Vivos Therapeutics, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
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-K
Period ended 2023-12-31; filed 2024-03-28.
0001493152-24-011755
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001641172-25-001750
Item 7. 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 156 previous paragraphs and 119 current paragraphs.
50 unchanged; 60 reworded; 9 added; 46 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 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 (9)
Current report
We are actively working with Stanford University to address the concerns that led to the hold and has continued engaged discussions with the university. While we believe these efforts will facilitate the resumption of the study, there can be no assurance that the hold will be lifted in a timely manner, or at all. Any delay or failure to resolve the issues could impact the development timeline and future prospects for the study. We remain committed to the highest standards of patient safety, scientific integrity, and regulatory compliance and will provide updates as material developments occur. This trial may not meet its designated endpoints, and therefore additional FDA clearances for the DNA device may not be obtained.
Current report
On May 16, 2024, we received a further 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.
Current report
On June 27, 2024, we met with the Panel to discuss our past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of its securities on Nasdaq.
Current report
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.
Current report
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.
Current report
For the year ended December 31, 2024, we sold 16,182 oral appliance arches and guides for a total of approximately $7.9 million, a 26% increase in revenue from the year ended December 31, 2023, when we sold 8,240 oral appliance arches and guides for a total of approximately $6.3 million. The increase is directly attributable to a 71% decrease in discounts offered during the same period, with less than $0.2 million in discounts offered during the year ended December 31, 2024 when compared to approximately $0.7 million of discounts offered during the year ended December 31, 2023, coupled with an increase in Guide sales, which are lower revenue generating products when compared to Vivos appliances.
Current report
Given that our alliance-based marketing and distribution model is very 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 this model.
Current report
Intangible Assets, Net
Current report
A discussion of recent accounting pronouncements is included in Note 1 to our financial statements contained in this Annual Report on Form 10-K.
Removed paragraphs (46)
Previous report
Overview
Previous report
Our business model is focused around dentists, and our program to train independent dentists and offer them other value-added services in connection with their ordering and use of The Vivos Method for patients is called theVivos Integrated Practice (“VIP”) program.
Previous report
Impact of COVID-19
Previous report
In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, now widely acknowledged to have been generally ineffective, and in many ways, harmful. As a result, nearly all of these Orders have been relaxed or lifted, but there is considerable uncertainty about whether the Orders will be reinstated should a new COVID-19 variant or entirely new virus emerge.
Previous report
Our business was materially impacted by COVID-19 in 2020 and to some extent thereafter 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 has progressed. It appears that the latest COVID-19 subvariants evoke generally milder symptoms and do not pose the same health or economic threat as previous strains. 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 the third quarter of 2023 continued to be negatively impacted by the ongoing overall workforce uncertainties in the dental market. In addition, new variants of COVID-19 continue to arise, and such variants may in the future cause an adverse effect on the dental market. As such, the long-term financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated at this time.
Previous report
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 December 31, 2023, 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. 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 during 2023.
Previous report
Seasonality. We believe that the patient volumes of our VIPs will be sensitive to seasonal fluctuations in urgent care and primary care activity. Typically, the fourth quarter tends to be one where we see higher enrollment levels for new VIP dentists, however, as previously mentioned reported, in the fourth quarter of 2022 we did not see that same pattern emerge. The first and second quarters of each year tend to be our weakest quarter of the year for new enrollments, and to a certain extent, appliance sales as well. This was the case in the first half of 2023. Winter months see a higher occurrence of influenza, bronchitis, pneumonia and similar illnesses; however, the timing and severity of these outbreaks vary dramatically. Additionally, as consumers shift toward high deductible insurance plans, they are responsible for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has occurred, which may lead to lower than expected patient volume or an increase in bad debt expense during that period. Our quarterly operating results may fluctuate in the future depending on these and other factors.
Previous report
Restatement of March 31, 2022 Financial Statements
Previous report
As described in Note 2, “Restatement of Consolidated Financial Statement,” in Item 1 of Part 1 of Amendment No. 1 to our Quarterly Report on Form 10-Q for the three months ended March 31, 2022, originally filed with the SEC on May 16, 2022 and such Amendment No. 1 filed on November 25, 2022 (the “10-Q/A”), we determined it was necessary to restate our financial statements for the three months ended March 31, 2022.
