Vivos Therapeutics Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
VVOS$0.09-8.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001493152-24-019247
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001493152-24-032240
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 108 current paragraphs.
45 unchanged; 31 reworded; 26 added; 2 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Strategic Alliance Agreement. We have historically sought to generate revenues based on enrollments of dentists in our VIP program and sales of Vivos Method appliances and devices and services to our VIPs. In June 2024, we announced an important pivot in the way we market and distribute our Vivos Method appliances and devices. This new strategy is seeking to drive revenue by entering into contractual alliances with dentists, sleep center operators and other healthcare providers.
Current report
This strategy pivot was accompanied by a $7.5 million equity growth investment V-CO Investors LLC, a Wyoming limited liability company (“V-CO”), which is an affiliate of New Seneca Partners, Inc. (“Seneca”), a leading North American private equity sponsor based in Southfield, Michigan. This investment materially bolstered our cash on hand and stockholders’ equity and has facilitated the launch of the new strategic alliance described below. We hope this will lead to other similar alliances, which would positively impact our revenue growth.
Current report
On June 12, 2024, VSI Providers, PLLC, a wholly-owned subsidiary of the Company (“VSI”), and Rebis Health Holdings, LLC (“Rebis”), entered into a strategic alliance agreement (the “SAA”) providing for a joint marketing and distribution arrangement under which each party’s products and services will be offered together as a comprehensive solution to patients seeking sleep apnea treatment. Rebis and its affiliates operate multiple sleep testing and treatment centers in Colorado. VSI has a network of licensed dental professionals trained in providing various sleep apnea treatment-related services and, through its affiliates, access to additional products and services related to sleep apnea treatment. The Company and V-CO are third-party beneficiaries of the SAA. Under the SAA VSI is providing Rebis with access to licensed dental professionals trained in providing certain dental services (each a “VSI Dental Provider”) to provide such dental services in designated practice locations (as described in the SAA); provided, that nothing in the SAA restrict Rebis’ right to utilize the dental services of its own employees in a similar capacity as the VSI Dental Providers. Pursuant to the SAA, Rebis will be entitled to receive from VSI an agreed upon percentage of patient payments collected by VSI Dental Providers, less certain administrative fees charged by VSI and agreed to direct cost deductions.
Current report
The term of the SAA commences as of June 10, 2024, and continues for a period of two (2) years unless sooner terminated. At the end of the initial term of the agreement, the SAA will automatically renew for additional one (1) year terms unless either party gives written notice of its intent not to renew at least sixty (60) days prior to the end of the then-current term. VSI and Rebis each may terminate the SAA (subject to applicable notice and cure periods) on breaches of the SAA, bankruptcy, and similar events. The SAA contains standard covenants regarding compliance with applicable laws, a two year non-solicitation of personnel provision, intellectual property, insurance and maintaining the confidentiality of communications and proprietary information. The SAA also contains customary representations and warranties of the parties, indemnification, and liability limitations.
Current report
We are aiming to replicate the marketing and distribution alliance memorialized by the SAA with other healthcare professionals as part of a growing network of providers who offer The Vivos Method as an alternative treatment for mild to severe OSA. We believe this will provide us with an important opportunity to increase our revenues going forward.
Current report
Management Services Agreement. Airway Integrated Management Company, LLC, a Colorado limited liability company and a wholly owned subsidiary of the Company (“AIM”), and V-CO entered into a management services agreement (the “MSA”). The purpose of the MSA is to create an incentive for V-CO to assist in establishing and growing our strategic alliance with Rebis.
Current report
Pursuant to the MSA, V-CO will provide certain management, consulting, and advisory services to the Company related to the SAA. The term of the MSA commences on June 10, 2024, and continues until the later of (i) June 10, 2027 or (ii) such time as V-CO has received two (2) times its original investment in the Private Placement (the “MSA Term”). The MSA will automatically renew for additional terms of one (1) year unless any party sooner terminates the agreement in accordance with the terms of the MSA. During the MSA Term, V-CO will provide to the Company and AIM oversight, management consulting and advisory services, including, without limitation: (i) management of general and administrative expenses of the SAA, (ii) advice on strategy of the SAA with a view towards maximizing the revenue and profit generated by the SAA, (iii) searches for additional potential sleep center operators to form strategic alliances with, (iv) making introductions to industry contacts of V-CO and its affiliates (including Seneca) for purposes of expanding the business and opportunities of the Company, AIM, VSI and the SAA, and (v) performing other services as may be reasonably requested from time to time by the Company, VSI or the AIM, and agreed to by V-CO, taking into account the level of compensation for services and other engagements that V-CO and its affiliates may have (collectively, the “Management Services”). As consideration for the Management Services, AIM has agreed to pay to V-CO for three (3) years a management fee equal to $37,500 per quarter, payable quarterly in arrears, with a minimum of $25,000 per quarter paid in cash and the remaining up to $12,500 per quarter paid in the form of cash or restricted Common Stock, as decided by V-CO (the “Management Fee”). The value of restricted Common Stock, if any, paid as part of the Management Fee will be calculated based upon the average 5-day closing price of the Common Stock ending as of the end of each applicable quarter (or, if the Common Stock is not then publicly listed, as determined in good faith by the Board using industry standard valuation metrics).
