What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-31 compared with 2021-03-25 · 1148 added, 1067 removed, 148 unchanged (94% of the section changed)

Financial Statements and Supplementary Data.

TO FINANCIAL STATEMENTS

THERAPEUTICS, INC.

AND SUBSIDIARIES

of Independent Registered Public Accounting Firm

Financial Statements

Sheets as of December 31, 2020 and 201 9

of Operations for the years ended December 31, 2020 and 201 9

of Stockholders’

Equity as of December 31, 2020 and 201 9

of Cash Flows for the years ended December 31, 2020 and 2019

to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated balance sheets as of December 31, 2021 and 2020

Consolidated statements of operations for the years ended December 31, 2021 and 2020

Consolidated statements of stockholders’ equity (deficit) for the years ended December 31, 2021 and 2020

Consolidated statements of cash flows for the years ended December 31, 2021 and 2020

Notes to consolidated financial statements

of Independent Registered Public Accounting Firm

4 unchanged sentences

have audited the accompanying balance sheets of Vivos Therapeutics, Inc.

and Subsidiaries (the “Company”), as of December

31, 2020 and 2019 and the related statements of operations, stockholders’

equity, and cash flows for each of the years in

the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of

the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years in the two-year

period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Company’s management is responsible for these financial statements.

Our responsibility is to express an opinion on the Company’s

and Subsidiaries (the “Company”), as of December

31, 2021 and 2020 and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years

in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company

as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended

December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Company’s management is responsible for these financial statements.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

& Moran, PLLC

have served as the Company’s auditor since 2018.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Plante & Moran, PLLC

have served as the Company’s auditor since 2018.

THERAPEUTICS INC.

AND SUBSIDIARIES

Balance Sheets

31, 2021 and 2020

Thousands, Except Per Share Amounts)

Current assets

Cash and cash equivalents

Cash and cash

Accounts receivable, net

Current portion of note receivable

Deferred offering costs

Prepaid expenses and other current assets

of allowance of $ 180 and $ 508 , respectively

Current portion of note

receivable from related party

improvement allowance receivable

expenses and other current assets

Total current assets

Property and equipment, net

Long-term assets

Property and equipment,

Note receivable from related

party, net of current portion

Intangible assets, net

Note receivable, net - related party

LIABILITIES AND STOCKHOLDER'S EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

Accounts payable

Accounts payable –

related party

Payable to related party

for redemption of Series A Preferred Stock

Accrued expenses

Contract liability

Current portion of long-term debt

Contract liabilities

Current portion of long-term

Current portion of deferred

portion of lease incentive liability

Total current liabilities

Long-term debt

Deferred rent

Total liabilities

Total current liabilities

Long-term liabilities

Long-term debt, net of

current maturities

Deferred rent, net of current

incentive liability, net of current portion

liabilities Total liabilities

Commitments and contingencies

Convertible Redeemable Series A Preferred Stock - $0.0001 par value.

50,000,000 shares authorized, none and 730,000 shares issued and outstanding at December 31, 2020 and 2019, respectively

Stockholders’ equity

Preferred Stock, $ 0.0001

Series B, nonvoting - $0.0001 par value, 1,200,000 authorized, none issued and outstanding at December 31, 2020 and 2019, respectively

Class A, voting - $0.0001 par value, 200,000,000 shares authorized, 18,209,452 and 12,444,165 issued and outstanding at December 31, 2020 and 2019, respectively

par value per share.

Authorized 50,000,000 shares;

no shares issued and outstanding

Common Stock, $ 0.0001 par value per share.

Authorized 200,000,000 shares;

issued and outstanding 23,012,119 and 18,209,452 shares as of December 31, 2021 and 2020, respectively

Additional paid-in capital

Accumulated deficit

(35,334,728 )

(23,277,851 )

Total stockholders' equity

Total liabilities and stockholders' equity

notes to consolidated financial statements.

stockholders’ deficit Total stockholders’ equity

liabilities and stockholders’ deficit Total liabilities and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS INC.

AND SUBSIDIARIES

Statements of Operations

Ended December 31, 2021 and 2020

Thousands, Except Per Share Amounts)

Product revenue

Service revenue

Total revenue

Cost of sales (exclusive

of depreciation and amortization shown separately below)

of sales (exclusive of depreciation and amortization shown separately below)

Operating expenses

1 unchanged sentence

Sales and marketing

Depreciation and amortization

Total operating expenses

Operating loss before interest expense and income taxes

(12,039,808 )

(10,577,233 )

Litigation settlement

Impairment loss

and amortization

operating expenses

Operating loss

Non-operating income (expense)

Interest expense

Loss on sale of business

Interest income

Other expense

Loss before income taxes

(12,056,877 )

(10,754,319 )

Income tax expense

(12,056,877 )

(10,754,319 )

Warrant beneficial conversion feature expense

Warrant beneficial conversion feature

Preferred stock accretion

Net loss attributable to common stockholders

$ (17,987,795 )

$ (11,754,319 )

Net loss per share attributable to common stockholders (basic and diluted)

Weighted average number of shares of Common Stock outstanding (basic and diluted)

notes to consolidated financial statements.

Net loss attributable

to common stockholders

Net loss per share attributable

to common stockholders (basic and diluted)

average number of shares of Common Stock outstanding (basic and diluted)

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS INC.

AND SUBSIDIARIES

Statements of Stockholders’

Year Ended December 31, 2020 and 2019

Stockholders'

Balance December 31, 2018

$ (12,523,532 )

Stock-based compensation expense

Preferred stock accretion

Common stock sold for cash, net

Common stock issued from exercise of stock options

Common stock issued for convertible debt

(10,754,319 )

Balance December 31, 2019

$ (23,277,851 )

$ (2,943,059 )

Statements of Stockholders’ Equity (Deficit)

Ended December 31, 2021 and 2020

Balances, December 31, 2019

Series B preferred stock issued:

For cash, net of issuance costs

In exchange for convertible debt

Issuance of Common Stock:

For exchange of Series B preferred stock

In initial public offering, net of issuance

To consultants for services

For settlement of liability

For conversion of convertible debt

In litigation settlement

Fair value of warrants issued in litigation

Stock-based compensation expense

Series A preferred stock accretion

Series B preferred stock issued for cash, net of issuance costs

Series B preferred stock issued in exchange for convertible debt

Exchange of Series B preferred stock into common shares, net of issuance costs

Issuance of common stock in initial public offering, net of issuance costs

Common stock issued in settlement

Common stock warrants issued in settlement

Common stock issued to consultants for services

Common stock issued for settlement of liability

Conversion of convertible debt to common stock

(12,056,877 )

Balance December 31, 2020

$ (35,334,728 )

notes to consolidated financial statements.

Balances, December 31, 2020

Issuance of Common Stock:

In follow-on public offering, net of issuance

To consultants for services

Upon exercise of stock options

Fair value of warrants issued:

To consultants for services

In business combination

For purchase of assets

Stock-based compensation expense

Balances, December 31, 2021

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS INC.

AND SUBSIDIARIES

Statements of Cash Flows

Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ (12,056,877 )

$ (10,754,319 )

Adjustments to reconcile net loss to net cash:

used in operating activities:

Depreciation and amortization expense

Stock-based compensation expense

Common stock for settlements

Warrants issued for settlements

Common stock issued for services

Accretion of discount on convertible debt

Accretion of discount on note receivable

Loss on sale of business

Changes in operating assets and liabilities:

Ended December 31, 2021 and 2020

CASH FLOWS FROM OPERATING

Adjustments to reconcile

net loss to net cash used in operating activities:

Stock-based compensation

Depreciation and amortization

Fair value of warrants

issued for services

Common stock issued for

services and settlement of liabilities

Accretion of discount on

note receivable

Impairment on note receivable

Common stock issued in

litigation settlement

Fair value of warrants

issued in litigation settlement

Changes in operating assets

and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Deferred rent and lease

incentive liability

Tenant improvement allowance

Prepaid expenses and other

current assets

Accounts payable

Accrued expenses

Contract liability

Deferred rent

Net Cash Used In Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions of property and equipment

Proceeds from sale of business

Principal collections under note receivable

Net Cash Used In Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Proceeds from issuance of debt

Redemption of preferred stock

Proceeds from issuance of preferred stock

Payment for issuance costs

cash used in operating activities

CASH FLOWS FROM INVESTING

of property and equipment

Payment for business acquisition

collections under note receivable

cash used in investing activities

CASH FLOWS FROM FINANCING

Proceeds from issuance

of common stock

Series A Preferred Stock

redemption payments

Payments for issuance costs

Principal payments on debt

Net Cash Provided by Financing Activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, at beginning of period

Cash and cash equivalents, at end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Proceeds from issuance

of preferred stock

from issuance of debt

cash provided by financing activities

Net increase in cash and

cash equivalents

Cash and cash equivalents

at beginning of year

and cash equivalents at end of year

SUPPLEMENTAL DISCLOSURE

OF CASH FLOW INFORMATION:

Cash paid for interest

Cash paid for income taxes

Accretion of redeemable preferred stock

Conversion of debt to common stock

Exchange of debt to Series B preferred stock

Exchange of Series B preferred stock into common shares

Common stock issued for payment of interest

Series B Preferred Stock issued for payment of interest

Series A Preferred Stock redemption included in accounts payable

Capital expenditures included in accounts payable

notes to consolidated financial statements.

SUPPLEMENTAL DISCLOSURE

OF NON-CASH INVESTING AND

FINANCING ACTIVITIES:

Fair value of warrants

issued in asset purchase

Fair value of warrants

issued in business acquisition

Fair value of warrants

issued to underwriters in connection with follow-on offering

Conversion of debt to common

Exchange of debt to Series

B preferred stock

Exchange of Series B preferred

stock into common shares

Common stock issued for

payment of interest

Series B Preferred Stock

issued for payment of interest

Series A Preferred Stock

redemption included in accounts payable

Capital expenditures included

in accounts payable

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

1 unchanged sentence

Solutions, Inc.

(“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently

incorporated in 2013.

On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First

(“First Vivos”), and Vivos Therapeutics, Inc.

(“Vivos”), a Wyoming corporation established

on July 7, 2016 to facilitate this merger.

On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos,

(“First Vivos”), and Vivos Therapeutics, Inc.

(“Vivos”), a Wyoming corporation established on July 7, 2016

to facilitate this merger.

Vivos was formerly named Corrective BioTechnologies, Inc.

until its name changed on

September 6, 2016 to Vivos Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc.

and had no substantial pre-combination

business activities.

First Vivos was incorporated in Texas on November 10, 2015.

Pursuant to the SEA, all of the outstanding shares

of common stock and warrants of BioModeling and all of the shares of commons stock of First Vivos were exchanged for newly issued

shares of Class A common stock and warrants of Vivos, the legal acquirer, collectively the “Company”.

until its name changed on September 6, 2016 to Vivos

Biotechnologies and on March 2, 2018 to Vivos Therapeutics, Inc.

and had no substantial pre-combination business activities.

was incorporated in Texas on November 10, 2015.

Pursuant to the SEA, all of the outstanding shares of common stock and warrants of BioModeling

and all of the shares of commons stock of First Vivos were exchanged for newly issued shares of Class A common stock and warrants of

Vivos, the legal acquirer, collectively the “Company”.

transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting

and accounting purposes.

Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s

historical financial statements and continued to be recorded at their historical carrying amounts.

early 2020 outbreak of COVID-19 and its development into a pandemic in March 2020 has resulted in significant economic disruption

Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread

of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level

of individual movement and in-person interaction across the globe.

This has significantly reduced global economic activity and

resulted in a decline in demand across many industries.

of the Company’s VIPs and potential VIPs closed their offices as a result of COVID-19, although some remained open to specifically

provide patients with Company products as Company appliances and VIPs were deemed an essential business for health considerations

in many jurisdictions.

In the face of the pandemic and the results potential for revenue reduction, Company management worked

diligently to reduce expenses and maintain revenues during 2020.

While revenue growth flattened in March and April 2020, expenses

were reduced and the Company aggressively expanded its network of healthcare providers familiar with its products by offering

online continuing education courses which introduced many in the medical and dental communities to the Company’s product

As a result of improving operating cash flows, the Company determined no triggering events had occurred indicating no impairment

needed as of December 31, 2020.

Company is engaged in the designing and selling of oral devices that assist with sleep and breathing disorders and hosting training

seminars for medical and dental professionals on sleep and breathing disorders.

The Company owns and operates three locations

where Vivos systems are measured and fitted.

The Company licenses its intellectual property to third-party manufacturers which

fabricate appliance devices for orders requested by healthcare professionals, at a specified price per appliance.

August 12, 2020, the Company reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law.

Company is a medical technology company focused on the development and commercialization to dental practices of a patented oral appliance

technology and related protocols called The Vivos Method.

The Company believes The Vivos Method represents the first non-surgical, non-invasive

and cost-effective treatment for people with dentofacial abnormalities and/or mild to moderate OSA and snoring.

The Company’s business

model is focused around dentists, and the Company’s program to train dentists and offer them other value-added services in connection

with their ordering and use of The Vivos Method for patients is called the Vivos Integrated Practice (“VIP”) program.

of Presentation and Consolidation

accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries (BioModeling,

and First Vivos), are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S.

GAAP”).

All significant intercompany balances and transactions have been eliminated in consolidation.

July 30, 2020, the Company effected a reverse stock split in which each common shareholder received one share of common stock

for every three shares outstanding.

On August 12, 2020, the Company reincorporated as a domestic Delaware corporation under Delaware

General Corporate Law from Wyoming.

All share and per share amounts in this report have been adjusted to reflect the effect of

these Reverse Stock Split.

prepare financial statements in conformity with U.S.

GAAP, management must make estimates and assumptions that affect the amounts

reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

Public Offering

December 11, 2020, the Company completed its initial public offering (“IPO”) by offering 4,025,000 common shares at

a price of $6.00 per share, for net proceeds of approximately $21.6 million after deducting underwriting discounts and

commissions and offering expenses payable by the Company.

In connection with the IPO, our outstanding units of Series B preferred

stock were automatically converted into an aggregate of 1,199,195 shares of common stock and 1,199,195 warrants to purchase an

aggregate of 1,199,195 shares of common stock (see Note 9).

