a partially paralyzed or weakened limb using their own muscle signals.
In the U.S., 7% of adults aged 65 and over require daily help with ADLs, with such long term support services consuming almost 10% of all healthcare spending.
According to the CDC, 7% of adults aged 65 and over in the United States require daily help with ADLs, with such long term support services consuming more than 13% of all healthcare spending.
To qualify for a MyoPro, candidates must meet a comprehensive set of requirements determined by a trained clinical professional during an evaluation.
Each MyoPro brace is custom fabricated for each patient for optimum fit, mobility and performance. To qualify for a MyoPro, candidates must meet a comprehensive set of requirements determined by a trained clinical professional during an evaluation.
The first is the electromechanical kit. The kit consists of the motor units, processor, sensors, and battery. Manufacturing for the electromechanical kit is provided by 14 Table of Contents our supplier Cogmedix, a wholly owned subsidiary of Coughlin Companies in Worcester, MA.
The first is the electromechanical kit. The kit consists of the motor units, processor, sensors, and battery. Manufacturing for the electromechanical kit is provided by our supplier Cogmedix, a wholly owned subsidiary of Coughlin Companies in Worcester, MA. The second element is the custom fabrication of the orthosis itself from measurements obtained either in person or remotely.
The concept was originally pioneered in the 1960s, refined in the labs of MIT, and made commercially feasible through our efforts. Partial paralysis is severe muscle weakness or loss of voluntary movement in one or more parts of the body. The MyoPro is listed in the United States with the FDA as a Class II (510(k)-exempt) device (Biofeedback Device).
The concept was originally pioneered in the 1960s, refined in the labs of the Massachusetts Institute of Technology, or MIT, and made commercially feasible through our efforts. Partial paralysis is severe muscle weakness or loss of voluntary movement in one or more parts of the body.
If we are serving the patient directly, then we bill the payer, and if an O&P provider is responsible for working with and delivering the MyoPro to the patient, then we sell the custom-fabricated MyoPro device to the O&P provider at a wholesale price, to which they add their clinical services.
If an O&P provider is responsible for working with and delivering the MyoPro to the patient, then we sell the custom-fabricated MyoPro device to the O&P provider at a wholesale price, to which they add their clinical services. In November 2018, the Centers for Medicare and Medicaid Services, or CMS, issued two billing codes for the MyoPro, L8701 and L8702.
Once these documents are obtained, our patient advocacy team submits a pre-authorization request to the patient’s insurer. If we receive a pre-authorization, we will proceed to measure the patient’s arm and hand, print orthotic parts using 3D printing techniques, then fabricate the MyoPro and deliver it to the patient. This process is what we refer to as direct billing.
If we receive a pre-authorization, we will proceed to measure the patient’s arm, create the orthotic parts, then fabricate the MyoPro and deliver it to the patient. This process is what we refer to as direct billing.
National and regional commercial plans, worker’s compensation programs, auto insurance carriers, Medicare Advantage plans, and some state Medicaid plans have paid for the MyoPro orthosis.
National and regional commercial plans, worker’s compensation programs, auto insurance carriers, Medicare Advantage plans, and some state Medicaid plans have paid for the MyoPro orthosis on a lump sum basis. CMS has reimbursed a number of Medicare Part B beneficiaries for a MyoPro on a rental basis.
Information on our investor relations page and on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or therein by reference.
Information on our investor relations page and on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or therein by reference. In addition, our filings with the SEC may be accessed through the SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system at www.sec.gov.
Since we began marketing our products directly to patients in 2019, our business development efforts have focused on developing a pipeline of patients in our reimbursement process and expanding the number of payers reimbursing for our products.
The MyoPro product line has been approved by the VA system for impaired veterans, and nearly 100 VA facilities have already ordered devices for their patients. 7 Table of Contents Since we began marketing our products directly to patients in 2019, our business development efforts have focused on developing a pipeline of patients in our reimbursement process and expanding the number of payers reimbursing for our products.
If reimbursement is approved and the individual is a suitable candidate for a MyoPro, then the fabrication and fitting process is undertaken: • First, we capture the shape of the patient’s arm, either through in-person measurement or utilizing telehealth and remote measurement equipment in order to obtain the patient’s measurements.
If reimbursement is approved and the individual is a suitable candidate for a MyoPro, then the fabrication and fitting process is undertaken: • First, we capture the shape of the patient’s arm, using our shape capture kit, which can be completed in-person or remotely.
The MyoPro can enable individuals to self-initiate and control movements of a partially paralyzed or weakened limb using their own muscle signals. When the user tries to move, our patented EMG control system uses sensors to detect the weak muscle signal and to activate a motor to move the limb in the desired direction.
When the user tries to move, our patented EMG control system uses sensors to detect the weak muscle signal and to activate a motor to move the limb in the desired direction. The user is in control of their own limb; the brace amplifies their weak muscle signal to regain function to the affected joint.
Our regulatory, clinical, and customer service personnel work closely with our suppliers and providers to promote compliance with quality standards and good manufacturing processes, which we believe result in a high-quality product and limited customer issues.
Our regulatory, clinical, and customer service personnel work closely with our suppliers and providers to promote compliance with quality standards and good manufacturing processes, which we believe result in a high-quality product and limited customer issues. 6 Table of Contents We have continually enhanced our product offerings by increasing functionality for users by the addition of a multi-articulated wrist and introducing a powered grasp for the hand.
Ekso Bionics has recently announced a product to be used only for rehab therapy at a hospital, and we can provide no assurance that these or other companies are not currently developing competing products for the home market.
Ekso Bionics has recently announced a product to be used only for rehab therapy at a hospital, and we can provide no assurance that these or other companies are not currently developing competing products for the home market. 8 Table of Contents Potential New Products from O&P Manufacturers If our business grows, interest may develop among new or existing manufacturers of other O&P devices that compete with the MyoPro, which may or may not challenge the validity of our intellectual property.
We also call on hospitals and O&P practices that provide our products to their patients as well as indirect sales through distributors in Europe and Australia. The MyoPro product line has been approved by the VA system for impaired veterans, and approximately 70 VA facilities have already ordered devices for their patients.
We also call on hospitals and O&P practices that provide our products to their patients as well as indirect sales through distributors in Europe and Australia.
We use various media to educate individuals about the MyoPro solution for their impaired limbs, and receive referrals from O&P providers and hospitals such as the Mayo Clinic, Cleveland Clinic, and VA Medical Centers.
We use various media to educate individuals about the MyoPro solution for their impaired limbs, and we receive referrals from O&P providers and healthcare facilities such as VA Medical Centers. In most cases, private health insurance companies reimburse providers for the MyoPro device. If we are serving the patient directly, then we bill the payer as the provider.
In instances where we are the provider, the initial evaluation is typically conducted using a telehealth platform. 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 and letter of medical necessity are typically obtained from the patient’s physician.
