What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-03-31 · 766 added, 881 removed, 415 unchanged (80% of the section changed)

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and Subsidiaries

on the Financial Statements

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

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”).

on the Consolidated Financial Statements

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

and Subsidiaries (the “Company”) as

of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the

years in the two-year period ended December 31, 2022, 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

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December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Company’s Ability to Continue as a Going Concern

financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 2 to the

financial statements, the Company’s significant operating losses raise substantial doubt about the Company’s

ability to continue as a going concern.

Management’s evaluation of the events and conditions and management’s plans in

regarding these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

Company’s management is responsible for these financial statements.

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Current assets

Cash and cash

Accounts receivable, net

of allowance of $ 180 and $ 508 , respectively

Current portion of note

receivable from related party

improvement allowance receivable

expenses and other current assets

Cash and cash equivalents

Accounts receivable, net of allowance of $ 712 and $ 180 , respectively

Tenant improvement allowance receivable

Prepaid expenses and other current assets

Total current assets

Long-term assets

Property and equipment,

Note receivable from related

party, net of current portion

Property and equipment, net

Operating lease right-of-use asset

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’

Deposits and other

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

Payable to related party

for redemption of Series A Preferred Stock

Accrued expenses

Contract liabilities

Current portion of long-term

Current portion of deferred

portion of lease incentive liability

Total current liabilities

Current portion of contract liabilities

Current portion of long-term debt

Current portion of operating lease liability

Current portion of deferred rent

Current portion of lease incentive liability

Other current 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

Contract liabilities, net of current portion

Operating lease

liability, net of current portion

Deferred rent, net of current portion

Lease incentive liability, net of current portion

Total liabilities

Commitments and contingencies (Note 13)

Stockholders’ equity

Preferred Stock, $ 0.0001

par value per share.

Preferred Stock, $ 0.0001 par value per share.

Authorized 50,000,000 shares;

no shares issued and outstanding

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

issued and outstanding

23,012,119 shares as of December 31,2022 and December 31, 2021

Additional paid-in capital

stockholders’ deficit Total stockholders’ equity

liabilities and stockholders’ deficit Total liabilities and stockholders’ equity

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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Product revenue

Total revenue

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

Service revenue

Cost of sales (exclusive of depreciation and amortization shown separately

Operating expenses

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Sales and marketing

Litigation settlement

Impairment loss

and amortization

operating expenses

Depreciation and amortization

Total operating expenses

Operating loss

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Other expense

PPP loan forgiveness

Loss before income taxes

Income tax expense

Warrant beneficial conversion feature

Preferred stock accretion

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)

Net loss attributable to common stockholders

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

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

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

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Balances, December 31, 2020

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

In follow-on public offering, net of issuance costs

To consultants for services

For settlement of liability

For conversion of convertible debt

In litigation settlement

Fair value of warrants issued in litigation

Exercise of stock options

Fair value of warrants issued:

To consultants for services

In business combination

For purchase of assets

Stock-based compensation expense

Series A preferred stock accretion

Balances, December 31, 2021

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:

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Ended December 31, 2022 and 2021

CASH FLOWS FROM OPERATING

Adjustments to reconcile

net loss to net cash used in operating activities:

Stock-based compensation

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

Loss on disposal of assets

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

Fair value of warrants issued for services

Common stock issued for services

Accretion of discount on note receivable

Forgiveness of indebtedness income

Impairment on note receivable

Common stock issued in

litigation settlement

Fair value of warrants

issued in litigation settlement

Changes in operating assets

and liabilities:

Changes in operating assets and liabilities:

Accounts receivable

Deferred rent and lease

incentive liability

Operating lease assets and

liabilities, net

Tenant improvement allowance

Prepaid expenses and other

current assets

Prepaid expenses and other current assets

Accounts payable

Accrued expenses

cash used in operating activities

CASH FLOWS FROM INVESTING

of property and equipment

Other liabilities

Contract liability

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions 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

Principal collections under note receivable

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Redemption of preferred stock

Payments for issuance costs

Principal payments on debt

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:

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest

Cash paid for income taxes

SUPPLEMENTAL DISCLOSURE

OF NON-CASH INVESTING AND

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

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

Capital expenditures included in accounts payable

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

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

to facilitate this merger.

to facilitate this share exchange combination transaction.

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.

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.

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 common stock of First Vivos were exchanged for newly issued shares

of common stock and warrants of Vivos, the legal acquirer.

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

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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.

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

historical financial statements and recorded at their historical carrying amounts.

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

as used herein, the term “the Company,” “we,” “us.” “our” and similar terminology refer

to Vivos Therapeutics, Inc., a Delaware corporation and its consolidated subsidiaries.

As used herein, the term “Common Stock”

refers to the common stock, $ 0.0001 par value per share, of Vivos Therapeutics, Inc., a Delaware corporation.

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.

technology and related treatments and training 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 in adults.

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.

