Vivos Therapeutics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. TABLE OF CONTENTS Page Report of Independent Registered Public Accounting Firm -77- Financial Statements: Consolidated balance sheets as of December 31, 2022 and 2021 -78- Consolidated statements of operations for the years ended December 31, 2022 and 2021 -79- Consolidated statements of stockholders’ equity (deficit) for the years ended December 31, 2022 and 2021 -80- Consolidated statements of cash flows for the years ended December 31, 2022 and 2021 -81- Notes to consolidated financial statements -82- - 76 - Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Vivos Therapeutics, Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We 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 as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. The Company’s Ability to Continue as a Going Concern The 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. Basis for Opinion The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Plante & Moran, PLLC We have served as the Company’s auditor since 2018. Denver, Colorado March 30, 2023 - 77 - VIVOS THERAPEUTICS INC. Consolidated Balance Sheets December 31, 2022 and 2021 (In Thousands, Except Per Share Amounts) 2022 2021 Current assets Cash and cash equivalents $ 3,519 $ 24,030 Accounts receivable, net of allowance of $ 712 and $ 180 , respectively 457 1,203 Tenant improvement allowance receivable - 516 Prepaid expenses and other current assets 1,448 1,575 Total current assets 5,424 27,324 Long-term assets Goodwill 2,843 2,843 Property and equipment, net 3,082 2,825 Operating lease right-of-use asset 1,695 - Intangible assets, net 302 341 Deposits and other 374 356 Total assets $ 13,720 $ 33,689 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 1,411 $ 920 Accrued expenses 1,912 2,853 Current portion of contract liabilities 2,926 2,399 Current portion of long-term debt - 1,265 Current portion of operating lease liability 419 - Current portion of deferred rent - 3 Current portion of lease incentive liability - 69 Other current liabilities 145 - Total current liabilities 6,813 7,509 Long-term liabilities Contract liabilities, net of current portion 112 - Operating lease liability, net of current portion 1,994 - Deferred rent, net of current portion - 343 Lease incentive liability, net of current portion - 298 Total liabilities 8,919 8,150 Commitments and contingencies (Note 13) - - Stockholders’ equity Preferred Stock, $ 0.0001 par value per share. Authorized 50,000,000 shares; no shares issued and outstanding - - Common Stock, $ 0.0001 par value per share. Authorized 200,000,000 shares; issued and outstanding 23,012,119 shares as of December 31,2022 and December 31, 2021 2 2 Additional paid-in capital 84,267 81,160 Accumulated deficit ( 79,468 ) ( 55,623 ) Total stockholders’ equity 4,801 25,539 Total liabilities and stockholders’ equity $ 13,720 $ 33,689 The accompanying notes are an integral part of these consolidated financial statements. - 78 - VIVOS THERAPEUTICS INC. Consolidated Statements of Operations Years Ended December 31, 2022 and 2021 (In Thousands, Except Per Share Amounts) 2022 2021 Revenue Product revenue $ 8,381 $ 6,520 Service revenue 7,643 10,365 Total revenue 16,024 16,885 Cost of sales (exclusive of depreciation and amortization shown separately below) 6,005 4,281 Gross profit 10,019 12,604 Operating expenses General and administrative 29,041 25,791 Sales and marketing 5,340 5,551 Impairment loss - 911 Depreciation and amortization 669 733 Total operating expenses 35,050 32,986 Operating loss ( 25,031 ) ( 20,382 ) Non-operating income (expense) Interest expense - ( 14 ) Other expense ( 190 ) ( 9 ) PPP loan forgiveness 1,287 - Other income 89 117 Loss before income taxes ( 23,845 ) ( 20,288 ) Income tax expense - - Net loss $ ( 23,845 ) $ ( 20,288 ) Net loss attributable to common stockholders $ ( 23,845 ) $ ( 20,288 ) Net loss per share attributable to common stockholders (basic and diluted) $ ( 1.04 ) $ ( 0.96 ) Weighted average number of shares of Common Stock outstanding (basic and diluted) 23,012,119 21,233,485 The accompanying notes are an integral part of these consolidated financial statements. - 79 - VIVOS THERAPEUTICS INC. Consolidated Statements of Stockholders’ Equity (Deficit) Years Ended December 31, 2022 and 2021 (In Thousands) Shares Amount Capital Deficit Total Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Total Balances, December 31, 2020 18,209,452 $ 2 $ 52,250 $ ( 35,335 ) $ 16,917 Issuance of Common Stock: In follow-on public offering, net of issuance costs 4,600,000 25,362 25,362 To consultants for services 2,667 20 20 Exercise of stock options 200,000 330 330 Fair value of warrants issued: To consultants for services 232 232 In business combination 172 172 For purchase of assets 136 136 Stock-based compensation expense 2,658 2,658 Net loss - - - ( 20,288 ) ( 20,288 ) Balances, December 31, 2021 23,012,119 2 81,160 ( 55,623 ) 25,539 Fair value of warrants issued: To consultants for services - - 711 - 711 In business combination - - - - - For purchase of assets - - - - - Stock-based