UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the Quarterly Period Ended | |
| or | |
| Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the Transition Period from to | |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, or “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐
NO
The registrant had shares of its common stock, $ par value per share, outstanding as of May 15, 2025.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that known and unknown risks, uncertainties and other factors, including those over which we may have no control and others listed in this Report and our other public filings, may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | our ability to continue to refine and execute our evolving business plan, including establishing and growing our new marketing and distribution model where we acquire or create contractual alliances with operators of sleep testing and treatment centers as a means of driving sales of our appliances, including our pending acquisition of The Sleep Center of Nevada, the closing of which is subject to a number of contingencies; | |
| ● | the acceptance and adoption by dentists, sleep specialists, medical doctors and other healthcare professionals of our proprietary oral appliances as a treatment for dentofacial abnormalities and/or mild to severe obstructive sleep apnea (“OSA”) and snoring in adults and moderate to severe OSA in children ages 6-17 as per our U.S. Food and Drug Administration (or FDA) clearances; | |
| ● | our expectations concerning the effectiveness and duration of treatment using our appliances and protocols (which we refer to as The Vivos Method) and the potential for side effects including, but not limited to, patient relapse after completion of treatment; | |
| ● | the potential financial benefits to dentists, sleep testing centers, sleep specialists, and other healthcare professionals from treating patients with The Vivos Method; | |
| ● | our potential profit margin from sales of our appliances and other treatments and services and leases of SleepImage® home sleep testing rings; | |
| ● | our ability to formulate, implement and modify as necessary effective sales, marketing and strategic initiatives to drive revenue growth (including, for example, our recently implemented strategic alliance and/or acquisition model, SleepImage® home sleep apnea test and our arrangements with sleep clinics and durable medical equipment companies (“DMEs”)); |
| ● | the viability of our current intellectual property and our ability to create and protect new intellectual property in the future; | |
| ● | acceptance by the professional medical and dental community, as well as the marketplace of the products and services that we market; |
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| ● | government regulations and our ability to obtain applicable regulatory approvals and comply with government regulations including under healthcare laws and the rules and regulations of the FDA and non-U.S. equivalent regulatory bodies; | |
| ● | our ability to retain key employees; | |
| ● | the emergence of alternative technologies, devices, drugs or other therapies which directly or indirectly impact the marketability of our products and services; | |
| ● | adverse changes in general market conditions for medical devices and the products and services we offer; | |
| ● | our ability to generate cash flow and profitability and continue as a going concern; | |
| ● | our future financing plans; and | |
| ● | our ability to adapt to changes in market conditions (including volatile and difficult to access capital markets) which could impair our operations and financial performance. |
These forward-looking statements involve numerous risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” “Business” and other sections in this Report as well as the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and our other public filings. You should thoroughly read this Report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this Report relate only to events or information as of the date on which the statements are made in this Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this Report and the documents that we refer to in this Report and have filed as exhibits to this Report and our other public filings, completely and with the understanding that our actual future results may be materially different from what we expect.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
VIVOS THERAPEUTICS INC.
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
| March 31, 2025 | December 31, 2024 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Goodwill | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Intangible assets, net | ||||||||
| Deposits and other | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current portion of contract liabilities | ||||||||
| Current portion of operating lease liability | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Contract liabilities, net of current portion | ||||||||
| Employee retention credit liability | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred Stock, $ par value per share. Authorized shares; shares issued and outstanding | ||||||||
| Common Stock, $ par value per share. Authorized shares; issued and outstanding shares as of March 31, 2025 and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Unaudited Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | ||||||||
| Product revenue | $ | $ | ||||||
| Service revenue | ||||||||
| Total revenue | ||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Non-operating income (expense) | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share (basic and diluted) | $ | ) | $ | ) | ||||
| Weighted average number of shares of Common Stock outstanding (basic and diluted) | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(In Thousands, Except Common Stock Amounts)
| Three Months Ended March 31, 2025 and 2024 | ||||||||||||||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of commons stock upon exercise of warrants, net of issuance costs | ||||||||||||||||||||
| Issuance of warrants to consultants for services | - | |||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Balances, December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2025 | ||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In Thousands)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Depreciation and amortization | ||||||||
| Fair value of warrants issued for services | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Operating lease liabilities, net | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| Deposits | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Other liabilities | ||||||||
| Contract liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisitions of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of pre-funded warrants | ||||||||
| Payments for issuance costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of year | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2025 and 2024
NOTE 1 - ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
BioModeling Solutions, Inc. (“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently incorporated in 2013. On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos, Inc. (“First Vivos”), and Vivos Therapeutics, Inc. (“Vivos”), a Wyoming corporation established on July 7, 2016 to facilitate the SEA transaction. Vivos was formerly named Corrective BioTechnologies, Inc. until its name changed on September 6, 2016 to Vivos Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc. and had no substantial pre-combination business activities. First Vivos was incorporated in Texas on November 10, 2015. Pursuant to the SEA, all of the outstanding shares of common stock and warrants of BioModeling and all of the shares of common stock of First Vivos were exchanged for newly issued shares of common stock and warrants of Vivos, the legal acquirer.
The transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes. Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s historical financial statements and recorded at their historical carrying amounts.
On August 12, 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law. Accordingly, as used herein, the term “the Company,” “we,” “us.” “our” and similar terminology refer to Vivos Therapeutics, Inc., a Delaware corporation and its consolidated subsidiaries. As used herein, the term “Common Stock” refers to the common stock, $ par value per share, of Vivos Therapeutics, Inc., a Delaware corporation.
Description of Business
We are a medical technology and services company that features a comprehensive suite of proprietary oral appliances and therapeutic treatments. Our products non-surgically treat certain maxillofacial and developmental abnormalities of the mouth and jaws that are closely associated with breathing and sleep disorders such as, mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. We offer three separate clinical pathways or programs to providers—Guided Growth and Development, Lifeline, and Complete Airway Repositioning and Expansion (“C.A.R.E.”). Each program features certain oral appliances coupled with specific therapeutic treatments, and each clinical pathway is intended to address the specific needs of a diverse patient population with different patient journeys. For example, the Guided Growth and Development program features the Vivos Guide and PEx appliances along with CO2 laser treatments and other adjunctive therapies designed for treating palatal growth and expansion in pediatric patients as they grow. The mid-range priced Lifeline program features a selection of mandibular advancement devices (“MADs”) such as the Versa and Vida Sleep which are FDA 510(k) cleared for mild-to-moderate OSA in adults, along with the patented Vida appliance, which is FDA 510(k) cleared as unspecified classification for the alleviation of Temporomandibular Joint Dysfunction (“TMD”) symptoms, bruxism, migraine headaches, and nasal dilation.
Our flagship C.A.R.E. program,
which is part of The Vivos Method, features our patented DNA, mRNA and mmRNA appliances, which are also FDA 510(k) cleared for mild-to-severe
OSA and snoring in adults. The Vivos Method may also include adjunctive myofunctional, chiropractic/physical therapy, and laser treatments
that, when properly used with the C.A.R.E. appliances, constitute a powerful non-invasive and cost-effective means of reducing or eliminating
OSA symptoms. In a small subset of a study, the data has actually shown that The Vivos Method can reverse OSA symptoms in a large portion
(up to
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We offer a suite of diagnostic
and support products and services to dental and medical providers and distributors who service patients with OSA or related conditions.
Such products and services include (i) VivoScore home sleep screenings and tests (powered by SleepImage® technology), (ii)
AireO2 (an electronic health record program designed specifically for use by dentists treating sleep patients), (iii) Treatment Navigator
(a concierge service to assist a provider in educating and supporting the doctors as they navigate insurance coverage, diagnostic indications
and treatment options), (iv) Billing Intelligence Services (which optimizes medical and dental reimbursement), (v) advanced training and
continuing education courses at our Vivos Institute in Denver, Colorado, (vi) MyoCorrect, a service through which Vivos-trained providers
can provide orofacial myofunctional therapy (“OMT”) to patients via a telemedicine platform, and (vii) our Medical Integration
Division (“MID”), which historically has managed independent medical practices under management and development agreements
which paid us from six (
Our business model has historically been to teach, train, and support dentists, medical doctors, and distributors in the use of our products and services. Dentists who use our products and services typically enroll in a variety of live or online training and educational programs offered through our Vivos Institute; a 18,000 sq. ft. facility located near the Denver International Airport. Dentists are able to select the specific program or clinical pathway that they want to focus on, such as Guided Growth and Development or Lifeline or both. They may also enroll in the VIP program for the complete set training, educational, and support services available in all three clinical pathway programs. Dentists enrolled in the VIP Program are referred to as “VIPs.” We charge up front enrollment fees to educate and train new providers. We also charge for the ancillary support services listed above and view each product and service as a revenue/profit center.
