UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
For the Fiscal Year Ended December 31, 2022
For the Transition Period from to
Commission
File Number: 001-39796
Vivos
Therapeutics, Inc.
(Exact
Name of Registrant as Specified in its Charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (866) 908-4867
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of exchange on which registered
Common stock, par value $0.0001 per share VVOS Nasdaq Capital Market
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). YES ☒ NO ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, or “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☒
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO X
As
of June 30, 2022, the last business day of the second fiscal quarter, the aggregate market value of the registrant’s voting stock
held by non-affiliates, was approximately $23.2 million based on the last reported sales price of $1.29 as quoted on the Nasdaq Capital
Market on such date.
The
registrant had 29,678,786 shares of its common stock, $0.0001 par value per share, outstanding as of March 28, 2022.
TABLE
OF CONTENTS
Page
Cautionary Note Regarding Forward-Looking Statements -ii-
Summary of Material Risks Associated with our Business -iii-
Part I
Item 1. Business -1-
Item 1A. Risk Factors -26-
Item 1B. Unresolved Staff Comments -57-
Item 2. Properties -57-
Item 3. Legal Proceedings -57-
Item 4. Mine Safety Disclosures -59-
Part II
Item 6. Reserved -62-
Item 7A. Quantitative and Qualitative Disclosures About Market Risk -75-
Item 8. Financial Statements and Supplementary Data -76-
Item 9A. Controls and Procedures -105-
Item 9B. Other Information -105-
Part III
Item 10. Directors, Executive Officers and Corporate Governance -106-
Item 11. Executive Compensation -113-
Item 14. Principal Accountant Fees and Services -125-
Part IV
Item 15. Exhibits and Financial Statement Schedules -125-
Signatures -127-
-i-
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The
forward-looking statements are contained principally in the sections entitled “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that known and unknown risks,
uncertainties and other factors, including those over which we may have no control and others listed in the “Risk Factors”
section of this Annual Report on Form 10-K, may cause our actual results, performance or achievements to be materially different from
those expressed or implied by the forward-looking statements.
You
can identify some of these forward-looking statements by words or phrases such as “may,” “hope,” “will,” “expect,” “anticipate,” “aim,” “estimate,”
“intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue”
or the negative of these terms or other comparable terminology. We have based these forward-looking
statements largely on our current expectations and projections about future events that we believe may affect our financial condition,
results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
-ii-
● acceptance by the marketplace of the products and services that we market;
● our ability to retain key employees;
● our future financing plans; and
These
forward-looking statements involve numerous risks and uncertainties. Although we believe that our expectations expressed in these forward-looking
statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other
matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our
actual results to be materially different from our expectations are generally set forth in “Risk Factors,” “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and other sections in this Annual
Report on Form 10-K. You should thoroughly read this Annual Report on Form 10-K and the documents that we refer to with the understanding
that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking
statements by these cautionary statements.
The
forward-looking statements made in this Annual Report on Form 10-K relate only to events or information as of the date on which the statements
are made in this Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to
reflect the occurrence of unanticipated events. You should read this Annual Report on Form 10-K and the documents that we refer to in
this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K, completely and with the understanding
that our actual future results may be materially different from what we expect.
SUMMARY
OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
The
following is a summary of certain risks, uncertainties and other factors related to our company. These do not represent all of the risks
we face. You should carefully consider all of the risk factors presented in “Item 1A. Risk Factors” (some of which are not
summarized below) and all other information contained in this Report, including the financial statements which are a part of this Report,
in order to a more complete picture of the risk factors we face.
Risks
Related to Our Business and Industry
-iii-
-iv-
Risks
Related to Our Products and Regulation
Risks
Related to Our Securities Generally
-v-
PART
I
Item
1. Business.
Overview
We
are a revenue stage medical technology company focused on the development and commercialization of a suite of innovative diagnostic
and multi-disciplinary treatment modalities for patients with cranial and/or dentofacial abnormalities and the wide array of medical
conditions that may result from them, including mild to moderate obstructive sleep apnea (known as OSA) and snoring in adults. We
believe our proprietary diagnostic tools, oral appliances, myofunctional therapy, clinical treatments, continuing education, and
practice solutions represent a powerful and highly effective set of resources for healthcare providers of all disciplines who treat
patients suffering from debilitating and even life-threatening breathing related sleep disorders and their comorbidities.
Our
primary focus has been on expanding awareness of, and providing treatment options for OSA for, the dentistry market, which we believe
represents a large and relatively untapped market for OSA treatment. As our business has evolved, we have expanded our treatment and
marketing programs to encompass a more multidisciplinary approach as we have learned even more about how OSA and its comorbidities are
diagnosed and treated. In this Annual Report on Form 10-K, we sometimes refer to dentists and other medical professionals who treat OSA
as “providers” (including our own Vivos-trained dentists).
Studies
have shown our comprehensive and multidisciplinary approach represents a significant improvement in the treatment of mild to moderate
OSA in comparison to or when combined with other largely palliative treatments such as continuous positive airway pressure (or CPAP).
