Vivos Therapeutics Inc
For the period ended Mar 31, 2025. Filed May 15, 2025.
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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.
Mar 31, 2025 · Filed May 15, 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-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045888
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001641172-25-010874
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 107 previous paragraphs and 66 current paragraphs.
26 unchanged; 31 reworded; 8 added; 48 removed; 2 previous and 1 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 (8)
Current report
Enrollments (Service Revenue) and Pivot in Marketing and Distribution Model
Current report
Enrolling dental practices as VIPs has historically been the first step in our ability to generate new revenue. However, as a result of our strategic pivot away from growing our VIP model and toward the acquisition and operation of medical and dental sleep medicine centers, we have reduced our sales personnel in connection with our VIP business model and generally ceased recruitment of new VIP dentists. As a result, future revenue from VIP enrollments is expected to decline substantially, and although we will continue to recognize some VIP enrollment revenue going forward in accordance with ASC 606, such revenue will make up proportionately less of our total revenue over time. While we will continue to provide technical and product support to our existing VIP customer base, we have also redeployed and refocused training facilities, programs and personnel on training and supporting the dentists, staff members, nurse practitioners, physician assistants, and medical doctors who work in one of the Company’s Sleep and Airway Medicine Centers as part of our new strategic model.
Current report
We will continue to shift our efforts away from educating, training and supporting independent VIP dentists and to pivot substantially all our focus and resources towards our new strategic alliance and acquisition model. We will, however, continue to provide technical and product support to our existing VIP customer base.
Current report
On April 15, 2025, we signed a definitive agreement to acquire the assets of a sleep testing center business in Las Vegas, Nevada known as Sleep Center of Nevada (“SCN”). We have subsequently signed a non-binding term sheet with a lender who will provide $7,500,000 in net financing, before certain fees and other costs, and expect to close the acquisition in June or July 2025. If consummated, we believe the acquisition will bring our OSA treatment technology and other diagnostic and therapeutic services to numerous patients in that market. Moreover, we expect to realize greater revenue growth and potential for profitability as we integrate our products and services into SCN’s business. In addition to the SCN acquisition, we are seeking other potential transactions (either strategic alliances or outright acquisition) with similar sleep specialty centers.
Current report
*Trade Policy Risk.*Certain of our products or components are manufactured outside the United States. Most products imported into the United States is subject to duty and restrictive quotas on the amount of products that can be imported from certain countries into the United States each year. Because of the duty rates and quotas, changes in U.S. trade policy as reflected in the imposition of tariffs, trade legislation, trade preference programs and trade agreements have the potential to materially impact our sourcing strategy and the competitiveness of our contract manufacturers. We manage this risk by continually monitoring U.S. trade policy, analyzing the impact of changes in such policy and adjusting its manufacturing and sourcing strategy accordingly.
Current report
Potential Nasdaq Delisting. As previously reported, we were previously subject to a Nasdaq Stock Market (“Nasdaq”) listing deficiencies related to Nasdaq’s $2,500,000 minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”).
Current report
Revenue decreased approximately $0.4 million, or 12%, to approximately $3.0 million for the three months ended March 31, 2025 compared to $3.4 million for the three months ended March 31, 2024. Revenue during the first three months of 2025 was impacted by a decrease of approximately $0.5 million in service revenue, offset by an increase of $0.1 million in product revenue. The increase in product revenue is attributable to an increase of approximately $0.1 million in C.A.R.E. appliance and Guide sales to VIPs. Additionally, we had a decrease in service revenue of approximately $0.7 million in VIP enrollment, and a decrease of approximately $0.1 million from BIS and Myofunctional revenue. This was offset by an increase of approximately $0.2 million in sponsorship, conference and training related revenue.
Current report
For the three months ended March 31, 2025, we sold 3,736 oral appliance arches for a total of approximately $1.8 million, an 8% increase in revenue from the three months ended March 31, 2024, when we sold 1,996 oral appliance arches for a total of approximately $1.7 million. The increase is directly attributable a higher volume in Guide sales, which are lower revenue generating products when compared to Vivos C.A.R.E. appliances.
Removed paragraphs (48)
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
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.
Previous 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.
Previous 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 restricts 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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).
Previous 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 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.
Previous report
Impact of COVID-19
Previous report
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 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.
Previous 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.
Previous report
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 report
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.