Previous report
The restatement of the previously filed financial statements was due to our management (with the concurrence of the Audit Committee of our Board of Directors) determining that our existing revenue recognition policy was not consistent with the guidance in ASC 606. After analyzing our contracts using the five-step process in ASC 606, we have determined that for VIP enrollment contracts, it is necessary for us to separately identify the performance obligations and recognize the revenue as the performance obligations are satisfied over the customer life as applicable. We identified a material weakness related to the operating effectiveness of our review controls in that we did not put the appropriate resources in place to be able to identify technical accounting issues and perform review functions appropriately for the revenue recognition issue described above and for those items which we had previously identified in Part II, Item 9A of our Form 10-K for the fiscal year ended December 31, 2022.
Previous report
For the year ended December 31, 2023, we sold 8,240 oral appliance arches for a total of approximately $6.1 million, a 22% decrease in revenue from the year ended December 31, 2022 when we sold 12,281 oral appliance arches for a total of approximately $7.8 million. Refer to “Material Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.
Previous report
Other Income
Previous report
PPP loan forgiveness was approximately $1.3 million for the year ended December 31, 2022. The PPP loan was forgiven by the SBA in its entirety in 2022.
Previous report
Use of Estimates
Previous report
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, the determination of 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. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operations will be affected.
Previous report
Cash and Cash Equivalents
Previous report
All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents.
Previous report
Accounts Receivable, Net
Previous report
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. The Company evaluates the collectability of its accounts receivable and determines 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 the Company is aware of a customer’s inability to meet its financial obligation, the Company may individually evaluate the related receivable to determine the allowance for expected credit losses. The Company uses 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.
Previous report
Property and Equipment, Net
Previous report
Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which ranges from 4 to 5 years. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range between 5 and 7 years. The Company does not begin depreciating assets until assets are placed in service.
Previous report
Goodwill and Intangible Assets, Net
Previous report
Equity Offering Costs
Previous report
Commissions, legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination of the success of the offering. Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period it is determined that the offering was successful. Deferred offering costs related to unsuccessful equity offerings are recorded as expense in the period when it is determined that an offering is unsuccessful.
Previous report
Accounting for Payroll Protection Program Loan
Previous report
The Company accounted for its U.S. Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”) loan as a debt instrument under ASC 470,Debt. The Company recognized the original principal balance as a financial liability with interest accrued at the contractual rate over the term of the loan. On January 21, 2022, the PPP loan received by the Company on May 8, 2020 was forgiven by the SBA in its entirety, which includes approximately $1.3 million in principal. As a result, the Company recorded a gain on the forgiveness of the loan in the quarter ended March 31, 2022 under non-operating income (expense).
Previous report
Employee Retention Tax Credit
Previous report
The employee retention tax credit (“ERTC”) for 2020 was established under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”). The ERTC provided for changes in the employee retention credit for 2020 and provided an additional credit for the first, second and third calendar quarters of 2021. Employers are eligible for the credit if they experienced either a full or partial suspension of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or if they experienced a significant decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 and the corresponding quarters in 2019. The ERTC is a refundable credit that employers can claim on qualified wages paid to employees, including certain health insurance costs.
Previous report
According to the Internal Revenue Service (“IRS”) Notice 2021-20, “Guidance on the Employee Retention Credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act,” the period during which there is a significant decline in gross receipts is determined by identifying the first quarter in 2020 in which the gross receipts are less than 50% of its gross receipts for the same period in 2019. The employee retention credit is available only to eligible employers. Section 2301(c)(2)(A) of the CARES Act defines the term “eligible employer” as any employer carrying on a trade or business during calendar year 2020, and, with respect to any calendar quarter, for which (1) the operation of the trade or business carried on during calendar year 2020 is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19, or (2) such calendar quarter is within the period in which the employer had a significant decline in gross receipts, as described in section 2301(c)(2)(B) of the CARES Act. VIP dentists and potential VIPs were forced to close their offices during 2020 as a result of COVID-19. Therefore, the Company qualifies as an eligible employer under this under the CARES Act.
Previous report
Section 2301(c)(3)(A)(ii) of the CARES Act also provides that if an eligible employer averaged 100 or fewer employees in 2019 (a “small eligible employer”), qualified wages are those wages paid by the eligible employer with respect to an employee during any period described in section 2301(c)(2)(A)(ii)(I) of the CARES Act (relating to a calendar quarter for which the operation of a trade or business is fully or partially suspended due to a governmental order) or during a calendar quarter within the period described in section 2301(c)(2)(A)(ii)(II) of the CARES Act (relating to a significant decline in gross receipts). The Company averaged fewer than 80 employees in 2019 and is therefore considered a small eligible employer under the CARES Act.
