What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-28 · 424 added, 699 removed, 261 unchanged (81% of the section changed)

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scores and have improved other conditions associated with OSA.

Approximately 42,000 patients have been treated to date worldwide with

our entire current suite of products by more than 1,900 trained dentists.

business model is focused around dentists, and our program to train independent 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”)

Nearly 58,000 patients have been treated to date worldwide with our entire

current suite of products by more than 2,000 trained dentists.

Note 1 to the accompanying financial statements for additional background information on our Company and current product and service

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.

business was materially impacted by COVID-19 in 2020 and to some extent thereafter through the early part of 2023 due 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

The impact of COVID-19 on our business diminished somewhat as 2023 has progressed.

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 and into 2023.

We believe new enrollments during the third quarter of

2023 continued to be negatively impacted by the ongoing overall workforce uncertainties in the dental market.

In addition, new variants

of COVID-19 continue to arise, and such variants may in the future cause an adverse effect on 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.

Items, Trends and Risks Impacting Our Business

believe that the following items and trends may be useful in better understanding our results of operations.

VIP Enrollments (Service Revenue).

Enrolling dental practices as VIPs is the first step in our ability to generate new revenue.

part of the VIP enrollment fee, we enter into a service contract with VIPs under which they receive training on the use of the Vivos

treatment modalities.

Enrollments (Service Revenue).

Enrolling dental practices as VIPs has historically been the first step in our ability to generate

As part of the VIP enrollment fee, we enter into a service contract with VIPs under which they receive training on the use

of the Vivos treatment modalities.

VIPs have the ability to start generating revenue for us and themselves after this training.

To entice dentists

to enroll as VIPs, we have worked with different marketing programs (which we generally call a “discovery track”) with respect

to the payment of VIPs enrollment fee, including discounts and payment plans.

Once VIPs execute their VIP enrollment agreement, the discovery

track allows the VIP 45 to 60 days to obtain financing and pay the enrollment fee.

Ongoing support and additional training is provided

throughout the year under the services contract, which includes access to our proprietary Airway Intelligence Services, which provides

the VIP with resources to help simplify the sleep apnea diagnostic and Vivos treatment planning process.

dentists to enroll as VIPs, we have worked with different marketing programs (which we generally call a “discovery track”)

with respect to the payment of VIPs enrollment fee, including discounts and payment plans.

Once VIPs execute their VIP enrollment agreement,

the discovery track allows the VIP 45 to 60 days to obtain financing and pay the enrollment fee.

Ongoing support and additional training

is provided throughout the year under the services contract, which includes access to our proprietary Airway Intelligence Services, which

provides the VIP with resources to help simplify the sleep apnea diagnostic and Vivos treatment planning process.

addition to enrollment service revenue, we offer additional services, such as our Billing Intelligence Services offering, and MyoCorrect

orofacial myofunctional therapy services, which was introduced in April 2021.

Revenue for these services is recognized as the Company’s

performance obligations are satisfied in accordance with ASC 606.

are also engaging in strategic collaborations to market the benefits of the Vivos treatment modalities and VIP enrollment to dentists,

including our cooperative relationships with various medical providers to deliver diagnostic and medical consultation services to people

across North America who suffer from OSA.

recognize revenue on VIP enrollments once the contract is executed, payment is received, and as the Company’s performance obligations

are satisfied in accordance with ASC 606.

Revenue for these services is recognized as our performance

obligations are satisfied in accordance with ASC 606.

of our 2024 marketing and distribution business model pivot, we have become more focused on engaging in strategic collaborations or

acquisitions to market the benefits of the Vivos treatment modalities to dentists and other medical providers, including our

cooperative relationships with various medical providers to deliver diagnostic and medical consultation services to people across

North America who suffer from OSA.

As such, while we will continue to recognize some VIP enrollment revenue going forward, such

revenue will become increasing less important to us.

recognize revenue on VIP enrollments once the contract is executed, payment is received, and as our performance obligations are satisfied

in accordance with ASC 606.

Sales Revenue.

Enrolling new VIPs is key to our ability to generate revenue, but equally as important is the number of Vivos treatment

case starts that our VIPs commence, as these lead to appliance orders and related revenue.

Once a VIP is fully trained, we encourage

them to start cases.

However, our experience has been that VIPs typically start slowly as they introduce The Vivos Method into their

While we work with VIPs to screen their patients for OSA with our SleepImage ® home sleep apnea ring test (which

we expect will encourage Vivos Method case starts), not all VIPs incorporate our The Vivos Method into their practices at the same rate.

We utilize Practice Advisors to help VIPs with onboarding and starting and increasing case starts over time.

We believe VIPs can recoup

their investment in VIP enrollment with approximately eight Vivos Method case starts, but as noted above, many VIPs start and also maintain

their case starts at a significantly slower rate.

We presently have a concentration of active VIPs who regularly start new Vivos Method

treatment cases.

Vivos treatment case starts is paramount, as case starts lead to appliance orders and related revenue.

provider is fully trained, we encourage them to start cases.

However, our experience has been that VIPs typically start slowly as

they introduce The Vivos Method into their practices.

The slow acceptance rate Vivos appliances with providers lead Vivos to

consider other business models including the alliance marketing and distribution model announced in 2024 to sell additional product.

While we work with VIPs to screen their patients for OSA with our SleepImage ® home sleep apnea ring test (which we

expect will encourage Vivos Method case starts), not all VIPs incorporate our The Vivos Method into their practices at the same

We believe VIPs can recoup their investment in VIP enrollment with approximately eight Vivos Method case starts, but as noted

above, many VIPs start and also maintain their case starts at a significantly slower rate.

We presently have a concentration of

active VIPs who regularly start new Vivos Method treatment cases.

Approximately 36% of our VIPs initiated a new case as of December

We are working not only to increase the

number of VIPs overall, but the number of active VIPs in terms of case starts.

More active VIPs are also more likely to take advantage

of our other service revenue generating offerings such as MyoCorrect orofacial myofunctional therapy and medical Billing Intelligence

As noted, we believe that reducing our reliance on VIPs and increasing the number of strategic marketing and distribution

alliances (or acquiring medical or dental practices) will provide us with a better opportunity to drive appliance sales going

addition, an important aspect of our strategy to increase product revenues relates to the products and related intellectual property

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and Vivos Vida Sleep.

During the remainder of 2023 and beyond, we will look to increase sales of these acquired products, but we may

be unable to do so to our advantage.