Previous report
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.
Previous report
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.
Previous report
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 32% of our VIPs initiated a new case as of September 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 report
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 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 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 nine months of 2024.
Previous report
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 report
*Impact on Sales from Unregistered Oral Appliance Publicity.*On or about March 1, 2023, CBS News reported the tragic case of a woman with a malocclusion and breathing problem who had received treatment via a fixed oral appliance known as the AGGA (Anterior Growth Guidance Appliance). The AGGA is a non-FDA cleared oral appliance developed by Dr. Steve Galella, a dentist from Tennessee. According to the televised CBS report, the device created serious issues with her dentition and jaws, resulting in the loss of several anterior teeth. The patient filed a $10 million lawsuit against the treating dentist.
Previous report
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. 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.
Previous report
The FDA regulates and categorizes all medical devices claiming to treat obstructive sleep apnea (OSA) and/or TMD disorders as Class II devices and requires that they have a 510(k) clearance in order to be used with patients. The AGGA device does not have any such FDA clearance, nor are there any known peer-reviewed and published studies validating the safety and efficacy of this device. In stark contrast, all Vivos oral appliances are duly registered or cleared by the FDA according to strict FDA guidelines. Our appliances and attending protocols for proper use are also backed by extensive peer reviewed published research. Moreover, Vivos appliances operate on a completely different mechanism of action than that of the AGGA and similar devices on the market. Vivos has always maintained that such appliances tend to create inflammation and pose other risks that are unacceptable. The AGGA is a fixed appliance, whereas Vivos appliances are removable devices.
Previous report
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 first quarter 2023 decreased as word spread. By the latter part of June 2023, we began to see a partial rebound in new enrollments. 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 2023 and into 2024.
Previous report
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.
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 2023 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 and in the first quarter of 2024. 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
Comparison of the three and nine months ended September 30, 2024 and 2023
Previous report
Revenue increased by approximately $0.6 million, or 17%, to approximately $3.9 million for the three months ended September 30, 2024 compared to $3.3 million for the three months ended September 30, 2023. The increase in total revenue during the third quarter of 2024 due to an increase of approximately $0.5 million in product revenue due to higher product sales and an increase of approximately $0.1 million in service revenue. The increase in product revenue is attributable to an increase of approximately $0.4 million in appliances sales and approximately $0.1 million in guide sales to existing VIPs. The increase in service revenue is attributable to an increase of approximately $0.2 million in sponsorship, seminar and other service revenue, offset by a decrease of $0.1 in VIP enrollments and Myofunctional therapy revenues. Lastly, BIS and sleep testing services revenue remained flat for the three months ended September 30, 2024 and 2023.
Previous report
For the three months ended September 30, 2024, we sold 1,954 oral appliance arches for a total of approximately $2.0 million, a 34% increase in revenue from the three months ended September 30, 2023, when we sold 1,809 oral appliance arches for a total of approximately $1.5 million. The increase in revenue is directly attributable to an 83% decrease in discounts for such appliances, offered during the same period, with less than $0.1 million in discounts offered during the three months ended September 30, 2024 when compared to approximately $0.2 million during the three months ended September 30, 2024. Refer to the section “Material Items, Trends and Risks Impacting Our Business” above for events that impacted our product sales.
Previous report
General and administrative expenses decreased approximately $0.1 million, or approximately 2%, to approximately $4.5 million for the three months ended September 30, 2024, as compared to $4.6 million for the three months ended September 30, 2023. The primary driver of this decrease was $0.1 million in employee compensation, 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 and third quarter of 2023 and 2024. Coupled with a decrease of approximately $0.1 million in travel, meals and entertainment, and a decrease of approximately $0.1 million related to taxes, licenses and other fees. This was offset by an increase of approximately $0.2 million related to professional fees including fees for consultants and legal services.
Previous report
Depreciation and amortization expense was approximately $0.1 million for the three months ended September 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 report
Excess warrant fair value and change in fair value of warrant liability, net of issuance costs
Previous report
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 $1.6 million for the three months ended September 30, 2023 was driven by a decrease of 62% in the stock price or approximately $7.95 per share during the period. 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 third quarter of 2024.