Protection Program Loan

May 8, 2020, the Company received approximately $1,265,000 in funding through the U.S.

Small Business Administration’s Payroll

Protection Program (PPP) that was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law in March

The interest rate on the loan is 1.00% per year and matures on May 5, 2022 and may be forgiven to the extent proceeds of

the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act.

The note is payable

in monthly installments of principal and interest over 12 months, beginning 12 months from the date of the note (deferral period).

The note might be repaid at any time with no payment penalty.

Company used these funds to assist with payroll, rent and utilities.

The Company has spent the funding in a manner in which it

believes the entire balance of the outstanding promissory note will be eligible for forgiveness through the terms of the PPP.

An application to forgive the entire amount was submitted with the lender in January 2021, however, there can be no assurance

given that any portion of the PPP loan will be forgiven.

Any request for forgiveness is subject to review and approval by the

lender and the SBA, including review of qualifying expenditures, staffing and salary levels.

there is no guidance in U.S.

GAAP that specifically addresses the accounting by an entity that obtains a forgivable loan from

a government entity.

In the absence of specific guidance, the Company believes that is acceptable to account for the PPP loan

as a debt instrument under ASC 470, Debt and apply the interest method in ASC 835-30, Imputation of Interest , which

considers the interest accrued during the payment deferral period allowed for the loan.

The Company recognized the entire loan

amount as a financial liability (current and noncurrent per ASC 470-10-45, Other Presentation ), with interest accrued and

expensed over the term of the loan (see Note 7).

Additionally, any amount forgiven when the Company is legally released as the

primary obligor under the loan, will be recognized in the income statement as a gain from extinguishment of the loan.

and Cash Equivalents

consider currency on hand, demand deposits and all highly liquid investments with an original or remaining maturity of three months

or less to be cash and cash equivalents.

As of December 31, 2020 and 2019, the Company had no cash equivalents and all cash amounts

consisted of cash on deposit.

As of December 31, 2020 and 2019, and from time to time during each year, the Company maintained

balances in excess of federally insured limits.

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration

of Credit Risk and Significant Customers

instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents

and accounts receivable.

The Company limits its exposure to credit loss by placing its cash with high credit quality financial

institutions.

Additionally, the Company has a diverse customer base and no single customer represented greater than ten percent

of sales or accounts receivable for the years ended December 31, 2020 and 2019.

Receivable, Net

accounts receivable in the accompanying financial statements are stated at the amounts management expects to collect.

performs credit evaluations of its customers’

financial condition and may require a prepayment for a portion of the services

to be performed.

The Company reduces accounts receivable by estimating an allowance that may become uncollectible in the future.

Management determines the estimated allowance for uncollectible amounts based on its judgements in evaluating the aging of the

receivables and the financial condition of our clients.

Allowance for uncollectible receivables was $507,347 and $180,852 as of

December 31, 2020 and 2019, respectively.

and Equipment, Net

and equipment are stated at historical cost less accumulated depreciation.

Depreciation is computed using the straight-line method

over the estimated useful lives of the assets, which ranges from 4 to 5 years.

Amortization of leasehold improvements is recognized

using the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range

between 5 and 7 years.

The Company does not begin depreciating assets until they are placed in service.

assets consist of assets acquired from First Vivos and costs paid to third parties for work related to the Company’s patents.

The identified intangible assets acquired from First Vivos are amortized using the straight-line method over the estimated life

of the assets, which approximates 5 years (See Note 5).

The costs paid to third parties for the Companies’

assets are amortized

using the straight-line method over the life of the underlying patents, which approximates 15 years.

The Company initially determined

the fair value of the intangible assets using a discounted cash flow approach.

is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired (See Note

Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist.

These indicators

may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or

disposition of a significant portion of the business or other factors.

The Company tests for impairment annually.

impairment of goodwill recognized at December 31, 2020 or 2019.

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Company reviews and evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that

an asset’s carrying amount may not be recoverable.

Such circumstances could include, but are not limited to, 1) a significant

decrease in the market value of an asset, 2) a significant adverse change in the extent or manner in which an asset is used, or

3) an adverse action or assessment by a regulator.

The Company measures the carrying amount of the asset against the estimated

undiscounted future cash flows associated with it.

Should the sum of the expected future net cash flows be less than the carrying

value of the asset being evaluated, an impairment loss would be recognized.

The impairment loss would be calculated as the amount

by which the carrying value of the asset exceeds its fair value.

The fair value is measured based on quoted market prices, if

If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including

the discounted value of estimated future cash flows.

The evaluation of asset impairment requires the Company to make assumptions

about future cash flows over the life of the asset being evaluated.

These assumptions require significant judgment and actual

results may differ from assumed and estimated amounts.

The Company’s evaluation of long-lived assets completed for the years

ended December 31, 2020 and 2019 resulted in no impairment loss.

Receivable, net

notes receivable in the accompanying financial statements are stated at the amount management expects to collect.

portion is what the Company expects to collect in the next twelve months and the long-term portion consists of the portion the

Company expects to collect beyond twelve months.

The Company reduced notes receivable by estimating a discount based on market

The discount on notes receivable was $68,101 and $93,421 as of December 31, 2020 and 2019, respectively.

Accretion on the

discount and interest on the note is recorded in interest income.

Value Measurements

value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date.

Fair value is estimated by applying the following hierarchy, which prioritizes the

inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of

input that is available and significant to the fair value measurement:

1 - Quoted prices in active markets for identical assets or liabilities.

2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical

or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable

market data for substantially the full term of the assets or liabilities.

3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants

would use in pricing the asset or liability.

Company believes that the fair value of cash, accounts receivable, accounts payable and accrued liabilities approximates their

carrying values at December 31, 2020 and 2019 due to their short maturities.

The Company also believes that the current and long-term

portion of notes receivable and debt approximates their carrying value at December 31, 2020 and 2019 as its terms are commensurate

with terms the Company can obtain from third parties.

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Company accounts for share-based payments to employees by recognizing compensation expense based upon the estimated fair value

of the awards on the date of grant.

Absent a publicly traded market for our stock, the Company uses the price paid for our stock

in the most recent sales to third parties as the stock price input into our valuation model as of the date of grant.

determines the estimated grant fair value using the Black-Scholes option pricing model and recognizes compensation costs ratably

over the requisite service period which approximates the vesting period using the straight-line method.

options issued to consultants, the Company recognizes the estimated fair value of options issued using the Black-Scholes option

pricing model at the time the services are rendered.

Black-Scholes model requires the input of certain subjective assumptions and the application of judgment in determining the fair

value of the awards.

The most significant assumptions and judgments include the expected volatility, risk-free interest rate,

the expected dividend yield, and the expected term of the awards.

The Company accounts for forfeitures as they occur.

assumptions used in our option pricing model represent management’s best estimates.

If factors change and different assumptions

are used, our equity-based compensation expense could be materially different in the future.

The key assumptions included in the

model are as follows:

price –

Historically, we used the price of our stock sold to third parties in our offerings as the most available representation

of fair value per share of common stock on date of grant.

Beginning in 2021, we will use our publicly quoted market price

volatility —

We determine the expected price volatility based on the historical volatilities of our peer group as we

do not have a sufficient trading history for our common stock.

Industry peers consist of several public companies in the bio-tech

industry similar to us in size, stage of life cycle and financial leverage.

We intend to continue to consistently apply this

process using the same or similar public companies until a sufficient amount of historical information regarding the volatility

of our own stock price becomes available, or unless circumstances change such that the identified companies are no longer

similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

interest rate —

The risk-free rate was determined based on yields of U.S.

Treasury Bonds of comparable terms.

The volatility

is based on analyzing the stock price and implied volatility of guideline companies.

dividend yield —

We have not previously issued dividends and do not anticipate paying dividends in the foreseeable future.

Therefore, we used a dividend rate of zero based on our expectation of not paying additional dividends.

We estimate the expected term using the simplified method which is the average of the vesting term and the contractual

term of the options.

and Development

related to research and development are expensed as incurred and include costs associated with research and development of new

products and enhancements to existing products.

There were no significant research and development costs incurred during the years

ended December 31, 2020 or 2019.

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Company uses the asset and liability method to recognize deferred tax assets and liabilities for the expected future tax consequences

of temporary differences between the carrying amounts and the tax basis of assets and liabilities.

tax assets and liabilities are determined using the effective tax rates for the years in which the tax assets and liabilities

are expected to be realized.

A valuation allowance is established when it is more likely than not that the future realization

of all or some of the deferred tax assets will not be achieved.

and Diluted Net Loss Per Share

net loss per share is computed using the weighted average number of common shares outstanding during the period.

Diluted net loss

per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive

potential common shares outstanding using the treasury stock method.

However, for the years ended December 31, 2019 and 2018,

diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of common stock

issuable upon the exercise of outstanding warrants and stock options would be anti-dilutive.

The numerator in the basic and diluted

net loss per share calculation is the net loss attributable to common stockholders, which is the net loss for the year increased

by the current year preferred stock dividends accrued.

holder of the Company’s outstanding Series A Preferred Stock (see Note 8) was entitled to participate in Common Stock dividends,

if and when declared, on a one-to-one per-share basis.

Accordingly, in periods in which the Company has net income, earnings per

share will be computed using the two-class method whereby the pro rata dividends distributable to the holder of Series A Preferred

Stock will be deducted from earnings applicable to common stockholders, regardless of whether a dividend is declared for such

undistributed earnings.

For the years ended December 31, 2020 and 2019, the Company incurred a net loss and, accordingly, there

were no undistributed earnings to allocate under the two-class method.

following table summarizes outstanding common stock securities not included in the computation of diluted net loss per common

share as their inclusion would be anti-dilutive:

Common Stock Warrants

Common Stock Options

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements

Company is an emerging growth company (“EGC”) as defined in Section 2(a) of the Securities Act, as modified by the

Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), whereby the Company is not required to comply with new

or revised financial accounting standards until the dates when private companies are required to comply with such standards.

JOBS Act provides that a company can elect to opt out of the extended transition periods and comply with the requirements that

apply to non-EGC public companies but any such election to opt out is irrevocable.

Presented below is a discussion of new accounting

standards including deadlines for adoption assuming that the Company retains its designation as an EGC.

Required to be Adopted in Future Years.

The following accounting standards are not yet effective, and a decision has not been

reached about whether the Company may elect to early adopt any of the standards:

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).

This ASU requires the Company to recognize lease assets

and lease liabilities on the balance sheet and also disclose key information about leasing arrangements.

In July 2018, the FASB

issued ASU No.

2018-11 Targeted Improvements , which provides lessees the option to adopt either (i) retrospectively to

each prior reporting period presented upon initial adoption, or (ii) apply the new leasing standard to all open leases as of the

adoption date by recognizing a cumulative-effect adjustment to accumulated deficit in the period of adoption without restating

prior periods.

The Company is still evaluating which transition approach will be implemented upon adoption of ASU No.

ASU 2016-02 is effective for the Company beginning in the first quarter of 2022 and early adoption is permitted.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments.

ASU 2016-13 amends the guidance on the impairment of financial instruments.

This guidance requires

use of an impairment model (known as the “current expected credit losses”, or CECL model) that is based on expected

losses rather than incurred losses.

Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit

ASU 2016-13 is effective for the Company beginning in the first quarter of 2023.

The Company is still evaluating the impact

the adoption of ASU 2016-13 will have on its results of operations or financial position.

December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes , which

is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the

general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective

for the Company beginning in the first quarter of 2022.

Early adoption is permitted, including adoption in an interim period.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption

until a future date are not currently expected to have a material impact on the Company’s financial statements upon adoption.

Adopted Standards.

The following recently issued accounting standards were adopted by the Company during the year ended December

June 2018, the FASB issued ASU 2018-07, Compensation —

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based

Payment Accounting , which expands the scope of Accounting Standards Codification (“ASC”) 718, Compensation—Stock

Compensation to include share-based payment transactions for acquiring goods and services from non-employees.

An entity should

apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and

the attribution of cost.

The Company adopted this new guidance using the modified retrospective method effective on January 1,

On the date of adoption, there were no outstanding awards granted to non-employees in transactions to acquire goods and

services for which the measurement date had not yet occurred.

Therefore, the adoption of this standard did not have any impact

on the Company’s financial statements.

January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill

ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment

test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment.

Under ASU 2017-04, goodwill impairment testing is performed by comparing the fair value of a reporting unit with its carrying

amount whereby an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s

however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit.

income tax effects are considered, if applicable.

ASU 2017-04 is effective for annual and any interim impairment tests performed

after December 15, 2022.

Effective October 1, 2020, the Company early adopted this new guidance for its annual goodwill impairment

testing whereby the adoption of this standard did not have any impact on the Company’s financial statements.

August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurements (Topic 820):

Disclosure Framework—Changes to the

Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 modifies the disclosure requirements on fair value measurements.

ASU 2018-13 was adopted effective for the Company beginning in the first quarter of 2020.

The Company adopted ASU 2018-13 effective

January 1, 2020.

The adoption of this standard did have a material impact on the Company’s financial statements.

First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC and Vivos Del Mar Management, LLC), are prepared

in conformity with generally accepted accounting principles in the United States of America (“U.S.

All significant

intercompany balances and transactions have been eliminated in consolidation.

Growth Company

Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our

Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements

that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required

to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),

reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory

vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

REVENUE RECOGNITION

May 2014, the FASB issued Accounting Standards Update No.

2014-09 (Topic 606) titled, “Revenue from Contracts with Customers.”

Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition”

(Topic 605), and requires

entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects

the consideration to which the entity expects to be entitled to in exchange for those goods or services.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting

standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do

not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are

required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out

of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election

to opt out is irrevocable.

The Company currently expects to retain its status as an emerging growth company until the year ending December

31, 2026, but this status could end sooner under certain circumstances.

Company generates revenue from the sale of products and services.

Revenue is recognized when control of the products or services

is transferred to our customers in a way that reflects the consideration we expect to be entitled to in exchange for those products

and services.

Revenue is recognized when control of the products or services is transferred

to our customers in a way that reflects the consideration we expect to be entitled to in exchange for those products and services.

