Vivos Therapeutics(VVOS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents Vivos Therapeutics, Inc.'s unaudited condensed consolidated financial statements for June 30, 2025, and the three and six-month periods then ended, including balance sheets, statements of operations, statements of stockholders' equity, statements of cash flows, and detailed notes on accounting policies, the SCN acquisition, and liquidity issues Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $26.0 million from $15.3 million at year-end 2024, primarily due to the SCN acquisition, while total liabilities rose to $21.5 million from $7.3 million, mainly from new debt, and stockholders' equity decreased to $4.6 million from $8.0 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,402 | $6,260 | | Goodwill | $8,450 | $2,843 | | Total assets | $26,033 | $15,284 | | Liabilities & Equity | | | | Total current liabilities | $6,426 | $4,978 | | Debt, net of current portion | $7,760 | $- | | Total liabilities | $21,450 | $7,330 | | Total stockholders' equity | $4,583 | $7,954 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, total revenue slightly decreased to $3.8 million from $4.1 million year-over-year, while the operating loss significantly widened to $4.9 million from $1.9 million, primarily due to a $2.3 million increase in general and administrative expenses, resulting in a net loss of $5.0 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $3,820 | $4,054 | $6,835 | $7,473 | | Gross Profit | $2,110 | $2,651 | $3,616 | $4,588 | | Operating Loss | $(4,865) | $(1,936) | $(8,780) | $(5,719) | | Net Loss | $(5,013) | $(1,930) | $(8,877) | $(5,692) | | Net Loss Per Share | $(0.55) | $(0.60) | $(1.00) | $(2.06) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities increased to $7.3 million, net cash used in investing activities was $6.0 million for the SCN acquisition, and net cash provided by financing activities was $11.5 million, resulting in a net decrease in cash of $1.9 million and an ending cash balance of $4.4 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,290) | $(5,564) | | Net cash used in investing activities | $(6,028) | $(211) | | Net cash provided by financing activities | $11,460 | $11,035 | | Net (decrease) increase in cash | $(1,858) | $5,260 | | Cash and cash equivalents at end of period | $4,402 | $6,903 | Notes to the Condensed Consolidated Financial Statements These notes detail the company's strategic pivot to an acquisition and alliance model, exemplified by the June 2025 acquisition of The Sleep Center of Nevada (SCN), and address significant accounting policies, revenue recognition changes, new debt structure, and a going concern warning due to recurring losses and negative cash flow - The company is pivoting its business strategy away from its legacy model of enrolling dentists (VIPs) and towards a new model focused on contractual alliances with and acquisitions of sleep centers, intended to align revenue generation more directly with appliance sales[32][35] - On June 10, 2025, the company acquired the operating assets of The Sleep Center of Nevada (SCN) for total consideration of $8.7 million, consisting of $6.0 million in cash, $1.3 million in stock, and $1.4 million in contingent consideration, adding $5.6 million in goodwill[27][86][87] - The company has incurred losses since inception, with a net loss of $8.9 million for the first six months of 2025 and an accumulated deficit of $113.1 million, leading management to conclude there is substantial doubt about the company's ability to continue as a going concern without additional financing[78][80] - To fund the SCN acquisition, the company issued a senior secured term note for $8.2 million with a 9% annual interest rate and an 18-month maturity, and also raised $3.65 million in a private placement of equity instruments[85][101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic pivot from its legacy VIP dentist enrollment model to a new sales model focused on acquiring and forming alliances with sleep centers, exemplified by the recent acquisition of The Sleep Center of Nevada (SCN), covering the financial impact of this transition, including decreased service revenue, increased G&A expenses, and liquidity challenges that raise substantial doubt about its going concern ability - The company has pivoted its business model away from enrolling individual dentists (VIPs) towards acquiring or forming alliances with sleep centers to drive appliance sales more directly[164][165] - A key milestone in the new strategy was the June 10, 2025 acquisition of The Sleep Center of Nevada (SCN), a seven-location operator, funded through an $8.2 million senior secured note and a $3.7 million private placement[159][160] - The company faces significant liquidity challenges, with recurring losses and negative operating cash flow, leading management to state there is substantial doubt about the company's ability to continue as a going concern without additional financing[226][229] Results of Operations For Q2 2025, revenue decreased 6% to $3.8 million year-over-year, as a $1.0 million decline in legacy VIP enrollment revenue was partially offset by new revenue from the SCN acquisition, while gross margin fell from 65% to 55%, and general and administrative expenses surged 55% to $6.4 million, primarily due to $1.8 million in SCN acquisition costs, leading to a significant increase in