Item 1A. Risk Factors -25-
Item 1B. Unresolved Staff Comments -57-
Item 1C. Cybersecurity -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 -80-
Item 8. Financial Statements and Supplementary Data -81-
Item 9A. Controls and Procedures -113-
Item 9B. Other Information -114-
Part III
Item 10. Directors, Executive Officers and Corporate Governance -115-
Item 11. Executive Compensation -122-
Item 14. Principal Accountant Fees and Services -134-
Part IV
Item 15. Exhibits and Financial Statement Schedules -135-
Signatures -138-
-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,” “will,” “expect,”
“anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,”
“is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking
statements largely on our current expectations and projections about future events that we believe may affect our financial condition,
results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
● 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.
-ii-
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-
Risks
Related to Our Products and Regulation
Risks
Related to Our Securities Generally
-iv-
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 dentofacial abnormalities and the wide array of medical conditions that may
result from them, including mild to severe obstructive sleep apnea (known as OSA) and snoring in adults. We believe our proprietary oral
appliances, diagnostic tools, 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 and sleep disorders and their comorbidities.
Up
to this point, our primary focus has been on expanding awareness of, and providing treatment options for OSA for and through the dental
industry, which we believe represents a large and relatively untapped market for OSA treatment. As our business has evolved, we have
expanded our marketing, provider outreach, and treatment programs to encompass a broader more multidisciplinary approach, with a greater
emphasis on working with medical doctors and other healthcare providers beyond dentists. Now that we have established a national network
of Vivos-trained dentists, it is time to focus our resources and efforts on the source of where the vast majority of OSA patients are
first diagnosed and treated—the medical profession and durable medical equipment (DME) companies. 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 severe OSA
in comparison to or when combined with other largely palliative treatments such as continuous positive airway pressure (or CPAP) or oral
myofunctional therapy. We call our solution The Vivos Method.
Our
Products and Services
Currently,
The Vivos Method comprises the following products and services:
The
November 2023 clearance of our CARE appliances for the indication described above represents the first time the FDA has ever granted
an oral appliance a clearance to treat severe OSA. We believe this unprecedented decision by the FDA will generate broader acceptance
throughout the medical community for our treatment options, leading to the potential for higher patient referrals and case starts as
well as collaboration with medical professionals. We also believe it will enhance our value proposition to third-party distribution partners
such as DME companies. This approval could also clear the way for greater reimbursement levels from medical insurance payors and Medicare.
● Vivos oral appliances and therapies outside of CARE system include:
These
products and services are used in a collaborative multidisciplinary treatment model comprising 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
2023, we expanded our product portfolio by acquiring certain devices (now known as Vivos Vida, Vivos Versa
and Vivos Vida Sleep) from Advanced Facialdontics, LLC. During 2022, we continued to expand and grow our screening and
home sleep test (or 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. Based on our direct experience with our Vivos-trained providers,
approximately 61,000 VivoScore HSTs were performed during 2023. 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 over existing home sleep apnea products and technologies in the market and allows healthcare providers
to more efficiently screen, diagnose and initiate treatment for OSA in their patients.
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 plague the dental
workplace. Throughout 2023, 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, 2023, there
were 57 Vivos-trained (VIP) dental offices who are at some stage of onboarding with our Treatment Navigator program. Based on
our evaluation of the program, we will restructure the Treatment Navigator program into a monthly subscription-based model. We expect
that this will grow into a material and important revenue stream as we move forward.
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 no one wants to wear those devices to bed every night
for life, rendering long-term compliance rates low. 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 treatment option
for patients diagnosed with mild to severe OSA that offers cost-effective treatment featuring (i) limited treatment times; with (ii)
lasting or durable effects; and (iii) the prospect of seeing a complete reversal of symptoms. Combining treatment technologies that impact
the upper airway by altering the size, shape, patency and position of corresponding hard and soft 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.
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 42,000 patients
treated worldwide by more than 1,900 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.
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 (or DSOs). Marketing to DSOs creates an opportunity to enroll and onboard multiple dental practices as VIPs under one common
ownership structure. This would allow us to leverage training and support across multiple VIP practices and gain economies of scale with
the goal of faster growth, both in VIP enrollments and in Vivos case starts. As of December 31, 2023, we believe we have made important
progress in penetrating this market, but as we cautioned previously, DSOs tend to move slowly when adopting new technologies or programs.
During
2023, we further extended our market reach by executing a U.S. nationwide distribution agreement with Lincare, a leading supplier of
in-home respiratory therapy products and services for approximately 1.8 million patients. The agreement follows the conclusion of a distribution
pilot with Lincare, and marks an important milestone in our strategy to engage with leading durable medical equipment (DME) companies
in the United States. Under the agreement, Lincare will have a six-month exclusivity period to distribute certain designated devices
in our portfolio. We also executed distribution and other strategic collaborations during 2023 to help drive sales of our expanding portfolio
of products.
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 and sleep disorders and their comorbidities. We fully recognize that breathing and 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. As word spreads among a broader array of professionals 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, approximately 61,000 VivoScore HSTs were performed during 2023. 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 (MESA), where 47 percent had
moderate-to-severe 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 and/or mild, moderate and severe 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.