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 typically obtained from the patient’s physician. Once these documents are obtained, our patient advocacy team submits a pre-authorization request to the patient’s insurer.
Our intellectual property also consists of trade secrets related to myoelectric control software and mechanical designs from over ten years of R&D and product development activity. We are headquartered in Boston, Massachusetts.
We hold 24 patents in the United States and various countries, which expire at various times from 2027 through 2039, and we have 14 pending patent applications in the United States and international markets. Our intellectual property also consists of trade secrets related to myoelectric control software and mechanical designs from over ten years of R&D and product development activity.
To bring the MyoPro to what we believe is the large number of potential patients outside of the U.S., in July 2017 we met the criteria to apply the CE Mark, which is a manufacturer’s declaration that the product complies with the essential requirements of the relevant European Union health, safety and environmental protection legislation for the MyoPro so that it can be marketed in Europe.
In July 2017 we met the criteria to apply the CE mark under the European Union (EU) Medical Devices Directive (93/42/EEC), or EU MDD, which is a manufacturer’s declaration that the product complies with the essential requirements of such legislation, so that the MyoPro can be marketed in the EU.
We have declared conformity to European Directives and apply the CE Mark for distribution of the MyoPro product line in Europe, and we have a Medical Device License for Canada. In addition, Myomo has recently obtained certification of our Quality System, or QS, to the Medical-Device-Single-Audit-Program, or MDSAP.
In addition to our EU authorization as outlined above, we have a Medical Device License for Canada. In addition, Myomo has obtained certification of our Quality System, or QS, to the Medical-Device-Single-Audit-Program, or MDSAP. This certifies compliance of the QS for sales in the United States, Canada, Brazil, Australia, and Japan.
Each successive 10-year period thereafter we will be required to complete a “maintenance” filing between every 9th and 10th year. Government Regulation The MyoPro device and our operations including our supply chain and distribution channels are subject to regulation by the FDA and various other U.S. federal and state agencies.
Our trademarks were initially registered in 2013 and 2014, and we have been making the required filings to maintain our trademarks. Government Regulation The MyoPro device and our operations including our supply chain and distribution channels are subject to regulation by the FDA and various other U.S. federal and state agencies.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to various administrative and legal actions against us, such as product recalls, product seizures and other civil and criminal sanctions. Healthcare and Privacy Laws and Regulation As an accredited Medicare provider, we are subject to broadly applicable fraud and abuse and other healthcare laws and regulations.
If we enter into other jurisdictions with additional international partners, we will need to seek the appropriate government approval to supply the devices in these countries. If we fail to comply with applicable foreign regulatory requirements, we may be subject to various administrative and legal actions against us, such as product recalls, product seizures and other civil and criminal sanctions.
In February 2022, researchers with the Cleveland VA published a study showing clinically significant gains in motor function in individuals with chronic moderate-to-sever arm weakness. Currently funded studies include a recently funded study of the device for patients with spinal cord injury, or SCI at Kessler Rehabilitation Center in New Jersey.
In addition to this research, several institutions have active funded research programs. In February 2022, researchers with the Cleveland VA published a study showing clinically significant gains in motor function in individuals with chronic moderate-to-sever arm weakness.
We utilize digital ads on various platforms as well as television ads to educate and inform 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 O&P provider will evaluate the patient for their suitability as a candidate.
Once the prospective patient contacts us or is referred to us, either our trained clinical staff or a trained O&P provider evaluates the patient for their suitability as a candidate. In instances where we are the provider, the initial clinical screening is often conducted using a telehealth platform.
We consider our relationship with our employees to be good. We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees and personnel. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Beginning in 2022, we enabled the use of remote measurement and 3D printing techniques in order to create the orthotic parts for the device, which has reduced the number of in-person visits by our clinical field staff. Orthotic devices are provided by clinical professionals who custom fabricate and fit these devices.
It is created individually for each patient, which is done by using 3D printing techniques for the orthotic components, where the measurements can be obtained either in-person or remotely. Using remote measurement for the orthotic components can reduce the number of in-person visits by our clinical field staff. Orthotic devices are provided by clinical professionals who fit these devices.
The second element is the custom fabrication of the orthosis itself from measurements obtained either in person or remotely. A third-party vendor creates the orthotic parts from these measurements and the fabrication of the device is done in our facility in Boston, MA.
A third-party, AB Corp, creates the orthotic parts from these measurements and the fabrication of the device is done in our facility in Boston, Massachusetts. 14 Table of Contents Coverage for the MyoPro from CMS is expected to increase sales volumes for the MyoPro.
We believe it is the only current device able to help neuromuscular-impaired people regain function in weak arms and hands using their own muscle signals. The device consists of a portable arm brace made of a lightweight metal and includes advanced signal processing software, non-invasive sensors, small motors, and a lightweight battery unit.
The device consists of a portable arm brace made of a lightweight metal and includes advanced signal processing software, non-invasive sensors, small motors, a lightweight battery unit, and 3D printed materials which are unique for each patient's arm and hand measurements.
As of December 31, 2022, 164 MyoPro units were in backlog, which we define as patients for whom we received insurance authorization, but revenue has not been recognized, with an estimated revenue value of $7.6 million, which is a 9% increase over 154 patients in backlog at December 31, 2021.
As of December 31, 2023, 230 MyoPro units were in backlog, which we define as patients for whom we received insurance authorization, or in the case of Medicare Part B patients, those who have been qualified for delivery through receipt of required medical documentation, but revenue has not been recognized.
As of December 31, 2022, 1,153 patients were in our reimbursement pipeline, a 43% increase compared to 808 patients in the pipeline at December 31, 2021.
Beginning in 2023, our business development efforts focused only on those payers that have previously reimbursed for the MyoPro. As of December 31, 2023, 1,042 patients were in our reimbursement pipeline, an 18% increase compared to 883 patients in the pipeline at December 31, 2022.
Under the new EU MDR requirements, CE certificates issued under the previous directives prior to May 2020 will remain valid in accordance with their term, beyond the expiration of the transition period, however certain limitations set forth in the EU MDR, such as the need to use classifications that are different from the previous directives, would apply. 10 Table of Contents We, together with Cogmedix, our primary contract manufacturer, actively maintain FDA 21 CFR Part 820 QSR and ISO 13485 Quality Management Systems for product design and development, manufacturing, distribution, and customer feedback processes.
The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the EU member states plus Norway, Liechtenstein and Iceland. We, together with Cogmedix, our primary contract manufacturer, actively maintain FDA 21 CFR Part 820 QSR and ISO 13485 Quality Management Systems for product design and development, manufacturing, distribution, and customer feedback processes.
With our product, a paralyzed individual, such as one who has suffered a brachial plexus injury, stroke or other neuromuscular disorder can experience improved function in performing ADLs including feeding, reaching and lifting. Each MyoPro brace is custom fabricated for each patient for optimum mobility and performance.
