UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
For the Fiscal Year Ended December 31, 2024
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: (844) 672-4357
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 28, 2024, 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 $7.4 million based on the last reported sales price of $2.22 as quoted on the Nasdaq Capital
Market on such date.
The
registrant 5,889,520 shares of its common stock, $0.0001 par value per share, outstanding as of March 31, 2025.
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 -32-
Item 1B. Unresolved Staff Comments -50-
Item 1C. Cybersecurity -50-
Item 2. Properties -51-
Item 3. Legal Proceedings -51-
Item 4. Mine Safety Disclosures -52-
Part II
Item 6. Reserved -56-
Item 7A. Quantitative and Qualitative Disclosures About Market Risk -70-
Item 8. Financial Statements and Supplementary Data -71-
Item 9A. Controls and Procedures -102-
Item 9B. Other Information -103-
Part III
Item 10. Directors, Executive Officers and Corporate Governance -103-
Item 11. Executive Compensation -111-
Item 14. Principal Accountant Fees and Services -127-
Part IV
Item 15. Exhibits and Financial Statement Schedules -128-
Signatures -131-
-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:
● 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
● We are responsible for the indemnification of our officers and directors.
-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 cranial, dentofacial and postural 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 and children
ages. Our flagship oral appliances for treating OSA, which have received clearances from the U.S. Food and Drug Administration (or FDA)
as described below, are our Complete Airway Repositioning and/or Expansion (C.A.R.E.) devices. We believe our C.A.R.E.
and other 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. Studies and direct experience 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 the current standard of care for OSA, continuous positive
airway pressure (known as CPAP), or oral myofunctional therapy. We call our overall solution The Vivos Method.
From
our inception in 2016 through the latter part of 2023, our primary focus was to increase market share and sales of our appliances by
training and marketing through dentists to their patients with OSA. Through a variety of sales efforts, including a direct sales
force, email campaigns, social media, print and online media, extensive clinical training and support, we established an
international network of approximately 2,000 dentists to sell our products and services. In addition, to build product credibility
and broad public awareness, we sought to obtain additional regulatory approvals from the FDA. In this model, our revenue was generated from both sales of appliances and related services to dentists as well as
having dentists enroll for a fee in our Vivos Integrated Practice (or VIP) program. In November 2023, we obtained a
significant first-ever FDA 510(k) clearance for one of our Vivos C.A.R.E. oral medical devices to treat severe OSA. To our
knowledge, no other oral appliance has ever received such a clearance. While such FDA 501(k) clearance was initially met with great
enthusiasm, by early 2024 our expectation for an increase in appliance sales to our roughly 2,000 trained dentists did not
materialize. We thus determined that, in a post-COVID dental industry environment and despite technological advantages of Vivos
treatment over alternative treatments for OSA, it was no longer prudent to rely primarily on the dentistry market as the primary
distribution channel for our products and services.
Over the course of 2024, we worked to pivot our business strategy and began to steadily decrease our prior dependence
on dentists to sell our products and our dependence on VIP enrollment revenue. This new business strategy is focused on contractual alliances
with (and, in the future, potential outright acquisitions by us of) OSA healthcare providers, including dentists, sleep centers and others
and is based on a profit-sharing model between us and the provider which aligns our revenue generation more directly to sales of our novel
appliances. In June of 2024, our business strategy pivot was realized through our entry into our first strategic alliance with Rebis Health
Holdings, LLC, an operator of multiple sleep treatment centers in Colorado (who we refer to herein as Rebis). Rebis rolled out this alliance,
which promotes all forms of OSA treatments, including the Vivos Method, at a single Rebis location. By the end of 2024, Rebis patients
were selecting Vivos treatment at a rate of approximately 2 to 1 over CPAP, or declining treatment options altogether. Subsequently, we
and Rebis announced that two additional locations within the greater Denver metro area would adopt our new business model. Due to the
results of our affiliation with Rebis to date, we intend to seek additional strategic affiliations, acquisitions, or alliances with sleep
testing and treatment centers nationwide. See “New Marketing and Distribution Alliance Strategy” below for more information.