Previous report
Healthcare plan expenses were not included in the analysis, although they are eligible if an employee has paid health insurance through their paycheck. Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the Code. The Company pays the first $500 of healthcare insurance for each employee, which generally covers the monthly cost of their insurance. Because of this, the Company conservatively did not include any of the cost of insurance in its analysis. Additionally, PPP loan amounts were deducted from the amount of total wages paid before calculating the qualified ERTC wages. The Company applied for the ERTC using Vivos Therapeutics Inc.’s payroll, which covers 95% of its employees.
Previous report
As indicated above, for 2020, companies were eligible for a credit equal to 50 percent of the first ten thousands of qualified wages paid per employee in the aggregate of each eligible quarter. Therefore, the maximum ERTC for the Company for 2020 is five thousand ($5,000) per employee. For the second and fourth quarters of 2020, the total eligible credit was limited to approximately $0.5 million.
Previous report
For 2021, the ERTC was 70% of the first ten thousand qualified wages paid per employee each quarter. Accordingly, the credit was limited to approximately $0.7 million. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERTC by analogy to ASC 450,Contingencies. Accordingly, under ASC 450, entities would treat the ERTCs (whether received in cash or as an offset to current or future payroll taxes) as if they were gain contingencies. When applying ASC 450-30, entities would not consider the probability of complying with the terms of the ERC program but, rather, would defer any recognition in the income statement until all uncertainties are resolved and the income is “realized” or “realizable” (i.e., upon receipt of the funds or formal notice by the IRS that the company is entitled to such funds). In our case, the Company elected to follow a more conservative approach and instead of recognizing a receivable for amounts to be received when the amended tax forms were filed in 2022, it was decided to wait for the notice from IRS and cash was received. As for financial statement presentation, it is believed that either classifying the amounts as a reduction to payroll tax expense (expense off-set is however contrary to U.S. GAAP) or as other income to be acceptable with appropriate disclosure of the election made by the company. However, the IRS issued a renewed warning regarding the ERTC on March 7, 2023 urging taxpayers to carefully review the ERTC guidelines. The Company continues to evaluate additional information from the IRS, and elected to disclose the funds received as a separate line item under long-term liabilities on the balance sheet, until more information becomes available from the IRS. As a result, for the year ended December 31, 2023, approximately $1.2 million was recorded under long-term liabilities.
Previous report
Loss and Gain Contingencies
Previous report
The Company is 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, the Company accrues that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss. The Company regularly evaluates current information available to it 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.
Previous report
Share-Based Compensation
Previous report
The Company measures 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. The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model. The Company estimates the expected term using the simplified method which is the average of the vesting term and the contractual term of the respective options. The Company determines the expected price volatility based on the historical volatilities of shares of the Company’s peer group as the Company does not have a sufficient trading history for its Common Stock. Industry peers consist of several public companies in the bio-tech industry similar to the Company in size, stage of life cycle and financial leverage. The Company 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 the Company’s own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. The Company recognizes 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. The Company recognizes 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.
Previous report
Research and Development
Previous report
Costs related to research and development are expensed as incurred and include costs associated with research and development of new products and enhancements to existing products. Research and development costs incurred were less than $0.1 million and less than $0.2 million for the years ended December 31, 2023 and 2022, respectively. These are recorded on the statement of operations under general and administrative expense.
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (60)
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. Approximately 42,000 patients have been treated to date worldwide with our entire current suite of products by more than 1,900 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. Nearly 58,000 patients have been treated to date worldwide with our entire current suite of products by more than 2,000 trained dentists.
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
VIP Enrollments (Service Revenue). Enrolling dental practices as VIPs has historically been 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.
Previous wording
In addition to enrollment service revenue, we offer additional services, such as our Billing Intelligence Services offering, and MyoCorrect orofacial myofunctional therapy services, which was introduced in April 2021. Revenue for these services is recognized as the Company’s performance obligations are satisfied in accordance with ASC 606.
Current wording
In addition to enrollment service revenue, we offer additional services, such as our Billing Intelligence Services offering, and MyoCorrect orofacial myofunctional therapy services, which was introduced in April 2021. Revenue for these services is recognized as our performance obligations are satisfied in accordance with ASC 606.
Previous wording
We are also engaging in strategic collaborations to market the benefits of the Vivos treatment modalities and VIP enrollment to dentists, including our cooperative relationships with various medical providers to deliver diagnostic and medical consultation services to people across North America who suffer from OSA.
Current wording
Because of our 2024 marketing and distribution business model pivot, we have become more focused on engaging in strategic collaborations or acquisitions to market the benefits of the Vivos treatment modalities to dentists and other medical providers, including our cooperative relationships with various medical providers to deliver diagnostic and medical consultation services to people across North America who suffer from OSA. As such, while we will continue to recognize some VIP enrollment revenue going forward, such revenue will become increasing less important to us.