the quarterly net loss to $5.0 million Financial Performance Comparison (in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3,820 | $4,054 | $(234) | | Gross Profit | $2,110 | $2,651 | $(541) | | Gross Profit % | 55% | 65% | -10% | | General and administrative | $6,409 | $4,122 | $2,287 | | Operating Loss | $(4,865) | $(1,936) | $(2,929) | | Net Loss | $(5,013) | $(1,930) | $(3,083) | - The decrease in service revenue was driven by a $1.0 million decline in VIP enrollment revenue, reflecting the strategic pivot, partially offset by a $0.5 million increase in sleep testing services, primarily from the newly acquired SCN[208] - The $2.3 million increase in G&A expenses for Q2 2025 was primarily caused by $1.8 million in costs related to acquiring and integrating SCN, including professional fees, salaries, and infrastructure costs[213] Liquidity and Capital Resources The company faces significant liquidity constraints, with an accumulated deficit of $113.1 million and net cash used in operations of $7.3 million for the first six months of 2025, and as of June 30, 2025, the company had $4.4 million in cash, which is insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern, necessitating reliance on debt and equity financing for operations and the SCN acquisition - As of June 30, 2025, the company had $4.4 million in cash, which is not sufficient to fund operations and strategic objectives for the next twelve months[229] - The company has a history of losses, including a net loss of $8.9 million for the first six months of 2025, and an accumulated deficit of $113.1 million[226] - Net cash used in operating activities increased to $7.3 million for the first half of 2025, up from $5.6 million in the prior-year period[227][233] - The company financed the SCN acquisition and its operations through the issuance of senior secured debt and equity securities, and management is reviewing all options for additional financing[231] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not required as the registrant is a smaller reporting company[238] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, excluding the internal controls of The Sleep Center of Nevada (SCN), acquired on June 10, 2025, which the company is currently integrating into its framework - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[239] - The evaluation of disclosure controls excluded The Sleep Center of Nevada (SCN), which was acquired on June 10, 2025, and represented approximately 33% of consolidated total assets as of June 30, 2025[240] - The company is in the process of integrating SCN's operations and controls, with completion expected within one year of the acquisition date[242] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ongoing litigation with Ortho-Tain, Inc., with Vivos initiating a lawsuit in Colorado for alleged false and defamatory statements, and Ortho-Tain filing a countersuit in Illinois alleging Lanham Act violations, both cases proceeding through various motions and discovery phases - Vivos filed a suit against Ortho-Tain, Inc. in Colorado, alleging false, threatening, and defamatory statements that interfered with a business relationship[245] - Ortho-Tain filed a countersuit in Illinois against Vivos, its CEO, and others, alleging violations of the Lanham Act and civil conspiracy related to a presentation at a Vivos-sponsored event[247] - The Illinois case was initially stayed pending the outcome of the Colorado case, but the stay was lifted in March 2023, and both cases are currently active with ongoing discovery and legal motions[249][251] Item 1A. Risk Factors This section details updated risk factors associated with the company's new business model and the acquisition of The Sleep Center of Nevada (SCN), including the unproven nature of the new sales and distribution model, substantial indebtedness incurred for the SCN acquisition, potential difficulties in integrating SCN's operations, and legal risks related to healthcare regulations such as the corporate practice of medicine and fee-splitting laws - The company's new sales, marketing, and distribution model, centered on acquiring sleep centers like SCN, is unproven and may not produce the anticipated benefits, making future prospects difficult to evaluate[253][254] - The company incurred substantial debt ($8.25 million principal) to finance the SCN acquisition, and servicing this debt could adversely affect financial condition, with no guarantee that cash flow will be sufficient to meet debt obligations[258][259] - Integrating SCN's operations may be more difficult, costly, or time-consuming than expected, potentially disrupting business and relationships with patients and employees[260] - Contractual arrangements with physicians at SCN may be found to violate state laws prohibiting the corporate practice of medicine or fee-splitting, which could require restructuring and result in penalties or loss of revenue[261] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable - Not applicable[273] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[274] Item 6. Exhibits, Financial Statement Schedules This section lists the documents filed as exhibits to the Quarterly Report on Form 10-Q, including certifications from the CEO and CFO and Inline XBRL data files - The exhibits filed with this report include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as Inline XBRL documents[277][278]