As described further below, during 2023 we entered into a distribution agreement with Lincare, a

leading durable medical equipment (“DME”), to distribute certain of our products, including those we acquired from AFD.

During the second half of 2021, we increased our efforts to market The Vivos Method and related products and services to

larger dental support organizations (“DSOs”).

Marketing to DSOs creates an opportunity to enroll and onboard multiple dental

practices as VIPs under one common ownership structure.

This would allow us to leverage training and support across multiple VIP practices

and gain economies of scale with the goal of faster growth, both in VIP enrollments and in Vivos case starts.

As of December 31, 2023,

we believe we have made important progress in penetrating this market, but as we cautioned previously, DSOs tend to move slowly when

adopting new technologies or programs.

Our other dentist enrollment program, which we refer to as the Airway Alliance Program (“AAP”),

was also established in the fourth quarter of 2021 and launched in the first quarter of 2022.

This program is designed to attract the

vast majority of the estimated 200,000 U.S.

and Canadian dentists who are being strongly encouraged by the American Dental Association

to screen their patients for sleep apnea.

The AAP gives these dentists a simple yet profitable way to screen their patients for OSA using

the SleepImage ® home sleep test.

Patients with OSA can be referred to a fully trained local VIP dentist for treatment.

The AAP program did not contribute meaningfully to revenue during 2023.

Our efforts to engage in research to demonstrate the clinical efficacy of our products and obtain additional regulatory

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Our DNA device is currently indicated for the treatment of mild

to severe sleep apnea and jaw repositioning in adults (and in the case of severe OSA, along with positive airway pressure (PAP) and/or

myofunctional therapy, as needed).

Enrollment of 150 patients with moderate to severe sleep apnea (apnea-hypopnea index score of 15 or

greater) will be randomly assigned to either treatment with our FDA-cleared DNA appliance or CPAP.

The protocol has been finalized and

enrollment will begin in 2024.

This trial may not meet its designated endpoints, and therefore additional FDA clearances for the DNA

device may not be obtained.

to severe sleep apnea and jaw repositioning in adults (and in the case of severe OSA, along with positive airway pressure and/or

myofunctional therapy, as needed) and has an FDA clearance intended to reduce nighttime snoring and to treat moderate and severe obstructive

sleep apnea in children, 6- 17 years of age who are diagnosed with snoring and/or moderate or severe obstructive sleep apnea and need

orthodontic treatment.

Enrollment of 150 patients with moderate to severe sleep apnea (apnea-hypopnea index score of 15 or greater) will

be randomly assigned to either treatment with our FDA-cleared DNA appliance or CPAP.

The protocol has been finalized, and enrollment

began in 2024.

Late 2024, our clinical study conducted in collaboration with Stanford University and evaluating the DNA and CPAP for

the treatment of OSA, was placed on hold by Stanford University.

The decision to pause the study was made due to low recruitment into

are actively working with Stanford University to address the concerns that led to the hold and has continued engaged discussions with

the university.

While we believe these efforts will facilitate the resumption of the study, there can be no assurance that the hold will

be lifted in a timely manner, or at all.

Any delay or failure to resolve the issues could impact the development timeline and future

prospects for the study.

We remain committed to the highest standards of patient safety, scientific integrity, and regulatory compliance

and will provide updates as material developments occur.

This trial may not meet its designated endpoints, and therefore additional FDA

clearances for the DNA device may not be obtained.

During 2023, we entered into distribution collaborations with third parties to expand access of our products to potential

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The distribution agreement was subject to a 90-day pilot program in Colorado and Florida.

of starting the pilot program, Lincare reported an initial 36% positive patient response to our products subject to the agreement.

Within weeks of starting the pilot program, Lincare reported an initial 36% positive patient response to our products subject to the

October 24, 2023, we announced the conclusion of this pilot program and an amendment to our Lincare agreement to appoint Lincare as our

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the Middle East-North Africa region.

Subject to regulatory approvals, we could see revenue from this collaboration in 2024.

With regulatory approvals pending, there was no revenue from this collaboration in 2024.

on Sales from Unregistered Oral Appliance Publicity.

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with the AGGA.

Vivos management immediately responded to correct any misstatements and to set the record straight.

Vivos management immediately responded to correct any misinformation and to set the record straight.

was not named in the lawsuit, nor was our device implicated in creating the tooth displacement and other concerns that gave rise to the

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Vivos has never had any association or affiliation with

the AGGA device or its promoters, nor has the Company ever endorsed these kind of counterfeit fixed oral appliances that make unproven

and unsubstantiated claims.

the AGGA device or its promoters, nor have we ever endorsed these kind of counterfeit fixed oral appliances that make unproven and unsubstantiated

AGGA is a non-FDA cleared oral appliance developed by Dr.

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treatment plan that likely incorporates one or more of several treatment modalities, including oral myofunctional therapy, SOT chiropractic,

physical therapy, laser therapy, nutritional counseling, CPAP, mandibular advancement, CARE device therapy, and more.

physical therapy, laser therapy, nutritional counseling, CPAP, mandibular advancement, C.A.R.E.

device therapy, and more.

The Vivos Method

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Unfortunately,

and despite our best efforts to distance ourselves and our products from the AGGA device, the entire matter generated a certain amount

of confusion and fear amongst both existing VIP dentists and other non-affiliated dentist prospects.

Thus, new provider enrollments and

sales of Vivos appliances in the third quarter decreased as word spread.

By the latter part of June, we began to see a partial rebound

in both new enrollments and appliance sales.

Nevertheless, certain Vivos-trained providers remain very cautious and are being far more

selective in their cases, which has continued to impact appliance sales through the end of the third quarter.

believe that this is a short-term phenomenon and should not be a long-term hindrance to new case starts or new VIP enrollments, but the

full impact of this phenomenon is hard to predict.

The U.S has been experiencing a period of inflation which has increased (and may continue to increase) our and our suppliers’ costs

as well as the end cost of our products to consumers.

and despite our best efforts to distance ourselves and our products from the AGGA device, the entire matter generated a certain

amount of confusion and fear amongst both existing VIP dentists and other non-affiliated dentist prospects.

Thus, new provider

enrollments and sales of Vivos appliances in the third quarter decreased as word spread in 2023.

By the latter part of June 2024, we

began to see a partial rebound in both new enrollments and appliance sales.

Nevertheless, certain Vivos-trained providers remain

very cautious and are being far more selective in their cases, which has continued to impact appliance sales through the end of the

third quarter.

believe that this is a short-term phenomenon and should not be a long-term hindrance to new case starts, but the full impact of this

phenomenon is hard to predict.

has been experiencing a period of inflation which has increased (and may continue to increase) our and our suppliers’

costs as well as the end cost of our products to consumers.

