UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
| Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the Fiscal Year Ended | |
| Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the Transition Period from to |
Commission
File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
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 ☐
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 ☐
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.
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).
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” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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
As
of June 30, 2023, 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 $
The registrant had shares of its common stock, $ par value per share, outstanding as of March 26, 2024.
EXPLANATORY NOTE
This Amendment No. 1 includes: Item 8 of Part II, “Financial Statements and Supplementary Data” in its entirety and without change from the Original Filing other than the correction described above.
In addition, pursuant to the rules of the SEC, the exhibit list included herein reflects currently-dated certifications from the Company’s principal executive officer and principal accounting officer, which are filed as exhibits to this Amendment No. 1.
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS
| -2- |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Vivos
Therapeutics, Inc. and Subsidiaries (PCAOB ID No.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Vivos Therapeutics, Inc. and Subsidiaries (the “Company”) as of December 31, 2022, the related consolidated statement of operations, stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
March 30, 2023, except for Note 8, as to which the date is November 22, 2023
We served as the Company’s auditor from 2018 - 2023.
| -3- |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Vivos
Therapeutics, Inc. and Subsidiaries (PCAOB ID No.
Opinion on the Consolidated Financial Statements
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/
March 28, 2024
We have served as the Company’s auditor since 2023.
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VIVOS THERAPEUTICS INC.
Consolidated Balance Sheets
December 31, 2023 and 2022
(In Thousands, Except Per Share Amounts)
| 2023 | 2022 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net
of allowance of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Goodwill | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Intangible assets, net | ||||||||
| Deposits and other | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current portion of contract liabilities | ||||||||
| Current portion of operating lease liability | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Contract liabilities, net of current portion | ||||||||
| Employee retention credit liability | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred Stock, $ par value per share. Authorized shares; shares issued and outstanding | ||||||||
| Common Stock, $ par value per share. Authorized shares; issued and outstanding shares as of December 31, 2023 and shares as December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| -5- |
VIVOS THERAPEUTICS INC.
Consolidated Statements of Operations
Years Ended December 31, 2023 and 2022
(In Thousands, Except Per Share Amounts)
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Product revenue | $ | $ | ||||||
| Service revenue | ||||||||
| Total revenue | ||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Non-operating income (expense) | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| PPP loan forgiveness | ||||||||
| Excess warrant fair value | ( | ) | ||||||
| Change in fair value of
warrant liability, net of issuance costs of $ | ||||||||
| Other income | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share (basic and diluted) | $ | ) | $ | ) | ||||
| Weighted average number of shares of Common Stock outstanding (basic and diluted) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2023 and 2022
(In Thousands)
| Additional | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of warrants to consultants for services | - | |||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock and warrants in private placement, net of issuance costs | ||||||||||||||||||||
| Issuance of common stock and warrants to consultants for services | ||||||||||||||||||||
| Issuance of common stock for purchase of assets | ||||||||||||||||||||
| Issuance of commons stock upon exercise of warrants | ||||||||||||||||||||
| Shares added for fractional shares pursuant to reverse stock split | ||||||||||||||||||||
| Reclassification of liability-classified warrants to equity | - | |||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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VIVOS THERAPEUTICS INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2023 and 2022
(In Thousands)
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of assets | ||||||||
| Fair value of common stock issued for services | ||||||||
| Fair value of warrants issued for services | ||||||||
| Change in fair value of
warrant liability, net of issuance costs of $ | ( | ) | ||||||
| Excess warrant fair value | ||||||||
| Forgiveness of indebtness income | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Operating lease liabilities, net | ( | ) | ||||||
| Tenant improvement allowance | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Deposits | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Employee retention credit liability | ||||||||
| Other liabilities | ||||||||
| Contract liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisitions of property and equipment | ( | ) | ( | ) | ||||
| Payment for asset purchase | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from the private placement of common stock and pre-funded warrants | ||||||||
| Payments for issuance costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Fair value of warrants issued in asset purchase | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| -8- |
VIVOS
THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
NOTE 1 - ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
BioModeling Solutions, Inc. (“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently incorporated in 2013. On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos, Inc. (“First Vivos”), and Vivos Therapeutics, Inc. (“Vivos”), a Wyoming corporation established on July 7, 2016 to facilitate this share exchange combination transaction. Vivos was formerly named Corrective BioTechnologies, Inc. until its name changed on September 6, 2016 to Vivos Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc. and had no substantial pre-combination business activities. First Vivos was incorporated in Texas on November 10, 2015. Pursuant to the SEA, all of the outstanding shares of common stock and warrants of BioModeling and all of the shares of common stock of First Vivos were exchanged for newly issued shares of common stock and warrants of Vivos, the legal acquirer.
The transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes. Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s historical financial statements and recorded at their historical carrying amounts.
On August 12, 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law. Accordingly, as used herein, the term “the Company,” “we,” “us.” “our” and similar terminology refer to Vivos Therapeutics, Inc., a Delaware corporation and its consolidated subsidiaries. As used herein, the term “Common Stock” refers to the common stock, $ par value per share, of Vivos Therapeutics, Inc., a Delaware corporation.
Reverse Stock Split
On
October 25, 2023, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of
Description of Business
We are a medical technology and services company that features a comprehensive suite of proprietary oral appliances and therapeutic treatments. Our products non-surgically treat certain maxillofacial and developmental abnormalities of the mouth and jaws that are closely associated with breathing and sleep disorders such as, mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. The Company offers three separate clinical pathways or programs to providers—Guided Growth and Development, Lifeline, and Complete Airway Repositioning and Expansion (“CARE”). Each program features certain oral appliances coupled with specific therapeutic treatments, and each clinical pathway is intended to address the specific needs of a diverse patient population with different patient journeys. For example, the Guided Growth and Development program features the Vivos Guide and PEx appliances along with CO2 laser treatments and other adjunctive therapies designed for treating palatal growth and expansion in pediatric patients as they grow. The mid-range priced Lifeline program features a selection of mandibular advancement devices (“MADs”) such as the Versa and Vida Sleep which are FDA 510(k) cleared for mild-to-moderate OSA in adults, along with the patented Vida appliance, which is FDA 510(k) cleared as unspecified classification for the alleviation of Temporomandibular Joint Dysfunction (“TMD”) symptoms, bruxism, migraine headaches, and nasal dilation.
| -9- |
The
Company’s flagship CARE program, which is part of The Vivos Method, features the Company’s patented DNA, mRNA and mmRNA appliances,
which are also FDA 510(k) cleared for mild-to-severe OSA and snoring in adults. The Vivos Method may also include adjunctive myofunctional,
chiropractic/physical therapy, and laser treatments that, when properly used with the CARE appliances, constitute a powerful non-invasive
and cost-effective means of reducing or eliminating OSA symptoms. In a small subset of a study, the data has actually shown that The
Vivos Method can reverse OSA symptoms in a large portion (up to
The
Company offers a suite of diagnostic and support products and services to dental and medical providers and distributors who service patients
with OSA or related conditions. Such products and services include (i) VivoScore home sleep screenings and tests (powered by SleepImage®
technology), (ii) AireO2 (an electronic health record program designed specifically for use by dentists treating sleep patients),
(iii) Treatment Navigator (a concierge service to assist a provider in educating and supporting the doctors as they navigate insurance
coverage, diagnostic indications and treatment options), (iv) Billing Intelligence Services (which optimizes medical and dental reimbursement),
(v) advanced training and continuing education courses at the Company’s Vivos Institute in Denver, Colorado, (vi) MyoCorrect, a
service through which Vivos-trained providers can provide orofacial myofunctional therapy (“OMT”) to patients via a telemedicine
platform, and (vii) the Company’s Medical Integration Division (“MID”), which manages independent medical practices
under management and development agreement which pays the Company from six (
The Company’s business model is to teach, train, and support dentists, medical doctors, and distributors in the use of the Company’s products and services. Dentists who use the Company’s products and services typically enroll in a variety of live or online training and educational programs offered through the Company’s Vivos Institute—an 18,000 sq. ft. facility located near the Denver International Airport. Dentists are able to select the specific program or clinical pathway that they want to focus on, such as Guided Growth and Development or Lifeline or both. They may also enroll in the VIP program for the complete set training, educational, and support services available in all three clinical pathway programs. Dentists enrolled in the VIP Program are referred to as “VIPs.” The Company charges up front enrollment fees to educate and train new providers. The Company also charges for the ancillary support services listed above, and views each product and service as a revenue/profit center.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway Alliances, LLC, a Colorado limited liability company), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company Status
The Company is an “emerging growth company” (an “EGC”), as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
| -10- |
Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGC but any such election to opt out is irrevocable. The Company currently expects to retain its status as an EGC until the year ending December 31, 2026, but this status could end sooner under certain circumstances.
Revenue Recognition
The Company generates revenue from the sale of products and services. A significant majority of the Company’s revenues are generated from enrolling dentists as either (i) Guided Growth and Development VIPs; (ii) Lifeline VIPs; (iii) combined Guided Growth and Development and Lifeline VIPs; or Premier Vivos Integrated Providers (Premier VIPs). Prior to the second quarter of 2023, the majority of VIP enrollments were Premier VIPs. The other, lower priced enrollments were piloted in prior fiscal quarters on a limited basis. They were officially adopted during the second quarter of 2023. For each VIP program, revenue is recognized when control of the products or services is transferred to customers (i.e., VIP dentists ordering such products or services for their patients) in a manner that reflects the consideration the Company expects to be entitled to in exchange for those products and services.
Following the guidance of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and the applicable provisions of ASC Topic 842, Leases (“ASC 842”), the Company determines revenue recognition through the following five-step model, which entails:
| 1) | identification of the promised goods or services in the contract; | |
| 2) | determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; | |
| 3) | measurement of the transaction price, including the constraint on variable consideration; | |
| 4) | allocation of the transaction price to the performance obligations; and | |
| 5) | recognition of revenue when, or as the Company satisfies each performance obligation. |
Service Revenue
VIP Enrollment Revenue
The
Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. All program
enrollees, irrespective of their level of enrollment, are commonly referred to as VIPs, unless it is necessary to specify their particular
program. Once it is determined that a contract exists (i.e., a VIP enrollment agreement is executed and payment is received), service
revenue related to VIP enrollments is recognized when the underlying services are performed. The price of the Premier VIP enrollment
that the VIP pays upon execution of the contract is significant, running at approximately $
The Company enters into programs that may provide for multiple performance obligations. Commencing in 2018, the Company began enrolling medical and dental professionals in a one-year program (now known as the Premier VIP Program) which includes training in a highly personalized, deep immersion workshop format which provides the Premier VIP dentist access to a team who is dedicated to creating a successful integrated practice.
VIP enrollment fees include multiple performance obligations which vary on a contract-by-contract basis. The performance obligations included with enrollments may include sleep apnea rings, a six or twelve months BIS subscription, a marketing package, lab credits and the right to sell our appliances. The Company allocates the transaction price of a VIP enrollment contract to each performance obligation under such contract using the relative standalone selling price method. The relative standalone price method is based on the proportion of the standalone selling price of each performance obligation to the sum of the total standalone selling prices of all the performance obligations in the contract.
| -11- |
The right to sell is similar to a license of intellectual property because without it the VIP cannot purchase appliances from the Company. The right to sell performance obligation includes the Vivos training and enrollment materials which prepare dentists for treating their patients using The Vivos Method.
Because the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, the Company believes that it is appropriate to estimate the standalone selling price of this performance obligation using the residual method. As such, the observable prices of other performance obligations under a VIP contract will be deducted from the contract price, with the residual being allocated to the right to sell performance obligation.
The Company uses significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell. The Company has determined that Premier VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail to participate in the Premier VIP program long term. Since the beginning of the Premier VIP program, just under one-third of new VIP members fall into this category, and the revenue allocated to the right to sell for those VIPs is accelerated at the time in which it becomes remote that a VIP will continue in the program. Revenue is recognized in accordance with each individual performance obligation unless it becomes remote the VIP will continue, at which time the remainder of revenue is accelerated and recognized in the following month. Those VIPs who complete training typically remain active for a much longer period, and revenue from the right to sell for those VIPs is recognized over the estimated period of which those VIPs will remain active. Because of various factors occurring year to year, the Company has estimated customer life for each year a contract is initiated. The estimated customer lives are calculated separately for each year and have been estimated at 15 months for 2020, 14 months for 2021, 18 months for 2022, and 23 months for 2023, as a result of customers staying active for longer periods of time. The right to sell is recognized on a sum of the years’ digits method over the estimated customer life for each year as this approximates the rate of decline in VIPs purchasing behaviors we have observed.
Other Service Revenue
In addition to VIP enrollment service revenue, in 2020 the Company launched BIS, an additional service on a monthly subscription basis, which includes the Company’s AireO2 medical billing and practice management software. Revenue for these services is recognized monthly during the month the services are rendered.
The Company also offers its VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method. The program includes packages of treatment sessions that are sold to the VIPs, and resold to their patients. Revenue for MyoCorrect services is recognized over the 12-month performance period as therapy sessions occur.
Allocation of Revenue to Performance Obligations
The Company identifies all goods and services that are delivered separately under a sales arrangement and allocates revenue to each performance obligation based on relative fair values. These fair values approximate the prices for the relevant performance obligation that would be charged if those services were sold separately, and are recognized over the relevant service period of each performance obligation. After allocation to the performance obligations, any remainder is allocated to the right to sell under the residual method and is recognized over the estimated customer life. In general, revenues are separated between durable medical equipment (product revenue) and education and training services (service revenue).
Treatment of Discounts and Promotions
From time to time, the Company offers various discounts to its customers. These include the following:
| 1) | Discount for cash paid in full |
| -12- |
| 2) | Conference or trade show incentives, such as subscription enrollment into the SleepImage® home sleep test program, or free trial period for the SleepImage® lease program | |
| 3) | Negotiated concessions on annual enrollment fee | |
| 4) | Credits/rebates to be used towards future product orders such as lab rebates |
The amount of the discount is determined up front prior to the sale. Accordingly, measurement is determined before the sale occurs and revenue is recognized based on the terms agreed upon between the Company and the customer over the performance period. In rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price. In this situation revenue is measured and the change in transaction price is allocated over the remaining performance obligation.
The amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale. Prior to the sale, the customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the Company provides. The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period. At the end of each reporting period, the Company updates the transaction price to represent the circumstances present at the end of the reporting period and any changes in circumstances during the reporting period.
Product Revenue
In addition to revenue from services, the Company also generates revenue from the sale of its line of oral devices and preformed guides (known as appliances or systems) to its customers, the VIP dentists. These include the DNA appliance®, mRNA appliance®, the mmRNA appliance, the Versa, , the Vida, the Vida Sleep and others. The Company expanded its product offerings in the first quarter of 2023 via the acquisition of certain U.S. and international patents, product rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC, a New York limited liability company (“AFD”). Revenue from appliance sales is recognized when control of product is transferred to the VIP in an amount that reflects the consideration it expects to be entitled to in exchange for those products. The VIP in turn charges the VIP’s patient and or patient’s insurance a fee for the appliance and for his or her professional services in measuring, fitting, installing the appliance and educating the patient as to its use. The Company contracts with VIPs for the sale of the appliance and is not involved in the sale of the products and services from the VIP to the VIP’s patient.
The Company’s appliances are similar to a retainer that is worn in the mouth after braces are removed. Each appliance is unique and is fitted to the patient. The Company utilizes its network of certified VIPs throughout the United States and in some non-U.S. jurisdictions to sell the appliances to their customers as well as in two dental centers that the Company operates. The Company utilizes third party contract manufacturers or labs to produce its unique, patented appliances and preformed guides. The manufacturer designated by the Company produces the appliance in strict adherence to the Company’s patents, design files, treatments, processes and procedures and under the direction and specific instruction of the Company, ships the appliance to the VIP who ordered the appliance from the Company. All of the Company’s contract manufacturers are required to follow the Company’s master design files in production of appliances or the lab will be in violation of the FDA’s rules and regulations. The Company performed an analysis under ASC 606-10-55-36 through 55-40 and concluded it is the principal in the transaction and is reporting revenue gross. The Company bills the VIP the contracted price for the appliance which is recorded as product revenue. Product revenue is recognized once the appliance ships to the VIP under the direction of the Company.
In support of the VIPs using the Company’s appliances for their patients, the Company utilizes a team of trained technicians to measure, order and fit each appliance. Upon scheduling the patient (which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s insurance coverage. Revenue is recognized differently for Company owned centers than for revenue from VIPs. The Company recognizes revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted and provided to the patient.
The Company offers certain dentists (known as Clinical Advisors) discounts from standard VIP pricing. This is done to help encourage Clinical Advisors, who help the VIPs with technical aspects of the Company’s products, to purchase Company products for their own practices. In addition, from time to time, the Company offers credits to incentivize VIPs to adopt the Company’s products and increase case volume within their practices. These incentives are recorded as a liability at issuance and deducted from the related product sale at the time the credit is used.
| -13- |
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, the determination of customer life and breakage related to recognizing revenue for VIP contracts, impairment of goodwill and long-lived assets; valuation assumptions for assets acquired in asset acquisitions; valuation assumptions for stock options, warrants, warrant liabilities and equity instruments issued for goods or services; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operations will be affected.
Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents.
Accounts Receivable, Net
Accounts receivable represents amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Accounts receivable are stated at the net amount expected to be collected, using an expected credit loss methodology to determine the allowance for expected credit losses. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. When the Company is aware of a customer’s inability to meet its financial obligation, the Company may individually evaluate the related receivable to determine the allowance for expected credit losses. The Company uses specific criteria to determine uncollectible receivables to be charged-off, including bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.
Property and Equipment, Net
Property
and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, which ranges from
Intangible Assets, Net
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. We test for impairment annually as of December 31. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
Intangible
assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related
to its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom
the Company acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software
underlying AireO2) for work related to the Company’s acquired patents, intellectual property and customer contracts and (iii) AFD,
from whom the Company acquired certain U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual
property in March 2023. The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer contracts are amortized
using the straight-line method over the estimated life of the assets, which approximates
| -14- |
Intangible assets consist of assets acquired from First Vivos and costs
paid to (i) MyoCorrect, from whom the Company acquired certain assets related to its OMT service in March 2021, (ii) Lyon Management and
Consulting, LLC and its affiliates (“Lyon Dental”), from whom the Company acquired certain medical billing and practice management
software, licenses and contracts in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired
patents, intellectual property and customer contracts and (iii) AFD, from whom the Company acquired certain U.S. and international patents,
trademarks, product rights, and other miscellaneous intellectual property in March 2023. The identifiable intangible assets acquired from
First Vivos and Lyon Dental for customer contracts are amortized using the straight-line method over the estimated life of the assets,
which approximates
Impairment of Long-lived Assets
We review and evaluate the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an adverse action or assessment by a regulator. We measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
Equity Offering Costs
Commissions, legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination of the success of the offering. Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period it is determined that the offering was successful. Deferred offering costs related to unsuccessful equity offerings are recorded as expense in the period when it is determined that an offering is unsuccessful.