Current report
In addition to the Management Fee, V-CO will also receive a quarterly cash participation payment from AIM (the “Participation Payment”) equal to an agreed upon percentage of the net positive cash flow (as determined in accordance with U.S. generally accepted accounting principles) generated by the operations of the SAA and received by VSI pursuant to the SAA (“Net Cash Flow”). The Participation Payment shall accrue (the “Accrued Amount”) and not be paid until the Company on a consolidated basis is cash flow positive from operations, as reported in its Securities and Exchange Commission (“SEC”) filings (the “Participation Trigger Event”) (meaning the Company shall receive all Net Cash Flow (if any) from VSI until the occurrence of the Participation Trigger Event). The Profit Participation shall continue to be earned quarterly until the later of such time as (i) V-CO receives an amount equal to two (2) times its investment in the Private Placement; or (ii) or June 10, 2027. The MSA contains customary covenants regarding confidentiality and indemnification. Under the MSA, V-CO will also assign to AIM or its affiliates V-CO’s entire right, title, and interest in any intellectual property it creates while working for or on behalf of AIM.
Current report
*Establishment and Growth of Our New Strategic Alliance Model.*We are placing significant emphasis on our new provider-based marketing and distribution model to grow our revenues. In June 2024, we announced the execution of a strategic marketing and distribution alliance with Rebis, an operator of multiple sleep testing and treatment centers in Colorado. This alliance, which we hope will be the first of a series of similar alliances across the country, marks an important pivot in our marketing and distribution model for our cutting edge OSA appliances. Under the new alliance, we are collaborating with Rebis to offer OSA patients a full spectrum of evidence-based treatments such as CPAP machines, and our own advanced, proprietary and FDA-cleared CARE oral medical devices, oral appliances and additional adjunctive therapies and methods. This new model differs from our current model which emphasizes a subscription-based relationship with our VIP dentists together with sales of our OSA devices to VIPs and the provision of services to VIPs. The new marketing and distribution strategic alliance is based on a revenue-sharing model between us and Rebis.
Current report
We are placing significant emphasis on establishing and growing this new model as a means of increasing our revenue. However, this new model is unproven and we have no operating history associated with this new model. There is therefore a lack of information for you to evaluate our future prospects utilizing this new model. Moreover, there is a material risk that this new model will not increase our revenues or be additive to our stockholders’ equity in the manner we anticipate. Our inability to introduce and scale this marketing and distribution model would materially harm our business and operating results and likely cause our stock price to suffer.
Current report
Potential Nasdaq Delisting. As previously reported, on May 16, 2024, the Company received written notice from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, as of March 31, 2024, the Company failed to comply with Nasdaq Listing Rule 5550(b)(1), which requires stockholders’ equity of at least $2.5 million (the “Equity Requirement”). On June 25, 2024, the Company 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 the Company’s closing of a $7.5 million equity private placement on June 10, 2024.
Current report
On June 27, 2024, the Company met with a Nasdaq Hearings Panel (the “Panel”) to discuss the Company’s past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of its securities on Nasdaq. On July 5, 2024, the Company was notified that the Panel had granted the Company’s request for continued listing on Nasdaq, subject to the Company’s filing of the Form 10-Q for the quarter ended June 30, 2024, with the SEC by August 15, 2024, evidencing the Company’s compliance with the Equity Requirement.
Current report
The Company is working diligently to ensure its 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. The Company anticipates that its previously disclosed strategic marketing and distribution alliance will also positively impact the Company’s revenue growth and stockholders’ equity in upcoming fiscal quarters. However, there is a risk that the Company will be unable to raise sufficient capital or generate sufficient revenue or operating results to maintain compliance with the Equity Requirement. If the Company fails to achieve ongoing compliance and its common stock is delisted by Nasdaq, such delisting would likely have a material adverse effect on the Company’s stock price, the ability of its stockholders to buy or sell their common stock, the ability of the Company to raise capital and on the Company’s reputation, all of which could make it significantly more difficult to operate the Company.
Current report
Comparison of the three and six months ended June 30, 2024 and 2023
Current report
Revenue increased by approximately $0.7 million, or 19%, to approximately $4.1 million for the three months ended June 30, 2024 compared to $3.4 million for the three months ended June 30, 2023. The increase in total revenue during the second quarter of 2024 was impacted by an increase of approximately $0.4 million in product revenue due to higher product sales, coupled with an increase of approximately $0.2 million in service revenue. The increase in product revenue is attributable to an increase of approximately $0.3 million in appliances sales, coupled with an increase of approximately $0.1 million in guide sales, all to existing VIPs. The increase in service revenue is attributable to an increase of approximately $0.3 million in VIP enrollment revenue followed by an increase decrease of approximately $0.1 million in sponsorship, seminar and other service revenue. This was offset by a decrease of approximately $0.1 million in Myofunctional therapy revenues. BIS and sleep testing services revenue remained unchanged for the three months ended June 30, 2024 and 2023.
Current report
During the three months ended June 30, 2024, we enrolled 32 VIPs and recognized VIP enrollment revenue of approximately $1.2 million, an increase of approximately 28% in enrollment revenue, compared to the three months ended June 30, 2023, when we enrolled 43 VIPs for a total of approximately $0.9 million. Revenue growth in the second quarter of 2024 was impacted by a higher incidence of breakage in contracts, this accelerated revenue recognition on several contracts for VIPs who did not complete their training during the first 90 days of their enrollment. Approximately $0.6 million in revenue was attributable to breakage during the three months ended June 30, 2024, when compared to approximately $0.1 million during the three months ended June 30, 2023.
Current report
Cost of sales remained relatively constant with an increase of $0.1 million or 8% at approximately $1.4 million for the three months ended June 30, 2024, compared $1.3 million for the three months ended June 30, 2023. This was primarily related to $0.1 million in higher costs associated with appliance lab fees, directly related to an increase in lab fees from our primary vendors.
Current report
Sales and marketing expenses decreased by approximately $0.3 million or approximately 46%, to $0.3 million for the three months ended June 30, 2024, compared to approximately $0.6 million for the three months ended June 30, 2023. This decrease was primarily driven by lower commissions and digital media and marketing supplies.