There
are approximately 4,500 sleep testing centers or sleep treatment clinics throughout the United States. These testing labs are typically
affiliated with or owned by independent sleep specialists. Medical doctors of all kinds tend to refer to patients who suspect of having
OSA into these facilities for testing and consultation with sleep specialist medical doctors. Once patients receive a diagnosis and in
many of these clinics, the default treatment recommendation is some form of CPAP. As noted above, through extensive interactions with
patients, at Rebis and otherwise, we have seen patients prefer Vivos treatment about 2 to 1 over CPAP or declining treatment options
altogether. When patients are educated about their OSA condition and the harm it does to their overall health, most of them would like
to fix the problem and not have to wear a medical device such as CPAP for the rest of their lives.
In
connection with our business model pivot, we have refined and enhanced diagnostic services and clinical care for patients with OSA.
As a direct result of these efforts, our average treatment times for our multidisciplinary Vivos Method using Vivos C.A.R.E. oral
devices have been reduced from approximately 18 to 24 months to 9 to 12 months. We believe this makes our Vivos treatment much more
appealing to patients with OSA as opposed to alternative treatments such as CPAP or surgical treatments. Importantly, the data which we submitted to the
FDA pursuant to our clearance showed average treatment times of 9.7 months. In addition, we have developed, and are currently in the
process of implementing, a more robust clinical diagnostic protocol that facilitates gathering greater clinical data, while also
driving much higher insurance payer reimbursements.
In
this Annual Report on Form 10-K, we sometimes refer to medical doctors, dentists and other medical professionals who treat OSA as “providers”
(including our independent Vivos-trained dentists).
New
Marketing and Distribution Alliance Strategy
We believe our sales, marketing
and distribution pivot in 2024 will be critical to our ability to drive our future revenue growth. Our Rebis alliance, which we hope will
be the first of a series of similar alliances and potential acquisitions across the country, marks an important pivot in our marketing
and distribution model for our cutting-edge OSA appliances. Under the new alliance, we are collaborating with Rebis to offer OSA patients
a full spectrum of evidence-based treatments such as our own advanced, proprietary and FDA-cleared C.A.R.E. oral medical devices, oral
appliances and additional adjunctive therapies and methods including CPAP machines. The program commenced in August of 2024 in the Longmont
office of Rebis.
We believe the advantages of this
new strategic marketing and distribution model are compelling:
In summary, under our new model,
we expect to present Vivos treatments to more patients, refer a higher percentage of cases into Vivos treatment, and potentially generate
more revenue and profit per case.
The Rebis strategic alliance was announced alongside
a $7.5 million equity private placement by us with an affiliate of New Seneca Partners, Inc. (who we refer herein as Seneca). Subject
to certain conditions, Seneca will participate in our net cash flow allocation from the alliance up to an agreed-upon amount as partial
consideration for the management advisory services Seneca is providing to us.
Our
Products and Services
Currently,
The Vivos Method is comprised of the following products and services:
The
November 2023 clearance of our C.A.R.E. appliances for the indication described above represents the first time the FDA has ever granted
an oral appliance a clearance to treat severe OSA. In our experience working closely with sleep specialists and other medical professionals
since that time, we believe this unprecedented decision by the FDA is generating broader acceptance throughout the medical community
for our treatment options, leading to the potential for higher patient referrals and case starts as well as closer 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. For example, in April
2024 we received the required regulatory approvals to enable Medicare reimbursement for our C.A.R.E. oral medical devices.
● Vivos oral appliances and therapies outside of C.A.R.E. system include:
These
products, services and resources are used to promote a collaborative multidisciplinary treatment model comprising dentists, general practice
physicians, sleep specialist physicians, myofunctional therapists, nutritionists, chiropractors, physical therapists, and healthcare
professionals. As part of cost optimization, and consistent with our business model pivot, during 2024 we eliminated our legacy subscription-based
program to train dentists called the Vivos Integrated Practice (VIP) program. Essentially, we unbundled the subscription-based VIP training
into several component parts. Currently, dentists can take courses individually in a customized fashion, learning at their own pace,
and only learning the materials they need in order to serve their patients.