Accounting for Payroll Protection Program Loan
The
Company accounted for its U.S. Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”)
loan as a debt instrument under ASC 470, Debt. The Company recognized the original principal balance as a financial liability
with interest accrued at the contractual rate over the term of the loan. On January 21, 2022, the PPP loan received by the Company on
May 8, 2020 was forgiven by the SBA in its entirety, which includes approximately $
Employee Retention Tax Credit
The employee retention tax credit (“ERTC”) for 2020 was established under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”). The ERTC provided for changes in the employee retention credit for 2020 and provided an additional credit for the first, second and third calendar quarters of 2021. Employers are eligible for the credit if they experienced either a full or partial suspension of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or if they experienced a significant decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 and the corresponding quarters in 2019. The ERTC is a refundable credit that employers can claim on qualified wages paid to employees, including certain health insurance costs.
According
to the Internal Revenue Service (“IRS”) Notice 2021-20, “Guidance on the Employee Retention Credit under Section 2301
of the Coronavirus Aid, Relief, and Economic Security Act,” the period during which there is a significant decline in gross receipts
is determined by identifying the first quarter in 2020 in which the gross receipts are less than
| -15- |
Section 2301(c)(3)(A)(ii) of the CARES Act also provides that if an eligible employer averaged 100 or fewer employees in 2019 (a “small eligible employer”), qualified wages are those wages paid by the eligible employer with respect to an employee during any period described in section 2301(c)(2)(A)(ii)(I) of the CARES Act (relating to a calendar quarter for which the operation of a trade or business is fully or partially suspended due to a governmental order) or during a calendar quarter within the period described in section 2301(c)(2)(A)(ii)(II) of the CARES Act (relating to a significant decline in gross receipts). The Company averaged fewer than 80 employees in 2019 and is therefore considered a small eligible employer under the CARES Act.
For
2021, the ERTC was
Loss and Gain Contingencies
The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably estimated. If some amount within a range of loss appears to be a better estimate than any other amount within the range, the Company accrues that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss. The Company regularly evaluates current information available to it to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Legal fees related to contingencies are charged to general and administrative expense as incurred. Contingencies that may result in gains are not recognized until realization is assured, which typically requires collection in cash.
| -16- |
The Company measures the cost of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the award as of the grant date. The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model. The Company estimates the expected term using the simplified method which is the average of the vesting term and the contractual term of the respective options. The Company determines the expected price volatility based on the historical volatilities of shares of the Company’s peer group as the Company does not have a sufficient trading history for its Common Stock. Industry peers consist of several public companies in the bio-tech industry similar to the Company in size, stage of life cycle and financial leverage. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. The Company recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period. For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award were, in substance, a single award. The Company recognizes the impact of forfeitures and cancellations in the period that the forfeiture or cancellation occurs, rather than estimating the number of awards that are not expected to vest in accounting for stock-based compensation.
Research and Development
Costs
related to research and development are expensed as incurred and include costs associated with research and development of new products
and enhancements to existing products. Research and development costs incurred were less than $
Leases
Operating leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability - current and non-current portion in our balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our balance sheets.
| -17- |
Income Taxes
The
Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which
deferred income taxes are recognized based on the estimated future tax effects of differences between the financial statement and tax
bases of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes
to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions
in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating
results, or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities
may be required. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. The
recorded valuation allowance is based on significant estimates and judgments and if the facts and circumstances change, the valuation
allowance could materially change. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit
of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an
audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest
benefit that has a
Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent dilutive.
Warrant Accounting
The Company accounts for its warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument, in accordance with ASC 815, Derivatives and Hedging. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. Management estimates the fair value of these liabilities using the Black-Scholes model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.
Segment Information
We manage our business within one reportable segment. The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker (CODM), reviews financial information presented on a consolidated basis, accompanied by information about operations for purposes of making operating decisions and assessing financial performance.
Recent Accounting Pronouncements
Presented below is a discussion of new accounting standards including deadlines for adoption assuming that the Company retains its designation as an EGC.
Recently Adopted Standards. The following recently issued accounting standards were adopted by the Company during the period ended December 31, 2023:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This guidance requires use of an impairment model (known as the “current expected credit losses”, or CECL model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. The Company adopted the new accounting standard on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
NOTE 2 - LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN
The
financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. The Company has incurred losses since inception, including $
| -18- |
Net
cash used in operating activities amounted to approximately $
As
of December 31, 2023, the Company had approximately $
Until a state of cash flow positivity is reached, management is reviewing all options to obtain additional financing to fund operations. This financing is expected to come primarily from the issuance of equity securities in order to sustain operations until the Company can achieve profitability and positive cash flows, if ever. There can be no assurances, however, that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, the Company may be required to delay, significantly modify or terminate some or all of its operations, all of which could have a material adverse effect on the Company and stockholders.
NOTE 3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES
Net Revenue
For the years ended December 31, 2023 and 2022, the components of revenue from contracts with customers and the related timing of revenue recognition is set forth in the table below (in thousands):
| 2023 | 2022 | |||||||
| Product revenue: | ||||||||
| Appliance sales to VIPs | $ | (1) | $ | (1) | ||||
| Center revenue | ||||||||
| Total product revenue | ||||||||
| Service revenue | ||||||||
| VIP | (2) | |||||||
| Billing intelligence services | (3) | (3) | ||||||
| Sleep testing services | ||||||||
| Myofunctional therapy services | ||||||||
| Sponsorship/seminar/other | ||||||||
| Total service revenue | ||||||||
| Total revenue | $ | $ | ||||||
| (1) | |
| (2) | |
| (3) |
| -19- |
Changes in Contract Liabilities
The key components of changes in contract liabilities for the years ended December 31, 2023 and 2022 are as follows (in thousands):
| 2023 | 2022 | |||||||
| Beginning balance, January 1 | $ | $ | ||||||
| New contracts, net of cancellations | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Ending balance, December 31 | $ | $ | ||||||
Current
portion of deferred revenue is approximately $
Changes in Accounts Receivable
Our
customers are billed based on fees agreed upon in each customer contract. Receivables from customers were $
Shipping Costs
Shipping
costs for product deliveries to customers are expensed as incurred and totaled approximately $
NOTE 4 - PROPERTY AND EQUIPMENT, NET
As of December 31, 2023 and 2022, property and equipment consist of the following (in thousands):
| 2023 | 2022 | |||||||
| Furniture and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Construction in progress | ||||||||
| Molds | ||||||||
| Gross property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net Property and equipment | $ | $ | ||||||
Leasehold
improvements relate to the Vivos Institute (the Company’s
| -20- |
NOTE 5 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill
of $
| Acquisitions | 2023 | 2022 | ||||||
| BioModeling | $ | $ | ||||||
| Empowered Dental | ||||||||
| Lyon Dental | ||||||||
| Total goodwill | $ | $ | ||||||
Intangible Assets
As of December 31, 2023 and 2022, identifiable intangible assets were as follows (in thousands):
| 2023 | 2022 | |||||||
| Patents and developed technology | $ | $ | ||||||
| Trade name | ||||||||
| Other | ||||||||
| Total intangible assets | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Net intangible assets | $ | $ | ||||||
Amortization
expense of identifiable intangible assets was less than $
| As of December 31, | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 6 - OTHER FINANCIAL INFORMATION
Accrued Expenses
As of December 31, 2023 and 2022, accrued expenses consist of the following (in thousands):
| 2023 | 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued legal and other | ||||||||
| Lab rebate liabilities | ||||||||
| Total accrued expenses | $ | $ | ||||||
| -21- |
NOTE 7 - PREFERRED STOCK
The Company’s Board of Directors has authority to issue up to shares of Preferred Stock. At December 31, 2020, all previously issued shares of Preferred Stock had been redeemed or converted to shares of Common Stock. As of December 31, 2023, the Company’s Board of Directors continues to have the authority to designate up to shares of Preferred Stock in various series that provide for liquidation preferences, and voting, dividend, conversion, and redemption rights as determined at the discretion of the Board of Directors.
NOTE 8 - COMMON STOCK
The Company is authorized to issue shares of Common Stock. Holders of Common Stock are entitled to one vote for each share held. The Company’s Board of Directors may declare dividends payable to the holders of Common Stock.
On
January 9, 2023, the Company closed a private placement (the “January 2023 Private Placement”) pursuant to which the Company
agreed to issue and sell shares of Common Stock, Pre-Funded Warrants to purchase up to an aggregate of
On
February 28, 2023, the Company acquired certain U.S. and international patents, patent applications, trademarks, product rights, and
other miscellaneous intellectual property from AFD. Pursuant to the asset acquisition the Company agreed to issue shares of Common
Stock in addition to cash consideration of $
In
addition, the Company entered into an employment agreement with Dr. Scott Simonetti, DDS, the founder and Chief Executive Officer of
AFD, as part-time Senior Director of Research and Development for an annual salary of approximately $
As
disclosed above, on October 25, 2023 (the “Effective Date”), the Company effected a Reverse Stock Split of its outstanding
shares of common stock at a ratio of
On
November 2, 2023, the Company closed a private placement (the “November 2023 Private Placement”) with an institutional investor
pursuant to which the Company sold an aggregate of $
On February
14, 2024, the Company entered into a warrant inducement letter agreement (the “Inducement Agreement”) with the same institutional
investor in the November 2023 Private Placement pursuant to which the investor agreed to exercise for cash the entirety of the Series
B Warrant at an exercise price of $
| -22- |
The number of shares of Common Stock available for issuance under the Company’s equity incentive plans and the Common Stock issuable pursuant to outstanding equity awards and common stock purchase warrants immediately prior to the Reverse Stock Split were proportionately adjusted by the ratio of the Reverse Stock Split. The exercise prices of such outstanding options and warrants were also adjusted in accordance with their respective terms. The number of authorized shares of common stock was not affected by the Reverse Stock Split.
NOTE 9 - STOCK OPTIONS AND WARRANTS
Stock Options
In 2017, the Company’s shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2017 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders have approved a total reserve of shares of Common Stock for issuance under the 2017 Plan.
In April 2019, the Company’s shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2019 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders originally approved a total reserve of shares of Common Stock for issuance under the 2019 Plan. At each of the Company’s annual meeting of stockholders held in 2020 and 2021, the Company’s stockholders approved amendments to the 2019 Plan to increase the number of shares of Common Stock available for issuance thereunder by an aggregate of shares of Common Stock such that, after such amendments, and prior to any grants, shares of Common Stock were available for issuance.
On September 22, 2023, stockholders approved an amendment to the Company’s 2019 Plan to increase the number of shares of Company common stock authorized to be issued pursuant to the 2019 Plan by shares from an aggregate of shares to an aggregate of shares.
During the years ended December 31, 2023 and 2022, the Company issued stock options to purchase and shares of Common Stock at a weighted average exercise price of $ and $ per share respectively, to certain members of the Board of Directors, employees and consultants. The stock options allow the holders to purchase shares of Common Stock at prices between $ and $ per share. Options for the purchase of and shares of common stock expired as of December 31, 2023 and 2022, respectively. The following table summarizes all stock options as of December 31, 2023 and 2022 (shares in thousands):
| 2023 | 2022 | |||||||||||||||||||||||
| Shares | Price (1) | Term (2) | Shares | Price (1) | Term (2) | |||||||||||||||||||
| Outstanding, at December 31, | $ | $ | ||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||||||||||
| Exercised | ||||||||||||||||||||||||
| Outstanding, at December 31 | (3) | (4) | ||||||||||||||||||||||
| Exercisable, at December 31 | (4) | (5) | ||||||||||||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
| -23- |
For the year ended December 31, 2023 and 2022, the valuation assumptions for stock options granted under the 2017 Plan and the 2019 Plan were estimated on the date of grant using the BSM option-pricing model with the following weighted-average assumptions:
| 2023 | 2022 | |||||||
| Grant date closing price of Common Stock | $ | $ | ||||||
| Expected term (years) | ||||||||
| Risk-free interest rate | % | % | ||||||
| Volatility | % | % | ||||||
| Dividend yield | % | % |
Based on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the years ended December 31, 2023 and 2022 was $ and $, respectively.
For the years ended December 31, 2023 and 2022, the Company recognized approximately $ and $ million, respectively, of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of December 31, 2023 and 2022 was approximately $ and $ million, respectively, which will be recognized over the weighted average remaining term of and years, respectively.
Warrants
The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the years ended December 31, 2023 and 2022 (shares in thousands):
| 2023 | 2022 | |||||||||||||||||||||||
| Shares | Price (1) | Term (2) | Shares | Price (1) | Term (2) | |||||||||||||||||||
| Outstanding, at December 31 | $ | $ | ||||||||||||||||||||||
| Grants of warrants: | ||||||||||||||||||||||||
| Consultants for services | (3) | |||||||||||||||||||||||
| Private placement | (4) | |||||||||||||||||||||||
| Exercised | ( | )(5) | ||||||||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||||||||||
| Outstanding, at December 31 | (6) | $ | | (6) | $ | |||||||||||||||||||
| Exercisable, at December 31 | (7) | $ | | (7) | $ | |||||||||||||||||||
| (1) | |
| (2) | |
| (3) |
| -24- |
| (4) | |
| (5) | |
| (6) | |
| (7) |
For the years ended December 31, 2023 and 2022, the valuation assumptions for warrants issued were estimated on the measurement date using the BSM option-pricing model with the following weighted-average assumptions:
| 2023 | 2022 | |||||||
| Measurement date closing price of Common Stock (1) | $ | $ | ||||||
| Contractual term (years) (2) | ||||||||
| Risk-free interest rate | % | % | ||||||
| Volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
| (1) | Weighted average grant price. | |
| (2) |
NOTE 10 - RELATED PARTY TRANSACTIONS
For the years ended December 31, 2023 and 2022, options for the purchase of and , respectively, of common stock were granted to the Company’s directors, officers, employees and consultants.
| -25- |
NOTE 11 - INCOME TAXES
For the years ended December 31, 2023 and 2022, the domestic and foreign components of loss before income taxes consist of the following (in thousands):
| 2023 | 2022 | |||||||
| Domestic | $ | ( | ) | $ | ( | ) | ||
| International | ||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
For the years ended December 31, 2023 and 2022, , the Company did not recognize any current or deferred income tax expense due to a valuation allowance against all of its net deferred income tax assets.
A reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate of 21% to the pre-tax loss, and the income tax benefit recognized in the consolidated financial statements is as follows for the years ended December 31, 2023 and 2022 (in thousands):
| 2023 | 2022 | |||||||
| Income tax (benefit) computed at federal statutory rate | $ | ( | ) | $ | ( | ) | ||
| PPP loan forgiveness | ( | ) | ||||||
| Other permanent differences | ||||||||
| State tax expenses | ( | ) | ( | ) | ||||
| Prior year adjustment to state net operating loss carryforward | ( | ) | ( | ) | ||||
| Nontaxable gain on change in fair value of warrants, net of issuance costs | ( | ) | ||||||
| Non-qualified stock option cancellations | ||||||||
| Other | ||||||||
| Change in valuation allowance | ||||||||
| Total income tax benefit | $ | $ | ||||||
As of December 31, 2023 and 2022, the principal components of deferred tax assets and liabilities were as follows (in thousands):
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | ||||||||
| Stock based compensation | ||||||||
| Lease liability | ||||||||
| Property, equipment and intangibles | ||||||||
| Other | ||||||||
| Total deferred tax assets before valuation allowance | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred income tax assets after valuation allowance | ||||||||
| Deferred tax liabilities: | ||||||||
| Goodwill | ( | ) | ||||||
| ROU asset | ( | ) | ( | |||||
| Total deferred income tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets and liabilities | $ | $ | ||||||
| -26- |
Management
assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing
deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such
objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of
this evaluation, as of December 31, 2023, a valuation allowance of $
As
of December 31, 2023, the Company has federal net operating loss (“NOL”) carryforwards of $
Federal and state laws impose substantial restrictions on the utilization of NOL carryforwards if the Company experiences significant ownership changes as defined in Section 382 of the Internal Revenue Code (“IRC”). Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards may be limited in the event a cumulative change in ownership of more than 50% among 5% or greater shareholders (or shareholder groups) over any three-year period. The Company is not currently utilizing its federal and state NOL carryforwards and has not completed a formal study to determine if any past ownership changes may have triggered limitations under IRC Section 382.. The Company’s ability to use its remaining NOL carryforwards may be further limited if the Company experiences an IRC Section 382 ownership change in connection with future changes in the Company’s stock ownership.
Management does not believe there are any significant uncertain tax positions as of and for the years ended December 31, 2023 and 2022. Accordingly, interest and penalties related to uncertain tax positions have been recognized for the years ended December 31, 2023 and 2022.
The Company files income tax returns in the United States federal and various state jurisdictions. The Company is no longer subject to income tax examinations for federal income taxes before 2020 or for states before 2019. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOL’s generated as such NOL’s are utilized. As of December 31, 2023, the Company has filed all appropriate foreign operation tax returns.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, now widely acknowledged to have been generally ineffective, and in many ways, harmful. As a result, nearly all of these Orders have been relaxed or lifted, but there is considerable uncertainty about whether the Orders will be reinstated should a new COVID-19 variant or entirely new virus emerge.
Our business was materially impacted by COVID-19 in 2020 and to some extent thereafter and through the early part of 2023 due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential VIPs having to close their offices. The impact of COVID-19 on our business diminished somewhat as 2023 has progressed. However, it appears that the latest COVID-19 subvariants evoke generally milder symptoms and do not pose the same health or economic threat as previous strains. However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to negatively impact our VIP dental practices and our revenue across the U.S. and Canada during 2022 and into 2023. We believe new enrollments during 2023 continue to be negatively impacted by the ongoing overall workforce uncertainties in the dental market. In addition, new variants of COVID-19 continue to arise, and such variants may in the future cause an adverse effect on the dental market. As such, the long-term financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated at this time.
| -27- |
Inflation, the War in Ukraine and Middle East Hostilities
The Company believes that as the U.S. experiences a period of inflation, which has increased (and may continue to increase), the Company and its suppliers’ costs as well as the end cost of the Company’s products to consumers may also increase. The worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and Hamas attacks on Israel in October of 2023 and Israel’s response have emerged as new barriers to long-term economic recovery. If an economic recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. To date, the Company has been able to manage inflation risk without a material adverse impact on its business or results of operations, and inflation has begun to abate somewhat during 2023. However, inflationary pressures (including increases in the price of raw material components of the Company’s appliances) made it necessary for the Company to adjust its standard pricing for its appliance products effective May 1, 2022. The full impact of such price adjustments on sales or demand for the Company’s products is not fully known at this time and may require the Company to adjust other aspects of its business as it seeks to grow revenue and, ultimately, achieve profitability and positive cash flow from operations.
An additional inflation-related risk is the Federal Reserve’s response, which up to this point has been to raise interest rates. Such actions have, in times past, created unintended consequences in terms of the impact on housing starts, overall manufacturing, capital markets, and banking. If such disruptions become systemic, like in the recession of 2008, then the impact on the Company’s revenue, earnings potential and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.
