Vivos Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are a revenue stage medical technology 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 what we call The Vivos Method.

The Vivos Method is an advanced therapeutic protocol, which often combines the use of customized oral appliance specifications and proprietary clinical treatments which we developed and is prescribed by specially trained dentists in cooperation with their medical colleagues. Published studies have shown that using our customized appliances and clinical treatments led to significantly lower Apnea Hypopnea Index scores and have improved other conditions associated with OSA. Approximately 60,000 patients have been treated to date worldwide with our entire current suite of products by more than 2,000 trained dentists.

In June 2024, as our initial entry into our new sales, marketing and distribution model, we entered into our first contractual alliance with Rebis Health, a sleep center operator in Colorado. Revenues from this arrangement have not developed as we had expected for many reasons beyond our control, but we learned important lessons which have led to changes to this model.

In an important milestone in our business model pivot we undertook during 2024 and 2025, on June 10, 2025, we acquired the net operating assets of R.D. Prabhu-Lata K. Shete MDs, LTD., a Nevada professional corporation d/b/a The Sleep Center of Nevada (“SCN”) pursuant to an Asset Purchase Agreement dated April 15, 2025 (the “SCN Purchase Agreement”) whereby we agreed to purchase the net operating assets and liabilities related to SCN’s sleep testing, diagnostics, and treatment centers (the “Acquisition”) from SCN’s shareholders Prabhu Rachakonda, M.D. (“Dr. Prabhu”) and Lata K. Shete, M.D.

With seven operating locations, two of which are currently onboarded to provide Vivos diagnostic and treatment services, SCN delivers and promotes sleep wellness and health through its proprietary, non-invasive treatments for OSA and is the largest operator of medical sleep centers in the State of Nevada. The Acquisition represents our first major acquisition of a sleep testing center and associated medical sleep practice. We funded the consideration for the Acquisition at closing by issuing a senior, non-convertible, secured term note to Streeterville Capital, LLC (the “Lender”) in the principal amount of $8.3 million. We also entered into a securities purchase agreement with V-Co Investors 2 LLC, a Wyoming limited liability company and affiliate of an existing significant investor in our company (“V-Co 2”), for a private placement of common stock and warrants in consideration for total gross proceeds of $3.7 million to support ourselves in connection with the Acquisition and for general working capital purposes. Please refer to “Material Items, Trends and Risks Impacting Our Business - Pivot in Our Sales, Marketing and Distribution Model and Decreased Emphasis on VIP Enrollments” and “Material Items, Trends and Risks Impacting Our Business – SCN Integration Update” below for a further discussion of the Acquisition and our progress on integrating SCN into our business.

Total consideration for SCN equaled to a sum of $8.7 million consisting of $6.0 million in cash consideration, 607,287 shares of Vivos common stock with a fair value of $1.3 million, and contingent “earn out” consideration with a fair value of $1.4 million payable upon the achievement of a financial milestone as specified in the SCN Purchase Agreement.

See Note 1 to the accompanying financial statements for additional background information on our company and our legacy VIP and current alliance/acquisition sales, marketing and distribution models.

Material Items, Trends and Risks Impacting Our Business

We believe that the following items and trends may be useful in better understanding our results of operations.

Pivot in Our Sales, Marketing and Distribution Model and Decreased Emphasis on VIP Enrollments. Enrolling dental practices as VIPs has historically been the first step in our ability to generate new revenue. However, as a result of our strategic pivot away from growing our VIP model and toward contractual alliances with, or the acquisition and operation of, medical and dental sleep medicine centers, we have reduced our sales personnel in connection with our VIP business model and generally ceased recruitment of new VIP dentists. As a result, revenue from VIP enrollments has declined substantially, although we will continue to recognize some VIP enrollment revenue going forward in accordance with ASC 606. VIP enrollment revenue is expected to cease by the end of 2026. While we will continue to provide technical and product support to our existing VIP customer base, we are now fully engaged in maximizing the SCN opportunity through refocused training facilities, programs and personnel aimed at supporting the dentists, staff members, nurse practitioners, physician assistants, and medical doctors who work at our Sleep and Airway Medicine Centers as part of our new strategic model.

As part of our pivot to the new strategic alliance and acquisition model, on April 15, 2025, we entered into the SCN Purchase Agreement with the Seller, pursuant to which we agreed to purchase, among other things, the operating assets related to SCN’s sleep testing, diagnostics, and treatment centers. By operating Sleep and Airway Medicine Centers (as we do through SCN), we generate product revenue though the sale of our appliances and oral guides as well as revenue from providing services to patients under the administration arrangement described below. Because of our acquisition of SCN, we generated service revenue which we call “treatment center” revenue, consisting of $1.3 million and $1.5 million for the three and nine months ended September 30, 2025 respectively. Treatment center revenue is expected to entirely replace our reliance on VIP subscription revenue, and we expect to grow treatment center revenue over time as more patients are provided services through our Sleep and Airway Medicine Centers. See Note 4 to the accompanying unaudited financial statements for further information on the composition of our revenues.

The below provides a summary of the Acquisition and the contractual arrangements we had entered with SCN in connection with the Acquisition:

On June 10, 2025, we completed the Acquisition, and we acquired all of the operating assets of the Seller in consideration for a (i) cash payment equal to $6.0 million, (ii) 607,287 shares of restricted common stock our company equal to $1.5 million based on the volume-weighted average price (“VWAP”) of our common stock for the 30 days immediately preceding the Acquisition and (iii) the assumption of certain specific trade accounts payable and liabilities related to specific SCN contracts assigned to us as part of the Acquisition. Pending the achievement of an agreed upon financial milestone, we will pay to Dr. Prabhu a contingent “earn out” consideration in the form of Vivos restricted common stock equal to $1.5 million based on the VWAP of the Vivos common stock for the 30 days following the date on which such financial milestone is achieved, as determined in accordance with U.S. generally accepted accounting principles.

As of June 10, 2025, but effective as of June 2, 2025, pursuant to the SCN Purchase Agreement, our wholly-owned subsidiary AIM, entered into Practice Administration Agreements (“PAAs”) respectively with SCN (the “SCN PAA”) and the Sleep Center of Nevada, Rachakonda & Associates, PLLC, a newly formed Nevada professional limited liability company owned and controlled by Dr. Prabhu (“SCN PLLC” and the practice management agreement with SCN PLLC, the “SCN PLLC PAA”). SCN PLLC was formed for the purpose of integrating the medical practices of SCN with the Company in connection with the Acquisition. The principal purpose of the PAAs is to allow AIM to manage the SCN practice in compliance with applicable federal and Nevada laws, rules and regulations relating to the corporate practice of medicine (the “CPM Laws”). AIM intends to conduct an orderly transition of the operation of the SCN practice to SCN PLLC.