We call our solution The Vivos Method.
Our
Products and Services
Currently,
The Vivos Method comprises the following products and services:
These
products are used in a collaborative multidisciplinary treatment model comprised of dentists, general practice physicians, sleep specialist
physicians, myofunctional therapists, nutritionists, chiropractors, physical therapists, and healthcare professionals. Our subscription-based
program to train dentists and offer them other value-added services is called the Vivos Integrated Practice (VIP) program.
During
2022, we continued to expand and grow our screening and home sleep test (“HST”) program (which we call our VivoScore
Program) featuring SleepImage® technology, a 510(k) cleared ring-based recorder and diagnostic platform
for home sleep apnea testing. We market and distribute our SleepImage® HST in the U.S. and Canada pursuant to a licensing
agreement with MyCardio LLC. During 2022, Vivos providers performed nearly 60,000 VivoScore home sleep tests, up 99% over 2021. Due to
the volume of business that we have generated with MyCardio LLC, we now receive pricing and terms for SleepImage® products
and services that are well below their published retail prices. We believe the rapid growth of our VivoScore program confirms our belief
that the SleepImage® HST offers significant commercial advantages and ease of use over existing home sleep
apnea products and technologies in the market and allows healthcare providers to screen, diagnose and initiate treatment for OSA in their
patients more efficiently.
We
have not yet seen a corresponding increase in patient enrollment in The Vivos Method treatment, however, and based on feedback from our
Vivos-trained providers, we believe this to be a function of staffing turnover and labor shortages that continue to adversely impact the dental
workplace. Throughout 2022, we continued to address this by conducting additional regional dental team training sessions on integrating
Vivos products and treatments. In addition, we drastically reduced the number of Practice Advisors who had previously been dispatched
as “boots on the ground” to help facilitate case starts and provide Vivos-trained providers with support, and we replaced
them with a new service called Treatment Navigator which we piloted and rolled out in the late summer and fall of 2022.
Treatment
Navigators work effectively as extensions of the dental office, working directly with perspective patients to provide them information
on The Vivos Method, aiding in education, screening, insurance verification of benefits and preauthorization, coordination among various
professional practitioners, recordkeeping, problem solving, as well as, delivering a home sleep test and following up with scheduling
an appointment with a VIP in their area. Dental offices who wish to avail themselves of this service pay Vivos enrollment fees and per
case fees for the service, thus adding an important new revenue line and profit center to the business. As of December 31, 2022, there
are approximately 70 Vivos-trained (VIP) dental offices who are at some stage of onboarding with our Treatment Navigator program. Based
on early feedback, we expect the Treatment Navigator program to continue to grow into a material and important revenue stream as we move
forward.
In
June 2022, we announced an exclusive distribution agreement with GM Instruments, Ltd. for the distribution of GM Instruments’ NR6
Rhinomanometer, the only FDA approved 4-phase rhinomanometer available in the U.S. used to calculate nasal airway resistance by measuring
nasal flow and the pressure producing that flow. Under this agreement, we became the exclusive U.S. and Canadian distributor of this
specialized diagnostic equipment for evaluating nasal breathing and function in dental patients with sleep and breathing issues. The
objective measurement of nasal breathing can be an essential data point in determining the appropriate breathing and sleep issue treatment
pathway as well as a predictor of potential CPAP intolerance or other treatment failure. Based
in the United Kingdom, GM Instruments is a global manufacturer and distributor of diagnostic technology for assessing nasal and respiratory
flow and function. The NR6 Rhinomanometer offers a quick non-invasive test to measure the function of the nose during active breathing.
These test results are being used by Vivos-trained dentists and others to measure outcomes of improvement for pre- mid- and post-treatment
of patients undergoing a variety of treatment modalities. Additionally, GM Instruments products are planned for use as part of research
protocols to improve and support the outcomes of Vivos products and methods for OSA diagnosis and treatment.
In
addition, on February 28, 2023, we acquired certain U.S. and international patents, product rights, and other miscellaneous intellectual
property from Advanced Facialdontics, LLC (“AFD”), a company holding propriety technology on certain FDA 510(k) cleared
dental and medical devices. With this asset purchase transaction, we acquired U.S. patents, provisional patent applications as well as
International patents, PCT patents and patent applications, thus expanding its product portfolio and revenue potential.
AFD’s
flagship product, the Preventive Oral Device®, known as the POD®, is a custom single
arch device with an FDA 510(k) clearance for treating an estimated 40 million patients in the U.S. and Canada with Temporomandibular
Joint Dysfunction (TMD) and/or Bruxism (teeth grinding or clenching), both known to be closely associated with OSA. Studies have shown
that there is a clear connection between OSA and TMD.
AFD’s
second FDA 510(k) cleared product, known as the Night BlockTM, is a custom dual-arch mandibular advancement oral appliance
that incorporates patented unilateral bite block technology, which may alleviate or eliminate many of the downsides that may be a result
of traditional oral appliance treatment such as inflammation of the TMJ, facial pain, neck pain, headaches, tension, fatigue, clenching,
and grinding.