These conditions could cause an economic recession or depression to commence, and if such recession or depression is sustained, it could have a material adverse effect on the Company’s business as demand for its products could decrease. Such conditions have also had, and may continue to have, an adverse effect on the capital markets, with public stock price decreases and volatility, which could make it more difficult for the Company to raise needed capital at the appropriate time.
Operating Leases
The Company has entered into various operating lease agreements for certain offices, medical facilities and training facilities. These leases have original lease periods expiring between 2022 and 2029. Most leases include an option to renew and the exercise of a lease renewal option typically occurs at the discretion of both parties. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease until it is reasonably certain that the Company will exercise that option.
In
January 2017, the Company entered into a commercial lease agreement for
In
May 2018, the Company entered into a commercial lease agreement for
In
October 2020, the Company entered into a commercial lease agreement for
| -28- |
In
April 2019, the Company entered into a commercial lease agreement for
In
April 2019, the Company entered into a commercial lease agreement for
In
April 2022, the Company entered into a commercial lease agreement for
As of December 31, 2023 and 2022, the components of lease expense are as follows (in thousands):
| Lease cost: | 2023 | 2022 | ||||||
| Operating lease cost | $ | $ | ||||||
| Total net lease cost | $ | $ | ||||||
Rent
expense is recognized on a straight-line basis over the lease term. Lease expense, including real estate taxes and related costs for
the years ended December 31, 2023 and 2022 aggregated approximately $
As of December 31, 2023 and 2022, the remaining lease terms and discount rate used are as follows (in thousands):
| 2023 | 2023 | |||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
Supplemental cash flow information related to leases as of December 31, 2023 and 2022 is as follows (in thousands):
| 2023 | 2022 | |||||||
| Cash flow classification of lease payments: | ||||||||
| Operating cash flows from operating leases | ||||||||
| -29- |
As of December 31, 2023 and 2022, the maturities of the Company’s future minimum lease payments were as follows (in thousands):
| As of December 31, | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Total | $ | |||
Basic and diluted net loss per share of Common Stock (“EPS”) is computed by dividing (i) net loss (the “Numerator”), by (ii) the weighted average number of shares of Common Stock outstanding during the period (the “Denominator”).
The calculation of diluted EPS is also required to include the dilutive effect, if any, of stock options, unvested restricted stock awards, convertible debt and Preferred Stock, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. As of December 31, 2023 and 2022, all Common Stock equivalents were antidilutive.
| 2023 |
2022 | |||||||
| Calculation of Numerator: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Loss applicable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Calculation of Denominator: | ||||||||
| Weighted average number of shares of Common Stock outstanding | ||||||||
| Net loss per share of Common Stock (basic and diluted) | $ | ) | $ | ) | ||||
| 2023 | 2022 | |||||||
| Common stock warrants | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
NOTE 14 - FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the measurement of fair value:
| -30- |
Level 1-Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date
Level 2-Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability
Level 3-Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date
As of December 31, 2023 and 2022, the fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities approximated their carrying values due to the short-term nature of these instruments.
As
discussed in Note 8, on January 9, 2023, the Company closed on the Private Placement for the sale by the Company of shares of the Company’s
common stock and the issuance of pre-funded warrant to purchase up to an aggregate of
Recurring Fair Value Measurements
For the years ended December 31, 2023 and 2022, the Company did not have any assets and liabilities classified as Level 1, Level 2 or Level 3. The Company has concluded that the warrants issued in connection with the private placement, met the definition of a liability under ASC 480, Distinguishing Liabilities from Equity and has classified the liability as Level 3.
The following table represent a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2023:
| Warrant Liability | ||||
| (In thousands) | ||||
| Beginning balance, January 1 | $ | |||
| Issuance of warrants | ||||
| Exercise of warrants | ( | ) | ||
| Change in fair value upon re-measurement | ( | ) | ||
| Reclassification of warrant liabilities to additional paid-in-capital | ( | ) | ||
| Ending balance, December 31 | $ | |||
| -31- |
The Company has re-measured the liability to estimate fair value at November 2, 2023 as a result of the amendment described above, using the Black-Scholes option pricing model with the following assumptions:
| January 9, 2023 | March 31, 2023 | June 30, 2023 | September 30, 2023 | November 2, 2023 | ||||||||||||||||
| Measurement date closing price of Common Stock (1) | $ | $ | $ | $ | $ | |||||||||||||||
| Contractual term (years) (2) | ||||||||||||||||||||
| Risk-free interest rate | % | % | % | % | % | |||||||||||||||
| Volatility | % | % | % | % | % | |||||||||||||||
| Dividend yield | % | % | % | % | % | |||||||||||||||
| (1) | ||
| (2) |
The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the years ended December 31, 2023 and 2022, the Company had no transfers of its assets or liabilities between levels of the fair value hierarchy.
Significant Concentrations
Credit Risk
Financial
instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents on
deposit with financial institutions, the balances of which frequently exceed federally insured limits. Management monitors the soundness
of these financial institutions and believes the Company’s risk is negligible. The Company has not experienced any losses in such
accounts. If any of the financial institutions with whom the Company does business was to be placed into receivership, the Company may
be unable to access the cash they have on deposit with such institutions. If the Company were unable to access cash and cash equivalents
as needed, the financial position and ability to operate the business could be adversely affected. As of December 31, 2023, the Company
had cash and cash equivalents with three financial institutions in the United States with an aggregate balance of $
| -32- |
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. No single customer represented more than 10% of our accounts receivable as of December 31, 2023. The Company maintains reserves for potential bad debts.
Supplier Concentration
As previously disclosed, the Company relies on third-party suppliers and contract manufacturers for the raw materials and components used in our appliances and to manufacture and assemble our products. As of December 31, 2023, the Company had five suppliers that accounted for approximately % of the Company’s total purchases during the year. The Company expects to maintain existing relationships with these vendors.
NOTE 15 – SUBSEQUENT EVENTS
On
October 30, 2023, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Holder”)
pursuant to which the Company sold an aggregate of approximately $
On
February 14, 2024, the Company entered into a warrant inducement letter agreement (the “Inducement Agreement”) with the Holder
pursuant to which the Holder agreed to exercise for cash the entirety of the Series B Warrant at an exercise price of $
Pursuant
to the Inducement Agreement, in consideration for the immediate exercise of the Series B Warrant in full, the Company agreed to issue
to the Holder, in a new private placement transaction (the “Inducement Transaction”): (i) a 5-year, Series B-1 Common Stock
Purchase Warrant to purchase
The Inducement Transaction closed on February 20, 2024. The Company intends to use the net proceeds received for general working capital and general corporate purposes.
The terms of the Inducement Agreement require the Company to file a registration statement registering the Inducement Warrant Shares for resale (“Resale Registration Statement”) no later than April 5, 2024 and to use commercially reasonable best efforts to cause the Resale Registration Statement to be effective within 60 calendar days following the filing.
The Company further agreed that until forty-five (45) days after the closing date of the Inducement Transaction, it will not (other than in connection with limited enumerated exceptions) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents or file any registration statement or any amendment or supplement (other than the Resale Registration Statement). The Company is further prohibited from entering into any “variable rate transaction” for a period of six months from the effective date of the Resale Registration Statement.
The Inducement Warrants contain (i) customary stock-based anti-dilution protection, (ii) a cashless exercise provision in the event the Inducement Warrant Shares are not registered for resale at the time of exercise, (iii) beneficial ownership limitations that may be waived at the option of the Holder upon 61 days’ notice to the Company, (iv) a put right granting the Holder the right to require the Company or its successor to redeem the Inducement Warrants in cash for their Black-Scholes value in the event of a Fundamental Transaction (as defined in the Inducement Warrants) and (v) other customary provisions for warrants of this type.
| -33- |
PART IV
Item 15. Exhibits and Financial Statement Schedules and Reports on Form 10-K
(a) List of documents filed as part of this Amendment No. 1:
(1) Financial Statements
For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page 2 of this Annual Report on Form 10-K/A, incorporated into this Item by reference.
(2) Financial Statement Schedules
None.
(3) The following exhibits are either filed as part of this Annual Report on Form 10-K/A:
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
| -34- |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A (Amendment No. 1) to be signed on its behalf by the undersigned.
| VIVOS THERAPEUTICS, INC. | ||
| Date: July 29, 2024 | By: | /s/ R. Kirk Huntsman |
| R. Kirk Huntsman | ||
| Chairman and Chief Executive Officer | ||
| Date: July 29, 2024 | By: | /s/ Bradford Amman |
| Bradford Amman | ||
| Chief Financial Officer | ||
| -35- |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference of our report dated March 30, 2023 (except for Note 8 which is dated November 22, 2023) on the financial statements of Vivos Therapeutics, Inc. and Subsidiaries’ Registration Statements on Form S-1 (No. 333-269453), Form S-3 (No. 333-262554) and Form S-8 (No. 333-257050) relating to the consolidated financial statements as of and for the year ended December 31, 2022 that appears in this Annual Report on Form 10-K/A.
/s/ Plante & Moran, PLLC
Denver, Colorado
July 29, 2024
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent the incorporation by reference in the Registration Statements on Form S-1 (No. 333-278564 and No. 333-269453), Form S-3 (No. 333-262554) and Form S-8 (No. 333-257050) of Vivos Therapeutics, Inc. (the “Company”), of our report dated March 28, 2024, relating to the consolidated financial statements of the Company as of and for the year ended December 31, 2023 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a going concern uncertainty), appearing in this Annual Report on Form 10-K/A of the Company for the year ended December 31, 2023.
/s/ Moss Adams LLP
Denver, Colorado
July 29, 2024
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14 OR RULE
15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, R. Kirk Huntsman, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Vivos Therapeutics, Inc: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: July 29, 2024 | /s/ R. Kirk Huntsman |
| R. Kirk Huntsman | |
| Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14 OR RULE
15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brad Amman, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Vivos Therapeutics, Inc.: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: July 29, 2024 | /s/ Bradford Amman |
| Bradford Amman | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of (18 U.S.C. 1350), the undersigned officer of Vivos Therapeutics, Inc., a Delaware corporation (the “Company”), does hereby certify, to the best of such officer’s knowledge and belief, that:
(1) The amendment to the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K/A”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-K/A fairly presents, in all materials respects, the financial condition and results of operations of the Company.
| Date: July 29, 2024 | By: | /s/ R. Kirk Huntsman |
| R. Kirk Huntsman | ||
| Chairman and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of (18 U.S.C. 1350), the undersigned officer of Vivos Therapeutics, Inc., a Delaware corporation (the “Company”), does hereby certify, to the best of such officer’s knowledge and belief, that:
(1) The amendment to the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K/A”) for the year ended December 31, 2023 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-K/A fairly presents, in all materials respects, the financial condition and results of operations of the Company.
| Date: July 29, 2024 | By: | /s/ Bradford Amman |
| Bradford Amman | ||
| Chief Financial Officer |
Cover - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Mar. 26, 2024 |
Jun. 30, 2023 |
|
| Cover [Abstract] | ||||
| Document Type | 10-K/A | |||
| Amendment Flag | true | |||
| Amendment Description | This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to the Annual Report on Form 10-K of Vivos Therapeutics, Inc. for the fiscal year ended December 31, 2023, originally filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “Original Filing”), is being filed solely to correct a typographical error in an internal cross reference within the Report of Independent Registered Public Accounting Firm and Exhibit 23.2, the consent of Plante & Moran, PLLC, which read “except for Note 9” instead of “except for Note 8”. In addition, pursuant to the rules of the SEC, the exhibit list included herein reflects currently-dated certifications from the Company’s principal executive officer and principal accounting officer, which are filed as exhibits to this Amendment No. 1. Except for the foregoing amended information, this Amendment No. 1 does not amend or update any other information contained in the Original Filing or reflect any events that have occurred after the filing date of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing. | |||
| Document Annual Report | true | |||
| Document Transition Report | false | |||
| Document Period End Date | Dec. 31, 2023 | |||
| Document Fiscal Period Focus | FY | |||
| Document Fiscal Year Focus | 2023 | |||
| Current Fiscal Year End Date | --12-31 | |||
| Entity File Number | 001-39796 | |||
| Entity Registrant Name | Vivos Therapeutics, Inc. | |||
| Entity Central Index Key | 0001716166 | |||
| Entity Tax Identification Number | 81-3224056 | |||
| Entity Incorporation, State or Country Code | DE | |||
| Entity Address, Address Line One | 7921 Southpark Plaza | |||
| Entity Address, Address Line Two | Suite 210 | |||
| Entity Address, City or Town | Littleton | |||
| Entity Address, State or Province | CO | |||
| Entity Address, Postal Zip Code | 80120 | |||
| City Area Code | (844) | |||
| Local Phone Number | 672-4357 | |||
| Title of 12(b) Security | Common stock, par value $0.0001 per share | |||
| Trading Symbol | VVOS | |||
| Security Exchange Name | NASDAQ | |||
| Entity Well-known Seasoned Issuer | No | |||
| Entity Voluntary Filers | No | |||
| Entity Current Reporting Status | Yes | |||
| Entity Interactive Data Current | Yes | |||
| Entity Filer Category | Non-accelerated Filer | |||
| Entity Small Business | true | |||
| Entity Emerging Growth Company | true | |||
| Elected Not To Use the Extended Transition Period | false | |||
| Entity Shell Company | false | |||
| Entity Public Float | $ 15.3 | |||
| Entity common stock, shares outstanding | 2,731,270 | |||
| ICFR Auditor Attestation Flag | false | |||
| Document Financial Statement Error Correction [Flag] | false | |||
| Entity Listing, Par Value Per Share | $ 0.0001 | |||
| Auditor Firm ID | 659 | 166 | ||
| Auditor Name | Moss Adams, LLP | Plante & Moran, PLLC | ||
| Auditor Location | Denver, Colorado | Denver, Colorado | ||
| Auditor Opinion [Text Block] | We have audited the accompanying consolidated balance sheet of Vivos Therapeutics, Inc. and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. | |||
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful accounts receivable | $ 250 | $ 712 |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 1,833,877 | 920,592 |
| Common stock, shares outstanding | 1,833,877 | 920,592 |
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Net of issuance costs | $ 645 | $ 645 |
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Statement of Cash Flows [Abstract] | ||
| Net of issuance costs | $ 645 | $ 645 |
ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 | ||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
| ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
BioModeling Solutions, Inc. (“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently incorporated in 2013. On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos, Inc. (“First Vivos”), and Vivos Therapeutics, Inc. (“Vivos”), a Wyoming corporation established on July 7, 2016 to facilitate this share exchange combination transaction. Vivos was formerly named Corrective BioTechnologies, Inc. until its name changed on September 6, 2016 to Vivos Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc. and had no substantial pre-combination business activities. First Vivos was incorporated in Texas on November 10, 2015. Pursuant to the SEA, all of the outstanding shares of common stock and warrants of BioModeling and all of the shares of common stock of First Vivos were exchanged for newly issued shares of common stock and warrants of Vivos, the legal acquirer.
The transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes. Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s historical financial statements and recorded at their historical carrying amounts.
On August 12, 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law. Accordingly, as used herein, the term “the Company,” “we,” “us.” “our” and similar terminology refer to Vivos Therapeutics, Inc., a Delaware corporation and its consolidated subsidiaries. As used herein, the term “Common Stock” refers to the common stock, $ par value per share, of Vivos Therapeutics, Inc., a Delaware corporation.
Reverse Stock Split
On October 25, 2023, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of 1-for-25 (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the Company’s Board of Directors under authority granted by the Company’s stockholders at the Company’s 2023 Annual Meeting of Stockholders held on September 22, 2023, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on October 25, 2023 (the “Certificate of Amendment”). Unless the context otherwise requires, all references in the accompanying financial statements, these footnotes to the financial statements in general to shares of the Company’s common stock, including prices per share of the common stock, reflect the Reverse Stock Split. Fractional shares were not issued, and the final number of shares were rounded up to the next whole share.
Description of Business
We are a medical technology and services company that features a comprehensive suite of proprietary oral appliances and therapeutic treatments. Our products non-surgically treat certain maxillofacial and developmental abnormalities of the mouth and jaws that are closely associated with breathing and sleep disorders such as, mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. The Company offers three separate clinical pathways or programs to providers—Guided Growth and Development, Lifeline, and Complete Airway Repositioning and Expansion (“CARE”). Each program features certain oral appliances coupled with specific therapeutic treatments, and each clinical pathway is intended to address the specific needs of a diverse patient population with different patient journeys. For example, the Guided Growth and Development program features the Vivos Guide and PEx appliances along with CO2 laser treatments and other adjunctive therapies designed for treating palatal growth and expansion in pediatric patients as they grow. The mid-range priced Lifeline program features a selection of mandibular advancement devices (“MADs”) such as the Versa and Vida Sleep which are FDA 510(k) cleared for mild-to-moderate OSA in adults, along with the patented Vida appliance, which is FDA 510(k) cleared as unspecified classification for the alleviation of Temporomandibular Joint Dysfunction (“TMD”) symptoms, bruxism, migraine headaches, and nasal dilation.
The Company’s flagship CARE program, which is part of The Vivos Method, features the Company’s patented DNA, mRNA and mmRNA appliances, which are also FDA 510(k) cleared for mild-to-severe OSA and snoring in adults. The Vivos Method may also include adjunctive myofunctional, chiropractic/physical therapy, and laser treatments that, when properly used with the CARE appliances, constitute a powerful non-invasive and cost-effective means of reducing or eliminating OSA symptoms. In a small subset of a study, the data has actually shown that The Vivos Method can reverse OSA symptoms in a large portion (up to 80%) of patients. The primary competitive advantage of The Vivos Method over other OSA therapies is that The Vivos Method’s typical course of treatment is limited in most cases to 12 to 15 months, and it is possible not to need lifetime intervention, unlike CPAP and neuro-stimulation implants. Additionally, out of approximately 42,000 patients treated to date worldwide with the Company’s entire current suite of products, there have been very few instances of relapse.
The Company offers a suite of diagnostic and support products and services to dental and medical providers and distributors who service patients with OSA or related conditions. Such products and services include (i) VivoScore home sleep screenings and tests (powered by SleepImage® technology), (ii) AireO2 (an electronic health record program designed specifically for use by dentists treating sleep patients), (iii) Treatment Navigator (a concierge service to assist a provider in educating and supporting the doctors as they navigate insurance coverage, diagnostic indications and treatment options), (iv) Billing Intelligence Services (which optimizes medical and dental reimbursement), (v) advanced training and continuing education courses at the Company’s Vivos Institute in Denver, Colorado, (vi) MyoCorrect, a service through which Vivos-trained providers can provide orofacial myofunctional therapy (“OMT”) to patients via a telemedicine platform, and (vii) the Company’s Medical Integration Division (“MID”), which manages independent medical practices under management and development agreement which pays the Company from six (6%) to eight (8%) percent of all net revenue from sleep-related services as well as development fees.