Pursuant to the PAAs, AIM provides management, administrative, and non-clinical services to SCN and SCN PLLC, in consideration for monthly administration fees (the “Administration Fees”) of $0.2 million from SCN and $0.1 million from SCN PLLC. The Administration Fees may be adjusted by AIM prospectively after quarterly reviews. Both the PAAs have a term of fifteen years and subject both SCN and SCN PLLC, along with Dr. Prabhu, to an exclusivity provision during the term and for a period of one-year after termination, whereby neither SCN nor SCN PLLC shall operate, participate in, or be connected with any other entity providing similar services within Nevada, except for operating its own medical practice without a third-party provider providing covered programs. In connection with the PAAs, Dr. Prabhu, as an equity owner of and on behalf of SCN and SCN PLLC, has entered into management and succession agreements with AIM for continued operation of their respective medical practices upon occurrence of certain events as described therein and for Dr. Prabhu to comply with the CPM Laws.

Pursuant to the SCN Purchase Agreement, SCN had entered into a physician employment agreement (the “Physician Employment Agreement”) with Dr. Prabhu. Under the Physician Employment Agreement, Dr. Prabhu shall perform his duties as a physician in SCN (or SCN affiliated companies) and comply with all CPM Laws. The Physician Employment Agreement provides an annual compensation of $400,000 and bonus incentives, payable in cash, should SCN achieve certain annual revenue targets in a calendar year. The Physician Employment Agreement also affords Dr. Prabhu a board observation right, whereby Dr. Prabhu is entitled to receive advanced notices and attend our board of directors meetings.

Below is a summary of financing arrangements we entered into to fund the Acquisition and our working capital:

Senior Secured Loan. On June 9, 2025, concurrently with the Acquisition, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (“Lender”), pursuant to which we issued and sold to Lender a Secured Promissory Note (the “Note”) in the original principal amount of $8.3 million (the “Principal Amount”, and the financing as described herein, the “Note Financing”). The Principal Amount includes an original issue discount of $0.7 million. We also agreed to pay $50 thousand to the Lender to cover its legal fees, accounting costs, due diligence, monitoring, and other transaction costs, each of which was added to the Principal Amount, resulting in a purchase price of for the Note and gross proceeds to the Company of $7.5 million received by the Company. The Note is not convertible into shares of Common Stock or otherwise.

The Note accrues interest at a rate of nine percent (9%) per annum and has a maturity date of eighteen (18) months from the issuance of the Note, unless earlier prepaid, redeemed or accelerated in accordance with its terms prior to such date. We used the net proceeds from the Note Financing for funding the cash portion of the Acquisition purchase price and to support ourselves in connection with the Acquisition. No placement agent was used in connection with the Note Financing.

The Note is secured by all of the tangible and intangible assets of AIM pursuant to that certain Security Agreement, dated June 9, 2025, between AIM and the Lender (the “Security Agreement”). We have also pledged the entirety of AIM’s membership interests to the Lender as collateral for the Loan pursuant to that certain Pledge Agreement dated June 9, 2025, between us and the Lender (“Pledge Agreement”) and caused AIM to enter into the Guaranty Agreement, dated June 9, 2025, in favor of the Lender (“Guaranty Agreement”) to respectively secure our performance and provide a guarantee of our obligations to the Lender under the Note and the other transaction documents.

Commencing six (6) months after the date of issuance of the Note and at any time thereafter until the Note is paid in full, the Lender will have the right to redeem up to $0.6 million of the Principal Amount under the Note per calendar month. We must pay the redeemed amount in cash within three (3) trading days of receiving a redemption notice. We may prepay all or any portion of the outstanding balance of the Note. If we elect to prepay the Note in part within one hundred twenty (120) days from the issuance of Note, we will be required to pay to the Lender an amount in cash equal to one hundred and seven percent (107%) of the portion (the “Prepayment Premium”) of the outstanding balance we elect to prepay. Notwithstanding the foregoing, the Prepayment Premium shall not apply to any outstanding balance of the Note that we elect to prepay on or after the one hundred twenty (120) days after the issuance of the Note.

Additionally, since the Note remained outstanding on the one hundred twenty (120) days from the anniversary of the issuance, in October 2025 we incurred a one-time monitoring fee equal to $1,495,000, which is the difference between (i) the outstanding balance of the Note divided by 0.85 (as minuend), and (ii) the outstanding balance of the Note (as subtrahend), which fee was added to the Principal Amount.

The Note provides for customary events of default (each as defined in the Note, an “Event of Default”), including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants as specified in the Note, failure to obtain prior written consent from the Lender on a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company) undertaken by us, and the occurrence of a bankruptcy, insolvency or similar event affecting us. Upon the occurrence of certain Events of Default related to the occurrence of a bankruptcy, insolvency or similar event affecting us, the outstanding Principal Amount of the Note will become automatically due and payable. Additionally, upon the occurrence of any Events of Default, interest shall begin accruing on the outstanding balance of the Note from the date of the Event of Default equal to the lesser of twenty-two percent (22%) per annum and the maximum rate allowable under law.

Private Placement Financing. On June 9, 2025, in connection with the Acquisition, we entered into a Securities Purchase Agreement (the “PIPE SPA”) with V-Co Investors 2 LLC, a Wyoming limited liability company (“V-Co 2”). V-Co 2 is an affiliate of New Seneca Partners Inc., a Michigan corporation (“Seneca”), a leading independent private equity firm and an existing significant investor in our company.

Pursuant to the PIPE SPA, we sold to V-Co 2 in a private placement offering (the “PIPE Offering”): (i) 828,000 shares (the “PIPE Shares”) of our common stock, (ii) a pre-funded warrant to purchase 725,258 shares of our common stock (the “Pre-Funded Warrant”, with the shares of common stock underlying the Pre-Funded Warrant being referred to as the “PFW Shares”), and (iii) a Common Stock Purchase Warrant to purchase up to 2,329,886 shares of our common stock (the “Common Stock Purchase Warrant, and together with the Pre-Funded Warrant, the “Warrants”, and with the shares of Common Stock underlying the Common Stock Purchase Warrant being referred to as the “Warrant Shares”).