The
acquisition of these novel technologies, patent portfolio and product rights further enhance our existing intellectual property and
technology base, enabling us to provide new, complementary products to many OSA patients who experience pain, discomfort, headaches,
tooth loss, and other symptoms that could be associated with TMD and Bruxism. In addition, this acquisition will provide our
providers with an additional treatment option for patients who do not have OSA, but suffer from jaw pain, headaches, and daytime
fatigue oftentimes associated with TMD and Bruxism. We expect to be able to manufacture the AFD products through our existing manufacturing relationships.
Background
on OSA
OSA
is a serious and chronic disease that negatively impacts a patient’s sleep, health, and quality of life. According to a 2019 article
published in Chest Physician, it is estimated that OSA afflicts 54 million adults in the U.S. alone. According to a 2016 report
by Frost & Sullivan, OSA has an annual societal cost of over $149.6 billion. According to the study “Global Prevalence of
Obstructive Sleep Apnea (OSA)” conducted by an international panel of leading researchers, nearly 1 billion people worldwide
have sleep apnea, and as many as 80% remain undiagnosed. Research has shown that when left untreated, OSA can increase the risk of comorbidities,
such as high blood pressure, heart failure, stroke, diabetes, dementia, chronic pain and other debilitating, life-threatening diseases.
Unfortunately
for OSA patients, the medical profession has not been able to provide them with solutions that are both effective and desirable. CPAP
is the “Gold Standard” treatment for over 90% of OSA patients, but patients often resist having to wear those devices to
bed every night for life, and long-term compliance is reported to be around 50%. Traditional oral appliances can be effective over limited
time frames, but often create other problems with temporomandibular joint (or TMJ) dysfunction, open bites, infections, and more. As
with CPAP, they too must be worn every night for life to be effective. More radical and invasive options such as neuro-stimulation devices,
or maxillomandibular advancement surgery are likewise viewed more as treatments of last resort. When The Vivos Method is presented as
a viable treatment option against the alternatives discussed above, we believe it will be the preferred choice of most patients.
We
believe our proprietary products comprising the Vivos CARE oral appliances represent the first non-surgical, non-invasive and cost-effective
treatment for adults with dentofacial abnormalities and/or patients diagnosed with mild to moderate OSA and snoring. Combining technologies
that typically expand the upper airway by altering the size, shape and position of its defining tissues, Vivos CARE represents a completely
new treatment modality in the treatment of dentofacial abnormalities that often lead to OSA and many other health conditions.
A
recently published peer reviewed study in a high impact medical journal (Sleep Medicine) showed that use of our CARE appliances
under the guidance of trained Vivos dentists with access to the complete Vivos Method led to significantly lower Apnea Hypopnea Index
scores, significant decreases in OSA severity categories, and significantly increased airway volumes, as measured with no appliance in
the mouth. These results come from a set of 220 treated patients. A second database review looking at a set of 786 patients undergoing
CARE treatment by providers with access to the Vivos Method was presented at the American Academy of Sleep Medicine’s annual scientific
meeting in 2022 with results largely consistent with this published set. A peer reviewed paper on this set is currently in editorial
review and anticipated soon. These two data sets furthermore are generally consistent with data seen in multiple smaller case series
published over the preceding decade.
The
Vivos Method is estimated to be indicated and potentially effective (within the scope of the FDA cleared uses) in approximately 80% of
cases of OSA where patients are compliant with clinical treatments. Our patented oral appliances have been utilized in over 33,000 patients
treated worldwide by more than 1,700 trained dentists.
Our
Target Customers
The
House of Delegates of the American Dental Association in 2017 adopted a policy statement describing the important role dentists can play
in helping identify patients at greater risk of sleep related breathing disorders. By virtue of the close connection and relationship
between the oral cavity and airway form and function, properly trained dentists can play a pivotal and even leading role in the treatment
of dentofacial abnormalities which are known to impact breathing and sleep, which in turn can lead to serious health conditions. The
VIP program provides dentists with compelling clinical reasons coupled with strong economic incentives to provide their breathing and
sleep disordered patients the best care possible.
We
have recently expanded our mission and product line positioning to extend the reach and scope of The Vivos Method beyond the dental profession
and to allow for greater collaboration and mutual referrals from other healthcare practitioners, including primary care physicians, medical
specialists, chiropractors, nutritionists, physical therapists, and others who see and treat patients with breathing and sleep disorders.
We believe this extension of our approach will broaden the knowledge among various professions as to what our technology and products
can do for their patients, ultimately leading more patients into treatment with Vivos products and services. We also incorporate courses
and curricula at The Vivos Institute into our Vivos Method training that provides information, tools, techniques, and systems that enable
other healthcare professionals to engage directly with dentists and actively contribute to the best possible clinical outcome for patients.