The Company’s business model is to teach, train, and support dentists, medical doctors, and distributors in the use of the Company’s products and services. Dentists who use the Company’s products and services typically enroll in a variety of live or online training and educational programs offered through the Company’s Vivos Institute—an 18,000 sq. ft. facility located near the Denver International Airport. Dentists are able to select the specific program or clinical pathway that they want to focus on, such as Guided Growth and Development or Lifeline or both. They may also enroll in the VIP program for the complete set training, educational, and support services available in all three clinical pathway programs. Dentists enrolled in the VIP Program are referred to as “VIPs.” The Company charges up front enrollment fees to educate and train new providers. The Company also charges for the ancillary support services listed above, and views each product and service as a revenue/profit center.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway Alliances, LLC, a Colorado limited liability company), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company Status
The Company is an “emerging growth company” (an “EGC”), as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGC but any such election to opt out is irrevocable. The Company currently expects to retain its status as an EGC until the year ending December 31, 2026, but this status could end sooner under certain circumstances.
Revenue Recognition
The Company generates revenue from the sale of products and services. A significant majority of the Company’s revenues are generated from enrolling dentists as either (i) Guided Growth and Development VIPs; (ii) Lifeline VIPs; (iii) combined Guided Growth and Development and Lifeline VIPs; or Premier Vivos Integrated Providers (Premier VIPs). Prior to the second quarter of 2023, the majority of VIP enrollments were Premier VIPs. The other, lower priced enrollments were piloted in prior fiscal quarters on a limited basis. They were officially adopted during the second quarter of 2023. For each VIP program, revenue is recognized when control of the products or services is transferred to customers (i.e., VIP dentists ordering such products or services for their patients) in a manner that reflects the consideration the Company expects to be entitled to in exchange for those products and services.
Following the guidance of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and the applicable provisions of ASC Topic 842, Leases (“ASC 842”), the Company determines revenue recognition through the following five-step model, which entails:
Service Revenue
VIP Enrollment Revenue
The Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. All program enrollees, irrespective of their level of enrollment, are commonly referred to as VIPs, unless it is necessary to specify their particular program. Once it is determined that a contract exists (i.e., a VIP enrollment agreement is executed and payment is received), service revenue related to VIP enrollments is recognized when the underlying services are performed. The price of the Premier VIP enrollment that the VIP pays upon execution of the contract is significant, running at approximately $26,200, with different entry levels for the various programs described above. Unearned revenue reported on the balance sheet as contract liability represents the portion of fees paid by VIP customers for services that have not yet been performed as of the reporting date and are recorded as the service is rendered. The Company recognizes this revenue as performance obligations are met. Accordingly, the contract liability for unearned revenue is a significant liability for the Company. Provisions for discounts are provided in the same period that the related revenue from the products and/or services is recorded.
The Company enters into programs that may provide for multiple performance obligations. Commencing in 2018, the Company began enrolling medical and dental professionals in a one-year program (now known as the Premier VIP Program) which includes training in a highly personalized, deep immersion workshop format which provides the Premier VIP dentist access to a team who is dedicated to creating a successful integrated practice.
VIP enrollment fees include multiple performance obligations which vary on a contract-by-contract basis. The performance obligations included with enrollments may include sleep apnea rings, a six or twelve months BIS subscription, a marketing package, lab credits and the right to sell our appliances. The Company allocates the transaction price of a VIP enrollment contract to each performance obligation under such contract using the relative standalone selling price method. The relative standalone price method is based on the proportion of the standalone selling price of each performance obligation to the sum of the total standalone selling prices of all the performance obligations in the contract.
The right to sell is similar to a license of intellectual property because without it the VIP cannot purchase appliances from the Company. The right to sell performance obligation includes the Vivos training and enrollment materials which prepare dentists for treating their patients using The Vivos Method.
Because the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, the Company believes that it is appropriate to estimate the standalone selling price of this performance obligation using the residual method. As such, the observable prices of other performance obligations under a VIP contract will be deducted from the contract price, with the residual being allocated to the right to sell performance obligation.
The Company uses significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell. The Company has determined that Premier VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail to participate in the Premier VIP program long term. Since the beginning of the Premier VIP program, just under one-third of new VIP members fall into this category, and the revenue allocated to the right to sell for those VIPs is accelerated at the time in which it becomes remote that a VIP will continue in the program. Revenue is recognized in accordance with each individual performance obligation unless it becomes remote the VIP will continue, at which time the remainder of revenue is accelerated and recognized in the following month. Those VIPs who complete training typically remain active for a much longer period, and revenue from the right to sell for those VIPs is recognized over the estimated period of which those VIPs will remain active. Because of various factors occurring year to year, the Company has estimated customer life for each year a contract is initiated. The estimated customer lives are calculated separately for each year and have been estimated at 15 months for 2020, 14 months for 2021, 18 months for 2022, and 23 months for 2023, as a result of customers staying active for longer periods of time. The right to sell is recognized on a sum of the years’ digits method over the estimated customer life for each year as this approximates the rate of decline in VIPs purchasing behaviors we have observed.
Other Service Revenue
In addition to VIP enrollment service revenue, in 2020 the Company launched BIS, an additional service on a monthly subscription basis, which includes the Company’s AireO2 medical billing and practice management software. Revenue for these services is recognized monthly during the month the services are rendered.
The Company also offers its VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method. The program includes packages of treatment sessions that are sold to the VIPs, and resold to their patients. Revenue for MyoCorrect services is recognized over the 12-month performance period as therapy sessions occur.
Allocation of Revenue to Performance Obligations
The Company identifies all goods and services that are delivered separately under a sales arrangement and allocates revenue to each performance obligation based on relative fair values. These fair values approximate the prices for the relevant performance obligation that would be charged if those services were sold separately, and are recognized over the relevant service period of each performance obligation. After allocation to the performance obligations, any remainder is allocated to the right to sell under the residual method and is recognized over the estimated customer life. In general, revenues are separated between durable medical equipment (product revenue) and education and training services (service revenue).
Treatment of Discounts and Promotions
From time to time, the Company offers various discounts to its customers. These include the following:
The amount of the discount is determined up front prior to the sale. Accordingly, measurement is determined before the sale occurs and revenue is recognized based on the terms agreed upon between the Company and the customer over the performance period. In rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price. In this situation revenue is measured and the change in transaction price is allocated over the remaining performance obligation.
The amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale. Prior to the sale, the customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the Company provides. The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period. At the end of each reporting period, the Company updates the transaction price to represent the circumstances present at the end of the reporting period and any changes in circumstances during the reporting period.
Product Revenue
In addition to revenue from services, the Company also generates revenue from the sale of its line of oral devices and preformed guides (known as appliances or systems) to its customers, the VIP dentists. These include the DNA appliance®, mRNA appliance®, the mmRNA appliance, the Versa, , the Vida, the Vida Sleep and others. The Company expanded its product offerings in the first quarter of 2023 via the acquisition of certain U.S. and international patents, product rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC, a New York limited liability company (“AFD”). Revenue from appliance sales is recognized when control of product is transferred to the VIP in an amount that reflects the consideration it expects to be entitled to in exchange for those products. The VIP in turn charges the VIP’s patient and or patient’s insurance a fee for the appliance and for his or her professional services in measuring, fitting, installing the appliance and educating the patient as to its use. The Company contracts with VIPs for the sale of the appliance and is not involved in the sale of the products and services from the VIP to the VIP’s patient.
The Company’s appliances are similar to a retainer that is worn in the mouth after braces are removed. Each appliance is unique and is fitted to the patient. The Company utilizes its network of certified VIPs throughout the United States and in some non-U.S. jurisdictions to sell the appliances to their customers as well as in two dental centers that the Company operates. The Company utilizes third party contract manufacturers or labs to produce its unique, patented appliances and preformed guides. The manufacturer designated by the Company produces the appliance in strict adherence to the Company’s patents, design files, treatments, processes and procedures and under the direction and specific instruction of the Company, ships the appliance to the VIP who ordered the appliance from the Company. All of the Company’s contract manufacturers are required to follow the Company’s master design files in production of appliances or the lab will be in violation of the FDA’s rules and regulations. The Company performed an analysis under ASC 606-10-55-36 through 55-40 and concluded it is the principal in the transaction and is reporting revenue gross. The Company bills the VIP the contracted price for the appliance which is recorded as product revenue. Product revenue is recognized once the appliance ships to the VIP under the direction of the Company.
In support of the VIPs using the Company’s appliances for their patients, the Company utilizes a team of trained technicians to measure, order and fit each appliance. Upon scheduling the patient (which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s insurance coverage. Revenue is recognized differently for Company owned centers than for revenue from VIPs. The Company recognizes revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted and provided to the patient.
The Company offers certain dentists (known as Clinical Advisors) discounts from standard VIP pricing. This is done to help encourage Clinical Advisors, who help the VIPs with technical aspects of the Company’s products, to purchase Company products for their own practices. In addition, from time to time, the Company offers credits to incentivize VIPs to adopt the Company’s products and increase case volume within their practices. These incentives are recorded as a liability at issuance and deducted from the related product sale at the time the credit is used.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, the determination of customer life and breakage related to recognizing revenue for VIP contracts, impairment of goodwill and long-lived assets; valuation assumptions for assets acquired in asset acquisitions; valuation assumptions for stock options, warrants, warrant liabilities and equity instruments issued for goods or services; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operations will be affected.
Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents.
Accounts Receivable, Net
Accounts receivable represents amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Accounts receivable are stated at the net amount expected to be collected, using an expected credit loss methodology to determine the allowance for expected credit losses. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. When the Company is aware of a customer’s inability to meet its financial obligation, the Company may individually evaluate the related receivable to determine the allowance for expected credit losses. The Company uses specific criteria to determine uncollectible receivables to be charged-off, including bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.
Property and Equipment, Net
Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which ranges from 4 to 5 years. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range between 5 and 7 years. The Company does not begin depreciating assets until assets are placed in service.
Intangible Assets, Net
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. We test for impairment annually as of December 31. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
Intangible assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related to its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom the Company acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired patents, intellectual property and customer contracts and (iii) AFD, from whom the Company acquired certain U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual property in March 2023. The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer contracts are amortized using the straight-line method over the estimated life of the assets, which approximates 5 years (See Note 5). The costs paid to MyoCorrect, Lyon Dental and AFD for patents and intellectual property are amortized over the life of the underlying patents, which approximates 15 years.
Intangible assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related to its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom the Company acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired patents, intellectual property and customer contracts and (iii) AFD, from whom the Company acquired certain U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual property in March 2023. The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer contracts are amortized using the straight-line method over the estimated life of the assets, which approximates 5 years (See Note 5). The costs paid to MyoCorrect, Lyon Dental and AFD for patents and intellectual property are amortized over the life of the underlying patents, which approximates 15 years.
Impairment of Long-lived Assets
We review and evaluate the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an adverse action or assessment by a regulator. We measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
Equity Offering Costs
Commissions, legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination of the success of the offering. Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period it is determined that the offering was successful. Deferred offering costs related to unsuccessful equity offerings are recorded as expense in the period when it is determined that an offering is unsuccessful.
Accounting for Payroll Protection Program Loan
The Company accounted for its U.S. Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”) loan as a debt instrument under ASC 470, Debt. The Company recognized the original principal balance as a financial liability with interest accrued at the contractual rate over the term of the loan. On January 21, 2022, the PPP loan received by the Company on May 8, 2020 was forgiven by the SBA in its entirety, which includes approximately $1.3 million in principal. As a result, the Company recorded a gain on the forgiveness of the loan in the quarter ended March 31, 2022 under non-operating income (expense).
Employee Retention Tax Credit
The employee retention tax credit (“ERTC”) for 2020 was established under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”). The ERTC provided for changes in the employee retention credit for 2020 and provided an additional credit for the first, second and third calendar quarters of 2021. Employers are eligible for the credit if they experienced either a full or partial suspension of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or if they experienced a significant decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 and the corresponding quarters in 2019. The ERTC is a refundable credit that employers can claim on qualified wages paid to employees, including certain health insurance costs.
According to the Internal Revenue Service (“IRS”) Notice 2021-20, “Guidance on the Employee Retention Credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act,” the period during which there is a significant decline in gross receipts is determined by identifying the first quarter in 2020 in which the gross receipts are less than 50% of its gross receipts for the same period in 2019. The employee retention credit is available only to eligible employers. Section 2301(c)(2)(A) of the CARES Act defines the term “eligible employer” as any employer carrying on a trade or business during calendar year 2020, and, with respect to any calendar quarter, for which (1) the operation of the trade or business carried on during calendar year 2020 is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19, or (2) such calendar quarter is within the period in which the employer had a significant decline in gross receipts, as described in section 2301(c)(2)(B) of the CARES Act. VIP dentists and potential VIPs were forced to close their offices during 2020 as a result of COVID-19. Therefore, the Company qualifies as an eligible employer under this under the CARES Act.
Section 2301(c)(3)(A)(ii) of the CARES Act also provides that if an eligible employer averaged 100 or fewer employees in 2019 (a “small eligible employer”), qualified wages are those wages paid by the eligible employer with respect to an employee during any period described in section 2301(c)(2)(A)(ii)(I) of the CARES Act (relating to a calendar quarter for which the operation of a trade or business is fully or partially suspended due to a governmental order) or during a calendar quarter within the period described in section 2301(c)(2)(A)(ii)(II) of the CARES Act (relating to a significant decline in gross receipts). The Company averaged fewer than 80 employees in 2019 and is therefore considered a small eligible employer under the CARES Act.
Healthcare plan expenses were not included in the analysis, although they are eligible if an employee has paid health insurance through their paycheck. Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the Code. The Company pays the first $500 of healthcare insurance for each employee, which generally covers the monthly cost of their insurance. Because of this, the Company conservatively did not include any of the cost of insurance in its analysis. Additionally, PPP loan amounts were deducted from the amount of total wages paid before calculating the qualified ERTC wages. The Company applied for the ERTC using Vivos Therapeutics Inc.’s payroll, which covers 95% of its employees.
As indicated above, for 2020, companies were eligible for a credit equal to 50 percent of the first ten thousands of qualified wages paid per employee in the aggregate of each eligible quarter. Therefore, the maximum ERTC for the Company for 2020 is five thousand ($5,000) per employee. For the second and fourth quarters of 2020, the total eligible credit was limited to approximately $0.5 million.
For 2021, the ERTC was 70% of the first ten thousand qualified wages paid per employee each quarter. Accordingly, the credit was limited to approximately $0.7 million. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERTC by analogy to ASC 450, Contingencies. Accordingly, under ASC 450, entities would treat the ERTCs (whether received in cash or as an offset to current or future payroll taxes) as if they were gain contingencies. When applying ASC 450-30, entities would not consider the probability of complying with the terms of the ERC program but, rather, would defer any recognition in the income statement until all uncertainties are resolved and the income is “realized” or “realizable” (i.e., upon receipt of the funds or formal notice by the IRS that the company is entitled to such funds). In our case, the Company elected to follow a more conservative approach and instead of recognizing a receivable for amounts to be received when the amended tax forms were filed in 2022, it was decided to wait for the notice from IRS and cash was received. As for financial statement presentation, it is believed that either classifying the amounts as a reduction to payroll tax expense (expense off-set is however contrary to U.S. GAAP) or as other income to be acceptable with appropriate disclosure of the election made by the company. However, the IRS issued a renewed warning regarding the ERTC on March 7, 2023 urging taxpayers to carefully review the ERTC guidelines. The Company continues to evaluate additional information from the IRS, and elected to disclose the funds received as a separate line item under long-term liabilities on the balance sheet, until more information becomes available from the IRS. As a result, for the period ending December 31, 2023, approximately $1.2 million was recorded under long-term liabilities.
Loss and Gain Contingencies
The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably estimated. If some amount within a range of loss appears to be a better estimate than any other amount within the range, the Company accrues that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss. The Company regularly evaluates current information available to it to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Legal fees related to contingencies are charged to general and administrative expense as incurred. Contingencies that may result in gains are not recognized until realization is assured, which typically requires collection in cash.
The Company measures the cost of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the award as of the grant date. The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model. The Company estimates the expected term using the simplified method which is the average of the vesting term and the contractual term of the respective options. The Company determines the expected price volatility based on the historical volatilities of shares of the Company’s peer group as the Company does not have a sufficient trading history for its Common Stock. Industry peers consist of several public companies in the bio-tech industry similar to the Company in size, stage of life cycle and financial leverage. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. The Company recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period. For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award were, in substance, a single award. The Company recognizes the impact of forfeitures and cancellations in the period that the forfeiture or cancellation occurs, rather than estimating the number of awards that are not expected to vest in accounting for stock-based compensation.
Research and Development
Costs related to research and development are expensed as incurred and include costs associated with research and development of new products and enhancements to existing products. Research and development costs incurred were less than $0.1 million and less than $0.2 million for the years ended December 31, 2023 and 2022, respectively. These are recorded on the statement of operations under general and administrative expense.
Leases
Operating leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability - current and non-current portion in our balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our balance sheets.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which deferred income taxes are recognized based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results, or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. The recorded valuation allowance is based on significant estimates and judgments and if the facts and circumstances change, the valuation allowance could materially change. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent dilutive.
Warrant Accounting
The Company accounts for its warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument, in accordance with ASC 815, Derivatives and Hedging. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. Management estimates the fair value of these liabilities using the Black-Scholes model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.
Segment Information
We manage our business within one reportable segment. The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker (CODM), reviews financial information presented on a consolidated basis, accompanied by information about operations for purposes of making operating decisions and assessing financial performance.
Recent Accounting Pronouncements
Presented below is a discussion of new accounting standards including deadlines for adoption assuming that the Company retains its designation as an EGC.
Recently Adopted Standards. The following recently issued accounting standards were adopted by the Company during the period ended December 31, 2023:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This guidance requires use of an impairment model (known as the “current expected credit losses”, or CECL model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. The Company adopted the new accounting standard on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
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LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN |
12 Months Ended |
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Dec. 31, 2023 | |
| Liquidity And Ability To Continue As Going Concern | |
| LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN | NOTE 2 - LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN
The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has incurred losses since inception, including $13.6 and $23.8 million for the years ended December 31, 2023 and 2022, respectively, resulting in an accumulated deficit of approximately $93.1 million as of December 31, 2023.
Net cash used in operating activities amounted to approximately $11.9 and $19.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had total liabilities of approximately $10.3 million.
As of December 31, 2023, the Company had approximately $1.6 million in cash and cash equivalents, which will not be sufficient to fund operations and strategic objectives over the next twelve months from the date of issuance of these financial statements. Without additional financing, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern. See Note 16 for additional information regarding the Company’s financing activity following the period ended December 31, 2023.
Until a state of cash flow positivity is reached, management is reviewing all options to obtain additional financing to fund operations. This financing is expected to come primarily from the issuance of equity securities in order to sustain operations until the Company can achieve profitability and positive cash flows, if ever. There can be no assurances, however, that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, the Company may be required to delay, significantly modify or terminate some or all of its operations, all of which could have a material adverse effect on the Company and stockholders.