compensation expense - - 2,396 - 2,396 Net loss - - - ( 23,845 ) ( 23,845 ) Balances, December 31, 2022 23,012,119 $ 2 $ 84,267 $ ( 79,468 ) $ 4,801 The accompanying notes are an integral part of these consolidated financial statements. - 80 - VIVOS THERAPEUTICS INC. Consolidated Statements of Cash Flows Years Ended December 31, 2022 and 2021 (In Thousands) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 23,845 ) $ ( 20,288 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 2,396 2,658 Loss on disposal of assets 36 - Depreciation and amortization 669 733 Fair value of warrants issued for services 711 232 Common stock issued for services - 20 Accretion of discount on note receivable - ( 29 ) Forgiveness of indebtedness income ( 1,265 ) - Impairment on note receivable - 911 Changes in operating assets and liabilities: Accounts receivable 746 228 Operating lease assets and liabilities, net 7 548 Tenant improvement allowance 516 ( 516 ) Prepaid expenses and other current assets 126 ( 902 ) Deposits ( 16 ) ( 47 ) Accounts payable 491 139 Accrued expenses ( 941 ) 1,117 Other liabilities 144 - Contract liability 638 ( 539 ) Net cash used in operating activities ( 19,587 ) ( 15,735 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment ( 924 ) ( 2,396 ) Payment for business acquisition - ( 225 ) Principal collections under note receivable - 13 Net cash used in investing activities ( 924 ) ( 2,608 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - 27,930 Redemption of preferred stock - ( 1,500 ) Payments for issuance costs - ( 2,238 ) Principal payments on debt - ( 25 ) Net cash provided by financing activities - 24,167 Net decrease in cash and cash equivalents ( 20,511 ) 5,824 Cash and cash equivalents at beginning of year 24,030 18,206 Cash and cash equivalents at end of year $ 3,519 $ 24,030 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 2 $ 18 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Fair value of warrants issued in asset purchase $ - $ 136 Fair value of warrants issued in business acquisition $ - 172 Fair value of warrants issued to underwriters in connection with follow-on offering $ - $ 1,486 Capital expenditures included in accounts payable $ - $ 110 The accompanying notes are an integral part of these consolidated financial statements. - 81 - VIVOS THERAPEUTICS INC. Notes to Consolidated Financial Statements NOTE 1 - ORGANIZATION, DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES Organization BioModeling Solutions, Inc. (“BioModeling”) was organized on March 20, 2007 as an Oregon limited liability company, and subsequently incorporated in 2013. On August 16, 2016, BioModeling entered into a share exchange agreement (the “SEA”) with First Vivos, Inc. (“First Vivos”), and Vivos Therapeutics, Inc. (“Vivos”), a Wyoming corporation established on July 7, 2016 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. 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. The transaction was accounted for as a reverse acquisition and recapitalization, with BioModeling as the acquirer for financial reporting and accounting purposes. Upon the consummation of the merger, the historical financial statements of BioModeling became the Company’s historical financial statements and recorded at their historical carrying amounts. On August 12, 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation under Delaware General Corporate Law. Accordingly, 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. Description of Business The Company is a medical technology company focused on the development and commercialization to dental practices of a patented oral appliance 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”. In 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”). Basis of Presentation and Consolidation The 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. GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation. - 82 - Emerging Growth Company Status The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company currently expects to retain its status as an emerging growth company until the year ending December 31, 2026, but this status could end sooner under certain circumstances. Revenue Recognition The Company generates revenue from the sale of 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. Following 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: 1) identification of the promised goods or services in the contract; 2) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; 3) measurement of the transaction price, including the constraint on variable consideration; 4) allocation of the transaction price to the performance obligations; and 5) recognition of revenue when, or as the Company satisfies each performance obligation. Service Revenue VIP Enrollment Revenue The Company reviews its VIP enrollment contracts from a revenue recognition perspective using the 5-step method outlined above. Once it is 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. The 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 (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. - 83 - VIP 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. The 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. Because 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. The Company uses significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell. 