Dentists enrolled in the VIP Program are referred to as “VIPs”.

addition to providing VIPs with appliances for use with their patients, the Company offers other products and services to VIPs, including

(i) SleepImage ® home sleep apnea test rings (“SleepImage”), which can be leased to VIPs for use with patients;

(ii) training and continuing education at the Company’s Vivos Institute training center, (iii) the Billing Intelligence Service

(“BIS”), a subscription-based billing solution for VIPs, (iv) the Company’s Medical Integration Division (“MID”),

which manages independent medical practices under management and development agreement which pays the Company from six ( 6 %)

to eight ( 8 %)

percent of all net revenue from sleep-related services as well as development fees and (v) MyoCorrect, a service through which VIPs can

provide orofacial myofunctional therapy (“OMT”) to patients via telemedicine technology (“MyoCorrect”).

of Presentation and Consolidation

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

First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC 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

accompanying condensed consolidated financial statements, which include the accounts of the Company and its wholly owned

subsidiaries (BioModeling, First Vivos, Vivos Therapeutics (Canada) Inc., Vivos Management and Development, LLC, Vivos Del Mar

Management, LLC, Vivos Modesto Management, LLC, Vivos Therapeutics DSO LLC, a Colorado limited liability company, and Vivos Airway

Alliances, LLC, a Colorado limited liability company), 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 Status

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

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

THERAPEUTICS INC.

to Consolidated Financial Statements

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

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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.

A significant majority of the Company’s revenues are generated

from enrolling dentists in the VIP program and sales of products and services to VIPs.

Revenue is recognized when control of the products

or services is transferred to customers (i.e., VIP dentists ordering such products or services for their patients) in a way that reflects

the consideration the Company expects to be entitled to in exchange for those products and services.

the guidance of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”)

and the applicable provisions of ASC Topic 842, Leases (“ASC 842”) , the

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

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

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.

Enrollment Revenue

Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above.

determined that a contract exists (a VIP enrollment agreement is executed and payment is received), service revenue related to VIP enrollments

is recognized when the underlying services are performed.

The price of the standard VIP enrollment that the VIP pays upon execution of

the contract is significant, running at approximately $ 31,500 , with different entry levels from $ 2,500 to $ 50,000 .

Unearned revenue reported on the balance sheet as contract liability represents

the portion of fees paid by VIP customers for services that have not yet been performed as of the reporting date and are recorded as

the service is rendered.

The Company recognizes this revenue as performance obligations are met.

Accordingly, the contract liability

for unearned revenue is a significant liability for the Company.

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 performance obligations.

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.

to Consolidated Financial Statements

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.

and dental professionals in a one-year program (later known as the VIP Program) which includes training in a highly personalized, deep

immersion workshop format which provides the VIP dentist access to a 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 are typically

provided within the first 30 to 45 days that a VIP enrolls.

Ongoing support and additional training are provided throughout the year and

includes access to the Company’s proprietary Airway Intelligence Service (“AIS”) which provides the VIP 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, a VIP may pay for seminars and training courses that meet the Provider’s

needs on a subscription or a course-by-course basis.

enrollment fees include multiple performance obligations which vary on a contract by contract basis.

The performance obligations included

with enrollments may include sleep apnea rings, a six or twelve months BIS subscription, a marketing package, lab credits and the right

to sell our appliances.

The Company allocates the transaction price of a VIP enrollment contract to each performance obligation under

such contract using the relative standalone selling price method.

The relative standalone price method is based on the proportion of

the standalone selling price of each performance obligation to the sum of the total standalone selling prices of all the performance

obligations in the contract.

right to sell is similar to a license of intellectual property because without it the VIP cannot purchase appliances from the Company.

The right to sell performance obligation includes the Vivos training and enrollment materials which prepare dentists for treating their

patients using The Vivos Method.

the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, the Company believes that it

is appropriate to estimate the standalone selling price of this performance obligation using the residual method.

As such, the observable

prices of other performance obligations under a VIP contract will be deducted from the contract price, with the residual being allocated

to the right to sell performance obligation.

Company uses significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right

The Company has determined that VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail

to participate in the VIP program long term.

Since the beginning of the VIP program, just under one-third of new VIP members fall into

this category, and the revenue allocated to the right to sell for those VIPs is accelerated at the time in which it becomes remote that

a VIP will continue in the program.

Revenue is recognized in accordance with each individual performance obligation unless it becomes

remote the VIP would continue, at which time the remainder of review is accelerated and recognized in the following month.

who complete training typically remain active for a much longer period, and revenue from the right to sell for those VIPs is recognized

over the estimated period of which those VIPs will remain active.

Because of various factors occurring year to year, the Company has

estimated customer life for each year a contract is initiated.

The estimated customer lives are calculated separately for each year and

have been estimated at 15 months for 2020, 14 months for 2021 and 18 months for 2022.

The right to sell is recognized on a sum of the

years’ digits method over the estimated customer life for each year as this approximates the rate of decline in VIPs purchasing

behaviors we have observed.

Service Revenue

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

which includes the Company’s AireO2 medical billing and practice management software.