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 2024, we continued 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 53,000 VivoScore HSTs were performed during 2024. Due to the volume of home sleep test screening 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 growth of our VivoScore program confirms our belief that the SleepImage®
HST offers significant technological and commercial advantages over alternative 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.
As
noted above, since our landmark FDA clearances in 2023 and 2024, we have not yet seen a corresponding increase in enrollment of patients
using our appliances. Based on feedback from our Vivos-trained providers, we believe this to be a function of staffing turnover in their
practices and labor shortages that continue to plague the dental workplace in the aftermath of the COVID-19 pandemic. Throughout 2024,
we continued to address this by conducting additional regional dental team training sessions on integrating Vivos products and treatment
protocols. In addition, we drastically reduced the number of individuals we call Practice Advisors who had previously been used 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 began to rollout in the late summer and fall of 2022.
Treatment
Navigators work effectively as extensions of the dental office, working directly with prospective patients to provide them information
on our C.A.R.E. appliances and other Vivos treatment options, 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 an affiliated sleep clinic or dentist (including dentists who are VIPs)
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 to our business. Based on our evaluation of the Treatment Navigator program, we have restructured
the Treatment Navigator program into a monthly subscription-based model.
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. In June 2024, Eli Lilly recently
reported that over 80 million adults in the U.S. are estimated to suffer from OSA. Recent medical literature estimates the prevalence
of OSA in the U.S. pediatric population at 20.4% or about 10 million children. According to a 2016 report by Frost & Sullivan, OSA
has an annual societal cost of over $149.6 billion and a Harvard and McKinsey study from 2010 put the figure at over $165 billion annually.
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, our experience shows it will be the preferred choice of most patients by a factor of about 2 to 1.
We
believe our proprietary products comprising the Vivos C.A.R.E. 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 C.A.R.E. 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 approximately
58,000 patients treated worldwide by more than 2,000 trained dentists.
Our
Target Customers
Because
of the close connection and relationship between the oral cavity and airway form and function, properly trained dentists, sleep specialists
and other medical providers 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. Our alliance marketing and distribution model provides
sleep centers with whom we collaborate better alternatives to CPAP and surgery for patients diagnosed with mild to severe OSA.
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 our TVI 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.
As
we have established a national network of Vivos-trained dentists, we are pivoting our focus to the source of where we believe the vast
majority of OSA patients are first diagnosed and treated: the medical profession. (including sleep centers and medical doctors and dentists
who offer OSA treatment, as well durable medical equipment (DME) companies who manufacture and distribute OSA therapies.
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 C.A.R.E. 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 the March
2025 edition of the same report, the global sleep apnea devices market size was $9.70 billion in 2024, and that the market is projected to grow from $10.30
billion in 2025 to $18.30 billion in 2032, a CAGR of 8.6% during the forecast period. 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 approximately 53,000 VivoScore HSTs during 2024, 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
Sleep Irregularity and Subclinical Markers of Cardiovascular Disease: The Multi-Ethnic Study of Atherosclerosis. 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 pivot to the alliance marketing and distribution
model, we anticipate our average sales price to patients to increase to approximately $4,500. 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 9 to 12 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 C.A.R.E. 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 12 months, with 10 to 12
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. As we pivot to the alliance marketing and
distribution model, we expect Vivos products to be available to greater pool of OSA patients. 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:
● 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 Vivos’ new strategic business model has numerous advantages that, taken together, set us apart from the competition
and position us for success in the marketplace:
Sales
and Marketing
Domestically,
during 2024, we continued our prospecting and marketing efforts to the dental community, albeit on a limited and dramatically scaled
back basis, as we reposition personnel and resources over to support our new strategic marketing distribution and acquisition model.