V-Co 2 paid a purchase price of $2.42 for each PIPE Share and Pre-Funded Warrant Share and associated Common Stock Purchase Warrant, with such price being established for purposes of compliance with the listing rules of the Nasdaq Stock Market LLC. The PIPE Offering closed on June 9, 2025. We received $2.7 million in cash proceeds upon the closing of the PIPE Offering. Additionally, the $1.1 million bridge note entered into by the Company and V-Co 2 on May 20, 2025, the terms of which were previously reported on Current Report on Form 8-K filed on May 23, 2025, automatically converted into the PIPE Offering, for total gross proceeds of $3.7 million upon conversion of the bridge note. The gross proceeds exclude an original issue discount of $0.1 million paid by us in connection with issuing the bridge note. We are using the net proceeds from the PIPE Offering to support the integration of SCN into our business and for general working capital purposes. No placement agent was used in connection with the PIPE Offering.

The Common Stock Purchase Warrant has a term ending on or before June 9, 2029, an exercise price of $2.23 per share and became exercisable immediately as of the date of issuance. The Pre-Funded Warrant has a term ending on the complete exercise of the Pre-Funded Warrant, an exercise price of $0.0001 per share and became exercisable immediately as of the date of issuance. The Warrants also contain customary stock-based (but not price-based) anti-dilution protection as well as beneficial ownership limitations preventing Seneca or its affiliates from exercising Warrants if such exercise would result in Seneca or its affiliates from owning in excess of 19.99% of our then outstanding common stock.

The terms of the PIPE SPA requires us to file a registration statement on Form S-3 or other appropriate form (the “Resale Registration Statement”) registering the PIPE Shares, the PFW Shares and the Warrant Shares (collectively, the “Registerable Securities”) for resale no later than 45 days of the closing of the PIPE Offering and to use commercially reasonable best efforts to cause the Resale Registration Statement to be effective within 90 days of the closing of the PIPE Offering. Subsequently, on July 24, 2025, we and V-Co 2 agreed to extend the respective date for which we file the registration statement and cause such registration statement to be declared effective by 30 days pursuant to an amendment to the June 2025 PIPE SPA. As of the date of this Report, we have yet to file the Resale Registration Statement, and V-Co 2 has not required us to. We must also use our commercially reasonable efforts to keep the Resale Registration Statement continuously effective (including by filing a post-effective amendment to the Resale Registration Statement or a new registration statement if the Resale Registration Statement expires) for a period of three (3) years after the date of effectiveness of the Resale Registration Statement or for such shorter period as such securities no longer constitute Registrable Securities, subject to certain limitations specified in the PIPE SPA. The PIPE SPA further provides that we shall pay V-Co 2 in the amount equal to $50,000 for the fees and expenses of V-Co 2’s counsel incurred in connection with the PIPE Offering. The PIPE SPA also includes standard representations, warranties, indemnifications, and covenants of the Company and V-Co 2.

SCN Integration Update. Our operational planning for the integration of SCN began in April 2025, when we signed the definitive agreement to purchase SCN. We believe these two months of advance planning has benefited the process of integrating SCN into our business, as our operations team has been able to execute our plan on schedule and under budget with respect to two of SCN’s seven locations in the greater Las Vegas area. Also, because of this effort, we recognized a small amount of SCN revenue during our fiscal second quarter (for the period beginning with the June 10, 2025 Acquisition closing date through June 30, 2025). For the three months ended September 30, 2025 (the first full quarter of SCN operations), we recognized Sleep Testing Service revenue from SCN of $2.2 million and treatment center revenue of $1.3 million. The goal is to continue to increase diagnostic sleep testing revenue from SCN and related Vivos treatment center revenue in the fourth quarter of 2025 and into 2026 and beyond.

As we had anticipated during the initial stage of SCN integration, patient demand is exceeding our capacity to process and treat patients under our model which includes offering SCN patients Vivos treatment options. Our goal is to ramp up our systems and operations by strategically deploying additional personnel and resources to meet this demand. We currently expect that some of SCN’s locations, including the two already integrated, to be primary treatment hubs with larger patient capacities, with the remaining being referral centers (which could be relocated facilities) requiring less time and effort to integrate.

Our operational plan is driven by our deployment of our Sleep Optimization (SO) teams, each consisting of one nurse practitioner (or physician’s assistant), two specially trained dentists, six dental assistants, six administrative support personnel, and one treatment navigator. These SO teams can be dedicated to high demand locations or spread across multiple locations as circumstances dictate. In third quarter, we had 1.5 SO teams deployed across two SCN locations and expect to have two additional SO teams deployed by the end of 2025. We anticipate an initial ramp of 30 to 60 days for SO teams to become fully functional, and up to five months or longer before net revenue collections match revenue generating activity (such as OSA diagnostic services or OSA treatment case starts). A fourth SO team is planned for deployment sometime in the first quarter of 2026, giving us an expected total of 4.5 SO teams operating by the end of the first quarter of 2026. Based on the current volume of OSA patient demand, we believe the current markets served by SCN could support up to eight SO teams, and potentially more if certain planned growth initiatives meet expectations. Such initiatives include, but are not limited to, the expansion of diagnostic and treatment services, the establishment and rollout of a pediatric OSA program, and the collaboration with certain specialty medical groups who treat patients with comorbid OSA but who lack the ability to test, evaluate and treat such patients within their existing practice environments.

Based on our experience to date, we believe our limiting constraints for near-term revenue growth at SCN are (1) physical space to see an optimal number of patients; (2) provider and staff recruiting, training, and onboarding; and (3) customary issues with third party provider credentialing. At the SCN locations we have onboarded, we are currently fully booked for appointments for several weeks, and we are processing what we believe is less than 40% of patients attempting to get appointments for treatment. We expect the current expansion at one facility and relocation of a second facility, coupled with the additional deployments of the two new SO teams by year-end 2025, will help reduce the backlog of patients seeking treatment. However, we do not believe we will be able to fully meet current demand until additional SO teams are fully deployed during 2026.

Our initial average case revenue and acceptance rate for Vivos treatment at SCN to date suggest that each SO team could potentially generate collections in excess of $500,000 per month, net of adjustments, with contribution margins above 50%. In addition to current Vivos diagnostic and treatment options, we expect to be able to offer SCN patients additional diagnostic and treatment services that could generate additional high-margin revenue. It will take time for each SO team to reach full capacity, if at all, so the above figures should be viewed as our current best estimates based on our limited operating experience and actual performance to date, rather than projections of our future performance. That said, we continue to gather additional data that will allow us to refine our model and optimize operations, and results of operations, in future periods.

Importantly, we expect to apply the lessons learned from our SCN integration activities to future sleep center or medical practice acquisitions or management collaborations we are currently exploring and hope to consummate in the future as described below. These lessons include our experience with the time needed to train medical providers in the use of Vivos diagnostic and treatment devices, and the challenges associated with validating issuance coverage. Further, we have noticed trends in our SCN operations that provide us with insights into how we can optimize such operations. For example, after a patient elects to proceed with treatment following a diagnosis of OSA, there is typically a delay between the recognition of diagnostic revenue and the subsequent recognition of treatment revenue related to the use of our appliances. Based on our relatively limited experience to date, this lag generally ranges from approximately one month to four and a half months following treatment acceptance. The timing difference is primarily attributable to the completion of prerequisite clinical procedures and the production lead time required to manufacture and fit the appliance.