To date, we have been able to manage inflation risk without a material adverse

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However, inflationary pressures (including increases in the price of raw material components

of our appliances) made it necessary for us to adjust our standard pricing for our appliance products effective May 1, 2022.

impact of such price adjustments on sales or demand for our products is not fully known at this time and may require us to adjust other

aspects of our business as we seek to grow revenue and, ultimately, achieve profitability and positive cash flow from operations.

of our appliances) made it necessary for us to adjust our standard pricing for our appliance products in 2022 and will be revisited in

The full impact of such price adjustments on sales or demand for our products is not fully known at this time and may require us

to adjust other aspects of our business as we seek to grow revenue and, ultimately, achieve profitability and positive cash flow from

additional inflation-related risk is the Federal Reserve’s response, which up to this point has been to raise interest rates.

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change in future periods.

Seasonality .

We believe that the patient volumes of our VIPs will be sensitive to seasonal fluctuations in urgent care and primary care activity.

Typically, the fourth quarter tends to be one where we see higher enrollment levels for new VIP dentists, however, as previously mentioned

reported, in the fourth quarter of 2022 we did not see that same pattern emerge.

The first and second quarters of each year tend to be

our weakest quarter of the year for new enrollments, and to a certain extent, appliance sales as well.

This was the case in the first

half of 2023.

Winter months see a higher occurrence of influenza, bronchitis, pneumonia and similar illnesses;

however, the timing and

severity of these outbreaks vary dramatically.

Additionally, as consumers shift toward high deductible insurance plans, they are responsible

for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has occurred, which

may lead to lower than expected patient volume or an increase in bad debt expense during that period.

Our quarterly operating results

may fluctuate in the future depending on these and other factors.

in Ukraine and Middle East Hostilities.

In addition, worldwide supply chain constraints and economic and capital markets uncertainty

arising out of Russia’s invasion of Ukraine in February 2022 and the attacks by Hamas on Israel in October of 2023 and Israel’s responses

have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery.

If an economic recession or

depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease.

arising out of Russia’s invasion of Ukraine in February 2022 and the attacks by Hamas on Israel in October of 2023 and Israel’s

responses have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery.

If an economic recession

or depression commences and is sustained, it could have a material adverse effect on our business as demand for our products could decrease.

Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when

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to trade at above $1.00 per share for at least 10 trading days, and this was achieved on November 9, 2023.

We therefore have regained compliance with the Minimum Bid Requirement.

At the Hearing on November 9, 2023, we presented our plan to regain compliance

with the minimum stockholders’ equity requirement (the “Equity Rule”), which plan includes raising additional equity

On November 30, 2023, we received a letter from the Hearings Panel that, subject to certain conditions, the Hearings Panel granted

our request to continue to be listed on Nasdaq.

These conditions include providing an update as to our plan to regain compliance with

the Equity Rule as well as demonstrating compliance by March 19, 2024.

On February 23, 2024 we presented our plan of compliance to the

Hearings Committee.

We believe that we will be able to regain and maintain compliance with both the minimum bid requirement and the minimum

stockholders’ equity requirement, which would allow our common stock to continue to trade on Nasdaq.

However, there can be no assurance

that the Hearing Panel will agree with our plan, that will be provided adequate time to achieve compliance or, even if provided adequate

time, that we will in fact be able to regain and maintain compliance with both requirements, in which case our common stock would be subject

to delisting from Nasdaq.

Such a delisting could have a material adverse effect on our stock price, the ability of our stockholders to

buy or sell their common stock, and our reputation, all of which could make it significantly more difficult to operate our company.

We therefore have regained

compliance with the Minimum Bid Requirement.

the Hearing on November 9, 2023, we presented our plan to regain compliance with the minimum stockholders’ equity requirement (the

“Equity Rule”), which plan includes raising additional equity capital.

On November 30, 2023, we received a letter from the

Hearings Panel that, subject to certain conditions, the Hearings Panel granted our request to continue to be listed on Nasdaq.

conditions include providing an update as to our plan to regain compliance with the Equity Rule as well as demonstrating compliance by

March 19, 2024.

On February 23, 2024 we presented our plan of compliance to the Hearings Committee.

On May 6, 2024, we received written

notice from the Nasdaq staff indicating that the Company had regained compliance with the Equity Rule.

May 16, 2024, we received a further written notice from Nasdaq indicating that, as of March 31, 2024, we failed to comply with the Equity

On June 25, 2024, we reported in a Current Report on Form 8-K that it believed it had stockholders’ equity of at least

$2.5 million as of the date of the filing of such report as a result of our closing of a $7.5 million equity private placement on June

June 27, 2024, we met with the Panel to discuss our past, current, and anticipated future compliance with the Equity Requirement, and

requested the continued listing of its securities on Nasdaq.

July 5, 2024, we were notified that the Panel had granted our request for continued listing on Nasdaq, subject to our filing of the Form

10-Q for the quarter ended June 30, 2024, with the Securities and Exchange Commission by August 15, 2024, evidencing our compliance with

the Equity Requirement.

We made such filing in a timely manner.

are working diligently to ensure our continued compliance with the Equity Requirement, including exploring a potential additional equity

capital financing or financings to stay above the minimum threshold of the Equity Requirement.

We anticipate that our new strategic marketing

and distribution alliance model will also positively impact our revenue growth and stockholders’ equity in upcoming fiscal quarters.

However, there is a risk that we will be unable to raise sufficient capital or generate sufficient revenue or operating results to maintain

compliance with the Equity Requirement.

If we fail to achieve ongoing compliance and its common stock is delisted by Nasdaq, such delisting

would likely have a material adverse effect on our stock price, the ability of our stockholders to buy or sell their common stock, our

ability to raise capital and on our reputation, all of which could make it significantly more difficult to operate.

Components of Consolidated Statements of Operations

We recognize revenue when we satisfy our performance obligations over time as our customers receive the benefit of the

promised goods and services, which generally occurs over a short period of time.

Performance obligations with respect to appliance sales

are typically satisfied by shipping or delivering products to our VIPs or, in the case of enrollment or service revenue, upon our satisfaction

of performance obligations associated with VIP enrollments.

Revenue consists of the gross sales price, net of estimated allowances, discounts,

and personal rebates that are accounted for as a reduction from the gross sale price.

We recognize revenue when we satisfy our performance obligations over time as our customers receive the benefit of

the promised goods and services, which generally occurs over a short period of time.

