VIVOS INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with the Company’s financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ significantly from those anticipated in these forward-looking statements as a result of the risk factors set forth above in Item 1A and other factors discussed in this Annual Report. Results of Operations Comparison for the Year Ended December 31, 2023 and December 31, 2022 The following table sets forth information from our statements of operations for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 Year Ended December 31, 2022 Revenues $ 19,500 $ 36,499 Cost of goods sold (25,536 ) (28,779 ) Gross (loss) profit (6,036 ) 7,720 Operating expense (2,787,110 ) (2,525,469 ) Operating loss (2,793,146 ) (2,517,749 ) Non-operating income (expense) (101,607 ) 47,588 Net loss $ (2,894,753 ) $ (2,470,161 ) 23 Revenues and Cost of Goods Sold Revenue was $19,500 and $36,499 for the years ended December 31, 2023 and 2022, respectively. All revenue recognized in the years ended December 31, 2023 and 2022 relate to the procedures performed with respect to the IsoPet ® therapies. Management does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies. Operating Expense Operating expense for the years ended December 31, 2023 and 2022, respectively, consisted of the following: Year Ended December 31, 2023 Year Ended December 31, 2022 Professional fees, including stock-based compensation $ 1,606,923 $ 1,755,316 Payroll expense 281,716 275,240 Research and development expense 732,698 343,802 General and administrative expense 165,773 151,111 Total operating expense $ 2,787,110 $ 2,525,469 Operating expense for the years ended December 31, 2023 and 2022 was $2,787,110 and $2,525,469, respectively. The increase in operating expense from 2022 to 2023 can be attributed to the decrease in professional fees ($1,606,923 for the year ended December 31, 2023 compared to $1,755,316 for the year ended December 31, 2022) as the Company utilized more services due to amending the offering statement on Form 1-A (File No. 024-11627) (the “ Offering Statement ”) for the Company’s offering being made pursuant to Regulation A+ (the “ Regulation A+ Offering ”), and the fees incurred for the consultants engaged in 2022, including: stock-based compensation; the increase in general and administrative expense ($165,773 for the year ended December 31, 2023 compared to $151,111 for the year ended December 31, 2022); the increase in research and development expense ($732,698 for the year ended December 31, 2023 compared to $343.802 for the year ended December 31, 2022) as the Company ramped up the development of their products with the recent raising of capital; and, an increase in payroll expense ($281,716 for the year ended December 31, 2023 compared to $275,240 for the year ended December 31, 2022) related to our Chief Executive Officer’s employment contract taking effect. Non-Operating Income Non-operating income for the years ended December 31, 2023 and 2022, respectively, consisted of the following: Years Ended December 31, 2023 Years Ended December 31, 2022 Interest income $ 49,577 $ - Loss on issuance of shares (151,184 ) - Forgiveness of debt - 47,588 Non-operating income $ (101,607 ) $ 47,588 Non-operating income (expense) for the year ended December 31, 2023 varied from the year ended December 31, 2022 due to the forgiveness of debt on old payables as we satisfied agreements with vendors to pay a portion of the payable with the remaining amount forgiven in 2022. In 2023, we recognized a loss on issuance of shares of $151,184 and interest earned on our bank accounts of $49,577. Net Loss Our net loss for the years ended December 31, 2023 and 2022 was $(2,894,753) and $(2,470,161), respectively. 24 Liquidity and Capital Resources At December 31, 2023, the Company had working capital of $1,365,120, compared to working capital of $1,661,044 at December 31, 2022. During the year ended December 31, 2023, the Company experienced negative cash flows from operations of $1,293,023 and realized $1,179,245 of cash flows from financing activities. As of December 31, 2023, the Company did not have any commitments for capital expenditures. Cash used in operating activities increased from $1,120,958 for the year ended December 31, 2022, to $1,293,023 for the year ended December 31, 2023. Cash used in operating activities was primarily a result of the Company’s non-cash items, such as loss from operations, loss on conversion of debt and share based compensation offset by forgiveness of debt. Cash provided from financing activities decreased from $1,220,000 for the year ended December 31, 2022 to $1,179,245 for the year ended December 31, 2023. In 2023, the Company raised $1,179,245 from sales of common stock. In 2022, the Company raise $1,220,000 from sales of common stock and warrants. The Company has generated material operating losses since inception. The Company had a net loss of $2,894,753 for the year ended December 31, 2023, and a net loss of $2,470,161 for the year ended December 31, 2022. The Company expects to continue to experience net operating losses for the foreseeable future. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s business. The Company anticipates raising additional capital within the next twelve months for working capital as well as business expansion, although the Company can provide no assurance that additional capital will be available on terms acceptable to the Company, if at all. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to curtail its business or cease all operations. The Company requires funding of at least $5 million per year to maintain current operating activities. Over the next 24 months, the Company believes it will cost approximately $9 million to: (1) fund the FDA approval process to conduct human clinical trials; (2) conduct Phase I, pilot, and clinical trials; (3) activate several regional clinics to administer IsoPet ® across the county; (4) create an independent production center within the current production site to create a template for future international manufacturing; and (5) initiate regulatory approval processes outside of the United States. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies, which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises. Although the Company is seeking to raise additional capital and has engaged in numerous discussions with investment bankers and investors, to date, the Company has not received firm commitments for the required funding. Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding debt, pay past due payables and maintain its current operating activities, that the terms associated with such funding will result in material dilution to existing shareholders. Recent geopolitical events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity in the capital markets, could impact the Company’s ability to obtain financing and its ability to execute its business plan. Our Chief Executive Officer currently works from his home office in virtual communication with key personnel. Cadwell Laboratories, which is controlled by Carl Cadwell, a director of the Company, provides office space to management on an as-needed basis until such time as the Company leases permanent office space. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on the Company’s financial condition, revenues, results of operations, liquidity or capital expenditures. Accounting Policies Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates the Company considers include criteria for stock-based compensation expense, and valuation allowances on deferred tax assets. Actual results could differ from those estimates. 25 Revenue Recognition In May 2014, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standard Update (“ ASU ”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method. Under the FASB’s Accounting Standards Codification (“ ASC ”) Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The Company recognized revenue as they (i) identified the contracts with each customer; (ii) identified the performance obligation in each contract; (iii) determined the transaction price in each contract; (iv) were able to allocate the transaction price to the performance obligations in the contract; and (v) recognized revenue upon the satisfaction of the performance obligation. Upon the sales of the product to complete the procedures on the animals, the Company recognized revenue as that was considered the performance obligation. Fair Value of Financial Instruments The Company adopted ASC Topic 820 (“Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: - Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; - Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and - Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Stock-Based Compensation The Company recognizes compensation costs under FASB ASC Topic 718, Compensation – Stock Compensation, and ASU No. 2018-07 – Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. This item is not applicable to the Company because the Company is a smaller reporting company as defined by Rule 12b-2 under the Securities Exchange Act of 1934. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. All financial information required by this Item is included on the pages immediately following the Index to Financial Statements appearing on page F-1 and is hereby incorporated by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None 26