Current report
Comparison of the six months ended June 30, 2024 and 2023
Current report
Revenue
Current report
For the six months ended June 30, 2024, we sold 4,029 oral appliance arches for a total of approximately $2.9 million, a 5% increase in revenue from the six months ended June 30, 2023, when we sold 4,452 oral appliance arches for a total of approximately $2.8 million. The increase is directly attributable to a 45% decrease in discounts offered during the same period, with less than $0.2 million in discounts offered during the six months ended June 30, 2024 when compared to approximately $0.4 million of discounts offered during the six months ended June 30, 2023. Refer to “Material Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.
Current report
For the six months ended June 30, 2024, gross profit increased by approximately $0.2 million to $4.6 million. This increase was attributable to a slight increase in revenue of approximately $0.2 million offset by an increase in cost of sales of less than $0.1 million. Gross margin remained constant at 61% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Current report
General and Administrative Expenses
Current report
Sales and Marketing
Current report
Depreciation and Amortization
Removed paragraphs (2)
Previous report
Potential Nasdaq Delisting. As previously reported, we fell out of compliance with Nasdaq’s $2.5 million minimum stockholders’ equity requirement (the “Equity Rule”) during 2023. On November 9, 2023, we presented a plan to a Nasdaq Hearings Panel (the “Hearings Panel”) outlining our intention to raise additional equity capital as part of our efforts to regain compliance with the Equity Rule. Subsequently, on November 30, 2023, we received a letter from the Hearings Panel informing us that the panel had granted the Company’s request to remain listed on Nasdaq, subject to certain conditions. Such conditions included providing an update on our compliance plan and demonstrating compliance with the Equity Rule by March 19, 2024.
Previous report
On February 23, 2024, we presented an updated plan of compliance to the Hearings Panel, and on May 6, 2024, Nasdaq confirmed that we had successfully regained compliance with the Equity Rule. Nasdaq will continue to monitor our ongoing compliance with the Equity Rule for a one-year period. Failure to demonstrate continued compliance would again subject the Company to delisting. This is highly likely given that our stockholder’s equity as reported in this Report as of March 31, 2024 is less than the $2.5 million required by the Equity Rule. As such, we will likely receive a delist determination letter from the Nasdaq staff and receive an opportunity to request a new hearing with the Hearings Panel and present a response. A delisting of our common stock would likely have a significant adverse impact on our stock price, the ability of our stockholders to trade their common stock, and our overall reputation, thereby posing challenges to the operation of our company.
Reworded paragraphs (31)
Previous wording
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. Over 42,600 patients have been treated to date, worldwide, with our entire current suite of products by more than 1,950 trained dentists.
Current wording
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. Over 45,000 patients have been treated to date, worldwide, with our entire current suite of products by more than 2,000 trained dentists.
Previous wording
Our business was materially impacted by COVID-19 in 2020 and to some extent thereafter and through the early part of 2023 due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential VIPs having to close their offices. The impact of COVID-19 on our business diminished somewhat as 2023 progressed. However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to negatively impact our VIP dental practices and our revenue across the U.S. and Canada during 2022 and into 2023. We believe new enrollments during at least the first half of 2023 continued to be negatively impacted by the ongoing overall workforce uncertainties in the dental market. Thus far in 2024, we do not believe COVID-19 issues are impacting our business in any material way. We continue to monitor the overall landscape of potential viral or other diseases which may pose a threat, and we will respond appropriately should any such threats materialize.
Current wording
Our business was materially impacted by COVID-19 in 2020 and to some extent thereafter and through the early part of 2023 due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential VIPs having to close their offices. The impact of COVID-19 on our business diminished somewhat through 2023. However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to negatively impact our VIP dental practices and our revenue across the U.S. and Canada during 2022 and into 2023. Thus far in 2024, we do not believe COVID-19 issues are impacting our business in any material way. We continue to monitor the overall landscape of potential viral or other diseases which may pose a threat, and we will respond appropriately should any such threats materialize.
Previous wording
New VIP Enrollments (Service Revenue). Enrolling dental practices as VIPs is the first step in our ability to generate new revenue. As part of the VIP enrollment fee, we enter into a service contract with VIPs under which they receive training on the use of the Vivos treatment modalities. VIPs have the ability to start generating revenue for us and themselves after this training. To entice dentists to enroll as VIPs, we have worked with different marketing programs (which we generally call a “discovery track”) with respect to the payment of VIPs enrollment fee, including discounts and payment plans. Once VIPs execute their VIP enrollment agreement, the discovery track allows the VIP 45 to 60 days to obtain financing and pay the enrollment fee. Ongoing support and additional training is provided throughout the year under the services contract, which includes access to our proprietary Airway Intelligence Services, which provides the VIP with resources to help simplify the sleep apnea diagnostic and Vivos treatment planning process.
Current wording
New VIP Enrollments (Service Revenue). Enrolling dental practices as VIPs has historically been the first step in our ability to generate new revenue (although the growth of strategic partner model could lessen our dependence on VIP enrollments). As part of the VIP enrollment fee, we enter into a service contract with VIPs under which they receive training on the use of the Vivos treatment modalities. VIPs have the ability to start generating revenue for us and themselves after this training. To entice dentists to enroll as VIPs, we have worked with different marketing programs (which we generally call a “discovery track”) with respect to the payment of VIPs enrollment fee, including discounts and payment plans. Once VIPs execute their VIP enrollment agreement, the discovery track allows the VIP 45 to 60 days to obtain financing and pay the enrollment fee. Ongoing support and additional training is provided throughout the year under the services contract, which includes access to our proprietary Airway Intelligence Services, which provides the VIP with resources to help simplify the sleep apnea diagnostic and Vivos treatment planning process.