Importantly, the EMG-driven device requires that users are actively engaged throughout the movement; if they stop trying to move, the device stops. With our product, someone who has upper extremity paralysis from a brachial plexus injury, stroke or other neuromuscular disorder can experience improved function in performing ADLs including feeding, reaching and lifting.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese factors include, among other things: • We have a history of operating losses and our financial statements for the year ended December 31, 2022 include disclosures regarding there being substantial doubt about our ability to continue as a going concern. • our ability to achieve reimbursement from third-party payers for our products, including the establishment of reimbursement codes from third-party payers for our products; • our dependence upon external sources for the financing of our operations; • our ability to operate our business during the COVID-19 pandemic, including manufacturing and delivery, sales, patient consultations, supply chain insurance reimbursement and employees; • 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 Annual Report on Form 10-K.
Biggest changeThese factors include, among other things: • our ability to achieve reimbursement from third-party payers for our products; • our dependence upon external sources for the financing of our operations; • our ability to obtain and maintain our strategic collaborations and to realize the intended 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 Annual Report on Form 10-K.
The risks described below are not the only ones we face. Additional risks not presently known to 15 Table of Contents 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 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 15 Table of Contents could be harmed by any of these risks.
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.
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 United States or other countries.
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.
Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process designed 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, 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.
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 24 Table of Contents 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.
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; • costs incurred by us in connection with the termination of contractual and other relationships, including distributorships; 16 Table of Contents • 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.
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; 16 Table of Contents • regulatory actions which may necessitate recalls of our products or warning letters that negatively affect the markets for our products; • 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 carryforwards; • 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.
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.
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 agreements directly with Cogmedix’s suppliers. Our ability and Cogmedix’s ability to secure adequate quantities of such products may be limited.
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.
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; 36 Table of Contents • 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.
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. 41 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this Annual Report on Form 10-K constitute forward-looking statements.
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. 39 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this Annual Report on Form 10-K constitute forward-looking statements.
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.
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 EEA to the UK remain unrestricted.
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 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.
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 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.
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 29 Table of Contents 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; • pursuing criminal prosecution.
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.
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; 36 Table of Contents • 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.
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.
In December 2021, we entered into a technology license agreement and a trademark license agreement with the JV Company, under which we will be entitled to receive 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.
In December 2021, we entered into a technology license agreement and a trademark license agreement with the JV Company, under which we were entitled to receive 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.
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.
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. Persistent inflation may materially impact our financial operations or results of operations.
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.
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 United States for months or longer depending on the requirements of the classification.
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 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 EEA/UK , 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.
Inflation has increased during the period covered by this Annual Report on Form 10-K, 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.
Inflation has remained persistent during the period covered by this Annual Report on Form 10-K, 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.
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.
With a small number of exceptions, appeals filed with the payer 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 any of these technologies or features are important to our products, this could prevent us from selling those products and could have a material 35 Table of Contents 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.
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.
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.
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 18 Table of Contents obtain these broad coverage policies.
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.
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 27 Table of Contents business in an adverse way.
See section entitled “ Business – Government Regulation – Healthcare Privacy Laws and Regulations.” The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform.
See section titled “ Business – Government Regulation – Healthcare Privacy Laws and Regulations.” . The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform.
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 27 Table of Contents known about the type of device, and the extent of control needed to provide reasonable assurance of safety and effectiveness.
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.
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.
While many companies continue to experience 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.
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 21 Table of Contents or inflationary pressures.
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.
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, 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 technology systems, infrastructure, and networks of our company and our vendors, including personal information of our employees, and patients, and company and vendor confidential data.
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 23 Table of Contents FDA or 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.
Holders of our common stock must bear the risk that any future offerings 37 Table of Contents 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.
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.
Any delays in 25 Table of Contents 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.
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.
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 33 Table of Contents lack of information about the exact use of technology or processes by third parties.
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.
To our knowledge, through the year ended December 31, 2022, fewer than 30 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.
To our knowledge, through the year ended December 31, 2023, 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.
We undertake no obligation, other than as maybe be required by law, to re-issue this Annual Report on Form 10-K or otherwise make public statements updating our forward-looking statements. Item 1B. Unresolve d Staff Comments Not applicable. 42 Table of Contents
We undertake no obligation, other than as maybe be required by law, to re-issue this Annual Report on Form 10-K or otherwise make public statements updating our forward-looking statements. Item 1B. Unresolve d Staff Comments Not applicable.
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.
Without an active market, the liquidity of such warrants will be limited. 34 Table of Contents 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.
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 30% of total revenues during the year ended December 31, 2022.
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 38% of total product revenues during the year ended December 31, 2023.
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.
Adverse events such as product defects or legal claims with respect to competing or similar products could cause 22 Table of Contents 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.
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. 17 Table of Contents Any factors that negatively impact sales of MyoPro would adversely affect our business, financial condition and operating results.
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.
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.
If a breach or compromise of our information technology systems or infrastructure 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.
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.
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 37 Table of Contents weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion.
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.
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 32 Table of Contents limited to selected countries in the European Union, or EU, China, Hong Kong, and Japan.
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.
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 carry-forwards or tax credits, or NOLs or credits, to offset future taxable 38 Table of Contents income.
Often, different 39 Table of Contents 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.
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.
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.
Additionally, because the MyoPro is a prescription 17 Table of Contents device, patients require the prescription of a healthcare provider to access our products and to have the device reimbursed by insurance.
Since inception through December 31, 2022, we have delivered nearly 2,000 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 1,600 units since such time. As a result, we have a limited operating history.
Since inception through December 31, 2023, we have delivered more than 2,400 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 2,000 units since such time. As a result, we have a limited operating history.
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.
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, 2023, we had U.S. federal and state net operating loss, or NOL, carryforwards of $77.4 million and $72.7 million, respectively, which begin to expire in the year 2028 and 2024 through 2044, respectively.
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.
Recent changes in enforcement practice by the 26 Table of Contents 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, 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.
In addition, 29 Table of Contents outside parties may attempt to penetrate our systems and infrastructure 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.
Further, any new contract manufacturer would need to be compliant with FDA regulations and International Organization for Standardization, or ISO, standard 13485. We also rely on third-party suppliers, some of which contract directly with Cogmedix, to supply certain components of the MyoPro products.
Further, any new contract manufacturer would need to be compliant with FDA regulations and International Organization for Standardization, or ISO, standard 13485. We also rely on third-party suppliers, including AB Corp, for 3D printed orthotic components. Some third-party suppliers contract directly with Cogmedix, to supply certain components of the MyoPro products.
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.
In addition, we could be subject to regulatory actions, inquiries, investigations, orders, penalties, fines, and/or claims made by individuals and groups in private litigation, including those involving privacy and security issues related to data collection and use practices and other data privacy and security laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices.
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.
Suppliers may encounter problems that limit their ability to manufacture components for our products, including financial difficulties or damage to their 19 Table of Contents manufacturing equipment or facilities.