We expect to fund costs associated with our SCN integration activities with net proceeds from our June 2025 debt and equity financings, potential future financings, and ultimately cash from operations.

Revised OSA Provider Management Model. In addition to growth through acquisitions of medical sleep providers like SCN, we are actively developing a revised strategic alliance or management model that we are implementing in situations where the sleep center or medical practice owners are not interested in being purchased by us, but are interested in making the full range of our OSA treatment options available to their patients. Our plan is to accomplish this type of collaboration through the creation and pro-rata funding of a new management services entity that is jointly owned by the sleep center owners and our company, but where our company retains a supermajority controlling interest. The revised management model incorporates our experience with Rebis Health in Colorado, our first sleep provider collaboration arrangement which we entered into in 2024, and which has not yet performed to our expectations. Under the revised model, through the co-owned management company, we will have more operational control to help ensure that our business model is being properly implemented.

We believe this revised management model can provide financial upside for our company with limited capital expenditures, and with what we believe are manageable risks. At the same time, this revised management model creates the potential for economic upside for sleep center or medical practice collaborators who are currently not interested in an outright sale to our company. Moreover, we believe the overall quality of care and service to the OSA patients of our medical provider collaborators can improve by having more treatment options available. The revised management model, as in the previous model, is designed to be compliant with current state and federal healthcare, anti-kickback, and corporate practice of medicine and dentistry regulations.

On July 14, 2025, we entered into our first management agreement under this revised approach with MISleep Solution LLC to provide our full suite of Vivos treatments and services to OSA patients at a joint location in Auburn Hills, Michigan (which is near Detroit). Consistent with our new model, our company owns a supermajority equity stake in the management services company, with the sleep doctors having minority ownership interests. The facility to support these operations is currently under construction, with an estimated opening date in early December 2025. We are currently in the process of hiring, training, and onboarding one complete SO team that we expect to deploy as soon as the physical facility is ready for occupancy. Based on our internal analysis and experience, we expect the economics of our Detroit SO team to be similar to the economics described above for our SO teams at SCN, except that net profit distributions from the management services entity will be paid out on a pro-rata basis (with our company receiving the supermajority share). As of this time, we have no direct operating history in the Detroit, Michigan market or with this new model. However, we believe that the overall benefit to our company that this model derives with limited risks (as opposed to outright acquisitions) and generally low equipment and facility capital expenditures relative to the potential revenue opportunity. This model also obviates the need for us to finance the purchase and other costs associated with our acquisition model.

Potential Provider Acquisition or Management Pipeline. We are currently in active discussions with a number of potential acquisition targets and strategic sleep center affiliations to follow our SCN acquisition and Detroit-area management agreement. Every prospect must meet a rigorous set of criteria and standards in order to be considered by our mergers and acquisitions team for acquisition or management. One such acquisition target is currently under an exclusive letter of intent with us. Our pipeline of additional potential acquisition and management opportunities with sleep centers and medical sleep specialists continues to expand. This is happening largely through word of mouth and very little expenditure in terms of marketing efforts to the more than 2,600 American Academy of Sleep Medicine accredited sleep testing centers nationwide. We believe this pipeline of potential acquisition and management activity, together with the experience gained from previous endeavors, will be a key driver of future accretive growth for us.

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 2025 and beyond, and our ability to capitalize on these initiatives is expected to be a material aspect of our sales and marketing program going forward.

For example, 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 and no material revenue thus far in 2025.

Trade Policy/Tarriff Risks. Certain of our products or components are manufactured outside the United States. Most products imported into the United States are subject to duty and restrictive quotas on the amount of products that can be imported from certain countries into the United States each year. Because of the duty rates and quotas, changes in U.S. trade policy as reflected in the imposition of tariffs, trade legislation, trade preference programs and trade agreements have the potential to materially impact our sourcing strategy and the competitiveness of our contract manufacturers. During 2025, the U.S. has imposed (and in some cases retracted) significant tariffs on a global scale, creating uncertainty and price fluctuations. We seek to manage this risk by continually monitoring U.S. trade policy, analyzing the impact of changes in such policy and adjusting its manufacturing and sourcing strategy accordingly.

Inflation. The U.S. has been experiencing a period of inflation which has increased (and may continue to increase) our and our suppliers’ costs as well as the end cost of our products to consumers. To date, we have been able to manage inflation risk without a material adverse impact on our business or results of operations. However, inflationary pressures (including increases in the price of raw material components of our appliances) made it necessary for us to adjust our standard pricing for our appliance products in 2022 and will be revisited in 2026. The full impact of such price adjustments on sales or demand for our products is not fully known at this time and may require us to adjust other aspects of our business as we seek to grow revenue and, ultimately, achieve profitability and positive cash flow from operations.

An additional inflation-related risk is the Federal Reserve’s response to inflation, which as of the date of this Report, has been to maintain elevated interest rates. Such actions have, in times past, created unintended consequences for housing starts, overall manufacturing, the capital markets, and the banking sector. An uncertain Federal Reserve response to inflation could, as a result, have an impact on our revenue, earnings and access to capital.

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. 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.

War in Ukraine and Middle East Hostilities. In addition, worldwide supply chain constraints and economic and capital markets uncertainty arising out of Russia’s invasion of Ukraine in February 2022 and conflicts and continuing tensions in the Middle East since October of 2023 have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery. If an economic recession or depression commences and is sustained as a result of such regional armed conflicts, 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.

Potential Nasdaq Delisting. As previously reported, we were previously subject to a Nasdaq Stock Market (“Nasdaq”) listing deficiencies related to Nasdaq’s $2,500,000 minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”).

On May 16, 2024, we received a 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 it believed it 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 June 27, 2024, we met with the Nasdaq Hearing Panel (the “Hearing Panel”) to discuss our past, current, and anticipated future compliance with the Equity Requirement, and requested the continued listing of its 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 made such filing in a timely manner.

We are working diligently to ensure our continued compliance with the Equity Requirement, including exploring additional equity capital financings to stay above the minimum threshold of the Equity Requirement. We anticipate that our new 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 capital or generate sufficient revenue or 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 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.