The
Vivos Method alters 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 treatment process progresses, the airway typically expands, with many patients reporting a significant reduction of
their OSA and snoring symptoms. The primary products used in The Vivos Method are our CARE devices – 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 9 to 18 months, with 12 to
15 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.
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 severe OSA and snoring in adults. We believe the following strategies will
play a critical role in achieving this goal and in establishing more predictable and growing revenue leading, ultimately, to cash flow
positive and profitable operations:
● Expand our market penetration with DME distribution agreements.
● Invest in research and development to drive innovation and expand indications.
● Pursue strategically adjacent markets and international opportunities.
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:
● Significant barriers to entry.
● Vivos Method insurance reimbursement.
● Body of published research and strong patient outcomes.
● First mover advantage.
● Differentiated products.
● Intellectual property portfolio and research and development capabilities.
● Extensive Training and Support Systems.
● Targeted approach to market development.
● Marketplace acceptance.
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 severe 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 patient referrals
for our VIP dentists from medical doctors and other healthcare professionals; (ii) provide them with the tools to treat patients
with our products; and (iii) 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
have recently restructured the VIP Program to include a Kick-Off program as an essential part of the value proposition. With a properly
executed Kick-Off, led by specially trained Vivos corporate staff, a newly enrolled VIP could easily recoup 100% or more of his or her
initial enrollment fees, thus making the decision to enroll much easier and attractive. We continue to 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 OSA. 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
15 direct sales and support 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 sales organization is comprised of individuals performing various roles consisting of:
Our
MID is comprised of a Senior Vice President that leads the MID sales, marketing, operations and finance efforts with one Director of
Operations and one Senior Market Manager. We plan on growing 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
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, most DSOs are slow and deliberate in their approach to introducing sleep dentistry programs.
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, key industry opinion leaders, trade shows and our own clinical
advisor network. In 2021, we made strides by establishing the following strategic partnerships aimed and broadening awareness of and
selling efforts for The Vivos Method:
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 middle and latter part of the year.
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 severe
OSA and snoring in adults (and in the case of severe OSA, along with positive airway pressure (PAP) and/or myofunctional therapy, as
needed). 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.
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 mild to moderate OSA and snoring in adults was approved.
In November 2023, the mmRNA appliance was cleared by the FDA to treat moderate and severe OSA in adults, 18 years of age and older along
with positive airway pressure (PAP) and/or myofunctional therapy, as needed. 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. In November 2023, the DNA appliance was cleared by the FDA to treat moderate and
severe OSA in adults, 18 years of age and older along with positive airway pressure (PAP) and/or myofunctional therapy, as needed. 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 codes, 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. 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 severe 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 recently published in Sleep Medicine. Several more retrospective
data sets have been presented at scientific meetings in the past year that further corroborate clinical efficacy 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 mild to severe 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 13
registered marks. 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 severe 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. We also offer the Vivos Versa, and two devices that use a unilateral bite block technique, the Vivos
Vida and the Vivos Vida Sleep. The regulatory status of our products is as follows:
All
of the oral appliances that comprise our CARE system (our DNA appliance®, mRNA appliance and mmRNA appliance®)
are cleared by the FDA as Class II sleep appliances to treat mild to severe OSA and snoring in adults.
In
October of 2022, we underwent our 2-year FDA regulatory inspection. This inspection resulted in our receipt of an FDA Form 483 with three
observations, none of which were repeat offenses from previous inspections. These observations were corrected and responded to according
to the Code of Federal Regulations. The FDA delivered a final report of the October 2022 inspection to us in January 2023.
Manufacturing
and Supply
We
rely on third-party suppliers and manufacturers on a per order, or per item basis. Outsourcing manufacturing reduces our need for capital
investment and reduces operational expenses. Additionally, outsourcing provides expertise and capacity necessary to scale up or down
based on demand for our appliances. We select our manufacturing labs so we can ensure that our appliances are safe and effective, adhere
to all applicable regulations, are of the highest quality, and meet our supply needs. We also rely on third-party carriers and freight
forwarders for product shipments, including shipments to and from our manufactures’ distribution facilities and customer distribution
facilities.
Our
Ongoing Clinical Research
We
are committed to ongoing research and development, and we have and intend in the future to invest in our clinical trial work to further
improve our products and clinical outcomes, increase patient acceptance and comfort and broaden the patient population that can benefit
from The Vivos Method. The following is summary of our currently active clinical trials:.
Upon
completion of the second and third pediatric clinical trial described above, which is expected to be completed in the during 2024, we
plan to submit a 510(k) application to the FDA requesting pediatric clearances and indications of use for the Vivos Guides.
In
addition, we are aggressively pursuing head-to-head comparisons of (i) our DNA device versus tonsillectomy in pediatric OSA, and (ii)
our DNA device vs. routine management of veterans with OSA and post-traumatic stress disorder with potential sites identified and preliminary
work underway.