Over the course of 2024 and first quarter of 2025, we worked to pivot our business strategy and began to steadily decrease our prior dependence on dentists to sell our products and our dependence on VIP enrollment revenue. This new business strategy is focused on contractual alliances with and outright acquisitions of sleep specialty providers, sleep centers and others and is based on a profit-sharing model between us and the provider which aligns our revenue generation more directly to sales of our novel appliances.
Basis of Presentation and Consolidation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows. The condensed consolidated balance sheet at December 31, 2024 has been derived from audited financial statements at that date. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”).
The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited condensed consolidated financial statements are read in conjunction with the December 31, 2024 audited consolidated financial statements contained in the Company’s 2024 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 31, 2025.
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Emerging Growth Company Status
The Company is an “emerging growth company” (an “EGC”), as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGC but any such election to opt out is irrevocable. We currently expect to retain our status as an EGC through December 31, 2025, but this status could end sooner under certain circumstances.
Revenue Recognition
We generate revenue from the sale of products and services. A significant majority of our revenues are generated from enrolling dentists as either (i) Guided Growth and Development VIPs; (ii) Lifeline VIPs; (iii) combined Guided Growth and Development and Lifeline VIPs; or Premier Vivos Integrated Providers (“Premier VIPs”). Prior to the second quarter of 2023, the majority of VIP enrollments were Premier VIPs. The other, lower priced enrollments were piloted in fiscal quarters prior to second quarter of 2023, and on a limited basis. They were officially adopted during the second quarter of 2023. For each VIP program, revenue is recognized when control of the products or services is transferred to customers (i.e., VIP dentists ordering such products or services for their patients) in a manner that reflects the consideration we expect to be entitled to in exchange for those products and services.
Following the guidance of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and the applicable provisions of ASC Topic 842, Leases (“ASC 842”), we determine revenue recognition through the following five-step model, which entails:
| 1) | identification of the promised goods or services in the contract; | |
| 2) | determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; | |
| 3) | measurement of the transaction price, including the constraint on variable consideration; | |
| 4) | allocation of the transaction price to the performance obligations; and | |
| 5) | recognition of revenue when, or as the Company satisfies each performance obligation. |
Service Revenue
VIP Enrollment Revenue
As part of our historic business
model based on VIP enrollment revenue and related appliance sales, we review our VIP enrollment contracts from a revenue recognition perspective
using the 5-step method outlined above. While we have pivoted our marketing and distribution model over the last year, we still recognize
legacy VIP enrollment revenue. All program enrollees, irrespective of their level of enrollment, are commonly referred to as VIPs, unless
it is necessary to specify their particular program. Once it is determined that a contract exists (i.e., a VIP enrollment agreement is
executed and payment is received), service revenue related to VIP enrollments is recognized when the underlying services are performed.
The price of the Premier VIP enrollment that the VIP pays upon execution of the contract is significant, running at approximately $
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We enter into programs that may provide for multiple performance obligations. Commencing in 2018, we began enrolling medical and dental professionals in a one-year program (now known as the Premier VIP Program) which includes training in a highly personalized, deep immersion workshop format which provides the Premier VIP dentist access to a team who is dedicated to creating a successful integrated practice.
VIP enrollment fees include multiple performance obligations which vary on a contract-by-contract basis. The performance obligations included with enrollments may include sleep apnea rings, a six- or twelve-month BIS subscription, a marketing package, lab credits and the right to sell our appliances. We allocate the transaction price of a VIP enrollment contract to each performance obligation under such contract using the relative standalone selling price method. The relative standalone price method is based on the proportion of the standalone selling price of each performance obligation to the sum of the total standalone selling prices of all the performance obligations in the contract.
The right to sell is similar to a license of intellectual property because without it the VIP cannot purchase appliances from us. The right to sell performance obligation includes the Vivos training and enrollment materials which prepare dentists for treating their patients using The Vivos Method.
Because the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, we believe that it is appropriate to estimate the standalone selling price of this performance obligation using the residual method. As such, the observable prices of other performance obligations under a VIP contract will be deducted from the contract price, with the residual being allocated to the right to sell performance obligation.
We use significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell. We have determined that Premier VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail to participate in the Premier VIP program long term. Since the beginning of the Premier VIP program, just under one-third of new VIP members fall into this category, and the revenue allocated to the right to sell for those VIPs is accelerated at the time in which it becomes remote that a VIP will continue in the program. Revenue is recognized in accordance with each individual performance obligation unless it becomes remote the VIP will continue, at which time the remainder of revenue is accelerated and recognized in the following month. Those VIPs who complete training typically remain active for a much longer period, and revenue from the right to sell for those VIPs is recognized over the estimated period of which those VIPs will remain active. Because of various factors occurring year to year, we have estimated customer life for each year a contract is initiated. Estimated customer lives have been calculated separately for each year and were estimated between 14 months and 27 months for the years 2020 through 2024, depending upon the length of time customers stayed active each year. The right to sell is recognized on a sum of the years’ digits method over the estimated customer life for each year as this approximates the rate of decline in VIPs purchasing behaviors we have observed.
Given that our alliance-based marketing and distribution model is relatively new and has yet to generate significant revenues, we are in the process of developing and implementing our revenue recognition plan for revenues derived from such model.
Other Service Revenue
In addition to VIP enrollment service revenue, in 2020 we launched BIS, an additional service on a monthly subscription basis, which includes our AireO2 medical billing and practice management software. Revenue for these services is recognized monthly during the month the services are rendered.
We also offer our VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method. The program includes packages of treatment sessions that are sold to the VIPs and resold to their patients. Revenue for MyoCorrect services is recognized over the 12-month performance period as therapy sessions occur.
As we shift to our new strategic alliance and acquisition business model, we expect to derive a greater portion of our revenues from management and services fees earned from the management of certain subsidiaries that have been established to manage and operate sleep and airway medicine centers in select markets with established patient bases who are diagnosed with OSA or other sleep related breathing disorders. Although we will continue to sell our products and services to trained and qualified VIP dentists, we eventually expect the revenue from our new strategic alliance and acquisitions business model to constitute the vast majority of service revenue for us.
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Allocation of Revenue to Performance Obligations
We identify all goods and services that are delivered separately under a sales arrangement and allocate revenue to each performance obligation based on relative fair values. These fair values approximate the prices for the relevant performance obligation that would be charged if those services were sold separately and are recognized over the relevant service period of each performance obligation. After allocation to the performance obligations, any remainder is allocated to the right to sell under the residual method and is recognized over the estimated customer life. In general, revenues are separated between durable medical equipment (product revenue) and education and training services (service revenue).
Treatment of Discounts and Promotions
From time to time, we offer various discounts to its customers. These include the following:
| 1) | Discount for cash paid in full | |
| 2) | Conference or trade show incentives, such as subscription enrollment into the SleepImage® home sleep test program, or a free trial period for the SleepImage® lease program | |
| 3) | Negotiated concessions on annual enrollment fee | |
| 4) | Credits/rebates to be used towards future product orders such as lab rebates |
The amount of the discount is determined up front prior to the sale. Accordingly, measurement is determined before the sale occurs and revenue is recognized based on the terms agreed upon between us and the customer over the performance period. In rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price. In this situation, revenue is measured and the change in transaction price is allocated over the remaining performance obligation.
The amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale. Prior to the sale, the customer and us agree upon the amount of consideration that the customer will pay in exchange for the we provide. The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period. At the end of each reporting period, we update the transaction price to represent the circumstances present at the end of the reporting period and any changes in circumstances during the reporting period.
