| Summary of Significant Accounting Policies | Note 3 — Summary of Significant Accounting Policies Interim Financial Statements The accompanying unaudited condensed consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) that are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the fiscal year ending December 31, 2024, or any other period. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related disclosures of the Company as of December 31, 2023 and 2022 and for the years then ended, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 . Basis of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Myomo Europe GmbH. All significant intercompany balances and transactions are eliminated. Comprehensive Income (Loss) Comprehensive loss inclu des all changes in equity during a period, except those resulting from investments by stockholders and distributions to stockholders. The Company's comprehensive loss includes changes in foreign currency translation adjustments and unrealized gains and losses on short term investments. There was a reclassification which management does not consider to be material out of accumulated other comprehensive income (loss) to other (income) expense related to realized gains or losses on short-term investments in the three and six months ended June 30, 2024. There were no reclassifications in the three and six months ended June 30, 2023. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Actual results could differ from these estimates. The Company’s significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations and reserves for slow-moving inventory. Cash, Cash Equivalents and Short-Term Investments The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist principally of deposit accounts and money market accounts at June 30, 2024 and December 31, 2023. The Company considers all investments with an original maturity of greater than three months but less than one year to be short-term investments. Short-term investments as of June 30, 2024 and December 31, 2023 consists of commercial paper, U.S. Treasury Bills and short-term corporate debt securities, which are classified as held-to-maturity, and certificates of deposit totaling approximately $ 3,135,800 and $ 1,994,700 as of June 30, 2024, and December 31, 2023, respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchases and evaluates the classification at each balance sheet date. All of the Company's U.S. Treasury Bills mature within the subsequent twelve months from the date of purchase. Accounts Receivable and Allowance for Credit Losses The Company reports accounts receivable at invoiced amounts less an allowance for credit losses accounts. The Company evaluates its accounts receivable on a continuous basis and, if necessary, establishes an allowance for credit losses based on a number of factors, including current credit conditions and customer payment history. The Company does not require collateral or accrue interest on accounts receivable and credit terms are generally 30 days. At June 30, 2024 , and December 31, 2023, the Company recorded an allowance for credit losses accounts which was immaterial to the condensed consolidated financial statements. Joint Venture On March 28, 2022, the Company invested cash consideration of $ 199,000 for a 19.9 % ownership stake in Jiangxi Myomo Medical Assistive Appliance Co. Ltd. (the "JV Company"), a company headquartered in China that is majority-owned by Beijing Ryzur Medical Investment Co., Ltd. (“Ryzur Medical”). The JV Company will manufacture and sell the Company’s current and future products in greater China, including Hong Kong, Macau and Taiwan. The Company accounts for its investment in the JV Company under the equity method because the Company exerts significant influence over its management. The investment was fully written off as of December 31, 2023, due to the recording of the Company's share of the losses of the JV Company in prior periods, which were recorded to other expense (income) in the condensed consolidated statement of operations, the Company has no obligation to fund any losses incurred by the JV Company. Revenue Recognition The Company accounts for revenue under ASC 606, “Revenue from Contracts with Customers” and all of the related amendments (Topic 606). Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time,” depending on the facts and circumstances of the arrangement and are evaluated using a five-step model. Generally, the Company recognizes revenue at a point in time. The Company recognizes revenue after applying the following five steps: 1) Identification of the contract, or contracts, with a customer, 2) Identification of the performance obligations in the contract, including whether they are distinct within the context of the contract, 3) Determination of the transaction price, including the constraint on variable consideration, 4) Allocation of the transaction price to the performance obligations in the contract, and 5) Recognition of revenue when, or as, performance obligations are satisfied. Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Product Revenue Increasingly, the Company derives its revenue from direct billing. The Company also derives revenue from the sale of its products to O&P providers in the United States and internationally and the Veterans Administration (“VA”). Under direct billing, the Company recognizes revenue when all of the following criteria are met: (i) The product has been delivered to the patient, including completion of initial instruction on its use, (ii) Collection is deemed probable and it has been determined that a significant reversal of the revenue to be recognized is not deemed probable when the uncertainty associated with the variable consideration is resolved. As an example, the Company will record revenue if it is notified that insurance intends to pay and a payment amount is provided, and (iii) The amount to be collected is estimable using the “expected value” estimation techniques, or the “most likely amount” as defined in ASC 606. For revenue derived from certain insurance companies where the Company has demonstrated sufficient payment history, the Company recognizes revenue when it receives a pre-authorization from the insurance company and control passes to the patient upon delivery of the device in an amount that reflects the consideration the Company expects to receive in exchange for the device. These insurers represent ed 27 % and 53 % of direct billing channel revenue during the three months ended June 30, 2024 and 2023, respectively. These insurers represented 35 % and 57 % of direct billing channel revenue during the six months ended June 30, 2024 and June 30, 2023, respectively. During the three months ended June 30, 2024, revenues from patients covered by Medicare Part B were recorded at the time the payment amount was known. Depending on the timing of product deliveries to customers, which is when cost of revenue must be recorded, and when the Company meets the criteria to record revenue, there may be fluctuations in gross margin. During the three months ended June 30, 2024 and 2023, the Company recognized revenue of approximate ly $ 1,865,800 and $ 403,900 , respectively, and during the six months ended June 30, 2024 and 2023, the Company recognized revenue of approximately $ 1,745,000 and $ 1,898,200 , respectively, from third-party payers for which costs related to the completion of the Company’s performance obligations were not recorded in the current period. For revenues derived from O&P providers and the VA, the Company recognizes revenue when control passes to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those services. Revenues may be recognized upon shipment or upon delivery, depending on the terms of the arrangement, provided that persuasive evidence of an arrangement exists, there are no uncertainties regarding customer acceptance and collectability is deemed probable. The Company has elected to record taxes collected from customers on a net basis and does not include tax amounts in revenue or cost of revenue. License Revenue If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when the license is transferred to the customer, the customer is able to use and benefit from the license, and collectability is deemed probable. On January 21, 2021, the Company entered into a definitive agreement with Ryzur Medical to form the JV Company to manufacture and sell the Company's current and future products in greater China, including Hong Kong, Macau and Taiwan (the “JV Agreement”). Under the JV Agreement, the Company is entitled to receive an upfront license fee of $ 2.7 million. As of June 30, 2023, the final portion of the initial license fee has been paid in full and recognized as license revenue. In addition, the Company is entitled to receive a guaranteed minimum payment for purchase of MyoPro Control Units for a period of ten years from the effective date of the JV Agreement. The Company will recognize revenue on these amounts upon invoicing of the JV Company as long as the collectability is deemed to be assured. Contract Balances The timing of revenue recognition may differ from the timing of payment by customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had $ 12,000 of deferred revenue as of June 30, 2024, and approximately $ 8,500 of deferred revenue as of December 31, 2023, the outstanding deferred revenue is expected to be recognized by the end of the third quarter of 2024. Disaggregated Revenue from Contracts with Customers The following table presents revenue by major source:
For the Three Months For the Six Months
2024 2023 2024 2023
Direct to patient $ 5,829,407 $ 3,304,113 $ 8,059,833 $ 5,718,727
Clinical/Medical providers 1,691,360 939,511 $ 3,215,323 $ 1,971,605
License revenue — 1,714,920 — 1,714,920
Total revenue from contracts with customers $ 7,520,767 $ 5,958,544 $ 11,275,156 $ 9,405,252 Geographic Data The Company generate d 86 % of its total revenue from the United States and 14 % from Germany for the three months ended June 30, 2024 . The Company generated 63 % of its total revenue from the United States, 29 % from China, 8 % from Germany and an immaterial amount from other international locations, for the three months ended June 30, 2023. During the six months ended June 30, 2024, the Company generated 82 % of its total revenues from the United States, 17 % from Germany and 1 % from other international locations. During the six months ended June 30, 2023, the Company generated 70 % of its total revenues from the United States, 18 % from China, 11 % from Germany, and 1 % from other international locations. Excluding license revenue during the six months ended June 30, 2023, the Company generated 85 % of its product revenues from the United States, 