Key Components of Consolidated Statements of Operations

Net revenue

Legacy VIP Model. Under our legacy VIP model, we recognize revenue when we satisfy our performance obligations over time as our customers receive the benefit of the promised goods and services, which generally occurs over a short period of time. Performance obligations with respect to appliance sales are typically satisfied by shipping or delivering products to our VIPs or to any sleep clinic, through our new marketing and distribution model, in 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.

New Treatment Center Distribution Model. The quarter ended September 30, 2025 represented the first full quarter of revenues generated from SCN and our agreements related to the Acquisition, leading to a significant increase of year over year revenue. Under this new model, VIP enrollment revenue has been substituted with a new revenue stream we call “treatment center” revenue, consisting of Vivos treatment protocols including head and neck exams, cone beam tomography, laser and myofunctional therapy, and Vivos appliances of approximately $1.3 million in the quarter.

Cost of sales. Cost of goods sold primarily consists of direct costs attributable to the purchase from third party suppliers and related products as well as direct payroll costs. It also includes freight costs, fulfillment, distribution, and warehousing costs related to products sold.

Sales and marketing. Sales and marketing costs primarily consist of personnel costs for employees engaged in sales and marketing activities, commissions, advertising and marketing costs, website enhancements, and conferences for our sales and marketing staff.

General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of personnel costs for our administrative, human resources, finance and accounting employees, and executives. General and administrative expenses also include contract labor and consulting costs, travel-related expenses, legal, auditing and other professional fees, rent and facilities costs, repairs and maintenance, and general corporate expenses.

Depreciation and amortization expense. Depreciation and amortization expense is comprised of depreciation expense related to property and equipment, amortization expense related to leasehold improvements, and amortization expense related to identifiable intangible assets.

Other income. Other income relates to interest income and the excess warrant fair value and change in fair value of warrant liability.

Results of Operations

Comparison of the three and nine months ended September 30, 2025 and 2024

Our consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024 (which includes incremental revenue recognized from the operations of SCN from June 10, 2025 to September 30, 2025) are presented below (dollars in thousands):

Comparison of the three months ended September 30, 2025 and 2024

Revenue

Revenue increased by approximately $2.9 million, or 76%, to approximately $6.8 million for the three months ended September 30, 2025 compared to $3.9 million for the three months ended September 30, 2024. The increase in total revenue during the third quarter of 2025 was impacted by an increase of approximately $2.7 million in service revenue and approximately $0.2 million in product revenue. The increase in service revenue is attributable to $2.2 million in sleep testing services primarily generated by SCN and $1.3 million generated from SCN treatment centers (providing the services described under “Key Components of Consolidated Statements of Operations” above) launched at two SCN locations, which was offset by a decrease of $0.8 million in VIP revenue from our legacy business model. VIP revenue in the third quarter of 2025 was impacted by no breakage in contracts, when compared to the same period in 2024. Breakage of contracts accelerated revenue recognition on several contracts for VIPs in 2024 who did not complete their training during the first 90 days of their enrollment. Approximately $0.5 million in revenue was attributable to breakage during the three months ended September 30, 2024. Over the last year, our reliance on VIP enrollment revenue has diminished significantly as such revenues have decreased.

For the three months ended September 30, 2025, we sold 4,370 oral appliance arches for a total of approximately $2.2 million, representing a 12% increase in revenue from the three months ended September 30, 2024, when we sold 1,954 oral appliance arches for a total of approximately $2.0 million. The decrease in revenue per appliance is directly attributable a higher volume mix of pediatric and Lifeline sales, which are lower revenue generating products when compared to higher end Vivos C.A.R.E. appliances.

We have observed a lag time that ranges from approximately one month to four and a half months following treatment acceptance which is primarily attributable to the completion of prerequisite clinical procedures and the production lead time required to manufacture and fit the appliance.

Cost of Sales and Gross Profit

Cost of sales increased $1.3 million or 87% to approximately $2.8 million for the three months ended September 30, 2025, compared to $1.5 million for the three months ended September 30, 2024. This was primarily attributable to higher costs associated with the integration of SCN, including $0.5 million related to appliance, pediatric and Lifeline fees, $0.4 million related to SCN operations, $0.3 million increase in support costs for the treatment centers such as staff compensation and financing fees, and $0.1 million increase in software and medical reporting services.

For the three months ended September 30, 2025, gross profit increased by approximately $1.6 million to $3.9 million. This increase was attributable to the increase in revenue of approximately $2.9 million offset by an increase in cost of sales of $1.3 million. Gross margin decreased to 58% for the three months ended September 30, 2025, compared to 60% for the three months ended September 30, 2024 due to the higher increase in cost of sales when compared to revenue.

General and Administrative Expenses

General and administrative expenses increased by approximately $3.4 million, or 76%, to approximately $7.9 million for the three months ended September 30, 2025, as compared to $4.5 million for the three months ended September 30, 2024. The primary cause of this increase was approximately $1.6 million in costs associated with integrating and running SCN’s operations, approximately $0.6 million related to professional fees, approximately $0.6 million associated with salaries and wages on additional personnel, infrastructure costs of approximately $0.4 million and travel related expenses of approximately $0.1 million, when compared to the three months ended September 30, 2024.

Sales and Marketing

Sales and marketing expenses stayed relatively flat at $0.4 million for the three months ended September 30, 2025, which is attributable to our one-time focus on the acquisition and commencement of integration of SCN into our operations offset by cost savings.

Depreciation and Amortization

Depreciation and amortization expense increased $0.2 million for the three months ended September 30, 2025 due to depreciation on assets acquired from SCN and being placed into service.

Other Income/(Expense)

Other (Expense) increased $0.7 million due to interest expense on a note during the three months ended September 30, 2025.

Comparison of the nine months ended September 30, 2025 and 2024

Revenue

Revenue increased approximately $2.3 million, or 20%, to approximately $13.6 million for the nine months ended September 30, 2025 compared to $11.3 million for the nine months ended September 30, 2024. The increase in total revenue was impacted by an increase of approximately $2.0 million in service revenue and approximately $0.3 million in product revenue. The increase in services revenue is attributable to $2.8 million in sleep testing services primarily generated by SCN and $1.6 million generated from treatment centers (providing the services described under “Key Components of Consolidated Statements of Operations” above) launched at two SCN locations, which was offset by a decrease of $2.6 million in VIP revenue from our legacy business model. VIP revenue in the first nine months of 2025 was impacted by lower breakage in contracts, when compared to the same period in 2024. Breakage of contracts accelerated revenue recognition on several contracts for VIPs in 2024 who did not complete their training during the first 90 days of their enrollment. Approximately $1.5 million in revenue was attributable to breakage during the nine months ended September 30, 2024. Additionally, there was approximately a $0.3 million increase in sponsorship and seminar revenue. Over the last year, our reliance on VIP enrollment revenue has diminished significantly as such revenues have decreased.