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. Those VIPs 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. Other Service Revenue In 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. Also, the Company offers its VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method. 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. Allocation of Revenue to Performance Obligations The 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). - 84 - Treatment of Discounts and Promotions From time to time, the Company offers various discounts to its customers. These include the following: 1) Discount for cash paid in full 2) Conference or trade show incentives, such as subscription enrollment into the SleepImage ® home sleep test program, or free trial period for the SleepImage ® lease program 3) Negotiated concessions on annual enrollment fee 4) Credits/rebates to be used towards future product orders such as lab rebates The amount of the discount is determined up front prior to the sale. Accordingly, measurement is determined before the sale occurs and revenue is recognized based on the terms agreed upon between the Company and the customer over the performance period. In rare circumstances, a discount has been given after the sale during a conference which is offering a discount to full price. In this situation revenue is measured and the change in transaction price is allocated over the remaining performance obligation. The amount of consideration can vary by customer due to promotions and discounts authorized to incentivize a sale. Prior to the sale, the customer and the Company agree upon the amount of consideration that the customer will pay in exchange for the services the Company provides. The net consideration that the customer has agreed to pay is the expected value that is recognized as revenue over the service period. 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. Product Revenue In 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 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. The 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. The appliance is similar to a retainer that is worn after braces are removed. Each appliance is unique and is fitted to the patient. The Company utilizes its network of certified 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. Within each center, the Company utilizes a team of medical professionals to measure, order and fit each appliance. Upon scheduling the patient (which is the Company’s customer in this case), the center takes a deposit and reviews the patient’s insurance coverage. 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. - 85 - The 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. Use of Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, assessing collectability on accounts receivable, the determination of customer life and breakage related to recognizing revenue for VIP contracts, notes receivable, impairment of goodwill and long-lived assets; valuation assumptions for assets acquired in business combinations; 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. Cash and Cash Equivalents All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents. Accounts Receivable, Net The accounts receivable in the accompanying financial statements are stated at the amounts management expects to collect. The Company performs credit evaluations of its customers’ financial condition and may require a prepayment for a portion of the services to be performed. The Company reduces accounts receivable by estimating an allowance that may become uncollectible in the future. Management determines the estimated allowance for uncollectible amounts based on its judgements in evaluating the aging of the receivables and the financial condition of our clients. Property and Equipment, Net Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which ranges from 4 to 5 years. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the life of the improvement or the term of the respective leases which range between 5 and 7 years. The Company does not begin depreciating assets until assets are placed in service. Intangible Assets, Net Intangible 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 years. - 86 - Goodwill Goodwill 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. Impairment of Long-lived Assets We 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 value. 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. Equity Offering Costs Commissions, legal fees and other costs that are directly associated with equity offerings are capitalized as deferred offering costs, pending a determination of the success of the offering. Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period it is determined that the offering was successful. Deferred offering costs related to unsuccessful equity offerings are recorded as expense in the period when it is determined that an offering is unsuccessful. Accounting for Payroll Protection Program Loan The 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). Loss and Gain Contingencies The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred, and the amount of loss can be reasonably estimated. If some amount within a range of loss appears to be a better estimate than any other amount within the range, the Company accrues that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss. The Company regularly evaluates current information available to it to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Legal fees related to contingencies are charged to general and administrative expense as incurred. Contingencies that may result in gains are not recognized until realization is assured, which typically requires collection in cash. - 87 - Share-Based Compensation The 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 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 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. Research and Development Costs 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 Operating 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. Income Taxes The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, under which deferred income taxes are recognized based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results, or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. The recorded valuation allowance is based on significant estimates and judgments and if the facts and circumstances change, the valuation allowance could materially change. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. - 88 - Basic and Diluted Net Loss Per Share Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of Common Stock, including stock options, convertible debt, Preferred Stock, and warrants, to the extent dilutive. Recent Accounting Pronouncements Presented below is a discussion of new accounting standards including deadlines for adoption assuming that the Company retains its designation as an EGC. Standards Required to be Adopted in Future Years. The following accounting standards are not yet effective as of December 31, 2022. In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This guidance requires use of an impairment model (known as the “current expected credit losses”, or CECL model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit 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. Other 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. Recently Adopted Standards. The following recently issued accounting standards were adopted by the Company during the year ended December 31, 2022: In 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 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 periods. In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 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. - 89 - NOTE 2 - LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN The financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As 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. As 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. The 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. The 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 resources. NOTE 3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES Net Revenue For 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): SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMERS Year Ended December 31, 2022 2021 Product revenue: Appliance sales to VIPs $ 7,820 $ 6,040 (1) Center revenue 561 480 Total product revenue 8,381 6,520 Service revenue VIP 4,838 8,517 (3) Billing intelligence services 1,170 905 (2) Management service revenue (includes MID) 63 313 Myofunctional therapy services 927 341 Sponsorship/seminar/other 645 289 Total service revenue 7,643 10,365 Total revenue $ 16,024 $ 16,885 (1) Revenue from the sale of products is typically fixed at inception of the contract and is recognized at the point in time when shipment of the related products occurs. - 90 - (2) Revenue from maintenance and subscription contracts is typically fixed at inception of the contract and is recognized ratably over time as the services are performed and the performance obligations completed. Revenue disclosed above for year ended December 31, 2022, includes a cumulative adjustment from prior years of approximately $ 0.1 million increase. (3) Revenue disclosed above for the year ended December 31, 2022, includes a cumulative adjustment from prior years of approximately $ 0.4 million decrease. Changes in Contract Liabilities The key components of changes in contract liabilities for the years ended December 31, 2022 and 2021 are as follows (in thousands): SCHEDULE OF CONTRACT LIABILITY December 31 2022 2021 Beginning balance, January 1 $ 2,399 $ 2,938 New contracts, net of cancellations 6,567 7,978 Revenue recognized ( 5,928 ) ( 8,517 ) Ending balance, December 31 $ 3,038 $ 2,399 Current 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. Shipping Costs Shipping 