Furthermore, our ability to utilize our NOLs or tax credits is conditioned upon our attaining 40 Table of Contents profitability and generating U.S. federal and state taxable income.
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.
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.
Any cyber-attack or security compromise or breach that leads to unauthorized access, use, disclosure, loss, corruption or other compromise of confidential and/or proprietary information or other sensitive 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, including those that protect the privacy and security of personal information.
For example, in January 2021, we announced that we had entered into a joint venture with Beijing Ryzur Medical Investment Co., Ltd., to manufacture and sell the products containing the Company’s technology in China, Hong Kong, Taiwan and Macau.
For example, we have entered into a joint venture with Beijing Ryzur Medical Investment Co., Ltd., to manufacture and sell the products containing the Company’s technology in China, Hong Kong, Taiwan and Macau.
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.
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. 28 Table of Contents 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.
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.
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 33 Table of Contents registered in Canada and in selected EU, countries with pending registration.
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.
We could be required to expend significant amounts of money and other resources to detect, mitigate and respond to these threats, compromises, or breaches and to repair or replace information technology systems infrastructure or networks and could suffer financial loss or the loss of valuable confidential and/or proprietary information.
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.
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.
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.
Additionally, we had U.S. federal and state research and development tax credits, or tax credits, of $0.4 million and $0.2 million, respectively, which begin to expire in the year 2026 and 2033, respectively. These NOL and tax credit carryforwards could expire unused and be unavailable to offset future taxable income or tax liabilities, respectively.
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.
Risks Related to Cybersecurity and Data Protection Our internal computer systems and infrastructure, or those of our customers, collaborators, contractors, or other third parties, may be subject to cyber-attacks or security compromises or breaches, which could result in a material disruption of our product development programs, damage to our reputation or financial condition.
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.
Despite the implementation of security measures, our internal computer systems and infrastructures and those of our customers, collaborators, contractors, or other third parties are vulnerable to damage, compromise or interruption from computer viruses, unauthorized access, misuse, or other security compromises or breaches. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.
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 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 from public heath crises, such as the Covid-19 pandemic, or other factors, our supply chain may be disrupted and our ability to manufacture and ship our products may be limited.
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.
In the ordinary course of our business, we collect and store confidential and/or proprietary information or other sensitive information, including, among other things, personal information about our employees and patients, intellectual property, and proprietary business information.
We believe that there is substantial doubt that our cash and cash equivalents at December 31, 2022, together with the net proceeds from our January 2023 financing will be sufficient to fund our operations for the twelve months from the date of this report.
We believe that our existing cash at December 31, 2023, together with the net proceeds from our January 2024 financing will be sufficient to fund our operations for the twelve months from the date of this report.
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.
For example, the California Consumer Privacy Act, or CCPA, is a comprehensive law 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.
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.
Our products are regulated as medical devices in the United States under the FFDCA, as implemented and enforced by the FDA.
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 30 Table of Contents able to generate sufficient revenue, attain profitability or commercialize our products.
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.
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.
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.
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.
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.
Revenues from patients who are covered by Medicare Advantage insurance plans are becoming an increasingly significant portion of our overall revenues. For the year ended December 31, 2022, approximately 60% of our product revenues were derived from patients with Medicare Advantage insurance plans.
Revenues from patients who are covered by Medicare Advantage insurance plans have become a significant portion of our overall revenues. For the year ended December 31, 2023, approximately 57% of our product revenues were derived from patients with Medicare Advantage insurance plans.
For example, from June 9, 2017 to December 31, 2022, 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.
For example, from December 31, 2022 to December 31, 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 high of $5.58 per share.
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.
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 or adequately address cyber-attacks or security compromises or breaches that could adversely affect our business.
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.
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.
Like the EU GDPR, the UK GDPR restricts personal data 32 Table of Contents 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.
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. The UK’s data protection regime is independent from but aligned to the EU’s data protection regime.
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 have determined that such ownership changes have occurred in prior years and as recently as January 2023. The result of these ownership changes is that we have a $64,000 annual limitation on our ability to utilize pre-ownership change NOL’s and that approximately $20.0 million of our federal NOL's and $48.0 million of our state NOL's will expire unutilized.
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.
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 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.
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.
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. 35 Table of Contents 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.
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.
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.
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 Section – Government Regulations – Current and Future Legislation .”.
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.
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. 38 Table of Contents 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.
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.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties Our primary offices are located at 137 Portland St. in Boston, Massachusetts, where we have a sublease expiring in August 2023 consisting of 9,094 square feet of office and laboratory space, which has been extended as a result of a lease in the same building for 3,859 square feet of space to be used for manufacturing which expires in January 2025.
Biggest changeItem 2. Properties Our primary offices are located at 137 Portland St. in Boston, Massachusetts, where we have a lease consisting of 9,094 square feet of office and laboratory space, which has been extended as a result of a lease in the same building for 3,859 square feet of space to be used for manufacturing which expires in January 2025.
A number of our employees work remotely from home across the U.S.
A number of our employees work remotely from home across the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine Safety Disclosures Not applicable. 43 Table of Contents PART II
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 42 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 43 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. Reserved 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45
Biggest changeItem 4. Mine Safety Disclosures 42 PART II 40 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. Reserved 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record On March 1, 2023, the closing price per share of our common stock was $0.63 as reported on The NYSE American, and we had approximately 282 stockholders of record (not including beneficial owners whose shares are held in street name).
Biggest changeHolders of Record On March 1, 2024, the closing price per share of our common stock was $4.01 as reported on The NYSE American, and we had approximately 124 stockholders of record (not including beneficial owners whose shares are held in street name).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe were unable to achieve a quorum for the meeting, and as a result, withdrew the proposal. See "Liquidity" for further discussion. Equity Offering In January 2023, we completed a public offering of our common stock, whereby we sold 13,169,074 shares of common stock and 6,830,926 pre-funded warrants at $0.325 per share.
Biggest changeIn January 2023, we completed a public equity offering, whereby we sold 13,169,074 shares of common stock and 6,830,926 pre-funded warrants at $0.325 per share, or $0.3249 per pre-funded warrant. Each pre-funded warrant in the above offerings entitles the holder to one share of common stock upon exercise at a nominal exercise price of $0.0001 per share.
Product Revenue Increasingly, we derive our revenue from direct billing. We also derive revenue from the sale of our products to O&P providers in the United States and internationally and the VA.
Product Revenue Increasingly, we derive our revenue from direct billing, and we also derive revenue from the sale of our products to O&P providers in the United States and internationally and the VA.
In particular: • Adjusted EBITDA does not include interest income; • Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision; • Adjusted EBITDA does not include depreciation expense from fixed assets, or amortization of leased assets; • Adjusted EBITDA does not include the impact of stock-based compensation; and • Adjusted EBITDA does not include the loss on equity investment in the JV Company.