Company determines revenue recognition through the following five-step model, which entails:

2 unchanged sentences

determination

of whether the promised goods or services are performance obligations, including whether they are distinct in the context

of the contract;

of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the

of the transaction price, including the constraint on variable consideration;

1 unchanged sentence

of revenue when, or as the Company satisfies each performance obligation.

revenue is recognized when the underlying training or other services are performed.

Unearned revenue reported on the balance sheet

as contract liability represents the portion of fees paid by customers for services that have not yet been performed as of the

reporting date and are recorded as the service is rendered.

The Company recognizes this revenue over the twelve-month life of

the contract.

Provisions for discounts are provided in the same period that the related revenue from the products and/or services

review our VIP contracts using the 5-step method outlined above.

Once it is determined that a contract exists, service revenue is recognized

when the underlying training or other services are performed.

Unearned revenue reported on the balance sheet as contract liability represents the portion of fees paid by customers for services that

have not yet been performed as of the reporting date and are recorded as the service is rendered.

The Company recognizes this revenue

over the twelve-month life of the contract.

Provisions for discounts are provided in the same period that the related revenue from the

products and/or services is recorded.

Company enters into programs that may provide for multiple element deliverables.

Commencing in 2018, the Company began enrolling

medical and dental professionals in a one-year program which includes training in a highly personalized, deep immersion workshop

format which provides the dentist access to a global team who is dedicated to creating a successful integrated practice.

topics covered in training include case selection, clinical diagnosis, appliance design, adjunctive therapies, instructions on

ordering Vivos products, guidance on pricing, instruction on insurance reimbursement protocols and interacting with our proprietary

software system and the many features on the Company’s website.

The initial training and educational workshop is typically

provided in the first month that a Vivos Integrated Provider (“VIP”

or “Provider”) enrolls.

Since Providers

are able to begin generating revenue after the first training workshop, we recognize 50% of the service revenue in the second

month of enrollment and the remaining 50% prorata throughout the following eleven months of the service contract.

Ongoing support

and additional training is provided throughout the year and includes access to the Company’s proprietary Airway Intelligence

Service (“AIS”) which provides the Provider with resources to help simplify the diagnostic and treatment planning

AIS is provided as part of the price of each appliance and is not a separate revenue stream.

Following the year of training

and support, the Provider may pay for seminars and training courses that meet the Provider’s needs on a subscription or

a course-by-course basis.

In addition to enrollment service revenue, the Company has launched an additional service on a monthly

subscription basis, its Billing Intelligence Service (“BIS”).

Revenue for these services is recognized monthly during

the month the services are rendered.

Company identifies all goods and services that are delivered separately under a sales arrangement and allocates revenue to each

deliverable based on relative fair values.

Fair values are generally established based on the relevant service period which approximates

the prices for relevant training that would be charged if those services were sold separately.

In general, revenues are separated

between durable medical equipment (product revenue) and education and training services (service revenue).

The allocated revenue

for each deliverable is then recognized ratably based on relative fair values of the components of the sale.

Revenue from training

is recognized over the relevant service period, i.e.

as the Company satisfies its performance obligations and creates value for

the Provider.

The Company also evaluates the impact of undelivered items on the functionality of delivered items for each sales

transaction and, where appropriate, defers revenue on delivered items when that functionality has been affected.

Functionality

is determined to be met if the delivered products or services represent a separate earnings process.

Commencing in 2018, the Company began enrolling medical

and dental professionals in a one-year program which includes training in a highly personalized, deep immersion workshop format which

provides the dentist access to a global team who is dedicated to creating a successful integrated practice.

The key topics covered in

training include case selection, clinical diagnosis, appliance design, adjunctive therapies, instructions on ordering the Company’s

products, guidance on pricing, instruction on insurance reimbursement protocols and interacting with our proprietary software system

and the many features on the Company’s website.

The initial training and educational workshop is typically provided in the first

month that a Vivos Integrated Provider (“VIP” or “Provider”) enrolls.

Since Providers are able to begin generating

revenue after the first training workshop, we recognize 50% of the service revenue in the second month of enrollment and the remaining

50% prorata throughout the following eleven months of the service contract.

Ongoing support and additional training is provided throughout

the year and includes access to the Company’s proprietary Airway Intelligence Service (“AIS”) which provides the Provider

with resources to help simplify the diagnostic and treatment planning process.

AIS is provided as part of the price of each appliance

and is not a separate revenue stream.

Following the year of training and support, the Provider may pay for seminars and training courses

that meet the Provider’s needs on a subscription or a course-by-course basis.

addition to enrollment service revenue, in 2020 the Company launched an additional service on a monthly subscription basis, its Billing

Intelligence Service (“BIS”).

Revenue for these services is recognized monthly during the month the services are rendered.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

REVENUE RECOGNITION (Continued)

Company identifies all goods and services that are delivered separately under a sales arrangement and allocates revenue to each deliverable

based on relative fair values.

Fair values are generally established based on the relevant service period which approximates the prices

for relevant training that would be charged if those services were sold separately.

In general, revenues are separated between durable

medical equipment (product revenue) and education and training services (service revenue).

The allocated revenue for each deliverable

is then recognized ratably based on relative fair values of the components of the sale.

Revenue from training is recognized over the

relevant service period, i.e., as the Company satisfies its performance obligations and creates value for the Provider.

also evaluates the impact of undelivered items on the functionality of delivered items for each sales transaction and, where appropriate,

defers revenue on delivered items when that functionality has been affected.

Functionality is determined to be met if the delivered products

or services represent a separate earnings process.

time to time, we offer various discounts to our customers.

These include the following:

Discount for cash pay in full

Discount for cash paid in full

Conference or trade show incentives

1 unchanged sentence

amount of the discount is determined up front prior to the sale.

Accordingly, measurement is determined before the sale occurs

and revenue is recognized based on the terms agreed upon between the Company and the customer over the performance period.

rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price.

this situation revenue is measured and the change in transaction price is allocated over the remaining performance obligation.

Accordingly, measurement is determined before the sale occurs and revenue

is recognized based on the terms agreed upon between the Company and the customer over the performance period.

In rare circumstances,

a discount has been given after the sale during a conference which is offering a discount to full price.

In this situation revenue is

measured and the change in transaction price is allocated over the remaining performance obligation.

amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale.

Prior to the sale,

the customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the

Company provides.

The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue

over the service period.

Prior to the sale, the

customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the Company provides.

The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period.

Any overpayments are refunded during the reporting period so that no refund liability is recognized.

At the end of each reporting period, the Company updates the transaction price to represent the circumstances present at the end

of the reporting period and any changes in circumstances during the reporting period.

addition to revenue from services, the Company also generates revenue from the sale of its patented oral devices and preformed

guides, known as appliances or systems to its customer, the Provider.

Revenue from the appliance sale is recognized when control

of product is transferred to the Provider in an amount that reflects the consideration it expects to be entitled to in exchange

for those products.

The Provider in turn charges the Provider’s patient and or patient’s insurance a fee for the appliance

and for his or her professional services in measuring, fitting, installing the appliance and educating the patient as to its use.

The Company is contracted with the Provider for the sale of the appliance and is not involved in the sale of the products and

services from the Provider to the Provider’s patient.

At the end of each reporting period,

the Company updates the transaction price to represent the circumstances present at the end of the reporting period and any changes in

circumstances during the reporting period.

addition to revenue from services, the Company also generates revenue from the sale of its patented oral devices and preformed guides,

known as appliances or systems to its customer, the Provider.

Revenue from the appliance sale is recognized when control of product is

transferred to the Provider in an amount that reflects the consideration it expects to be entitled to in exchange for those products.

The Provider in turn charges the Provider’s patient and or patient’s insurance a fee for the appliance and for his or her

professional services in measuring, fitting, installing the appliance and educating the patient as to its use.

The Company is contracted

with the Provider for the sale of the appliance and is not involved in the sale of the products and services from the Provider to the

Provider’s patient.

appliance is similar to a retainer that is worn after braces are removed.

Each appliance is unique and is fitted to the patient.

The Company utilizes its network of certified dental Providers throughout the country to sell the appliances to their customers

as well as in two centers that the Company operates.

The Company utilizes third party contract manufacturers or labs to produce

its unique, patented appliances and preformed guides.

The manufacturer designated by the Company produces the appliance in strict

adherence to the Company’s patents, design files, protocols, processes and procedures and under the direction and specific

instruction of the Company, ships the appliance to the Provider who ordered the appliance from the Company.

All of the Company’s

contract manufacturers are required to follow the Company’s master design files in production of appliances or the lab will

be in violation of the FDA’s rules and regulations.

The Company performed an analysis under ASC Topic 606-10-55-36 through

55-40 and concluded it is the principal in the transaction and is reporting revenue gross.

The Company bills the Provider the

contracted price for the appliance which is recorded as product revenue.

Product revenue is recognized once the appliance ships

to the Provider under the direction of the Company.

in 2018, the Company operated three centers in Colorado and Utah.

Effective October 1, 2019, the Company sold its center in Utah

(see Note 3).

Within each center, the Company utilizes a team of medical professionals to measure, order and fit each appliance.

Upon scheduling the patient (which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s

insurance coverage.

Company utilizes its network of certified dental Providers throughout the country to sell the appliances to their customers as well as

in two centers that the Company operates.

The Company utilizes third party contract manufacturers or labs to produce its unique, patented

appliances and preformed guides.

The manufacturer designated by the Company produces the appliance in strict adherence to the Company’s

patents, design files, protocols, processes and procedures and under the direction and specific instruction of the Company, ships the

appliance to the Provider who ordered the appliance from the Company.

All of the Company’s contract manufacturers are required

to follow the Company’s master design files in production of appliances or the lab will be in violation of the FDA’s rules

and regulations.

The Company performed an analysis under ASC Topic 606-10-55-36 through 55-40 and concluded it is the principal in the

transaction and is reporting revenue gross.

The Company bills the Provider the contracted price for the appliance which is recorded as

product revenue.

Product revenue is recognized once the appliance ships to the Provider under the direction of the Company.

THERAPEUTICS INC.

to Consolidated Financial Statements

each center, the Company utilizes a team of medical professionals to measure, order and fit each appliance.

Upon scheduling the patient

(which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s insurance coverage.

Revenue is recognized differently for our Company owned centers than for its Providers.

The Company recognizes

revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted and provided to

The Company recognizes revenue in the centers

after the appliance is received from the manufacturer and once the appliance is fitted and provided to the patient.

Company offers its Clinical Advisors discounts from our standard Provider pricing.

This is done to help encourage our Clinical

Advisors, who help the Provider with technical aspects of our products, to purchase our products for their own practices.

from time to time, we offer buy one get one offers and other credits to incentivize our Providers to embrace our products and

increase volume within their practices.

This is done to help encourage our Clinical Advisors,

who help the Provider with technical aspects of our products, to purchase our products for their own practices.

In addition, from time

to time, we offer buy one get one offers and other credits to incentivize our Providers to embrace our products and increase volume within

their practices.

preparation of financial statements and related disclosures in conformity with U.S.

GAAP requires the Company to make judgments, assumptions,

and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes.

The Company bases its

estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the

circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources.

The Company’s

significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable and notes

receivable, impairment of goodwill and long-lived assets;

valuation assumptions for assets acquired in business combinations;

assumptions for stock options, warrants and equity instruments issued for goods or services;

deferred income taxes and the related valuation

and the evaluation and measurement of contingencies.

Additionally, the full impact of COVID-19 is unknown and cannot be reasonably

However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting

To the extent there are material differences between the Company’s estimates and the actual results, the Company’s

future consolidated results of operations will be affected.

and Cash Equivalents

highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s

immediate and general business use are classified as cash and cash equivalents.

Receivable, Net

accounts receivable in the accompanying financial statements are stated at the amounts management expects to collect.

The Company performs

credit evaluations of its customers’ financial condition and may require a prepayment for a portion of the services to be performed.

The Company reduces accounts receivable by estimating an allowance that may become uncollectible in the future.

Management determines

the estimated allowance for uncollectible amounts based on its judgements in evaluating the aging of the receivables and the financial

condition of our clients.

Receivable from Related Party, net

to uncertainty around collections, the note receivable due from a related party was impaired as of December 31, 2021.

To the extend cash

is collected in the future, we will recognize income in the period cash is collected.

and Equipment, Net

and equipment are stated at historical cost less accumulated depreciation.

Depreciation is computed using the straight-line method over

the estimated useful lives of the assets, which ranges from 4 to 5 years.

Amortization of leasehold improvements is recognized using

the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range between 5 and

The Company does not begin depreciating assets until they are placed in service.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

REVENUE RECOGNITION (Continued)

Company’s revenue from contracts with customers is shown in the table below:

Year Ended December 31,

assets consist of assets acquired from First Vivos and costs paid to OMT and Lyon Dental for work related to the Company’s patents,

intellectual property and customer contracts.

The identifiable intangible assets acquired from First Vivos and Lyon Dental for customer

contracts are amortized using the straight-line method over the estimated life of the assets, which approximates 5 years (See Note 5).

The costs paid to OMT and Lyon Dental for patents and intellectual property are amortized over the life of the underlying patents, which

approximates 15 years.

The Company initially determined the fair value of identifiable intangible assets using a discounted cash flow

valuation model.

represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired.

Goodwill is not amortized but tested for impairment annually after the close of the year, or more frequently when events or circumstances

indicate that the carrying value of a reporting unit more likely than not exceeds its fair value.

The goodwill impairment test is applied

by performing a qualitative assessment before calculating the fair value of the reporting unit.

If, on the basis of qualitative factors,

it is considered more likely than not that the fair value of the reporting unit is greater than the carrying amount, further testing

of goodwill for impairment is not required.

If, on the basis of quantitative factors, the carrying amount of a reporting unit exceeds

the reporting unit’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount

of goodwill allocated to that reporting unit.

of Long-lived Assets

assets consist of identifiable intangible assets, property and equipment, which are reviewed for impairment whenever events or changes

in circumstances indicate the carrying amount of an asset may not be recoverable.

Impairment exists for long-lived assets if the carrying

amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets.

An impairment

charge is recognized for the amount by which the carrying amount of the asset, or asset group, exceeds its fair value.

Offering Costs

legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination

of the success of the offering.