Product Revenue
In addition to revenue from services, we also generate revenue from sales of our line of oral devices and preformed guides (known as appliances or systems) to our customers, the VIP dentists or OSA patients directly in the case of our strategic alliance model. These include the DNA appliance®, mRNA appliance®, the mmRNA appliance, the Versa, the Vida, the Vida Sleep and others. We expanded our product offerings in the first quarter of 2023 via the acquisition of certain U.S. and international patents, product rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC, a New York limited liability company (“AFD”). Revenue from appliance sales is recognized when the control of a product is transferred to the VIP in an amount that reflects the consideration it expects to be entitled to in exchange for those products. The VIP in turn charges the VIP’s patient and or patient’s insurance a fee for the appliance and for his or her professional services in measuring, fitting, and installing the appliance and educating the patient as to its use. We contract with VIPs for the sale of the appliance, and we are not involved in the sale of the products and services from the VIP to the VIP’s patient. In the case of sales to sleep centers through our distribution alliances, revenue from appliance sales is recognized when the control of a product is transferred to the patient.
Our appliances are similar to a retainer that is worn in the mouth after braces are removed. Each appliance is unique and is fitted to the patient. We utilize our network of certified VIPs throughout the United States and in some non-U.S. jurisdictions (notably Canada and Australia) to sell the appliances to their customers as well as in two dental centers that we operate. We utilize third party contract manufacturers or labs to produce our patient-customized, patented appliances and our preformed guides. The manufacturer designated by us produces the appliance in strict adherence to our patents, design files, treatments, processes and procedures and under the direction and specific instructions from us, ships the appliance to the VIP who ordered the appliance from us. All of our contract manufacturers are required to follow our master design files in the production of appliances, or the lab will be in violation of the FDA’s rules and regulations. We have performed an analysis and concluded we are the principal in the transaction since we have control of the product and we reporting revenue gross. We bill the VIP the contracted price for the appliance which is recorded as product revenue. Product revenue is recognized once the appliance ships to the VIP under our direction.
| 13 |
In support of the VIPs using our appliances for their patients, we utilize a team of trained technicians to measure, order and fit each appliance. Revenue is recognized differently for Company owned centers and distribution alliances with third party sleep centers than it does for revenue from VIPs. Upon scheduling the patient (which is our customer in this case), the center takes a deposit and reviews the patient’s insurance coverage. We recognize revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted and provided to the patient.
We offer certain dentists (known as Clinical Advisors) discounts to standard VIP pricing. This is done to help encourage Clinical Advisors, who help the VIPs with technical aspects of our products, to purchase our products for their own practices. In addition, from time to time, we offer credits to incentivize VIPs to adopt the our products and increase case volume within their practices. These incentives are recorded as a liability at issuance and are deducted from the related product sale at the time the credit is used.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. We base our estimates and assumptions on existing facts, historical experience, and various other factors that we believe are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Our significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, determining customer life and breakage related to recognizing revenue for VIP contracts, impairment of goodwill and long-lived assets; valuation assumptions for assets acquired in asset acquisitions; valuation assumptions for stock options, warrants, warrant liabilities and equity instruments issued for goods or services; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. We believe we have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between our estimates and the actual results, our future consolidated results of operations will be affected.
Accounts Receivable, Net
Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Accounts receivable are stated at the net amount expected to be collected, using an expected credit loss methodology to determine the allowance for expected credit losses. We evaluate the collectability of its accounts receivable and determine the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. When we are aware of a customer’s inability to meet its financial obligation, we may individually evaluate the related receivable to determine the allowance for expected credit losses. We use specific criteria to determine uncollectible receivables to be charged off, including bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.
Loss and Gain Contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably estimated. If some amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. If we determine that a loss is reasonably possible and the range of the loss is estimable, then we disclose the range of the possible loss. If we cannot estimate the range of loss, we will disclose the reason why it cannot estimate the range of loss. We regularly evaluate current information available to us to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Legal fees related to contingencies are charged to general and administrative expense as incurred. Contingencies that may result in gains are not recognized until realization is assured, which typically requires collection in cash.
We measure the cost of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the award as of the grant date. We compute the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model. We estimate the expected term using the simplified method which is the average of the vesting term and the contractual term of the respective options. We determine the expected price volatility based on the historical volatilities of shares of our peer group as we do not have sufficient trading history for our Common Stock. Industry peers consist of several public companies in the bio-tech industry similar to us in size, stage of life cycle and financial leverage. We intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. We recognize the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period. For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award were, in substance, a single award. We recognize the impact of forfeitures and cancellations in the period that the forfeiture or cancellation occurs, rather than estimating the number of awards that are not expected to vest in accounting for stock-based compensation.
| 14 |
Leases
Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued expenses, and operating lease liability - current and non-current portion in our balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our balance sheets.
Income Taxes
We account for income taxes in
accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which deferred income taxes are recognized
based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given
the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from
year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future
taxable income, and available tax planning strategies. If tax regulations, operating results, or the ability to implement tax-planning
strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. A valuation allowance is recorded
when it is more likely than not that a deferred tax asset will not be realized. The recorded valuation allowance is based on significant
estimates and judgments and if the facts and circumstances change, the valuation allowance could materially change. In accounting for
uncertainty in income taxes, we recognize the financial statement benefit of a tax position only after determining that the relevant tax
authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold,
the amount recognized in the financial statements is the largest benefit that has a
Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent the same are dilutive.
Warrant Accounting
We account for our warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument, in accordance with ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity. Warrants classified as equity are recorded at fair value as of the date of issuance on our consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities are recorded on our consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. Management estimates the fair value of these liabilities using the Black-Scholes model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions, expected volatility, expected life, yield, and risk-free interest rate.
| 15 |
Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company’s chief operating decision maker (“CODM”), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of March 31, 2025, our CODM is the Company’s Chief Executive Officer, and we concluded that we have one reportable segment. Refer to Note 14, “Segment Information”, for additional disclosures regarding segment information.
Accounting Pronouncements
Presented below is a discussion of new accounting standards including deadlines for adoption assuming that we retain our designation as an EGC.
Recent Accounting Pronouncements Yet to be Adopted
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). The standard’s purpose is “to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development).” Public companies will be required to disclose in the notes to financial statements specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to:
| 1. | Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. | |
| 2. | Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements. | |
| 3. | Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. | |
| 4. | Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. |
The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.
We have reviewed and considered all other recent accounting pronouncements that have not yet been adopted and believe there are none that could potentially have a material impact on our business practices, financial condition, results of operations, or disclosures.
NOTE 2 - LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN
The financial statements have
been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern.
We have incurred losses since inception, including $
Net cash used in operating activities
amounted to approximately $
| 16 |
As of March 31, 2025, we had approximately
$
We have implemented cost savings measures that have reduced cash used in operations. However, as our product offerings and strategies continue to be refined, our sales did not grow during either of our fiscal years ended 2023 or 2024, nor the first quarter of 2025 as anticipated. As such, we have raised equity capital in the fiscal year ended December 31, 2023 and 2024. We will be required to obtain additional financing to satisfy our cash needs (including with respect to our pending acquisition of The Sleep Center of Nevada, as discussed in Note 15) and increase our stockholders’ equity for Nasdaq compliance purposes as we seek to increase revenue to achieve positive cash flow operations.
Until we have attained positive cash flow, our management is reviewing all options to obtain additional financing to fund our operations. This financing is expected to come primarily from the issuance of debt or equity securities in order to sustain operations until we can close our Sleep Center of Nevada acquisition and ultimately achieve positive cash flows, if ever. We originally expected the Strategic Alliance Agreement (“SAA”) with Rebis entered into in June 2024 to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, due to ongoing delays at Rebis that are beyond our control, we are currently re-evaluating and lowering our revenue expectations under the SAA and are seeking to make other acquisitions or enter into other strategic alliances (such as our pending acquisition of The Sleep Center of Nevada). There can be no assurances that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or the SAA agreement or similar alliances or acquisitions do not result in the patient volume, appliance sales and financial results within the timeframes we expect, we may be required to delay, significantly modify or terminate some or all of our operations, all of which could have a material adverse effect on us and our stockholders.