Revenue for these services is recognized

monthly during the month the services are rendered.

the Company offers its VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos

The program includes packages of treatment sessions that are sold to the VIPs, and resold to their patients.

Revenue for MyoCorrect

services is recognized over the 12-month performance period as therapy sessions occur.

of Revenue to Performance Obligations

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

obligation based on relative fair values.

These fair values approximate the prices for the relevant performance obligation that would

be charged if those services were sold separately, and are recognized over the relevant service period of each performance obligation.

After allocation to the performance obligations, any remainder is allocated to the right to sell under the residual method and is recognized

over the estimated customer life.

In general, revenues are separated between durable medical equipment (product revenue) and education

and training services (service revenue).

of Discounts and Promotions

time to time, the Company offers various discounts to its customers.

These include the following:

Discount for cash paid in full

Conference or trade show incentives

Negotiated concessions on annual enrollment fee

for cash paid in full

or trade show incentives, such as subscription enrollment into the SleepImage ® home sleep test program, or free trial

period for the SleepImage ® lease program

concessions on annual enrollment fee

Credits/rebates

to be used towards future product orders such as lab rebates

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

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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.

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.

(known as appliances or systems) to its customers, the VIP dentists.

Revenue from the appliance sale is recognized when control of product

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

VIP in turn charges the VIP’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 VIPs

for the sale of the appliance and is not involved in the sale of the products and services from the VIP to the VIP’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.

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

Company utilizes its network of certified VIPs throughout the United States and in some non-U.S.

jurisdictions 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, treatments, processes and procedures and under the direction and specific

instruction of the Company, ships the appliance to the VIP 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 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 VIP the contracted price for the appliance which

is recorded as product revenue.

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

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

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(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.

Revenue is recognized differently for Company owned centers than for revenue from VIPs.

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.

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.

Company offers certain dentists (known as Clinical Advisors) discounts from standard VIP pricing.

This is done to help encourage Clinical

Advisors, who help the VIPs with technical aspects of the Company’s products, to purchase Company products for their own practices.

In addition, from time to time, the Company offers credits to incentivize VIPs to adopt the Company’s products and increase case

volume within their practices.

These performance obligations are recorded as revenue in future periods over the life of the credit.

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

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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;

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

of customer life and breakage related to recognizing revenue for VIP contracts, notes receivable, impairment of goodwill and long-lived

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.

valuation assumptions for stock options, warrants and equity

instruments issued for goods or services;

deferred income taxes and the related valuation allowances;

and the evaluation and measurement

of contingencies.

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

However, the Company has made

appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

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

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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

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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.

to Consolidated Financial Statements

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.

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

assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, LLC (“MyoCorrect LLC”), from whom the

Company acquired certain assets related to its OMT service in March 2021 and (ii) Lyon Management and Consulting, LLC and its affiliates

(“Lyon Dental”), from whom the Company acquired certain medical billing and practice management software, licenses and contracts

in April 2021 (including the software underlying AireO2) for work related to the Company’s acquired 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 MyoCorrect

LLC and Lyon Dental for patents and intellectual property are amortized over the life of the underlying patents, which approximates 15

is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.

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.

We test for impairment annually as of December 31.

There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31,

2022 and accordingly, no impairment was required.

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.

review and evaluate 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.

We measure 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

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

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 us 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.

There were no quantitative or qualitative indicators of impairment that occurred for the year ended December 31, 2022 and accordingly,

no impairment was required.

Offering Costs

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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.

Company accounted for its U.S.

Small Business Administration’s (“SBA”) Payroll Protection Program (“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

recorded a gain on the forgiveness of the loan in the quarter ended March 31, 2022 under non-operating income (expense).

and Gain Contingencies

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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

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.

determines the expected price volatility based on the historical volatilities of shares of the Company’s peer group as the

Company does not have a sufficient trading history for its Common Stock.

Industry peers consist of several public companies in the

bio-tech industry similar to the Company in size, stage of life cycle and financial leverage.

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 the Company’s own stock price becomes available, or unless circumstances change such that the

identified companies are no longer similar to the Company, 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.

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 and

cancellations in the period that the forfeiture and cancellations occurs, rather than estimating the number of awards that are not

expected to vest in accounting for stock-based compensation.

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.

Research and development costs incurred were less than $ 0.2 million for years ended December 31,

2022 and 2021.

leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability - current

and non-current portion in our balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease

liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

at the lease commencement date based on the present value of lease payments over the lease term.

In determining the present value of

lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit

in the lease is not readily determinable.

The determination of our incremental borrowing rate requires management judgment based on information

available at lease commencement.

The operating lease ROU assets also include adjustments for prepayments, accrued lease payments and

exclude lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we

will exercise such options.

Operating lease cost is recognized on a straight-line basis over the expected lease term.

Lease agreements

entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component.

Lease agreements with a noncancelable term of less than 12 months are not recorded on our balance sheets.

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

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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, 2022.

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.

June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses

Measurement of Credit Losses on Financial Instruments.

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

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 losses.

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

The adoption of this standard

will 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

February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (ASC 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.