Our
Mission
Our
mission is to rid the world of sleep apnea by being a leading technology platform and go-to resource for the latest and most effective
treatment modalities, products, and clinical education available to healthcare providers of all specialties who treat patients suffering
from breathing related sleep disorders and their comorbidities. We fully recognize that breathing related sleep disorders, including
OSA, are often complex conditions with multiple contributing factors that require more than a single solution. To that end, we have broadened
our product and services lines that comprise The Vivos Method to go beyond the proprietary technologies featured in our CARE oral appliances,
and now offer providers far greater optionality in selecting a diagnostic or treatment solution that is best for their patients. This
approach recognizes that there is no “one size fits all” solution for patients, and that both providers and patients are
best served by offering a variety of solutions at various price points that can meet the needs of a larger segment of the population.
We
believe this evolution of our mission (which was originally focused almost exclusively on the dental community) will appeal to a much
broader array of healthcare professionals, including chiropractors, nutritionists, primary care physicians, cardiologists, physical therapists,
dentists and others, all of whom have a strong vested interest in the overall health and wellbeing of their patients, and each of whom
has something meaningful to contribute when properly educated and trained. In addition, we see tremendous opportunity with Durable Medical
Equipment (DME) companies, who also have relationships with OSA patients. As word spreads among a broader array of professionals, equipment
suppliers and their patients, we expect more people to come to know and understand the compelling advantages of The Vivos Method. We
believe this will allow us to scale our business and grow our company more rapidly.
Our
Market Opportunity
According
to a March 2021 Sleep Apnea Devices Market Size & Share Report, the global sleep apnea devices market size was valued at $3.7 billion
in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 6.2% from 2021 to 2028. According to an American Sleep Association
study published in 2020, an estimated 50 million to 70 million people in the U.S. are suffering from some form of sleep disorders. Moreover,
according to Canadian Respiratory Journal in 2014, around 5.4 million adults in Canada were diagnosed with sleep apnea or were at higher
risk of developing OSA. According to a study conducted by ResMed in 2018, around 175 million people in Europe were suffering from sleep
apnea. We therefore believe that effective diagnostic and treatment strategies are needed to minimize the negative health impacts of
OSA and to maximize cost-effectiveness.
Based
on our direct experience with our Vivos-trained providers performing nearly 60,000 VivoScore HSTs during 2022, we strongly believe the
published estimates from available public information, which range from 12% to 20% of the population, seriously underestimate the extent
of the condition and scope of the problem in the United States and Canada. Our VivoScore testing routinely results in approximately 50%
of patients testing positive OSA, a number consistent with a recent study published in the Journal of the American Heart Association
on a sample consisting of ~2000 middle-aged to older adults from the Multi-Ethnic Study of Atherosclerosis, where 47% had
moderate-to-severe sleep apnea (OSA). We therefore believe our prior estimate that approximately 15% of the adult population in the United
States and Canada suffers from OSA to be extremely conservative. Based on the estimated total adult population of 284 million in the
United States and Canada, we believe the total addressable United States and Canadian market could be as high as 80 million adults. To
be conservative and based on available data and our internal market analysis, we estimate that over 80% of individuals diagnosed with
OSA in the North American addressable market may be candidates for The Vivos Method, leaving us with a total addressable consumer market
of approximately 64 million adults.
We
currently charge clinicians an average sales price of approximately $1,500 per adult case for The Vivos Method. There are approximately
200,000 general dentists and dental specialists in the United States and another 30,000 in Canada who could potentially offer the Vivos
Method to their patients. Add to that the nearly 80,000 licensed chiropractors and over 1.1 million medical doctors across all specialties
who routinely see and treat patients with OSA. Each of them see and treat patients with OSA for many related conditions on a regular
basis even though the vast majority remain undiagnosed with respect to their OSA. As we raise awareness, and now that new technologies
such as SleepImage® have driven the cost of diagnosis down dramatically, more providers will be able to integrate evaluations
of breathing and sleep into their basic clinical treatments, and more patients will get diagnosed and seek treatment. Therefore, based
on the addressable U.S. and Canadian consumer market described above and average sales price, we believe the addressable consumer market
for adults in the United States and Canada is approximately $96 billion.
Our
Treatment Alternative for OSA - The Vivos Method
The
Vivos Method is a non-invasive, non-surgical, non-pharmaceutical, multi-disciplinary treatment modality for the treatment of
dentofacial abnormalities in adults and children and/or mild to moderate OSA and snoring in adults. Proprietary and virtually painless, The
Vivos Method has been shown to typically expand the upper airway and offers patients what we believe to be an effective treatment
alternative based on published peer-reviewed retrospective clinical data. Based on feedback from independent VIPs and their
patients, we believe initial therapeutic benefits from using the treatment guidance’s and devices are often achieved
relatively quickly (in days or weeks) and final clinical results are typically achieved in 12 to 18 months), all at a relatively low
cost to consumers ranging between $7,000 and $10,000 for adults (costs vary by provider) when compared to other options such as
lifetime CPAP or surgery. With our recently announced product line expansion, Vivos now has less expensive treatment options
available for patients down to around $3,500. These lower cost options include mandibular advancement devices (MAD) that are not
considered a permanent solution, but may offer certain patients an affordable interim solution until they can upgrade to our CARE
devices.