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Comparison of the nine months ended September 30, 2024 and 2023
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Revenue
Previous report
Revenue increased approximately $0.8 million, or 7%, to approximately $11.3 million for the nine months ended September 30, 2024 compared to $10.6 million for the nine months ended September 30, 2023. The increase in revenue during the nine months of 2024 due to an increase of approximately $0.8 million in product revenue due to higher product sales. The increase in product revenue is attributable to an increase of approximately $0.5 million in appliances sales, coupled with an increase of approximately $0.3 million in guide sales 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 $0.2 million in VIP enrollment revenue. This was offset by an increase of approximately $0.3 million in sponsorship, seminar and other service revenue, and an increase of approximately $0.1 million in sleep testing services. BIS revenue remained unchanged for the nine months ended September 30, 2024 and 2023.
Previous report
During the nine months ended September 30, 2024, we enrolled 87 VIPs and recognized VIP enrollment revenue of approximately $3.0 million, a decrease of approximately 6% in enrollment revenue, compared to the nine months ended September 30, 2023, when we enrolled 110 VIPs for a total of approximately $3.2 million. Revenue decrease in the first nine months of 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 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 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 late 2023 and all of 2024, which resulted in lower service revenue for the nine months ended September 30, 2024. This was offset 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 $1.5 million in revenue was attributable to breakage during the nine months ended September 30, 2024, when compared to approximately $0.4 million during the nine months ended September 30, 2023.
Previous report
For the nine months ended September 30, 2024, we sold 5,993 oral appliance arches for a total of approximately $5.6 million, a 17% increase in revenue from the nine months ended September 30, 2023, when we sold 6,261 oral appliance arches for a total of approximately $4.8 million. The increase is directly attributable to a 66% decrease in discounts offered during the same period, with less than $0.2 million in discounts offered during the nine months ended September 30, 2024 when compared to approximately $0.6 million of discounts offered during the nine months ended September 30, 2023. Refer to the section “Material Items, Trends and Risks Impacting Our Business” above for events that impacted our product sales.
Previous report
Cost of sales remained relatively constant with an increase of less than $0.1 million, or 1%, at approximately $4.4 million for the nine months ended September 30, 2024, compared to slightly under $4.4 million for the nine months ended September 30, 2023. This was primarily due to $0.7 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 $0.2 million in VIP training, and a decrease of approximately $0.2 million for inventory obsolescence expense.
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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 47,000 patients have been treated to date, worldwide, with our entire current suite of products by more than 2,000 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 59,000 patients have been treated to date worldwide with our entire current suite of products by more than 2,000 trained dentists.
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 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.
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 to 17 years of age who are diagnosed with snoring and/or moderate or severe obstructive sleep apnea who need orthodontic treatment. Enrollment of 150 patients with moderate to severe sleep apnea (apnea-hypopnea index score of 15 or greater) will be randomly assigned to either treatment with our FDA-cleared DNA appliance or CPAP. The protocol has been finalized, and enrollment began in 2024. Late 2024, our clinical study conducted in collaboration with Stanford University and evaluating the DNA and CPAP for the treatment of OSA, was placed on hold by Stanford University. The decision to pause the study was made due to low recruitment into the study.
Previous 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.
Current 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.
Previous wording
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, which are pending in several countries under the agreement, we could see revenue from this collaboration in the latter part of 2024.
Current wording
For example, in October 2023, we announced an exclusive distribution agreement with NOUM DMCC, a Dubai-based company focused on diagnostic testing and treatment product distribution for healthcare providers and hospital networks treating obstructive sleep apnea patients throughout the Middle East-North Africa region. With regulatory approvals pending, there was no revenue from this collaboration in 2024 and thus far in 2025.
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. In addition, future price adjustments may be required 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
An additional inflation-related risk is the Federal Reserve's involvement with interest rates with recent history both increasing and decreasing interest rates in order to manage inflation. Such actions have, in times past, created unintended consequences in terms of the impact on housing starts, overall manufacturing, capital markets, and banking. If such disruptions become systemic, as occurred in the recession of 2008, then the impact on our revenue, earnings and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.
Current wording
An additional inflation-related risk is the Federal Reserve’s response to inflation, which as of the date of this Report, has been to maintain elevated interest rates. Such actions have, in times past, created unintended consequences for housing starts, overall manufacturing, the capital markets, and the banking sector. If such disruptions become systemic, as occurred in the recession of 2008, then the impact on our revenue, earnings and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.