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 of $ 1.9 million and a right-of-use (ROU) asset of approximately $ 1.2 million, while eliminating deferred rent of approximately $ 0.3 million and tenant improvement allowance of approximately

$ 0.4 million.

We applied the new lease standard to all open leases as of the adoption date, with no retrospective adjustments to prior comparative

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

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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

ASU 2019-12 was effective for the Company

beginning in the first quarter of 2022.

The adoption of this standard did not have a material impact on the Company’s consolidated

financial statements.

2 - LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN

financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of

the Company as a going concern.

of December 31, 2022, the Company had an accumulated deficit of approximately $ 79.5 million.

As of December 31, 2022, the Company incurred

a net loss of approximately $ 23.8 million.

Net cash used in operating activities amounted to approximately $ 19.6 million for the year

ended December 31, 2022.

As of December 31, 2022, the Company had total liabilities of approximately $ 8.9 million.

of December 31, 2022, the Company had approximately $ 3.5 million in cash and cash equivalents, which may not be sufficient to fund the

operations and strategic objectives of the Company over the next twelve months from the date of issuance of these financial statements.

Without additional financing, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

Company will be required to obtain additional financing and expects to satisfy its cash needs primarily from the issuance of equity securities

or indebtedness in order to sustain operations until it can achieve profitability and positive cash flows, if ever.

There can be no assurances,

however, that adequate additional funding will be available on favorable terms, or at all.

If such funds are not available in the future,

the Company may be required to delay, significantly modify or terminate its operations, all of which could have a material adverse effect

on the Company.

Company does not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely

to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital

3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES

the years ended December 31, 2022 and 2021, 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

SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMERS

Year Ended December 31,

Product revenue:

Appliance sales to VIPs

product revenue

Center revenue

Total product revenue

Service revenue

Billing intelligence services

Management service revenue

(includes MID)

Management service revenue (includes MID)

Myofunctional therapy services

Sponsorship/seminar/other

service revenue

Total service revenue

Total 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

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the services are performed and the performance obligations completed.

Revenue disclosed above for year ended December 31, 2022, includes

a cumulative adjustment from prior years of approximately $ 0.1 million increase.

disclosed above for the year ended December 31, 2022, includes a cumulative adjustment from prior years of approximately $ 0.4 million

in Contract Liabilities

key components of changes in contract liabilities for the years ended December 31, 2022 and 2021 are as follows (in thousands):

OF CONTRACT LIABILITY

Balance at beginning of year

SCHEDULE OF CONTRACT LIABILITY

Beginning balance, January 1

New contracts, net of cancellations

Revenue recognized

at end of year

THERAPEUTICS INC.

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.

Ending balance, December 31

portion of deferred revenue is approximately $ 2.9 million which is expected to be recognized over the next 12 months from the date of

the period presented.

costs for product deliveries to customers are expensed as incurred and totaled approximately $ 0.1 million and $ 0.4 million for the years

ended December 31, 2022 and 2021, respectively.

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

of December 31, 2022 and 2021, property and equipment consist of the following (in thousands):

OF PROPERTY AND EQUIPMENT

SCHEDULE OF PROPERTY AND EQUIPMENT

Furniture and equipment

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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.

Net Property and equipment

improvements relate to the Vivos Institute (the Company’s 15,000 square foot facility where the Company provides advanced post-graduate

education and certification to dentists, dental teams, and other healthcare professionals in a live and hands-on setting) and the two

Company-owned dental centers in Colorado.

Total depreciation and amortization expense was $ 0.6 million and $ 0.4 million for the years

ended December 31, 2022 and 2021, 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

of $ 2.8 million as of December 31, 2022 and 2021 consist of the following acquisitions (in thousands):

SCHEDULE OF GOODWILL

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

Total goodwill

described in Note 1 above, on August 16, 2016, BioModeling entered into the SEA with First Vivos and Vivos.

The transaction was accounted

for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes.

As a result of the transaction, we identified intangible assets of $ 2.1 million and goodwill (including the acquired workforce) of $ 2.6

million was recorded in accounting for the reverse acquisition.

November 2018, the Company entered into an asset purchase agreement with Empowered Dental Lab, LLC, a Utah limited liability company

(“Empowered Dental”), under which the Company agreed to purchase certain inventory and assets from Empowered Dental in exchange

for total consideration of $ 75,000 .

As a result of the transaction, goodwill of $ 52,000 was recognized in accounting for this transaction

as a business combination.

April 14, 2021, the Company acquired certain assets of Lyon Dental.

The business acquisition allowed the Company to expand and enhance

its current medical billing practice services under the name AireO2, which services are provided through the Company’s BIS offering.

The consideration transferred includes $ 0.2 million in cash and a warrant to purchase 25,000 shares of Common Stock 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.

of December 31, 2022 and 2021, identifiable intangible assets were as follows (in thousands):

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Less accumulated amortization

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

Net intangible assets

expense of identifiable intangible assets was less than $ 0.1 million and $ 0.3 million for the years ended December 31, 2022 and 2021,

respectively.