Previous wording
Product Sales Revenue. Throughout the latter part of 2023 and into the first quarter of 2024, the Company experienced a decline in Product Sales Revenue. As previously noted, we believe this decline was due in part to certain adverse events in the larger sleep apnea oral appliance market, and not specific to Vivos. Another factor contributing to the decline was our Reductions In Force (RIF) which we undertook during 2022 and 2023. However, those product sales revenue declines only began to reverse somewhat after the end of the first quarter of 2024. Enrolling new VIPs is key to our ability to generate revenue from product sales, and lower VIP enrollments during 2023 and into the first quarter of 2024 also dampened product sales revenue. Equally as important, however, is the number of Vivos treatment case starts that our existing VIPs commence, as these lead to appliance orders and related revenue. Once a VIP is fully trained, we encourage them to start cases. However, our experience has been that VIPs typically starts slowly as they introduce The Vivos Method into their practices. While we work with VIPs to screen their patients for OSA with our SleepImage® home sleep apnea ring test (which we expect will encourage Vivos Method case starts), not all VIPs incorporate our The Vivos Method into their practices at the same rate. We utilize Practice Advisors to help VIPs with onboarding and starting and increasing case starts over time. We believe VIPs can recoup their investment in VIP enrollment with approximately eight Vivos Method case starts, but as noted above, many VIPs start and also maintain their case starts at a significantly slower rate. We presently have a concentration of active VIPs who regularly start new Vivos Method treatment cases. Approximately 40% of our VIPs initiated a new case as of March 31, 2024. We are working not only to increase the number of VIPs overall, but the number of active VIPs in terms of case starts. More active VIPs are also more likely to take advantage of our other service revenue generating offerings such as MyoCorrect orofacial myofunctional therapy and medical Billing Intelligence Services.
Current wording
Product Sales Revenue. Throughout the latter part of 2023 and into the second quarter of 2024, the Company experienced a decline in Product Sales Revenue. As previously noted, we believe this decline was due in part to certain adverse events in the larger sleep apnea oral appliance market, and not specific to Vivos. Another factor contributing to the decline was our Reductions In Force (RIF) which we undertook during 2022 and 2023. However, those product sales revenue declines began to reverse somewhat in the second quarter of 2024. Enrolling new VIPs has historically been key to our ability to generate revenue from product sales, and lower VIP enrollments during 2023 and into the first quarter of 2024 also dampened product sales revenue. Equally as important, however, is the number of Vivos treatment case starts that our existing VIPs commence, as these lead to appliance orders and related revenue. Once a VIP is fully trained, we encourage them to start cases. However, our experience has been that VIPs typically start slowly as they introduce The Vivos Method into their practices. While we work with VIPs to screen their patients for OSA with our SleepImage® home sleep apnea ring test (which we expect will encourage Vivos Method case starts), not all VIPs incorporate our The Vivos Method into their practices at the same rate. We utilize Practice Advisors to help VIPs with onboarding and starting and increasing case starts over time. We believe VIPs can recoup their investment in VIP enrollment with approximately eight Vivos Method case starts, but as noted above, many VIPs start and also maintain their case starts at a significantly slower rate. We presently have a concentration of active VIPs who regularly start new Vivos Method treatment cases. Approximately 40% of our VIPs initiated a new case as of June 30, 2024. We are working not only to increase the number of VIPs overall, but the number of active VIPs in terms of case starts. More active VIPs are also more likely to take advantage of our other service revenue generating offerings such as MyoCorrect orofacial myofunctional therapy and medical Billing Intelligence Services.
Previous wording
In addition, an important aspect of our strategy to increase product revenues relates to the products and related intellectual property we acquired in March 2023 from Advanced Facialdontics, LLC (“AFD”), including a custom single arch device with an FDA 510(k) clearance for treating TMD and/or Bruxism (teeth grinding or clenching). We have rebranded the AFD products as Vivos Vida and Vivos Vida Sleep. During the first quarter of 2024, certain of those products were among the fastest growing segment of our entire product line, and we fully expect to continue to increase sales of these acquired products throughout the remainder of 2024 and beyond. As described further below, during 2023 we entered into a distribution agreement with Lincare, a leading durable medical equipment (“DME”), to distribute certain of our products, including those we acquired from AFD.
Current wording
In addition, an important aspect of our strategy to increase product revenues relates to the products and related intellectual property we acquired in March 2023 from Advanced Facialdontics, LLC (“AFD”), including a custom single arch device with an FDA 510(k) clearance for treating TMD and/or Bruxism (teeth grinding or clenching). We have rebranded the AFD products as Vivos Vida TM and Vivos Vida Sleep TM. During the first quarter of 2024, certain of those products were among the fastest growing segment of our entire product line, and we expect to continue to increase sales of these acquired products throughout the remainder of 2024 and beyond.
Previous wording
Marketing to DSOs. During the second half of 2021, we increased our efforts to market The Vivos Method and related products and services to larger dental support organizations (“DSOs”). Marketing to DSOs creates an opportunity to enroll and onboard multiple dental practices as VIPs under one common ownership structure. This would allow us to leverage training and support across multiple VIP practices and gain economies of scale with the goal of faster growth, both in VIP enrollments and in Vivos case starts. As of March 31, 2024, we believe we have made important progress in penetrating this market, but as we cautioned previously, DSOs tend to move slowly when adopting new technologies or programs, and we do not expect DSO training or product sales to materially impact overall revenue in 2024. Our other dentist enrollment program, which we refer to as the Airway Alliance Program (“AAP”), was also established in the fourth quarter of 2021 and launched in the first quarter of 2022. This program is designed to attract the vast majority of the estimated 200,000 U.S. and Canadian dentists who are being strongly encouraged by the American Dental Association to screen their patients for sleep apnea. The AAP gives these dentists a simple yet profitable way to screen their patients for OSA using the SleepImage® home sleep test. Patients with OSA can be referred to a fully trained local VIP dentist for treatment. The AAP program did not contribute meaningfully to revenue in the first quarter of 2024.