The
Vivos Method’s CARE devices alter the size, shape and position of the tissues that surround and define the functional space known
as the upper airway. Our treatment also improves nasal breathing, reduces mouth breathing, reduces Apnea Hypopnea Index (AHI) scores,
and generally facilitates better breathing and sleep. These statements are based on retrospective raw data with validated before and
after sleep studies, rhinomanometry testing before and after treatment, Cone Beam Computerized Tomography (CBCT) scans from treating
clinicians and patient testimony. As The Vivos Method CARE treatment process progresses, the airway typically expands, with many patients
reporting a significant reduction of their mild to moderate OSA and snoring symptoms. The primary products used in The Vivos Method CARE
treatment are the DNA appliance®, the mRNA appliance®, and the mmRNA appliance®, each of
which is a specifically designed, customized oral appliance that is worn primarily in the evening hours and overnight. The treatment
time may range from 10 to 24 months, with 12 to 18 months being typical. Our appliances may require periodic adjustments some of which
can be performed by the patient and others that are typically rendered at the dental office where treatment was initiated. Through the
course of treatment with The Vivos Method CARE devices, patients have reported a variety of outcomes, including:
● Reduction of snoring;
● Reduction in AHI level and/or other measures of OSA;
● Relief of OSA symptoms;
● Restoration and improvement of normal (nasal) breathing;
● Improvement in overall sleep quality;
● Reduction in the need for other lifetime treatment options such as CPAP;
● Restoration and maintenance of proper facial symmetry and alignment;
● Dentofacial and orthodontic improvement and/or correction;
● Resolution of TMJ pain, clicking, and locking;
● Improved posture with better balance and facial symmetry.
Our
Growth Strategy
Our
goal is to be the global leader in providing a clinically effective non-surgical, non-invasive, non-pharmaceutical, and low-cost alternative
for patients with dentofacial abnormalities and/or mild to moderate OSA and snoring in adults. We believe the following strategies will
play a critical role in achieve this goal and in establishing more predictable and growing revenue leading, ultimately, to cash flow
positive and profitable operations:
Our
Revenue Model
Our
revenue is currently derived from the following primary sources:
Our
Competitive Strengths
We
believe that The Vivos Method has numerous advantages that, taken together, set us apart from the competition and position us for success
in the marketplace:
Sales
and Marketing
We
have established a methodical approach to market development which centers on active engagement directly with members of the medical
community, including general dentists and medical doctors who treat dentofacial abnormalities and/or mild to moderate OSA and snoring,
to educate them on The Vivos Method and its benefits. The goals of our sales and marketing efforts are (i) to secure new VIP dentists
and provide them with the tools to treat patients with our products and (ii) more broadly educate the medical community regarding our
products with a view towards expanding our number of VIPs as well as medical professionals who could refer patients to our VIPs for treatment.
We
sell the VIP Program to dentists through a direct sales force that primarily targets general dentists in the United States and Canada.
Our sales effort is developed through social media initiatives, and our new website with over 150 videos, and the production of over
350 new content creation projects. Our VIP program was developed to train independent dentists to identify and treat dental conditions
that may be associated with mild to moderate sleep apnea. Our sales program to target medical doctors is our MID program, which was developed
to assist VIP practices to establish clinical collaboration ties to local primary care physicians, sleep specialists, ENTs, pediatricians,
pulmonologists and other healthcare professionals who routinely see or treat patients with sleep and breathing disorders.
In
countries outside of North America we typically offer a modified training and support program at a lower cost. We currently have approximately
25 direct sales representatives in the United States and Canada. Our direct sales force engages in sales efforts and promotional activities
focused on referring physicians, as well as directly to the over 200,000 professionally active general dentists in the United States
and 20,000 general dentists in Canada.
Our
current VIP sales organization is comprised of three teams consisting of:
Our
MID is comprised of a Senior Vice President that leads the MID sales, marketing, operations and finance efforts with one Senior Director
of Business Development, one Director of Operations and one Senior Market Manager. We plan to grow our MID organization by recruiting
candidates that have extensive healthcare backgrounds, strong business development experience setting up physician owned medical facilities/practices
and significant healthcare regulatory knowledge.
In
the late fourth quarter of 2021, we launched our sales initiative targeting the large and rapidly growing segment of private equity and
corporate sponsored dental groups known as Dental Service Organizations (or DSOs). With an estimated 2,600 DSO groups in the U.S. and
Canada covering total office locations in excess of 40,000, DSOs provide business management and support to dental practices, including
non-clinical operations. In many ways, DSO’s represent the most patient centric and profit motivated model to scale in dentistry,
which we believe makes the integration of sleep medicine as part of the DSO offering an ideal fit for Vivos to help drive awareness of
OSA, new VIP subscriptions and sales of our products and services. Our early experience in working with DSOs has been that while some
DSO-participating dentists have become VIPs and direct customers of ours, in some cases, the DSO would prefer to be the customer or have
primary (or shared) responsibility for paying VIP subscription fees to us.