In particular: • Adjusted EBITDA does not include interest income, net; • Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision; • Adjusted EBITDA does not include depreciation expense from fixed assets, or amortization of leased assets; • Adjusted EBITDA does not include the impact of stock-based compensation; and • Adjusted EBITDA does not include the loss on equity investment in the JV Company.
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 announced that we became accredited as a Medicare provider. • In January 2022, we introduced the MyoPro 2+ and began in-house fabrication of the device.
The assignment of unique L-Codes, if followed by appropriate payment terms (which are still pending), may 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 announced that we became accredited as a Medicare provider. • In January 2022, we introduced the MyoPro 2+ and began in-house fabrication of the device.
Loss on equity investment represents our share of the losses incurred by the JV Company, which began limited operations in 2022. Income tax expense Income tax expense recorded during the years ended December 31, 2022 and 2021 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH.
Loss on equity investment represents our share of the losses incurred by the JV Company, which began limited operations in 2023. Income tax expense Income tax expense recorded during the years ended December 31, 2023 and 2022 represents the provision for income taxes for our wholly-owned subsidiary, Myomo Europe GmbH.
Other milestones our history include: • In 2012, we introduced the MyoPro, the primary business focus shifted during this time period, from devices which 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.
Other milestones in our history include: • In 2012, we introduced the MyoPro, the primary business focus shifted during this time period, from devices which 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 activities of daily living or 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.
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.
During the fourth quarter of 2022, we sold 692,914 shares of common stock under a Common Stock Purchase Agreement with Keystone Capital Partners, LLC at a weighted average sales price of $0.683 per share, generating proceeds after fees and expenses of approximately $0.4 million.
The net cash used in operating activities for the year ended December 31, 2022 was primarily used to fund a net loss net approximately $10.7 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.9 million of which approximately $1.1 million of non-cash adjustments related to stock-based compensation, and approximately $1.4 million of cash used from changes in operating assets and liabilities, primarily related to an increase in inventory and decreases in accounts payable and accrued expenses and operating lease liabilities.
Net cash used in operating activities for the year ended December 31, 2022 was primarily used to fund a net loss net approximately $10.7 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.9 million of which approximately $1.2 million of non-cash adjustments related to stock-based compensation, and approximately $1.4 million of cash used from changes in operating assets and liabilities, primarily related to a decrease in accounts payable and accrued expenses and an increase in inventory.
We reported a net loss for the years ended December 31, 2022 and 2021, and as a result, all potentially dilutive common shares are considered antidilutive for these years.
We reported a net loss for the years ended December 31, 2023 and 2022, and as a result, all potentially dilutive common shares are considered antidilutive for these years.
Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 The following table sets forth our revenue, gross profit and gross margin for each of the years presented.
Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 The following table sets forth our revenue, gross profit and gross margin for each of the years presented.
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. 45 Table of Contents • On July 31, 2017, we met the criteria to apply the CE Mark for the MyoPro.
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, or IPO, and a private offering concurrent with the IPO, generating net proceeds of $6.9 million in the aggregate. 44 Table of Contents • On July 31, 2017, we met the criteria to apply the CE mark for the MyoPro under the EU MDD.
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 in the U.S., Europe and Australia that provide our products to their patients as well as generate indirect sales.
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 in the United States, Europe and Australia that provide our products to their patients as well as generate indirect sales.
These insurers represented approximately 44% and 39% of the direct billing channel revenue in 2022 and 2021, respectively. Depending on the timing of product deliveries to customers, which is when cost of revenue must be recorded, and when we meet the criteria to record revenue, there may be fluctuations in gross margin.
These insurers represented approximately 66% and 44% of the direct billing channel revenue in 2023 and 2022, respectively. Depending on the timing of product deliveries to customers, which is when cost of revenue must be recorded, and when we meet the criteria to record revenue, there may be fluctuations in gross margin.
We also sell our products to O&P providers in the U.S. Europe and Australia, to the VA and to rehabilitation hospitals. Though we increasingly provide devices directly to patients, we sometimes utilize the clinical services of O&P providers for which they are paid a fee.
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.
Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income.
Income Taxes We account for income taxes under ASC 740, “Income Taxes under ASC 740”, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income.
Recent Accounting Standards In September 2022, the 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.
Recent Accounting Standards In September 2022, the 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 roll-forward of those obligations.
We used $10.2 million in cash for operating activities during the year ended December 31, 2022. We have historically funded our operations through financing activities, including raising equity and debt capital.
We used $6.2 million in cash for operating activities during the year ended December 31, 2023. We have historically funded our operations through financing activities, including raising equity and debt capital.
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 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 roll-forward of obligations outstanding will be effective for fiscal years 53 Table of Contents beginning after December 15, 2023. Early adoption is permitted.
This has enabled us to sell the MyoPro to individuals in the European Union (the “EU”). • In November 2018, we announced that the CMS had published two new codes (L8701, L8702) pursuant to our application for HCPCS codes which become effective in early 2019.
This has enabled us to sell the MyoPro to individuals in the EU. • In November 2018, we announced that the CMS had published two new codes (L8701, L8702) that describe our products, pursuant to our application for HCPCS codes which become effective in early 2019.
The net cash used in operating activities for the year ended December 31, 2021 was primarily used to fund a net loss net approximately $10.4 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.4 million of which approximately $1.1 million of non-cash adjustments related to stock-based compensation, and approximately $0.6 million of cash used from changes in operating assets and liabilities, primarily related to an increase in accounts payable and accrued expenses, offset by increases in inventory and accounts receivable.
The net cash used in operating activities for the year ended December 31, 2023 was primarily used to fund a net loss net approximately $8.1 million, adjusted for non-cash expenses in the aggregate amount of approximately $1.7 million of which approximately $1.1 million is related to non-cash adjustments related to stock-based compensation, and approximately $0.34 million of cash generated from changes in operating assets and liabilities, primarily related to an increase in accounts payable and accrued expenses, offset by increases in inventory and accounts receivable.
Leases We account for leases under Accounting Standards Codification (“ASC”) Topic 842, leases. We assess whether a contract is or contains a lease at inception of the contract and recognize right-of-use assets and corresponding lease liabilities at the lease commencement date, except for short-term leases, which are under one year, and leases of low value.
We assess whether a contract is or contains a lease at inception of the contract and recognize right-of-use assets and corresponding lease liabilities at the lease commencement date, except for short-term leases, which are under one year, and leases of low value.
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 $0.1 million or 3% in 2022 compared to 2021.
R&D costs are expensed as they are incurred. We intend to enhance our existing products in 2024 and expect R&D costs to increase on an annual basis. R&D expenses increased by approximately $0.2 million or 6% in 2023 compared to 2022.
The decrease in income tax expense relates to decreased income from Myomo Europe GmbH in 2022 compared to 2021. 48 Table of Contents Adjusted EBITDA We believe that the presentation of Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional information about our financial results.