Current wording
Marketing to DSOs. During the second half of 2021, we increased our efforts to market The Vivos Method and related products and services to larger dental support organizations (“DSOs”). Marketing to DSOs creates an opportunity to enroll and onboard multiple dental practices as VIPs under one common ownership structure. This allows us to leverage training and support across multiple VIP practices and gain economies of scale with the goal of faster growth, both in VIP enrollments and in Vivos case starts. As we cautioned previously, DSOs tend to move slowly when adopting new technologies or programs, and we do not expect DSO training or product sales to materially impact overall revenue in 2024. Our other dentist enrollment program, which we refer to as the Airway Alliance Program (“AAP”), was also established in the fourth quarter of 2021 and launched in the first quarter of 2022. This subscription program was designed to attract the vast majority of the estimated 200,000 U.S. and Canadian dentists who are being strongly encouraged by the American Dental Association to screen their patients for sleep apnea. The AAP program has not contributed meaningful revenue in the first six months of 2024.
Previous wording
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 (PAP) and/or myofunctional therapy, as needed). 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. This trial may not meet its designated endpoints, and therefore additional FDA clearances for the DNA device may not be obtained.
Current wording
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 (PAP) and/or myofunctional therapy, as needed). 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 the initial start-up fees have been incurred, however, the timing of the enrollment of patients is being determined. This trial may not meet its designated endpoints, and therefore additional FDA clearances for the DNA device may not be obtained.
Previous wording
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.
Current wording
Distribution Agreements. During 2023, we entered into distribution collaborations with third parties to expand access of our products to potential patients. For example, the SAA with Rebis is expected to deliver our proprietary treatment options and protocols to mild to severe OSA patients who have failed being candidates for CPAP. By collaborating with Rebis and other similar sleep clinics, we will be able to drive top line revenue and lower customer acquisition costs and overhead. 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.
Previous wording
For example, on June 1, 2023, we entered into a non-exclusive distribution agreement with Lincare, a leading supplier in the United States of respiratory products, such as CPAP equipment. Lincare currently provides respiratory products to approximately 1.8 million patients nationwide. Pursuant to this agreement, Lincare began to distribute certain of our products in the United States, including the Vida™, VidaSleep™, and Versa®. The distribution agreement was subject to a 90-day pilot program in Colorado and Florida. Within weeks of starting the pilot program, Lincare reported an initial 36% positive patient response to our products subject to the agreement.
Current wording
On June 1, 2023, we entered into a non-exclusive distribution agreement with Lincare, a leading supplier in the United States of respiratory products, such as CPAP equipment. Lincare currently provides respiratory products to approximately 1.8 million patients nationwide. Pursuant to this agreement, Lincare began to distribute certain of our products in the United States, including the Vida™, VidaSleep™, and Versa®. The distribution agreement was subject to a 90-day pilot program in Colorado and Florida. Within weeks of starting the pilot program, Lincare reported an initial 36% positive patient response to our products subject to the agreement.
Previous wording
Key Components of Consolidated Statements of Operations
Current wording
Key Components of Condensed Consolidated Statements of Operations
Previous wording
Our consolidated statements of operations for the three months ended March 31, 2024 and 2023 are presented below (dollars in thousands):
Current wording
Our consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 are presented below (dollars in thousands):
Previous wording
For the three months ended March 31, 2024, we sold 1,996 oral appliance arches for a total of approximately $1.7 million, a 6% decrease in revenue from the three months ended March 31, 2023, when we sold 2,369 oral appliance arches for a total of approximately $1.8 million. Refer to “Material Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.
Current wording
For the three months ended June 30, 2024, we sold 2,033 oral appliance arches for a total of approximately $2.0 million, a 28% increase in revenue from the three months ended June 30, 2023, when we sold 2,083 oral appliance arches for a total of approximately $1.5 million. The increase is directly attributable to a 71% decrease in discounts offered during the same period, with less than $0.1 million in discounts offered during the three months ended June 30, 2024 when compared to approximately $0.2 million during the three months ended June 30, 2024. Refer to “Material Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.
Previous wording
For the three months ended March 31, 2024, gross profit decreased by approximately $0.4 million to $1.9 million. This decrease was attributable to a decrease in revenue of approximately $0.4 million offset by a decrease in cost of sales of less than $0.1 million. Gross margin decreased to 57% for the three months ended March 31, 2024, compared to 61% for the three months ended March 31, 2023 due to the revenue decrease.
Current wording
For the three months ended June 30, 2024, gross profit increased by approximately $0.6 million to $2.7 million. This increase was attributable to an increase in revenue of approximately $0.7 million offset by an increase in cost of sales of approximately $0.1 million. Gross margin increased to 65% for the three months ended June 30, 2024, compared to 62% for the three months ended June 30, 2023, due primarily to the revenue increase.
Previous wording
Depreciation and amortization expense was approximately $0.2 million for the three months ended March 31, 2024 and 2023, respectively. Depreciation and amortization had a slight decrease during the period due to some assets being fully depreciated and an immaterial amount of depreciable assets placed into service.
Current wording
Depreciation and amortization expense was approximately $0.1 million for the three months ended June 30, 2024 and 2023. Depreciation and amortization decreased slightly during the period due to some assets being fully depreciated and a small amount of depreciable assets placed into service.
Previous wording
Other income of less than $0.1 million includes immaterial interest income from financial institutions.