Government
Regulation
Our
products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States,
as well as comparable authorities in the European Economic Area (“EEA”). Our products are subject to regulation as medical
devices under the Federal Food, Drug, and Cosmetic Act, or FDCA, as implemented and enforced by the FDA. The FDA regulates the development,
design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping,
premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import
and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses
and otherwise meet the requirements of the FDCA.
In
addition to U.S. regulations, we are subject to a variety of regulations in the EEA governing clinical trials and the commercial sales
and distribution of our products. Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be
required to obtain authorization before commencing clinical trials and to obtain marketing authorization or approval of our products
under the comparable regulatory authorities of countries outside of the United States before we can commence clinical trials or commercialize
our products in those countries. The approval process varies from country to country and the time may be longer or shorter than that
required for FDA clearance or approval.
FDA
Premarket Clearance and Approval Requirements
Unless
an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket
notification or pre-market approval (PMA). Under the FDCA, medical devices are classified into one of three classes—Class I, Class
II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory
control needed to ensure its safety and effectiveness. Class I includes devices with the lowest risk to the patient and are those for
which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance
with the applicable portions of the QSR, facility registration and product listing, reporting of adverse medical events, and truthful
and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s General Controls,
and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can
include performance standards, post-market surveillance, patient registries and FDA guidance documents. While most Class I devices are
exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a
premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s
permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Under
the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially
equivalent” to either a device that was legally marketed (for which the FDA has not required a PMA submission) prior to May 28,
1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another commercially available device that was cleared
to through the 510(k) process. The FDA has 90 days from the date of the pre-market equivalence acceptance to authorize or decline commercial
distribution of the device. However, similar to the PMA process, clearance may take longer than this three-month window, as the FDA can
request additional data. If the FDA resolves that the product is not substantially equivalent to a predicate device, then the device
acquires a Class III designation, and a PMA must be approved before the device can be commercialized.
The
Vivos Guides are registered with the FDA as Class I devices for orthodontic tooth positioning. On December 30, 2022 the FDA granted 510(k)
clearance for the DNA appliance® to treat mild to moderate obstructive sleep apnea and snoring in adults. This approval
was the first time the FDA has granted such a clearance on an oral appliance with a mechanism of action other than mandibular advancement.
The mRNA appliance® has 510(k) clearance from the FDA as a Class II medical device for the treatment of snoring, and mild-to-moderate
OSA in adults. The mmRNA appliance® has 510(k) clearance from the FDA as a Class II medical device for jaw repositioning, and for
the treatment of snoring, and mild-to-moderate OSA in adults. In November 2023, our DNA, mRNA and mmRNA appliances were cleared by the
FDA to treat moderate and severe OSA in adults, 18 years of age and older along with positive airway pressure (PAP) and/or myofunctional
therapy, as needed.
Devices
deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices, or devices that have
a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed
in Class III, requiring approval of a PMA. Some pre-amendment devices are unclassified but are subject to the FDA’s premarket notification
and clearance process in order to be commercially distributed. We do not have any Class III devices.
PMA
Pathway
Class
III devices require PMA approval before they can be marketed although some pre-amendment Class III devices for which the FDA has not
yet required a PMA are cleared through the 510(k) process. The PMA process is more demanding than the 510(k) premarket notification process.
In a PMA application, the manufacturer must demonstrate that the device is safe and effective, and the PMA application must be supported
by extensive data, including data from preclinical studies and human clinical trials. The PMA must also contain a full description of
the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling.
Following receipt of a PMA application, the FDA determines whether the application is sufficiently complete to permit a substantive review.
If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA application, although in
practice, the FDA’s review often takes significantly longer, and can take up to several years. An advisory panel of experts from
outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability
of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval
inspection of the applicant or its third-party manufacturers.
The
FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA application constitute
valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA
may approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device, including,
among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients
in the clinical study that supported a PMA approval or requirements to conduct additional clinical studies post-approval. The FDA may
condition a PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional
safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be
required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those
patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of
the approval.
Certain
changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the
design performance specifications, which affect the safety or effectiveness of the device, require submission of a new PMA application
or a PMA supplement. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement
is limited to information needed to support any changes from the device covered by the original PMA application and may not require as
extensive clinical data or the convening of an advisory panel. Certain other changes to an approved device require the submission of
a new PMA application, such as when the design change causes a different intended use, mode of operation, and technical basis of operation,
or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with
the original PMA application are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness.
Clinical
Trials
Clinical
trials are almost always required to support a PMA application and are sometimes required to support a 510(k) submission. All clinical
investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s
investigational device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion of the investigational
device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If
the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit
an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant risk device is one
that presents a potential for serious risk to the health, safety, or welfare of a patient and either is implanted, used in supporting
or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment
of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate
data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol
is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies us that
the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires
modification, the FDA may require a response on such deficiencies or permit a clinical trial to proceed under a conditional approval.
In
addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board, or IRB, for each clinical
site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of
the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of
investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to the
patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval
from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators
obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee
that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data
derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement
must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may
affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.
During
a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting
clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping
and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators
in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational