VVOS 10-K & 10-Q changes, risk factors and insider trading

Our business has a limited operating history, and we continue to refine our business model, which makes it difficult to evaluate and compare compare our past performance with both current performance and future prospects. Moreover, we have recently made significant strategic, operational and staffing changes to our business, and it is impossible to know how or if such changes will increase future revenue and earnings.

Our business was formed only in 2016, and therefore there is limited historical data on which to evaluate our company. This is particularly true because our VIP-focused business model only commenced in mid-2018. Furthermore, since the roll out of our VIP-focused business model, we have continued to refine or alter our strategies, including in 2024 to reduce our reliance on VIP enrollment revenue and instead pursue marketing and distribution alliances with, or acquisitions of, medical sleep clinics and other medical providers. The 2024 pivot in our business model was accompanied by significant strategic, financial, operational and staffing changes to our business.business, which we have continued to refine as we progress. Therefore, there is very limited and evolving or differing historical operating data on which to evaluate the results of and prospects for our current business model. Moreover, given that our newmedical-focused sales, marketing and distribution model is at its veryearly early stages, it is impossible to know with any certainty whether this new model will increase our revenues or ultimately lead to profitability.

Additionally, frombeginning in 2022 and until 2023, we have periodically reduced staff and eliminated or renegotiated certain vendor contracts, strategically reorganized our business and revamped our business model. Further such steps, or even more, may be required before management is satisfied that we are positioned to succeed or even survive, and there is a risk that we will be unable to implement cost-cutting programs effectively.

Furthermore, in 2022 we did not put the appropriate resources in place to be able to identify technical accounting issues and perform review functions appropriately related to revenue recognition. Material errors were identified in our ability to determine that its existing revenue recognition policy was consistent with the guidance in ASC 606. After analyzing contracts using the five-step process in ASC 606, we have determined that for both VIP enrollment contracts and Orofacial Myofunctional Therapy (MyoCorrectMyoSync), modifications to our revenue recognition policies were required in order to identify the performance obligations and recognize the revenue as the performance obligations are satisfied or over the customer life as applicable.

For the year ended December 31, 2023, we began to implement a remediation plan to address the material weakness derived from the deficiencies and errors noted above. While we believe that at December 31, 2023, we had taken great strides to complete the full remediation of all of our internal control deficiencies and associated material weakness by undertaking the plan described in Item 9A of this Report, we believe theour additional review and testing in 2024 canhad affirmativelycured declare that the material weakness has beenand fully remediated the material weakness as of December 31, 2024.

Currently, our primary product is The Vivos Method, inclusive of MyoCorrectMyoSync and our SleepImage HST. Our secondary source of revenue is our clinical clinical training and practice support programs, including Billing Intelligence Services,Services and Airway Intelligence System and AireO2.System. We expect expect that sales of the component aspects of The Vivos Method and our services to our VIPs and affiliated sleep centers related to the use of such treatments will account for a significant majority of our prospective revenue for the foreseeable future. We currently market and sell our appliances (which are central to The Vivos Method) primarily in the United States and Canada, with a very limited presence in Australia. The Vivos Method is different from current surgical and non-surgical treatments dentofacial abnormalities and/or mild to severe OSA and snoring, therefore we cannot assure you that dentists and sleep clinics in corroboration with physicians will use The Vivos Method or become VIPs or strategic alliance partners, and demand for The Vivos Method may decline or may not increase as quickly as we expect. Also, we cannot assure you that The Vivos Method will compete effectively as a treatment alternative to other more well-known and well-established therapies, such as CPAP, mandibular advancement, or palatal surgical procedures. The Vivos Method currently represents our primary product, and since our VIP program has historically been, but is no longer, our primary means of commercialization, however, we are reliant on the level of recurring sales using The Vivos Method treatment and decreased or lower than expected sales to and maintenance of VIPs or sleep centers would cause us to lose all or substantially all of our revenue.

A material portion of our future revenue is expected to derive from sales of our appliances and other closely related diagnostic and therapeutic services to patients through dentists and other medical professionals, who are part of various Vivos-supported Medical and Dental Service OrganizationOrganizations (DSO)MSOs we/ may form and other Medical Service Organization (MSODSOs) which leaveswe intend to form in various states, and which leave us reliant on our ability to establish, staff, and operate such operations successfully across diverse and geographically dispersed markets.

Our business and results of operations may be impacted by the extent to which patients using The Vivos Method achieve adequate levels of third-party insurance reimbursement.reimbursement, or the extent to which third party patient financing is available.

The cost of treatments for dentofacial abnormalities and/or mild to severe OSA, such as CPAP, and most surgical procedures generally are covered and reimbursed in whole or part by third-party healthcare insurers. The Vivos Method is a customized protocol often combined with custom oral appliance therapy, some of which currently qualify for reimbursement. Our ability to generate revenue from additional additional sales of The Vivos Method for the treatment of dentofacial abnormalities and/or mild to severe OSAOSA, as well as our potential revenues from MSO/DSO support fees, may be materially limited by the extent to which reimbursement of The Vivos Method or other treatments and testing offered by our supported providers is available in the future. In addition, third-party healthcare insurers are increasingly challenging the prices charged for medical products and procedures. If we are successful in our efforts to obtain reimbursement for the billable procedures within The Vivos Method,Method or otherwise impacting our business, any changes in this reimbursement system could materially affect our ability to continue to grow our business.

Our products are currently recommended only by a relatively small minority of medical sleep specialists, who are integral to the diagnosis and treatment of sleep breathing disorders. Accordingly, our ability to scale our business is thus highly dependent on the expansion of qualified medical sleep specialists who will support and recommend the Vivos Method to their patients.

The misrepresentation, misuse or off-label use of The Vivos Method or other Vivos products and services could result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

We train our marketing personnel and direct sales force to not promote the oral appliances of The Vivos Method for uses outside of the FDA-cleared FDA-cleared indications for use, known as off-label uses. We cannot, however, prevent a medical professional from using our appliances off label when, in their independent professional medical judgment, he or she deems it appropriate. There may be increased risk of injury or other side effects to patients if physicians misrepresent, misuse or attempt to use our appliances and associated treatments off label. Furthermore, the use of our appliances and associated treatments for indications other than those cleared by the FDA or cleared by any foreign regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

We have engaged in and will continue to pursue acquisitions ofof, or affiliations with, medical or dental practices or complementary businesses or technologies, which could divert the attention of management, and which may not be integrated successfully into our existing business.

We have engaged in and will continue to pursue acquisitions of medical or dental practices or other complementary businesses or assets as well as licenses of technology to, among other things, expand the our marketing and distribution model and the scope of products and services we provide. For example, in February 2023, acquired certain U.S. and international patents, product rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC. We cannot guarantee that we will identify suitable acquisition candidates, that acquisitions will be completed on acceptable terms or that we will be able to successfully integrate the operations of any acquired business into our existing business. The acquisitions could be of significant size and involve operations in multiple jurisdictions. Moreover, the acquisition of medical or dental practice implicates complicated healthcare laws which will need to be navigated. The acquisition and integration of another business or technology would divert management attention from other business activities, including our core business. This diversion, together with other difficulties we may incur in integrating an acquired business or technology, could have a material adverse effect on our business, financial condition and results of operations. In addition, we may borrow money or issue capital stock to finance acquisitions. Such borrowings might not be available on terms as favorable to us as our current borrowing terms and may increase our leverage, and the issuance of capital stock could dilute the interests of our stockholders.

We substantially rely on the efforts of our current senior management, including our Chief Executive Officer, R. Kirk Huntsman, our Chief Financial Officer, Brad AmmanAmman, and Susan McCullough, our EVP of Operations, and Michael Bruhn, our EVP of Operations, East Coast, among others. Our business would be impeded or harmed if we were to lose their services. In addition, if we are unable to attract, train and retain highly skilled technical, managerial, product development, sales and marketing personnel, we may be at a competitive disadvantage and unable to develop new products or increase revenue. The failure to attract, train, retain and and effectively manage employees could negatively impact our research and development, sales and marketing and reimbursement efforts. In In particular, the loss of sales personnel could lead to lost sales opportunities as it can take several months to hire and train replacement replacement sales personnel. Uncertainty created by turnover of key employees could adversely affect our business.

To expand our medical provider-focused marketing and distribution model, achieve increased revenue levels, complete clinical studies and develop future products, we believe that we will be required to periodically expand our operations, particularly in the areas of sales and marketing, clinical research, reimbursement, research and development, manufacturing and quality assurance. As we expand our operations in these areas, management will face new and increased responsibilities. To accommodate any growth and compete effectively, we must continue to upgrade and improve our information systems, as well as our procedures and controls across our business, and expand, train, motivate and manage our work force. Our future success will depend significantly on the ability of our current and future management to operate effectively. Our personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable to effectively manage our expected growth, this could have a material adverse effect on our business, financial condition and results of operations.

We have received an FDA warning letter in the past when such a letter was received by our subsidiary BioModeling Solutions, Inc. (“BioModeling” or “BMS”) in January 2018 following a routine FDA audit. In its letter, the FDA noted matters such as inadequate documentation of certain FDA-required procedures, not keeping certain records and materials in paper format and in triplicate, and using certain descriptive words and phrases on its website and in marketing materials that were unapproved in advance by FDA. We believe these issues have been resolved as ofthe FDA notified the Company in 2022 that the Warning Letter had been resolved. Since that time, we have enhanced our latestquality systems, policies, and procedures designed to support ongoing compliance. In a subsequent FDA auditinspection in fall2024, ofthe 2022agency byissued a single observation and did not havingcite any repeat offenses from the stated observations of said warning letter and we have submitted written requestrelated to havethose thematters. warningWe letterremain subject resolved.to ongoing FDA oversight, and there can be no assurance that future inspections will not identify additional issues.

UnderOur ourmedical-provider focused alliance marketing and distribution model,model our M&A Group, or formerly known as our Medical Integration Division,under which will seek to acquire or create alliances with healthcare providers, may implicate federal and state laws involving the practice of medicine and related anti-kickback and similar laws.

Our failure to meet the continuing listing requirements of The Nasdaq Capital MarketMarket, including the minimum stockholders’ equity requirement and minimum bid price requirements, could result in a delisting of our securities.

If we fail to satisfy the continuing listing requirements of Nasdaq, such as the corporate governance, stockholders$2.5 million minimum stockholders’ equity (the “Equity Requirement”) or minimum closing bid price requirements, Nasdaq may take steps to delist our common stock. Given Suchthat aour stockholders’ equity at December 31, 2025 was less than $2.5 million, we are presently not in compliance with the Equity Requirement. We are seeking to regain compliance by raising new funding in the form of equity and reducing costs. However, we will be faced with delisting proceedings which will distract management and cost resources to remedy, A delisting of our common stock from Nasdaq for any would very likely (i) damage our reputation, (ii) make it more difficult to manage our business and raise necessary capital, (iii) have a negative effect on the price of our common stock and would(iv) impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting,delisting scenario, we would likely take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements. During 2022, we received two notices from Nasdaq informing us of our failure to comply with two continuing Nasdaq listing requirements: failure to timely file our reports with the SEC, and failure to achieve the Nasdaq minimum bid price for 30 consecutive trading days. While both of these deficiencies were cleared by January 2023, we became subject to additional delisting from Nasdaq during 2023, one for failure to meet the minimum bid requirement and the other for failing to meet Nasdaq’s $2.5 million minimum stockholders’ equity requirement.

At the Hearing on November 9, 2023, we presented our plan to regain compliance with the minimum stockholders’ equity requirement (the “Equity Rule”),Requirement, which plan includesincluded raising additional equity capital. On November 30, 2023, we received a letter from the Hearings Panel that, subject to certain conditions, the Hearings Panel granted our request to continue to be listed on Nasdaq. These conditions include providing an update as to our plan to regain compliance with the Equity RuleRequirement as well as demonstrating compliance by March 19, 2024. On February 23, 2024 we presented our plan of compliance to the Hearings Committee. On May 6, 2024, we received written notice from the Nasdaq staff indicating that the Company had regained compliance with the Equity Rule.Requirement.

On June 27, 2024, we met with the Panel to discuss our past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of our securities on Nasdaq. On July 5, 2024, we were notified that the Panel had granted our request for continued listing on Nasdaq, subject to our filing of the Form 10-Q for the quarter ended June 30, 2024, with the Securities and Exchange Commission by August 15, 2024, evidencing our compliance with the Equity Requirement.

We are working diligently to ensure continued compliance with the Equity Requirement, including exploring potential additional equity capital financing or financings to stay above the minimum threshold of the Equity Requirement. We anticipate that our newmedical provider-focused strategic marketing and distribution alliance will also positively impact our revenue growth and stockholders’ equity in upcoming fiscal quarters. However, there is a risk that we will be unable to raise sufficient capital or generate sufficient revenue or positive operating results to maintain compliance with the Equity Requirement. If we fail to achieve ongoing compliance and our common stock is delisted by Nasdaq, such delisting would likely have a material adverse effect on our stock price, the ability of its stockholders to buy or sell their common stock, our ability to raise capital and on our reputation, all of which could make it significantly more difficult to operate. The risk of delisting for our company is compounded by the fact that we have been faced with delisting proceedings before, and no assurances can be given that we will be able to operate.maintain compliance or satisfy Nasdaq that our plan to regain compliance has merit.

The Securities and Exchange Commission (or SEC) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not obtain or retain a listing on Nasdaq and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

We are a revenue stage medical technology and healthcare services company focused on the development and commercialization of innovative treatment alternatives for patients with dentofacial abnormalities and/or patients diagnosed with mild to severe obstructive sleep apnea (“OSA”) and snoring in adults. We believe our technologies and conventions represent a significant improvement in the treatment of mild to severe OSA versus other treatments such as continuous positive airway pressure (“CPAP”) or palliative oral appliance therapies. Our alternative treatments are part of The Vivos Method.

See Note 1Item to1. theBusiness accompanyingof financialthis statementsReport for additional background information on our Company and current product and service offerings.

VIP Enrollments (Service Revenue). Enrolling dental practices as VIPs has historically been the first step in our ability to generate new revenue. As part of the VIP enrollment fee, we enter into a service contract with VIPs under which they receive training on the use of the Vivos treatment modalities. VIPs have the ability to start generating revenue for us and themselves after this training. To entice dentists to enroll as VIPs, we have worked with different marketing programs (which we generally call a “discovery track”) with respect to the payment of VIPs enrollment fee, including discounts and payment plans. Once VIPs execute their VIP enrollment agreement, the discovery track allows the VIP 45 to 60 days to obtain financing and pay the enrollment fee. Ongoing support and additional training is provided throughout the year under the services contract, which includes access to our proprietary Airway Intelligence Services, which provides the VIP with resources to help simplify the sleep apnea diagnostic and Vivos treatment planning process.

In addition to enrollment service revenue, we offer additional services, such as our Billing Intelligence Services offering, and MyoSync (formally MyoCorrect ) orofacial myofunctional therapy services, which was introduced in April 2021. Revenue for these services is recognized as our performance obligations are satisfied in accordance with ASC 606.

Because of our 2024 marketing and distribution business model pivot, we have become more focused on engaging in strategic collaborations or acquisitions acquisitions to market the benefits of the Vivos treatment modalities to dentists and other medical providers, including our cooperative relationships with various medical providers to deliver diagnostic and medical consultation services to people across North America who suffer from OSA. As such, while we will continue to recognize some VIP enrollment revenue goingthrough forward,2026, we believe such revenue will become increasing less important to us.immaterial.

Product Sales Revenue. Vivos treatment case starts is paramount, as case starts lead to appliance orders and related revenue. Once a provider provider is fully trained, we encourage them to start cases. However, our experience has been that VIPs typically start slowly as they introduce The Vivos Method into their practices. The slow acceptance rate Vivos appliances with providers lead Vivos to consider other business models including the medical provider-focused alliance marketing and distribution model announced in 2024 to sell additional product. While we work with VIPs to screen their patients for OSA with our SleepImage® home sleep apnea ring test (which we expect expect will encourage Vivos Method case starts), not all VIPs incorporate our The Vivos Method into their practices at the same rate. We believe VIPs can recoup their investment in VIP enrollment with approximately eight Vivos Method case starts, but as noted above, many VIPs start and also maintain their case starts at a significantly slower rate. We presently have a low concentration of active VIPs who regularly start new Vivos Method treatment cases. Approximately 36% of our VIPs initiated a new case as of December 31, 2024. As noted, we believe that reducing our reliance on VIPs and increasing the number of strategic marketing and distribution alliances (or acquiring medical or dental practices) will provide us with a better opportunity to drive appliance sales going forward.

Clinical Trial Work. Our efforts to engage in research to demonstrate the clinical efficacy of our products and obtain additional regulatory clearances for the use of our products is an important aspect of our overall strategy. In this regard, on May 29, 2023, we and Stanford University executed an agreement to commence a sponsored clinical research study to evaluate the efficacy of our FDA-cleared DNA appliance compared to the standard of care, CPAP for treatment of sleep apnea. Our DNA device is currently indicated for the treatment of mild to severe sleep apnea and jaw repositioning in adults (and in the case of severe OSA, along with positive airway pressure and/or myofunctional myofunctional therapy, as needed) and has an FDA clearance intended to reduce nighttime snoring and to treat moderate and severe obstructive sleep sleep apnea in children, 6- 17 years of age who are diagnosed with snoring and/or moderate or severe obstructive sleep apnea and need orthodontic orthodontic treatment. Enrollment of 150 patients with moderate to severe sleep apnea (apnea-hypopnea index score of 15 or greater) will be randomly assigned to either treatment with our FDA-cleared DNA appliance or CPAP. The protocol has been finalized, and enrollment began in 2024. Late 2024, our clinical study conducted in collaboration with Stanford University and evaluating the DNA and CPAP for the treatment of OSA, was placed on hold by Stanford University. The decision to pause the study was made due to low recruitment into the study. The study is still on hold as of 2025.

We are actively working with Stanford University to address the concerns that led to the hold and has continued engaged discussions with the university. While we believe these efforts will facilitate the resumption of the study, there can be no assurance that the hold will be lifted in a timely manner, or at all. Any delay or failure to resolve the issues could impact the development timeline and future prospects for the study. We remain committed to the highest standards of patient safety, scientific integrity, and regulatory compliance and will provide updates as material developments occur. This trial may not meet its designated endpoints, and therefore additional FDA clearances for the DNA device may not be obtained.

Distribution Agreements. During 2023, we entered into distribution collaborations with third parties to expand access of our products to potential patients. We hope that these strategic initiatives will lead to revenue growth opportunities for us in 2024 and beyond, and our ability to capitalize on these initiatives is expected to be a material aspect of our medical provider-focused sales and marketing program going forward.

Also, in October 2023, we announced an exclusive distribution agreement with NOUM DMCC, a Dubai-based company focused on diagnostic testing and treatment product distribution for healthcare providers and hospital networks treating obstructive sleep apnea patients throughout the Middle East-North Africa region. With regulatory approvals pending, there was no revenue from this collaboration in 2024.2024 or 2025.

An additional inflation-related risk is the Federal Reserve’s response, which up to this point has been to raiseslightly decrease interest rates, rates.however, the perceived decrease was lower than what was expected. Such actions have, in times past, created unintended consequences in terms of the impact on housing starts, overall manufacturing, capital markets, and banking. If such disruptions become systemic, as occurred in the recession of 2008, then the impact on our revenue, earnings and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate.

Supply Chain. From time to time, we may experience supply chain challenges due to forces beyond our control. For example, the Suez Canal blockage earlier in 2021 caused some delay in shipments of SleepImage® rings from China. Changes in U.S. or foreign trade policy, including the imposition of new tariffs, increases in existing tariffs or changes in customs classifications, could increase our costs. Overall, however, as our appliances are made in the U.S., we have not experienced significant supply chain issues as a result of COVID-19 or otherwise, although this may change in future periods.

WarMiddle in Ukraine and Middle East Hostilities. In addition, worldwidegeopolitical supplyinstability chainin constraintsthe andMiddle East continues to create uncertainty in global economic conditions and capitalcommercial marketsactivity. uncertainty arising out of Russia’s invasion of UkraineHostilities in Februarythe 2022region, andincluding the attacks by Hamas on Israel in October of2023, 2023Israel’s subsequent military responses, and Israel’s responsesmore recent U.S. and Israeli military actions involving Iran, have disruptedcontributed commercialto heightened regional and capitalglobal tensions. marketsThese anddevelopments, emergedcombined aswith newthe barriersongoing toeffects long-termof economicRussia’s recovery.invasion of Ukraine that began in February 2022, have intensified supply chain constraints, increased commodity price volatility, disrupted international trade flows, creating. If an economic recession recession or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.

PotentialWe Nasdaqhave Delisting.a Ashistory previouslyof reported,challenges weof aremaintaining currentlycompliance with the Nasdaq’s continuing listing requirements. We have been subject to two Nasdaq Stock Market (“Nasdaq”) listing deficiencies, one related to Nasdaq’s $1.00 minimum bid price requirement (the “Minimum Bid Requirement”) and a second related to Nasdaq’s $2,500,000 minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”).Requirement.

On September 21, 2023, we received a written notice from the Nasdaq staff confirming that since, as of that date, we failed to meet the Minimum Bid Requirement, and because as of the period ended June 30, 2023 we also failed the Minimum Stockholders’ Equity Requirement, Nasdaq would commence delisting proceedings against us. As permitted under Nasdaq rules, we appealed the Nasdaq staff’s determination and requested a hearing (the “Hearing”) before a Nasdaq Hearing Panel (the “Hearing Panel”). The Hearing request stayed any delisting or suspension action by the Nasdaq staff pending the issuance of the Hearing’s Panel decision. The Hearing took place on November 9, 2023.

At the Hearing on November 9, 2023, we presented our plan to regain compliance with the minimum stockholders’ equity requirement (the “Equity Rule”),Requirement, which plan includesincluded raising additional equity capital. On November 30, 2023, we received a letter from the Hearings Panel that, subject to certain conditions, the Hearings Panel granted our request to continue to be listed on Nasdaq. These conditions include providing an update as to our plan to regain compliance with the Equity Rule as well as demonstrating compliance by March 19, 2024. On February 23, 2024 we presented our plan of compliance to the Hearings Committee. On May 6, 2024, we received written notice from the Nasdaq staff indicating that the Companywe had regained compliance with the Equity Rule. Requirement.

On May 16, 2024, we received a further written notice from Nasdaq indicating that, as of March 31, 2024, we failed to comply with the Equity Requirement. On June 25, 2024, we reported in a Current Report on Form 8-K that itwe believed itwe had stockholders’ equity of at least $2.5 million as of the date of the filing of such report as a result of our closing of a $7.5 million equity private placement on June 10, 2024.

On July 5, 2024, we were notified that the Panel had granted our request for continued listing on Nasdaq, subject to our filing of the Form 10-Q for the quarter ended June 30, 2024, with the Securities and Exchange Commission by August 15, 2024,Commission, evidencing our compliance with the Equity Requirement. We made such filing in a timely manner.

We are working diligently to ensure our continued compliance with the Equity Requirement, including exploring a potential additional equity capital financing or financings and cost reductions to stay above the minimum threshold of the Equity Requirement. We anticipate that our new medical provider-focused strategic marketing and distribution alliance model will also positively impact our revenue growth and stockholders’ equity in upcoming fiscal quarters. However, there is a risk that we will be unable to raise sufficient capitalcapital, reduce costs sufficiently or generate sufficient revenue or operating results to maintain compliance with the Equity Requirement. If we fail to achieve ongoing compliance and itsour common stock is delisted by Nasdaq, such delisting would likely have a material adverse effect on our stock price, the ability of our stockholders to buy or sell their common stock, our ability to raise capital and on our reputation, all of which could make it significantly more difficult to operate.

Net revenue. We recognize revenue when we satisfy our performance obligations over time as our customers receive the benefit of the the promised goods and services, which generally occurs over a short period of time. Performance obligations with respect to appliance sales are typically satisfied at a point in time by shipping or delivering products to our VIPs or to the sleep clinic, through our new strategic strategic alliance model,model. inIn the case of enrollment or service revenue, upon our satisfaction of performance obligations associated with VIP enrollments. Revenue consists of the gross sales price, net of estimated allowances, discounts, and personal rebates that are accounted for as a reduction from the gross sale price.

Revenue increased approximately $1.2$2.4 million, or 9%,16%, to approximately $15.0$17.5 million for the year ended December 31, 20242025 compared to $13.8$15.0 million million for the year ended December 31, 2023.2024. RevenueThis was due to an increase of approximately $4.8 million in Sleep testing services, and an increase of approximately $2.2 million of revenue generated from Vivos treatment to patients launched at two SCN locations. The increase in revenue during the year ended December 31,202431, 2025 was impactedoffset by the decline in product revenue attributable to a decrease of approximately $1.4 million in appliance sales to VIPs, followed by an increase of approximately $1.6 million in product revenue, coupled with a decrease of approximately $0.4$1.0 million in service revenue. The increase in product revenuetooth is attributable to an increase of approximately $2.1 million in Guide sales to VIPs, followed by a decrease of approximately $0.5 million in C.A.R.E. appliancepositioner sales to VIPs. Additionally, we had a decrease in service revenue of approximately $1.4$2.0 million in our VIP enrollment revenue, and a decrease of approximately $0.3$0.7 million from Myofunctional revenue. This was offset by an increase of approximately $1.3 million in sponsorship, conference and training related revenue.revenue, and a decrease of approximately $0.3 million in Myofunctional therapy and $0.2 million in BIS revenue decreased by $0.1 million to approximately $0.8 million, which was offset by an increase of $0.1 million from sleep testing services to approximately $1.3 million for the year ended December 31, 2024.revenue.

For the year ended December 31, 2024,2025, we sold 16,18225,441 oral appliance arches and guidestooth positioners for a total of approximately $7.9$6.5 million, a 26%18% increase decrease in revenue from the year ended December 31, 2023,2024, when we sold 8,24016,182 oral appliance arches and guidestooth positioners for a total of approximately $6.3 $7.9 million. The increaserevenue decrease is directly attributable to aan 71% decreaseincrease in discounts offered during the same period, with less than $0.2$1.6 million in discounts offered during the year ended December 31, 20242025 when compared to approximately $0.7$0.2 million of discounts offered during the year ended December 31, 2023,2024, coupled with an increase in Guidetooth positioner sales, which area lower revenueprice generatingpoint products product when compared to Vivos appliances.

Cost of sales increased by approximately $0.5$0.9 million, or 9%,15%, to approximately $6.9 million for the year ended December 31, 2025, compared to approximately $6.0 million for the year ended December 31, 2024, compared to approximately $5.5 million for the year ended December 31, 2023.2024. This was primarily due to $1.2approximately $1.1 million in higher costs in directlydiagnostic services related to new sleep center affiliations, and an increase in lab fees from our primary vendors, offset by a decrease of lessapproximately than $0.3$0.5 million related to lower costsadditional staff associated with the ringsleep leasecenter program and a decrease of slightly over $0.3 million in VIP training, and a decrease of approximately $0.1 million for inventory obsolescence expense.affiliations.

For the year ended December 31, 2024,2025, gross profit increased by approximately $0.7$1.5 million or 17% to $9$10.5 million. This increase was attributable to an increase in revenue of approximately $1.2$2.4 millionmillion, offset by an increase in cost of sales of approximately $0.5$0.9 million. Gross margin margin remained constant at 60% for the year ended December 31, 2024,2025, comparedand year ended December 31, 2023.2024.

Sales and marketing expense decreased by $0.7$0.3 million to approximately $1.7$1.4 million for the year ended December 31, 2024,2025, compared to $2.5approximately $1.7 million for the year ended December 31, 2023.2024. This decrease was primarily driven by a $0.4$0.2 million decrease in commissions, as well as a $0.3$0.1 million decrease related to a reduction in website development, materials and product samples as well as print media and marketing supplies, including conventions and tradeshow expenses.

Depreciation and amortization expense was approximately $0.6$1.3 million for the yearsyear ended December 31, 20242025, andcompared 2023.to approximately $0.6 million for the year ended December 31, 2024. Depreciation and amortization remained constant during the periodincreased due to an immaterialincrease amount ofin depreciable assets placedrelated intoto service.the new sleep center asset acquisition and affiliations.

The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. We have incurred losses since inception, including $11.1$21.2 million and $13.6$11.1 million for the years ended December December 31, 20242025 and 2023,2024, respectively, resulting in an accumulated deficit of approximately $104.2$125.4 million as of December 31, 2024.2025.

We have implemented cost savings measures that lead tohave reduced impact to cash used in operations. However, sales did not grow in the year ended December 31, 20232024 or in 20242025 as anticipated, as our product offerings and distribution strategies continue to be improved and refined. As such, we have raised equity capital inthroughout late 20232024 and throughout 20242025 and will be required to obtain additional financing to satisfy our cash needs and bolster our stockholders’ equity for Nasdaq compliance purposes, as management continues to work towards increasing revenue to achieve cash flow positive operations in the foreseeable future.

Until we aattain state ofpositive cash flowflow, positivity is reached,our management is reviewing all options to obtain additional financing to fund our operations. ThisWe financingfinanced the isSCN expected to come primarilyacquisition from the issuance of senior secured debt and equity securities securities. As reflected in orderour increase in revenue for the year ended December 31, 2025, we expect the SCN Acquisition will ultimately allow our company to sustain operations until we can achieve profitability and positive cash flows,flows; ifhowever, ever.there is a risk this may not occur. We expectoriginally thatexpected ourthe new salesStrategic andAlliance marketingAgreement alliance(“SAA”) with Rebis (andHealth similarentered into alliancesin orJune acquisitions of sleep centers or other providers we may undertake) have the potential2024 to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, theredue to ongoing delays at Rebis Health that are beyond our control, we are currently re-evaluating expectations under this SAA. As such, we seek to acquire other sleep centers in transactions similar to the SCN Acquisition or enter into other strategic alliances with improved terms. There can be no assurances that this new model will have effects we anticipate, and our relatively low cash on hand could lead us to again requiring additional funding. There is a risk that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or thatthe ifSAA ouror newsimilar modelalliances doesor acquisitions do not result in the patient volumevolume, appliance sales and financial results within the expected timelines,timeframes we expect, we may also be required to delay, significantly modify or terminate some or all of our operations, all of which could have a material adverse effect on us and our stockholders.

For the year ended December 31, 2024,2025, net cash used in investing activities consisted of capital expenditures of approximately $5.2 million for softwarethe SCN Acquisition in June 2025, assets placed in service in 2025 related to the integration of $0.6SCN and capital expenditures of approximately $2.3 million related to the development of software for internal use,use expectedthat towas bealso placed in service in the first quarter of the fiscal year ended December 31, 2025. This compares to net cash used in investing activities for the year ended December 31, 2023 2024 of $0.9$0.6 million due to capital expenditures for internallythe developed software, as well as a purchasedevelopment of asoftware patentfor portfoliointernal in February 2023.use.