Deferred offering costs related to successful offerings are charged to additional paid-in capital in

the period it is determined that the offering was successful.

Deferred offering costs related to unsuccessful equity offerings are recorded

as expense in the period when it is determined that an offering is unsuccessful.

for Payroll Protection Program Loan

Company is accounting for the PPP loan as a debt instrument under ASC 470, Debt .

The Company recognized the original principal

balance as a financial liability with interest accrued at the contractual rate over the term of the loan.

On January 21, 2022 the PPP

loan received by the Company on May 8, 2020, was forgiven by the SBA in its entirety, which includes approximately $ 1.3 million in principal.

As a result, the Company will record a gain on the forgiveness of the loan in the first quarter of 2022.

and Gain Contingencies

Company is subject to the possibility of various loss contingencies arising in the ordinary course of business.

An estimated loss contingency

is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably

If some amount within a range of loss appears to be a better estimate than any other amount within the range, the Company

accrues that amount.

Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the

Company accrues the lowest amount in the range.

If the Company determines that a loss is reasonably possible and the range of the loss

is estimable, then the Company discloses the range of the possible loss.

If the Company cannot estimate the range of loss, it will disclose

the reason why it cannot estimate the range of loss.

The Company regularly evaluates current information available to it to determine

whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed.

Legal fees related

to contingencies are charged to general and administrative expense as incurred.

Contingencies that may result in gains are not recognized

until realization is assured, which typically requires collection in cash.

THERAPEUTICS INC.

to Consolidated Financial Statements

Company measures the cost of employee and director services received in exchange for all equity awards granted, including stock options,

based on the fair market value of the award as of the grant date.

The Company computes the fair value of stock options using the Black-Scholes-Merton

(“BSM”) option pricing model.

The Company estimates the expected term using the simplified method which is the average of

the vesting term and the contractual term of the respective options.

The Company determines the expected price volatility based on the

historical volatilities of their peer group as the Company does not have a sufficient trading history for their common stock.

peers consist of several public companies in the bio-tech industry similar to the Company in size, stage of life cycle and financial

The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient

amount of historical information regarding the volatility of our own stock price becomes available, or unless circumstances change such

that the identified companies are no longer similar to Vivos, in which case, more suitable companies whose share prices are publicly

available would be utilized in the calculation.

The Company recognizes the cost of the equity awards over the period that services are

provided to earn the award, usually the vesting period.

For awards granted which contain a graded vesting schedule, and the only condition

for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service

period as if the award were, in substance, a single award.

The Company recognizes the impact of forfeitures in the period that the forfeiture

occurs, rather than estimating the number of awards that are not expected to vest in accounting for stock-based compensation.

public trading of the Company’s shares which commenced in December 2020, the Company estimated fair value of its shares based on

the most recent sales to third parties.

Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which

deferred income taxes are recognized based on the estimated future tax effects of differences between the financial statement and tax

bases of assets and liabilities given the provisions of enacted tax laws.

Deferred income tax provisions and benefits are based on changes

to the assets or liabilities from year to year.

In providing for deferred taxes, the Company considers tax regulations of the jurisdictions

in which the Company operates, estimates of future taxable income, and available tax planning strategies.

If tax regulations, operating

results, or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities

may be required.

A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized.

recorded valuation allowance is based on significant estimates and judgments and if the facts and circumstances change, the valuation

allowance could materially change.

In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit

of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an

For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest

benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

and Diluted Net Loss Per Share

net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common

shares outstanding for each period presented.

Diluted net loss per common share is computed by giving effect to all potential shares

of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent dilutive.

Accounting Pronouncements

below is a discussion of new accounting standards including deadlines for adoption assuming that the Company retains its designation

THERAPEUTICS INC.

to Consolidated Financial Statements

Required to be Adopted in Future Years.

The following accounting standards are not yet effective as of December 31, 2021.

February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,

Leases (Topic 842).

This ASU requires the Company to recognize lease assets and lease liabilities on the balance sheet and also

disclose key information about leasing arrangements.

In July 2018, the FASB issued ASU No.

2018-11 Targeted Improvements , which

provides lessees the option to adopt either (i) retrospectively to each prior reporting period presented upon initial adoption, or (ii)

apply the new leasing standard to all open leases as of the adoption date by recognizing a cumulative-effect adjustment to accumulated

deficit in the period of adoption without restating prior periods.

The Company adopted the new accounting standard on January 1, 2022,

this adoption required the company to recognize a current and long-term lease liability of approximately within the range of $ 2.4 million

to $ 2.2 million and a right-of-use (ROU) asset of approximately within the range of $ 1.7 million to $ 1.5 million.

We applied the new

lease standard to all open leases as of the adoption date, with no retrospective adjustments to prior comparative periods.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

ASU 2016-13 amends the guidance on the impairment of financial instruments.

This guidance requires use of an impairment

model (known as the “current expected credit losses”, or CECL model) that is based on expected losses rather than incurred

Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses.

ASU 2016-13 is effective

for the Company beginning in the first quarter of 2023.

The Company is still evaluating the impact the adoption of ASU 2016-13 will have

on its results of operations or financial position.

December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes , which is intended

to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles

in Topic 740 and clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for the Company beginning

in the first quarter of 2022.

Early adoption is permitted, including adoption in an interim period.

The adoption of this standard did

not have a material impact on the Company’s consolidated financial statements.

accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until

a future date are not currently expected to have a material impact on the Company’s financial statements upon adoption.

Adopted Standards.

The following recently issued accounting standards were adopted by the Company during the year ended December

August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and

Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity).

ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible

preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with

current GAAP.

Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash

or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts

in an entity’s own equity.

Effective January 1, 2021, the Company elected to adopt ASU 2020-06 using the modified retrospective

transition method which did not result in any changes to the Company’s financial statements upon adoption.

2 – LIQUIDITY

of December 31, 2021, the Company had an accumulated deficit of $ 55.6

For the years ended December 31, 2021

and 2020, the Company incurred a net loss of $ 20.3

million, respectively.

Net cash used in operating

activities amounted to $ 15.7

million and $ 5.7

million for the years ended December 31, 2021

and 2020, respectively.

Since March 2020, the Company’s business has been negatively impacted as a result of the COVID-19

Revenue growth and collections in 2021 were impacted by significant headwinds throughout the Company’s core customer

base, mostly driven by COVID-19 Delta and Omicron variant resurgences in the middle and latter part of the year as discussed in Note

THERAPEUTICS INC.

to Consolidated Financial Statements

discussed in Note 9, in December 2020 the Company completed an IPO of approximately 4.0 million shares of Common Stock for net proceeds

of approximately $ 21.6 million, and in May 2021, the Company completed a follow-on underwritten public offering of 4.6 million shares

of Common Stock for net proceeds of approximately $ 25.4 million.

As of December 31, 2021, the Company has cash and cash equivalents of

$ 24.0 million and total liabilities of $ 8.1 million.

believes the Company’s existing cash resources will be sufficient to fund the Company’s contractual obligations and working

capital requirements at least through the first quarter of 2023.

3 – RECEIVABLES, CONTRACT ASSETS AND CONTRACT LIABILITIES

the years ended December 31, 2021 and 2020, the components of revenue from contracts with customers and the related timing of revenue

recognition is set forth in the table below (in thousands):

OF REVENUE FROM CONTRACT WITH CUSTOMERS

Product revenue:

Appliance sales to integrated providers

Center revenue

Total product revenue

Appliance sales to VIPs

product revenue

Service revenue

Billing intelligence services

Management service revenue

(includes MID)

Sponsorship/seminar/other

Total service revenue

Total revenue

of obtaining the contract

Company does pay commissions to certain employees and others to incentivize sales growth.

The Company recognizes these incremental

costs of obtaining a contract as an expense when incurred since the amortization period of the asset that we would have otherwise

recognized would be amortized over a period of less than one year.

timing of the Company’s delivery of product is different from the timing of the payments made by customers, the Company

recognizes either a contract asset (performance precedes customer payment) or a contract liability (customer payment precedes

performance).

Contracts are often paid in arrears and are recognized as receivables after the Company considers whether a significant

financing component exists.

on product revenues is typically paid by credit card upfront.

Payment on service revenues in 2020 and 2019 was sought up front

and for training to be received, a minimum deposit is required.

In some cases, the Company allowed installment plans to entice

additional providers.

opening and closing balances of the Company’s contract liability are as follows:

Beginning balance, January 1

New contracts

service revenue

from the sale of products is typically fixed at inception of the contract and is recognized at the point in time when shipment of

the related products occurs.

from maintenance and subscription contracts is typically fixed at inception of the contract and is recognized ratably over time as

the services are performed and the performance obligations completed.

in Contract Liabilities

key components of changes in contract liabilities for the years ended December 31, 2021 and 2020 are as follows (in thousands):

OF CONTRACT LIABILITY

Balance at beginning of year

New contracts, net of cancellations

Revenue recognized

Ending balance, December 31

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

- BUSINESS DIVESTITURES

October 1, 2019, the Company sold its center in Utah to an entity controlled by the spouse of an employee for total consideration

of $1,225,000.

Consideration included cash of $250,000 and a note receivable of $975,000.

The note receivable has a stated interest

Based on market rates, the Company recorded a discount on the note receivable of approximately $100,000 that is being

amortized monthly over a five-year period.

Assets disposed of included goodwill of approximately $1,072,000, other intangible

assets of $27,000 and tangible assets of approximately $86,000.

The sale of the center resulted in recognizing a loss of approximately

The results of operations from this center were immaterial to the Company as a whole.

at end of year

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

costs for product deliveries to customers are expensed as incurred and totaled approximately $ 0.1 million for the years ended December

31, 2021 and 2020.

Shipping costs for product deliveries to customers are included in cost of goods sold in the accompanying consolidated

statement of operations.

4 - PROPERTY AND EQUIPMENT, NET

and equipment consist of the following:

December 31, 2020

December 31, 2019

of December 31, 2021 and 2020, property and equipment consist of the following (in thousands):

OF PROPERTY AND EQUIPMENT

Furniture and equipment

2 unchanged sentences

Gross property and equipment

Less - Accumulated depreciation and amortization

Net property and equipment

improvements relate to the centers in Colorado.

Total depreciation and amortization expense was $298,836 and $326,849 for the

years ended December 31, 2020 and 2019, respectively.

- INTANGIBLE ASSETS, NET AND GOODWILL

amortize identifiable intangible assets on a straight-line basis over their estimated lives, which range from 5-15 years.

December 31, 2020 and 2019, identifiable intangibles were as follows:

December 31, 2020

December 31, 2019

Less accumulated depreciation

Property and equipment

improvements relate to the Vivos Institute and the two Company-owned dental centers in Colorado.

Total depreciation and amortization

expense was $ 0.4 million and $ 0.3 million for the years ended December 31, 2021 and 2020, respectively.

5 – GOODWILL AND INTANGIBLE ASSETS

by reporting unit consisted of the following as of December 31, 2021 and 2020 (in thousands):

Reporting Unit

Vivos Solutions

Empowered Dental

April 14, 2021, we acquired Lyon Management and Consulting, LLC (Lyon Dental).

The business acquisition allows us to expand and enhance

its current medical billing practice services which are conducted through our BIS offering.

The consideration transferred includes $ 0.2

million in cash and 25,000 warrants at a price of $ 8.90 per share fair valued using a Black-Scholes Model as of April 14, 2021 for a

total of $ 0.2 million, when combined the total consideration exchanged is $ 0.4 million, the excess of the consideration transferred over

the fair value of the acquired assets was allocated to Goodwill.

THERAPEUTICS INC.

to Consolidated Financial Statements

of December 31, 2021 and 2020, identifiable intangible assets were as follows (in thousands):

OF IDENTIFIABLE INTANGIBLES

Patents and developed technology

Total intangible assets

Less accumulated amortization

expense of identifiable intangible assets was $419,029 and $424,379 for the years ended December 31, 2020 and 2019, respectively.

The estimated future amortization of identifiable intangible assets is as follows:

of $2,671,434 at December 31, 2020 and 2019 was tested for impairment on December 31, 2020 and 2019, respectively and impairment

was not required.

ACCRUED EXPENSES

expenses consist of the following:

December 31, 2020

December 31, 2019

intangible assets

expense of identifiable intangible assets was $ 0.3 million and $ 0.4 million for the years ended December 31, 2021 and 2020.

The estimated

future amortization of identifiable intangible assets is as follows (in thousands):

OF ESTIMATED FUTURE AMORTIZATION OF IDENTIFIABLE INTANGIBLE ASSETS

6 – OTHER FINANCIAL INFORMATION

October 2019, the Company sold its dental center in Utah to an entity controlled by the spouse of an employee for total consideration

of approximately $ 1.2 million, including a note receivable of approximately $ 1.0 million.

This note receivable provides for stated interest

rate of 6.0 %.

Based on consideration of prevailing market interest rates at the time of sale and the credit risk of the purchaser, the

Company recorded a discount on the note receivable of approximately $ 0.1 million that is being accreted to interest income over a five-year

Interest income related to the note receivable amounted to approximately $ 0.1 million for each of the years ended December 31,

2021 and 2020.

Due to uncertainty around collections, the note receivable was impaired as of December 31, 2021.

To the extend cash is

collected in the future, we will recognize income in the period cash is collected.

expenses consist of the following (in thousands):

OF ACCRUED EXPENSES

Accrued payroll

Accrued interest and other

Accrued legal and other

Lab rebate liabilities

Accrued common stock subscriptions

Accrued consulting

Total accrued expenses

accrued liabilities

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

Company issued debt on April 19, 2017 and May 22, 2017 included stock warrants that allow the holders to purchase 33,334 and 16,667

shares of the Company’s common stock, respectively, at a price equal to the higher of a) $1.50/share or b) a 50% discount

to the Company’s ten-day average stock price as quoted or listed on a national exchange.

The warrants expire on the third

anniversary from the date of the debt issuance.

The debt issued on April 19, 2017 was converted into shares of the Company’s

common stock at a conversion price of $1.50 per share on April 19, 2019.

The debt issued on May 22, 2017 was converted

into shares of the Company’s common stock at a conversion price of $1.50 per share on May 22, 2019.