Previous wording
*War in Ukraine and Middle East Hostilities.*In addition, worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and the attacks by Hamas on Israel in October of 2023 and Israel’s responses (including recent military engagement in Lebanon and with Iran) have disrupted commercial and capital markets, and emerged as potential barriers to long-term economic recovery. If an economic recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.
Current wording
*War in Ukraine and Middle East Hostilities.*In addition, worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and the attacks by Hamas on Israel in October of 2023 and Israel’s responses have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery. If an economic recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.
Previous wording
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 wording
On May 16, 2024, we received a written notice from Nasdaq indicating that, as of March 31, 2024, we failed to comply with the Equity Requirement. On June 25, 2024, we reported in a Current Report on Form 8-K that it believed it had stockholders’ equity of at least $2.5 million as of the date of the filing of such report as a result of our closing of a $7.5 million equity private placement on June 10, 2024.
Previous wording
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 wording
On June 27, 2024, we met with the Nasdaq Hearing Panel (the “Hearing Panel”) to discuss our past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of its securities on Nasdaq.
Previous wording
The Company is working diligently to ensure its continued compliance with the Equity Requirement, including its $4.3 million shelf offering in September 2024 as well as exploring potential additional equity capital 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 wording
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.
Previous wording
Key Components of Condensed Consolidated Statements of Operations
Current wording
Key Components of Consolidated Statements of Operations
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. Net 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 any sleep clinic, through our new marketing and distribution model, in the case of enrollment or service revenue, upon our satisfaction of performance obligations associated with VIP enrollments. Revenue consists of the gross sales price, net of estimated allowances, discounts, and personal rebates that are accounted for as a reduction from the gross sale price.
Previous wording
Cost of sales. Cost of goods sold primarily consists of direct costs attributable to the purchase from third party suppliers and related products. It also includes freight costs, fulfillment, distribution, and warehousing costs related to products sold. A prior period amount of less than $0.2 million previously classified as “Loss on inventory write-down” has been reclassified to “Cost of sales” in the current period’s financial statements to better reflect the nature of these transactions and to enhance the comparability of financial statemen line items across periods.
Current wording
Cost of sales. Cost of goods sold primarily consists of direct costs attributable to the purchase from third party suppliers and related products. It also includes freight costs, fulfillment, distribution, and warehousing costs related to products sold.
Previous wording
Other income. Other income relates to interest income in 2024, as well as excess warrant fair value and change in fair value of warrant liability in 2023.
Current wording
Other income. Other income relates to interest income and the excess warrant fair value and change in fair value of warrant liability.
Previous wording
Our consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 are presented below (dollars in thousands):
Current wording
Our consolidated statements of operations for the three months ended March 31, 2025 and 2024 are presented below (dollars in thousands):
Previous wording
During the three months ended September 30, 2024, we enrolled 5 VIPs and recognized VIP enrollment revenue of approximately $0.9 million, a decrease of approximately 6% in enrollment revenue, compared to the three months ended September 30, 2023, when we enrolled 29 VIPs for a total of approximately $1.0 million in revenue. Revenue decrease in the third quarter of 2024 was impacted by a reduction in VIP enrollments due to a change in sales strategy and focus toward sleep center affiliations, offset 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 $0.5 million in revenue was attributable to breakage during the three months ended September 30, 2024, when compared to approximately $0.3 million during the three months ended September 30, 2023.
Current wording
During the three months ended March 31, 2025, we recognized VIP enrollment revenue of approximately $0.2 million, a decrease of approximately 75% in enrollment revenue, compared to approximately $0.9 million for the three months ended March 31, 2024. Service revenue overall decreased due to a sales strategy shift and focus toward sleep center affiliations, coupled with lower enrollments in early 2024, and no enrollment since October 2024. This was slightly offset by breakage in contracts, which accelerated revenue recognition on several contracts for VIPs who did not complete their training during the first 90 days of their enrollment. Approximately $0.1 million in revenue was attributable to breakage during the three months ended March 31, 2025, when compared to approximately $0.4 million during the three months ended March 31, 2024.
Previous wording
Cost of sales remained relatively constant with a decrease of less than $0.1 million or 2% at approximately $1.5 million for the three months ended September 30, 2024, compared $1.6 million for the three months ended September 30, 2023. This was primarily related to $0.1 million decrease in sleep testing reporting and $0.1 million decrease in VIP training related costs, due to lower enrollments and fewer training sessions scheduled during the period.