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

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION OF IDENTIFIABLE INTANGIBLE ASSETS

As of December 31,

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

SCHEDULE OF ACCRUED EXPENSES

Accrued payroll

1 unchanged sentence

Lab rebate liabilities

accrued liabilities

THERAPEUTICS INC.

to Consolidated Financial Statements

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.

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

Total accrued expenses

May 8, 2020, the Company received approximately $ 1.3 million in loan funding through the PPP that was part of the Coronavirus Aid, Relief,

and Economic Security Act (the “CARES Act”) signed into law in March 2020.

The interest rate on the loan was 1.00 % per year

and was scheduled to mature 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.

to Consolidated Financial Statements

On January 21, 2022,

the PPP loan was forgiven by the SBA in its entirety.

As a result, the Company recorded other income on the forgiveness of the loan in

the first quarter of 2022.

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.

to Consolidated Financial Statements

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.

At December 31, 2020, all previously

issued shares of Preferred Stock had been redeemed or converted to shares of Common Stock.

As of December 31, 2022, the Company’s

Board of Directors has authority to designate up to an additional 50 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

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 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.

Company is authorized to issue 200,000,000 shares of Common Stock.

Holders of Common Stock are entitled to one vote for each share held.

The Company’s Board of Directors may declare dividends payable to the holders of Common 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.

shares were reserved for future issuance for Common Stock 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 of Common Stock 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 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.

to Consolidated Financial Statements

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

which shares were reserved for future issuance for Common Stock 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

originally approved a total reserve of 333,334 shares of Common Stock for issuance under the 2019 Plan.

At each of the Company’s

annual meeting of stockholders held in 2020 and 2021, the Company’s stockholders approved amendments to the 2019 Plan to increase

the number of shares of Common Stock available for issuance thereunder by an aggregate of 2,033,333 shares of Common Stock such that,

after such amendments, and prior to any grants, 2,366,667 shares of Common Stock were available for issuance.

the years ended December 31, 2022 and 2021, the Company issued stock options to purchase 1,974,168 and 969,000 shares of Common Stock

at a weighted average exercise price of $ 1.01 and $ 5.23 per share respectively, to certain members of the Board of Directors, employees

and consultants.

The stock options allow the holders to purchase shares of Common Stock at prices between $ 0.48 and $ 7.50 per share.

Options for the purchase of 1,206,348 shares of Common Stock expired as of December 31, 2022.

The following table summarizes all stock

options as of December 31, 2022 and 2021 (shares in thousands):

SCHEDULE OF STOCK OPTIONS

Outstanding, beginning of year

Outstanding, end of year

Vested, end of year

Forfeited/cancelled

Outstanding, at December 31

Exercisable, at December 31

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

the respective exercise dates as of December 31, 2021, the aggregate intrinsic value of shares of Common Stock issued upon exercise

of stock options amounted to $ 0.6 million.

of December 31, 2022 and 2021, the aggregate intrinsic value of stock options outstanding was $ 0 .

of December 31, 2022 and 2021, the aggregate intrinsic value of exercisable stock options was $ 0 .

the years ended December 31, 2022, and 2021, the valuation assumptions for stock options granted under 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

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE

Grant date closing price of common stock

2 unchanged sentences

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

on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the year ended

December 31, 2022 and 2021 was $ 1.01 and $ 5.23 , respectively.

3 unchanged sentences

was approximately $ 3.0 million, which will be recognized over the weighted average remaining term of 4.1 years as of December 31, 2022.

THERAPEUTICS INC.

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

following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the years ended December

31, 2022 and 2021 (shares in thousands):

SCHEDULE 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

Outstanding, December 31

Exercisable, December 31

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

February, 2022, the Company granted warrants to consultants in exchange for marketing, business development, investor relations and

communication services.

Warrants issued in February 2022 provide for the purchase of an aggregate of 80,000 shares of Common Stock

and are exercisable at $ 3.27 per share.

The aggregate fair value of the February warrants amounted to $ 0.1 million which is being

recognized over the period that the services are provided.

In May, 2022, the Company granted warrants to consultants in exchange

for marketing and business development services.

Warrants issued in May 2022 provide for the purchase of an aggregate of 130,000

shares of Common Stock and are exercisable at $ 1.29 per share.

The aggregate fair value of the May warrants amounted to $ 0.1 million

which is being recognized over the period that the services are provided.

Warrants issued in December 2022 provide for the purchase

of an aggregate of 850,000 shares of Common Stock and are exercisable at $ 0.48 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.

The aggregate fair value of the December

warrants amounted to $ 0.2 million which is being recognized over the period that the services are provided or according to the vesting

For the year ended December 31, 2022, the Company recognized expense of $ 0.7 million.

of December 31, 2022 and 2021, 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

of December 31, 2022 and 2021, the aggregate intrinsic value of warrants exercisable was $ 0 .

the year ended December 31, 2022, the valuation assumptions for warrants issued 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

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE

Measurement date closing price of Common Stock (1)

5 unchanged sentences

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 .

This agreement terminated on April 30, 2020.