The increase in income tax expense relates to increased income from Myomo Europe GmbH in 2023 compared to 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.
The revenue increase was driven primarily by a higher average selling price, offset by a lower number of revenue units . Including the license revenue received from our joint venture partner in China, total revenue increased 12% compared to 2021.
The revenue increase was driven primarily by a higher average selling price, as well as a higher number of revenue units. Including the license revenue received from our joint venture partner in China, total revenue increased 24% compared to 2022.
Revenues generated through the direct billing channel were approximately $10.7 million, or 74% of product revenue in 2022, compared to approximately $10.7 million, or 77% of product revenue in 2021.
Revenues generated through the direct billing channel were approximately $12.3 million, or 71% of product revenue in 2023, compared to approximately $10.7 million, or 74%, of product revenue in 2022.
Gross margin Cost of revenue consists of direct costs for the manufacturing, casting/printing of orthotic parts, fabrication and fitting of our products, inventory reserves, warranty costs, royalties associated with licensed technologies and instruction. Gross margin decreased to 65.9% for the year ended December 31, 2022, as compared to 74.4% in the comparable period of 2021.
Gross margin Cost of revenue consists of direct costs for the manufacturing, casting/printing of orthotic parts, fabrication and fitting of our products, inventory reserves, warranty costs and royalties associated with licensed technologies. 46 Table of Contents Gross margin increased to 68.5% for the year ended December 31, 2023, as compared to 65.9% in the comparable period of 2022.
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.
Our technology was originally developed at MIT in collaboration with medical experts affiliated with Harvard Medical School. Myomo was incorporated in 2004.
The MyoPro product line has been approved by the VA system for impaired veterans, and over 70 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 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.
Investing Activities . During the year ended December 31, 2022 our cash used in investing activities of $0.3 million was primarily due to our investment in a joint venture with Ryzur Medical and purchases of equipment. Cash used in investing activities in 2021 was primarily for leasehold improvements to our new headquarters facility in Boston. Financing Activities .
Investing Activities . During the year ended December 31, 2023 our cash used in investing activities of $2.0 million was primarily due to our investment in short-term investments and purchases of equipment. Cash used in investing activities in 2022 was primarily for our investment in a joint venture with Ryzur Medical and purchases of equipment. Financing Activities .
During the year ended December 31, 2022 cash provided by financing activities of approximately $0.4 million was due to net proceeds received from stock issued under our equity line of credit.
During the year ended December 31, 2022 cash provided by financing activities of approximately $0.4 million was due to net proceeds received from stock issued under our equity line of credit. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements in the years ended December 31, 2023 and December 31, 2022.
We recognize 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 52 Table of Contents Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We recognize revenue after applying the following five steps: 51 Table of Contents 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; and 5) Recognition of revenue when, or as, performance obligations are satisfied.
For these leases, we recognize the lease payments as an operating expense on a straight-line basis over the term of the lease. 53 Table of Contents Income Taxes We account for income taxes under ASC 740 Income Taxes.
For these leases, we recognize the lease payments as an operating expense on a straight-line basis over the term of the lease.
We expect that our revenues will continue to grow, primarily as a result of our increased patient pipeline entering 2023 and through higher revenue from O&P practices outside of the United States. Product revenue in 2022 increased by approximately $0.7 million, or 5% compared to 2021.
We expect that our revenues will continue to grow, primarily as a result of our expected ability to serve Medicare Part B beneficiaries and through expected higher revenue from O&P practices outside of the United States. Product revenue in 2023 increased by approximately $2.9 million, or 20%, compared to 2022.
Under the Agreements, we and the JV Company have entered into a ten-year agreement to license our intellectual property, including recently issued patents in China and Hong Kong, and purchase MyoPro Control System units from us.
Under the Agreements, we and the JV Company have entered into a ten-year agreement to license our intellectual property, including recently issued patents in China and Hong Kong, and purchase MyoPro Control System units from us. Under the Agreements, we were entitled to receive an upfront license fee of $2.7 million, which has been paid as of December 31, 2023.
Years Ended December 31, Year-to-year change 2022 2021 $ % Research and development $ 2,482,489 $ 2,557,367 $ (74,878 ) (3 %) Selling, general and administrative 18,442,811 18,022,975 419,836 2 Total operating expenses $ 20,925,300 $ 20,580,342 $ 344,958 2 % 47 Table of Contents 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.
Years Ended December 31, Year-to-year change 2023 2022 $ % Research and development $ 2,636,487 $ 2,482,489 $ 153,998 6 % Selling, general and administrative 18,777,445 18,442,811 334,634 2 Total operating expenses $ 21,413,932 $ 20,925,300 $ 488,632 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.
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, we ship its products to O&P providers pending reimbursement from non-government, third-party payers.
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.
GAAP. 49 Table of Contents The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the years indicated: 2022 2021 GAAP net loss $ (10,721,022 ) $ (10,372,329 ) Adjustments to reconcile to Adjusted EBITDA: Interest income (88,731 ) (1,612 ) Loss on equity investment 66,511 - Income Taxes 69,937 88,928 Depreciation and amortization expense 192,799 145,995 Stock-based compensation 1,190,494 1,096,408 Adjusted EBITDA $ (9,290,012 ) $ (9,042,610 ) Liquidity and Capital Resources Liquidity We measure our liquidity in a number of ways, including the following: December 31, 2022 2021 Cash $ 5,345,967 $ 15,524,378 Working capital 5,613,521 14,903,804 We had working capital and stockholders’ equity of approximately $5.6 million and $6.4 million respectively, as of December 31, 2022.
GAAP. 48 Table of Contents The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the years indicated: 2023 2022 GAAP net loss $ (8,147,565 ) $ (10,721,022 ) Adjustments to reconcile to Adjusted EBITDA: Interest income, net (410,274 ) (88,731 ) Loss on equity investment 169,503 66,511 Income taxes 156,002 69,937 Depreciation and amortization expense 164,306 192,799 Stock-based compensation 1,115,602 1,190,494 Adjusted EBITDA $ (6,952,426 ) $ (9,290,012 ) Liquidity and Capital Resources Liquidity We measure our liquidity in a number of ways, including the following: December 31, 2023 2022 Cash and cash equivalents $ 6,871,306 $ 5,345,967 Short-term investments $ 1,994,662 - Working capital 8,173,925 5,613,521 We had working capital and stockholders’ equity of approximately $8.2 million and $9.0 million respectively, as of December 31, 2023.
Cash Flows Year Ended December 31, 2022 2021 Net cash used in operating activities $ (10,233,542 ) $ (9,547,695 ) Net cash used in investing activities (310,793 ) (326,462 ) Net cash provided by financing activities 376,858 13,167,666 Effect of foreign exchange rate changes on cash (10,934 ) (10,392 ) Net increase (decrease) in cash and cash equivalents $ (10,178,411 ) $ 3,283,117 Operating Activities .
