Item 3. Legal Proceedings
Item
3. Legal Proceedings.
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Below
is a description of our outstanding pending litigation matters. Litigation is subject to inherent uncertainties and an adverse result
in the below described or other matters may arise from time to time that may harm our business.
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On
April 13, 2021, the Washington State Department of Financial Institutions (“WSDFI”) sent a letter and subpoena requesting
that we produce certain documents and records. WSDFI is investigating certain sales of our common stock by a previous employee and independent
contractor in Washington prior to our initial public offering. This subject matter in general (including activities of such previous
employee and independent contractor) had been among the issues previously investigated by a joint committee of our Board of Directors
and internal and external legal counsel that commenced in February 2020 and, pursuant to the findings and recommendations of the joint
committee, led to the company implementing in April 2020 certain enhanced corporate governance policies (in the form of a formal written
policy on private stock sales requiring prior approval of our internal or external legal counsel and changes to certain organizational
matters). We have cooperated with WSDFI regarding this investigation, but during and subsequent to the year ended December 31, 2022,
we have not been made aware of any developments with the investigation.
On June 5, 2020, we filed suit against Ortho-Tain, Inc. (“Ortho-Tain”) in the United States District Court for the District
of Colorado seeking relief from certain false, threatening, and defamatory statements to our business affiliate, Benco Dental (“Benco”).
We believe such statements have interfered with our business relationship and contract, causing harm to our reputation, loss of goodwill,
and unspecified monetary damages. On February 12, 2021, we amended our complaint to add claims for false advertising and unfair business
practices, as well as additional variants of the original claims to address Ortho-Tain’s alleged false advertising campaign against
us in the fall of 2020. Our amended complaint seeks permanent injunctive relief to prevent what we believe are defamatory statements and
interference with our business relationships by Ortho-Tain. We further seek declaratory relief to refute the defendant’s false allegations,
as well as monetary damages. Prior to filing suit, we worked collaboratively with legal counsel at Benco to address and resolve this matter.
Such efforts were unsuccessful. On February 26, 2021, Ortho-Tain, Inc. filed a motion to dismiss the amended complaint. We opposed the
motion. On June 21, 2022, the Tenth Circuit entered an order and judgment. Pursuant to such order, the appeal was terminated and the case
remanded to the U.S. District Court for the District of Colorado for further proceedings. On July 13, 2022, the Clerk of Court for the
Tenth Circuit transferred jurisdiction back to the District Court. On February 1, 2023, Ortho-Tain filed a motion to re-open the district
court case and set a status conference. On February 22, 2023, Vivos filed a notice of non-opposition joining that request. The parties
are currently awaiting further action from the district court, including a new decision on Ortho-Tain’s motion to dismiss.
On July 22, 2020 Ortho-Tain, Inc. filed a Complaint at Law in the United States District Court for the Northern District of Illinois naming
Vivos, along with the Company’s Chief Executive Officer, R. Kirk Huntsman, Benco Dental Supply Co., Dr. Brian Kraft, Dr. Ben Miraglia,
and Dr. Mark Musso. The Ortho-Tain complaint alleges violation of the Lanham Act and an alleged civil conspiracy among the defendants
to violate the Lanham Act by an alleged false designation of origin related to a presentation given by Dr. Brian Kraft at an event sponsored
by the Company and Benco Dental. Ortho-Tain also alleges that the actions of the defendants, including the Company, diverted sales from
Ortho-Tain, deprived Ortho-Tain of advertising value and resulted in a loss of goodwill to Ortho-Tain. Ortho-Tain also alleges two separate
breach of contract actions against Dr. Brian Kraft and the Company’s Chief Executive Officer, R. Kirk Huntsman. On September 9,
2020, the Company moved to dismiss the claims against it. On May 14, 2021, the United States District Judge entered an order granting
the Company’s motion to stay this case pending the outcome of a substantially similar, first-filed suit by the Company pending in
the United States District Court for the District of Colorado. In light of the stay, the Court denied, without prejudice, the Company’s
pending motion to dismiss. On September 3, 2021, on December 2, 2021, on April 4, 2022, on July 5, 2022, on September 19, 2022, and on
November 22, 2022 the Court extended the stay. On March 20, 2023, the Parties submitted their joint status report. In their status report,
the Parties requested that the Court reconsider Defendants’ motions to dismiss and Plaintiff’s motion to strike which were
fully briefed at the time the case was stayed. Defendants also requested a stay of discovery pending a ruling on the motions to dismiss.