As of December 31, 2020, the Company owed Upeva,

approximately $ 10,000 .

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.

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.

Such agreements contained customary

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 $ 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.

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.

the years ended December 31, 2022 and 2021, options for the purchase of 3,619,154 and 969,000 , respectively, of Common Stock were granted

to the Company’s directors, officers, employees and consultants.

12 - INCOME TAXES

1 unchanged sentence

(in thousands):

OF LOSS BEFORE INCOME TAX

SCHEDULE OF LOSS BEFORE INCOME TAX

International

1 unchanged sentence

the years ended December 31, 2022 and 2021, income tax expense (benefit) consists of the following (in thousands):

OF INCOME TAX EXPENSE (BENEFIT)

SCHEDULE OF INCOME TAX EXPENSE (BENEFIT)

Current income tax benefit (expense):

5 unchanged sentences

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

OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXE S

Income tax (benefit) computed at federal statutory rate

PPP loan forgiveness

Other permanent differences

State tax expenses

Prior year adjustment to state NOL

Non-qualified stock option cancellations

Change in valuation allowance

1 unchanged sentence

of December 31, 2022 and 2021, the principal components of deferred tax assets and liabilities were as follows (in thousands):

OF DEFERRED TAX ASSETS AND LIABILITIES

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets:

1 unchanged sentence

Stock based compensation

Lease liability

Property, equipment and intangibles

Total deferred tax assets before valuation allowance

5 unchanged sentences

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.

to Consolidated Financial Statements

Company has federal net operating loss carry forwards of $ 38.4

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

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

Such objective evidence limits the ability to consider other subjective evidence such as our projections for future

On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $ 15.6

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 of $ 4.8

Company has federal net operating loss carry forwards of $ 58.2 million.

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 in 2036 .

As of December 31, 2022, the remaining federal net operating losses of $ 54.8

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.

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”).

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 period.

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 2022 and 2021 taxable periods.

16 unchanged sentences

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.

to Consolidated Financial Statements

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.

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.

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.

mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, now widely acknowledged to have been generally

ineffective, and in many ways, harmful.

As a result, nearly all of these Orders have been relaxed or lifted, but there is considerable

uncertainty about whether the Orders will be reinstated should a new COVID-19 variant or entirely new virus emerge.

Our business was materially impacted by COVID-19 in 2020 and to some extent

in 2021due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential

VIPs having to close their offices.

The impact of COVID-19 on our business diminished somewhat as 2022 progressed.

However, it appears

that the latest COVID-19 subvariants evoke generally milder symptoms and do not pose the same health or economic threat as previous strains.

However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to

negatively impact our VIP dental practices and our revenue across the U.S.

and Canada during 2022.

We believe new enrollments during the

fourth quarter of 2022 were negatively impacted by the ongoing overall workforce uncertainties in the dental market.

As such, the long-term

financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated at this time.

such, the long-term financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated

at this time.

and War in Ukraine

Company believes the U.S.

has entered a period of inflation which has increased (and may continue to increase) the Company and its suppliers’

costs as well as the end cost of the Company’s products to consumers.

To date, the Company been able to manage inflation risk without

a material adverse impact on its business or results of operations.

However, inflationary pressures (including increases in the price

of raw material components of the Company’s appliances) made it necessary for the Company to adjust its standard pricing for its

appliance products effective May 1, 2022.

The full impact of such price adjustments on sales or demand for the Company’s products

is not fully known at this time and may require the Company to adjust other aspects of its business as it seek to grow revenue and, ultimately,

achieve profitability and positive cash flow from operations.

addition, worldwide supply chain constraints due in part to Russia’s invasion of Ukraine in February 2022, have emerged as new

barriers to long-term economic recovery.

conditions could cause an economic recession or depression to commence, and if such recession or depression is sustained, it could have

a material adverse effect on the Company business as demand for its products could decrease.

Such conditions have also had, and may continue

to have, an adverse effect on the capital markets, with public stock price decreases and volatility, which could make it more difficult

for the Company to raise needed capital at the appropriate time.

Company has entered into various operating lease agreements for certain offices, medical facilities and training facilities.

have original lease periods expiring between 2022 and 2029.

Most leases include an option to renew and the exercise of a lease renewal

option typically occurs at the discretion of both parties.

For purposes of calculating operating lease liabilities, lease terms are deemed

not to include options to extend the lease until it is reasonably certain that the Company will exercise that option.

January 2017, the Company entered into a commercial lease agreement for 2,220 square feet of office in Johnstown, CO that was to commence

on March 1, 2018 and end February 28, 2025.

As of January 1, 2022, the Company recorded an operating lease right of use asset and lease

liabilities of $ 0.3 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s

incremental borrowing rate of 6.0 %.

May 2018, the Company entered into a commercial lease agreement for 3,643 square feet of office in Highlands Ranch, CO that was to commence

on November 1, 2018 and end on January 1, 2029.

As of January 1, 2022, the Company recorded an operating lease right of use asset and

lease liabilities of $ 0.8 million in the consolidated balance sheet representing the present value of minimum lease payments using the

Company’s incremental borrowing rate of 7.3 %.