Cash Flows Year Ended December 31, 2023 2022 Net cash used in operating activities $ (6,172,764 ) $ (10,233,542 ) Net cash used in investing activities (2,029,565 ) (310,793 ) Net cash provided by financing activities 9,713,457 376,858 Effect of foreign exchange rate changes on cash 14,211 (10,934 ) Net increase (decrease) in cash and cash equivalents $ 1,525,339 $ (10,178,411 ) Operating Activities .
Variable compensation for personnel engaged in sales and marketing activities is generally earned and recorded as expense when the product is delivered.
Variable compensation for personnel engaged in sales and marketing activities is generally earned and recorded as expense when the product is delivered. We expect sales and marketing expenses to increase in 2024 as we increase our clinical capacity to serve Medicare Part B beneficiaries.
The increase was primarily due to higher advertising and insurance costs, offset by lower payroll costs related to lower bonus compensation in 2022. Other expense (income) The following table sets forth our interest and other expense (income) for each of the years presented.
The increase was primarily due stock compensation expense, and professional fees, partially offset by a decrease in wages as well as lower advertising costs in 2023. 47 Table of Contents Other expense (income) The following table sets forth our interest and other expense (income) for each of the years presented.
Accounts Receivable We carry accounts receivable at invoiced amounts less an allowance for doubtful accounts. We evaluate our accounts receivable on a continuous basis, and if necessary, establish an allowance for doubtful accounts based on a number of factors, including current credit conditions and customer payment history.
We evaluate our accounts receivable on a continuous basis, and if necessary, establish an allowance for credit losses based on a number of factors, including current credit conditions and customer payment history. We do not require collateral or accrue interest on accounts receivable and credit terms are generally 30 days.
The decrease in gross margin was driven primarily by higher component costs and other costs in the current inflationary environment, unabsorbed fixed costs and an increase in the warranty reserve. We expect our gross margins to vary depending on the mix of channel revenues and timing of reimbursements from certain third-party payers, which impacts revenue recognition.
The increase in gross margin on product sales, was driven by a higher average selling price, as well as higher revenues in 2023. We expect our gross margin to vary depending on the mix of channel revenues and timing of reimbursements from certain third-party payers, which impacts revenue recognition.
There can be no assurance we will be successful in implementing our plans to sustain our operations and continue to conduct our business.
We may also explore strategic alternatives for the purpose of maximizing 49 Table of Contents 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.
In many cases, we are not able to recognize revenue in these situations until payment is received, as then all of the revenue recognition criteria have been met. We have elected to record taxes collected from customers on a net basis and do not include tax amounts in revenue or cost of revenue.
We have elected to record taxes collected from customers on a net basis and do not include tax amounts in revenue or cost of revenue.
Quantitative and Qualitat ive Disclosures about Market Risk This item is not applicable to us as a smaller reporting company. Item 8. Financial Statemen ts and Supplementary Data See the financial statements filed as part of this Annual Report on Form 10-K as listed under Item 15 below. Item 9.
Financial Statemen ts and Supplementary Data See the financial statements filed as part of this Annual Report on Form 10-K as listed under Item 15 below. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure Not Applicable.
The cash in these accounts is held for working capital purposes and invested by the bank in overnight money market funds that invest in short-term government or government backed securities. Our primary objective is to preserve our capital for purposes of funding our operations. Item 7A.
Quantitative and Qualitative Disclosure about Market Risk Our unrestricted cash and cash equivalents, totaling approximately $6.9 million as of December 31, 2023, was deposited in bank accounts. The cash in these accounts is held for working capital purposes and invested by the bank in overnight money market funds that invest in short-term government or government backed securities.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements in the years ended December 31, 2022 and December 31, 2021. 51 Table of Contents 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.
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.
We expect that general and administrative expenses will increase slightly in 2023 as a result of increased incentive compensation expense, offset by the effect of the reduction in force in January 2023. Selling, general and administrative expenses increased by approximately $0.4 million or 2% in 2022 compared to 2021.
We expect that general and administrative expenses will increase in 2024 as a result of increasing our reimbursement capacity in order to serve Medicare Part B beneficiaries. Selling, general and administrative expenses increased by approximately $0.3 million or 2% in 2023 compared to 2022.
Years Ended December 31, Year-to-year change 2022 2021 $ % Product revenue $ 14,555,229 $ 13,856,374 $ 698,855 5 % License revenue 1,000,000 - 1,000,000 NM Total revenue 15,555,229 13,856,374 1,698,855 12 Cost of revenue 5,302,133 3,544,097 1,758,036 50 Gross profit $ 10,253,096 $ 10,312,277 $ (59,181 ) - Gross margin 65.9 % 74.4 % (8.5 %) Revenues We derive revenue primarily from providing devices directly to patients and billing insurance companies directly.
Years Ended December 31, Year-to-year change 2023 2022 $ % Product revenue $ 17,476,238 $ 14,555,229 $ 2,921,009 20 % License revenue 1,764,920 1,000,000 764,920 NM Total revenue 19,241,158 15,555,229 3,685,929 24 Cost of revenue 6,058,775 5,302,133 756,642 14 Gross profit $ 13,182,383 $ 10,253,096 $ 2,929,287 29 Gross margin 68.5 % 65.9 % 2.6 % Revenues We derive revenue primarily from providing devices directly to patients and billing insurance companies directly.
During the year ended December 31, 2021 cash provided by financing activities of approximately $13.2 million was primarily due to approximately $12.1 million of net proceeds received from the exercise of warrants and net proceeds of approximately $1.1 million from the issuance of shares through our ATM facility.
During the year ended December 31, 2023 cash provided by financing activities of approximately $9.7 million was due to net proceeds received from the sale of common stock and pre-funded warrants, net of offering costs.
The JV Company, once fully operational will manufacture and sell our current and future products in greater China, including Hong Kong, Macau and Taiwan. We account for our investment in the JV Company under the equity method because we exert significant influence over its management. The investment is included in total assets on the consolidated balance sheet.
We account for our investment in the JV Company under the equity method because we exert significant influence over its management. The investment is included in total assets on the consolidated balance sheet, which was fully written off to loss on equity investment in other income (expense), net as of December 31, 2023.
Considering our cash balance as of December 31, 2022 and net proceeds from the equity offering in January 2023 as well as our cash used from operations during the year ended December 31, 2022, management believes there is substantial doubt regarding our ability to continue as a going concern for the next 12 months from the date of this report.
Considering our cash balance as of December 31, 2023, the net proceeds from the equity offering in January 2024 and managements plans to grow our clinical, reimbursement and manufacturing capacity to serve Medicare Part B beneficiaries in 2024, management believes there will be sufficient cash to fund our operations and capital expenditures for the next 12 months from the date of this report.
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.