Previous wording
We recognize revenue on VIP enrollments once the contract is executed, payment is received, and as the Company’s performance obligations are satisfied in accordance with ASC 606.
Current wording
We recognize revenue on VIP enrollments once the contract is executed, payment is received, and as our performance obligations are satisfied in accordance with ASC 606.
Previous wording
Product Sales Revenue. Enrolling new VIPs is key to our ability to generate revenue, but equally as important is the number of Vivos treatment case starts that our 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 38% of our VIPs initiated a new case as of December 31, 2023. 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. Vivos treatment case starts is paramount, as case starts lead to appliance orders and related revenue. Once a provider 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. The slow acceptance rate Vivos appliances with providers lead Vivos to consider other business models including the alliance marketing and distribution model announced in 2024 to sell additional product. 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 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 36% of our VIPs initiated a new case as of December 31, 2024. As noted, we believe that reducing our reliance on VIPs and increasing the number of strategic marketing and distribution alliances (or acquiring medical or dental practices) will provide us with a better opportunity to drive appliance sales going forward.
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 Versa, Vivos Vida and Vivos Vida Sleep. During the remainder of 2023 and beyond, we will look to increase sales of these acquired products, but we may be unable to do so to our advantage. 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 Versa, Vivos Vida and Vivos Vida Sleep.
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 will begin 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 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- 17 years of age who are diagnosed with snoring and/or moderate or severe obstructive sleep apnea and 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.
Previous wording
Also, 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. Subject to regulatory approvals, we could see revenue from this collaboration in 2024.
Current wording
Also, 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.
Previous wording
News of this lawsuit quickly spread throughout the country, and particularly within the dental and orthodontic communities. Within days, rumors and wildly untrue statements were published on social media platforms and elsewhere that began to associate and confuse Vivos appliances with the AGGA. Vivos management immediately responded to correct any misstatements and to set the record straight.
Current wording
News of this lawsuit quickly spread throughout the country, and particularly within the dental and orthodontic communities. Within days, rumors and wildly untrue statements were published on social media platforms and elsewhere that began to associate and confuse Vivos appliances with the AGGA. Vivos management immediately responded to correct any misinformation and to set the record straight.
Previous wording
Vivos was not named in the lawsuit, nor was our device implicated in creating the tooth displacement and other concerns that gave rise to the lawsuit. To our knowledge, in approximately 42,000 patients treated, Vivos oral appliances have never caused the loss of even a single tooth, and we have never been sued over a patient complaint or safety issue. Vivos has never had any association or affiliation with the AGGA device or its promoters, nor has the Company ever endorsed these kind of counterfeit fixed oral appliances that make unproven and unsubstantiated claims.
Current wording
Vivos was not named in the lawsuit, nor was our device implicated in creating the tooth displacement and other concerns that gave rise to the lawsuit. To our knowledge, in approximately 58,000 patients treated, Vivos oral appliances have never caused the loss of even a single tooth, and we have never been sued over a patient complaint or safety issue. Vivos has never had any association or affiliation with the AGGA device or its promoters, nor have we ever endorsed these kind of counterfeit fixed oral appliances that make unproven and unsubstantiated claims.
Previous wording
Our core product is The Vivos Method, not any one single device. We believe this is a key distinguishing factor for our approach. The Vivos Method involves far more than just our oral appliances. It begins with proper and thorough diagnosis and ends with a customized multidisciplinary treatment plan that likely incorporates one or more of several treatment modalities, including oral myofunctional therapy, SOT chiropractic, physical therapy, laser therapy, nutritional counseling, CPAP, mandibular advancement, CARE device therapy, and more. The Vivos Method is thus a fully integrated end-to-end diagnostic, training, and treatment platform that can adapt to the needs of virtually any and every breathing disordered sleep patient.
Current wording
Our core product is The Vivos Method, not any one single device. We believe this is a key distinguishing factor for our approach. The Vivos Method involves far more than just our oral appliances. It begins with proper and thorough diagnosis and ends with a customized multidisciplinary treatment plan that likely incorporates one or more of several treatment modalities, including oral myofunctional therapy, SOT chiropractic, physical therapy, laser therapy, nutritional counseling, CPAP, mandibular advancement, C.A.R.E. device therapy, and more. The Vivos Method is thus a fully integrated end-to-end diagnostic, training, and treatment platform that can adapt to the needs of virtually any and every breathing disordered sleep patient.