October 2020, the Company entered into a commercial lease agreement for 4,800 square feet of office in Orem, Utah that was to commence

on January 1, 2021 and end on December 1, 2025.

As of January 1, 2022, the Company recorded an operating lease right of use asset and

lease liabilities of $ 0.6 million in the consolidated balance sheet representing the present value of minimum lease payments using the

Company’s incremental borrowing rate of 6.6 %.

April 2019, the Company entered into a commercial lease agreement for 3,231 square feet of office in Highlands Ranch, CO that was to

commence on May 1, 2019 and end on May 31, 2022.

As of January 1, 2022, the Company recorded an operating lease right of use asset and

lease liabilities of less than $ 0.1 million in the consolidated balance sheet representing the present value of minimum lease payments

using the Company’s incremental borrowing rate of 6.7 %.

April 2019, the Company entered into a commercial lease agreement for 14,732 square feet of office in Denver, CO that was to commence

on September 23, 2020 and end on March 22, 2028.

As of January 1, 2022, the Company recorded an operating lease right of use asset and

lease liabilities of less than $ 1.4 million in the consolidated balance sheet representing the present value of minimum lease payments

using the Company’s incremental borrowing rate of 7.1 %.

April 2022, the Company entered into a commercial lease agreement for 8,253 square feet of office in Littleton, CO that was to commence

in May 16, 2022 and end on November 15, 2027.

As of May 16, 2022, the Company recorded an operating lease right of use asset and lease

liabilities of less than $ 1.5 million in the consolidated balance sheet representing the present value of minimum lease payments using

the Company’s incremental borrowing rate of 10.6 %.

of December 31, 2022 and 2021, the components of lease expense are as follows (in thousands):

SCHEDULE OF LEASE EXPENSE

Operating lease cost

Total net lease cost

expense is recognized on a straight-line basis over the lease term.

Lease expense, including real estate taxes and related costs, for the years

ended December 31, 2022 and 2021 aggregated approximately $ 0.5

million, and $ 0.6

million respectively.

This is included under general and administrative expense.

of December 31, 2022, the remaining lease terms and discount rate used are as follows (in thousands):

OF REMAINING LEASE TERMS AND DISCOUNT RATE

Weighted-average remaining lease term (years)

Weighted-average discount rate

cash flow information related to leases as of December 31, 2022 is as follows (in thousands):

RELATED TO LEASES

flow classification of lease payments:

cash flows from operating leases

of December 31, 2022, the maturities of the Company’s future minimum lease payments were as follows (in thousands):

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

As of December 31,

Total lease payments

Imputed interest

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”).

and diluted net loss per share of Common Stock (“EPS”) is computed by dividing (i) net loss (the “Numerator”),

by (ii) the weighted average number of shares of Common Stock 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,

1 unchanged sentence

the weighted average number of shares outstanding.

For the years ended December 31, 2021 and 2020, all Common Stock equivalents were

antidilutive.

As of December 31, 2022 and 2021, 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

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

2 unchanged sentences

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):

of December 31, 2022 and 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

12 unchanged sentences

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

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, 2022 and 2021, 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

15 unchanged sentences

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

4 unchanged sentences

16 - SUBSEQUENT EVENTS

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.

2023 Private Placement

January 5, 2023, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (who

is the selling stockholder named herein) pursuant to which we agreed sell up to an aggregate of $ 8,000,000 of our securities in a private

placement consisting of 2,000,000 shares of our Common Stock, a pre-funded warrant to purchase up to an aggregate of 4,666,667 shares

of our Common Stock and a Common Stock purchase warrant to purchase up to an aggregate of 6,666,667 shares of our Common Stock (as the

context requires, we sometimes refer to the pre-funded warrant and the Common Stock purchase warrant issued in our January 2023 private

placement as the “warrants”).

The purchase price per share and associated Common Stock purchase warrant was $ 1.20 , and the

purchase price per pre-funded warrant and associated Common Stock purchase warrant was $ 1.1999 .

private placement closed on January 9, 2023.

After the placement agent fees and estimated offering expenses payable by us, we received

net proceeds of approximately $ 7.4 million.

We intend to use the net proceeds from the private placement for general working capital

and general corporate purposes.

Common Stock purchase warrant entitles the holder, for a period of five years and 6 months, to purchase one share of Common Stock at

an exercise price of $1.20 per share.

The pre-funded warrant entitles the holder, for a period until the entirety of the pre-funded warrant

is exercised, to purchase one share of Common Stock at an exercise price of $0.0001 per share.

Both warrants contain a customary 4.99 %

beneficial ownership limitation that may be waived at the option of the holder upon 61 days’ notice to us.

Purchase Agreement includes standard representations, warranties and covenants.