July 1, 2018, the Company issued convertible debt of $525,000 as part of the Merger Agreement with TMJ.

The debt is convertible

into shares of the Company’s common stock at a conversion rate of $7.50 per share.

The interest rate on the debt is 6% and

the maturity date is July 1, 2023.

The debt was paid in full in 2019.

November 6, 2018, the Company issued convertible debt of $25,000 as part of the asset purchase agreement with Empowered Dental

The debt is convertible into shares of the Company’s common stock at a conversion rate of $7.50 per share.

interest rate on the debt is 10% per annum beginning July 1, 2020, and the maturity date was extended to December 31, 2020.

Company repaid this convertible debt plus interest in January 2021.

April 18, 2019, the Company began offering 6% convertible notes (the “2019 Notes”) to accredited investors pursuant

to SEC Rule 506(c).

Upon the closing of an aggregate gross cash consideration to the Company of at least $10,000,000 (a “Qualified

Financing”), the outstanding loan balance of the 2019 Notes (the “Loan Balance”) shall be automatically converted

into that number or principal amount of the securities of the Company issued in the Qualified Financing (the “New Securities”)

at a conversion price equal to (a) seventy-five percent (75%) of the price per share (or conversion price per share as the case

may be) of New Securities paid by the investors in such Qualified Financing if the Qualified Financing occurs on or prior to December

31, 2019 and (b) fifty percent (50%) of the price per share (or conversion price per share as the case may be) of New Securities

paid by the investors in such Qualified Financing if the Qualified Financing occurs after December 31, 2019;

provided, however,

that in no event for purposes of any mandatory conversion shall the Loan Balance be convertible at a price lower than $7.50 per

share, which shall serve as a floor price.

In any such conversion, the holders of the 2019 Notes shall be provided with all of

the same rights, privileges and preferences (including contractual rights and protections such as pre-emptive rights, rights of

first refusal, co-sale rights, information and registration rights) as are provided to the holders of the New Securities issued

in such Qualified Financing.

The Company incurred approximately $31,000 in issuance costs associated with the 2019 Notes.

maturity date of the 2019 Notes was March 31, 2020.

One holder of a $75,000 note elected to be paid out the principal and interest

which was repaid in December 2020.

During the year ended December 31, 2020, holders of $2,943,870 exchanged outstanding principal

and interest on the notes into Series B preferred units (see Note 9).

Holders of $770,000 principal (plus $26,068 in accrued interest)

exchanged their 2019 Notes into the Company Class A common stock.

May 8, 2020, the Company received approximately $1,265,000 in funding through the U.S.

Small Business Administration’s Payroll

of December 31, 2021 and 2020, the Company’s debt consisted of the following (in thousands):

OF OUTSTANDING DEBT

Empowered Dental loan, due December

PPP loan maturing May

Less current maturities

debt, net of current maturities

see caption below for further discussion of the terms of the PPP loan.

November 2018, the Company issued convertible debt of $ 25,000 as part of the consideration in an asset purchase agreement with Empowered

Dental Lab, LLC.

The debt was convertible into shares of the Company’s common stock at a conversion rate of $ 7.50 per share.

interest rate on the debt was 10.0 % per annum beginning July 1, 2020, and the maturity date was extended to December 31, 2020 .

repaid this convertible debt plus interest in January 2021.

May 8, 2020, the Company received approximately $ 1.3 million in funding through the U.S.

Small Business Administration’s Payroll

Protection Program (PPP) that was part of the Coronavirus Aid, Relief, and Economic Security Act signed into law in March 2020.

The interest rate on the loan is 1.00% per year and matures on May 5, 2022.

The Company used these funds to assist with payroll,

rent and utilities.

The Company has spent the funding in a manner in which it believes the entire balance of the outstanding promissory

note will be eligible for forgiveness through the terms of the PPP.

An application to forgive the entire amount was submitted

with the lender in January 2021, however, there can be no assurance given that any portion of the PPP loan will be forgiven.

request for forgiveness is subject to review and approval by the lender and the SBA, including review of qualifying expenditures,

staffing and salary levels.

in interest expense for the year ended December 31, 2020 was $47,001 of interest on the 2019 Notes and $2,799 of interest on the

Empowered Dental Lab convertible note.

Included in interest expense for the year ended December 31, 2019 was $88,045 of accrued

interest on 2019 convertible notes.

rate on the loan is 1.00 % per year and matures on May 5, 2022 .

The Company used these funds to assist with payroll, rent and utilities.

The Company has spent the funding in a manner in which it believes the entire balance of the outstanding promissory note will be eligible

for forgiveness through the terms of the PPP.

An application to forgive the entire amount was submitted with the lender in January 2021,

as of December 31, 2021 the application was under review.

On January 21, 2022 the PPP loan was forgiven by the SBA in its entirety.

a result, the Company will record other income on the forgiveness of the loan in the first quarter of 2022.

April 2019, the Company began offering 6.0 % convertible notes (the “Convertible Notes”) to accredited investors in a private

Upon the closing of an aggregate gross cash consideration to the Company of at least $ 10 million (a “Qualified Financing”),

the outstanding loan balance of the Convertible Notes (the “Loan Balance”) shall be automatically converted into that number

or principal amount of the securities of the Company issued in the Qualified Financing (the “New Securities”) at a conversion

price equal to (a) seventy-five percent (75%) of the price per share (or conversion price per share as the case may be) of New Securities

paid by the investors in such Qualified Financing if the Qualified Financing occurs on or prior to December 31, 2019 and (b) fifty percent

(50%) of the price per share (or conversion price per share as the case may be) of New Securities paid by the investors in such Qualified

Financing if the Qualified Financing occurs after December 31, 2019;

provided, however, that in no event for purposes of any mandatory

conversion shall the Loan Balance be convertible at a price lower than $7.50 per share, which shall serve as a floor price .

conversion, the holders of the Convertible Notes shall be provided with all of the same rights, privileges and preferences (including

contractual rights and protections such as pre-emptive rights, rights of first refusal, co-sale rights, information and registration

rights) as are provided to the holders of the New Securities issued in such Qualified Financing.

The Company incurred less than $ 0.1

million in issuance costs associated with the Convertible Notes.

The maturity date of the Convertible Notes was March 31, 2020.

of a less than $ 0.1 million note elected to be paid out the principal and interest which was repaid in December 2020.

During the year

ended December 31, 2020, holders of $ 2.9 million exchanged outstanding principal and interest on the notes into Series B preferred units

discussed in Note 8.

Holders of $ 0.8 million of principal (plus $ 26 thousand in accrued interest) exchanged their Convertible Notes into

the Company Class A common stock.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

–DEBT (Continued)

debt was as follows:

December 31, 2020

December 31, 2019

Principal balance of debt due December 31, 2020

2019 Convertible Notes due March 31, 2020

PPP loan maturing May 5, 2022

Less - Current portion of debt

Long-term portion of debt

future principal payments for outstanding debt are as follows:

Year ending December 31:

Total expected future principal payments

CONVERTIBLE REDEEMABLE PREFERRED STOCK

Company’s Board of Directors may, from time to time, authorize the issuance of preferred stock from the 50,000,000 shares

approved for issuance.

Each issuance of preferred stock may have different voting, dividend, conversion, redemption, and liquidation

In May 2017, the Company entered into a Definitive Purchase Agreement (the “DPA”) to acquire all of the

licensed intellectual property, consisting primarily of patents, from its largest shareholder, current Chief Medical Officer and

former majority shareholder of BioModeling.

The Company’s Board of Directors previously authorized the issuance of 1 million

shares of Series A convertible preferred stock (“Series A Preferred Stock”) with a stated value of $5 per share.

share is convertible at any time into one share of Class A common stock and each share of Series A Preferred Stock is also entitled

The Series A Preferred Stock was redeemable at the Company’s option at any time for the stated value and at

the option of the holder at 20% each year, commencing twelve months from the closing date with a limitation of $1 million in any

twelve-month period unless authorized by the Board of Directors to be more in any twelve-month period.

accordance with ASC 480, the Company has accounted for the Series A Preferred Stock as temporary equity.

As such, the carrying

value of the shares was accreted over time such that the carrying value of the shares was at least equal to the redemption value

of the shares.

The accretion was recorded as a debit to Additional Paid-In Capital and a credit to Preferred Stock.

of the IPO, the Company redeemed all remaining Series A Preferred Stock in December 2020 representing 700,000 shares and $3,500,000.

During the years ended December 31, 2020 and 2019, the Company recognized $2,333,333 and $1,000,000 of accretion, respectively.

During the years ended December 31, 2020 and 2019, the Company redeemed 730,000 and 70,000

shares, respectively, of the Series A Preferred Stock for $3,650,000 and $350,000, respectively.

8 – PREFERRED STOCK

Company’s Board of Directors has authority to issue up to 50,000,000 shares of Preferred Stock.

Through December 31, 2020, the

Board of Directors had designated 1.0 million and 1.2 million shares of Preferred Stock as Series A and Series B, respectively.

December 31, 2020, all previously issued shares of Preferred Stock had been redeemed or converted to shares of Common Stock.

As of December

31, 2021, the Board of Directors has authority to designate up to an additional 47.8 million shares of Preferred Stock in various series

that provide for liquidation preferences, and voting, dividend, conversion, and redemption rights as determined at the discretion of

the Board of Directors.

details about the terms of the Series A and Series B Preferred Stock are set forth below.

Series A Preferred Stock

May 2017, the Company entered into a Definitive Purchase Agreement (the “DPA”) to acquire all of the licensed intellectual

property, consisting primarily of patents, from its largest shareholder, current Chief Medical Officer and former majority shareholder

of BioModeling.

The Company’s Board of Directors previously authorized the issuance of 1,000,000 shares of Series A convertible

preferred stock (“Series A Preferred Stock”) with a stated value of $ 5.00 per share.

Each share was convertible at any time

into one share of Class A common stock and each share of Series A Preferred Stock was also entitled to one vote.

The Series A Preferred

Stock was redeemable at the Company’s option at any time for the stated value and at the option of the holder at 20 % each year,

commencing twelve months from the closing date with a limitation of $ 1.0 million in any twelve-month period unless otherwise authorized

by the Board of Directors.

accordance with ASC 480, the Company accounted for the Series A Preferred Stock as temporary equity.

As such, the carrying value of the

shares was accreted over time such that the carrying value of the shares was at least equal to the then current redemption value of the

The accretion was recorded as a reduction of Additional Paid-In Capital and an increase to Series A Preferred Stock.

of the IPO that was completed in December 2020, the Company agreed to redeem all remaining Series A Preferred Stock in December 2020

representing 700,000 shares and $ 3.5 million.

During the year ended December 31, 2020, the Company recognized accretion of $ 2.3 million

for the remaining redemption value.

For the year ended December 31, 2020, the Company agreed to redeem 730,000 shares of the Series A

Preferred Stock for a total redemption price of $ 3.7 million.

The redemption price was paid in 2020 for a total of $ 2.2 million and $ 1.5

million was recognized as a current liability that was paid in January 2021.

B Preferred Stock

January 9, 2020, the Company’s Board of Directors designated 1,200,000 shares of Preferred Stock as Series B.

The terms of the

Series B Preferred Stock provided for par value of $ 0.0001 per share and an issuance price of $ 15.00 per share.

The shares of Series

B Preferred Stock did not provide the holders with rights to demand redemption, dividends, or to vote as a class with the Company’s

holders of Common Stock.

Upon liquidation, the shares of Series B Preferred had priority over the holders of shares of Common Stock.

The terms of the Series B Preferred Stock provided for mandatory conversion to shares of Common Stock upon a sale of the Company or upon

completion of a qualified financing for aggregate gross cash proceeds of at least $ 15.0 million (referred to as an “MC Event”).

Upon a MC Event, the shares of Series B Preferred automatically converted to shares of Common Stock based on a conversion price equal

to 75 % of the price paid by investors in a sale of the Company or a qualified financing.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

- STOCKHOLDERS’

Company is authorized to issue 200,000,000 shares of common stock, par value of $0.0001 per share and 50,000,000 of preferred

stock, par value of $0.0001 per share.

Company commenced a private placement of units (the “Series B Units”) consisting of (i) one share of Series B Preferred,

and (ii) one warrant to be issued for the number of shares of common stock into which the Series B Preferred stock was convertible upon

a MC Event (the “Contingent Warrants”).

The Contingent Warrants provided for an exercise price equal to 125 % of the price

of the Company’s shares of Common Stock on the date of a MC Event.

The Company reported no beneficial conversion on the Contingent

Warrants as the warrant has a contingent beneficial conversion feature that is not calculated as a separate derivative until the contingent

event has occurred.

The private placement provided for the sale of units at an issuance price of $ 15.00 per unit.

Based on the terms

of the Series B Preferred, the Company classified it within permanent equity during the periods it was outstanding.

the year ended December 31, 2020, the Company issued 163,500 Series B Units for net proceeds of approximately $ 2.5 million.

Additionally,

holders of the Convertible Notes discussed in Note 7 agreed to exchange an aggregate principal and accrued interest balance of approximately

$ 2.9 million into 196,258 shares of Series B Preferred.

Offering costs associated with this issuance of Series B Unites amounted to approximately

less than $ 0.1 million.

In December 2020, all shares of Series B Preferred Stock were converted into 1,199,195 shares of Common Stock

since the IPO discussed in Note 9 triggered the MC Event.

In addition, as discussed in Note 10, the MC Event resulted in the issuance

of the Contingent Warrants that provide for the purchase of 1,199,195 shares of Common Stock at an exercise price of $ 7.50 per share.

9 – COMMON STOCK

Company is authorized to issue 200,000,000 shares of common stock, par value of $ 0.0001 per share and 50,000,000 of preferred stock,

par value of $ 0.0001 per share.

Holders of the common stock are entitled to one vote for each share held.

The Company’s

Board of Directors may grant dividends to holders of the preferred stock and the common stock.

the year ended December 31, 2020, the Company issued 4,025,000 shares of common stock for net proceeds of approximately $21.6

Offering costs associated with this stock issuance were approximately $700,000.

The Company also issued 1,199,195 shares

issued through the conversion of Series B preferred stock (the “Series B Preferred”).