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. NOTE 4 - PROPERTY AND EQUIPMENT, NET As of December 31, 2022 and 2021, property and equipment consist of the following (in thousands): SCHEDULE OF PROPERTY AND EQUIPMENT 2022 2021 December 31, 2022 2021 Furniture and equipment $ 1,265 $ 1,394 Leasehold improvements 2,479 2,387 Construction in progress 948 212 Molds 143 75 Gross property and equipment 4,835 4,068 Less accumulated depreciation ( 1,753 ) ( 1,243 ) Net Property and equipment $ 3,082 $ 2,825 Leasehold 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. - 91 - NOTE 5 - GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill of $ 2.8 million as of December 31, 2022 and 2021 consist of the following acquisitions (in thousands): SCHEDULE OF GOODWILL December 31, Acquisitions 2022 2021 BioModeling $ 2,619 $ 2,619 Empowered Dental 52 52 Lyon Dental 172 172 Total goodwill $ 2,843 $ 2,843 As 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. In 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. On 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. Intangible Assets As of December 31, 2022 and 2021, identifiable intangible assets were as follows (in thousands): SCHEDULE OF IDENTIFIABLE INTANGIBLES 2022 2021 December 31, 2022 2021 Patents and developed technology $ 2,136 $ 2,136 Trade name 330 330 Other 27 27 Total intangible assets 2,493 2,493 Less accumulated amortization ( 2,191 ) ( 2,152 ) Net intangible assets $ 302 $ 341 - 92 - Amortization 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, 2023 39 2024 39 2025 39 2026 23 2027 18 Thereafter 144 Total $ 302 NOTE 6 - OTHER FINANCIAL INFORMATION Accrued Expenses Accrued expenses consist of the following (in thousands): SCHEDULE OF ACCRUED EXPENSES 2022 2021 December 31, 2022 2021 Accrued payroll $ 1,358 $ 1,397 Accrued legal and other 473 990 Lab rebate liabilities 81 466 Total accrued expenses $ 1,912 $ 2,853 NOTE 7 - DEBT PPP Loan On 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. 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. NOTE 8 - PREFERRED STOCK The Company’s Board of Directors has authority to issue up to 50,000,000 shares of Preferred Stock. 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 Directors. NOTE 9 - COMMON STOCK The 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. - 93 - NOTE 10 - STOCK OPTIONS AND WARRANTS Stock Options In 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 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. In April 2019, the Company’s shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under which shares were reserved for future issuance for 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. During 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 2022 2021 Shares Price (1) Term (2) Shares Price (1) Term (2) Outstanding, beginning of year 2,851 $ 4.96 3.3 2,302 $ 4.84 1.3 Grants 1,974 1.01 969 5.23 Forfeited/cancelled ( 1,206 ) 5.38 ( 220 ) 6.25 Exercised - - ( 200 ) (3) 1.65 Outstanding, at December 31 3,619 (4) 2.89 3.3 2,851 (4) 4.96 3.3 Exercisable, at December 31 2,258 (5) 3.02 3.4 1,898 (5) 4.53 2.7 (1) Represents the weighted average exercise price. (2) Represents the weighted average remaining contractual term until the stock options expire. (3) On 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. (4) As of December 31, 2022 and 2021, the aggregate intrinsic value of stock options outstanding was $ 0 . (5) As of December 31, 2022 and 2021, the aggregate intrinsic value of exercisable stock options was $ 0 . - 94 - For 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: SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE 2022 2021 Grant date closing price of common stock $ 1.01 $ 5.23 Expected term (years) 3.5 3.5 Risk-free interest rate 3.4 % 0.8 % Volatility 112 % 141 % Dividend yield 0 % 0 % Based 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. For the years ended December 31, 2022 and 2021, the Company recognized approximately $ 2.4 million and $ 2.7 million, respectively, of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of December 31, 2022 was approximately $ 3.0 million, which will be recognized over the weighted average remaining term of 4.1 years as of December 31, 2022. Warrants The 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 2022 2021 Shares Price (1) Term (2) Shares Price (1) Term (2) Outstanding, beginning of year 2,556 $ 7.44 3.1 1,960 $ 4.38 4.2 Grants of warrants: Consultants for services 1,060 (3) 1.05 371 7.56 Acquisition of assets - 225 7.56 Outstanding, December 31 3,616 (4) $ 5.50 2.6 2,556 (4) $ 7.44 3.1 Exercisable, December 31 3,101 (5) $ 5.80 2.5 2,311 (5) $ 7.42 3.1 (1) Represents the weighted average exercise price. (2) Represents the weighted average remaining contractual term until the warrants expire. (3) In 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 December warrants amounted to $ 0.2 million which is being recognized over the period that the services are provided or according to the vesting schedule. For the year ended December 31, 2022, the Company recognized expense of $ 0.7 million. (4) As of