For the nine months ended September 30, 2025, we sold 12,222 oral appliance arches for a total of approximately $5.9 million, representing a 5% increase in revenue from the nine months ended September 30, 2024, when we sold 5,993 oral appliance arches for a total of approximately $5.6 million. The decrease in revenue per appliance is directly attributable to an increase in pediatric and Lifeline sales at a lower average price than higher end CARE devices. Refer to “Material Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.

We have observed a lag time that ranges from approximately one month to four and a half months following treatment acceptance which is primarily attributable to the completion of prerequisite clinical procedures and the production lead time required to manufacture and fit the appliance.

Cost of Sales and Gross Profit

Cost of sales increased $1.7 million or 37% to approximately $6.1 million for the nine months ended September 30, 2025, compared to $4.4 million for the nine months ended September 30, 2024. This was primarily attributable to higher costs associated with the integration of SCN, including $0.6 million related to appliance and pediatric and Lifeline fees, $0.5 million related to SCN operations, $0.2 million increase in support costs for the treatment centers such as staff compensation and financing fees, and $0.4 million increase in software and medical reporting services, when compared to the nine months ended September 30, 2024.

For the nine months ended September 30, 2025, gross profit increased by approximately $0.6 million to $7.6 million. This increase was attributable to the increase in revenue of approximately $2.3 million offset by an increase in cost of sales of $1.7 million. Gross margin decreased to 55% for the nine months ended September 30, 2025, compared to 61% for the nine months ended September 30, 2024 due to the higher increase in cost of sales when compared to revenue.

General and Administrative Expenses

General and administrative expenses increased by approximately $5.7 million or 42% to approximately $19.2 million for the nine months ended September 30, 2025, as compared to $13.5 million for the nine months ended September 30, 2024. The primary cause of this increase was approximately $2.0 million in costs associated with integrating and running SCN’s operations, approximately $1.6 million related to professional fees, approximately $1.1 million associated with salaries and wages on additional personnel, infrastructure costs of approximately $0.6 million and equipment, repairs and maintenance of approximately $0.2 million, when compared to the nine months ended September 30, 2024.

Sales and Marketing

Sales and marketing expenses decreased by $0.3 million to $1.0 million for the nine months ended September 30, 2025, compared to $1.3 million for the nine months ended September 30, 2024. This decrease was primarily driven by our decrease in sales and marketing campaigns, resulting in lower commissions paid to our employees for digital media services and reduction in use of marketing supplies.

Depreciation and Amortization

Depreciation and amortization expense increased $0.4 million to approximately $0.9 million for the nine months ended September 30, 2025 from $0.4 million for the nine months ended September 30, 2024. Depreciation and amortization increased during the period due to depreciation on the assets acquired from SCN and being placed into service.

Other Income/(Expense)

Other (Expense) increased $0.8 million due to interest expense on a note during the nine months ended September 30, 2025.

Liquidity and Capital Resources

The accompanying unaudited 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 $5.4 and $2.6 million for the three months ended September 30, 2025 and 2024, respectively, and $14.3 and $8.3 million for the nine months ended September 30, 2025 and 2024, respectively, and accumulated deficit of approximately $118.5 million as of September 30, 2025.

Net cash used in operating activities amounted to approximately $11.5 and $9.8 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had total liabilities of approximately $23.1 million.

As of September 30, 2025, we had approximately $3.1 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 the accompanying unaudited financial statements. Without additional financing, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

We have implemented cost savings measures in our legacy business that have reduced cash used in operations. However, even though we have worked to refine our business model, our sales did not grow during our fiscal year ended 2024, and is only beginning to increase during the nine months of 2025. Revenue from our first contractual alliance with Rebis Health have not developed as we had expected for many reasons beyond our control, but we learned important lessons which have led to improvements to our alliance model. We expected a short-term drop in sales and an increase in costs as we executed on our business model pivot. This trend began to shift materially in the quarter ended September 30, 2025 as we experienced our first full quarter of SCN operations and resulting in increases in revenue.

As such, we have funded our operations through equity raises in the period ended September 30, 2025 and fiscal year ended December 31, 2023 and 2024. We were required to obtain additional financing to satisfy our cash needs, including to fund the SCN acquisition, and increase our stockholders’ equity for Nasdaq compliance purposes as we seek to increase revenue with a view towards ultimately achieving positive cash flow from operations. For a discussion of the financings to fund the SCN acquisition, please refer to the section “Material Items, Trends and Risks Impacting Our Business - Pivot in Our Sales, Marketing and Distribution Model and Decreased Emphasis on VIP Enrollments.”

Until we attain 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 during the three months ended September 30, 2025, we 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 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 adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, or the 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.

We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Cash Flows

The following table presents a summary of our cash flow for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Net cash used in operating activities of approximately $11.5 million for the nine months ended September 30, 2025 an increase of approximately $1.7 million compared to net cash used in operating activities of approximately $9.8 million for the nine months ended September 30, 2024. This increase is due primarily to a $6.0 million increase in net loss for the nine months ended September 30, 2025 and decrease in contract liabilities of approximately $0.5 million, offset by an increase in depreciation and amortization of approximately $0.4 million, an increase of approximately $2.0 million in accounts payable, an increase of approximately $1.0 million in other liabilities, and an increase of approximately $0.6 million in interest expense on a promissory note.

For the nine months ended September 30, 2025, net cash used in investing activities consisted of approximately $5.1 million for payment of a business acquisition and capital expenditures of $0.8 million related to the development of software for internal use, and assets placed in service in 2025 related to the integration of SCN. This compares to net cash used in investing activities for the nine months ended September 30, 2024 of $0.4 million due to capital expenditures for internally developed software.

Net cash provided by financing activities of $14.2 million for the nine months ended September 30, 2025, is attributable to proceeds of approximately $9.2 million from the issuance of debt, approximately $1.7 million for the issuance of warrants, approximately $0.6 million form the issuance of pre-funded warrants, approximately $2.8 million from the issuance of common stock, and approximately $0.9 million form the exercise of warrants. This compares to net cash used in investing financing for the nine months ended September 30, 2024 of $14.8 million attributable to proceeds from the issuance of Common Stock, net of approximately $0.9 million of professional fees and other issuance costs, in our February 2024 warrant inducement transaction and the June and September 2024 private placements.

Critical Accounting Policies Involving Management Estimates and Assumptions

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 ended December 31, 2024. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the three and nine months ended September 30, 2025.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed in Note 1 to the accompanying condensed consolidated financial statements included in this Report, we believe that the impact of recently issued standards that are not yet effective could have a material impact on our financial position or results of operations upon adoption. For additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncements under Note 1 to the accompanying condensed consolidated financial statements included in this Report.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this Report.