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REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES |
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| REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES | NOTE 3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES
Net Revenue
For the years ended December 31, 2023 and 2022, the components of revenue from contracts with customers and the related timing of revenue recognition is set forth in the table below (in thousands):
Changes in Contract Liabilities
The key components of changes in contract liabilities for the years ended December 31, 2023 and 2022 are as follows (in thousands):
Current portion of deferred revenue is approximately $2.1 million, which is expected to be recognized over the next 12 months from the date of the period presented. Additionally, revenue from breakage on contract liabilities was approximately $0.5 and $1.6 million for the years ended December 31, 2023 and 2022.
Changes in Accounts Receivable
Our customers are billed based on fees agreed upon in each customer contract. Receivables from customers were $0.2 million at December 31, 2023, a decrease of $0.3 million from $0.5 million at December 31, 2022. An allowance is maintained for accounts receivable which is generally based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. Adjustment to the allowance are recorded in bad debt expense under general and administrative expenses in the consolidated statement of operations. An allowance of $0.3 and $0.7 million existed as of December 31, 2023 and 2022.
Shipping Costs
Shipping costs for product deliveries to customers are expensed as incurred and totaled approximately $0.2 million for the year ended December 31, 2023, and approximately $0.2 million for the year ended December 31, 2022. Shipping costs for product deliveries to customers are included in cost of goods sold in the accompanying consolidated statement of operations.
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PROPERTY AND EQUIPMENT, NET |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | NOTE 4 - PROPERTY AND EQUIPMENT, NET
As of December 31, 2023 and 2022, property and equipment consist of the following (in thousands):
Leasehold improvements relate to the Vivos Institute (the Company’s 15,000 square foot facility where the Company provides advanced post-graduate education and certification to dentists, dental teams, and other healthcare professionals in a live and hands-on setting) and the two Company-owned dental centers in Colorado. Total depreciation and amortization expense was $0.7 and $0.6 million for the years ended December 31, 2023 and 2022, respectively.
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GOODWILL AND INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GOODWILL AND INTANGIBLE ASSETS | NOTE 5 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill of $2.8 million as of December 31, 2023 and 2022, consist of the following acquisitions (in thousands):
Intangible Assets
As of December 31, 2023 and 2022, identifiable intangible assets were as follows (in thousands):
Amortization expense of identifiable intangible assets was less than $0.1 million for the years ended December 31, 2023 and 2022. The estimated future amortization of identifiable intangible assets is as follows (in thousands):
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OTHER FINANCIAL INFORMATION |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER FINANCIAL INFORMATION | NOTE 6 - OTHER FINANCIAL INFORMATION
Accrued Expenses
As of December 31, 2023 and 2022, accrued expenses consist of the following (in thousands):
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PREFERRED STOCK |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Equity [Abstract] | |
| PREFERRED STOCK | NOTE 7 - PREFERRED STOCK
The Company’s Board of Directors has authority to issue up to shares of Preferred Stock. At December 31, 2020, all previously issued shares of Preferred Stock had been redeemed or converted to shares of Common Stock. As of December 31, 2023, the Company’s Board of Directors continues to have the authority to designate up to shares of Preferred Stock in various series that provide for liquidation preferences, and voting, dividend, conversion, and redemption rights as determined at the discretion of the Board of Directors.
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COMMON STOCK |
12 Months Ended |
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Dec. 31, 2023 | |
| Common Stock | |
| COMMON STOCK | NOTE 8 - COMMON STOCK
The Company is authorized to issue shares of Common Stock. Holders of Common Stock are entitled to one vote for each share held. The Company’s Board of Directors may declare dividends payable to the holders of Common Stock.
On January 9, 2023, the Company closed a private placement (the “January 2023 Private Placement”) pursuant to which the Company agreed to issue and sell shares of Common Stock, Pre-Funded Warrants to purchase up to an aggregate of 186,667 shares of Common Stock and Common Stock Purchase Warrants to purchase up to an aggregate of 266,667 shares of Common Stock for net proceeds of approximately $7.4 million. Issuance costs associated with the January 2023 Private Placement were approximately $0.6 million.
On February 28, 2023, the Company acquired certain U.S. and international patents, patent applications, trademarks, product rights, and other miscellaneous intellectual property from AFD. Pursuant to the asset acquisition the Company agreed to issue shares of Common Stock in addition to cash consideration of $50,000. As a result of this transaction the Company recorded intangible assets of approximately $0.2 million. As part of the Asset Purchase Agreement, the Company agreed to a future earnout payment consideration based on a sliding-scale percentage on the volume of future sales, as well as a cash payment of $0.2 million upon the achievement of specified milestones. Per the Company’s accounting policy, the contingent consideration obligation will be recorded as the contingency is resolved and the consideration is paid or becomes payable.
In addition, the Company entered into an employment agreement with Dr. Scott Simonetti, DDS, the founder and Chief Executive Officer of AFD, as part-time Senior Director of Research and Development for an annual salary of approximately $0.1 million and a five-year warrant to purchase up to 16,000 shares of Common Stock with an exercise price of $15.25 per share; provided, however, that the shares of Common Stock underlying such warrant are subject to vesting only upon the achievement of specified milestones related to new FDA authorizations for the intangible assets acquired.
As disclosed above, on October 25, 2023 (the “Effective Date”), the Company effected a Reverse Stock Split of its outstanding shares of common stock at a ratio of 1-for-25. As of the Effective Date, every twenty-five shares of the Company’s issued and outstanding Common Stock was combined into one share of Common Stock. As a result, the Company’s issued and outstanding Common Stock on the Effective Date was proportionally reduced from approximately shares to approximately shares. The ownership percentage of each of the Company’s stockholders remained unchanged, other than as a result of fractional shares. No fractional shares of Common Stock were issued in connection with the Reverse Stock Split, and stockholders that would hold a fractional share of Common Stock as a result of the Reverse Stock Split had such fractional shares of Common Stock rounded up to the nearest whole share of Common Stock.
On November 2, 2023, the Company closed a private placement (the “November 2023 Private Placement”) with an institutional investor pursuant to which the Company sold an aggregate of $4,000,003 of securities in a private placement consisting of (i) shares of Common Stock, (ii) a pre-funded warrant to purchase 850,393 shares of Common Stock at an exercise price of $0.0001 per share, (iii) a five-year Series A Common Stock Purchase Warrant to purchase up to 980,393 shares of Common Stock with an exercise price of $3.83 per share and (iii) an 18-month Series B Common Stock Purchase Warrant (the “Series B Warrant”) to purchase up to 980,393 shares of Common Stock with an exercise price of $3.83 per share. Issuance costs associated with the November 2023 Private Placement were approximately $0.5 million.
On February 14, 2024, the Company entered into a warrant inducement letter agreement (the “Inducement Agreement”) with the same institutional investor in the November 2023 Private Placement pursuant to which the investor agreed to exercise for cash the entirety of the Series B Warrant at an exercise price of $4.02 per share (with such exercise price being established for purposes of compliance with the listing rules of the Nasdaq Stock Market), resulting in gross proceeds to the Company of approximately $4.0 million. Pursuant to the Inducement Agreement, in consideration for the immediate exercise of the Series B Warrant in full, the Company agreed to issue to the investor, in a new private placement transaction (the “Inducement Transaction”): (i) a 5-year, Series B-1 Common Stock Purchase Warrant to purchase 735,296 shares of the Company’s common stock at an exercise price of $5.05 per share, and (ii) an 18-month, Series B-2 common stock purchase warrant to purchase 735,296 shares of our common stock at an exercise price of $5.05 per share (collectively, the “Inducement Warrants” and such aggregate 1,470,592 shares of the Company’s common stock underlying the Inducement Warrants, the “Inducement Warrant Shares”). The Inducement Warrants are identical to each other, other than their dates of expiration, and are substantially identical to the Series B Warrant.
The number of shares of Common Stock available for issuance under the Company’s equity incentive plans and the Common Stock issuable pursuant to outstanding equity awards and common stock purchase warrants immediately prior to the Reverse Stock Split were proportionately adjusted by the ratio of the Reverse Stock Split. The exercise prices of such outstanding options and warrants were also adjusted in accordance with their respective terms. The number of authorized shares of common stock was not affected by the Reverse Stock Split.
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STOCK OPTIONS AND WARRANTS |
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| Stock Options And Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCK OPTIONS AND WARRANTS | NOTE 9 - STOCK OPTIONS AND WARRANTS
Stock Options
In 2017, the Company’s shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2017 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders have approved a total reserve of shares of Common Stock for issuance under the 2017 Plan.
In April 2019, the Company’s shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2019 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders originally approved a total reserve of shares of Common Stock for issuance under the 2019 Plan. At each of the Company’s annual meeting of stockholders held in 2020 and 2021, the Company’s stockholders approved amendments to the 2019 Plan to increase the number of shares of Common Stock available for issuance thereunder by an aggregate of shares of Common Stock such that, after such amendments, and prior to any grants, shares of Common Stock were available for issuance.
On September 22, 2023, stockholders approved an amendment to the Company’s 2019 Plan to increase the number of shares of Company common stock authorized to be issued pursuant to the 2019 Plan by shares from an aggregate of shares to an aggregate of shares.
During the years ended December 31, 2023 and 2022, the Company issued stock options to purchase and shares of Common Stock at a weighted average exercise price of $ and $ per share respectively, to certain members of the Board of Directors, employees and consultants. The stock options allow the holders to purchase shares of Common Stock at prices between $ and $ per share. Options for the purchase of and shares of common stock expired as of December 31, 2023 and 2022, respectively. The following table summarizes all stock options as of December 31, 2023 and 2022 (shares in thousands):
For the year ended December 31, 2023 and 2022, the valuation assumptions for stock options granted under the 2017 Plan and the 2019 Plan were estimated on the date of grant using the BSM option-pricing model with the following weighted-average assumptions:
Based on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the years ended December 31, 2023 and 2022 was $ and $, respectively.
For the years ended December 31, 2023 and 2022, the Company recognized approximately $ and $ million, respectively, of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of December 31, 2023 and 2022 was approximately $ and $ million, respectively, which will be recognized over the weighted average remaining term of and years, respectively.
Warrants
The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the years ended December 31, 2023 and 2022 (shares in thousands):
For the years ended December 31, 2023 and 2022, the valuation assumptions for warrants issued were estimated on the measurement date using the BSM option-pricing model with the following weighted-average assumptions:
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RELATED PARTY TRANSACTIONS |
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Dec. 31, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 10 - RELATED PARTY TRANSACTIONS
For the years ended December 31, 2023 and 2022, options for the purchase of and , respectively, of common stock were granted to the Company’s directors, officers, employees and consultants.
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 11 - INCOME TAXES
For the years ended December 31, 2023 and 2022, the domestic and foreign components of loss before income taxes consist of the following (in thousands):
For the years ended December 31, 2023 and 2022, , the Company did not recognize any current or deferred income tax expense due to a valuation allowance against all of its net deferred income tax assets.
A reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate of 21% to the pre-tax loss, and the income tax benefit recognized in the consolidated financial statements is as follows for the years ended December 31, 2023 and 2022 (in thousands):
As of December 31, 2023 and 2022, the principal components of deferred tax assets and liabilities were as follows (in thousands):
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of this evaluation, as of December 31, 2023, a valuation allowance of $19.3 million has been recorded to record the deferred tax asset that is more likely than not to be realized. For the years ended December 31, 2023 and 2022, the valuation allowance increased by $3.7 million and $4.8 million, respectively.
As of December 31, 2023, the Company has federal net operating loss (“NOL”) carryforwards of $72.4 million. The Company also has various state NOL carry forwards. The determination of the state NOL carryforwards is dependent upon the apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. If federal NOL carryforwards are not utilized, approximately $3.3 million will expire in 2036 and 2037. As of December 31, 2023, the remaining federal NOL carryforward of $69.1 million has no expiration date.
Federal and state laws impose substantial restrictions on the utilization of NOL carryforwards if the Company experiences significant ownership changes as defined in Section 382 of the Internal Revenue Code (“IRC”). Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards may be limited in the event a cumulative change in ownership of more than 50% among 5% or greater shareholders (or shareholder groups) over any three-year period. The Company is not currently utilizing its federal and state NOL carryforwards and has not completed a formal study to determine if any past ownership changes may have triggered limitations under IRC Section 382.. The Company’s ability to use its remaining NOL carryforwards may be further limited if the Company experiences an IRC Section 382 ownership change in connection with future changes in the Company’s stock ownership.
Management does not believe there are any significant uncertain tax positions as of and for the years ended December 31, 2023 and 2022. Accordingly, interest and penalties related to uncertain tax positions have been recognized for the years ended December 31, 2023 and 2022.
The Company files income tax returns in the United States federal and various state jurisdictions. The Company is no longer subject to income tax examinations for federal income taxes before 2020 or for states before 2019. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOL’s generated as such NOL’s are utilized. As of December 31, 2023, the Company has filed all appropriate foreign operation tax returns.
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 12 - COMMITMENTS AND CONTINGENCIES
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, now widely acknowledged to have been generally ineffective, and in many ways, harmful. As a result, nearly all of these Orders have been relaxed or lifted, but there is considerable uncertainty about whether the Orders will be reinstated should a new COVID-19 variant or entirely new virus emerge.
Our business was materially impacted by COVID-19 in 2020 and to some extent thereafter and through the early part of 2023 due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential VIPs having to close their offices. The impact of COVID-19 on our business diminished somewhat as 2023 has progressed. However, it appears that the latest COVID-19 subvariants evoke generally milder symptoms and do not pose the same health or economic threat as previous strains. However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to negatively impact our VIP dental practices and our revenue across the U.S. and Canada during 2022 and into 2023. We believe new enrollments during 2023 continue to be negatively impacted by the ongoing overall workforce uncertainties in the dental market. In addition, new variants of COVID-19 continue to arise, and such variants may in the future cause an adverse effect on the dental market. As such, the long-term financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated at this time.
Inflation, the War in Ukraine and Middle East Hostilities
The Company believes that as the U.S. experiences a period of inflation, which has increased (and may continue to increase), the Company and its suppliers’ costs as well as the end cost of the Company’s products to consumers may also increase. The worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and Hamas attacks on Israel in October of 2023 and Israel’s response have emerged as new barriers to long-term economic recovery. If an economic recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. To date, the Company has been able to manage inflation risk without a material adverse impact on its business or results of operations, and inflation has begun to abate somewhat during 2023. However, inflationary pressures (including increases in the price of raw material components of the Company’s appliances) made it necessary for the Company to adjust its standard pricing for its appliance products effective May 1, 2022. The full impact of such price adjustments on sales or demand for the Company’s products is not fully known at this time and may require the Company to adjust other aspects of its business as it seeks to grow revenue and, ultimately, achieve profitability and positive cash flow from operations.
An additional inflation-related risk is the Federal Reserve’s response, which up to this point has been to raise interest rates. Such actions have, in times past, created unintended consequences in terms of the impact on housing starts, overall manufacturing, capital markets, and banking. If such disruptions become systemic, like in the recession of 2008, then the impact on the Company’s revenue, earnings potential and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.
These conditions could cause an economic recession or depression to commence, and if such recession or depression is sustained, it could have a material adverse effect on the Company’s business as demand for its products could decrease. Such conditions have also had, and may continue to have, an adverse effect on the capital markets, with public stock price decreases and volatility, which could make it more difficult for the Company to raise needed capital at the appropriate time.
Operating Leases
The Company has entered into various operating lease agreements for certain offices, medical facilities and training facilities. These leases have original lease periods expiring between 2022 and 2029. Most leases include an option to renew and the exercise of a lease renewal option typically occurs at the discretion of both parties. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease until it is reasonably certain that the Company will exercise that option.
In January 2017, the Company entered into a commercial lease agreement for 2,220 square feet of office in Johnstown, Colorado that was to commence on March 1, 2018 and end February 28, 2025. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.3 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.0%.
In May 2018, the Company entered into a commercial lease agreement for 3,643 square feet of office in Highlands Ranch, Colorado that was to commence on November 1, 2018 and end on January 1, 2029. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.8 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 7.3%.
In October 2020, the Company entered into a commercial lease agreement for 4,800 square feet of office in Orem, Utah that was to commence on January 1, 2021 and end on December 1, 2025. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.6 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.6%.
In April 2019, the Company entered into a commercial lease agreement for 3,231 square feet of office in Highlands Ranch, Colorado that was to commence on May 1, 2019 and end on May 31, 2022. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $0.1 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.7%.
In April 2019, the Company entered into a commercial lease agreement for 14,732 square feet of office space for its former corporate headquarters in Denver, Colorado that was to commence on September 23, 2020 and end on March 22, 2028. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $1.4 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 7.1%.
In April 2022, the Company entered into a commercial lease agreement for 8,253 square feet of office space for its corporate headquarters in Littleton, Colorado that commenced May 16, 2022 and ends on November 15, 2027. As of May 16, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $1.5 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 10.6%.
As of December 31, 2023 and 2022, the components of lease expense are as follows (in thousands):
Rent expense is recognized on a straight-line basis over the lease term. Lease expense, including real estate taxes and related costs for the years ended December 31, 2023 and 2022 aggregated approximately $0.5 million, respectively. This is included under general and administrative expense.
As of December 31, 2023 and 2022, the remaining lease terms and discount rate used are as follows (in thousands):
Supplemental cash flow information related to leases as of December 31, 2023 and 2022 is as follows (in thousands):
As of December 31, 2023 and 2022, the maturities of the Company’s future minimum lease payments were as follows (in thousands):
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NET LOSS PER SHARE OF COMMON STOCK |
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| NET LOSS PER SHARE OF COMMON STOCK |
Basic and diluted net loss per share of Common Stock (“EPS”) is computed by dividing (i) net loss (the “Numerator”), by (ii) the weighted average number of shares of Common Stock outstanding during the period (the “Denominator”).
The calculation of diluted EPS is also required to include the dilutive effect, if any, of stock options, unvested restricted stock awards, convertible debt and Preferred Stock, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. As of December 31, 2023 and 2022, all Common Stock equivalents were antidilutive.
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FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS |
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| Investments, All Other Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS | NOTE 14 - FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the measurement of fair value:
Level 1-Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date
Level 2-Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability
Level 3-Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date
As of December 31, 2023 and 2022, the fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities approximated their carrying values due to the short-term nature of these instruments.