Current wording
Other income of less than $0.1 million includes interest income from financial institutions.
Previous wording
The liability for the warrants issued in the January 9, 2023 private placement totaled approximately $14.5 million which included 186,667 pre-funded warrants with a fair value of approximately $6.7 million and 266,667 additional common stock purchase warrants with a fair value of approximately $7.7 million. The difference between the fair value of the $14.5 million liability-classified warrants and the net proceeds received of approximately $8.0 million, or approximately $6.5 million, was recognized as a day-one non-operating expense. The change in fair value of the warrant liability was approximately $10.2 million, or $9.6 million of other income net of issuance costs of $0.6 million, for the three months ended March 31, 2023. The net impact of the private placement warrants for the three months ended March 31, 2023 was approximately $3.2 million of other income. No warrant liability was recorded in the first quarter of 2024, as such there is no other income recorded for the three months ended March 31, 2024.
Current wording
The liability for the warrants issued in the January 9, 2023 private placement totaled approximately $14.5 million which included 186,667 pre-funded warrants with a fair value of approximately $6.7 million and 266,667 additional common stock purchase warrants with a fair value of approximately $7.7 million. The difference between the fair value of the $14.5 million liability-classified warrants and the net proceeds received of approximately $8.0 million, or approximately $6.5 million, was recognized as a day-one non-operating expense. The change in fair value of the warrant liability was approximately $10.2 million, or $9.6 million of other income net of issuance costs of $0.6 million, for the three months ended June 30, 2023. The net impact of the private placement warrants for the three months ended June 30, 2023 was approximately $3.2 million of other income. The derivative warrant liability was eliminated in November 2023, and as a result, no change in fair value of warrant liability was recorded in the second quarter of 2024.
Previous wording
Revenue decreased approximately $0.4 million, or 11%, to approximately $3.4 million for the three months ended March 31, 2024 compared to $3.8 million for the three months ended March 31, 2023. Revenue during the first three months of 2024 was impacted by a decrease of approximately $0.1 million in product revenue due to lower product sales, coupled with a decrease of approximately $0.3 million in service revenue. The decrease in total revenue is attributable to a decrease of approximately $0.4 million in VIP enrollment revenue followed by a decrease of approximately $0.2 million in appliance sales to VIPs. This was offset by an increase of approximately $0.1 million in guides sales to VIPs, and an increase of approximately $0.1 million from sleep testing services and devices. BIS and Myofunctional therapy revenues remained relatively unchanged at $0.2 million each for the three months ended March 31, 2024 and 2023. Sponsorship and seminar revenue also remained flat at approximately $0.1 million during the same periods.
Current wording
Revenue increased approximately $0.2 million, or 3%, to approximately $7.5 million for the six months ended June 30, 2024 compared to $7.3 million for the six months ended June 30, 2023. The increase in total revenue during the second quarter of 2024 was impacted by an increase of approximately $0.3 million in product revenue due to higher product sales, coupled with a decrease of approximately $0.1 million in service revenue. The increase in product revenue is attributable to an increase of approximately $0.1 million in appliances sales, coupled with an increase of approximately $0.2 million in guide sales, all to existing VIPs. The decrease in service revenue is attributable to a decrease of approximately $0.2 million in Myofunctional therapy revenues followed by a decrease of approximately $0.1 million in VIP enrollment revenue. This was offset by an increase of approximately $0.2 million in sleep testing services, sponsorship, seminar and other service revenue. BIS revenue remained unchanged for the six months ended June 30, 2024 and 2023.
Previous wording
During the three months ended March 31, 2024, we enrolled 50 VIPs and recognized VIP enrollment revenue of approximately $0.9 million, a decrease of 30% in enrollment revenue, compared to the three months ended March 31, 2023, when we enrolled 36 VIPs for a total of approximately $1.3 million. Revenue growth in the first quarter of 2024 was impacted by updates to key inputs in our revenue recognition methodology, primarily estimated customer lives. As part of our annual process, the estimated customer lives are calculated separately for each year and was estimated to be 27 months in 2024, an increase of 17%, compared to 23 months in 2023, and an even higher increase of 50% when compared to 18 months in 2022. Estimated customer lives impacts the amortization of revenue to be spread over a longer period of time, thus decreasing the revenue that is recognized over the same period when compared to 2023. Although this negatively impacts our revenue recognition, it is a result of customers staying active for a longer period of time, thus increasing our customer retention year-over-year. Additionally, our revenue was impacted by new entry levels into the VIP program, ranging from $2,500 to $50,000 and adding an $8,000 pediatric program, which was received positively by our providers, however it results in lower revenue per contract. This coupled with lower enrollments during 2023, resulted in lower revenue for the first quarter of 2024.
Current wording
During the six months ended June 30, 2024, we enrolled 82 VIPs and recognized VIP enrollment revenue of approximately $2.1 million, a decrease of approximately 6% in enrollment revenue, compared to the six months ended June 30, 2023, when we enrolled 81 VIPs for a total of approximately $2.2 million. Revenue decrease in the first six months of 2024 was impacted by updates to key inputs in our revenue recognition methodology, primarily estimated customer lives. As part of our annual process, the estimated customer lives are calculated separately for each year and was estimated to be 27 months in 2024, an increase of 17%, compared to 23 months in 2023, and an even higher increase of 50% when compared to 18 months in 2022. Estimated customer lives impacts the amortization of revenue to be spread over a longer period of time, thus decreasing the revenue that is recognized over the same period when compared to 2023. Although this negatively impacts our revenue recognition, it is a result of customers staying active for a longer period of time, thus increasing our customer retention year-over-year. Additionally, our revenue was impacted by new entry levels into the VIP program, ranging from $2,500 to $50,000 and adding an $8,000 pediatric program, all of which were received positively by our providers. However, the lower priced enrollment options resulted in lower revenue per contract. This, coupled with lower enrollments during 2023, resulted in lower service revenue for the first half of 2024.