We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
NOTE 3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES
Net Revenue
For the three months ended March 31, 2025 and 2024, the components of revenue from contracts with customers and the related timing of revenue recognition is set forth in the table below (in thousands):
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Product revenue | ||||||||
| Appliances | ||||||||
| Guides | ||||||||
| Total product revenue | (1) | (1) | ||||||
| Service revenue | ||||||||
| VIP | (2) | (2) | ||||||
| Billing intelligence services | ||||||||
| Sleep testing services | ||||||||
| Myofunctional therapy services | ||||||||
| Sponsorship/seminar/other | ||||||||
| Total service revenue | ||||||||
| Total revenue | $ | $ | ||||||
| (1) | |
| (2) |
| 17 |
Changes in Contract Liabilities
The key components of changes in contract liabilities for the three months ended March 31, 2025 and 2024 are as follows (in thousands):
| 2025 | 2024 | |||||||
| Beginning balance, January 1 | $ | $ | ||||||
| New contracts, net of cancellations | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Ending balance, March 31 | $ | $ | ||||||
The current
portion of deferred revenue is approximately $
Changes in Accounts Receivable
Our customers
are billed based on fees agreed upon in each customer contract. Receivables from customers were $
NOTE 4 - PROPERTY AND EQUIPMENT, NET
As of March 31, 2025 and December 31, 2024, property and equipment consist of the following (in thousands):
March 31, | December 31, 2024 | |||||||
| Furniture and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Construction in progress | ||||||||
| Molds and other | ||||||||
| Gross property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net Property and equipment | $ | $ | ||||||
Leasehold improvements relate
to the Vivos Institute (a
NOTE 5 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill of $
| Acquisitions | March 31, | December 31, 2024 | ||||||
| BioModeling | $ | $ | ||||||
| Empowered Dental | ||||||||
| Lyon Dental | ||||||||
| Total goodwill | $ | $ | ||||||
| 18 |
Intangible Assets
As of March 31, 2025 and December 31, 2024, identifiable intangible assets were as follows (in thousands):
March 31, | December 31, 2024 | |||||||
| Patents and developed technology | $ | $ | ||||||
| Trade name | ||||||||
| Other | ||||||||
| Total intangible assets | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Net intangible assets | $ | $ | ||||||
Amortization expense of identifiable
intangible assets was less than $
| Three Months Ending March 31, | ||||
| 2025 (remaining nine months) | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 6 – OTHER FINANCIAL INFORMATION
Accrued Expenses
As of March 31, 2025 and December 31, 2024, accrued expenses consist of the following (in thousands):
March 31, | December 31, 2024 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued legal and other | ||||||||
| Accrued sales tax | ||||||||
| Total accrued liabilities | $ | $ | ||||||
NOTE 7 – PREFERRED STOCK
As of March 31, 2025, our Board of Directors continues to have the authority to designate up to shares of Preferred Stock in various series that provide for liquidation preferences, and voting, dividend, conversion, and redemption rights as determined at the discretion of the Board of Directors.
NOTE 8 – COMMON STOCK
We are authorized to issue shares of Common Stock. Holders of Common Stock are entitled to one vote for each share held. Our Board of Directors may declare dividends payable to the holders of Common Stock.
| 19 |
On February 14, 2024, we
entered into a warrant inducement letter agreement (the “Inducement Agreement”) with the same institutional investor in the
November 2023 Private Placement pursuant to which the investor agreed to exercise for cash the entirety of the Series B Warrant at an
exercise price of $
On June 10, 2024 we, entered
into a securities purchase agreement (the “SPA”) with V-CO Investors LLC, a Wyoming limited liability company (“V-CO”).
V-CO is an affiliate of New Seneca Partners Inc., a Michigan corporation (“Seneca”), an independent private equity firm. Pursuant
to the SPA, we sold to V-CO in a private placement offering (the “Private Placement”): (i) shares (the “Shares”)
of our Common Stock, (ii) a pre-funded warrant to purchase
V-CO paid a purchase price
of $ for each Share and Pre-Funded Warrant Share and associated Common Stock Purchase Warrant, with such price being established
for purposes of compliance with the listing rules of the Nasdaq Stock Market LLC. The Private Placement closed on September 10, 2024.
We received gross proceeds of $
The SPA provides that for a period of three (3) years from the closing of the offering, Seneca shall be entitled to (i) receive notice of any regular or special meeting of our board of directors (the “Board”) at the time such notice is provided to the members of the Board, (ii) receive copies of any materials delivered to our directors in connection with such meetings and (iii) allow one Seneca representative (who shall be an officer or employee of Seneca) to attend and participate (but not vote) in all such meetings of the Board. The SPA also includes standard representations, warranties, indemnifications, and covenants of the Company and V-CO.
The terms of the SPA require us to file a registration statement on Form S-3 or other appropriate form (the “Resale Registration Statement”) registering the Shares, the PFW Shares and the Warrant Shares (collectively, the “Registerable Securities”) for resale. Such Resale Registration Statement was filed with the SEC on July 30, 2024, and was declared effective by the SEC on August 7, 2024. Pursuant to the SPA, we must also use its commercially reasonable efforts to keep the Resale Registration Statement continuously effective (including by filing a post-effective amendment to the Resale Registration Statement or a new registration statement if the Resale Registration Statement expires) for a period of three (3) years after the date of effectiveness of the Resale Registration Statement or for such shorter period as such securities no longer constitute Registrable Securities, subject to certain limitations specified in the SPA.
On September 18, 2024, we
entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors in connection
with a registered direct offering (the “Offering”), priced at-the-market under Nasdaq Stock Market rules, to purchase
H.C. Wainwright & Co.,
LLC, pursuant to an engagement agreement with us, dated May 2, 2024 and amended on August 2, 2024 (as amended, the “Engagement Agreement”),
acted as the exclusive placement agent (the “Placement Agent”) for the Offering. Pursuant to the Engagement Agreement, we
have paid the Placement Agent
| 20 |
The gross proceeds to us from
the Offering were approximately $
The Shares were issued pursuant to an effective shelf registration statement on Form S-3 that was filed with the SEC (File No. 333-262554) on February 7, 2022 and declared effective on February 14, 2022. A prospectus supplement relating to the Offering has been filed with the SEC.
The Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Purchase Agreement, we agreed to certain restrictions on the issuance and sale of our shares of Common Stock and securities convertible into shares of Common Stock for a period of 30 days following the closing of the Offering. We also agreed not to effect or agree to effect any Variable Rate Transaction (as defined in the Purchase Agreement) until one year following the closing of the Offering, subject to certain exceptions.
On December 22, 2024, we entered
into a securities purchase agreement (the “December 2024 SPA”) with certain institutional investors (who are the selling stockholders
named herein) in connection with a registered direct offering, priced at-the-market under Nasdaq Stock Market rules, to purchase
We agreed to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), with the SEC, covering the resale of the December 2024 Warrants Shares within 30 calendar days following the date of the December 2024 SPA and to use commercially reasonable efforts to cause the registration statement to be declared effective by the SEC within 90 days following the closing of the December 2024 Offering.
Pursuant to the HCW Engagement
Agreement dated May 2, 2024, as amended on August 2, 2024 and December 22, 2024 with us, HCW acted as the Placement Agent for the December
2024 Offering. Pursuant to the HCW Engagement Agreement, we have
We have also issued to the
Placement Agent or its designees (who are among the selling stockholders named herein) warrants (the “December 2024 PA Warrants”)
to purchase up to
The gross proceeds from the
December 2024 Offering were approximately $
| 21 |
NOTE 9 – STOCK OPTIONS AND WARRANTS
Stock Options
In 2017, our shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2017 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. Our shareholders have approved a total reserve of shares of Common Stock for issuance under the 2017 Plan.
On September 22, 2023, our stockholders approved an amendment and restatement of the 2019 Plan to increase the number shares or our Common Stock available for issuance thereunder by shares of Common Stock such that, after amendment and restatement of the 2019 Plan, shares of Common Stock are available for issuance under the 2019 Plan. As of March 31, 2025, awards (in the form of options) for an aggregate of shares of Common Stock have been issued under our 2019 Plan. A total of shares remaining for issuance were retired with the approval and adoption of the 2024 Omnibus Plan (as further described below).