We
utilize indirect and direct marketing channels to inform and educate dentists, medical doctors and healthcare professionals about The
Vivos Method. Our indirect marketing channels include strategic partners, industry key opinion leaders, trade shows and our own clinical
advisor network.
Our
direct marketing channels include outreach to prospective VIPs using digital advertising platforms including Facebook and Google ad placements.
The objective of our indirect and direct marketing efforts are to bring dentists, medical doctors and healthcare professionals to our
educational and training websites to learn about OSA and its treatment alternatives.
We
further believe our dentist and medical doctor marketing efforts have been effective in facilitating contact via our Vivos introduction
and online training webinars, despite significant headwinds throughout our core customer base, mostly driven by COVID-19 Delta and Omicron
variant resurgences in the early and middle part of the year.
Potential
Economics for Trained VIP Clinicians
Dentists
that enroll in our VIP program have the potential for compelling economics. The actual incidence of dental patients with OSA will vary,
but our conservative estimate would suggest that the average dental practice sees 400-500 adult patients a year with a high risk of suffering
from obstructive sleep apnea. Using these demographic figures, the economic potential per dentist may be calculated, based on a retail
adult case fee of approximately $9,000, fully burdened VIP provider costs of approximately $3,000, and net profit of approximately $6,000,
to be over $3.3 million in annual gross revenue potential annually with over $2.4 million in potential net profit. We believe, based
on our experience, that dentists have seen accretive economic additions to their practices by utilizing The Vivos Method, and thus participation
in the VIP program can likely add to the dentist’s take-home income.
In
terms of continuing training, our sales and clinical advisory dentists conduct training primarily in a highly personalized, deep immersion
workshop format at our Vivos Institute. The key topics covered in training include case selection, clinical diagnosis, treatment planning,
appliance design, adjunctive therapies, information on our productions and services, guidance on pricing, case acceptance, instruction
on insurance reimbursement protocols and interacting with our proprietary software system and the many other features of our website.
We present our training material in a manner we believe to be superior to most other dental training and experience, including preparatory
online courses, didactic lectures, hands-on training, specialized small group breakout sessions, and post training technical support
from assigned mentors. As a result, we are able to complete the initial training workshops, both online and in person, typically within
just 6-7 days spread out over a couple of weeks. Our success in training approximately 1,650 dentists confirms our belief that training
represents a minimal barrier to adoption for most dentists.
Below
is an illustrative model depicting the total additional revenue a dentist might receive by treating patients with The Vivos Method. The
potential patients with dentofacial abnormalities and/or mild to moderate OSA is determined by using a calculation that results in a
conservative estimate that 30% of patients of a dental practice patient may suffer from OSA (according to a 2019 article published in
Chest Physician). The revenue treatment fee is estimated at $9,000 per patient. This illustration helps to explain why a dentist
might want to become a trained VIP and use The Vivos Method.
To
facilitate the adoption of The Vivos Method, we market the VIP Program, and as part of that offering, we often partner with equipment
manufacturers to bundle training and equipment into a turn-key program financed by third party lenders for those dental practices who
need to purchase additional equipment. The VIP Program fees are also often financed by third party lenders separate from any equipment
purchases. Loan terms and payments will vary depending on the doctor’s credit, the interest rate, the amount financed, and the
term of the loan. Generally, payments on such financing range from about $600 to $2,500 per month.
Insurance
Reimbursement
Insurance
reimbursement is available across the full spectrum of Vivos appliances. Medical coverage and benefits are subject to medical necessity
and payer guidelines. Although medical insurance is never a guarantee of payment, the average reimbursement seen is approximately 50%
(ranging from 5% to 70%). Benefits payable are subject to deductibles and policy limitations that may vary. A verification of benefits
(VOB) is generally required for all medical policies to check for validity of billable coding for oral appliance therapy (OAT) and need
for pre-authorization that may be required for reimbursement. Vivos Integrated Practices (VIPs) typically remain out-of-network with
commercial health insurance, but this depends on the individual practice and the commercial payer guidelines in each state. As out-of-network
providers, dentists can set their own fees and balance bill the patient for the cost of care not covered by the patient’s health
insurance. Although many patients pay for treatment out of pocket on a fee for service basis, the availability of health insurance coverage
is an important consideration for many patients who desire treatment so that billing guidance is an important component of support provided
by Vivos to VIPs.
Our
mRNA appliance® and mmRNA appliance® are custom fabricated mandibular advancement appliances indicated to treat mild to moderate
OSA and snoring in adults. The mRNA and mmRNA can be billed in- and out-of-network to most commercial payers under the E0486 CPT code.