Previous wording
Cost of sales remained relatively constant with a decrease of less than $0.1 million or 3% at approximately $1.5 million for the three months ended March 31, 2024, compared to slightly over $1.5 million for the three months ended March 31, 2023. This was primarily related to $0.1 million in lower costs associated with appliances, medical reporting expense, and membership support costs, driven by the lower sales explained above. This was offset by an increase of approximately less than $0.1 million due to higher costs associated with the ring lease program and VIP training.
Current wording
Cost of sales remained relatively constant with an increase of less than $0.1 million, or 2%, at approximately $2.9 million for the six months ended June 30, 2024, compared to slightly over $2.8 million for the six months ended June 30, 2023. This was primarily related to $0.3 million in higher costs directly related to an increase in lab fees from our primary vendors, offset by a decrease of less than $0.3 million related to lower costs associated with the ring lease program and VIP training.
Previous wording
General and administrative expenses decreased approximately $1.6 million, or approximately 25%, to approximately $4.9 million for the three months ended March 31, 2024, as compared to $6.5 million for the three months ended March 31, 2023. The primary driver of this decrease was $0.9 million in professional fees and a change in personnel and related compensation of approximately $0.7 million, including salaries and benefits, paid time off, stock-based compensation, and other employee-related expenses, as a result of the reduction in force implemented during the second quarter of 2023. Other drivers of the decrease in general and administrative expenses included a decrease of approximately $0.2 million related to bad debt expense, and a decrease of approximately $0.1 million related to insurance. This was offset by an increase of approximately $0.3 million in fees related to being a public company.
Current wording
General and administrative expenses decreased by approximately $3.4 million, or approximately 27%, to approximately $9.0 million for the six months ended June 30, 2024, as compared to $12.4 million for the six months ended June 30, 2023. The primary driver of this decrease was $1.7 million in professional fees and a change in personnel and related compensation of approximately $1.1 million, including salaries and benefits, paid time off, stock-based compensation, and other employee-related expenses, as a result of the reduction in force implemented beginning with the second quarter of 2023. Other drivers of the decrease in general and administrative expenses included a decrease of approximately $0.2 million related to bad debt expense, a decrease of approximately $0.2 million related to insurance, and a decrease of approximately $0.1 million in training and education. This was offset by an increase of approximately $0.1 million in fees related to being a public company.
Previous wording
Sales and marketing expenses remained constant with a slight increase of less than by $0.1 million to $0.7 million for the three months ended March 31, 2024, compared to slightly over $0.6 million for the three months ended March 31, 2023. This increase was primarily driven by commissions and digital media and marketing supplies.
Current wording
Sales and marketing expenses decreased by $0.2 million to $1.0 million for the six months ended June 30, 2024, compared to slightly over $1.2 million for the six months ended June 30, 2023. This decrease was primarily driven by lower commissions and digital media and marketing supplies.
Previous wording
The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has incurred losses since inception, including $3.8 and $1.7 million for the three months ended March 31, 2024 and 2023, respectively, resulting in an accumulated deficit of approximately $96.8 million as of March 31, 2024.
Current wording
The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has incurred losses since inception, including $5.7 and $7.2 million for the six months ended June 30, 2024 and 2023, respectively, resulting in an accumulated deficit of approximately $98.7 million as of June 30, 2024.
Previous wording
Net cash used in operating activities amounted to approximately $2.5 and $3.5 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had total liabilities of approximately $11.2 million.
Current wording
Net cash used in operating activities amounted to approximately $5.6 and $6.4 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had total liabilities of approximately $9.5 million.
Previous wording
As of March 31, 2024, we had approximately $2.6 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 issuance of these financial statements. Without additional financing, these factors raise substantial doubt regarding our ability to continue as a going concern. See Note 15 to the financial statements included in this Report for additional information regarding our financing activity following the three months ended March 31, 2024.
Current wording
As of June 30, 2024, we had approximately $6.9 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 issuance of these financial statements. Without additional financing, these factors raise substantial doubt regarding our ability to continue as a going concern.
Previous wording
We previously disclosed that our goal was to decrease costs and increase revenues during 2023 with the aim of becoming cash flow positive from operations by the first quarter of 2024 without the need for additional financing, if possible. We have successfully implemented cost savings measures and significantly reduced cash used in operations. However, sales did not grow in 2023 or it the first quarter of 2024 as anticipated as our product offerings and strategies continue to be refined. As such, we anticipate that we have raised new financing in late 2023 and early 2024 and will be required to obtain additional financing to satisfy our cash needs and bolster our stockholders’ equity for Nasdaq compliance purposes, as management continues to work towards increasing revenue to achieve cash flow positive operations in the foreseeable future.
Current wording
We have successfully implemented cost savings measures and significantly reduced cash used in operations. However, sales did not grow in 2023 or in the first half of 2024 as anticipated, as our product offerings and strategies continue to be refined. As such, we have raised equity capital in late 2023 and early 2024 and will be required to obtain additional financing to satisfy our cash needs and bolster our stockholders’ equity for Nasdaq compliance purposes, as management continues to work towards increasing revenue to achieve cash flow positive operations in the foreseeable future.
Previous wording
Until a state of cash flow positivity is reached, management is reviewing all options to obtain additional financing to fund operations. This financing is expected to come primarily from the issuance of equity securities in order to sustain operations until we can achieve profitability and positive cash flows, if ever. There can be no assurances, however, that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, 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.