14 % from Germany and 1 % from other international locations. Cost of Revenue In conjunction with the adoption of ASC 606, there are certain cases in which the Company will expense costs when incurred as required by ASC 340-40-25. In certain cases, the Company ships the MyoPro device to O&P providers, or provides the device directly to patients, pending reimbursement from third-party payers, after which revenue is recognized. For the three and six months ended June 30, 2024, the Company recorded cost of goods sold of approximate ly $ 121,800 and $ 144,600 , respectively, without corresponding revenue. For the three and six months ended June 30, 2023, the Company recorded cost of goods sold of $ 265,600 and $ 366,800 , respectively, without corresponding revenue. Direct billing fees paid to O&P providers for services they provide in conjunction with patient evaluations are expensed as incurred as required by ASC 340-40-25, as a cost of obtaining a contract. These costs are recorded as sales and marketing expense. Internal costs incurred and fees paid to O&P providers to measure, fit and deliver the device to patients are expensed to cost of revenue. Advertising The Company charges the costs of advertising to operating expenses as incurred . Advertising expense amounted to approximately $ 849,600 and $ 846,400 for the three months ended June 30, 2024 and 2023 , respectively, and approximately $ 1,636,900 and $ 1,537,900 during the six months ended June 30, 2024 and 2023, respectively. Foreign Currency Translation The functional currency of the Company’s foreign subsidiary, Myomo Europe GmbH, is the Euro. Foreign exchange translation gains and losses from the Euro to U.S. dollars are included in other comprehensive (loss) gain. The Company recorded losses of approximately $ 9,200 and $ 71,400 during the three months ended June 30, 2024 and 2023, respectively, and a gain of approximately $ 52,400 and a loss of approximately $ 5,600 during the six months ended June 30, 2024 and 2023, respectively, which are included in accumulated other comprehensive income in the condensed consolidated balance sheet. Transaction and translation foreign exchange gains and losses from a foreign currency to the functional currency are included in cost of goods sold in the consolidated statements of operations. Such amounts were immaterial for the three months ended June 30, 2024 and 2023. The balance sheet is translated using the spot rate on the day of reporting and the statement of operations is translated monthly using the average rate for the month. Net Loss per Share Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus potentially dilutive common shares. Restricted stock, restricted stock units, stock options and warrants are excluded from the diluted net loss per share calculation when their impact is antidilutive. The Company reported a net loss for the three months ended June 30, 2024 and 2023, and as a result, all potentially dilutive common shares are considered antidilutive for these periods. Potential dilutive common shares issuable consist of the following at:
June 30,
2024 2023
Stock options 23,629 26,138
Restricted stock units 1,275,862 1,608,615
Other warrants 668,250 668,250
Total 1,967,741 2,303,003 Due to their nominal exercise price of $ 0.0001 per share, a total of 7,721,519 and 6,830,926 outstanding pre-funded warrants as of June 30, 2024 and 2023, respectively are considered common stock equivalents and are included in weighted average shares outstanding in the accompanying condensed consolidated statements of operations as of the closing dates of the Company's public equity offerings in January 2023, August 2023, and January 2024, respectively. Recently Adopted Accounting Standards In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”, that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding are effective for fiscal years, including interim periods, beginning after December 15, 2022, except for the requirement to disclose a rollforward of obligations outstanding will be effective for fiscal years beginning after December 15, 2023. The Company adopted this new standard on January 1, 2024, which did not have a material impact on its financial position and results of operations. In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative”, that adds 14 of the 27 identified disclosure or presentation requirements to the Codification, each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation from its existing regulations by June 30, 2027. The Company currently complies with these disclosure requirements as applicable under Regulation S-X or Regulation S-K and will adopt these new standards depending on timing of when they become effective, which is not expected to have a material impact on its financial position and results of operations. In December 2023, the FASB issued ASU 2023-09, “Accounting Standards Update, Income Taxes (Topic 740: Improvements to Income Tax Disclosures”. ASU 2023-09 focuses on income tax disclosures around effective tax rates and cash income taxes paid. This amendment in the ASU will become effective for public companies as of December 15, 2024 and effective to all other companies as of December 15, 2025. The Company will adopt these new standards when they become effective, which is not expected to have a material impact on its financial position and results of operations. |