Previous wording
Unfortunately, and despite our best efforts to distance ourselves and our products from the AGGA device, the entire matter generated a certain amount of confusion and fear amongst both existing VIP dentists and other non-affiliated dentist prospects. Thus, new provider enrollments and sales of Vivos appliances in the third quarter decreased as word spread. By the latter part of June, we began to see a partial rebound in both new enrollments and appliance sales. Nevertheless, certain Vivos-trained providers remain very cautious and are being far more selective in their cases, which has continued to impact appliance sales through the end of the third quarter.
Current wording
Unfortunately, and despite our best efforts to distance ourselves and our products from the AGGA device, the entire matter generated a certain amount of confusion and fear amongst both existing VIP dentists and other non-affiliated dentist prospects. Thus, new provider enrollments and sales of Vivos appliances in the third quarter decreased as word spread in 2023. By the latter part of June 2024, we began to see a partial rebound in both new enrollments and appliance sales. Nevertheless, certain Vivos-trained providers remain very cautious and are being far more selective in their cases, which has continued to impact appliance sales through the end of the third quarter.
Previous wording
We believe that this is a short-term phenomenon and should not be a long-term hindrance to new case starts or new VIP enrollments, but the full impact of this phenomenon is hard to predict.
Current wording
We believe that this is a short-term phenomenon and should not be a long-term hindrance to new case starts, but the full impact of this phenomenon is hard to predict.
Previous wording
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 effective May 1, 2022. 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.
Current wording
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.
Previous wording
At the Hearing on November 9, 2023, we presented our plan to regain compliance with the minimum stockholders’ equity requirement (the “Equity Rule”), which plan includes raising additional equity capital. On November 30, 2023, we received a letter from the Hearings Panel that, subject to certain conditions, the Hearings Panel granted our request to continue to be listed on Nasdaq. These conditions include providing an update as to our plan to regain compliance with the Equity Rule as well as demonstrating compliance by March 19, 2024. On February 23, 2024 we presented our plan of compliance to the Hearings Committee. We believe that we will be able to regain and maintain compliance with both the minimum bid requirement and the minimum stockholders’ equity requirement, which would allow our common stock to continue to trade on Nasdaq. However, there can be no assurance that the Hearing Panel will agree with our plan, that will be provided adequate time to achieve compliance or, even if provided adequate time, that we will in fact be able to regain and maintain compliance with both requirements, in which case our common stock would be subject to delisting from Nasdaq. Such a delisting could have a material adverse effect on our stock price, the ability of our stockholders to buy or sell their common stock, and our reputation, all of which could make it significantly more difficult to operate our company.
Current wording
At the Hearing on November 9, 2023, we presented our plan to regain compliance with the minimum stockholders’ equity requirement (the “Equity Rule”), which plan includes raising additional equity capital. On November 30, 2023, we received a letter from the Hearings Panel that, subject to certain conditions, the Hearings Panel granted our request to continue to be listed on Nasdaq. These conditions include providing an update as to our plan to regain compliance with the Equity Rule as well as demonstrating compliance by March 19, 2024. On February 23, 2024 we presented our plan of compliance to the Hearings Committee. On May 6, 2024, we received written notice from the Nasdaq staff indicating that the Company had regained compliance with the Equity Rule.
Previous wording
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, 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.
Current wording
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 the sleep clinic, through our new strategic alliance 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.
Previous wording
Other income. Other income relates to the PPP loan forgiven in January 2022 by the SBA, as well as excess warrant fair value and change in fair value of warrant liability.
Current wording
Other income. Other income relates to the excess warrant fair value and change in fair value of warrant liability.
Previous wording
Revenue decreased approximately $2.2 million, or 14%, to approximately $13.8 million for the year ended December 31, 2023 compared to $16 million for the year ended December 31, 2022. Revenue during 2023 was impacted by a decrease of approximately $2.1 million in product revenue, coupled with a decrease of approximately $0.1 million in service revenue. The decrease in total revenue is attributable to a decrease of approximately $1.7 million in appliance sales to VIPs, followed by a decrease of approximately $0.9 million in VIP revenue, a decrease of approximately $0.4 million from our two company-owned dental centers, and a decrease of approximately $0.3 million in BIS revenue. This was offset by an increase of approximately $0.6 million from sleep testing services and devices and an increase of approximately $0.6 million in sponsorship, conference and training related revenue, respectively. Myofunctional therapy remained relatively unchanged at $0.9 million for the year ended December 31, 2023 and 2022.