As discussed in Note 8, on January 9, 2023, the Company closed on the Private Placement for the sale by the Company of shares of the Company’s common stock and the issuance of pre-funded warrant to purchase up to an aggregate of 186,667 shares of common stock at an exercise price of $0.0001 per share, and the issuance of warrant to purchase up to an aggregate of 266,667 shares of common stock at an exercise price of $30 per share. The warrants are initially exercisable commencing January 9, 2023 through their expiration date of July 9, 2028. In addition, as part of the November 2023 Private Placement, we agreed to amend the existing outstanding common stock purchase warrant held by the purchaser and issued in January 2023 to purchase up to an aggregate of 266,667 shares of Common Stock at an exercise price of $30.00 per share with an expiration date of July 5, 2028. Such amendment, which became effective upon the closing of the November 2023 Private Placement, reduced the exercise price of the January warrant to $3.83 per share and extended the expiration date of such warrant to . The amendment also restated in its entirety the definition of “Black Scholes Value” contained in the January warrant which resulted in the classification of the warrant from liability to equity. The liability associated with those warrants was initially recorded at fair value in the Company’s consolidated balance sheet upon issuance, and subsequently re-measured as of March 31, 2023, June 30, 2023, September 30, 2023, and November 2, 2023 when the November 2023 Private Placement closed. The changes in the fair value between issuance, the March 31, 2023 measurement date, the June 30, 2023 measurement date, the September 30, 2023, and the November 2, 2023 measurement date are recorded as a component of other income (expense), in the consolidated statement of operations.
Recurring Fair Value Measurements
For the years ended December 31, 2023 and 2022, the Company did not have any assets and liabilities classified as Level 1, Level 2 or Level 3. The Company has concluded that the warrants issued in connection with the private placement, met the definition of a liability under ASC 480, Distinguishing Liabilities from Equity and has classified the liability as Level 3.
The following table represent a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2023:
The Company has re-measured the liability to estimate fair value at November 2, 2023 as a result of the amendment described above, using the Black-Scholes option pricing model with the following assumptions:
The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the years ended December 31, 2023 and 2022, the Company had no transfers of its assets or liabilities between levels of the fair value hierarchy.
Significant Concentrations
Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents on deposit with financial institutions, the balances of which frequently exceed federally insured limits. Management monitors the soundness of these financial institutions and believes the Company’s risk is negligible. The Company has not experienced any losses in such accounts. If any of the financial institutions with whom the Company does business was to be placed into receivership, the Company may be unable to access the cash they have on deposit with such institutions. If the Company were unable to access cash and cash equivalents as needed, the financial position and ability to operate the business could be adversely affected. As of December 31, 2023, the Company had cash and cash equivalents with three financial institutions in the United States with an aggregate balance of $1.6 million.
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. No single customer represented more than 10% of our accounts receivable as of December 31, 2023. The Company maintains reserves for potential bad debts.
Supplier Concentration
As previously disclosed, the Company relies on third-party suppliers and contract manufacturers for the raw materials and components used in our appliances and to manufacture and assemble our products. As of December 31, 2023, the Company had five suppliers that accounted for approximately % of the Company’s total purchases during the year. The Company expects to maintain existing relationships with these vendors.
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SUBSEQUENT EVENTS |
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| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS
On October 30, 2023, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Holder”) pursuant to which the Company sold an aggregate of approximately $4.0 million of securities of the Company in a private placement, such securities consisting of shares of the Company’s common stock, par value $ (or, in lieu of a Share, a pre-funded warrant to purchase one share of Common Stock), (ii) a Series A Warrant to purchase up to 980,393 shares of Common Stock and (iii) a Series B Warrant to purchase up to 980,393 shares of Common Stock with an exercise price of $3.83 per share. The private placement closed on November 2, 2023. As of January 31, 2024, all of the pre-funded warrants granted as part of the private placement were exercised.
On February 14, 2024, the Company entered into a warrant inducement letter agreement (the “Inducement Agreement”) with the Holder pursuant to which the Holder agreed to exercise for cash the entirety of the Series B Warrant at an exercise price of $4.02 per share (with such exercise price being established for purposes of compliance with the listing rules of the Nasdaq Stock Market), resulting in gross proceeds to the Company of approximately $4.0 million. The resale of the shares of Common Stock underlying the Series B Warrant has been registered pursuant to a Registration Statement on Form S-1 (File No. 333-275726), which became effective with the Securities and Exchange Commission (“SEC”) on December 1, 2023.
Pursuant to the Inducement Agreement, in consideration for the immediate exercise of the Series B Warrant in full, the Company agreed to issue to the Holder, in a new private placement transaction (the “Inducement Transaction”): (i) a 5-year, Series B-1 Common Stock Purchase Warrant to purchase 735,296 shares of Common Stock at an exercise price of $5.05 per share, and (ii) an 18-month, Series B-2 Common Stock Purchase Warrant to purchase 735,296 shares of Common Stock at an exercise price of $5.05 per share (collectively, the “Inducement Warrants” and such aggregate 1,470,592 shares of Common Stock underlying the Inducement Warrants, the “Inducement Warrant Shares”). The Inducement Warrants are identical to each other, other than their dates of expiration, and are substantially identical to the Series B Warrant.
The Inducement Transaction closed on February 20, 2024. The Company intends to use the net proceeds received for general working capital and general corporate purposes.
The terms of the Inducement Agreement require the Company to file a registration statement registering the Inducement Warrant Shares for resale (“Resale Registration Statement”) no later than April 5, 2024 and to use commercially reasonable best efforts to cause the Resale Registration Statement to be effective within 60 calendar days following the filing.
The Company further agreed that until forty-five (45) days after the closing date of the Inducement Transaction, it will not (other than in connection with limited enumerated exceptions) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents or file any registration statement or any amendment or supplement (other than the Resale Registration Statement). The Company is further prohibited from entering into any “variable rate transaction” for a period of six months from the effective date of the Resale Registration Statement.
The Inducement Warrants contain (i) customary stock-based anti-dilution protection, (ii) a cashless exercise provision in the event the Inducement Warrant Shares are not registered for resale at the time of exercise, (iii) beneficial ownership limitations that may be waived at the option of the Holder upon 61 days’ notice to the Company, (iv) a put right granting the Holder the right to require the Company or its successor to redeem the Inducement Warrants in cash for their Black-Scholes value in the event of a Fundamental Transaction (as defined in the Inducement Warrants) and (v) other customary provisions for warrants of this type. |
ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Organization | Organization
BioModeling Solutions, Inc. (“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently incorporated in 2013. On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos, Inc. (“First Vivos”), and Vivos Therapeutics, Inc. (“Vivos”), a Wyoming corporation established on July 7, 2016 to facilitate this share exchange combination transaction. Vivos was formerly named Corrective BioTechnologies, Inc. until its name changed on September 6, 2016 to Vivos Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc. and had no substantial pre-combination business activities. First Vivos was incorporated in Texas on November 10, 2015. Pursuant to the SEA, all of the outstanding shares of common stock and warrants of BioModeling and all of the shares of common stock of First Vivos were exchanged for newly issued shares of common stock and warrants of Vivos, the legal acquirer.
The transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes. Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s historical financial statements and recorded at their historical carrying amounts.
On August 12, 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law. Accordingly, as used herein, the term “the Company,” “we,” “us.” “our” and similar terminology refer to Vivos Therapeutics, Inc., a Delaware corporation and its consolidated subsidiaries. As used herein, the term “Common Stock” refers to the common stock, $ par value per share, of Vivos Therapeutics, Inc., a Delaware corporation.
Reverse Stock Split
On October 25, 2023, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of 1-for-25 (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the Company’s Board of Directors under authority granted by the Company’s stockholders at the Company’s 2023 Annual Meeting of Stockholders held on September 22, 2023, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on October 25, 2023 (the “Certificate of Amendment”). Unless the context otherwise requires, all references in the accompanying financial statements, these footnotes to the financial statements in general to shares of the Company’s common stock, including prices per share of the common stock, reflect the Reverse Stock Split. Fractional shares were not issued, and the final number of shares were rounded up to the next whole share.
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| Description of Business | Description of Business
We are a medical technology and services company that features a comprehensive suite of proprietary oral appliances and therapeutic treatments. Our products non-surgically treat certain maxillofacial and developmental abnormalities of the mouth and jaws that are closely associated with breathing and sleep disorders such as, mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. The Company offers three separate clinical pathways or programs to providers—Guided Growth and Development, Lifeline, and Complete Airway Repositioning and Expansion (“CARE”). Each program features certain oral appliances coupled with specific therapeutic treatments, and each clinical pathway is intended to address the specific needs of a diverse patient population with different patient journeys. For example, the Guided Growth and Development program features the Vivos Guide and PEx appliances along with CO2 laser treatments and other adjunctive therapies designed for treating palatal growth and expansion in pediatric patients as they grow. The mid-range priced Lifeline program features a selection of mandibular advancement devices (“MADs”) such as the Versa and Vida Sleep which are FDA 510(k) cleared for mild-to-moderate OSA in adults, along with the patented Vida appliance, which is FDA 510(k) cleared as unspecified classification for the alleviation of Temporomandibular Joint Dysfunction (“TMD”) symptoms, bruxism, migraine headaches, and nasal dilation.
The Company’s flagship CARE program, which is part of The Vivos Method, features the Company’s patented DNA, mRNA and mmRNA appliances, which are also FDA 510(k) cleared for mild-to-severe OSA and snoring in adults. The Vivos Method may also include adjunctive myofunctional, chiropractic/physical therapy, and laser treatments that, when properly used with the CARE appliances, constitute a powerful non-invasive and cost-effective means of reducing or eliminating OSA symptoms. In a small subset of a study, the data has actually shown that The Vivos Method can reverse OSA symptoms in a large portion (up to 80%) of patients. The primary competitive advantage of The Vivos Method over other OSA therapies is that The Vivos Method’s typical course of treatment is limited in most cases to 12 to 15 months, and it is possible not to need lifetime intervention, unlike CPAP and neuro-stimulation implants. Additionally, out of approximately 42,000 patients treated to date worldwide with the Company’s entire current suite of products, there have been very few instances of relapse.
The Company offers a suite of diagnostic and support products and services to dental and medical providers and distributors who service patients with OSA or related conditions. Such products and services include (i) VivoScore home sleep screenings and tests (powered by SleepImage® technology), (ii) AireO2 (an electronic health record program designed specifically for use by dentists treating sleep patients), (iii) Treatment Navigator (a concierge service to assist a provider in educating and supporting the doctors as they navigate insurance coverage, diagnostic indications and treatment options), (iv) Billing Intelligence Services (which optimizes medical and dental reimbursement), (v) advanced training and continuing education courses at the Company’s Vivos Institute in Denver, Colorado, (vi) MyoCorrect, a service through which Vivos-trained providers can provide orofacial myofunctional therapy (“OMT”) to patients via a telemedicine platform, and (vii) the Company’s Medical Integration Division (“MID”), which manages independent medical practices under management and development agreement which pays the Company from six (6%) to eight (8%) percent of all net revenue from sleep-related services as well as development fees.
The Company’s business model is to teach, train, and support dentists, medical doctors, and distributors in the use of the Company’s products and services. Dentists who use the Company’s products and services typically enroll in a variety of live or online training and educational programs offered through the Company’s Vivos Institute—an 18,000 sq. ft. facility located near the Denver International Airport. Dentists are able to select the specific program or clinical pathway that they want to focus on, such as Guided Growth and Development or Lifeline or both. They may also enroll in the VIP program for the complete set training, educational, and support services available in all three clinical pathway programs. Dentists enrolled in the VIP Program are referred to as “VIPs.” The Company charges up front enrollment fees to educate and train new providers. The Company also charges for the ancillary support services listed above, and views each product and service as a revenue/profit center.
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| Basis of Presentation and Consolidation | Basis of Presentation and Consolidation
The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway Alliances, LLC, a Colorado limited liability company), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation.
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| Emerging Growth Company Status | Emerging Growth Company Status
The Company is an “emerging growth company” (an “EGC”), as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGC but any such election to opt out is irrevocable. The Company currently expects to retain its status as an EGC until the year ending December 31, 2026, but this status could end sooner under certain circumstances.
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| Revenue Recognition | Revenue Recognition
The Company generates revenue from the sale of products and services. A significant majority of the Company’s revenues are generated from enrolling dentists as either (i) Guided Growth and Development VIPs; (ii) Lifeline VIPs; (iii) combined Guided Growth and Development and Lifeline VIPs; or Premier Vivos Integrated Providers (Premier VIPs). Prior to the second quarter of 2023, the majority of VIP enrollments were Premier VIPs. The other, lower priced enrollments were piloted in prior fiscal quarters on a limited basis. They were officially adopted during the second quarter of 2023. For each VIP program, revenue is recognized when control of the products or services is transferred to customers (i.e., VIP dentists ordering such products or services for their patients) in a manner that reflects the consideration the Company expects to be entitled to in exchange for those products and services.
Following the guidance of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and the applicable provisions of ASC Topic 842, Leases (“ASC 842”), the Company determines revenue recognition through the following five-step model, which entails:
Service Revenue
VIP Enrollment Revenue
The Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. All program enrollees, irrespective of their level of enrollment, are commonly referred to as VIPs, unless it is necessary to specify their particular program. Once it is determined that a contract exists (i.e., a VIP enrollment agreement is executed and payment is received), service revenue related to VIP enrollments is recognized when the underlying services are performed. The price of the Premier VIP enrollment that the VIP pays upon execution of the contract is significant, running at approximately $26,200, with different entry levels for the various programs described above. Unearned revenue reported on the balance sheet as contract liability represents the portion of fees paid by VIP customers for services that have not yet been performed as of the reporting date and are recorded as the service is rendered. The Company recognizes this revenue as performance obligations are met. Accordingly, the contract liability for unearned revenue is a significant liability for the Company. Provisions for discounts are provided in the same period that the related revenue from the products and/or services is recorded.
The Company enters into programs that may provide for multiple performance obligations. Commencing in 2018, the Company began enrolling medical and dental professionals in a one-year program (now known as the Premier VIP Program) which includes training in a highly personalized, deep immersion workshop format which provides the Premier VIP dentist access to a team who is dedicated to creating a successful integrated practice.
VIP enrollment fees include multiple performance obligations which vary on a contract-by-contract basis. The performance obligations included with enrollments may include sleep apnea rings, a six or twelve months BIS subscription, a marketing package, lab credits and the right to sell our appliances. The Company allocates the transaction price of a VIP enrollment contract to each performance obligation under such contract using the relative standalone selling price method. The relative standalone price method is based on the proportion of the standalone selling price of each performance obligation to the sum of the total standalone selling prices of all the performance obligations in the contract.
The right to sell is similar to a license of intellectual property because without it the VIP cannot purchase appliances from the Company. The right to sell performance obligation includes the Vivos training and enrollment materials which prepare dentists for treating their patients using The Vivos Method.
Because the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, the Company believes that it is appropriate to estimate the standalone selling price of this performance obligation using the residual method. As such, the observable prices of other performance obligations under a VIP contract will be deducted from the contract price, with the residual being allocated to the right to sell performance obligation.
The Company uses significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell. The Company has determined that Premier VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail to participate in the Premier VIP program long term. Since the beginning of the Premier VIP program, just under one-third of new VIP members fall into this category, and the revenue allocated to the right to sell for those VIPs is accelerated at the time in which it becomes remote that a VIP will continue in the program. Revenue is recognized in accordance with each individual performance obligation unless it becomes remote the VIP will continue, at which time the remainder of revenue is accelerated and recognized in the following month. Those VIPs who complete training typically remain active for a much longer period, and revenue from the right to sell for those VIPs is recognized over the estimated period of which those VIPs will remain active. Because of various factors occurring year to year, the Company has estimated customer life for each year a contract is initiated. The estimated customer lives are calculated separately for each year and have been estimated at 15 months for 2020, 14 months for 2021, 18 months for 2022, and 23 months for 2023, as a result of customers staying active for longer periods of time. The right to sell is recognized on a sum of the years’ digits method over the estimated customer life for each year as this approximates the rate of decline in VIPs purchasing behaviors we have observed.
Other Service Revenue
In addition to VIP enrollment service revenue, in 2020 the Company launched BIS, an additional service on a monthly subscription basis, which includes the Company’s AireO2 medical billing and practice management software. Revenue for these services is recognized monthly during the month the services are rendered.
The Company also offers its VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method. The program includes packages of treatment sessions that are sold to the VIPs, and resold to their patients. Revenue for MyoCorrect services is recognized over the 12-month performance period as therapy sessions occur.
Allocation of Revenue to Performance Obligations
The Company identifies all goods and services that are delivered separately under a sales arrangement and allocates revenue to each performance obligation based on relative fair values. These fair values approximate the prices for the relevant performance obligation that would be charged if those services were sold separately, and are recognized over the relevant service period of each performance obligation. After allocation to the performance obligations, any remainder is allocated to the right to sell under the residual method and is recognized over the estimated customer life. In general, revenues are separated between durable medical equipment (product revenue) and education and training services (service revenue).
Treatment of Discounts and Promotions
From time to time, the Company offers various discounts to its customers. These include the following:
The amount of the discount is determined up front prior to the sale. Accordingly, measurement is determined before the sale occurs and revenue is recognized based on the terms agreed upon between the Company and the customer over the performance period. In rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price. In this situation revenue is measured and the change in transaction price is allocated over the remaining performance obligation.
The amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale. Prior to the sale, the customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the Company provides. The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period. At the end of each reporting period, the Company updates the transaction price to represent the circumstances present at the end of the reporting period and any changes in circumstances during the reporting period.
Product Revenue
In addition to revenue from services, the Company also generates revenue from the sale of its line of oral devices and preformed guides (known as appliances or systems) to its customers, the VIP dentists. These include the DNA appliance®, mRNA appliance®, the mmRNA appliance, the Versa, , the Vida, the Vida Sleep and others. The Company expanded its product offerings in the first quarter of 2023 via the acquisition of certain U.S. and international patents, product rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC, a New York limited liability company (“AFD”). Revenue from appliance sales is recognized when control of product is transferred to the VIP in an amount that reflects the consideration it expects to be entitled to in exchange for those products. The VIP in turn charges the VIP’s patient and or patient’s insurance a fee for the appliance and for his or her professional services in measuring, fitting, installing the appliance and educating the patient as to its use. The Company contracts with VIPs for the sale of the appliance and is not involved in the sale of the products and services from the VIP to the VIP’s patient.
The Company’s appliances are similar to a retainer that is worn in the mouth after braces are removed. Each appliance is unique and is fitted to the patient. The Company utilizes its network of certified VIPs throughout the United States and in some non-U.S. jurisdictions to sell the appliances to their customers as well as in two dental centers that the Company operates. The Company utilizes third party contract manufacturers or labs to produce its unique, patented appliances and preformed guides. The manufacturer designated by the Company produces the appliance in strict adherence to the Company’s patents, design files, treatments, processes and procedures and under the direction and specific instruction of the Company, ships the appliance to the VIP who ordered the appliance from the Company. All of the Company’s contract manufacturers are required to follow the Company’s master design files in production of appliances or the lab will be in violation of the FDA’s rules and regulations. The Company performed an analysis under ASC 606-10-55-36 through 55-40 and concluded it is the principal in the transaction and is reporting revenue gross. The Company bills the VIP the contracted price for the appliance which is recorded as product revenue. Product revenue is recognized once the appliance ships to the VIP under the direction of the Company.
In support of the VIPs using the Company’s appliances for their patients, the Company utilizes a team of trained technicians to measure, order and fit each appliance. Upon scheduling the patient (which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s insurance coverage. Revenue is recognized differently for Company owned centers than for revenue from VIPs. The Company recognizes revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted and provided to the patient.