On November 26, 2024, our shareholders approved and adopted the Vivos Therapeutics, Inc. 2024 Omnibus Equity Incentive Plan (or the “2024 Omnibus Plan”). The 2024 Omnibus Plan automatically replaced and superseded the 2019 Plan. Under the 2024 Omnibus Plan, a total of shares are available for future use. awards are to be granted under the 2019 Plan or any other prior plan on or after the effective date of the 2024 Omnibus Plan and after the 2024 Omnibus Plan became effective any unused shares left in the 2019 Plan are to be retired. We anticipate that the shares will allow the 2024 Omnibus Plan to operate for several years, although this could change based on other factors, including but not limited to merger and acquisition activity. The purpose of the 2024 Omnibus Plan is to promote the success and enhance the value of the Company by linking the personal interest of the participants to those of our stockholders by providing the participants with an incentive for outstanding performance. Any non-employee director, officer, employee or consultant of the Company or its subsidiaries or affiliates will be eligible to participate in the 2024 Omnibus Plan. As of March 31, 2025, we had five non-employee directors, two officers, 111 employees and three consultants, although we expect that, based on our current usage, awards will be generally limited to approximately five non-employee directors, two officers ten employees, and three consultants. The 2024 Omnibus Plan provides for the grant of options to purchase shares of our Common Stock, including stock options intended to qualify as incentive stock options (“ISOs”) under Section 422 of the Code and nonqualified stock options that are not intended to so qualify (“NQSOs”), stock appreciation rights (“SARs”), restricted stock awards, and other equity-based or equity-related awards including restricted stock units and performance units (each, an “Award”). As of March 31, 2025, awards (in the form of options) for an aggregate of shares of Common Stock have been issued under our 2024 Omnibus Plan.
The following table summarizes all stock options as of March 31, 2025 (shares in thousands):
| 2025 | ||||||||||||
| Shares | Price (1) | Term (2) | ||||||||||
| Outstanding, at December 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Forfeited | ||||||||||||
| Exercised | ||||||||||||
| Outstanding, at March 31 | (3) | $ | ||||||||||
| Exercisable, at March 31 | (4) | |||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
There were no stock options granted for the three months ended March 31, 2025. For each of the three months ended March 31, 2025, and 2024 the Company recognized approximately $ million of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of March 31, 2025 was approximately $ million, which will be recognized over the weighted average remaining term of years.
| 22 |
Warrants
The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the three months ended March 31, 2025 (shares in thousands):
| 2025 | ||||||||||||
| Shares | Price (1) | Term (2) | ||||||||||
| Outstanding, at December 31, 2024 | $ | |||||||||||
| Grants of warrants: | ||||||||||||
| Consultants for services | ||||||||||||
| Warrant inducement | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Outstanding, at March 31 | (3) | $ | ||||||||||
| Exercisable, at March 31 | (4) | $ | ||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
warrants were granted for the three months ended March 31, 2025.
NOTE 10 - INCOME TAXES
Income tax expense during interim
periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently
occurring items which are recorded in the interim period. The provision for income taxes for the three months ended March 31, 2025 and
2024 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth. On the basis of this evaluation, a full valuation allowance has been recorded at March 31, 2025 and December 31, 2024 to record the deferred tax asset that is not likely to be realized.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgement including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
There were no new material commitments or contingencies entered into during the three months ended March 31, 2025 and 2024. However, subsequent to March 31, 2025, we entered into an asset purchase agreement in connection with our purchase of The Sleep Center of Nevada, which transaction is subject to significant commitments and contingencies. See Note 15 for further information.
Basic and diluted net loss per share of Common Stock (“EPS”) is computed by dividing (i) net loss (the “Numerator”), by (ii) the weighted average number of shares of Common Stock outstanding during the period (the “Denominator”).
The calculation of diluted EPS is also required to include the dilutive effect, if any, of stock options, unvested restricted stock awards, convertible debt and Preferred Stock, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. As of March 31, 2025 and 2024, all Common Stock equivalents were antidilutive.
| 23 |
| For The Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Calculation of Numerator: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Loss applicable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Calculation of Denominator: | ||||||||
| Weighted average number of shares of Common Stock outstanding | ||||||||
| Net loss per share of Common Stock (basic and diluted) | $ | ) | $ | ) | ||||
March 31, 2025 | March 31, 2024 | |||||||
| Common stock warrants | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
NOTE 13 - FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, we consider the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the measurement of fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date
Level 2 - Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability
Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date
As of March 31, 2025 and 2024, the fair value of our cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities approximated their carrying values due to the short-term nature of these instruments.
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Recurring Fair Value Measurements
For the three months ended March 31, 2025 and 2024, we did not have any assets and liabilities classified as Level 1, Level 2 or Level 3.
Our policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the three months ended March 31, 2025 and 2024 we had no transfers of assets or liabilities between levels of the fair value hierarchy.
Significant Concentrations
Credit Risk
We maintain our cash and cash
equivalents primarily in depository and money market accounts within three large financial institutions in the United States. Cash balances
deposited at these major financial banking institutions exceed the insured limits. We have not experienced any losses on our bank deposits
and believe these deposits do not expose us to any significant credit risk. If we were unable to access cash and cash equivalents as needed,
the financial position and ability to operate the business could be adversely affected. As of March 31, 2025, we had cash and cash equivalents
with three financial institutions in the United States with an aggregate balance of $
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising our customer base and their dispersion across different geographies and industries. We perform ongoing credit evaluations on certain customers and generally do not require collateral on accounts receivable. No single customer represented more than 10% of our sales or accounts receivable as of March 31, 2025. We maintain reserves for potential bad debts.
Supplier Concentration
As previously disclosed, we rely on third-party suppliers and contract manufacturers for the raw materials and components used in our appliances and to manufacture and assemble our products. As of March 31, 2025, we had five suppliers that accounted for approximately % of our total purchases during the year. We expect to maintain existing relationships with these vendors.
NOTE 14 – SEGMENT INFORMATION
We operate our business as
Our CODM uses consolidated revenue, gross profit, gross margin and operating loss as the measure of profit or loss. Our CODM assesses performance for the segment and allocates resources and monitors budget versus actual results using consolidated revenue, gross profit, gross margin and operating loss, as disclosed in the statement of operations. The monitoring of budget versus actual results are used in establishing management’s compensation. The measure of segment assets is reported on the balance sheet as total consolidated assets. Revenue and long-lived tangible assets are all located in the U.S.
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NOTE 15 – SUBSEQUENT EVENTS
On April 15, 2025, we entered
into an Asset Purchase Agreement (the “Purchase Agreement”) with R.D. Prabhu-Lata K. Shete MDs, LTD., a Nevada professional
corporation d/b/a The Sleep Center of Nevada (“SCN”), and its shareholders Prabhu Rachakonda, M.D. and Lata K. Shete, M.D.
Pursuant to the Purchase Agreement, we will purchase, among other things, the operating assets related to SCN’s sleep testing, diagnostics,
and treatment centers in consideration of (i) a cash payment equal to $
We expect to finance the cash portion of the acquisition consideration given our current cash on hand. We intend to secure the funding for the upfront cash payment which may include, but are not limited to, a senior debt facility and equity financing. No definitive agreement has been reached with respect to any debt facility nor equity financing as of the date of this Report.
The closing of the transaction contemplated by the Purchase Agreement (the “Closing”) is expected to occur later in the current quarter or in the third quarter, and the Closing is not subject to approval by our stockholders. The Closing is subject to a number of conditions, including, among others, (i) the accuracy of representations and warranties of the parties; (ii) performance of interim covenants between signing and closing; (iii) the receipt by the Seller of certain third-party consents; (iv) an absence of material adverse change with respect to SCN; (v) us having completed the due diligence investigation, the results of which are satisfactory to us in our sole discretion; (vi) us having received a quality of earnings report and audited financials of SCN; (vii) an absence of litigation or similar proceedings seeking to restrain or prohibit the proposed transaction; and (viii) execution and delivery of all required closing deliverables. The Closing is expected to occur within approximately five business days following the satisfaction or waiver of the Closing conditions set forth in the Purchase Agreement. The Purchase Agreement also contains customary representations, warranties and covenants for a transaction of this type. The Purchase Agreement further contains customary indemnification provisions pursuant to which the parties agree to indemnify each other for certain matters, including, among other things, breaches of certain representations, warranties and covenants in connection with the transaction.
In connection with the transaction
contemplated in the Purchase Agreement, at the Closing, the parties directly, or through their subsidiaries, will also enter into a transition
services agreement, practice administration and management and succession agreements designed to maintain compliance with corporate practice
of medicine doctrines, as well as certain other ancillary agreements, including an employment agreement between us and Dr. Prabhu Rachakonda
which will afford Dr. Rachakonda an annual salary of $
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a revenue stage medical technology company focused on the development and commercialization of innovative treatment alternatives for patients with dentofacial abnormalities and/or patients diagnosed with mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. We believe our technologies and conventions represent a significant improvement in the treatment of mild to severe OSA versus other treatments such as continuous positive airway pressure (“CPAP”) or palliative oral appliance therapies. Our alternative treatments are part of The Vivos Method.