Performance obligations with respect to

appliance sales are typically satisfied by shipping or delivering products to our VIPs or to the sleep clinic, through our new

strategic alliance model, in the case of enrollment or service revenue, upon our satisfaction of performance obligations associated

with VIP enrollments.

Revenue consists of the gross sales price, net of estimated allowances, discounts, and personal rebates that

are accounted for as a reduction from the gross sale price.

Cost of goods sold primarily consists of direct costs attributable to the purchase from third party suppliers and related

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equipment, amortization expense related to leasehold improvements, and amortization expense related to identifiable intangible assets.

Other income relates to the PPP loan forgiven in January 2022 by the SBA, as well as excess warrant fair value and change in fair value of warrant

of March 31, 2022 Financial Statements

described in Note 2, “Restatement of Consolidated Financial Statement,” in Item 1 of Part 1 of Amendment No.

1 to our Quarterly

Report on Form 10-Q for the three months ended March 31, 2022, originally filed with the SEC on May 16, 2022 and such Amendment No.

filed on November 25, 2022 (the “10-Q/A”), we determined it was necessary to restate our financial statements for the three

months ended March 31, 2022.

restatement of the previously filed financial statements was due to our management (with the concurrence of the Audit Committee of our

Board of Directors) determining that our existing revenue recognition policy was not consistent with the guidance in ASC 606.

After analyzing

our contracts using the five-step process in ASC 606, we have determined that for VIP enrollment contracts, it is necessary for us to

separately identify the performance obligations and recognize the revenue as the performance obligations are satisfied over the customer

life as applicable.

We identified a material weakness related to the operating effectiveness of our review controls in that we did not

put the appropriate resources in place to be able to identify technical accounting issues and perform review functions appropriately

for the revenue recognition issue described above and for those items which we had previously identified in Part II, Item 9A of our Form

10-K for the fiscal year ended December 31, 2022.

Other income relates to the excess warrant fair value and change in fair value of warrant liability.

of Operations

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Total revenue

Cost of sales (exclusive

of depreciation and amortization shown separately below)

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

Gross profit %

Operating expenses

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Other expense

PPP loan forgiveness

Excess warrant fair value

Change in fair value of

warrant liability, net of issuance costs of $645

decreased approximately $2.2 million, or 14%, to approximately $13.8 million for the year ended December 31, 2023 compared to $16 million

Change in fair value of warrant liability, net of issuance costs of $645

increased approximately $1.2 million, or 9%, to approximately $15.0 million for the year ended December 31, 2024 compared to $13.8 million

for the year ended December 31, 2023.

Revenue during 2023 was impacted by a decrease of approximately $2.1 million in product revenue,

coupled with a decrease of approximately $0.1 million in service revenue.

The decrease in total revenue is attributable to a decrease

of approximately $1.7 million in appliance sales to VIPs, followed by a decrease of approximately $0.9 million in VIP revenue, a decrease

of approximately $0.4 million from our two company-owned dental centers, and a decrease of approximately $0.3 million in BIS revenue.

This was offset by an increase of approximately $0.6 million from sleep testing services and devices and an increase of approximately

$0.6 million in sponsorship, conference and training related revenue, respectively.

Myofunctional therapy remained relatively unchanged

at $0.9 million for the year ended December 31, 2023 and 2022.

the year ended December 31, 2023, we enrolled 150 VIPs and recognized VIP revenue of approximately $3.9 million, a decrease of 19% in

enrollment revenue, compared to the year ended December 31, 2022, when we enrolled 196 VIPs for a total of approximately $4.8 million.

Revenue growth in 2023 was impacted by updates to key inputs in our revenue recognition methodology, primarily estimated customer lives.

As part of our annual process, the

estimated customer lives are calculated separately for each year and was estimated to be 23 months in 2023, an increase of 28%, compared

to 18 months in 2022.

This impacts the amortization of revenue to be spread over longer period of time, thus decreasing the revenue that

is recognized over the same period when compared to 2022.

Although this negatively impacts our revenue recognition, it is a result of

customers staying active for longer period of time, thus increasing our customer retention year-over-year.

Additionally, our revenue

was impacted by new entry levels into the VIP program, ranging from $2,500 to $50,000 and adding an $8,000 pediatric program, which was

received positively by our providers, however it results in lower revenue per contract.

This coupled with lower enrollments, resulted

in lower revenue for 2023.

the year ended December 31, 2023, we sold 8,240 oral appliance arches for a total of approximately $6.1 million, a 22% decrease in revenue

from the year ended December 31, 2022 when we sold 12,281 oral appliance arches for a total of approximately $7.8 million.

Refer to “Material

Items, Trends and Risks Impacting Our Business” section above for events that impacted our product sales.

Revenue during the year ended December 31,2024 was impacted by an increase of approximately $1.6

million in product revenue, coupled with a decrease of approximately $0.4 million in service revenue.

The increase in product revenue

is attributable to an increase of approximately $2.1 million in Guide sales to VIPs, followed by a decrease of approximately $0.5 million

appliance sales to VIPs.

Additionally, we had a decrease in service revenue of approximately $1.4 million in our VIP enrollment

revenue, and a decrease of approximately $0.3 million from Myofunctional revenue.

This was offset by an increase of approximately $1.3

million in sponsorship, conference and training related revenue.

BIS revenue decreased by $0.1 million to approximately $0.8 million,

which was offset by an increase of $0.1 million from sleep testing services to approximately $1.3 million for the year ended December

the year ended December 31, 2024, we enrolled 112 VIPs and recognized VIP enrollment revenue of approximately $2.5 million, a decrease

of approximately 37% in enrollment revenue, compared to the year ended December 31, 2023, when we enrolled 150 VIPs for a total of approximately

$3.9 million.

Service revenue decrease in 2024 was due to changes to key inputs in our revenue recognition methodology, primarily estimated

customer lives.

As part of our annual process, the estimated customer lives are calculated separately for each year and was estimated

to be 27 months in 2024, an increase of 17%, compared to 23 months in 2023, and an increase of 50% when compared to 18 months in 2022.

Estimated customer lives impacts the amortization of revenue to be spread over a longer period of time, thus decreasing the revenue that

is recognized over the same period when compared to December 31, 2023.

Although such adjustment to customer lives negatively impacts

our revenue recognition, increasing estimated customer lives results in customers staying active for a longer period of time, thus increasing

our customer retention year-over-year.