The E0486 code is reimbursable by many major commercial medical payers following a medical diagnosis of OSA and adherence to payer guidelines
for alternative OSA therapy. Pre-authorization may also be required for reimbursement of these appliances and the pre-authorization requirements
may vary based on the payer policies and patient’s insurance coverage. As described above, the same VOB and pre-authorization/LMN
process is employed in the billing practices for these appliances to navigate the pathway to payment of medical benefits.
Our
mRNA appliance® and our DNA appliance are not currently covered by Medicare or Medicaid as they do not feature the specific
design criteria required by the Centers for Medicaid and Medicare (CMS) for payment for oral appliances billed with code E0486. To
meet the billing requirements of CMS for custom mandibular advancement oral appliances, the mmRNA appliance® (Modified
Mandibular Repositioning Nighttime Appliance) was developed based on the original design of the mRNA appliance. In August 2021
510(k) for Class II clearance from the FDA for the mmRNA appliance with indications to treat jaw repositioning and mild to moderate
OSA and snoring in adults was approved. In December 2021, the mmRNA was accepted by the CMS Pricing, Data Analysis and Coding
(“PDAC”). This acceptance places the mmRNA device on the PDAC list of oral appliances covered by and billable to
Medicare, making the benefits of the mmRNA device available to millions of Medicare beneficiaries. Notwithstanding this important
achievement, in general we have found the lack of inclusion on the current CMS Medicare PDAC list does not hinder market
distribution or acceptance of Vivos appliances. This is due to the fact that most dentists who work with The Vivos Method are
out-of-network with commercial payers and do not typically file for reimbursement under Medicare. When Medicare reimbursement is
desired by Vivos providers they are typically registered with Medicare DME as a non-participating DME supplier, allowing the
provider to balance bill patients like they would when billing as an out-of- network provider to commercial policies and are not
limited to accepting Medicare reimbursement rates as payment in full.
We
have seen an increase in the ability for Reimbursement for our other FDA registered oral appliances such as the Vivos Guides for children
and the DNA appliance for adults. When preauthorizing and billing the Vivos Guides and DNA appliance an undefined CPT code can be utilized
only when medical necessity is present and documented properly. A dentist billing an undefined CPT code for a Class I or Class II oral
appliance must proceed with caution. These preauthorization and billing requirements pertain to all valid and billable codes and must
be supported with documented medical necessity reviewed by the medical director at the payor before being submitted for possible reimbursement.
Pre-authorization with medical review is accomplished via a “letter of medical necessity” (LMN) used to summarize and communicate
the existing medical necessity. The plan’s medical director will then review the LMN, supporting clinical documentation of dentofacial
abnormalities present, CT images, co-morbidities, and any other related medical conditions diagnosed by a medical doctor. Once authorized
the OAT can be billed for benefit calculation and payment. In December 2022 the DNA appliance received 510(k) clearance with indications
to treat mild to moderate OSA and snoring in adults. While the DNA appliance can still be pre-authorized and billed using an undefined
CPT code, the newly issued 510(k) clearance for the DNA appliance allows for additional code types to be utilized when OSA is present
and diagnosed by a Medical Doctor. The DNA appliance can be pre-authorized and billed using a HCPCS Code designated for use by reducing
upper airway collapsibility, that is custom fabricated, without a fixed mechanical hinge. While the use of this designated HCPCS code
is new there is a potential pathway for additional registrations with Vivos appliances on the PDAC list of oral appliances covered by
and billable to Medicare.
Dental
Insurance Coverage
Dental
insurance coverage for Vivos appliances also exists. Codes for sleep apnea appliances were added to the CDT code set in 2022. Vivos appliances
with indications for treatment of OSA are billable with these code, however dental benefits for these codes are nascent at present and
secondary to medical coverage. Orthodontic coverage and benefits are also available for Vivos appliances registered with indication of
jaw expansion and tooth movement.
Published
Research
There
are several studies in the medical literature on upper airway remodeling in pathologic conditions such as asthma, chronic obstructive
pulmonary disease and similar conditions. In contrast, there is a dearth of studies that have documented pneumatization and physiologic
upper airway remodeling. Advances in 3D digital imaging, adjunctive treatments from chiropractic and other specialists, and applied diagnostic
technologies such as rhinomanometry, combined with real-world experience in many thousands of cases, has allowed us to make further advances
in the understanding of dentofacial phenomena and how to activate and optimize dentofacial development for improved airway form and function.
For example, while it was believed that cranial sutures undergo closure in early adulthood, it is now thought that populations of stem
cells may persist to permit continued growth and development. Using this premise, the midfacial bone volume may be increased surgically
or non-surgically. Since the roof of the mouth is the floor of the nose, the volume of the nasal airway can also be increased surgically
or non-surgically. There are certain aspects of the underlying biological and bio-mechanical processes that we currently do not fully
understand, and are continually exploring. Nevertheless, our experience continues to be that using our patented, non-surgical treatment
we are able to target and evoke a resizing of the oral cavity and upper airways to address dentofacial abnormalities and/or mild to moderate
OSA and snoring. Using various assessment techniques, we have previously reported surface area, volumetric and functional changes of
the upper airway.