Current wording
Revenue increased approximately $1.2 million, or 9%, to approximately $15.0 million for the year ended December 31, 2024 compared to $13.8 million for the year ended December 31, 2023. Revenue during the year ended December 31,2024 was impacted by an increase of approximately $1.6 million in product revenue, coupled with a decrease of approximately $0.4 million in service revenue. The increase in product revenue is attributable to an increase of approximately $2.1 million in Guide sales to VIPs, followed by a decrease of approximately $0.5 million in C.A.R.E. appliance sales to VIPs. Additionally, we had a decrease in service revenue of approximately $1.4 million in our VIP enrollment revenue, and a decrease of approximately $0.3 million from Myofunctional revenue. This was offset by an increase of approximately $1.3 million in sponsorship, conference and training related revenue. BIS revenue decreased by $0.1 million to approximately $0.8 million, which was offset by an increase of $0.1 million from sleep testing services to approximately $1.3 million for the year ended December 31, 2024.
Previous wording
During the year ended December 31, 2023, we enrolled 150 VIPs and recognized VIP revenue of approximately $3.9 million, a decrease of 19% in enrollment revenue, compared to the year ended December 31, 2022, when we enrolled 196 VIPs for a total of approximately $4.8 million. Revenue growth in 2023 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 23 months in 2023, an increase of 28%, compared to 18 months in 2022. This impacts the amortization of revenue to be spread over longer period of time, thus decreasing the revenue that is recognized over the same period when compared to 2022. Although this negatively impacts our revenue recognition, it is a result of customers staying active for 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, resulted in lower revenue for 2023.
Current wording
During the year ended December 31, 2024, we enrolled 112 VIPs and recognized VIP enrollment revenue of approximately $2.5 million, a decrease of approximately 37% in enrollment revenue, compared to the year ended December 31, 2023, when we enrolled 150 VIPs for a total of approximately $3.9 million. Service revenue decrease in 2024 was due to changes 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 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 December 31, 2023. Although such adjustment to customer lives negatively impacts our revenue recognition, increasing estimated customer lives results in customers staying active for a longer period of time, thus increasing our customer retention year-over-year. Additionally, our revenue was lowered by a sales strategy shift and focus toward sleep center affiliations, coupled with lower enrollments in late 2023 and all of 2024, which resulted in lower service revenue for the year ended December 31, 2024. This was offset by a higher incidence of 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 $1.7 million in revenue was attributable to breakage during the year December 31, 2024, when compared to approximately $0.7 million during the year ended December 31, 2023.
Previous wording
Cost of sales decreased by approximately $0.5 million to approximately $5.5 million for the year ended December 31, 2023 compared to approximately $6.0 million for year ended December 31, 2022. This was primarily related to a decrease of approximately $0.8 million in lower costs associated with appliances driven by the lower sales explained above, and a decrease of approximately $0.3 million related to VIP training. This was offset by an increase of approximately $0.3 million due to higher costs associated with the ring lease program, and an increase of approximately $0.1 million in membership support costs.
Current wording
Cost of sales increased by approximately $0.5 million, or 9%, to approximately $6.0 million for the year ended December 31, 2024, compared to approximately $5.5 million for the year ended December 31, 2023. This was primarily due to $1.2 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 a decrease of slightly over $0.3 million in VIP training, and a decrease of approximately $0.1 million for inventory obsolescence expense.
Previous wording
For the year ended December 31, 2023, gross profit decreased by approximately $1.7 million to $8.3 million. This decrease was attributable to a decrease in revenue of approximately $2.2 million offset by a decrease in cost of sales of $0.6 million. Gross margin decreased to 60% for the year ended December 31, 2023, compared to 63% for the year ended December 31, 2022.
Current wording
For the year ended December 31, 2024, gross profit increased by approximately $0.7 million to $9 million. This increase was attributable to an increase in revenue of approximately $1.2 million offset by an increase in cost of sales of approximately $0.5 million. Gross margin remained constant at 60% for the year ended December 31, 2024, compared year ended December 31, 2023.
Previous wording
General and administrative expenses decreased approximately $6.6 million, or approximately 23%, to approximately $22.5 million for the year ended December 31, 2023, as compared to $29.0 million for the year ended December 31, 2022. The primary driver of this decrease was a change in personnel and related compensation of approximately $3.7 million, including salaries and benefits, paid time off, stock-based compensation, and other employee-related expenses, as a result of reduction in force and less stock options granted during the year. Other drivers of the decrease in general and administrative expenses included a decrease of approximately $0.9 million related to travel expenses, a decrease of approximately $0.7 million on bad debt expense, a decrease of approximately $0.5 million related to insurance, a decrease of approximately $0.4 million in professional fees, and a decrease of approximately $0.4 million related to research and development, office supplies, bank charges and merchant fees as well as equipment repairs and maintenance, offset by an increase of $0.1 million for annual meeting and proxy related fees.