The Parties are awaiting further direction from the Court.
On
May 17, 2021, plaintiff Steven Rospond (“Rospond”) filed a lawsuit against an entity called Proceed Finance asserting claims
for breach of contract and violation of the Kansas Consumer Protection Act against Defendants Proceed Finance and Security First Bank
regarding a $50,000 loan Rospond took to pay for services provided by our company. Rospond sent us a subpoena seeking various documents
relating to the services provided by us to which it responded and provided documents on December 21, 2021. In an Order dated October
26, 2021, the court granted Rospond an extension of up to seven days after we delivered documents to Rospond within which to amend his
lawsuit, including to assert claims against us. To date, we have no knowledge of Rospond asserting any claims against us. According to
the court’s docket, this lawsuit was dismissed for lack of prosecution on June 15, 2022.
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On
May 23, 2022, Dr. G. David Singh (“Dr. Singh”), the founder and former director and Chief Medical Officer of our company,
through his legal counsel, sent a demand letter (the “Demand Letter”) to us. The Demand Letter asserted certain allegations,
including an assertion that contested our decision to terminate Dr. Singh’s employment for cause in March 2022. As previously disclosed,
on March 1, 2022, with the unanimous approval of our Board of Directors, we provided notice of termination of Dr. Singh’s employment
with our company “for cause” pursuant to the terms Dr. Singh’s amended and restated employment agreement with us (the
“Employment Agreement”). In the Demand Letter, Dr. Singh also asserted certain potential claims against us and/or R. Kirk
Huntsman, our Chairman and Chief Executive Officer, including for breach of contract, breach of fiduciary duty, defamation and other
civil claims and remedies which could include severance payments to Dr. Singh and other money relief if Dr. Singh’s claims are
upheld in arbitration. We believe that Dr. Singh’s assertions completely lack merit in fact or law and further believes that Dr.
Singh will be unable to establish actionable damages. Further, we believe that several provisions of Dr. Singh’s Employment Agreement
limit or restrict claims Dr. Singh is alleging, including a mandatory arbitration clause and exclusive remedy provisions. However, no
assurances can be given that our positions regarding the Demand Letter or the Employment Agreement will be upheld by an arbitrator. The
parties engaged in voluntary mediation, with no resolution reached.
On November 3, 2022, the Company initiated arbitration with the American Arbitration Association against Dr. Gurdev Dave Singh. The Company’s
Demand for Arbitration alleges that Dr. Singh’s behaviors and actions constituted a breach of the Employment Agreement as well as
a breach of a fiduciary duty to which he owed the Company, and requests that the Arbitrator declare that Dr. Singh’s sole remedy
or relief against the Company is what was agreed upon in the Employment Agreement. On December 7, 2022, Dr. Singh filed a Cross-Complaint
in the Arbitration alleging claims against the Company for breach of contract, employment discrimination, and violation of the Colorado
Wage Act. The Arbitrator has been selected and pursuant to a scheduling conference held on February 15, 2023, the case has been tentatively
set for a four-day Arbitration commencing on January 16, 2024.
On January 23, 2023, we filed a complaint against Dr. Singh and Dr. Rod Willey in the United States District Court for the District of
Colorado alleging that Dr. Singh violated his employment agreement with Vivos when he and Dr. Willey formed a competing venture, named
Koala Plus. Additionally, we contend that both defendants violated state and federal trade secret laws when they formed this competing
business and attempted to unlawfully use our trade secrets to divert business away from Vivos. We believe the defendants actions have
caused unspecified monetary damages. Dr. Singh’s responsive pleading is due on March 31, 2023. Dr. Willey failed to timely respond
and Vivos moved for a Clerk’s Entry of Default, which was granted on March 24, 2023.
Item
4. Mine Safety Disclosures.
Not
applicable.
PART
II