The Company issued 300,000 shares

to settle a shareholder demand (see Note 10).

The Company issued 106,314 shares for the conversion of convertible debt (see Note

Finally, the Company also issued 134,778 shares to consultants for services.

the year ended December 31, 2019, the Company issued 376,574 shares of common stock for net proceeds of $1,997,192.

Offering costs

associated with this stock issuance were immaterial.

Included in these amounts were 50,000 shares of common stock issued through

option exercises for net proceeds of $82,500.

The Company also issued 126,518 shares issued through the conversion of convertible

debt for net proceeds of $250,475, and 44,286 shares through the conversion of a shareholder note for net proceeds of $498,218.

Stock –

January 9, 2020, the Company’s Board of Directors designated 1,200,000 shares of Series B Preferred.

The terms of the Series

B Preferred have a par value of $0.0001 per share and provide for an issuance price of $15.00 per share.

The shares of Series

B Preferred do not provide the holders with rights to demand redemption, dividends, or to vote as a class with the Company’s

holders of common stock.

Upon liquidation, the shares of Series B Preferred have priority over the holders of shares of common

The terms of the Series B Preferred provide for mandatory conversion to shares of common stock upon a sale of the Company

or upon completion of a qualified financing for aggregate gross cash proceeds of at least $15.0 million.

Upon a mandatory conversion

event, the shares of Series B Preferred will convert to shares of common stock based on a conversion price equal to 75% of the

price paid by investors in a sale of the Company or a qualified financing.

Company commenced a private placement of units (the “Series B Units”) consisting of (i) one share of Series B Preferred,

and (ii) one warrant to be issued for the number of shares of common stock into which to Series B Preferred stock is convertible

upon a mandatory conversion event (the “Contingent Warrants”).

The Contingent Warrants will provide for an exercise

price equal to 125% of the price of the Company’s shares of common stock on the date of a mandatory conversion event.

Company reported no beneficial conversion on the Contingent Warrant as the warrant has a contingent beneficial conversion feature

that is not calculated as a separate derivative until the contingent event has occurred.

The private placement provides for the

sale of units at an issuance price of $15.00 per unit for gross proceeds up to $15,000,000.

The private placement also provides

for an over-allotment option for the issuance of up to an additional $3,000,000 or 200,000 units.

Based on the terms of the Series

B Preferred, the Company has classified it within permanent equity in the accompanying consolidated balance sheet during 2020.

the year ended December 31, 2020, the Company received gross proceeds of approximately $2,450,000 from the issuance of Series

B Units resulting in the issuance of 163,500 shares of Series B Preferred stock.

Additionally, holders of the 2019 Notes agreed

to exchange an aggregate principal balance of $2,839,535 plus accrued interest of $104,335 into 196,258 shares of Series B Preferred.

Offering costs associated with this issuance were approximately $50,000.

As of December 31, 2020, all of the Series B stock was

converted into 1,199,195 shares of common stock as the IPO triggered the mandatory conversion.

2017, the Company’s shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under

The Company’s Board of

Directors may declare dividends payable to the holders of Common Stock.

For the years ended December 31, 2021 and 2020, the Company completed

initial public offerings of its shares of Common Stock as discussed below.

2021 Follow-on Offering

May 2021, the Company completed a follow-on offering of 4.6 million shares of Common Stock at an issuance price of $ 6.00 per share for

gross proceeds of $ 27.6 million.

The net proceeds amounted to approximately $ 25.4 million after deducting an aggregate of $ 2.2 million

for underwriting discounts and commissions and offering expenses payable by the Company.

the year ended December 31, 2020, the Company issued 4,025,000 shares of common stock for net proceeds of approximately $ 21.6 million

in an initial underwritten public offering.

Offering costs associated with this stock issuance were approximately $ .07 million.

also issued 1,199,195 shares issued through the conversion of all shares of Series B Preferred Stock.

10 – STOCK OPTIONS AND WARRANTS

2017, the Company’s shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under which

shares were reserved for future issuance for options, restricted stock awards and other equity awards.

The 2017 Plan permits grants of

equity awards to employees, directors, consultants and other independent contractors.

The Company’s shareholders have approved

a total reserve of 1,333,333 million shares for issuance under the 2017 Plan.

April 2019, the Company’s shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under

which shares were reserved for future issuance for options, restricted stock awards and other equity awards.

The 2017 Plan permits

grants of equity awards to employees, directors, consultants and other independent contractors.

The Company’s shareholders

have approved a total reserve of 1,333,333 million shares for issuance under the 2017 Plan.

In April 2019, the Company’s

shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under which shares were reserved

for future issuance for options, restricted stock awards and other equity awards.

The 2019 Plan permits grants of equity awards

to employees, directors, consultants and other independent contractors.

The Company’s shareholders have approved a total

reserve of 333,334 shares for issuance under the 2019 Plan.

On June 18, 2020, the Company’s shareholders approved an amendment

and restatement of the 2019 Plan to increase the number of shares of common stock available for issuance thereunder by 833,333

share of common stock such that, after amendment and restatement of the 2019 Plan, and prior to any grants, 1,166,667 shares of

common stock were available under the 2019 Plan.

the years ended December 31, 2020 and 2019, the Company issued stock options to purchase 429,012 and 503,333 shares at a weighted

average exercise price of $7.50 per share of the Company’s common stock to certain members of the Board of Directors and

certain employees.

The stock options allow the holders to purchase shares of the Company’s common stock at prices between

$1.50 and $7.50 per share.

Options for the purchase of 26,667 shares of common stock expired as of December 31, 2020.

The following

table summarizes all stock options as of December 31, 2020 and 2019:

The 2019 Plan permits grants

of equity awards to employees, directors, consultants and other independent contractors.

The Company’s shareholders have approved

a total reserve of 333,334 shares for issuance under the 2019 Plan.

Consecutively, on June 18, 2020, and July 28, 2021 the Company’s

stockholders approved an amendment and restatement of the 2019 Plan to increase the number of shares of Common Stock available for issuance

thereunder by 2,033,333 shares of Common Stock such that, after amendment and restatement of the 2019 Plan, and prior to any grants,

2,366,667 shares of Common Stock were available under the 2019 Plan.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

- STOCKHOLDERS’

EQUITY (Continued)

Stock Options

Exercise Price

Contractual Life

Intrinsic Value

Options outstanding at December 31, 2018

Expired/terminated

Options outstanding at December 31, 2019

Expired/terminated

Options outstanding at December 31, 2020

Options exercisable at December 31, 2019

Options exercisable at December 31, 2020

Company accounts for share based payments by recognizing compensation expense based upon the estimated fair value of the awards

on the date of grant.

The Company determines the estimated grant fair value using the Black-Scholes option pricing model and recognizes

compensation expense ratably over the requisite service period which approximates the vesting period using the straight-line method.

weighted average assumptions used in the fair value calculations are as follows:

the years ended December 31, 2021 and 2020, the Company issued stock options to purchase 969,000 and 429,012 shares at a weighted average

exercise price of $ 5.23 and $ 7.50 per share of the Company’s common stock, respectively, to certain members of the Board of Directors,

employees and consultants.

The stock options allow the holders to purchase shares of the Company’s common stock at prices between

$ 1.50 and $ 7.50 per share.

Options for the purchase of 220,001 and 26,667 shares of common stock expired as of December 31, 2021 and

2020, respectively.

The following table summarizes all stock options as of December 31, 2021 and 2020 (shares in thousands):

OF STOCK OPTIONS

Outstanding, beginning of year

Outstanding, end of year

Vested, end of year

the weighted average exercise price.

the weighted average remaining contractual term until the stock options expire.

the respective exercise dates, the aggregate intrinsic value of shares of Common Stock issued upon exercise of stock options amounted

to $ 0.6 million.

of December 31, 2021 and 2020, the aggregate intrinsic value of stock options outstanding was $ 0 million and $ 3.1 million, respectively.

of December 31, 2021 and 2020, the aggregate intrinsic value of vested stock options was $ 0 million and $ 2.0 million, respectively.

the years ended December 31, 2021 and 2020, the valuation assumptions for stock options granted under the 2017 Plan and the 2019 Plan

were estimated on the date of grant using the BSM option-pricing model with the following weighted-average assumptions:

OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE

Grant date closing price of Common Stock

Expected term (years)

Risk-free interest rate

Expected volatility

Expected dividend yield

the years ended December 31, 2020 and 2019, the Company recognized approximately $2,172,000 and $1,987,000, respectively, of share-based

Dividend yield

on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the years ended

December 31, 2021 and 2020 was $ 4.96 and $ 4.84 , respectively.

the years ended December 31, 2021 and 2020, the Company recognized approximately $ 2.7 million and $ 2.2 million, respectively, of share-based

compensation expense relating to the vesting of stock options.

The options were valued using the Black-Scholes valuation method

at the date of the grant and compensation expense is recognized over the vesting period.

Unrecognized expense relating to these

awards as of December 31, 2020 was approximately $3,441,030, which will be recognized over the weighted average remaining term

of 2.38 years at December 31, 2020.

2020 and in connection with the IPO, the Company issued warrants to the underwriter that provide for the purchase of 402,500 shares

of common stock at an exercise price of $7.50 per share, are exercisable beginning on June 8, 2021, and expire on December 10,

to the terms of the Series B Units and in connection with the IPO which qualified as a mandatory conversion event, 1,199,195 Contingent

Warrants were provided for an exercise price equal to 125% of the price of the Company’s shares of common stock on the date

of an MC event, or $7.50 per share based on the IPO price of $6.00.

October 22, 2020, two minority stockholders initiated a derivative demand which resulted in a settlement and release agreement

that was entered into on November 6, 2020 (See Note 10).

Pursuant to the settlement, the Company issued warrants to purchase an

aggregate of 325,000 shares of common stock (the “Settlement Warrants”).

The Settlement Warrants are exercisable on

a cash only basis at an exercise price of $7.50 per share, are exercisable beginning on June 15, 2021, and expire on May 6, 2024.

June 13, 2017, the Company issued warrants to purchase an aggregate of 33,334 shares of common stock to an investor of convertible

The warrants are exercisable on a cash basis at an exercise price of $1.50 per share, are exercisable beginning on June

30, 2017, and expire on June 30, 2022.

Unrecognized expense relating to these awards as of December 31, 2021

was approximately $ 4.8 million, which will be recognized over the weighted average remaining term of 2.9 years as of December 31, 2021.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

following table sets forth warrant activity for the years ended December 31, 2021 and 2020 (shares in thousands):

OF WARRANT OUTSTANDING

Outstanding, beginning of year

Grants of warrants:

Underwriter pursuant to IPOs

Consultants for services

Acquisition of assets

Business combination

Contingent warrants

Settlement warrants

Outstanding, end of year

Vested, end of year

the weighted average exercise price.

the weighted average remaining contractual term until the warrants expire.

connection with its registered underwritten follow-on offering in May 2021, the Company granted warrants to the underwriter that

provide for the purchase of 276,000 shares of Common Stock at an exercise price of $ 7.50 per share with a fair value of approximately

$ 1.5 million.

These warrants became exercisable in November 2021 and expire in May 2026.

connection with the IPO in December 2020, the Company granted warrants to the underwriter that provide for the purchase of 402,500

shares of common stock at an exercise price of $ 7.50 per share.

These warrants became exercisable in June 2021 and expire in December

March 2021, the Company granted warrants to consultants in exchange for services.

Warrants issued in March 2021 provide for the purchase

of an aggregate of 95,000 shares of Common Stock and are exercisable at $ 7.50 per share.

The aggregate fair value of the March warrants

amounted to $ 0.2 million which is being recognized over the period that the services are provided.

For the year ended December 31,

2021, the Company recognized expense of $ 0.2 million.

March 2021, the Company granted warrants in connection with the acquisition of certain assets from MyoCorrect, LLC (“MyoCorrect”)

that provide for the purchase of up to 200,000 shares of Common Stock through March 2026.

The aggregate fair value of these warrants

amounted to $ 0.1 million which is being recognized over the vesting period.

Warrants to purchase 25,000 shares of Common Stock vested

in March 2021 and the remainder vest upon the achievement of pre-determined performance metrics related to the utilization of MyoCorrect,

with a five-year term.

April, 2021, the Company granted warrants in connection with a business combination.

Warrants granted in April 2021 provide for the

purchase of an aggregate of 25,000 shares of Common Stock and are exercisable at $ 8.90 per share.

The aggregate fair value of the

April warrants amounted to $ 0.2 million which is being recognized over the period that the services are provided.

For the year ended

December 31, 2021, the Company recognized expense of $ 0.2 million.

to the terms of the Series B Units and in connection with the IPO which qualified as a MC Event, approximately 1,199,000 Contingent

Warrants were issued at an exercise price equal to 125 % of the price of the Company’s shares of common stock on the date of

an MC event, or $ 7.50 per share based on the IPO price of $ 6.00 per share.

October 22, 2020, two minority stockholders initiated a derivative demand which resulted in a settlement and release agreement that

was entered into on November 6, 2020.

Pursuant to the settlement, the Company issued warrants to purchase an aggregate of 325,000

shares of common stock (the “Settlement Warrants”).

The Settlement Warrants are exercisable on a cash only basis at an

exercise price of $ 7.50 per share, are exercisable beginning on June 15, 2021, and expire on May 6, 2024.

of December 31, 2021 and 2020, the aggregate intrinsic value of warrants outstanding was $ 0 .

of December 31, 2021 and 2020, the aggregate intrinsic value of vested warrants was $ 0 .

the years ended December 31, 2021 and 2020, the valuation assumptions for warrants were estimated on the measurement date using the BSM

option-pricing model with the following weighted-average assumptions:

OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE

Measurement date closing price of Common Stock (1)

Contractual term (years) (2)

Risk-free interest rate

Dividend yield

average grant price.

valuation of warrants is based on the contractual term of the warrant rather than the expected term.

11 - RELATED PARTY TRANSACTIONS

Company was a party to a management agreement with Upeva, Inc., a company for which the Company’s prior Secretary and one

of the Company’s former board members serves as chief executive officer.

In return for various legal and other consulting

services, the Company paid Upeva a monthly fee of $10,000.

Company was a party to a management agreement with Upeva, Inc., a company for which the Company’s prior Secretary and one of the

Company’s former board members serves as chief executive officer.