We believe that we have access to capital resources, if necessary, through potential public or private equity offerings, exercises of outstanding warrants, debt financings, or other means. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
Years Ended December 31, Year-to-year change 2022 2021 $ % Interest income $ (88,731 ) $ (1,612 ) $ (87,119 ) NM Other expense, net 1,101 16,948 (15,847 ) (94 )% Loss on equity investment 66,511 - 66,511 NM Total other expense (income) $ (21,119 ) $ 15,336 $ (36,455 ) (238 )% Interest income increased due to higher interest rates in 2022.
Years Ended December 31, Year-to-year change 2023 2022 $ % Interest income, net $ (410,274 ) $ (88,731 ) $ (321,543 ) 362 % Other expense, net 785 1,101 (316 ) (29 ) Loss on equity investment 169,503 66,511 102,992 155 Total other income $ (239,986 ) $ (21,119 ) $ (218,867 ) 1036 % Interest income increased due to higher interest rates and a higher average investment balances in 2023.
We do not require collateral or accrue interest on accounts receivable and credit terms are generally 30 days. Joint Venture On March 28, 2022, we invested cash consideration of $199,000 for a 19.9% ownership stake in the JV Company.
Joint Venture On March 28, 2022, we invested cash consideration of $199,000 for a 19.9% ownership stake in the JV Company. The JV Company, once fully operational will manufacture and sell our current and future products in greater China, including Hong Kong, and Taiwan.
See "Liquidity" for further discussion. 46 Table of Contents 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 in 2023 as we focus our efforts on patients with insurance payers who have reimbursed for the MyoPro in the past, grow our operations in Germany and invest in the enhancement of our MyoPro products.
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 at least through the third quarter of 2024.
Under the Agreements, we are entitled to receive an upfront license fee of $2.7 million, of which $1.0 million has been paid concurrent with the beginning of limited operations as of December 31, 2022.
Under the JV Agreements, we were entitled to receive an upfront license fee of $2.7 million, which was paid in full as of December 31, 2023. We are entitled to guaranteed minimum payments for purchases of MyoPro Control Units for a period of 10 years from the effective date of the Technology License Agreement.
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 valuation of our deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations, the discount rate on leases and inventory reserves.
Our significant estimates include the valuation of our deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations, the discount rate on leases and inventory reserves. 50 Table of Contents Cash Equivalents and Short-Term Investments We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Removed
The JV Company has advised us that effects of COVID-19 in China are delaying the banking and government approvals necessary to pay the remainder of the license fee. We cannot be certain as to if or when the remaining license fee will be paid.
Added
The MyoPro product line has been approved by the VA system for impaired veterans, and over 70 VA facilities have ordered devices for their patients.
Removed
If uncured, failure to pay us the required fees contemplated by the Agreements may entitle us to terminate such Agreements and withdraw from the joint venture.
Added
The EU MDR repealed and replaced the EU MDD on May 26, 2021, and we therefore worked with our EU-Authorized Representative to ensure all EU MDR requirements were met, which enabled us to establish a new declaration of conformity under the EU MDR to allow continued to CE mark application.
Removed
Equity Line of Credit On August 2, 2022, the Company entered into a Common Stock Purchase Agreement ("Purchase Agreement") with Keystone Capital Partners ("Keystone"), establishing an equity line facility.
Added
Equity Offerings On January 19, 2024 we completed a registered direct equity offering, selling 1,354,218 shares of common stock and 224,730 pre-funded warrants at $3.80 per share, or $3,7999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $5.4 million.
Removed
On October 28, 2022, we filed a Definitive Proxy Statement for notice of a special Shareholders Meeting to be held on December 7, 2022 to vote on a proposal to permit us to sell additional shares of common stock under the Purchase Agreement, in excess of an exchange cap contained therein.
Added
Net proceeds from the offering are expected to be used to hire more than 50 people through the second quarter of 2024 in order to increase our clinical, reimbursement and manufacturing capacity to serve Medicare Part B beneficiaries.
Removed
Each pre-funded warrant entitles the holder to one share of common stock upon exercise at a nominal exercise price of $0.0001 per share. Net proceeds from the transaction were approximately $5.7 million, and will be used to fund operations while we continue to work with CMS to obtain coverage and reimbursement for our products.
Added
On August 29, 2023, we completed a public equity offering, selling 5,413,334 shares of common stock and 1,920,000 pre-funded warrants at $0.60 per share, or at $0.5999 per pre-funded warrant, generating net proceeds after fees and expenses of approximately $3.9 million.
Removed
The decrease during 2022 was driven primarily by lower prototype and other product development expenses related to the introduction of the MyoPro2+ in January 2022.
Added
CMS Status 45 Table of Contents On November 1, 2023, CMS issued a final rule that results in a change in the benefit category associated with products billed under the HCPCS codes for our products from durable medical equipment rental to a brace, which would permit reimbursement of MyoPro sales on a lump sum basis.
Removed
We expect sales and marketing expenses to be roughly flat or decrease slightly in 2023 as a result of a reduction in force in January 2023 and efforts to reduce advertising spend while maintaining our existing lead generating capability.
Added
The rule became effective on January 1, 2024. On February 29, 2024, CMS published final average payment determinations for the HCPCS codes describing our products of approximately $33,500 for L8701, the MyoPro Motion W, and approximately $65,900 for L8702, the MyoPro Motion G, which are effective April 1, 2024.
Removed
During 2021, $12.1 million was received from the exercise of warrants, including $4.8 million in net proceeds in October 2021 from a transaction to induce the exercise of warrants issued in conjunction with our equity offering in February 2020 at a reduced exercise price of $5.00 per share.
Added
Beginning March 2023, we began submitting claims to the Medicare program via CMS' - durable medical equipment administrative contractors, referred to as the DME MACs.
Removed
These financing activities, in addition to funding of $1.1 million received from sales of common stock under our ATM Facility, with Alliance Global Partners during the year ended December 31, 2021 are helping us to sustain our operations.
Added
A total of 40 claims have been submitted, and 21 claims have been paid, either as a rental fee or a purchase across all of the DME MACs as of the filing date of this Annual Report on Form 10-K. The remaining patients' claims are under review as part of the process of individual consideration.
Removed
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.
Added
We cannot provide any assurance as to whether additional claims for reimbursement for our products will be approved and paid by CMS or by a DME MAC nor can we provide any assurance as to the timing of any such future payments.
Removed
We intend to stop activities directed at increasing the number of payers that will reimburse for our products until CMS either begins to reimburse for the MyoPro or states its intention to do so. As a result, we have undertaken cost reduction activities, including the reduction of approximately 12% of our workforce in January 2023.
Added
We believe it is achievable to be cash flow breakeven on a quarterly basis by the fourth quarter of 2024 assuming the final fees published by CMS are not significantly different than the preliminary fees published, that we are able to hire 50 additional employees by the end of the second quarter of 2024 in order to increase our clinical, reimbursement and manufacturing capacity to serve an expected increase in volume from Medicare Part B beneficiaries and there are no unexpected supply chain disruptions.

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