As part of our new strategic marketing distribution, we are collaborating with Rebis to offer OSA patients a full spectrum of
evidence-based treatments such as our own advanced, proprietary and FDA-cleared C.A.R.E. oral medical devices, oral appliances and
additional adjunctive therapies and methods including CPAP machines. The program commenced in August of 2024 in the Longmont office
of Rebis. We believe this new strategic marketing and distribution model provides several advantages. First, it provides
Vivos-trained providers direct access to far more OSA patients who are likely candidates for Vivos treatment. As we roll out this
new model going forward, potentially thousands of patients each month could be exposed to Vivos treatment options. Second, we expect
to close more cases using Vivos-trained personnel. Third, top line revenue and profit per case are expected to rise. This
significantly alters the economics to Vivos, when compared to our prior model, increasing top-line revenues per case start by
approximately 4-6 times. In summary, under our new model, we expect to present Vivos treatment to more patients, refer a higher
percentage of cases into Vivos treatment, and generate more revenue and profit per case. Accordingly, we have scaled back our VIP
enrollments, and as a result, our in-house direct sales personnel and have asked our Practice Advisors to assume direct sales and
marketing activities. Although we have seen some initial benefits from these changes, we do not yet have data to support any
conclusions as to the effects of these changes overall on our revenue and potential for profit. However, we believe the potential
for revenue growth from our new direct marketing distribution and acquisition model may eventually replace revenue from our legacy
model of VIP enrollments and we expect higher revenue and margins.
Internationally,
our efforts are primarily focused on the MENA region of the Middle East, where we have a very active international distributor, Noum,
Inc. In November 2024, we conducted our first regional training in Dubai. Since then, patient interest in the region is exceeding forecasts,
and we expect to continue to support our training and distribution efforts going forward. At this time, we do not have plans to continue
further international expansion and will continue to focus and deploy resources primarily in the United States.
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. 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 and patients of sleep clinics through our merging DSO and MSO business model.
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 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 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. During 2024, the FDA expanded the DNA’s clearance to treat children ages 6-17 for moderate to
severe OSA in children with malocclusions. When preauthorizing and billing the Vivos Guides and DNA appliances, 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 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, which 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.
In
September 2024, the American Medical Association (AMA) issued new CPT Codes for billing medical insurance which apply only to Vivos C.A.R.E.
appliances. As previously mentioned, Vivos C.A.R.E. devices were already approved for Medicare reimbursement. The new CPT Codes went
into effect January 1, 2025. We do not yet know the level of reimbursement, if any, that commercial medical insurance payers will pay
out on the new codes. However, we now believe it has taken all the major requisite steps in order to position our flagship C.A.R.E. devices
to be more consistently covered by medical insurance payers.
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.
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 C.A.R.E. treatment for Obstructive Sleep Apnea recently published in the top-tier medical journal, 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 C.A.R.E. 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 14
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) to treat mild to severe OSA.
In addition, in September 2024 the FDA granted the Vivos C.A.R.E. DNA appliance® an unprecedented clearance to treat children
ages 6-17 for moderate to severe OSA. In addition, we offer our own specially designed pre-formed Vivos Guides, which the FDA considers
Class I orthodontic devices for tooth positioning. 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 C.A.R.E. 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.
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.
During
the fourth quarter of 2024, we opened our facility in Orem, Utah as an in-house manufacturer of Vivos products. Our goal is to increase
profit margins and product quality with the new facility while also shortening fabrication and delivery times. As of December 31, 2024,
approximately 20-30% of total appliance orders are being fulfilled by our new Orem facility.
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 Vivos products and technology. Currently, Vivos is sponsoring a large independent prospective pediatric trial on the clinical effects
of Vivos Guides with over 150 children currently enrolled. We expect to continue to enroll children ages 3-12 in the trial up to a total
potential cohort of 500 children. We currently enroll approximately 20 new children per month. We expect to submit and publish the results
of this trial by the end of 2026.
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.
Once
the current pediatric clinical trial is complete, we plan to submit a 510(k) application to the FDA requesting pediatric clearances and
indications of use for the Vivos Guides.
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