Additionally, our revenue was lowered by a sales strategy shift and focus toward sleep center

affiliations, coupled with lower enrollments in late 2023 and all of 2024, which resulted in lower service revenue for the year ended

December 31, 2024.

This was offset by a higher incidence of breakage in contracts, which accelerated revenue recognition on several contracts

for VIPs who did not complete their training during the first 90 days of their enrollment.

Approximately $1.7 million in revenue was

attributable to breakage during the year December 31, 2024, when compared to approximately $0.7 million during the year ended December

the year ended December 31, 2024, we sold 16,182 oral appliance arches and guides for a total of approximately $7.9 million, a 26% increase

in revenue from the year ended December 31, 2023, when we sold 8,240 oral appliance arches and guides for a total of approximately $6.3

The increase is directly attributable to a 71% decrease in discounts offered during the same period, with less than $0.2 million

in discounts offered during the year ended December 31, 2024 when compared to approximately $0.7 million of discounts offered during

the year ended December 31, 2023, coupled with an increase in Guide sales, which are lower revenue generating products when compared

to Vivos appliances.

of Sales and Gross Profit

of sales decreased by approximately $0.5 million to approximately $5.5 million for the year ended December 31, 2023 compared to approximately

$6.0 million for year ended December 31, 2022.

This was primarily related to a decrease of approximately $0.8 million in lower costs

associated with appliances driven by the lower sales explained above, and a decrease of approximately $0.3 million related to VIP training.

This was offset by an increase of approximately $0.3 million due to higher costs associated with the ring lease program, and an increase

of approximately $0.1 million in membership support costs.

the year ended December 31, 2023, gross profit decreased by approximately $1.7 million to $8.3 million.

This decrease was attributable

to a decrease in revenue of approximately $2.2 million offset by a decrease in cost of sales of $0.6 million.

Gross margin decreased

to 60% for the year ended December 31, 2023, compared to 63% for the year ended December 31, 2022.

of sales increased by approximately $0.5 million, or 9%, to approximately $6.0 million for the year ended December 31, 2024, compared

to approximately $5.5 million for the year ended December 31, 2023.

This was primarily due to $1.2 million in higher costs directly related

to an increase in lab fees from our primary vendors, offset by a decrease of less than $0.3 million related to lower costs associated

with the ring lease program and a decrease of slightly over $0.3 million in VIP training, and a decrease of approximately $0.1 million

for inventory obsolescence expense.

the year ended December 31, 2024, gross profit increased by approximately $0.7 million to $9 million.

This increase was attributable

to an increase in revenue of approximately $1.2 million offset by an increase in cost of sales of approximately $0.5 million.

remained constant at 60% for the year ended December 31, 2024, compared year ended December 31, 2023.

and Administrative Expenses

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in personnel and related compensation of approximately $1.7 million, including salaries and benefits, paid time off, stock-based compensation,

and other employee-related expenses, as a result of reduction in force and less stock options granted during

Other drivers of the decrease in general and administrative expenses included a decrease of approximately

$0.9 million related to travel expenses, a decrease of approximately $0.7 million on bad debt expense, a decrease of approximately $0.5

million related to insurance, a decrease of approximately $0.4 million in professional fees, and a decrease of approximately $0.4 million

related to research and development, office supplies, bank charges and merchant fees as well as equipment repairs and maintenance, offset

by an increase of $0.1 million for annual meeting and proxy related fees.

and other employee-related expenses, as a result of reduction in force and less stock options vested during the year, as a result of

the reduction in force implemented beginning with the second and third quarters of 2023 and into the year ended December 31,

Other reasons for the decrease in general and administrative expenses include a decrease of approximately $1.8 million in professional

fees, including consulting and legal fees.

A decrease of approximately $0.4 million related to travel, meals and entertainment, a decrease

of approximately $0.3 million related to insurance, a decrease of approximately $0.2 million related to change in the allowance for credit

losses, and a decrease of approximately $0.2 million in infrastructure expenses such as communications, development and customization.

and Marketing

and marketing expense decreased by $2.9 million to $2.5 million for the year ended December 31, 2023, compared to $5.3 million for the

year ended December 31, 2022.

This decrease was primarily driven by a $1.0 million decrease in commissions, as well as a $1.0 million

decrease related to a reduction in website development, materials and product samples as well as print media and marketing supplies,

and a decrease of $0.9 million in conventions and tradeshow expenses.

and marketing expense decreased by $0.7 million to approximately $1.7 million for the year ended December 31, 2024, compared to $2.5

million for the year ended December 31, 2023.

This decrease was primarily driven by a $0.4 million decrease in commissions, as well as

a $0.3 million decrease related to a reduction in website development, materials and product samples as well as print media and marketing

supplies, including conventions and tradeshow expenses.

and Amortization

and amortization expense was approximately $0.6 and $0.7 million for the years ended December 31, 2023 and 2022, respectively.

and amortization remained constant during the period due to an immaterial amount of depreciable assets placed into service.

loan forgiveness was approximately $1.3 million for the year ended December 31, 2022.

The PPP loan was forgiven by the SBA in its entirety in 2022.

and amortization expense was approximately $0.6 million for the years ended December 31, 2024 and 2023.

Depreciation and

amortization remained constant during the period due to an immaterial amount of depreciable assets placed into service.

warrant fair value and change in fair value of warrant liability, net of issuance costs

liability for the warrants issued in the January 9, 2023 private placement totaled approximately $14.5 million which included 186,667

186,667 pre-funded warrants with a fair value of approximately $6.7 million and 266,667 additional warrants with a fair value of

approximately $7.7 million.

The difference between the fair value of the $14.5 million liability-classified warrants and the net

proceeds received of approximately $8.0 million, or approximately $6.5 million, was recognized as a day-one non-operating expense.

The change in fair value of the warrant liability was approximately $10.8 million, or $10.2 million of other income net of issuance

costs of $0.6 million, for the year ended December 31, 2023.

The net impact of the private placement warrants on net loss for the

year ended December 31, 2023 was approximately $3.8 million of other income.

pre-funded warrants with a fair value of approximately $6.7 million and 266,667 additional warrants with a fair value of approximately

$7.7 million.

The difference between the fair value of the $14.5 million liability-classified warrants and the net proceeds received

of approximately $8.0 million, or approximately $6.5 million, was recognized as a day-one non-operating expense.

The change in fair value

of the warrant liability was approximately $10.8 million, or $10.2 million of other income net of issuance costs of $0.6 million, for

the year ended December 31, 2023.