Management’s evaluation of disclosure controls and procedures excluded the internal controls of The Sleep Center of Nevada, which we acquired on June 10, 2025. The Sleep Center of Nevada represents approximately 28% of our consolidated total assets as of and for the period ended September 30, 2025 and 20% and 33% of our consolidated revenues for the three and nine months ended September 30, 2025. We are in the process of integrating The Sleep Center of Nevada into our disclosure controls and procedures and internal control framework.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As noted above, we are in the process of integrating The Sleep Center of Nevada and expect to complete this integration within one year of the acquisition date.

We are voluntarily providing in this Item 1A. updated risk factors associated with SCN, the Acquisition and related matters.

In 2024 and 2025, we worked to pivot our sales, marketing distribution model, including via the acquisition of the Sleep Center of Nevada (the “Acquisition”). However, this new model is unproven and may not produce the benefits we anticipate. This makes it difficult to evaluate our future prospects and may increase the risk of your investment.

In June 2025, we acquired all assets, including operating assets such as sleep testing, diagnostics, and treatment centers, of SCN. The Acquisition marked the completion in a pivot to our sales, marketing distribution model for our innovative OSA appliances. Under the new model, SCN will provide sleep disorder patients with the opportunity to be candidates for our advanced, proprietary and FDA-cleared CARE oral medical devices, oral appliances and additional adjunctive therapies and methods. Under customary agreements designed to comply with applicable corporate practice of medicine law, our operation of SCN allows us to manage and capture both diagnostic and consulting revenues, representing new higher margin revenue streams for us, as well as potential Vivos appliance sales revenue from SCN. We are exploring and seeking to implement additional acquisitions of, or collaborations with, medical sleep and similar healthcare practices to expand our business model in an effort to grow our revenues.

We are placing significant emphasis on establishing and growing this new model as means of increasing our revenue. However, this new model is unproven, and we have limited operating history associated with this new model. Our prior collaboration with Rebis Health in Colorado entered into in 2024 has not met our expectations and differed materially from the SCN acquisition in that we did not have adequate control over patient processing, systems and protocols, dentist hiring and management, staff hiring and management, patient education, hours of operation, or medical provider training and education. As a result, the Rebis Health collaboration has not benefited us as we had anticipated. There is therefore a lack of information for you to evaluate our future prospects utilizing this new model.

Moreover, there is a material risk that this new model will not increase our revenues or gross margins in the manner we anticipate. For example, we have faced challenges in fully integrating SCN’s operations into our own and meeting market demand due to matters such as (i) difficulties in identifying and training healthcare providers in the products and services we offer and (ii) obtaining insurance reimbursement for such products and services. Our ability to address these and similar challenges could lead to slower increases, or even reductions, in our revenues.

In addition, we may be unable to find additional sleep medical providers to incorporate into our business, and even if we do, the is a risk we may not derive the benefits from additional acquisition that we intend to. Our inability to implement and scale this marketing and distribution model would materially harm our business and operating results and likely cause our stock price to suffer.

Additionally, if the benefits of the Acquisition or similar acquisitions or collaborations we may undertake do not meet the expectations of our shareholders, the market price of our securities may decline. Fluctuations, including declines, in the price of our common stock could contribute to the loss of all or part of your investment. Certain factors, including, but not limited to, the factors listed below could have a material adverse effect on the price of our common stock:

• actual or anticipated fluctuations in financial results post-Acquisition or following the execution of similar transactions;
• changes in the market’s expectations about our operating results post-Acquisition or following the execution of similar transactions;
• announcements of technological innovation, or new products, by our competition; and
• the success of our competitors.

As such, no assurances can be given that the Acquisition or similar transactions will benefit our operating results or stock price.

We have incurred substantial indebtedness in connection with financing the SCN acquisition, the cost of servicing that debt could adversely affect our business, financial condition, and results of operation, and we may not be able in the future to service that debt.

Concurrently with the SCN Acquisition, we entered into a Note Purchase Agreement with Streeterville Capital, LLC, a Utah limited liability company (“Lender”), pursuant to which we issued and sold to Lender a Secured Promissory Note in the original principal amount of $8,250,000 (the “Note”). The Note is secured by our wholly-owned subsidiary AIM, which manages SCN in accordance with the corporate practice of medicine. The Company has also pledged the entirety of AIM’s membership interests to the Lender as collateral for the Loan pursuant and caused AIM to provide a guarantee of our obligations to the Lender under the Note and the other transaction documents.

Our ability to make scheduled payments under the Note or any alternative debt financing arrangements we may enter into in connection with our growth strategy to acquire additional medical sleep practices will depend on our financial and operating performance, which will be affected by economic, financial, competitive, business, and other factors, some or all of which are beyond our control. The indebtedness we incurred in connection with the Acquisition will require us to dedicate a portion of our cash flow to servicing this debt, thereby reducing the availability of cash to fund other business initiatives. There can be no assurance that our business, inclusive of SCN, will generate sufficient cash flow from operations to service our indebtedness or to fund our other liquidity needs. If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or sell certain of our assets. There can be no assurance that we will be able to restructure or refinance any of our indebtedness on commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. If we are unable to generate or borrow sufficient cash to make payments on our indebtedness, our business, financial condition, and results of operations could be adversely affected.

Integrating SCN’s operations may be more difficult, costly, or time-consuming than expected.

The ongoing integration of Vivos and SCN could result in the disruption of our ongoing business, and inconsistencies in standards, controls, procedures, policies and insurance coverage that adversely affect our ability to maintain relationships with patients and employees or achieve the anticipated benefits of the Acquisition. As with any acquisition, there also may be disruptions that cause us to lose patients or cause patients to elect alternative form of sleep treatment. We may also face other unintended consequences from the Acquisition (including adverse effects on our business reputation, supply chain issues, and similar matters) that that could have a material adverse effect on our results of operations, financial condition and stock price.

If our contractual arrangements between AIM and our physicians at SCN are found to constitute the improper rendering of medical services or fee splitting under applicable state laws, our business, financial condition and our ability to operate in those states could be adversely impacted.