Since
2009, our technology has been the subject of over 60 peer-reviewed articles in the medical, dental and orthodontic literature. While
most of these papers have been small uncontrolled case series, their results were reflected in our retrospective database review of 220
patients undergoing CARE treatment for Obstructive Sleep Apnea published in July 2022 in Sleep Medicine. The results of that review
showed 63.6% of Vivos patients had achieved improvement in their AHI scores by at least one severity class, while 25.9% saw a complete
resolution of their OSA symptoms. Again, these results were measured pre- and post-treatment, with no appliance in the mouth. Several
more retrospective data sets have been presented at scientific meetings in the past year that further corroborate clinical efficacy of
Vivos CARE treatment in adult OSA, pediatric OSA, and also in adult headache severity. The results of these presentations are in various
stages of medical journal submission. The results published have illustrated that CARE therapy when provided as part of the Vivos Method
can provide a significant change in the severity of patients’ dentofacial abnormalities and/or OSA and snoring (as measured by
industry standard indices such as the AHI, among others), improvement in oral conditions, sleep-related quality of life, reduction in
snoring, high patient compliance rates and a strong safety profile.
Intellectual
Property
To
establish and protect our proprietary rights, we rely on a combination of patents, trademarks, copyrights and trade secrets, including
know-how, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention
assignment agreements, and other contractual rights. Our intellectual property is important in achieving and maintaining our position
in the market. We currently own five design patents that expire between 2023 through 2029 and two utility patents expiring in 2029 and
2030. We also own two Canadian patents and a European patent that has been validated in Belgium, Switzerland, Germany, Denmark, Spain,
France, United Kingdom, Hungary, Italy and the Netherlands, all of which expire in 2029. Our U.S. trademark portfolio consists of ten
registered marks and one pending trademark application. Extensive online and in-person training, multiple touch point support systems,
specific fabrication materials, customized appliance designs, and multi-disciplinary treatment modalities are all considered proprietary
trade secrets and competitive advantages with no known counterparts.
FDA
Regulatory Status
The
Vivos Method offers treatment modalities that uses nonsurgical, noninvasive, and cost-effective oral appliance technology prescribed
by trained dentists and medical professionals to treat dentofacial abnormalities and/or mild to moderate OSA and snoring. The Vivos Method
includes a customized treatment plan that may begin with a simple and easy at-home sleep apnea screening using proprietary HST technology
from SleepImage®. We offer three Class II devices cleared by the FDA (DNA, mRNA and mmRNA). We offer our
own specially designed pre-formed Vivos Guides. The regulatory status of our products is as follows:
We
are conducting two separate Western Copernicus Group Institutional Review Board (“WCG IRB”) approved pediatric clinical trials with eight
private dental sites around the country.
The purpose of the first study is to evaluate the safety and efficacy of an intraoral device
(the DNA) to reduce sleep related breathing disorders in children, including: snoring, mild to moderate obstructive sleep apnea (OSA),
and Upper Airway Resistance Syndrome (“UARS”). The child subjects enrolled in this study will be using the DNA appliance to correct orthodontic
issues. They will also present with midfacial hypoplasia suitable for arch development. During orthodontic treatment and arch development,
the device will be studied to determine whether it can also reduce symptoms of sleep-related breathing disorders in children. The study
will recruit pediatric subjects who have already elected to utilize the study device for their orthodontic treatment. If they meet the
inclusion and exclusion criteria, then they will be included in the study.
The purpose of the second study is to evaluate the safety and efficacy of an intraoral device (the Vivos Grow and/or Vivos Way
appliances) to reduce sleep-related breathing disorders in children, including: snoring, mild to moderate OSA, and UARS. The child
subjects enrolled in this study will be using the Vivos Grow/Vivos Way appliance to correct orthodontic issues. They will also
present with midfacial hypoplasia suitable for arch development. During orthodontic treatment and arch development, the devices will
be studied to determine whether they can also reduce symptoms of sleep related breathing disorders in children. The study will
recruit pediatric subjects who have already elected to utilize the study device for their orthodontic treatment. If they meet the
inclusion and exclusion criteria they can be included in the study. Upon completion of the two pediatric clinical trials described
below which are expected to be completed in the next 6 to 12 months we plan to submit two separate 510(k) applications to the FDA
requesting pediatric clearances and indications of use for the DNA appliance® as well as the Vivos Guides.
All
of the oral appliances that comprise our Vivos Complete Airway Repositioning and/or Expansion (CARE) system (our DNA
appliance®, mRNA appliance and mmRNA appliance®) are cleared by the FDA as Class II sleep appliances
to treat mild to moderate OSA and snoring in adults. Patients undergoing treatment are seeing improvement in the said cleared
indications of use, but clinicians have also reported that they are seeing other comorbidities and medical conditions improve due to
treatment. These appliances (which are central to The Vivos Method) and other Vivos appliances are made available to trained
clinicians who exercise their independent clinical judgment with respect to their use and suitability as a part of an overall