In addition, and subject to customary exceptions, the

Purchase Agreement provides that:

from January 5, 2023 until ninety (90) days after the effective date of the registration statement, neither our company nor any subsidiary

of our company shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common

Stock or securities convertible into or exercisable for Common Stock or (ii) file any registration statement or any amendment or supplement

thereto, in each case other than as contemplated by the Registration Rights Agreement (as defined below);

from January 5, 2023 until nine (9) months after the effective date of the registration statement, we shall be prohibited from effecting

or entering into an agreement to effect any issuance by us or any of our subsidiaries of any shares of Common Stock or securities convertible

into or exercisable for Common Stock (or a combination of units thereof) involving a “variable rate transaction”, meaning

a transaction in which we (i) issue or sell any debt or equity securities that are convertible into, exchangeable or exercisable for,

or include the right to receive, additional shares of Common Stock either (i) at a conversion price, exercise price or exchange rate

or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time

after the initial issuance of such debt or equity securities or (ii) with a conversion, exercise or exchange price that is subject to

being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent

events directly or indirectly related to our business or the market for the Common Stock or (ii) enter into, or effect a transaction

under, any agreement, including, but not limited to, an equity line of credit, whereby we may issue securities at a future determined

January 5, 2023, in connection with the private placement, we entered into a registration rights agreement (the “Registration Rights

Agreement”) with the investor, pursuant to which we agreed to file a registration statement with the SEC to register for resale

the shares issued in the private placement and the shares of Common Stock issuable upon exercise of the warrants.

We is subject to customary

penalties and liquidated damages in the event we does not meet certain filing and effectiveness deadlines set forth in the Registration

Rights Agreement, up to a maximum aggregate penalty of 10.5 % of the gross proceeds of the private placement.

We have filed a registration

statement in order to satisfy our obligations under the Registration Rights Agreement.

Capital Partners, LLC and A.G.P./Alliance Global Partners acted as placement agents for the Private Placement (the “Placement Agents”).

Pursuant to a placement agency agreement, dated January 5, 2023, between us and the Placement Agents (the “Placement Agency Agreement”),

we agreed to pay the Placement Agent a cash fee equal to 6.0 % of the gross proceeds received by us in the private placement, in addition

to the reimbursement of $ 40,000 of expenses.

The Placement Agency Agreement contains customary representations, warranties, terms and

conditions, including for indemnification of the Placement Agents and their related parties by us.

2023 Asset Purchase

February 28, 2023, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Advanced Facialdontics,

LLC, a New York limited liability company (“AFD”), pursuant to which the Company acquired certain

and international patents, trademarks, product rights, and other miscellaneous intellectual property from AFD (the “Acquired

flagship product, the Preventive Oral Device ® , known as the POD ® (the “POD”), is a custom single

arch device with an FDA 510(k) clearance for treating an estimated 40 million patients in the U.S.

and Canada with Temporomandibular

Joint Dysfunction (“TMD”) and/or Bruxism (teeth grinding or clenching), both known to be closely associated with OSA .

The Company’s primary existing products are used by dentists to treat mild to moderate OSA.

second FDA 510(k) cleared product, known as the Night Block™, is a custom dual-arch mandibular advancement oral appliance that

incorporates patented unilateral bite block technology, which can alleviate or eliminate many of the downsides of traditional oral appliance

treatment such as inflammation of the TMJ, facial pain, neck pain, headaches, tension, fatigue, clenching, and grinding.

acquisition of these novel technologies, patent portfolio, related trademarks, and product rights further enhance the Company’s

existing intellectual property and technology base, enabling the Company to provide new, complementary products to many OSA patients

who experience pain, discomfort, headaches, tooth loss, and other symptoms associated with TMD and Bruxism.

addition, this acquisition will provide dentists and other healthcare professional who use the Company’s existing products with

an additional treatment option for patients who do not have OSA, but suffer from jaw pain, headaches, and daytime fatigue.

expects to be able to manufacture the AFD products through existing manufacturing relationships.

of the Asset Purchase Agreement

to the terms of the Asset Purchase Agreement, the Company provided the following consideration for the Acquired Assets:

$ 50,000 in cash;

250,000 shares of unregistered Common Stock;

cash earnout payments based on sliding-scale percentages (from low double digits to low single digits) based on the volume of future

sales of POD devices;

additional cash earnout payments based on different sliding-scale percentages (from low double digits to mid-single digits) based on

the volume of future sales of non-POD devices developed by the Company utilizing the Acquired Assets;

a mid-single digit royalty on revenue received from licensing the Acquired Assets to third parties, including low five-digit quarterly

minimum royalties starting in 2024;

cash milestone payments of up to $ 225,000 in the aggregate, based upon the achievement of specified milestones related to new FDA authorizations

for the Acquired Assets;

a five-year warrant to purchase up to 400,000 shares of Common Stock with an exercise price of $0.61 per share;

provided, however, that

the shares of Common Stock underlying such warrant are subject to vesting only upon the achievement of specified milestones related to

new FDA authorizations for the Acquired Assets.

addition, Dr.

Scott Simonetti, DDS, the founder and Chief Executive Officer of AFD, has been hired as the Company’s part-time Senior

Director of Research and Development for an annual salary of $ 96,000 .

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