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The Vivos Method is an advanced therapeutic protocol, which often combines the use of customized oral appliance specifications and proprietary clinical treatments developed by our company and prescribed by specially trained dentists in cooperation with their medical colleagues. Published studies have shown that using our customized appliances and clinical treatments led to significantly lower Apnea Hypopnea Index scores and have improved other conditions associated with OSA. Nearly 59,000 patients have been treated to date worldwide with our entire current suite of products by more than 2,000 trained dentists.
See Note 1 to the accompanying financial statements for additional background information on our Company and current product and service offerings.
Material Items, Trends and Risks Impacting Our Business
We believe that the following items and trends may be useful in better understanding our results of operations.
Enrollments (Service Revenue) and Pivot in Marketing and Distribution Model
Enrolling dental practices as VIPs has historically been the first step in our ability to generate new revenue. However, as a result of our strategic pivot away from growing our VIP model and toward the acquisition and operation of medical and dental sleep medicine centers, we have reduced our sales personnel in connection with our VIP business model and generally ceased recruitment of new VIP dentists. As a result, future revenue from VIP enrollments is expected to decline substantially, and although we will continue to recognize some VIP enrollment revenue going forward in accordance with ASC 606, such revenue will make up proportionately less of our total revenue over time. While we will continue to provide technical and product support to our existing VIP customer base, we have also redeployed and refocused training facilities, programs and personnel on training and supporting the dentists, staff members, nurse practitioners, physician assistants, and medical doctors who work in one of the Company’s Sleep and Airway Medicine Centers as part of our new strategic model.
We will continue to shift our efforts away from educating, training and supporting independent VIP dentists and to pivot substantially all our focus and resources towards our new strategic alliance and acquisition model. We will, however, continue to provide technical and product support to our existing VIP customer base.
On April 15, 2025, we signed a definitive agreement to acquire the assets of a sleep testing center business in Las Vegas, Nevada known as Sleep Center of Nevada (“SCN”). We have subsequently signed a non-binding term sheet with a lender who will provide $7,500,000 in net financing, before certain fees and other costs, and expect to close the acquisition in June or July 2025. If consummated, we believe the acquisition will bring our OSA treatment technology and other diagnostic and therapeutic services to numerous patients in that market. Moreover, we expect to realize greater revenue growth and potential for profitability as we integrate our products and services into SCN’s business. In addition to the SCN acquisition, we are seeking other potential transactions (either strategic alliances or outright acquisition) with similar sleep specialty centers.
Clinical Trial Work. Our efforts to engage in research to demonstrate the clinical efficacy of our products and obtain additional regulatory clearances for the use of our products is an important aspect of our overall strategy. In this regard, on May 29, 2023, we and Stanford University executed an agreement to commence a sponsored clinical research study to evaluate the efficacy of our FDA-cleared DNA appliance compared to the standard of care, CPAP for treatment of sleep apnea. Our DNA device is currently indicated for the treatment of mild to severe sleep apnea and jaw repositioning in adults (and in the case of severe OSA, along with positive airway pressure and/or myofunctional therapy, as needed) and has an FDA clearance intended to reduce nighttime snoring and to treat moderate and severe obstructive sleep apnea in children, 6 to 17 years of age who are diagnosed with snoring and/or moderate or severe obstructive sleep apnea who need orthodontic treatment. Enrollment of 150 patients with moderate to severe sleep apnea (apnea-hypopnea index score of 15 or greater) will be randomly assigned to either treatment with our FDA-cleared DNA appliance or CPAP. The protocol has been finalized, and enrollment began in 2024. Late 2024, our clinical study conducted in collaboration with Stanford University and evaluating the DNA and CPAP for the treatment of OSA, was placed on hold by Stanford University. The decision to pause the study was made due to low recruitment into the study.
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Distribution Agreements. During 2023, we entered into distribution collaborations with third parties to expand access of our products to potential patients. We hope that these strategic initiatives will lead to revenue growth opportunities for us in 2024 and beyond, and our ability to capitalize on these initiatives is expected to be a material aspect of our sales and marketing program going forward.
For example, in October 2023, we announced an exclusive distribution agreement with NOUM DMCC, a Dubai-based company focused on diagnostic testing and treatment product distribution for healthcare providers and hospital networks treating obstructive sleep apnea patients throughout the Middle East-North Africa region. With regulatory approvals pending, there was no revenue from this collaboration in 2024 and thus far in 2025.
Trade Policy Risk. Certain of our products or components are manufactured outside the United States. Most products imported into the United States is subject to duty and restrictive quotas on the amount of products that can be imported from certain countries into the United States each year. Because of the duty rates and quotas, changes in U.S. trade policy as reflected in the imposition of tariffs, trade legislation, trade preference programs and trade agreements have the potential to materially impact our sourcing strategy and the competitiveness of our contract manufacturers. We manage this risk by continually monitoring U.S. trade policy, analyzing the impact of changes in such policy and adjusting its manufacturing and sourcing strategy accordingly.
Inflation. The U.S. has been experiencing a period of inflation which has increased (and may continue to increase) our and our suppliers’ costs as well as the end cost of our products to consumers. To date, we have been able to manage inflation risk without a material adverse impact on our business or results of operations. However, inflationary pressures (including increases in the price of raw material components of our appliances) made it necessary for us to adjust our standard pricing for our appliance products in 2022 and will be revisited in 2025. The full impact of such price adjustments on sales or demand for our products is not fully known at this time and may require us to adjust other aspects of our business as we seek to grow revenue and, ultimately, achieve profitability and positive cash flow from operations.
An additional inflation-related risk is the Federal Reserve’s response to inflation, which as of the date of this Report, has been to maintain elevated interest rates. Such actions have, in times past, created unintended consequences for housing starts, overall manufacturing, the capital markets, and the banking sector. If such disruptions become systemic, as occurred in the recession of 2008, then the impact on our revenue, earnings and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.
Supply Chain. From time to time, we may experience supply chain challenges due to forces beyond our control. For example, the Suez Canal blockage earlier in 2021 caused some delay in shipments of SleepImage® rings from China. Overall, however, as our appliances are made in the U.S., we have not experienced significant supply chain issues as a result of COVID-19 or otherwise, although this may change in future periods.
War in Ukraine and Middle East Hostilities. In addition, worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and the attacks by Hamas on Israel in October of 2023 and Israel’s responses have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery. If an economic recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.
Potential Nasdaq Delisting. As previously reported, we were previously subject to a Nasdaq Stock Market (“Nasdaq”) listing deficiencies related to Nasdaq’s $2,500,000 minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”).
On May 16, 2024, we received a written notice from Nasdaq indicating that, as of March 31, 2024, we failed to comply with the Equity Requirement. On June 25, 2024, we reported in a Current Report on Form 8-K that it believed it had stockholders’ equity of at least $2.5 million as of the date of the filing of such report as a result of our closing of a $7.5 million equity private placement on June 10, 2024.
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On June 27, 2024, we met with the Nasdaq Hearing Panel (the “Hearing Panel”) to discuss our past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of its securities on Nasdaq.
On July 5, 2024, we were notified that the Panel had granted our request for continued listing on Nasdaq, subject to our filing of the Form 10-Q for the quarter ended June 30, 2024, with the Securities and Exchange Commission by August 15, 2024, evidencing our compliance with the Equity Requirement. We made such filing in a timely manner.
We are working diligently to ensure our continued compliance with the Equity Requirement, including exploring a potential additional equity capital financing or financings to stay above the minimum threshold of the Equity Requirement. We anticipate that our new strategic marketing and distribution alliance model will also positively impact our revenue growth and stockholders’ equity in upcoming fiscal quarters. However, there is a risk that we will be unable to raise sufficient capital or generate sufficient revenue or operating results to maintain compliance with the Equity Requirement. If we fail to achieve ongoing compliance and its common stock is delisted by Nasdaq, such delisting would likely have a material adverse effect on our stock price, the ability of our stockholders to buy or sell their common stock, our ability to raise capital and on our reputation, all of which could make it significantly more difficult to operate.