December 31, 2022 and 2021, the aggregate intrinsic value of warrants outstanding was $ 0 . (5) As of December 31, 2022 and 2021, the aggregate intrinsic value of warrants exercisable was $ 0 . - 95 - For 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: SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN THE FAIR VALUE 2022 2021 Measurement date closing price of Common Stock (1) $ 0.79 $ 7.44 Contractual term (years) (2) 5.0 2.6 Risk-free interest rate 3.6 % 0.3 % Volatility 102 % 138 % Dividend yield 0 % 0 % (1) Weighted average grant price. (2) The valuation of warrants is based on the contractual term of the warrant rather than the expected term. NOTE 11 - RELATED PARTY TRANSACTIONS For 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. NOTE 12 - INCOME TAXES For the years ended December 31, 2022 and 2021, the domestic and foreign components of loss before income taxes consist of the following (in thousands): SCHEDULE OF LOSS BEFORE INCOME TAX 2022 2021 Domestic $ ( 23,945 ) $ ( 20,307 ) International 100 19 Loss before income taxes $ ( 23,845 ) $ ( 20,288 ) For the years ended December 31, 2022 and 2021, income tax expense (benefit) consists of the following (in thousands): SCHEDULE OF INCOME TAX EXPENSE (BENEFIT) 2022 2021 Current income tax benefit (expense): Federal $ - $ - States - - Total current income tax benefit (expense) - - Deferred income tax benefit (expense): Federal - - States - - Total deferred income tax benefit (expense) - - Total income tax expense (benefit) $ - $ - - 96 - For the years ended December 31, 2022 and 2021, income tax benefit differed from amounts that would result from applying the U.S. statutory income tax rate of 21.0% to the Company’s loss before income taxes as follows (in thousands): SCHEDULE OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXE S 2022 2021 Income tax (benefit) computed at federal statutory rate $ ( 5,007 ) $ ( 4,261 ) PPP loan forgiveness ( 270 ) 109 Other permanent differences 346 - State tax expenses ( 510 ) ( 502 ) Prior year adjustment to state NOL ( 44 ) ( 275 ) Non-qualified stock option cancellations 613 - Change in valuation allowance 4,872 4,929 Total income tax benefit $ - $ - As of December 31, 2022 and 2021, the principal components of deferred tax assets and liabilities were as follows (in thousands): SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2022 2021 Deferred tax assets: Net operating loss carryforwards 13,786 9,150 Stock based compensation 776 1,005 Lease liability 561 - Property, equipment and intangibles 458 - Other 452 699 Total deferred tax assets before valuation allowance 16,033 10,854 Valuation allowance (15,639 ) (10,766 ) Total deferred income tax assets after valuation allowance 394 88 Deferred tax liabilities: Property, equipment and intangibles - ( 88 ) ROU asset ( 394 ) - Total deferred income tax liabilities ( 394 ) ( 88 ) Net deferred tax assets and liabilities $ - $ - Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of this evaluation, as of December 31, 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 million. The 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. Federal 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 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. - 97 - Management does not believe that there are significant uncertain tax positions related to the 2022 and 2021 taxable periods. There are no interest and penalties related to uncertain tax positions for the years ended December 31, 2022 and 2021. The Company files income tax returns in the United States federal and various state jurisdictions. The Company is no longer subject to income tax examinations for federal income taxes before 2019 or for states before 2018. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOL’s generated as such NOL’s are utilized. As of December 31, 2022, the Company has filed all appropriate foreign operation tax returns. NOTE 13 - COMMITMENTS AND CONTINGENCIES COVID-19 Pandemic In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, 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. 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. - 98 - Inflation and War in Ukraine The 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. In 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. These 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. Operating Leases The Company has entered into various operating lease agreements for certain offices, medical facilities and training facilities. These leases 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. In 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 %. In 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 %. In 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 %. In 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 %. In 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 %. - 99 - In 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 %. As of December 31, 2022 and 2021, the components of lease expense are as follows (in thousands): SCHEDULE OF LEASE EXPENSE Lease cost: 2022 2021 Operating lease cost $ 487 $ 583 Total