Current wording
General and administrative expenses decreased approximately $4.6 million, or approximately 20%, to approximately $17.9 million for the year ended December 31, 2024, as compared to $22.5 million for the year ended December 31, 2023. The primary driver of this decrease was a change in personnel and related compensation of approximately $1.7 million, including salaries and benefits, paid time off, stock-based compensation, and other employee-related expenses, as a result of reduction in force and less stock options vested during the year, as a result of the reduction in force implemented beginning with the second and third quarters of 2023 and into the year ended December 31, 2024. Other reasons for the decrease in general and administrative expenses include a decrease of approximately $1.8 million in professional fees, including consulting and legal fees. A decrease of approximately $0.4 million related to travel, meals and entertainment, a decrease of approximately $0.3 million related to insurance, a decrease of approximately $0.2 million related to change in the allowance for credit losses, and a decrease of approximately $0.2 million in infrastructure expenses such as communications, development and customization.
Previous wording
Sales and marketing expense decreased by $2.9 million to $2.5 million for the year ended December 31, 2023, compared to $5.3 million for the year ended December 31, 2022. This decrease was primarily driven by a $1.0 million decrease in commissions, as well as a $1.0 million decrease related to a reduction in website development, materials and product samples as well as print media and marketing supplies, and a decrease of $0.9 million in conventions and tradeshow expenses.
Current wording
Sales and marketing expense decreased by $0.7 million to approximately $1.7 million for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31, 2023. This decrease was primarily driven by a $0.4 million decrease in commissions, as well as a $0.3 million decrease related to a reduction in website development, materials and product samples as well as print media and marketing supplies, including conventions and tradeshow expenses.
Previous wording
Depreciation and amortization expense was approximately $0.6 and $0.7 million for the years ended December 31, 2023 and 2022, respectively. Depreciation and amortization remained constant during the period due to an immaterial amount of depreciable assets placed into service.
Current wording
Depreciation and amortization expense was approximately $0.6 million for the years ended December 31, 2024 and 2023. Depreciation and amortization remained constant during the period due to an immaterial amount of depreciable assets placed into service.
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 $13.6 and $23.8 million for the years ended December 31, 2023 and 2022, respectively, resulting in an accumulated deficit of approximately $93.1 million as of December 31, 2023.
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. We have incurred losses since inception, including $11.1 and $13.6 million for the years ended December 31, 2024 and 2023, respectively, resulting in an accumulated deficit of approximately $104.2 million as of December 31, 2024.
Previous wording
Net cash used in operating activities amounted to approximately $11.9 and $19.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had total liabilities of approximately $10.3 million.
Current wording
Net cash used in operating activities amounted to approximately $12.7 and $11.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had total liabilities of approximately $7.3 million as compared with $10.3 million as of December 31, 2023.
Previous wording
As of December 31, 2023, we had approximately $1.6 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 16 to the financial statements included in this Report for additional information regarding our financing activity following the year ended December 31, 2023.
Current wording
As of December 31, 2024, we had approximately $6.3 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 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 have not grown during 2023 as anticipated as our product offerings and strategies are refined. As such, we now anticipate that we will be required to obtain additional financing to satisfy our cash needs, as management continues to work towards increasing revenue and achieving cash flow positive operations in the foreseeable future.
Current wording
We have implemented cost savings measures that lead to reduced impact to cash used in operations. However, sales did not grow in the year ended December 31, 2023 or in 2024 as anticipated, as our product offerings and distribution strategies continue to be improved and refined. As such, we have raised equity capital in late 2023 and throughout 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 its 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 that our new sales and marketing alliance with Rebis (and similar alliances or acquisitions of sleep centers or other providers we may undertake) have the potential to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, there can be no assurances that this new model will have effects we anticipate, and our relatively low cash on hand could lead us to again requiring additional funding. There is a risk that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or that if our new model does not result in the patient volume and financial results within the expected timelines, we may also 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
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 its financial condition, results of operations, liquidity, capital expenditures or capital resources.
Current wording
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.
Previous wording
Net cash used in operating activities of approximately $11.9 million for the year ended December 31, 2023 is a decrease of approximately $7.6 million compared to net cash used in operating activities of approximately $19.6 million for the year ended December 31, 2022. This decrease is due primarily to the decrease in our net loss of approximately $10.3 million, 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 $1.2 million for the PPP loan, an increase of approximately $1.2 million for the employee retention credit liability, an increase of approximately $0.7 million in prepaid expenses and other current assets, and a decrease of approximately $1.3 million in stock-based compensation. This was offset by a decrease of approximately $0.3 million in accounts receivable related to the MID clinics and VIP enrollments under payment plans.