The Company offers certain dentists (known as Clinical Advisors) discounts from standard VIP pricing. This is done to help encourage Clinical Advisors, who help the VIPs with technical aspects of the Company’s products, to purchase Company products for their own practices. In addition, from time to time, the Company offers credits to incentivize VIPs to adopt the Company’s products and increase case volume within their practices. These incentives are recorded as a liability at issuance and deducted from the related product sale at the time the credit is used.
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| Use of Estimates | Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, the determination of customer life and breakage related to recognizing revenue for VIP contracts, impairment of goodwill and long-lived assets; valuation assumptions for assets acquired in asset acquisitions; valuation assumptions for stock options, warrants, warrant liabilities and equity instruments issued for goods or services; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operations will be affected.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents.
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| Accounts Receivable, Net | Accounts Receivable, Net
Accounts receivable represents amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Accounts receivable are stated at the net amount expected to be collected, using an expected credit loss methodology to determine the allowance for expected credit losses. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. When the Company is aware of a customer’s inability to meet its financial obligation, the Company may individually evaluate the related receivable to determine the allowance for expected credit losses. The Company uses specific criteria to determine uncollectible receivables to be charged-off, including bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.
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| Property and Equipment, Net | Property and Equipment, Net
Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which ranges from 4 to 5 years. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range between 5 and 7 years. The Company does not begin depreciating assets until assets are placed in service.
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| Intangible Assets, Net | Intangible Assets, Net
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. We test for impairment annually as of December 31. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
Intangible assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related to its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom the Company acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired patents, intellectual property and customer contracts and (iii) AFD, from whom the Company acquired certain U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual property in March 2023. The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer contracts are amortized using the straight-line method over the estimated life of the assets, which approximates 5 years (See Note 5). The costs paid to MyoCorrect, Lyon Dental and AFD for patents and intellectual property are amortized over the life of the underlying patents, which approximates 15 years.
Intangible assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related to its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom the Company acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired patents, intellectual property and customer contracts and (iii) AFD, from whom the Company acquired certain U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual property in March 2023. The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer contracts are amortized using the straight-line method over the estimated life of the assets, which approximates 5 years (See Note 5). The costs paid to MyoCorrect, Lyon Dental and AFD for patents and intellectual property are amortized over the life of the underlying patents, which approximates 15 years.
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| Impairment of Long-lived Assets | Impairment of Long-lived Assets
We review and evaluate the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an adverse action or assessment by a regulator. We measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.
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| Equity Offering Costs | Equity Offering Costs
Commissions, legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination of the success of the offering. Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period it is determined that the offering was successful. Deferred offering costs related to unsuccessful equity offerings are recorded as expense in the period when it is determined that an offering is unsuccessful.
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| Accounting for Payroll Protection Program Loan | Accounting for Payroll Protection Program Loan
The Company accounted for its U.S. Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”) loan as a debt instrument under ASC 470, Debt. The Company recognized the original principal balance as a financial liability with interest accrued at the contractual rate over the term of the loan. On January 21, 2022, the PPP loan received by the Company on May 8, 2020 was forgiven by the SBA in its entirety, which includes approximately $1.3 million in principal. As a result, the Company recorded a gain on the forgiveness of the loan in the quarter ended March 31, 2022 under non-operating income (expense).
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| Employee Retention Tax Credit | Employee Retention Tax Credit
The employee retention tax credit (“ERTC”) for 2020 was established under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”). The ERTC provided for changes in the employee retention credit for 2020 and provided an additional credit for the first, second and third calendar quarters of 2021. Employers are eligible for the credit if they experienced either a full or partial suspension of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or if they experienced a significant decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 and the corresponding quarters in 2019. The ERTC is a refundable credit that employers can claim on qualified wages paid to employees, including certain health insurance costs.
According to the Internal Revenue Service (“IRS”) Notice 2021-20, “Guidance on the Employee Retention Credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act,” the period during which there is a significant decline in gross receipts is determined by identifying the first quarter in 2020 in which the gross receipts are less than 50% of its gross receipts for the same period in 2019. The employee retention credit is available only to eligible employers. Section 2301(c)(2)(A) of the CARES Act defines the term “eligible employer” as any employer carrying on a trade or business during calendar year 2020, and, with respect to any calendar quarter, for which (1) the operation of the trade or business carried on during calendar year 2020 is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19, or (2) such calendar quarter is within the period in which the employer had a significant decline in gross receipts, as described in section 2301(c)(2)(B) of the CARES Act. VIP dentists and potential VIPs were forced to close their offices during 2020 as a result of COVID-19. Therefore, the Company qualifies as an eligible employer under this under the CARES Act.
Section 2301(c)(3)(A)(ii) of the CARES Act also provides that if an eligible employer averaged 100 or fewer employees in 2019 (a “small eligible employer”), qualified wages are those wages paid by the eligible employer with respect to an employee during any period described in section 2301(c)(2)(A)(ii)(I) of the CARES Act (relating to a calendar quarter for which the operation of a trade or business is fully or partially suspended due to a governmental order) or during a calendar quarter within the period described in section 2301(c)(2)(A)(ii)(II) of the CARES Act (relating to a significant decline in gross receipts). The Company averaged fewer than 80 employees in 2019 and is therefore considered a small eligible employer under the CARES Act.
Healthcare plan expenses were not included in the analysis, although they are eligible if an employee has paid health insurance through their paycheck. Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the Code. The Company pays the first $500 of healthcare insurance for each employee, which generally covers the monthly cost of their insurance. Because of this, the Company conservatively did not include any of the cost of insurance in its analysis. Additionally, PPP loan amounts were deducted from the amount of total wages paid before calculating the qualified ERTC wages. The Company applied for the ERTC using Vivos Therapeutics Inc.’s payroll, which covers 95% of its employees.
As indicated above, for 2020, companies were eligible for a credit equal to 50 percent of the first ten thousands of qualified wages paid per employee in the aggregate of each eligible quarter. Therefore, the maximum ERTC for the Company for 2020 is five thousand ($5,000) per employee. For the second and fourth quarters of 2020, the total eligible credit was limited to approximately $0.5 million.
For 2021, the ERTC was 70% of the first ten thousand qualified wages paid per employee each quarter. Accordingly, the credit was limited to approximately $0.7 million. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERTC by analogy to ASC 450, Contingencies. Accordingly, under ASC 450, entities would treat the ERTCs (whether received in cash or as an offset to current or future payroll taxes) as if they were gain contingencies. When applying ASC 450-30, entities would not consider the probability of complying with the terms of the ERC program but, rather, would defer any recognition in the income statement until all uncertainties are resolved and the income is “realized” or “realizable” (i.e., upon receipt of the funds or formal notice by the IRS that the company is entitled to such funds). In our case, the Company elected to follow a more conservative approach and instead of recognizing a receivable for amounts to be received when the amended tax forms were filed in 2022, it was decided to wait for the notice from IRS and cash was received. As for financial statement presentation, it is believed that either classifying the amounts as a reduction to payroll tax expense (expense off-set is however contrary to U.S. GAAP) or as other income to be acceptable with appropriate disclosure of the election made by the company. However, the IRS issued a renewed warning regarding the ERTC on March 7, 2023 urging taxpayers to carefully review the ERTC guidelines. The Company continues to evaluate additional information from the IRS, and elected to disclose the funds received as a separate line item under long-term liabilities on the balance sheet, until more information becomes available from the IRS. As a result, for the period ending December 31, 2023, approximately $1.2 million was recorded under long-term liabilities.
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| Loss and Gain Contingencies | Loss and Gain Contingencies
The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably estimated. If some amount within a range of loss appears to be a better estimate than any other amount within the range, the Company accrues that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss. The Company regularly evaluates current information available to it to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Legal fees related to contingencies are charged to general and administrative expense as incurred. Contingencies that may result in gains are not recognized until realization is assured, which typically requires collection in cash.
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| Share-Based Compensation |
The Company measures the cost of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the award as of the grant date. The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model. The Company estimates the expected term using the simplified method which is the average of the vesting term and the contractual term of the respective options. The Company determines the expected price volatility based on the historical volatilities of shares of the Company’s peer group as the Company does not have a sufficient trading history for its Common Stock. Industry peers consist of several public companies in the bio-tech industry similar to the Company in size, stage of life cycle and financial leverage. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. The Company recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period. For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award were, in substance, a single award. The Company recognizes the impact of forfeitures and cancellations in the period that the forfeiture or cancellation occurs, rather than estimating the number of awards that are not expected to vest in accounting for stock-based compensation.
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| Research and Development | Research and Development
Costs related to research and development are expensed as incurred and include costs associated with research and development of new products and enhancements to existing products. Research and development costs incurred were less than $0.1 million and less than $0.2 million for the years ended December 31, 2023 and 2022, respectively. These are recorded on the statement of operations under general and administrative expense.
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| Leases | Leases
Operating leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability - current and non-current portion in our balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our balance sheets.
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| Income Taxes | Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which deferred income taxes are recognized based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results, or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. The recorded valuation allowance is based on significant estimates and judgments and if the facts and circumstances change, the valuation allowance could materially change. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
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| Basic and Diluted Net Loss Per Share |
Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent dilutive.
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| Warrant Accounting | Warrant Accounting
The Company accounts for its warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument, in accordance with ASC 815, Derivatives and Hedging. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. Management estimates the fair value of these liabilities using the Black-Scholes model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.
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| Segment Information | Segment Information
We manage our business within one reportable segment. The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker (CODM), reviews financial information presented on a consolidated basis, accompanied by information about operations for purposes of making operating decisions and assessing financial performance.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
Presented below is a discussion of new accounting standards including deadlines for adoption assuming that the Company retains its designation as an EGC.
Recently Adopted Standards. The following recently issued accounting standards were adopted by the Company during the period ended December 31, 2023:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This guidance requires use of an impairment model (known as the “current expected credit losses”, or CECL model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. The Company adopted the new accounting standard on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. |
REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES (Tables) |
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| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMERS | For the years ended December 31, 2023 and 2022, the components of revenue from contracts with customers and the related timing of revenue recognition is set forth in the table below (in thousands):
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| SCHEDULE OF CONTRACT LIABILITY | The key components of changes in contract liabilities for the years ended December 31, 2023 and 2022 are as follows (in thousands):
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PROPERTY AND EQUIPMENT, NET (Tables) |
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| SCHEDULE OF PROPERTY AND EQUIPMENT | As of December 31, 2023 and 2022, property and equipment consist of the following (in thousands):
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF GOODWILL |
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| SCHEDULE OF IDENTIFIABLE INTANGIBLES | As of December 31, 2023 and 2022, identifiable intangible assets were as follows (in thousands):
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| SCHEDULE OF ESTIMATED FUTURE AMORTIZATION OF IDENTIFIABLE INTANGIBLE ASSETS |
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OTHER FINANCIAL INFORMATION (Tables) |
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| SCHEDULE OF ACCRUED EXPENSES | As of December 31, 2023 and 2022, accrued expenses consist of the following (in thousands):
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STOCK OPTIONS AND WARRANTS (Tables) |
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| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK OPTIONS |
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| SCHEDULE OF WARRANT OUTSTANDING | The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the years ended December 31, 2023 and 2022 (shares in thousands):
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| Warrant [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Option [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LOSS BEFORE INCOME TAX | For the years ended December 31, 2023 and 2022, the domestic and foreign components of loss before income taxes consist of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXES | A reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate of 21% to the pre-tax loss, and the income tax benefit recognized in the consolidated financial statements is as follows for the years ended December 31, 2023 and 2022 (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES | As of December 31, 2023 and 2022, the principal components of deferred tax assets and liabilities were as follows (in thousands):
|
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COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LEASE EXPENSE | As of December 31, 2023 and 2022, the components of lease expense are as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REMAINING LEASE TERMS AND DISCOUNT RATE | As of December 31, 2023 and 2022, the remaining lease terms and discount rate used are as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF RELATED TO LEASES | Supplemental cash flow information related to leases as of December 31, 2023 and 2022 is as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS | As of December 31, 2023 and 2022, the maturities of the Company’s future minimum lease payments were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET LOSS PER SHARE OF COMMON STOCK (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF COMPUTATION OF ANTI-DILUTIVE WEIGHTED-AVERAGE SHARES OUTSTANDING |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OUTSTANDING COMMON STOCK SECURITIES NOT INCLUDED IN THE COMPUTATION OF DILUTED NET LOSS PER SHARE |
|
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FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE LIABILITIES ON RECURRING BASIS | The following table represent a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2023:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE PRICING MODEL | The Company has re-measured the liability to estimate fair value at November 2, 2023 as a result of the amendment described above, using the Black-Scholes option pricing model with the following assumptions:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | |||||
|---|---|---|---|---|---|---|
Oct. 25, 2023 |
Feb. 28, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
Jan. 21, 2022 |
Aug. 12, 2020 |
|
| Property, Plant and Equipment [Line Items] | ||||||
| Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
| Reverse stock split | 1-for-25 | |||||
| Percentage of revenue | 80.00% | |||||
| Acquired finite lived intangible assets weighted average useful life | 5 years | |||||
| Gross receipts | 50.00% | |||||
| Description | Healthcare plan expenses were not included in the analysis, although they are eligible if an employee has paid health insurance through their paycheck. Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the Code. The Company pays the first $500 of healthcare insurance for each employee, which generally covers the monthly cost of their insurance. Because of this, the Company conservatively did not include any of the cost of insurance in its analysis. Additionally, PPP loan amounts were deducted from the amount of total wages paid before calculating the qualified ERTC wages. The Company applied for the ERTC using Vivos Therapeutics Inc.’s payroll, which covers 95% of its employees | |||||
| Tax credit description | As indicated above, for 2020, companies were eligible for a credit equal to 50 percent of the first ten thousands of qualified wages paid per employee in the aggregate of each eligible quarter. Therefore, the maximum ERTC for the Company for 2020 is five thousand ($5,000) per employee. For the second and fourth quarters of 2020, the total eligible credit was limited to approximately $0.5 million | |||||
| Credit percentage | 70.00% | |||||
| Credit limited | $ 700,000 | |||||
| Long term liabilities | 1,200,000 | |||||
| Research and development, expense | $ 100,000 | $ 100,000 | $ 200,000 | |||
| Income tax examination description | greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. | |||||
| Payroll Protection Program [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Debt face amount | $ 1,300,000 | |||||
| Patents [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Ffinite lived intangible assets useful life | 15 years | |||||
| VIP Enrollment Agreement [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| [custom:CostOfServiceExpense] | $ 26,200 | |||||
| Minimum [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Percentage of revenue | 6.00% | |||||
| Property plant and equipment useful life | 4 years | |||||
| Minimum [Member] | Leasehold Improvements [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Property plant and equipment useful life | 5 years | |||||