In return for various legal and other consulting services, the

Company paid Upeva a monthly fee of $ 10,000 .

This agreement terminated on April 30, 2020.

As of December 31, 2020,

the Company owed Upeva, Inc.

As of December 31, 2020, the Company owed Upeva,

approximately $ 10,000 .

Additionally, the former Secretary and director is the beneficial owner of

254,902 common shares of the Company through Spire Family Holdings, L.P.

the year ended December 31, 2020, one of the Company’s former directors who held $200,000 in 2019 Notes exchanged her outstanding

The former Secretary and director is the beneficial owner of 254,902 common shares of the Company through

Spire Family Holdings, L.P.

Additionally, the former Secretary and director is the beneficial owner of 254,902 common shares of the Company

through Spire Family Holdings, L.P.

The payment was made early 2021, no outstanding fees are due.

the year ended December 31, 2020, one of the Company’s former directors who held $ 0.2 million in 2019 Notes exchanged her outstanding

notes for Series B preferred units, which converted into 45,252 common shares.

2019, one of the Company’s directors and holder of the Company’s Series A preferred stock, exercised his right to

redeem 70,000 shares of the Series A preferred stock for $5.00 per share for a total of $350,000.

During 2020, one of the Company’s

Directors and holder of the Company’s Series A preferred stock, exercised his right to redeem 730,000 shares of the Series

A preferred stock for $5.00 per share for a total of $3,650,000.

2020, one of the Company’s Directors and holder of the Company’s Series A preferred stock, exercised his right to redeem

730,000 shares of the Series A preferred stock for $ 5.00 per share for a total of $ 3.7 million.

Per the director’s request, $ 2

million was paid in December 2020, and the rest was paid in full in January 2021.

July 2020, two of the directors voluntarily entered into separation agreements with our company.

1 unchanged sentence

releases, confidentiality and non-disparagement provisions.

As consideration for the entering the separation agreements, each

director received an equity grant in the amount 16,667 shares and the ability to retain and exercise their previously granted

and vested options, and the Company also committed to providing continued indemnification obligations consistent with organizational

documents and to retain director’s and officer’s insurance for a period of twenty-four months in connection with two

of the directors’

prior service on the board.

August 2020, the Company also entered into a Separation Agreement with another director pursuant to which the Company is required

to purchase from the director and her affiliated entities 13,575 shares of Series B Preferred Stock and warrants to purchase common

stock and 16,667 shares of common stock held for an aggregate purchase price of $325,000.

If the Company was unable to close a

qualified financing, as defined in the agreement of at least $3,000,000 of equity or equity-linked securities by September 15,

2020 (as was extended up to October 28, 2020), a modified consideration would include 16,667 shares of unrestricted, fully vested

common stock, a grant of stock options to purchase 33,334 shares of common stock at a price of $7.50 that will be fully vested

and exercisable and $22,000 in cash.

The Company recorded general and administrative expense and accrued expenses of approximately

$286,000 for cash and equity issuances with this settlement.

In November 2020, the Company granted this former director 16,667

shares of unrestricted, fully vested common stock, a grant of stock options to purchase 33,334 shares of common stock at a price

of $7.50 that will be fully vested and exercisable and paid $47,000 in cash (including $25,000 for legal fees) to settle terms

outlined in her separation agreement.

October 22, 2020, two minority stockholders of the Company, Lazarus Asset Management, LLC and a former director of the Company

(who we refer to as the Demanding Stockholders), sent a derivative demand to the Company through counsel asking the board of directors

to review and investigate certain recent actions taken by the board of directors, or members thereof, and senior management including

(i) pursuit of the initial public offering described in the Company’s filing on Form S-1, (ii) the board of directors’

previous rejection (on two occasions) of a “reverse merger”

transaction proposal made by Lazarus Asset Management,

LLC, (iii) purported mismanagement of corporate assets, and (iv) various matters related to stock sales and other matters.

discussions with the Demanding Stockholders and their counsel, the Company ascertained that the Demanding Stockholders were acting

for themselves and on behalf of an additional group of minority shareholders, (we refer to the Demanding Stockholders and all

such other minority shareholders they acted on behalf of collectively as the Stockholder Group).

the Company believes that the assertions of the Demanding Stockholders lacked any merit in fact and in law, rather than expending

resources investigating or litigating the claims of the Demanding Stockholders, and in order to proceed with the Company’s

initial public offering, on November 6, 2020, without admitting or denying any claims asserted by the Demanding Stockholders,

the Company entered into a Settlement and Release Agreement with each member of the Stockholder Group (which the Company refers

to as the Settlement and Release Agreement).

Pursuant to the Settlement and Release Agreement, all claims of the Demanding Stockholders

were withdrawn with prejudice, and the Company and the Stockholder Group provided each other with full releases of any claims.

In consideration of such withdrawal and releases, the members of the Stockholder Group have received:

(i) an aggregate of 300,000

shares of Company common stock and (ii) warrants to purchase an aggregate of 325,000 shares of common stock (see Note 9).

warrants (x) will be exercisable on a cash only basis at a strike price of 125% of the public offering price per share in a Company

qualified public offering of more than $10 million, (y) will be exercisable for a period of 36 months, beginning six months after

the consummation of a qualified public offering and ending on the forty-second month anniversary of a Company qualified public

Finally, the Settlement and Release Agreement contains customary representations, warranties and covenants, including

relating to confidentiality and non-disparagement, and the Company agreed to reimburse the Demanding Stockholders for up to $50,000

of their legal fees associated with the demand letter the Company received on October 22, 2020 from them.

late 2019, a voucher program was offered whereby any employee could pre-purchase a $30,000 VIP deposit with the Company that could

be redeemed in full after February 15, 2020, subject to certain limitations, toward a VIP enrollment the employee brought forth

in the future.

The purpose of this program was to assist with cash flow constraints at the time.

Thirteen vouchers totaling $390,000

For the year ended December 31, 2020, the Company redeemed each of the thirteen vouchers totaling $390,000.

included the balance in contract liabilities.

As consideration for the entering the separation agreements, each director

received an equity grant in the amount 16,667 shares and the ability to retain and exercise their previously granted and vested options,

and the Company also committed to providing continued indemnification obligations consistent with organizational documents and to retain

director’s and officer’s insurance for a period of twenty-four months in connection with two of the directors’ prior

service on the board.

August 2020, the Company also entered into a Separation Agreement with another director pursuant to which the Company is required to

purchase from the director and her affiliated entities 13,575 shares of Series B Preferred Stock and warrants to purchase common stock

and 16,667 shares of common stock held for an aggregate purchase price of $ 0.3 million.

If the Company was unable to close a qualified

financing, as defined in the agreement of at least $3 million of equity or equity-linked securities by September 15, 2020 (as was extended

up to October 28, 2020), a modified consideration would include 16,667 shares of unrestricted, fully vested common stock, a grant of

stock options to purchase 33,334 shares of common stock at a price of $ 7.50 that will be fully vested and exercisable and $ 22 thousand

The Company recorded general and administrative expense and accrued expenses of approximately $ 0.3 million for cash and equity

issuances with this settlement.

In November 2020, the Company granted this former director 16,667 shares of unrestricted, fully vested

common stock, a grant of stock options to purchase 33,334 shares of common stock at a price of $ 7.50 that will be fully vested and exercisable

and paid $ 47 thousand in cash (including $ 25 thousand for legal fees) to settle terms outlined in her separation agreement.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

October 22, 2020, two minority stockholders of the Company, Lazarus Asset Management, LLC and a former director of the Company (who we

refer to as the Demanding Stockholders), sent a derivative demand to the Company through counsel asking the board of directors to review

and investigate certain recent actions taken by the board of directors, or members thereof, and senior management including (i) pursuit

of the initial public offering described in the Company’s filing on Form S-1, (ii) the board of directors’ previous rejection

(on two occasions) of a “reverse merger” transaction proposal made by Lazarus Asset Management, LLC, (iii) purported mismanagement

of corporate assets, and (iv) various matters related to stock sales and other matters.

After discussions with the Demanding Stockholders

and their counsel, the Company ascertained that the Demanding Stockholders were acting for themselves and on behalf of an additional

group of minority shareholders, (we refer to the Demanding Stockholders and all such other minority shareholders they acted on behalf

of collectively as the Stockholder Group).

the Company believes that the assertions of the Demanding Stockholders lacked any merit in fact and in law, rather than expending resources

investigating or litigating the claims of the Demanding Stockholders, and in order to proceed with the Company’s initial public

offering, on November 6, 2020, without admitting or denying any claims asserted by the Demanding Stockholders, the Company entered into

a Settlement and Release Agreement with each member of the Stockholder Group (which the Company refers to as the Settlement and Release

Pursuant to the Settlement and Release Agreement, all claims of the Demanding Stockholders were withdrawn with prejudice,

and the Company and the Stockholder Group provided each other with full releases of any claims.

In consideration of such withdrawal and

releases, the members of the Stockholder Group have received:

(i) an aggregate of 300,000 shares of Company common stock and (ii) warrants

to purchase an aggregate of 325,000 shares of common stock (see Note 9).

Such warrants (x) will be exercisable on a cash only basis at

a strike price of 125 % of the public offering price per share in a Company qualified public offering of more than $ 10 million, (y) will

be exercisable for a period of 36 months, beginning six months after the consummation of a qualified public offering and ending on the

forty-second month anniversary of a Company qualified public offering .

Finally, the Settlement and Release Agreement contains customary

representations, warranties and covenants, including relating to confidentiality and non-disparagement, and the Company agreed to reimburse

the Demanding Stockholders for up to $ 50 thousand of their legal fees associated with the demand letter the Company received on October

22, 2020 from them.

the year ended December 31, 2021 and 2020, options for the purchase of 539,000 and 429,012 shares, respectively, of the Company’s

common stock were granted to the Company’s directors, officers, employees and consultants.

12 - INCOME TAXES

and foreign components of loss before income tax are as follows:

Years Ended December 31,

$ (12,071,603 )

$ (10,768,069 )

(12,056,877 )

(10,754,319 )

tax expense (benefit) consists of the following:

Years Ended December 31,

Current income taxes

Total current income taxes

Deferred income taxes

Total deferred income taxes

the years ended December 31, 2021 and 2020, the domestic and foreign components of loss before income taxes consist of the following

(in thousands):

OF LOSS BEFORE INCOME TAX

International

Loss before income taxes

the years ended December 31, 2021 and 2020, income tax expense (benefit) consists of the following (in thousands):

OF INCOME TAX EXPENSE (BENEFIT)

Current income tax benefit (expense):

Total current income tax benefit (expense)

Deferred income tax benefit (expense):

Total deferred income tax benefit (expense)

Total income tax expense (benefit)

tax expense (benefit) differed from amounts that would result from applying the US statutory income tax rates (21% for the year

ended December 31, 2020 and 2019) to loss before income taxes as follows:

Years Ended December 31,

statutory income tax expense (benefit)

$ (2,507,484 )

$ (2,258,407 )

the years ended December 31, 2021 and 2020, income tax benefit differed from amounts that would result from applying the U.S.

income tax rate of 21.0% to the Company’s loss before income taxes as follows (in thousands):

OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXES

Income tax benefit computed at federal statutory

Permanent differences

State tax expenses

Prior year adjustment to state NOL

Change in valuation allowance

Income tax expense

principal components of deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows:

Total income tax benefit

of December 31, 2021 and 2020, the principal components of deferred tax assets and liabilities were as follows (in thousands):

OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets:

Net operating loss carry forwards

Net operating loss carryforwards

Stock based compensation

1 unchanged sentence

Valuation allowance

Total deferred tax assets after valuation allowance

Total deferred income tax assets after valuation allowance

Deferred tax liabilities:

Property, equipment and intangibles

Total deferred tax liabilities

Total deferred income tax liabilities

Net deferred tax assets and liabilities

assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing

deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception.

objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of

this evaluation, as of December 31, 2021, a valuation allowance of $ 10.8

million has been recorded to record the deferred

tax asset that is more likely than not to be realized.

The net change during the year in the total valuation allowance is an increase

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

- INCOME TAXES (Continued)

assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use

the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred

since inception.

Such objective evidence limits the ability to consider other subjective evidence such as our projections for

future growth.

On the basis of this evaluation, as of December 31, 2020, a valuation allowance of $5,837,312 has been recorded

to record the deferred tax asset that is more likely than not to be realized.

The net change during the year in the total valuation

allowance is an increase of $1,065,812.

Company has federal net operating loss carry forwards of $ 38.4

The Company has various state net operating loss carry forwards.

The determination of the state net operating loss carry forwards is dependent upon the apportionment percentages and state laws

that can change from year to year and impact the amount of such carry forwards.

If federal net operating loss carry forwards are

not utilized, $3,332,471 will begin to expire in 2036.

The remaining federal net operating losses of $19,048,093 have no expiration.

does not believe that there are significant uncertain tax positions in 2020 or 2019.

There are no interest and penalties related

to uncertain tax positions in 2020 or 2019.

The Company also has various state

net operating loss carry forwards.

The determination of the state net operating loss carry forwards is dependent upon the apportionment

percentages and state laws that can change from year to year and impact the amount of such carry forwards.

If federal net operating loss

carry forwards are not utilized, approximately $ 3.3

million will begin to expire

As of December 31, 2021, the remaining

federal net operating losses of $ 35.1

million have no expiration dates.

and state laws impose substantial restrictions on the utilization of net operating loss (“NOL”) carryforwards in the event of an ownership change for income

tax purposes, as defined in Section 382 of the Internal Revenue Code (“IRC”).

Pursuant to IRC Section 382, annual use of

the Company’s NOL carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year

The Company has not completed an IRC Section 382 analysis regarding the limitation of NOL carryforwards.

However, it is possible

that past ownership changes will result in the inability to utilize a significant portion of the Company’s NOL carryforward that

was generated prior to any change of control.

The Company’s ability to use its remaining NOL carryforwards may be further limited

if the Company experiences an IRC Section 382 ownership change in connection with future changes in the Company’s stock ownership.

does not believe that there are significant uncertain tax positions related to the 2021 and 2020 taxable periods.