net lease cost $ 487 $ 583 Rent 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. As of December 31, 2022, the remaining lease terms and discount rate used are as follows (in thousands): SCHEDULE OF REMAINING LEASE TERMS AND DISCOUNT RATE 2022 Weighted-average remaining lease term (years) 4.64 Weighted-average discount rate 8.3 % Supplemental cash flow information related to leases as of December 31, 2022 is as follows (in thousands): SCHEDULE OF RELATED TO LEASES 2022 Cash flow classification of lease payments: Operating cash flows from operating leases 438 As 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, 2023 $ 602 2024 621 2025 594 2026 507 2027 493 Thereafter 140 Total lease payments 2,957 Less: Imputed interest ( 544 ) Total $ 2,413 NOTE 14 - NET LOSS PER SHARE OF COMMON STOCK Basic 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”). The calculation of diluted EPS is also required to include the dilutive effect, if any, of stock options, unvested restricted stock awards, convertible debt and Preferred Stock, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. As of December 31, 2022 and 2021, all Common Stock equivalents were antidilutive. - 100 - Presented 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 2022 2021 Calculation of Numerator: Net loss $ ( 23,845 ) ( 20,288 ) Loss applicable to common stockholders $ ( 23,845 ) $ ( 20,288 ) Calculation of Denominator: Weighted average number of shares of Common Stock outstanding 23,012,119 21,233,485 Net loss per share of Common Stock (basic and diluted) $ ( 1.04 ) $ ( 0.96 ) As 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 December 31, 2022 December 31, 2021 Common stock warrants 3,616 2,556 Common stock options 3,619 2,851 Total 7,235 5,407 NOTE 15 - FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS Fair Value Measurements Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the measurement of fair value: Level 1-Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date Level 2-Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability Level 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 As 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. Recurring Fair Value Measurements For the years ended December 31, 2022 and 2021, the Company did not have any recurring measurements for the fair value of assets and liabilities. - 101 - The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the years ended December 31, 2022 and 2021, the Company had no transfers of its assets or liabilities between levels of the fair value hierarchy. Significant Concentrations Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions. Cash deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. As of December 31, 2022, the Company had cash and cash equivalents with two financial institutions in the United States with an aggregate balance of $ 3.5 million. As of December 31, 2021, the Company had cash and cash equivalents with two financial institutions in the United States with an aggregate balance of $ 24.0 million. The Company has never experienced any losses related to its investments in cash, cash equivalents and restricted cash. Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts. NOTE 16 - SUBSEQUENT EVENTS January 2023 Private Placement On 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 . The 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. The 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. The Purchase Agreement includes standard representations, warranties and covenants. In addition, and subject to customary exceptions, the Purchase Agreement provides that: (a) 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); or (b) 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 price. - 102 - On 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. Roth 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. February 2023 Asset Purchase On 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 U.S. and international patents, trademarks, product rights, and other miscellaneous intellectual property from AFD (the “Acquired Assets”) . AFD’s 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. AFD’s 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. The 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. In 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. The Company expects to be able to manufacture the AFD products through existing manufacturing relationships. - 103 - Terms of the Asset Purchase Agreement Pursuant to the terms of the Asset Purchase Agreement, the Company provided the following consideration for the Acquired Assets: (i) $ 50,000 in cash; (ii) 250,000 shares of unregistered Common Stock; (iii) 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; (iv) 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; (v) 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; (vi) 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; and (vii) 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. In 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 . - 104 - Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.