Current wording
Cost of sales remained relatively constant with an increase of less than $0.1 million or 2% at approximately $1.5 million for the three months ended March 31, 2025, compared to slightly under $1.5 million for the three months ended March 31, 2024. This was primarily related to $0.2 million in higher costs associated with appliances, driven by the higher product sales as explained above. This was offset by a decrease of approximately $0.1 million due to lower costs associated with medical reporting expense and membership support costs as a result of no VIP enrollments during the period.
Previous wording
For the three months ended September 30, 2024, gross profit increased by approximately $0.6 million to $2.3 million. This increase was attributable to an increase in revenue of approximately $0.6 million. Gross margin increased to 60% for the three months ended September 30, 2024, compared to 53% for the three months ended September 30, 2023, due primarily to the revenue increase.
Current wording
For the three months ended March 31, 2025, gross profit decreased by approximately $0.4 million to $1.5 million. This decrease was attributable to the decrease in revenue of approximately $0.4 million. Gross margin decreased to 50% for the three months ended March 31, 2025, compared to 57% for the three months ended March 31, 2024 due to the decrease in service revenue.
Previous wording
General and administrative expenses decreased by approximately $3.5 million, or approximately 20%, to approximately $13.5 million for the nine months ended September 30, 2024, as compared to $17 million for the nine months ended September 30, 2023. The primary cause of this decrease was $1.6 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 and third quarter of 2023 and 2024. Other cause of the decrease in general and administrative expenses included a decrease of approximately $0.2 million related to change in allowance for credit losses, a decrease of approximately $0.3 million related to insurance, a decrease of approximately $0.2 million in travel, meals and entertainment, 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.
Current wording
General and administrative expenses remained relatively constant with a decrease of less than $0.1 million or 1% to approximately $4.9 million for the three months ended March 31, 2025, as compared to slightly over $4.9 million for the three months ended March 31, 2024. The primary cause of this decrease was $0.1 million in travel, meals and entertainment, a decrease of approximately $0.1 million related to being a public company, and a decrease of less than $0.1 million related to change in the allowance for credit losses. This was offset by an increase of approximately $0.1 million in professional fees, including consulting and legal fees and approximately $0.1 million in infrastructure expenses such as communications, development and customization.
Previous wording
Sales and marketing expenses decreased by approximately $0.3 million or approximately 46%, to $0.3 million for the three months ended September 30, 2024, compared to approximately $0.6 million for the three months ended September 30, 2023. This decrease was primarily driven by lower commissions and digital media and marketing supplies.
Current wording
Sales and marketing expenses decreased by $0.3 million to approximately $0.4 million for the three months ended March 31, 2025, compared to $0.7 million for the three months ended March 31, 2024. This decrease was primarily driven by a $0.3 million decrease in commissions related to lower service revenue.
Previous wording
Depreciation and amortization expense was approximately $0.4 million for the nine months ended September 30, 2024 and approximately $0.5 million for the nine months ended September 30, 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 wording
Depreciation and amortization expense was approximately $0.2 million for the three months ended March 31, 2025 and approximately $0.1 million for three months ended March 31, 2024, respectively. Depreciation and amortization had a slight increase during the period due to assets being placed into service.
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 $8.3 and $9.3 million for the nine months ended September 30, 2024 and 2023, respectively, resulting in an accumulated deficit of approximately $101.4 million as of September 30, 2024.
Current wording
The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate our continuation as a going concern. We have incurred losses since inception, including $3.9 and $3.8 million for the three months ended March 31, 2025 and 2024, respectively, resulting in an accumulated deficit of approximately $108 million as of March 31, 2025.
Previous wording
Net cash used in operating activities amounted to approximately $9.8 and $9.2 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had total liabilities of approximately $7.7 million.
Current wording
Net cash used in operating activities amounted to approximately $3.8 and $2.5 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had total liabilities of approximately $6.9 million.
Previous wording
As of September 30, 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.
Current wording
As of March 31, 2025, we had approximately $2.3 million in cash and cash equivalents, which will not be sufficient to fund operations and strategic objectives over the next twelve months from the date of the issuance of these financial statements. Without additional financing, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
Previous wording
We have implemented cost savings measures that lead to reduced impact to 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.