The net impact of the private placement warrants on net loss for the year ended December 31, 2023 was

approximately $3.8 million of other income.

and Capital Resources

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the Company as a going concern.

The Company has incurred losses since inception, including $13.6 and $23.8 million for the years ended

December 31, 2023 and 2022, respectively, resulting in an accumulated deficit of approximately $93.1 million as of December 31, 2023.

We have incurred losses since inception, including $11.1 and $13.6 million for the years ended December

31, 2024 and 2023, respectively, resulting in an accumulated deficit of approximately $104.2 million as of December 31, 2024.

cash used in operating activities amounted to approximately $12.7 and $11.9 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2023, the Company had total liabilities of approximately $10.3 million.

As of December 31, 2024, we had total liabilities of approximately $7.3 million as compared with $10.3 million as of December 31, 2023.

of December 31, 2024, we had approximately $6.3 million in cash and cash equivalents, which will not be sufficient to fund operations

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these factors raise substantial doubt regarding our ability to continue as a going concern.

See Note 16 to the financial statements included

in this Report for additional information regarding our financing activity following the year ended December 31,

previously disclosed that our goal was to decrease costs and increase revenues during 2023 with the aim of becoming cash flow positive

from operations by the first quarter of 2024 without the need for additional financing, if possible.

We have successfully implemented

cost savings measures and significantly reduced cash used in operations.

However, sales have not grown during 2023 as anticipated as

our product offerings and strategies are refined.

As such, we now anticipate that we will be required to obtain additional financing

to satisfy our cash needs, as management continues to work towards increasing revenue and achieving cash flow positive operations in

the foreseeable future.

a state of cash flow positivity is reached, management is reviewing all options to obtain additional financing to fund operations.

financing is expected to come primarily from the issuance of equity securities in order to sustain operations until we 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, we may be required to delay, significantly modify or terminate some

or all of its operations, all of which could have a material adverse effect on us and our stockholders.

have implemented cost savings measures that lead to reduced impact to cash used in operations.

However, sales did not grow in the year

ended December 31, 2023 or in 2024 as anticipated, as our product offerings and distribution strategies continue to be improved and refined.

As such, we have raised equity capital in late 2023 and throughout 2024 and will be required to obtain additional financing to satisfy

our cash needs and bolster our stockholders’ equity for Nasdaq compliance purposes, as management continues to work towards increasing

revenue to achieve cash flow positive operations in the foreseeable future.

Until a state of cash flow positivity is reached, management is reviewing

all options to obtain additional financing to fund operations.

This financing is expected to come primarily from the issuance of equity

securities in order to sustain operations until we can achieve profitability and positive cash flows, if ever.

We expect that our new

sales and marketing alliance with Rebis (and similar alliances or acquisitions of sleep centers or other providers we may undertake) have

the potential to increase patient volume, drive top line revenue and lower customer acquisition costs and overhead.

However, there can

be no assurances that this new model will have effects we anticipate, and our relatively low cash on hand could lead us to again requiring

additional funding.

There is a risk that adequate additional funding will be available on favorable terms, or at all.

If such funds are

not available in the future, or that if our new model does not result in the patient volume and financial results within the expected

timelines, we may also be required to delay, significantly modify or terminate some or all of our operations, all of which could have

a material adverse effect on us and our stockholders.

do 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 its financial condition, results of operations, liquidity, capital expenditures or capital resources.

current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

following table presents a summary of our cash flow for the years ended December 31, 2024 and 2023 (in thousands):

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Financing activities

cash used in operating activities of approximately $11.9 million for the year ended December 31, 2023 is a decrease of approximately

cash used in operating activities of approximately $12.7 million for the year ended December 31, 2024 is an increase of approximately

$0.7 million compared to net cash used in operating activities of approximately $11.9 million for the year ended December 31, 2023.

decrease is due primarily to the decrease in our net loss of approximately $10.3 million, a favorable net change in the fair value of

warrant liability of approximately $10.2 million, offset by day-one non-operating warrant expense of approximately $6.5 million, an increase

of approximately $1.2 million for the PPP loan, an increase of approximately $1.2 million for the employee retention credit liability,

an increase of approximately $0.7 million in prepaid expenses and other current assets, and a decrease of approximately $1.3 million

in stock-based compensation.

This was offset by a decrease of approximately $0.3 million in accounts receivable related to the MID clinics

and VIP enrollments under payment plans.

increase is due primarily to a decrease of approximately $1.8 million in accounts payable, decrease of approximately $0.5 million in

accrued expenses, a decrease of approximately $1.2 million for the employee retention credit liability which was not present in 2024,

a decrease in accounts receivable of approximately $0.4 million offset by the decrease in the allowance for doubtful accounts, an decrease

in prepaids of approximately $1.0 million, and a decrease in fair value of common stock and warrants issued for services of approximately

$0.7 million.

This was offset by a decrease in our net loss of approximately $2.5 million, a favorable net change in the fair value of

warrant liability of approximately $10.2 million, offset by day-one non-operating warrant expense of approximately $6.5 million.

the year ended December 31, 2024, net cash used in investing activities consisted of capital expenditures for software of $0.6 million

related to the development of software for internal use, expected to be placed in service in 2024, as well as a purchase of a patent

portfolio in February 2023.

This compares to net cash used in investing activities for the year ended December 31, 2022 of $0.9 million

due to capital expenditures for internally developed software.

cash provided by financing activities of $10.9 million for the year ended December 31, 2023, is attributable to proceeds of $12.0 million

from the issuance of Common Stock, net of approximately $1.1 million of professional fees and other issuance costs, in our private placements

in January 2023 and November 2023.

There was no cash used for financing activities for the year ended December 31, 2022.

related to the development of software for internal use, expected to be placed in service in 2025.

This compares to net cash used in

investing activities for the year ended December 31, 2023 of $0.9 million due to capital expenditures for internally developed software,

as well as a purchase of a patent portfolio in February 2023.

cash provided by financing activities of $17.9 million for the years ended December 31, 2024, is attributable to proceeds of $19.2 million

from the issuance of Common Stock and Warrants, net of approximately $1.4 million of professional fees and other issuance costs, in our

February warrant inducement, as well as the June, September and December private placements.

This compares to net cash used in investing

financing for the year ended December 31, 2023 of $10.9 million, attributable to gross proceeds of $12.0 million from the issuance of

Common Stock, net of approximately $1.1 million of professional fees and other issuance costs, from our private placement in January

and November 2023.

Accounting Policies Involving Management Estimates and Assumptions

of Presentation and Consolidation

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

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

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

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

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

accounting policies are more fully described in Note 1 of the Consolidated Financial Statements.