Our accounting policies are more fully described in Note 1 of the Consolidated Financial Statements. As disclosed in Note 1, 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,Alliance, LLC, a Colorado limited liability companycompany, Vivos Providers Network, LLC, a Colorado limited liability company, Airway Integrated Management Company, LLC and Airway Intelligence Center, LLC. Additionally, Sleep Center of Nevada, Rachakonda & Associates, PLLC, Nevada Sleep and Airway, Patterson & Associates, PLLC, AIM – Detroit, LLC, Sleep Medicine of Detroit, P.C., and Sleep Dentistry of Detroit, P.C.), are not wholly owned but are controlled by Vivos and 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.

WeEffective areJanuary 1, 2026, the Company is no longer 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, we 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 tomust 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..

We generate revenue from the sale of products and services. AHistorically, a significant majority of our revenues are generated from enrolling dentists 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 fiscal quarters prior to second quarter of 2023, and 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 we expect to be entitled to in exchange for those products and services.

We review itsour 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 $23,200, 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. we recognize this revenue as performance obligations are met. Accordingly, the contract liability for unearned revenue is a significant liability for us. Provisions for discounts are provided in the same period that the related revenue from the products and/or services is recorded.

Potential Nasdaq Delisting. Given that our stockholders’ equity at December 31, 2025 and MarchJune 31,30, 2026 was less than $2.5 million, we are presently not in compliance with the Nasdaq Stock Market’s (“Nasdaq”) minimum stockholders’ equity requirement (the “Equity Requirement”). We are seeking to regain compliance by raising new funding in the form of equity and reducing costs. However, we will be faced with delisting proceedings which will distract management and cost resources to remedy.

We have taken affirmative steps since December 31, 2025 to remedy the Minimum Stockholders’ Equity Requirement. Specifically, as previously reported, the Company engaged in two equity financing transactions during the first quarter ended March 31, 2026 for aggregate gross proceeds of $6.8 million: a $4.6 million warrant exercise inducement transaction and $2.25 million private placement with an existing investor. The Company also engaged in a $2 million private placement in the second quarter ended June 30, 2026 with one new and one existing investor. While these equity financings do not in and of themselves cure the Minimum Stockholders’ Equity Requirement deficiency, they demonstrate our ability to raise funding to bolster its stockholders’ equity.

In accordance with the Nasdaq Listing Rules, we havetimely 45 calendar days, or until June 1, 2026, to submitsubmitted a plan to regain compliance with the Stockholders’ Equity Requirement, which the Company plans to timely submit Requirement for the Staff’s consideration. If the plan is accepted, the Staff may grant us an extension period of up to 180 calendar days from the date of the deficiency notice (or through October 14, 2026) to regain compliance with the Minimum Stockholders’ Equity Requirement.

Other income. Other income relates to the excess warrant fair value and change in fair value of warrant liability.liability and contingent consideration for the purchase of SCN.

Comparison of the three and six months ended MarchJune 31,30, 2026 and 2025

Our consolidated statements of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (which includes incremental revenue recognized from the operations of SCN since June 10, 2025) are presented below (dollars in thousands):

For the three months ended March 31,June 30, 2026, we sold 5,3045,180 oral appliance arches and tooth positioners for a total of approximately $1.4 million, a 21%28% decrease in revenue revenue from the three months ended MarchJune 31,30, 2025, when we sold 3,7354,116 oral appliance arches and tooth positioners for a total of approximately $1.8 $1.9 million. The revenue decrease is directly attributable toa anhigher increasevolume inmix discountsof offeredpreformed duringappliance thesales, samewhich period, with $0.5 million in discounts offered during the three months ended March 31, 2026 compared to approximately $0.2 million offered during the three months ended March 31, 2025, coupled with an increase in tooth positioner sales at aare lower pricerevenue pointgenerating productproducts when compared to Vivos C.A.R.E. appliances.

Cost of sales increased by$0.5 approximately $0.6 million,million or 38%,29% to approximately $2.1$2.2 million for the three months ended MarchJune 31,30, 2026, compared to approximately $1.5$1.7 million for the three months ended MarchJune 31,30, 2025. This was primarily dueattributable to approximatelyhigher $0.7 million in higher costs related to additional staff associated with thediagnostic sleep center affiliationsservices and anpatient therapy, increaseincluding the addition of approximatelystaff $0.1at millionthe inVivos diagnostic servicestreatment related to new sleep center affiliations.centers.

For the three months ended MarchJune 31,30, 2026, gross profit increased by approximately $1.5$0.8 million or 103% to $3.1$3.0 million. This increase was attributable attributable to anthe increase in revenue of approximately $2.1$1.3 million,million offset by anand increase in cost of sales of approximately $0.6$0.5 million. Gross margin increased to 60%57% for the three months ended June 30, 2026, compared to 55% for the three months ended MarchJune 31,30, 2026,2025 when compareddue to 50% for the threeincrease monthsin endedhigher Marchmargins on 31,Service 2025.Revenue.

General and Administrativeadministrative expenses increased $4.1$0.7 million or 11% to approximately $9.0$7.1 million for the three months ended MarchJune 31,30, 2026, as compared to approximately $4.9$6.4 million for the three months ended MarchJune 31,30, 2025. ThisThe primary cause of this increase was primarily due to approximately $1.5$0.6 million in costs associated with running SCN’s operations. In addition, approximately $0.9 million related to professional fees, approximately $1.5 million associated with salaries and wages forrelated Vivosto personnelacquiring SCN and relatedopening Vivos treatment centerscenters, and infrastructureapproximately costs$0.3 million in higher rent expense, offset by a reduction of approximately $0.2 million whenin comparedbad todebt theand three months ended March 31, 2025.allowances.