| Maximum [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Percentage of revenue | 8.00% | |||||
| Property plant and equipment useful life | 5 years | |||||
| Maximum [Member] | Leasehold Improvements [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Property plant and equipment useful life | 7 years | |||||
LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Liquidity And Ability To Continue As Going Concern | ||
| Net income (loss) attributable to parent | $ 13,583 | $ 23,845 |
| Retained earnings (accumulated deficit) | 93,051 | 79,468 |
| Net cash provided by (used in) operating activities | 11,946 | 19,587 |
| Liabilities | 10,319 | 8,919 |
| Cash and cash equivalents, at carrying value | $ 1,643 | $ 3,519 |
SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMERS (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | $ 13,801 | $ 16,024 | |||||||
| Appliance Sales to VIP [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | [1] | 6,081 | 7,820 | ||||||
| Center Revenue [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 189 | 561 | |||||||
| Product [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 6,270 | 8,381 | |||||||
| VIP [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 3,922 | 4,838 | [2] | ||||||
| Billing Intelligence Services [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | [3] | 887 | 1,170 | ||||||
| Sleep Testing Services [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 1,185 | 594 | |||||||
| Myofunctional Therapy Services [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 861 | 927 | |||||||
| Sponsorship Seminar Other [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | 676 | 114 | |||||||
| Service [Member] | |||||||||
| Disaggregation of Revenue [Line Items] | |||||||||
| Total revenue | $ 7,531 | $ 7,643 | |||||||
| |||||||||
SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMERS (Parenthetical) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
|---|---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
||||
| Disaggregation of Revenue [Line Items] | |||||
| Increase decrease in revenue | $ 13,801 | $ 16,024 | |||
| VIP [Member] | |||||
| Disaggregation of Revenue [Line Items] | |||||
| Increase decrease in revenue | $ 3,922 | 4,838 | [1] | ||
| Cumulative Effect, Period of Adoption, Adjustment [Member] | VIP [Member] | |||||
| Disaggregation of Revenue [Line Items] | |||||
| Increase decrease in revenue | 400 | ||||
| Cumulative Effect, Period of Adoption, Adjustment [Member] | BIS [Member] | |||||
| Disaggregation of Revenue [Line Items] | |||||
| Increase decrease in revenue | $ 100 | ||||
| |||||
SCHEDULE OF CONTRACT LIABILITY (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Beginning balance | $ 3,038 | $ 2,399 |
| New contracts net of cancellation | 3,730 | 6,567 |
| Revenue recognized | (4,341) | (5,928) |
| Ending balance | $ 2,427 | $ 3,038 |
REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES (Details Narrative) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Deferred revenue current | $ 2.1 | |
| Revenue from breakage on contract liabilities | 0.5 | $ 1.6 |
| Receivable from customers | 0.2 | 0.5 |
| Decrease in receivable from customers | 0.3 | |
| Allowance for doubtful accounts receivable | 0.3 | 0.7 |
| Cost of goods sold | $ 0.2 | $ 0.2 |
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Gross property and equipment | $ 5,640 | $ 4,835 |
| Less accumulated depreciation | (2,326) | (1,753) |
| Net Property and equipment | 3,314 | 3,082 |
| Furniture and Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Gross property and equipment | 1,321 | 1,265 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Gross property and equipment | 2,479 | 2,479 |
| Construction in Progress [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Gross property and equipment | 1,435 | 948 |
| Molds [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Gross property and equipment | $ 405 | $ 143 |
PROPERTY AND EQUIPMENT, NET (Details Narrative) $ in Millions |
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2023
USD ($)
ft²
|
Dec. 31, 2022
USD ($)
|
|
| Property, Plant and Equipment [Abstract] | ||
| Area of Land | ft² | 15,000 | |
| Depreciation and amortization expense | $ | $ 0.7 | $ 0.6 |
SCHEDULE OF GOODWILL (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Total goodwill | $ 2,843 | $ 2,843 |
| Bio Modeling [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Total goodwill | 2,619 | 2,619 |
| Empowered Dental [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Total goodwill | 52 | 52 |
| Lyon Dental [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Total goodwill | $ 172 | $ 172 |
SCHEDULE OF IDENTIFIABLE INTANGIBLES (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Feb. 28, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | |||
| Total intangible assets | $ 2,659 | $ 200 | $ 2,493 |
| Less accumulated amortization | (2,239) | (2,191) | |
| Net intangible assets | 420 | 302 | |
| Patents and Developed Technology [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Total intangible assets | 2,302 | 2,136 | |
| Trade Names [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Total intangible assets | 330 | 330 | |
| Other Intangible [Member] | |||
| Finite-Lived Intangible Assets [Line Items] | |||
| Total intangible assets | $ 27 | $ 27 |
SCHEDULE OF ESTIMATED FUTURE AMORTIZATION OF IDENTIFIABLE INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| 2024 | $ 50 | |
| 2025 | 50 | |
| 2026 | 35 | |
| 2027 | 29 | |
| 2028 | 29 | |
| Thereafter | 227 | |
| Net intangible assets | $ 420 | $ 302 |
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Goodwill | $ 2,843 | $ 2,843 |
| Amortization of Intangible Assets | $ 100 | $ 100 |
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Accrued payroll | $ 1,498 | $ 1,358 |
| Accrued legal and other | 798 | 473 |
| Lab rebate liabilities | 38 | 81 |
| Total accrued expenses | $ 2,334 | $ 1,912 |
PREFERRED STOCK (Details Narrative) - shares |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
| Board of Directors [Member] | ||
| Preferred stock, shares authorized | 50,000,000 | |
| Board of Directors [Member] | Maximum [Member] | ||
| Preferred stock, shares authorized | 50,000,000 |
SCHEDULE OF STOCK OPTIONS (Details) - Share-Based Payment Arrangement, Option [Member] - $ / shares shares in Thousands |
12 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||
| Number of stock options outstanding, Balance | 145 | [1] | 114 | ||||||||||
| Weighted average exercise price, Balance | [2] | $ 72.25 | $ 124.00 | ||||||||||
| Weighted average remaining contractual life | [3] | 3 years 4 months 24 days | 3 years 3 months 18 days | 3 years 3 months 18 days | |||||||||
| Number of stock options outstanding, Granted | 16 | 79 | |||||||||||
| Weighted average exercise price, Granted | [2] | $ 9.89 | $ 25.25 | ||||||||||
| Number of stock options outstanding, Forfeited | (34) | (48) | |||||||||||
| Weighted average exercise price, Forfeited | [2] | ||||||||||||
| Number of stock options outstanding, Exercised | [4] | ||||||||||||
| Weighted average exercise price, Exercised | [2] | ||||||||||||
| Number of stock options outstanding, Balance | 127 | [4] | 145 | [1] | 114 | ||||||||
| Weighted average exercise price, Balance | [2] | $ 62.45 | $ 72.25 | $ 124.00 | |||||||||
| Number of stock exercisable, Balance | 89 | [1] | 90 | ||||||||||
| Weighted average exercisable, Balance | [2] | $ 68.67 | $ 75.50 | ||||||||||
| Weighted average remaining contractual life, Excersiable | [3] | 3 years 1 month 6 days | 3 years 4 months 24 days | ||||||||||
| |||||||||||||
SCHEDULE OF STOCK OPTIONS (Details) (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Stock Options And Warrants | ||
| Aggregate intrinsic value stock options outstanding | $ 65,500 | $ 65,500 |
| Aggregate intrinsic value stock options outstanding exercisable | $ 24,600 | $ 24,600 |
SCHEDULE OF WARRANT OUTSTANDING (Details) - $ / shares shares in Thousands |
12 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||
| Warrants outstanding, beginning balance | 144 | [1] | 102 | ||||||||||||||||
| Warrant price, beginning balance | [2] | $ 137.50 | $ 186.00 | ||||||||||||||||
| Weighted average remaining contractual life, Ending | [3] | 4 years 7 months 6 days | 2 years 7 months 6 days | 3 years 1 month 6 days | |||||||||||||||
| Number of stock options, options outstanding, exercised, shares | (624) | [4] | |||||||||||||||||
| Number of stock options, options outstanding, forfeited, shares | (50) | ||||||||||||||||||
| Warrants outstanding, ending balance | 2,821 | [1] | 144 | [1] | 102 | ||||||||||||||
| Warrant price, ending balance | [2] | $ 13.15 | $ 137.50 | $ 186.00 | |||||||||||||||
| Warrants outstanding, exercisable ending balance | [5] | 2,760 | 124 | ||||||||||||||||
| Warrant price, exercisable ending balance | [2] | $ 9.30 | $ 145.00 | ||||||||||||||||
| Weighted average remaining contractual life, exercisable ending | [3] | 3 years 6 months | 2 years 6 months | ||||||||||||||||
| Consultants For Services [Member] | |||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||
| Grants of warrants | 86 | [6] | 42 | ||||||||||||||||
| Private Placement [Member] | |||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||
| Grants of warrants | 3,265 | [7] | |||||||||||||||||
| |||||||||||||||||||
SCHEDULE OF WARRANT OUTSTANDING (Details) (Parenthetical) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 12 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2023 |
Jan. 31, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
Aug. 31, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Feb. 28, 2023 |
Feb. 28, 2022 |
|
| Purchase of warrants | 16,000 | ||||||||
| Warrant exercise price | $ 15.25 | ||||||||
| Intrinsic value of warrants outstanding | $ 19.2 | $ 0.0 | |||||||
| Intrinsic value of warrants exercisable | $ 19.2 | 0.0 | |||||||
| Prefunded Warrants [Member] | Private Placement [Member] | |||||||||
| Purchase of warrants | 850,393 | 186,667 | |||||||
| Warrant exercise price | $ 0.0001 | $ 0.0001 | |||||||
| Warrant [Member] | Private Placement [Member] | |||||||||
| Purchase of warrants | 1,960,786 | 266,667 | 437,393 | 186,667 | |||||
| Warrant exercise price | $ 3.83 | $ 30 | |||||||
| Stock based compensation expense | $ 3.8 | $ 14.5 | |||||||
| Consultant [Member] | |||||||||
| Purchase of warrants | 900 | 1,500 | 84,000 | ||||||
| Warrant exercise price | $ 15.25 | $ 8.50 | $ 10.25 | $ 22.75 | |||||
| Intrinsic value of warrants outstanding | $ 0.1 | $ 0.1 | $ 1.3 | ||||||
| Stock based compensation expense | $ 0.7 | $ 0.7 | |||||||
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Apr. 30, 2019 |
Dec. 31, 2023 |
Dec. 31, 2022 |
Sep. 22, 2023 |
Dec. 31, 2017 |
|||
| Weighted-average grant date fair value | $ 9.89 | $ 25.25 | |||||
| Share-Based Payment Arrangement, Option [Member] | |||||||
| Share based compensation arrangements by share based payment award options grants in period weighted average exercise price | [1] | $ 9.89 | $ 25.25 | ||||
| Share based compensation expense | $ 1.1 | $ 2.4 | |||||
| Unrecognized expense | $ 1.8 | $ 3.0 | |||||
| Weighted average remaining term | 3 years 8 months 12 days | 4 years 1 month 6 days | |||||
| 2019 Plan [Member] | |||||||
| Common stock authorized | 80,000 | ||||||
| 2019 Plan [Member] | Minimum [Member] | |||||||
| Number of common stock grants | 94,667 | ||||||
| 2019 Plan [Member] | Maximum [Member] | |||||||
| Number of common stock grants | 174,667 | ||||||
| Shareholder [Member] | 2017 Plan [Member] | |||||||
| Shares reserved for future issuance | 53,333 | ||||||
| Shareholder [Member] | 2019 Plan [Member] | |||||||
| Shares reserved for future issuance | 13,333 | ||||||
| Common stock available for issuance shares | 81,334 | ||||||
| Number of common stock grants | 94,667 | ||||||
| Board of Directors Employees and Consultants [Member] | |||||||
| Shares issued price per share | $ 8.50 | $ 187.50 | |||||
| Board of Directors Employees and Consultants [Member] | Share-Based Payment Arrangement, Option [Member] | |||||||
| Share based compensation arrangement by share based payment award shares purchased for award | 16,000 | 78,967 | |||||
| Share based compensation arrangements by share based payment award options grants in period weighted average exercise price | $ 9.98 | $ 25.25 | |||||
| Share based compensation arrangement by share based payment award non option equity instruments expirations | 33,553 | 48,254 | |||||
| |||||||
RELATED PARTY TRANSACTIONS (Details Narrative) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Directors, Officers, Employees and Consultatants [Member] | ||
| Options shares purchased | 16,000 | 79,000 |
SCHEDULE OF LOSS BEFORE INCOME TAX (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Domestic | $ (13,626) | $ (23,945) |
| International | 43 | 100 |
| Loss before income taxes | $ (13,583) | $ (23,845) |
SCHEDULE OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXES (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Income tax (benefit) computed at federal statutory rate | $ (2,852) | $ (5,007) |
| PPP loan forgiveness | (270) | |
| Other permanent differences | 174 | 346 |
| State tax expenses | (365) | (510) |
| Prior year adjustment to state net operating loss carryforward | (200) | (44) |
| Nontaxable gain on change in fair value of warrants, net of issuance costs | (793) | |
| Non-qualified stock option cancellations | 260 | 613 |
| Other | 86 | |
| Change in valuation allowance | 3,690 | 4,872 |
| Total income tax benefit | ||
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Net operating loss carryforwards | $ 17,354 | $ 13,786 |
| Stock based compensation | 532 | 776 |
| Lease liability | 472 | 561 |
| Property, equipment and intangibles | 662 | 458 |
| Other | 649 | 452 |
| Total deferred tax assets before valuation allowance | 19,669 | 16,033 |
| Valuation allowance | (19,329) | (15,639) |
| Total deferred income tax assets after valuation allowance | 340 | 394 |
| Goodwill | (12) | |
| ROU asset | (328) | (394) |
| Total deferred income tax liabilities | (340) | (394) |
| Net deferred tax assets and liabilities |
INCOME TAXES (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Operating Loss Carryforwards [Line Items] | ||
| Deferred tax valuation allowance | $ 19,329 | $ 15,639 |
| Change in valuation allowance | 3,700 | 4,800 |
| Net operating loss carry forwards | 72,400 | |
| Remaining federal net operating losses | 69,100 | |
| Interest and penalties accrued | ||
| Expire In Two Thousand Thirty Six [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Net operating loss carry forwards | $ 3,300 | |
SCHEDULE OF LEASE EXPENSE (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Operating lease cost | $ 481 | $ 487 |
| Total net lease cost | $ 481 | $ 487 |
SCHEDULE OF REMAINING LEASE TERMS AND DISCOUNT RATE (Details) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Weighted-average remaining lease term (years) | 3 years 8 months 12 days | 4 years 7 months 6 days |
| Weighted-average discount rate | 8.30% | 8.30% |
SCHEDULE OF RELATED TO LEASES (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Operating cash flows from operating leases | $ 602 | $ 438 |
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS (Details) $ in Thousands |
Dec. 31, 2023
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 2024 | $ 621 |
| 2025 | 594 |
| 2026 | 507 |
| 2027 | 493 |
| 2028 | 133 |
| Thereafter | 7 |
| Total lease payments | 2,355 |
| Less: Imputed interest | (360) |
| Total | $ 1,995 |
COMMITMENTS AND CONTINGENCIES (Details Narrative) $ in Thousands |
12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
|
Dec. 31, 2023
USD ($)
ft²
|
Dec. 31, 2022
USD ($)
|
May 16, 2022
USD ($)
|
Apr. 30, 2022
ft²
|
Jan. 01, 2022
USD ($)
|
Oct. 31, 2020
ft²
|
Apr. 30, 2019
ft²
|
May 31, 2018
ft²
|
Jan. 31, 2017
ft²
|
|
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 15,000 | ||||||||
| Right of use asset | $ 1,385 | $ 1,695 | |||||||
| Operating lease liability | 1,995 | ||||||||
| Payment for rent | $ 500 | $ 500 | |||||||
| Johnstown Co [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 2,220 | ||||||||
| Right of use asset | $ 300 | ||||||||
| Estimated borrowing rate | 6.00% | ||||||||
| Highlands Ranch Co [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 3,643 | ||||||||
| Right of use asset | $ 800 | ||||||||
| Estimated borrowing rate | 7.30% | ||||||||
| Operating lease liability | $ 800 | ||||||||
| Orem Utah [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 4,800 | ||||||||
| Right of use asset | $ 600 | ||||||||
| Estimated borrowing rate | 6.60% | ||||||||
| Operating lease liability | $ 600 | ||||||||
| Highlands Ranch Co [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 3,231 | ||||||||
| Right of use asset | $ 100 | ||||||||
| Estimated borrowing rate | 6.70% | ||||||||
| Operating lease liability | $ 100 | ||||||||
| Denver Co [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 14,732 | ||||||||
| Right of use asset | $ 1,400 | ||||||||
| Estimated borrowing rate | 7.10% | ||||||||
| Operating lease liability | $ 1,400 | ||||||||
| Littleton Co [Member] | |||||||||
| Product Liability Contingency [Line Items] | |||||||||
| Area of land | ft² | 8,253 | ||||||||
| Right of use asset | $ 1,500 | ||||||||
| Estimated borrowing rate | 10.60% | ||||||||
| Operating lease liability | $ 1,500 | ||||||||
SCHEDULE OF COMPUTATION OF ANTI-DILUTIVE WEIGHTED-AVERAGE SHARES OUTSTANDING (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Earnings Per Share [Abstract] | ||
| Net loss | $ (13,583) | $ (23,845) |
| Loss applicable to common stockholders | $ (13,583) | $ (23,845) |
| Weighted average number of shares of Common Stock outstanding (diluted) | 1,219,381 | 920,592 |
| Weighted average number of shares of Common Stock outstanding (basic) | 1,219,381 | 920,592 |
| Net loss per share of Common Stock (basic) | $ (11.14) | $ (25.90) |
| Net loss per share of Common Stock (diluted) | $ (11.14) | $ (25.90) |
SCHEDULE OF OUTSTANDING COMMON STOCK SECURITIES NOT INCLUDED IN THE COMPUTATION OF DILUTED NET LOSS PER SHARE (Details) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 2,949 | 290 |
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 2,822 | 145 |
| Share-Based Payment Arrangement, Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 127 | 145 |
SCHEDULE OF FAIR VALUE LIABILITIES ON RECURRING BASIS (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2023 |
|
| Investments, All Other Investments [Abstract] | ||
| Beginning balance | ||
| Issuance of warrants | 14,453 | |
| Exercise of warrants | (2,847) | |
| Change in fair value upon re-measurement | $ (10,875) | |
| Reclassification of warrant liabilities to additional paid-in-capital | (731) | |
| Ending balance |
SCHEDULE OF FAIR VALUE PRICING MODEL (Details) |
Nov. 02, 2023
Integer
|
Sep. 30, 2023
Integer
|
Jun. 30, 2023
Integer
|
Mar. 31, 2023
Integer
|
Jan. 09, 2023
Integer
|
||||
|---|---|---|---|---|---|---|---|---|---|
| Measurement Input, Share Price [Member] | |||||||||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||||||
| Derivative liability measurement input | [1] | 3.62 | 4.75 | 12.75 | 8.50 | 36.00 | |||
| Measurement Input, Expected Term [Member] | |||||||||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||||||
| Contractual term (years) | [2] | 5 years | 4 years 9 months 18 days | 5 years | 5 years 3 months 18 days | 5 years 6 months | |||
| Measurement Input, Risk Free Interest Rate [Member] | |||||||||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||||||
| Derivative liability measurement input | 4.6 | 4.5 | 4.1 | 3.5 | 3.6 | ||||
| Measurement Input, Price Volatility [Member] | |||||||||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||||||
| Derivative liability measurement input | 100 | 100 | 100 | 100 | 100 | ||||
| Measurement Input, Expected Dividend Rate [Member] | |||||||||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||||||
| Derivative liability measurement input | 0 | 0 | 0 | 0 | 0 | ||||
| |||||||||
FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Nov. 30, 2023 |
Dec. 31, 2023 |
Oct. 30, 2023 |
Feb. 28, 2023 |
Jan. 31, 2023 |
Jan. 09, 2023 |
Dec. 31, 2022 |
|
| Warrant purchase | 16,000 | ||||||
| Warrants exercise price | $ 15.25 | ||||||
| Cash and cash equivalents at carrying value | $ 1,643 | $ 3,519 | |||||
| Supplier Concentration Risk [Member] | Revenue Benchmark [Member] | Five Suppliers [Member] | |||||||
| Concentration of risk percentage | 80.00% | ||||||
| Securities Purchase Agreement [Member] | |||||||
| Warrants exercise price | $ 3.83 | ||||||
| Securities Purchase Agreement [Member] | Common Stock [Member] | Prefund Warrant [Member] | Private Placement [Member] | |||||||
| Warrant purchase | 186,667 | ||||||
| Warrants exercise price | $ 0.0001 | ||||||
| Securities Purchase Agreement [Member] | Common Stock [Member] | Common Stock Purchase Warrant [Member] | Private Placement [Member] | |||||||
| Warrant purchase | 266,667 | 266,667 | |||||
| Warrants exercise price | $ 3.83 | $ 30.00 | $ 30 | ||||
| Expiration date | Nov. 02, 2028 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
12 Months Ended | |||||
|---|---|---|---|---|---|---|
Feb. 14, 2024 |
Oct. 30, 2023 |
Dec. 31, 2023 |
Feb. 28, 2023 |
Dec. 31, 2022 |
Aug. 12, 2020 |
|
| Subsequent Event [Line Items] | ||||||
| Stock Issued During Period, Value, New Issues | $ 2,764,000 | |||||
| Common stock par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
| Inducement warrant | 16,000 | |||||
| Warrants exercise price | $ 15.25 | |||||
| Securities Purchase Agreement [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Warrants exercise price | $ 3.83 | |||||
| Securities Purchase Agreement [Member] | Private Placement [Member] | Series A Warrant [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Inducement warrant | 980,393 | |||||
| Securities Purchase Agreement [Member] | Private Placement [Member] | Series B Warrant [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Inducement warrant | 980,393 | |||||
| Securities Purchase Agreement [Member] | Common Stock [Member] | Private Placement [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Stock Issued During Period, Value, New Issues | $ 4.0 | |||||
| Common stock par value | $ 0.0001 | |||||
| Inducement [Member] | Series B Warrant [Member] | Subsequent Event [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Warrants exercise price | $ 4.02 | |||||
| Proceeds from Warrant Exercises | $ 4,000,000.0 | |||||
| Inducement Agreement [Member] | Series B Warrant [Member] | Subsequent Event [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Inducement warrant | 1,470,592 | |||||
| Warrants exercise price | $ 4.02 | |||||
| Proceeds from Warrant Exercises | $ 4,000,000.0 | |||||
| Inducement Agreement [Member] | Series B -1 Common Stock [Member] | Subsequent Event [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Inducement warrant | 735,296 | |||||
| Warrants exercise price | $ 5.05 | |||||
| Inducement Agreement [Member] | Series B -2 Common Stock [Member] | Subsequent Event [Member] | ||||||
| Subsequent Event [Line Items] | ||||||
| Inducement warrant | 735,296 | |||||
| Warrants exercise price | $ 5.05 |