As disclosed in Note 1, the accompanying

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

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

significant intercompany balances and transactions have been eliminated in consolidation.

Growth Company Status

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

by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, the Company may take advantage of certain

exemptions from various reporting requirements that are applicable to other public companies that are not EGCs.

These include, but are

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

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

the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result, we may take advantage of certain exemptions

from various reporting requirements that are applicable to other public companies that are not EGCs.

These include, but are 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.

Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until

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period and comply with the requirements that apply to non-EGC but any such election to opt out is irrevocable.

The Company currently

expects to retain its status as an EGC until the year ending December 31, 2026, but this status could end sooner under certain circumstances.

Company generates revenue from the sale of products and services.

A significant majority of the Company’s revenues are generated

from enrolling dentists as either (i) Guided Growth and Development VIPs;

We currently expect to

retain our status as an EGC until the year ending December 31, 2025, but this status could end sooner under certain circumstances.

generate revenue from the sale of products and services.

A significant majority of our revenues are generated from enrolling dentists

as either (i) Guided Growth and Development VIPs;

(ii) Lifeline VIPs;

(iii) combined Guided Growth and Development and Lifeline VIPs;

or Premier Vivos Integrated Providers (Premier

Prior to the second quarter of 2023, the majority of VIP enrollments were Premier VIPs.

The other, lower

priced enrollments were piloted in prior fiscal quarters on a limited basis.

or Premier Vivos Integrated Providers (“Premier VIPs”).

Prior to the second quarter of 2023, the majority of VIP enrollments

were Premier VIPs.

The other, lower priced enrollments were piloted in fiscal quarters prior to second quarter of 2023, and on a limited

They were officially adopted during the second quarter of 2023.

For each VIP program, 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 manner that reflects the consideration the Company expects to be entitled

to in exchange for those products and services.

For each VIP program, 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 manner

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

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

ASC Topic 842, Leases (“ASC 842”), the Company determines revenue recognition through the following five-step model,

ASC Topic 842 , Leases (“ASC 842”), we determine revenue recognition through the following five-step model,

which entails:

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of the transaction price to the performance obligations;

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

of revenue when, or as we satisfy each performance obligation.

Enrollment Revenue

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

enrollees, irrespective of their level of enrollment, are commonly referred to as VIPs, unless it is necessary to specify their particular

Once it is determined that a contract exists (i.e., 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 Premier VIP enrollment

that the VIP pays upon execution of the contract is significant, running at approximately $26,200, with different entry levels for the

various programs described above.

Unearned revenue reported on the balance sheet as contract liability represents

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

the service is rendered.

The Company recognizes this revenue as performance obligations are met.

Accordingly, the contract liability

for unearned revenue is a significant liability for the Company.

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

revenue from the products and/or services is recorded.

Company enters into programs that may provide for multiple performance obligations.

Commencing in 2018, the Company began enrolling medical

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

deep immersion workshop format which provides the Premier VIP dentist access to a team who is dedicated to creating a successful integrated

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.

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

All program enrollees,

irrespective of their level of enrollment, are commonly referred to as VIPs, unless it is necessary to specify their particular program.

Once it is determined that a contract exists (i.e., 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 Premier VIP enrollment that the

VIP pays upon execution of the contract is significant, running at approximately $23,200, with different entry levels for the various

programs described above.

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.

recognize this revenue as performance obligations are met.

Accordingly, the contract liability for unearned revenue is a significant

liability for us.

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

enter into programs that may provide for multiple performance obligations.

Commencing in 2018, we began enrolling medical and dental

professionals in a one-year program (now known as the Premier VIP Program) which includes training in a highly personalized, deep immersion

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

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

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

to sell our appliances.

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

such contract using the relative standalone selling price method.

The relative standalone price method is based on the proportion of

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

obligations in the contract.

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

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

patients using The Vivos Method.

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

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

As such, the observable

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

to the right to sell performance obligation.

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

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

and fail to participate in the Premier VIP program long term.

Since the beginning of the Premier 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 will continue, at which time the remainder of revenue 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, 18 months for 2022, and 23 months for 2023, as a result

of customers staying active for longer periods of time.

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.

We allocate the transaction price of a VIP enrollment contract to each performance obligation under such contract

using the relative standalone selling price method.

The relative standalone price method is based on the proportion of the standalone

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

the contract.

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

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

using The Vivos Method.

the right to sell is never sold outside of VIP contracts, and VIP contracts are sold for varying prices, we believe 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.

use significant judgements in revenue recognition including an estimation of customer life over which it recognizes the right to sell.

We have determined that Premier VIPs who do not complete sessions 1 and 2 of training rarely complete training at all and fail to participate

in the Premier VIP program long term.

Since the beginning of the Premier 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 will continue, at which time the remainder of revenue is accelerated and recognized in the following month.

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

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

Because of various factors occurring year to year, we have estimated

customer life for each year a contract is initiated.

Estimated customer lives have been calculated separately for each year and were

estimated between 14 months and 27 months for the years 2020 through 2024, depending upon the length of time customers stayed active

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.

Given that our alliance-based marketing and distribution model is very new and has yet to generate significant revenues,

we are in the process of developing and implementing our revenue recognition plan for revenues derived from this model.

Service Revenue

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

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

Revenue for these services is recognized

monthly during the month the services are rendered.

Company also 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.

addition to VIP enrollment service revenue, in 2020 we launched BIS, an additional service on a monthly subscription basis, which includes

our AireO2 medical billing and practice management software.

Revenue for these services is recognized monthly during the month the services

are rendered.

also offer our VIPs the ability to provide MyoCorrect to the VIP’s patients as part of treatment with The Vivos Method.

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

Revenue for MyoCorrect services is recognized

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

of Revenue to Performance Obligations

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

obligation based on relative fair values.

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

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

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

over the estimated customer life.

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

and training services (service revenue).

identify all goods and services that are delivered separately under a sales arrangement and allocate revenue to each performance obligation

based on relative fair values.

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

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

After allocation

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

estimated customer life.

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

services (service revenue).

of Discounts and Promotions

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

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

These include the following:

for cash paid in full

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

period for the SleepImage ® lease program

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

trial period for the SleepImage ® lease program

concessions on annual enrollment fee

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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.

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

In rare circumstances, a discount

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

In this situation, revenue is measured

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

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

Prior to the sale, the

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

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

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

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

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

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

These include the DNA appliance ® , mRNA appliance ® ,

the mmRNA appliance, the Versa, the Vida, the Vida Sleep, and others.