Sales and marketing expenseexpenses decreased by $0.1 million to approximately $0.2 million for the three months ended MarchJune 31,30, 2026, as compared to approximately $0.3 million for the three months ended MarchJune 31,30, 2025.2025, Thiswhich decreaseis was primarily driven by a $0.1 million decreaseattributable in mediasignificant marketing andpart video production expenses as a result ofto our strategic pivot which allows us to rely less heavilyfocus on salesreducing and marketing compared with the legacy VIP model.costs.

DepreciationSales and amortizationmarketing expenseexpenses wasdecreased approximatelyby $0.5$0.2 million to $0.4 million for the threesix months ended MarchJune 31,30, 2026, compared to approximately $0.2$0.6 million for for the threesix months ended MarchJune 31,30, 2025. DepreciationThis decrease was primarily driven by our decrease in sales and amortizationmarketing increasedcampaigns, duelower commissions paid to anour increaseemployees for digital media services and reduction in depreciableuse assetsof relatedmarketing to the new sleep center asset acquisition and affiliations.supplies.

The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. We have incurred losses since inception, including $7.7 million$5.5 and $3.9$5.0 million for the three months ended MarchJune 30, 31,2026 and 2025, respectively, and $13.3 and $8.9 million for the six months ended June 30, 2026 and 2025, respectively, resulting in an accumulated deficit of approximately $133$138.5 million as of MarchJune 31,30, 2026.

Net cash used in operating activities amounted to approximately $6.0$9.2 and $3.8$7.3 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. respectively. As of MarchJune 31,30, 2026, we had total liabilities of approximately $26.3$28.1 million as compared with $26.7 million as of December 31, 2025.million.

As of MarchJune 31,30, 2026, we had approximately $2.1$1.8 million in cash and cash equivalents, which will not be sufficient to fund operations and strategic objectives over the next twelve months from the date of the issuance of these financial statements. As of the date of this Report, we have both near and long term cash requirements to operate our business, and withoutWithout additional financing, these factors raise substantial doubt regarding ourthe Company’s ability to continue as a going concern.

Until we attainhave attained positive cash flow, our management is reviewing all options to obtain additional financing to fund our operations. We financed the SCN acquisition from the issuance of senior secured debt and equity securities. As reflected in our increase in revenue for the three months ended March 31, 2026, weWe expect the SCN acquisition will ultimately allow our company to achieve positive cash flows; however, there is a risk this may not occur. We originally expected the Strategic Alliance Agreement (“SAA”) with Rebis Health entered into in June 2024 to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead. However, due to ongoing delays at Rebis Health that are beyond our control, we are currently re-evaluating and lowering our revenue expectations under the SAA. As such, we seek to acquire other sleep centers in transactions similar to the SCN Acquisitionacquisition or enter into other strategic alliances with improved terms.alliances. There can be no assurances that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or ifthe SAA or similar alliances or acquisitions do not result in the patient volume, appliance sales and financial results within the timeframes we expect, we may be required to delay, significantly modify or terminate some or all of our operations, all of which could have a material adverse effect on us and our stockholders.

The following table presents a summary of our cash flow for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Net cash used in operating activities of approximately $6.0$9.2 million for the threesix months ended MarchJune 31,30, 2026 which represents an increase of approximately $2.4 $1.9 million compared to net cash used in operating activities of approximately $3.8$7.3 million for the threesix months ended March 31,June 30, 2025. This increase is due primarily to a $4.4 million increase in net loss for the six months ended June 30, 2026, a decrease in other liabilities of $0.6 million, a decrease in stock-based compensation expense of approximately $0.4 million, offset by an increase of approximately $0.7 million in accounts payable, an increase of approximately $3.9$1.2 million in ouraccrued netexpenses, loss,an includingincrease in depreciation and amortization of $0.5 million, an increase of $0.4 million in fair valueaccounts ofreceivable Common Stock issued for services, offset byand an increase of approximately $0.6 million inrelated accruedto expenses,the an increasefair of approximately $0.4 million in contract liabilities, an increasevalue of $0.3common millionstock issued for depreciation and amortization, and an increase of approximately $0.2 million in accounts payable.services.

For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities consisted of capitalapproximately expenditures$0.4 million related to the acquisition of lessproperty, thanplant $0.1and million for leasehold improvements.equipment. This compares to net cash used in investing activities for the threesix months ended MarchJune 31,30, 2025 of $0.1approximately $5.1 million duefor topayment of a business acquisition and capital expenditures for the development of software$0.9 formillion internalrelated use.to internally developed software.

Net cash provided by financing activities of $6.1$9.3 million for the threesix months ended MarchJune 31,30, 2026, is attributable to proceeds of approximately $4.6 million from the exercise of warrants, approximately $1.4$3.0 million from the issuance of debt,debt and $1.0 million for the issuance of preferred stock, offset by a decrease of approximately $6.6 million of proceeds from debt and a decrease of approximately $0.6 million from the issuance of warrants, and approximately $0.3 million from the issuance of common stock, net of approximately $0.4 million repayment of debt and $0.3 million of professional fees and other issuance costs associated with equity and debt financings. This compares to no cash provided by investing financing for the three months ended March 31, 2025.warrants.

Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year year ended December 31, 2025. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting accounting policies and estimates as of and for the three and six months ended MarchJune 31,30, 2026.