Key Components of Consolidated Statements of Operations
Net revenue. We recognize revenue when we satisfy our performance obligations over time as our customers receive the benefit of the promised goods and services, which generally occurs over a short period of time. Performance obligations with respect to appliance sales are typically satisfied by shipping or delivering products to our VIPs or to any sleep clinic, through our new marketing and distribution model, in the case of enrollment or service revenue, upon our satisfaction of performance obligations associated with VIP enrollments. Revenue consists of the gross sales price, net of estimated allowances, discounts, and personal rebates that are accounted for as a reduction from the gross sale price.
Cost of sales. Cost of goods sold primarily consists of direct costs attributable to the purchase from third party suppliers and related products. It also includes freight costs, fulfillment, distribution, and warehousing costs related to products sold.
Sales and marketing. Sales and marketing costs primarily consist of personnel costs for employees engaged in sales and marketing activities, commissions, advertising and marketing costs, website enhancements, and conferences for our sales and marketing staff.
General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of personnel costs for our administrative, human resources, finance and accounting employees, and executives. General and administrative expenses also include contract labor and consulting costs, travel-related expenses, legal, auditing and other professional fees, rent and facilities costs, repairs and maintenance, and general corporate expenses.
Depreciation and amortization expense. Depreciation and amortization expense is comprised of depreciation expense related to property and equipment, amortization expense related to leasehold improvements, and amortization expense related to identifiable intangible assets.
Other income. Other income relates to interest income and the excess warrant fair value and change in fair value of warrant liability.
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Results of Operations
Comparison of the three months ended March 31, 2025 and 2024
Our consolidated statements of operations for the three months ended March 31, 2025 and 2024 are presented below (dollars in thousands):
| Three Months Ended March 31, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| Revenue | ||||||||||||
| Product revenue | $ | 1,813 | $ | 1,674 | $ | 139 | ||||||
| Service revenue | 1,203 | 1,745 | (542 | ) | ||||||||
| Total revenue | 3,016 | 3,419 | (403 | ) | ||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 1,507 | 1,482 | 25 | |||||||||
| Gross profit | 1,509 | 1,937 | (428 | ) | ||||||||
| Gross profit % | 50 | % | 57 | % | ||||||||
| Operating expenses | ||||||||||||
| General and administrative | 4,892 | 4,921 | (29 | ) | ||||||||
| Sales and marketing | 358 | 655 | (297 | ) | ||||||||
| Depreciation and amortization | 177 | 146 | 31 | |||||||||
| Operating loss | (3,918 | ) | (3,785 | ) | (133 | ) | ||||||
| Non-operating income (expense) | ||||||||||||
| Other expense | (4 | ) | (1 | ) | (3 | ) | ||||||
| Other income | 58 | 23 | 35 | |||||||||
| Net loss | $ | (3,864 | ) | $ | (3,763 | ) | $ | (101 | ) | |||
Revenue
Revenue decreased approximately $0.4 million, or 12%, to approximately $3.0 million for the three months ended March 31, 2025 compared to $3.4 million for the three months ended March 31, 2024. Revenue during the first three months of 2025 was impacted by a decrease of approximately $0.5 million in service revenue, offset by an increase of $0.1 million in product revenue. The increase in product revenue is attributable to an increase of approximately $0.1 million in C.A.R.E. appliance and Guide sales to VIPs. Additionally, we had a decrease in service revenue of approximately $0.7 million in VIP enrollment, and a decrease of approximately $0.1 million from BIS and Myofunctional revenue. This was offset by an increase of approximately $0.2 million in sponsorship, conference and training related revenue.
During the three months ended March 31, 2025, we recognized VIP enrollment revenue of approximately $0.2 million, a decrease of approximately 75% in enrollment revenue, compared to approximately $0.9 million for the three months ended March 31, 2024. Service revenue overall decreased due to a sales strategy shift and focus toward sleep center affiliations, coupled with lower enrollments in early 2024, and no enrollment since October 2024. This was slightly offset by breakage in contracts, which accelerated revenue recognition on several contracts for VIPs who did not complete their training during the first 90 days of their enrollment. Approximately $0.1 million in revenue was attributable to breakage during the three months ended March 31, 2025, when compared to approximately $0.4 million during the three months ended March 31, 2024.
For the three months ended March 31, 2025, we sold 3,736 oral appliance arches for a total of approximately $1.8 million, an 8% increase in revenue from the three months ended March 31, 2024, when we sold 1,996 oral appliance arches for a total of approximately $1.7 million. The increase is directly attributable a higher volume in Guide sales, which are lower revenue generating products when compared to Vivos C.A.R.E. appliances.
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Cost of Sales and Gross Profit
Cost of sales remained relatively constant with an increase of less than $0.1 million or 2% at approximately $1.5 million for the three months ended March 31, 2025, compared to slightly under $1.5 million for the three months ended March 31, 2024. This was primarily related to $0.2 million in higher costs associated with appliances, driven by the higher product sales as explained above. This was offset by a decrease of approximately $0.1 million due to lower costs associated with medical reporting expense and membership support costs as a result of no VIP enrollments during the period.
For the three months ended March 31, 2025, gross profit decreased by approximately $0.4 million to $1.5 million. This decrease was attributable to the decrease in revenue of approximately $0.4 million. Gross margin decreased to 50% for the three months ended March 31, 2025, compared to 57% for the three months ended March 31, 2024 due to the decrease in service revenue.
General and Administrative Expenses
General and administrative expenses remained relatively constant with a decrease of less than $0.1 million or 1% to approximately $4.9 million for the three months ended March 31, 2025, as compared to slightly over $4.9 million for the three months ended March 31, 2024. The primary cause of this decrease was $0.1 million in travel, meals and entertainment, a decrease of approximately $0.1 million related to being a public company, and a decrease of less than $0.1 million related to change in the allowance for credit losses. This was offset by an increase of approximately $0.1 million in professional fees, including consulting and legal fees and approximately $0.1 million in infrastructure expenses such as communications, development and customization.
Sales and Marketing
Sales and marketing expenses decreased by $0.3 million to approximately $0.4 million for the three months ended March 31, 2025, compared to $0.7 million for the three months ended March 31, 2024. This decrease was primarily driven by a $0.3 million decrease in commissions related to lower service revenue.
Depreciation and Amortization
Depreciation and amortization expense was approximately $0.2 million for the three months ended March 31, 2025 and approximately $0.1 million for three months ended March 31, 2024, respectively. Depreciation and amortization had a slight increase during the period due to assets being placed into service.
Other Income
Other income of less than $0.1 million includes interest income from financial institutions.
Liquidity and Capital Resources
The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate our continuation as a going concern. We have incurred losses since inception, including $3.9 and $3.8 million for the three months ended March 31, 2025 and 2024, respectively, resulting in an accumulated deficit of approximately $108 million as of March 31, 2025.
Net cash used in operating activities amounted to approximately $3.8 and $2.5 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had total liabilities of approximately $6.9 million.
As of March 31, 2025, we had approximately $2.3 million in cash and cash equivalents, which will not be sufficient to fund operations and strategic objectives over the next twelve months from the date of the issuance of these financial statements. Without additional financing, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
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We have implemented cost savings measures that have reduced cash used in operations. However, as our product offerings and strategies continue to be refined, our sales did not grow during either of our fiscal years ended 2023 or 2024, nor the first quarter of 2025 as anticipated. As such, we have raised equity capital in the financial year ended December 31, 2023 and 2024. We intend to obtain additional financing to satisfy our cash needs (including the $6 million in cash required for our acquisition of SCN) and increase our stockholders’ equity for Nasdaq compliance purposes as our management attempts to increase revenue to achieve positive cash flow from our operations.
Until we have attained positive cash flow, our management is reviewing all options to obtain additional financing to fund our operations. This financing is expected to come primarily from the issuance of debt or equity securities in order to sustain operations until we can close our Sleep Center of Nevada acquisition and ultimately achieve positive cash flows, if ever. We originally expected the Strategic Alliance Agreement (“SAA”) with Rebis entered into in June 2024 to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, due to ongoing delays at Rebis that are beyond our control, we are currently re-evaluating and lowering our revenue expectations under the SAA and are seeking to make other acquisitions or enter into other strategic alliances (such as our pending acquisition of SCN). There can be no assurances that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or the SAA agreement or similar alliances or acquisitions do not result in the patient volume, appliance sales and financial results within the timeframes we expect, we may be required to delay, significantly modify or terminate some or all of our operations, all of which could have a material adverse effect on us and our stockholders.