There are no interest

and penalties related to uncertain tax positions for the years ended December 31, 2021 and 2020.

Company files income tax returns in the United States federal and various state jurisdictions.

The Company is no longer subject

to income tax examinations for federal income taxes before 2016 or for states before 2015.

Net operating loss carryforwards are

subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed

The amount subject to disallowance is limited to the NOL utilized.

Accordingly, the Company may be subject to examination

for prior NOL’s generated as such NOL’s are utilized.

As of December 31, 2020, the Company had not filed its 2018

and 2019 foreign operation tax returns.

THERAPEUTICS INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is no longer subject to income

tax examinations for federal income taxes before 2016 or for states before 2015.

Net operating loss carryforwards are subject to examination

in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute.

The amount subject

to disallowance is limited to the NOL utilized.

Accordingly, the Company may be subject to examination for prior NOL’s generated

as such NOL’s are utilized.

As of December 31, 2021, the Company has filed all appropriate foreign operation tax returns.

13 – COMMITMENTS AND CONTINGENCIES

Company leases office properties under various lease terms.

Rent expense, including real estate taxes and related costs, for the

years ended December 31, 2020 and 2019 aggregated approximately $458,497 and $309,086, respectively.

In connection with some of

the Company’s leases, lease incentives were granted.

Deferred lease incentives are being amortized on a straight-line basis

over the term of the lease.

rental payments over the term of the Company’s leases are as follows:

Year Ending December 31,

December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of

the virus resulted in a world-wide pandemic.

By March 2020, the U.S.

economy had been largely shut down by mass quarantines and government

mandated stay-in-place orders (the “Orders”) to halt the spread of the virus.

Many of these Orders have been relaxed or lifted

in jurisdictions where large portions of the population have been vaccinated, but there is considerable uncertainty about whether the

Orders will need to be reinstated due to the ongoing spread of new variants of COVID-19.

A significant portion of the worldwide population

remains unvaccinated, and uncertainty also exists about whether existing vaccines will be effective as new variants of COVID-19 emerge.

Accordingly, the overall impact of COVID-19 continues to have an adverse impact on global business activities.

of the Company’s VIPs and potential VIPs closed their offices during periods of 2020 as a result of COVID-19, although some remained

open to specifically provide patients with Company products as Company appliances and VIPs were deemed an essential business for health

considerations in many jurisdictions.

In the face of the pandemic and the results potential for revenue reduction, Company management

worked diligently to reduce expenses and maintain revenues during 2020.

While revenue growth flattened in March and April 2020, expenses

were reduced and the Company aggressively expanded its network of healthcare providers familiar with its products by offering online

continuing education courses which introduced many in the medical and dental communities to the Company’s product line.

As businesses

continued to reopen through 2021, the impact of COVID-19 on the Company began to diminish, although the Company is closely monitoring

the potential impact of COVID-19 variants on its business.

Of note, second half of the year, many of the Company’s Canadian VIPs

have not traveled to the US for training in light of travel restrictions.

As of August 9, 2021, the Government of Canada imposed further

restrictions on unvaccinated travelers, which has caused delays with some of the Company’s Canadian VIPs receiving required training

and commencing Vivos Method cases.

quarter 2021 revenue growth was impacted by lower VIP enrollments due largely to the COVID-19 Delta and Omicron variant resurgences.

The Company achieved sales growth despite seeing significant headwinds throughout our core customer base, mostly driven by such COVID-19

variant resurgences in the middle and latter part of the year.

In December 2021, the American Dental Association reported that just 60% of dental practices were open and operating with business as

Another industry source reported 92% of dental practices were struggling to hire or replace hygienists, and 77% reported difficulty

hiring front desk positions.

These challenges across the dental community have impacted both doctor enrollments and patient case starts,

as replacement dental personnel must be trained in The Vivos Method.

THERAPEUTICS INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

world-wide response to the pandemic resulted in a significant downturn in economic activity and there is no assurance that government

stimulus programs will successfully restore the economy to the levels that existed before the pandemic.

In addition, worldwide supply

chain constraints and inflation have emerged as new barriers to long-term economic recovery.

If an economic recession or depression is

sustained, it could have a material adverse effect on the Company’s business as demand for its products could decrease.

current disruption to the Company’s business is expected to be temporary, the long-term financial impact on the Company’s

business cannot be reasonably estimated at this time.

October 2020, the Company received a derivative demand from certain stockholders (the “Derivative Action”) asking the Board

of Directors to review and investigate certain recent actions taken on behalf of the Company.

Upon further investigation, the Company

determined that the assertions of the Derivative Action lacked merit in fact and in law.

However, rather than expending resources investigating

or litigating the claims set forth in the Derivative Action, and in order to proceed with the Company’s December 2020 IPO discussed

in Note 9, the Company entered into a Settlement and Release Agreement in November 2020 without admitting or denying any of the claims

that were asserted.

Pursuant to the Settlement and Release Agreement, all claims under the Derivative Action were withdrawn with prejudice,

and the parties provided each other with full releases of any claims.

consideration of such withdrawal and releases, the parties to the Derivative Action received (i) an aggregate of 300,000 shares of Common

Stock with a fair value of $ 1.8 million, (ii) warrants to purchase an aggregate of 325,000 shares of Common Stock with an estimated fair

value $ 1.5 million, and (iii) reimbursement of up to $ 50 thousand for legal fees incurred.

The warrants to purchase 325,000 shares of

Common Stock are exercisable by paying the exercise price of $ 7.50 per share in cash, and are exercisable for the period from June 2021

until June 2024 when they expire if not previously exercised.

The total costs to settle the Derivative Action amounted to $ 3.3 million,

which is included in the accompanying statement of operations for the year ended December 31, 2020.

Company leases office properties under various lease terms.

Rent expense, including real estate taxes and related costs, for the years

ended December 31, 2021 and 2020 aggregated approximately $ 0.6 million and $ 0.5 million, respectively.

In connection with some of the

Company’s leases, lease incentives were granted.

Deferred lease incentives are being amortized on a straight-line basis over the

term of the lease.

rental payments over the term of the Company’s leases are as follows (in thousands):

OF FUTURE RENTAL PAYMENTS OF LEASES

Years Ending December 31,

Total operating lease payments

2020, the Company entered into new employment agreements with its chief executive officer, chief medical officer and chief financial

The agreements include incentive compensation in the form of cash bonuses and stock options.

The employment agreements

require the continuation of salary and benefits for up to two years in the event the employee is terminated without cause.

August 2018, the Company entered into a consulting agreement with Pro Player Health Alliance, LLC.

In accordance with the agreement,

the consultant will provide business advisory and consulting services in exchange for cash and shares of the Company’s common

These shares will be held in escrow and distributed upon board approval as these services are performed and certain milestones

Total expense recognized for this agreement was approximately $0 and $151,000 for the years ended December 31, 2020 and

2019, respectively.

Following the IPO, the Company issued 40,000 shares of common stock to settle a liability that had been established

and recorded in accrued expenses.

The employment agreements require

the continuation of salary and benefits for up to two years in the event the employee is terminated without cause.

THERAPEUTICS INC.

to Consolidated Financial Statements

September 2017, BioModeling was the subject of a routine FDA audit.

The audit resulted in certain findings that BioModeling was

required to remediate.

On September 27, 2017, BioModeling believed that it had filed its response letter to the audit findings

with the FDA.

In January 2018, BioModeling received notice that the FDA had posted a Warning Letter on its website alleging failure

by BioModeling to reply in a timely manner to the September 2017 audit findings.

The Company and BioModeling immediately contacted

the FDA in January 2018 and resubmitted the September 27, 2017 audit response letter.

In April 2018, the FDA completed a second

audit of BioModeling which focused on the September 2017 response letter and the Warning Letter.

The Company believes that this

issue has been satisfactorily resolved although no definitive statement to that effect has been made by the FDA.

The audit resulted in certain findings that BioModeling was required

to remediate.

On September 27, 2017, BioModeling believed that it had filed its response letter to the audit findings with the FDA.

January 2018, BioModeling received notice that the FDA had posted a Warning Letter on its website alleging failure by BioModeling to

reply in a timely manner to the September 2017 audit findings.

The Company and BioModeling immediately contacted the FDA in January 2018

and resubmitted the September 27, 2017 audit response letter.

In April 2018, the FDA completed a second audit of BioModeling which focused

on the September 2017 response letter and the Warning Letter.

The Company believes that this issue has been satisfactorily resolved although

no definitive statement to that effect has been made by the FDA.

Company has a defined contribution employee benefit plan under section 401(k) of the Code (the “401(k) Plan”).

Plan covers all eligible U.S.

employees that are entitled to participate at the beginning of the first full quarter following commencement

of employment.

The Company matches the entire amount of the employee contributions up to 3% of the participating employee’s compensation,

and then 50 % of employee contributions between 4% and 5% of the participating employee’s compensation.

These matching contributions

vest for 100 % when the matching contributions are made.

Total contributions to the 401(k) Plan amounted to $ 0.4 million and $ 0.3 million

for the years ended December 31, 2021 and 2020, respectively.

14 – NET LOSS PER SHARE OF COMMON STOCK

and diluted net loss per share of Common Stock (“EPS”) is computed by dividing (i) net loss, as adjusted for beneficial conversion

features and accretion related to Preferred Stock (the “Numerator”), by (ii) the weighted average number of common shares

outstanding during the period (the “Denominator”).

calculation of diluted EPS is also required to include the dilutive effect, if any, of stock options, unvested restricted stock awards,

convertible debt and Preferred Stock, and other Common Stock equivalents computed using the treasury stock method, in order to compute

the weighted average number of shares outstanding.

For the years ended December 31, 2021 and 2020, all Common Stock equivalents were

antidilutive.

below are the calculations of the Numerators and the Denominators for basic and diluted EPS (dollars in thousands, except per share amounts):

SCHEDULE OF COMPUTATION OF ANTI-DILUTIVE WEIGHTED-AVERAGE SHARES OUTSTANDING

Calculation of Numerator:

Warrant beneficial conversion feature

( 3,598 ) (1)

Accretion of Series A Preferred Stock redemption amount

( 2,333 ) (2)

Loss applicable to common stockholders

Calculation of Denominator:

Weighted average number of shares of Common Stock outstanding

Net loss per share of Common Stock (basic and diluted)

the beneficial conversion feature related to warrants issued in settlement as discussed in Note 9.

accretion of the Series A Preferred Stock redemption premium discussed in Note 8.

holder of the Series A Preferred Stock discussed in Note 8 was entitled to participate in Common Stock dividends, if and when declared,

on a one-to-one per-share basis.

Accordingly, in any periods in which the Company has net income, earnings per share was required to

be computed using the two-class method whereby the pro rata dividends distributable to the holder of Series A Preferred Stock would have

been deducted from earnings applicable to common stockholders, regardless of whether a dividend was declared for such undistributed earnings.

For the years ended December 31, 2021 and 2020, the Company incurred a net loss and, accordingly, there were no undistributed earnings

to allocate under the two-class method.

THERAPEUTICS INC.

to Consolidated Financial Statements

of December 31, 2021, the following potential Common Stock equivalents were excluded from the computation of diluted net loss per share

of Common Stock since the impact of inclusion was antidilutive (in thousands):

SCHEDULE OF OUTSTANDING COMMON STOCK SECURITIES NOT INCLUDED IN THE COMPUTATION OF DILUTED NET LOSS PER SHARE

Common stock warrants

Common stock options

15 - FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

Value Measurements

value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction

between market participants on the measurement date.

When determining fair value, the Company considers the principal or most advantageous

market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability.

applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization

within the hierarchy upon the lowest level of input that is available and significant to the measurement of fair value:

1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date

2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through

market collaboration, for substantially the full term of the asset or liability

3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available,

thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date

of December 31, 2021 and 2020, the fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable,

and accrued liabilities approximated their carrying values due to the short-term nature of these instruments.

Due to the U.S.

guarantee and the otherwise unique terms of the PPP Loan discussed in Note 7, it was not possible to determine fair value of this debt

Fair Value Measurements

the years ended December 31, 2021 and 2020, the Company did not have any recurring measurements for the fair value of assets and liabilities.

Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events

or change in circumstances that caused the transfer.

During the years ended December 31, 2021 and 2020, the Company had no transfers

of its assets or liabilities between levels of the fair value hierarchy.

Concentrations

instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and

accounts receivable.

The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions.

deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits.

of December 31, 2021, the Company had cash and cash equivalents with two financial institutions in the United States with an aggregate

balance of $ 24.0 million.

As of December 31, 2020, the Company had cash and cash equivalents with two financial institutions in the United

States with an aggregate balance of $ 18.2 million.

The Company has never experienced any losses related to its investments in cash, cash

equivalents and restricted cash.

THERAPEUTICS INC.

to Consolidated Financial Statements

credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer

base and their dispersion across different geographies and industries.

The Company performs ongoing credit evaluations on certain customers

and generally does not require collateral on accounts receivable.

The Company maintains reserves for potential bad debts.

16 - SUBSEQUENT EVENTS

January 2021, the Company paid off the outstanding balance of a convertible note payable (see Note 7) issued in connection with

an acquisition in 2018.

$25,000 in principal amount on the convertible note plus interest of $4,741 was paid.

January 2021, $1,500,000 in cash was paid to our founder and chief medical officer to fully redeem the remaining Series A preferred

stock he held and had redeemed in December 2020.

This amount was recorded in accounts payable at December 31, 2020.

March 2021, the Company issued 145,000 stock options to certain employees and an officer.

February 7, 2022 the Company filed a Form S-3 with the Securities and Exchange Commission, or SEC, utilizing a “shelf” registration

Under this shelf registration process, the Company may offer and sell, either individually or in combination, in one or more

offerings, any of the securities described within the Form S-3, for total gross proceeds of up to $ 75 million.

February 25, 2022 the Company issued 290,000 stock options to certain employees and officers with an exercise price of $ 3.27 per share,

one-fifth vested on the date of grant, and one-fifth vests annually through February 25, 2027.

Additionally, the Company issued warrants

to purchase 80,000 shares of the Company’s common stock to certain consultants for sales consulting services with an exercise price

of $ 3.27 per share, vesting monthly over one year term of the agreement.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data