Current wording
We have implemented cost savings measures that have reduced cash used in operations. However, as our product offerings and strategies continue to be refined, our sales did not grow during either of our fiscal years ended 2023 or 2024, nor the first quarter of 2025 as anticipated. As such, we have raised equity capital in the financial year ended December 31, 2023 and 2024. We intend to obtain additional financing to satisfy our cash needs (including the $6 million in cash required for our acquisition of SCN) and increase our stockholders’ equity for Nasdaq compliance purposes as our management attempts to increase revenue to achieve positive cash flow from our operations.
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. 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.
Current wording
Until we have attained positive cash flow, our management is reviewing all options to obtain additional financing to fund our operations. This financing is expected to come primarily from the issuance of debt or equity securities in order to sustain operations until we can close our Sleep Center of Nevada acquisition and ultimately achieve positive cash flows, if ever. We originally expected the Strategic Alliance Agreement (“SAA”) with Rebis entered into in June 2024 to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, due to ongoing delays at Rebis that are beyond our control, we are currently re-evaluating and lowering our revenue expectations under the SAA and are seeking to make other acquisitions or enter into other strategic alliances (such as our pending acquisition of SCN). There can be no assurances that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or the SAA agreement or similar alliances or acquisitions do not result in the patient volume, appliance sales and financial results within the timeframes we expect, we may be required to delay, significantly modify or terminate some or all of our operations, all of which could have a material adverse effect on us and our stockholders.
Previous wording
The following table presents a summary of our cash flow for the nine months ended September 30, 2024 and 2023 (in thousands):
Current wording
The following table presents a summary of our cash flow for the three months ended March 31, 2025 and 2024 (in thousands):
Previous wording
Net cash used in operating activities of approximately $9.8 million for the nine months ended September 30, 2024 is an increase of approximately $0.6 million compared to net cash used in operating activities of approximately $9.2 million for the nine months ended September 30, 2023. This increase is due primarily to a $1.2 million decrease in account payable for the nine months ended September 30, 2024, a decrease of $0.7 million of prepaid expenses and other assets, $0.5 million in accounts receivable, a decrease of approximately $0.5 million in contract liability, and a decrease of approximately $0.4 million in accrued expenses and other liabilities. This was offset by the absence of a 2023 unfavorable net change in the fair value of warrant liability of approximately $3.9 million.
Current wording
Net cash used in operating activities of approximately $3.8 million for the three months ended March 31, 2025 is an increase of approximately $1.3 million compared to net cash used in operating activities of approximately $2.5 million for the three months ended March 31, 2024. This increase is due primarily to a decrease of approximately $0.9 million in contract liability, a decrease of approximately $0.6 million in accrued expenses, a decrease of approximately $0.2 million in accounts payable, offset by the increase in other liabilities of approximately $0.4 million.
Previous wording
For the nine months ended September 30, 2024, net cash used in investing activities consisted of capital expenditures for software of $0.4 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 nine months ended September 30, 2023 of $0.7 million due to capital expenditures for internally developed software and an asset purchase.
Current wording
For the three months ended March 31, 2025, net cash used in investing activities consisted of capital expenditures for software of $0.1 million related to the development of software for internal use, which was placed in service in March 2025, as compared to net cash used in investing activities for the three months ended March 31, 2024 of $0.2 million from capital expenditures for internally developed software.
Previous wording
Net cash provided by financing activities of $14.8 million for the nine months ended September 30, 2024, is attributable to proceeds of $15.7 million from the issuance of Common Stock and Warrants, net of approximately $0.9 million of professional fees and other issuance costs, in our February warrant inducement, as well as the June and September private placements. This compares to net cash used in investing financing for the nine months ended September 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.
Current wording
No cash was provided by financing activities for the three months ended March 31, 2025, as compared to net cash provided in financing activities of $3.6 million for the three months ended March 31, 2024, is attributable to proceeds of $3.9 million from the issuance of Common Stock, net of approximately $0.3 million of professional fees and other issuance costs, in our February 2024 warrant inducement.
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 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 nine months ended September 30, 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 and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the three months ended March 31, 2025.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Cost of Sales and Gross Profit
Previous report — wording carried elsewhere
Other income of less than $0.1 million includes interest income from financial institutions.