Current wording
Net cash used in operating activities of approximately $12.7 million for the year ended December 31, 2024 is an increase of approximately $0.7 million compared to net cash used in operating activities of approximately $11.9 million for the year ended December 31, 2023. This increase is due primarily to a decrease of approximately $1.8 million in accounts payable, decrease of approximately $0.5 million in accrued expenses, a decrease of approximately $1.2 million for the employee retention credit liability which was not present in 2024, a decrease in accounts receivable of approximately $0.4 million offset by the decrease in the allowance for doubtful accounts, an decrease in prepaids of approximately $1.0 million, and a decrease in fair value of common stock and warrants issued for services of approximately $0.7 million. This was offset by a decrease in our net loss of approximately $2.5 million, 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.
Previous wording
For the year ended December 31, 2023, net cash used in investing activities consisted of capital expenditures for software of $0.9 million related to the development of software for internal use, expected to be placed in service in 2024, as well as a purchase of a patent portfolio in February 2023. This compares to net cash used in investing activities for the year ended December 31, 2022 of $0.9 million due to capital expenditures for internally developed software.
Current wording
For the year ended December 31, 2024, net cash used in investing activities consisted of capital expenditures for software of $0.6 million related to the development of software for internal use, expected to be placed in service in 2025. This compares to net cash used in investing activities for the year ended December 31, 2023 of $0.9 million due to capital expenditures for internally developed software, as well as a purchase of a patent portfolio in February 2023.
Previous wording
Net cash provided by financing activities of $10.9 million for the year ended December 31, 2023, is attributable to proceeds of $12.0 million from the issuance of Common Stock, net of approximately $1.1 million of professional fees and other issuance costs, in our private placements in January 2023 and November 2023. There was no cash used for financing activities for the year ended December 31, 2022.
Current wording
Net cash provided by financing activities of $17.9 million for the years ended December 31, 2024, is attributable to proceeds of $19.2 million from the issuance of Common Stock and Warrants, net of approximately $1.4 million of professional fees and other issuance costs, in our February warrant inducement, as well as the June, September and December private placements. This compares to net cash used in investing financing for the year ended December 31, 2023 of $10.9 million, attributable to gross proceeds of $12.0 million from the issuance of Common Stock, net of approximately $1.1 million of professional fees and other issuance costs, from our private placement in January and November 2023.
Previous wording
The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway Alliances, LLC, a Colorado limited liability company), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation.
Current wording
Our accounting policies are more fully described in Note 1 of the Consolidated Financial Statements. As disclosed in Note 1, the accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway Alliances, LLC, a Colorado limited liability company), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation.
Previous wording
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, the Company 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.
Current wording
We are 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.
Previous wording
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. The Company currently expects to retain its status as an EGC until the year ending December 31, 2026, but this status could end sooner under certain circumstances.
Current wording
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 until the year ending December 31, 2025, but this status could end sooner under certain circumstances.
Previous wording
The Company generates revenue from the sale of products and services. A significant majority of the Company’s 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 prior fiscal quarters 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 the Company expects to be entitled to in exchange for those products and services.
Current wording
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.
Previous wording
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”), the Company determines revenue recognition through the following five-step model, which entails:
Current wording
Following the guidance ofASC Topic 606, Revenue from Contracts with Customers(“ASC 606”) and the applicable provisions ofASC Topic 842,Leases (“ASC 842”), we determine revenue recognition through the following five-step model, which entails:
Previous wording
The Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. 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 $26,200, with different entry levels for the various programs described above. Unearned revenue reported on the balance sheet as contract liability represents the portion of fees paid by VIP customers for services that have not yet been performed as of the reporting date and are recorded as the service is rendered. The Company recognizes this revenue as performance obligations are met. Accordingly, the contract liability for unearned revenue is a significant liability for the Company. Provisions for discounts are provided in the same period that the related revenue from the products and/or services is recorded.
Current wording
We review its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. 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 $23,200, with different entry levels for the various programs described above. Unearned revenue reported on the balance sheet as contract liability represents the portion of fees paid by VIP customers for services that have not yet been performed as of the reporting date and are recorded as the service is rendered. we recognize this revenue as performance obligations are met. Accordingly, the contract liability for unearned revenue is a significant liability for us. Provisions for discounts are provided in the same period that the related revenue from the products and/or services is recorded.
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