We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Cash Flows
The following table presents a summary of our cash flow for the three months ended March 31, 2025 and 2024 (in thousands):
| 2025 | 2024 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (3,796 | ) | $ | (2,516 | ) | ||
| Investing activities | (122 | ) | (151 | ) | ||||
| Financing activities | - | 3,635 | ||||||
Net cash used in operating activities of approximately $3.8 million for the three months ended March 31, 2025 is an increase of approximately $1.3 million compared to net cash used in operating activities of approximately $2.5 million for the three months ended March 31, 2024. This increase is due primarily to a decrease of approximately $0.9 million in contract liability, a decrease of approximately $0.6 million in accrued expenses, a decrease of approximately $0.2 million in accounts payable, offset by the increase in other liabilities of approximately $0.4 million.
For the three months ended March 31, 2025, net cash used in investing activities consisted of capital expenditures for software of $0.1 million related to the development of software for internal use, which was placed in service in March 2025, as compared to net cash used in investing activities for the three months ended March 31, 2024 of $0.2 million from capital expenditures for internally developed software.
No cash was provided by financing activities for the three months ended March 31, 2025, as compared to net cash provided in financing activities of $3.6 million for the three months ended March 31, 2024, is attributable to proceeds of $3.9 million from the issuance of Common Stock, net of approximately $0.3 million of professional fees and other issuance costs, in our February 2024 warrant inducement.
Critical Accounting Policies Involving Management Estimates and Assumptions
Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the three months ended March 31, 2025.
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Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed in Note 1 to the accompanying condensed consolidated financial statements included in this Report, we believe that the impact of recently issued standards that are not yet effective could have a material impact on our financial position or results of operations upon adoption. For additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncements under Note 1 to the accompanying condensed consolidated financial statements included in this Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Below is a description of our outstanding pending litigation matters. Litigation is subject to inherent uncertainties and an adverse result in the below described or other matters may arise from time to time that may harm our business.
On June 5, 2020, we filed suit against Ortho-Tain, Inc. (“Ortho-Tain”) in the United States District Court for the District of Colorado seeking relief from certain false, threatening, and defamatory statements to our business affiliate, Benco Dental (“Benco”). We believe such statements have interfered with our business relationship and contract with Benco, causing harm to our reputation, loss of goodwill, and unspecified monetary damages. On February 12, 2021, we amended our complaint to add claims for false advertising and unfair business practices, as well as additional variants of the original claims to address Ortho-Tain’s alleged false advertising campaign against us in the fall of 2020. Our amended complaint seeks permanent injunctive relief to prevent what we believe are defamatory statements and interference with our business relationships by Ortho-Tain.
We further seek declaratory relief to refute the defendant’s false allegations, as well as monetary damages. Prior to filing the suit, we worked collaboratively with legal counsel at Benco to address and resolve this matter. Such efforts were unsuccessful. On February 26, 2021, Ortho-Tain, Inc. filed a motion to dismiss the amended complaint. We opposed the motion. On June 21, 2022, the Tenth Circuit entered an order and judgment. Pursuant to such order, the appeal was terminated, and the case was remanded to the U.S. District Court for the District of Colorado for further proceedings. On July 13, 2022, the Clerk of Court for the Tenth Circuit transferred jurisdiction back to the District of Colorado. On February 14, 2024, the District Court of Colorado issued an order denying Ortho-Tain’s motion to dismiss after analyzing the issue of litigation privilege under the standard ordered by the Tenth Circuit. In response, Ortho-Tain filed a notice of appeal of the District Court of Colorado order on February 14, 2024. The appeal has been docketed in the Tenth Circuit, and the record has been completed. On March 5, 2024, we filed a motion to dismiss the appeal for lack of jurisdiction. Ortho-Tain filed its response to the motion to dismiss on March 19, 2024. Our reply in support of the motion to dismiss was filed on March 26, 2024. On March 20, 2024, the Court ordered that our motion to dismiss for lack of jurisdiction would be referred to the panel of judges to be assigned to the appeal, and that no ruling on the motion to dismiss would be issued at that time. Ortho-Tain filed its opening brief on April 29, 2024. We filed an Answer Brief on May 29, 2024. Ortho-Tain filed its response brief on June 20, 2024. On October 31, 2024, the Tenth Circuit ordered additional briefing on two discrete issues and that briefing was filed on November 21, 2024. Oral Argument occurred on March 18, 2025, and the parties are awaiting a ruling.
On July 22, 2020, Ortho-Tain, Inc. filed a complaint in the United States District Court for the Northern District of Illinois against the Company, our Chairman and Chief Executive Officer, R. Kirk Huntsman, Benco Dental Supply Co., Dr. Brian Kraft, Dr. Ben Miraglia, and Dr. Mark Musso (the “Illinois Ortho-Tain Case”). The complaint in the Illinois Ortho-Tain Case addresses the same events as the suit we filed against Ortho-Tain in June 2020 as described above. The complaint in the Illinois Ortho-Tain Case alleges violation of the Lanham Act and an alleged civil conspiracy among the defendants to violate the Lanham Act by an alleged false designation of origin related to a presentation given by Dr. Brian Kraft at an event sponsored by us and Benco Dental.
Ortho-Tain also alleges that the actions of the defendants diverted sales from Ortho-Tain, deprived Ortho-Tain of advertising value and resulted in a loss of goodwill to Ortho-Tain. Ortho-Tain further alleges two separate breach of contract actions against Dr. Brian Kraft and Mr. Huntsman. Ortho-Tain’s allegation of breach of contract against Mr. Huntsman, relates to a Non-Disclosure Agreement entered into in October 2013 with Mr. Huntsman’s prior entity, Xenith Practices, LLC, which Non-Disclosure Agreement expired pursuant to its terms in October 2016. We continue to evaluate the allegations, although we believe the allegations lack merit and further believe Ortho-Tain will be unable to establish actionable damages.
On September 9, 2020, we moved to dismiss the claims against it in the Illinois Ortho-Tain Case. On October 23, 2020, we filed a motion requesting, in the alternative, that if the case is not dismissed, it be transferred to the Colorado action described above or stayed. On May 14, 2021, the United States District Judge entered an order granting our motion to stay this case pending the outcome of a substantially similar, first-filed suit by us is pending in the United States District Court. In light of the stay, the District Court denied, without prejudice, our pending motion to dismiss. On March 2, 2023, the District Court lifted the stay.
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The Defendants renewed their motions to dismiss. On August 23, 2024, the District Court of Colorado issued its order partially granting the motions to dismiss, including dismissing Defendants Benco Dental Supply Co. and Dr. Mark Musso. Ortho-Tain subsequently sought leave to amend its Complaint to try and address the deficiencies identified by the District Court of Colorado in its August 23, 2024 order. The Defendants opposed the Motion for Leave to Amend, and, on October 9, 2024, the District Court of Colorado held a hearing to address the Motion for Leave to Amend. The District Court of Colorado denied Plaintiff’s Motion for Leave to File an Amended Complaint without Prejudice.
The Parties submitted a Joint Discovery Plan to the District Court on October 21, 2024. On October 22, 2024, the District Court ordered the parties to exchange Rule 26(a)(1) initial disclosures by November 22, 2024 and Initial Written Discovery to Be Issued by the same date, which the parties completed. The parties are continuing with discovery and have provided additional status reports to the District Court on January 6, 2025, February 24, April 7, and May 5, 2025. The District Court set a deadline of May 16, 2025 to amend pleadings, May 26, 2025 to file another joint status report, and July 30, 2025 to complete fact discovery.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits, Financial Statement Schedules.
The following documents are filed as exhibits to this Quarterly Report on Form 10-Q.
| (1) | Incorporated by reference to the Company’s Registration Statement on Form S-1, filed with the SEC on October 9, 2020. |
| (2) | Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 27, 2023. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Vivos Therapeutics, Inc. | ||
| Date: May 15, 2025 | By: | /s/ R. Kirk Huntsman |
| R. Kirk Huntsman | ||
| Chairman of the Board and Chief Executive Officer | ||
| (principal executive officer) | ||
| Date: May 15, 2025 | By: | /s/ Bradford Amman |
| Bradford Amman | ||
| Chief Financial Officer and Secretary | ||
| (principal accounting officer) | ||
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