Our contractual relationships between AIM and our physicians at SCN (and similar arrangements we may enter into in the future in connection with other sleep provider acquisitions) may implicate certain state laws that generally prohibit non-professional entities from providing licensed medical services or exercising control over medical practitioners or other healthcare professionals (such activities generally referred to as the “corporate practice of medicine”, and laws, rules and regulations relating to the corporate practice of medicine, the “CPM Laws”) or engaging in certain practices such as fee-splitting with such licensed professionals. The interpretation and enforcement of CPM Laws vary significantly from state to state. There can be no assurance that CPM Laws will be interpreted in a manner consistent with our practices or that other laws or regulations will not be enacted in the future that could have a material and adverse effect on our business, financial condition and results of operations. Regulatory authorities, state boards of medicine, state attorneys general and other parties may assert that, despite the agreements through which we operate, we are engaged in the provision of medical services and/or that our arrangements with our medical practitioners constitute unlawful fee-splitting. If a jurisdiction’s prohibition on the corporate practice of medicine or fee-splitting is interpreted in a manner that is inconsistent with our practices, we would be required to restructure or terminate our arrangements with our medical practitioner at SCN to bring our activities into compliance with such CPM Laws. A determination of non-compliance, or the termination of or failure to successfully restructure these relationships could result in disciplinary action, penalties, damages, fines, and/or a loss of revenue, any of which could have a material and adverse effect on our business, financial condition and results of operations. State corporate practice and fee-splitting prohibitions also often impose penalties our medical practitioners for aiding in the improper rendering of professional services, which could discourage medical practitioners and other healthcare professionals from providing clinical services at SCN or other sleep centers we may operate in the future.

As a result of our business model pivot which includes the acquisition of sleep centers like SCN, we may become a party to lawsuits, demands, claims, qui tam suits, governmental investigations and audits and other legal matters, any of which could result in, among other things, substantial financial and other penalties, damage to our reputation or adverse effects on our ability to conduct business.

As a result of our 2025 business model pivot, which includes acquisitions of sleep medical providers like SCN as a means of driving sales of our OSA treatments, our business has (subject to compliance with CPM laws as described above) become more associated with diagnosing and treating OSA patients. Given the nature of this business, we may in the future be subject to investigations and audits by governmental agencies, private civil qui tam complaints and other lawsuits, demands, claims, legal proceedings and/or other actions alleging our, or the medical practices we manage, failure to comply with applicable rules, regulations, laws or the practice of medicine.

For example, we and sleep medical providers we manage (like SCN) could become subject to audits from the government concerning the billing of patients. If, following the conclusion of any audit, the government were to require refunds and/or modifications to our business practices, and such amounts or changes are significant, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, any allegation against us, our medical providers we manage or related personnel, representatives, third party vendors, or operations in such matters or matters that involve patients suffering adverse health outcomes, may, among other things harm our reputation, stock price, and adversely affect our relationships and/or contracts related to our business, among other things.

Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings, as well as defending ourselves in such matters, would require management’s attention and cause us to incur significant legal expense. Negative developments, findings or terms and conditions that we might agree to accept as part of a negotiated resolution of pending or future legal or regulatory matters, or have been forced upon us, could result in, among other things, harm to our or our medical providers’ reputation, substantial financial penalties or awards against us, substantial payments made by us, required changes to our business practices, impacts on our various relationships and/or contracts related to our business, exclusion from future participation in Medicare, Medicaid and other healthcare programs and, in certain cases, criminal penalties, any of which could have a material adverse effect on us.

Changes in the structure of and payment rates under private insurance, Medicare, Medicaid or other non-Medicare government-based programs or payment rates related to our business could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Sleep center providers like SCN or other medical sleep providers we may acquire and manage or do business with rely on various forms of insurance held by patients for payment for products and services. These include private insurance, Medicare, Medicaid and other government programs. As such, the business of the medical sleep providers we manage and our business and results of operations could be adversely impacted by matters related to insurance coverage including, without limitation:

• The risk that reimbursement rates are reduced by private insurance carriers or government insurance providers;
• The risk that changes in insurance policies or regulatory mandates could limit the ability to either be paid for covered services or bill for treatments or services or otherwise impact reimbursement;
• The risk that interpretations of existing regulations, manual provisions and/or guidance, or the implementation or enforcement of new interpretations, will be inconsistent with how we and the medical sleep providers we manage have interpreted regulations, manual provisions and/or guidance;
• The risk that data and related reporting requirements are implemented that result in decreased reimbursement, increased technology and operational costs, or reputational harm;
• The risk that increases in our operating costs will outpace any Medicare or other rate increases we receive;
• The risk of federal budget sequestration cuts or other disruptions in federal government operations and funding; and
• The risk of ensuring that the sleep medical providers we manage remain compliant with applicable requirements, including marketing and education requirements and restrictions, as well as contractual terms with associated insurance plans.

If we are faced with these or similar risks, we could face material adverse consequences on our business, results of operations, financial condition and cash flows.

Our business and the medical practices we manage are labor intensive. Our inability to recruit qualified talent and manage labor costs or shortages result could result significant increases in our operating costs, decreases in productivity, and disruptions in our business operations.

Our business and the business of the medical practices we manage is labor intensive. This is particularly true with respect to the Sleep Optimization (SO) teams we are putting in place at SCN, each consisting of one nurse practitioner (or physician’s assistant), two specially trained dentists, six dental assistants, six administrative support personnel, and one treatment navigator. Labor requirements also exist, albeit to a lesser extent, for contractual alliances with medical sleep providers we may enter into. We face increased labor costs and the risk of difficulties in hiring skilled clinical personnel. The healthcare labor market for the talent we require is challenging and experiences volatility, uncertainty and labor supply shortages. We may be unable to achieve the financial results we desire from the SCN acquisition, the acquisition of other medical sleep providers or our contractual alliances due to variations in labor-related costs and the productivity our personnel.

We have incurred and, as we seek to scale our business, expect to continue to incur increased labor costs, including through elevated compensation levels to our personnel, the ultimate extent of which will depend on the needs at SCN or other medical sleep providers we acquire as well as macroeconomic conditions and ancillary impacts on the labor market, among other things.

We compete for qualified talent with hospitals and other healthcare providers. Furthermore, changes in certification requirements could adversely impact our ability to maintain sufficient staff levels, including to the extent our personnel are not able to meet new requirements. In addition, if we experience a higher than normal turnover rate for our skilled clinical personnel, our operations and ability to meet patient demand may be negatively impacted, which could adversely affect our business, results of operations, financial condition and cash flows.

Also, political or other efforts at the national or local level could result in actions or proposals that increase the likelihood of success of union organizing activities at the facilities we manage. If a significant portion of our personnel were to become unionized, we could experience, among other things, potential additional work stoppages or other business disruptions; adverse impacts to our financial results due to the costs of bargaining or implementing a grievance procedure and processing grievances, decreases in our operational flexibility and efficiency, or negative impacts on our employee culture. Any of these events or circumstances, including our responses to such events or circumstances, could have a material adverse effect on our employee relations, treatment growth, productivity, business, results of operations, financial condition, cash flows and reputation.