Current wording
Until a state of cash flow positivity is reached, management is reviewing all options to obtain additional financing to fund operations. This financing is expected to come primarily from the issuance of equity securities in order to sustain operations until we can achieve profitability and positive cash flows, if ever. We expect the SAA with Rebis to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, 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 that our SAA agreement will result in the patient volume and financial results within the expected timeline and 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.
Previous wording
The following table presents a summary of our cash flow for the three months ended March 31, 2024 and 2023 (in thousands):
Current wording
The following table presents a summary of our cash flow for the six months ended June 30, 2024 and 2023 (in thousands):
Previous wording
Net cash used in operating activities of approximately $2.5 million for the three months ended March 31, 2024 is a decrease of approximately $1.0 million compared to net cash used in operating activities of approximately $3.5 million for the three months ended March 31, 2023. This decrease is due primarily to the absence of a favorable net change in the fair value of warrant liability of approximately $10.2 million, offset by day-one non-operating warrant expense of approximately $6.5 million, an increase of approximately $0.6 million in contract liability, an increase of approximately $0.3 million in accounts payable, and an increase of approximately $0.2 million in accrued expenses and other liabilities. This was offset by an increase in our net loss of approximately $2.0 million, the decrease of approximately $0.6 million in fair value of warrants issued for services, and an increase of approximately $0.5 million in accounts receivable related to the DSO clinics and VIP enrollments under payment plans.
Current wording
Net cash used in operating activities of approximately $5.6 million for the six months ended June 30, 2024 is a decrease of approximately $0.8 million compared to net cash used in operating activities of approximately $6.4 million for the six months ended June 30, 2023. This decrease is due primarily to a $1.5 million decrease in net loss for the six months ended June 30, 2024, the absence of a 2023 unfavorable net change in the fair value of warrant liability of approximately $2.3 million, offset by an increase of $0.3 million in accounts receivable a decrease of approximately $0.3 million in contract liability, a decrease of approximately $0.3 million in accounts payable, accrued expenses and other liabilities and a decrease of approximately $0.8 million in fair value of warrants issued for services.
Previous wording
For the three months ended March 31, 2024, net cash used in investing activities consisted of capital expenditures for software of $0.2 million related to the development of software for internal use expected to be placed in service in 2024. This compares to net cash used in investing activities for the three months ended March 31, 2023 of $0.3 million due to capital expenditures for internally developed software and an asset purchase.
Current wording
For the six months ended June 30, 2024, net cash used in investing activities consisted of capital expenditures for software of $0.2 million related to the development of software for internal use expected to be placed in service in 2024. This compares to net cash used in investing activities for the six months ended June 30, 2023 of $0.5 million due to capital expenditures for internally developed software and an asset purchase.
Previous wording
Net cash provided by 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 warrant inducement. This compares to net cash used in investing financing for the three months ended March 31, 2023, of $7.4 million attributable to proceeds of $8.0 million from the issuance of Common Stock, net of approximately $0.6 million of professional fees and other issuance costs, from our private placement in January 2023.
Current wording
Net cash provided by financing activities of $11.4 million for the six months ended June 30, 2024, is attributable to proceeds of $11.0 million from the issuance of Common Stock, net of approximately $0.4 million of professional fees and other issuance costs, in our February warrant inducement and June private placement. This compares to net cash used in investing financing for the six months ended June 30, 2023 of $7.4 million, attributable to gross proceeds of $8.0 million from the issuance of Common Stock, net of approximately $0.6 million of professional fees and other issuance costs, from our private placement in January 2023.
Previous wording
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, 2023. 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, 2024.
Current wording
Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies Involving Management Estimates and Assumptions” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as amended. 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 and six months ended June 30, 2024.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
General and administrative expenses decreased approximately $1.8 million, or approximately 30%, to approximately $4.1 million for the three months ended June 30, 2024, as compared to $5.9 million for the three months ended June 30, 2023. The primary driver of this decrease was $0.8 million in professional fees and a change in personnel and related compensation of approximately $0.4 million, including salaries and benefits, paid time off, stock-based compensation, and other employee-related expenses, as a result of the reduction in force implemented during the second quarter of 2023. Other drivers of the decrease in general and administrative expenses included a decrease of approximately $0.2 million related to taxes, licenses and fees, a decrease of approximately $0.1 million related to insurance, a decrease of approximately $0.1 million in travel, meals and entertainment, a decrease of approximately $0.1 in training and education.
Current report — wording carried from elsewhere
Cost of Sales and Gross Profit
Current report — wording carried from elsewhere
Depreciation and amortization expense was approximately $0.3 million for the six months ended June 30, 2024 and 2023. Depreciation and amortization decreased slightly during the period due to some assets being fully depreciated and a small amount of depreciable assets placed into service.
Current report — wording carried from elsewhere
Other income of less than $0.1 million includes interest income from financial institutions.
Current report — wording carried from elsewhere
Excess warrant fair value and change in fair value of warrant liability, net of issuance costs
Current report — wording carried from elsewhere
The liability for the warrants issued in the January 9, 2023 private placement totaled approximately $14.5 million which included 186,667 pre-funded warrants with a fair value of approximately $6.7 million and 266,667 additional common stock purchase warrants with a fair value of approximately $7.7 million. The difference between the fair value of the $14.5 million liability-classified warrants and the net proceeds received of approximately $8.0 million, or approximately $6.5 million, was recognized as a day-one non-operating expense. The change in fair value of the warrant liability was approximately $10.2 million, or $9.6 million of other income net of issuance costs of $0.6 million, for the six months ended June 30, 2023. The net impact of the private placement warrants for the six months ended June 30, 2023 was approximately $3.2 million of other income. The derivative warrant liability was eliminated in November 2023, and as a result, no change in fair value of warrant liability was recorded in the first half of 2024.