The Company expanded its product offerings in the first quarter

of 2023 via the acquisition of certain U.S.

and international patents, product rights, and other miscellaneous intellectual property

from Advanced Facialdontics, LLC, a New York limited liability company (“AFD”).

Revenue from appliance sales 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.

contracts 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

Company’s appliances are similar to a retainer that is worn in the mouth 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 dental 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.

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.

support of the VIPs using the Company’s appliances for their patients, the Company utilizes a team of trained technicians 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

The Company recognizes revenue in the centers after the appliance is received from the manufacturer and once the appliance is fitted

and provided to the patient.

Company offers 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 incentives are recorded as a liability at issuance and deducted from the related product sale at

the time the credit is used.

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, impairment of goodwill and long-lived assets;

assumptions for assets acquired in asset acquisitions;

valuation assumptions for stock options, warrants, warrant liabilities and equity

instruments issued for goods or services;

deferred income taxes and the related valuation allowances;

and the evaluation and measurement

of contingencies.

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

However, the Company has made

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

To the extent there are material

differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operations

will be affected.

and Cash Equivalents

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

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

Receivable, Net

receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not

bear interest.

Accounts receivable are stated at the net amount expected to be collected, using an expected credit loss methodology to

determine the allowance for expected credit losses.

The Company evaluates the collectability of its accounts receivable and determines

the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables, historical

collection trends, and charge-offs.

When the Company is aware of a customer’s inability to meet its financial obligation, the Company

may individually evaluate the related receivable to determine the allowance for expected credit losses.

The Company uses specific criteria

to determine uncollectible receivables to be charged-off, including bankruptcy filings, the referral of customer accounts to outside

parties for collection, and the length that accounts remain past due.

and Equipment, Net

and equipment are stated at historical cost less accumulated depreciation.

Depreciation is computed using the straight-line method over

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

Amortization of leasehold improvements is recognized using

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

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

and Intangible Assets, Net

Prior to the sale, we

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

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, we update the transaction price to represent the circumstances present at the end of the reporting period and any changes in

circumstances during the reporting period.

addition to revenue from services, we also generate revenue from the sale of our line of oral devices and preformed guides (known as

appliances or systems) to our customers, the VIP dentists, or to OSA patients directly now in our strategic alliance model.

include the DNA appliance®, mRNA appliance®, the mmRNA appliance, the Versa, the Vida, the Vida Sleep and others.

expanded our product offerings in the first quarter of 2023 via the acquisition of certain U.S.

and international patents, product

rights, and other miscellaneous intellectual property from Advanced Facialdontics, LLC, a New York limited liability company

Revenue from appliance sales is recognized when the control of a 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, and

installing the appliance and educating the patient as to its use.

We contract with VIPs for the sale of the appliance and are not

involved in the sale of the products and services from the VIP to the VIP’s patient.

utilize third party contract manufacturers or labs to produce its patient-customized, patented appliances and its preformed guides.

manufacturer designated by us produces the appliance in strict adherence to our patents, design files, treatments, processes and procedures

and under the direction and our specific instruction, ships the appliance to the VIP who ordered the appliance from us.

All of our contract

manufacturers are required to follow our master design files in production of appliances or the lab will be in violation of the FDA’s

rules and regulations.

We performed an analysis and concluded it is the principal in the transaction since it has control of the product

and are reporting revenue gross.

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

revenue is recognized once the appliance ships to the VIP under our direction.

support of the VIPs using our appliances for their patients, we utilize a team of trained technicians to measure, order and fit each

Revenue is recognized differently for Company owned centers and distribution alliances with third party sleep centers than

it does for revenue from VIPs.

Upon scheduling the patient (which is our customer in this case), we owned center takes a deposit and

reviews the patient’s insurance coverage.

We recognize revenue in the centers after the appliance is received from the manufacturer

and once the appliance is fitted and provided to the patient.

offer certain dentists (known as Clinical Advisors) discounts to standard VIP pricing.

This is done to help encourage Clinical Advisors,

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

In addition, from time to

time, we offer credits to incentivize VIPs to adopt our products and increase case volume within their practices.

These incentives are

recorded as a liability at issuance and are deducted from the related product sale at the time the credit is used.

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

6 unchanged sentences

There were no quantitative or qualitative indicators

of impairment that occurred for the year ended December 31, 2023, and no impairment was required.

assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom the Company acquired certain assets related

to its OMT service in March 2021, (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 and (iii) AFD,

from whom the Company acquired certain U.S.

and international patents, trademarks, product rights, and other miscellaneous intellectual

property in March 2023.

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,

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

of impairment that occurred for the year ended December 31, 2024, accordingly no impairment was required.

assets consist of assets acquired from First Vivos and costs paid to (i) MyoCorrect, from whom we acquired certain assets related to

its OMT service in March 2021, (ii) Lyon Management and Consulting, LLC and its affiliates (“Lyon Dental”), from whom we

acquired certain medical billing and practice management software, licenses and contracts in April 2021 (including the software underlying

AireO2) for work related our acquired patents, intellectual property and customer contracts and (iii) AFD, from whom we acquired certain

and international patents, trademarks, product rights, and other miscellaneous intellectual property in March 2023.

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, Lyon Dental and AFD for patents

and intellectual property are amortized over the life of the underlying patents, which approximates 15 years.

of Long-lived Assets

16 unchanged sentences

There were no quantitative or qualitative

indicators of impairment that occurred for the year ended December 31, 2023, and no impairment was required.

Offering Costs

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

of the success of the offering.

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

the period it is determined that the offering was successful.

Deferred offering costs related to unsuccessful equity offerings are recorded

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

for Payroll Protection Program Loan

Company 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).

Retention Tax Credit

employee retention tax credit (“ERTC”) for 2020 was established under the Coronavirus Aid, Relief, and Economic Security

Act of 2020 (the “CARES Act”) and amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief

The ERTC provided for changes in the employee retention credit for 2020 and provided an additional credit for the first,

second and third calendar quarters of 2021.

Employers are eligible for the credit if they experienced either a full or partial suspension

of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or if they experienced a significant

decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 and the corresponding quarters in 2019.

The ERTC is a refundable credit that employers can claim on qualified wages paid to employees, including certain health insurance costs.

to the Internal Revenue Service (“IRS”) Notice 2021-20, “Guidance on the Employee Retention Credit under Section 2301

of the Coronavirus Aid, Relief, and Economic Security Act,” the period during which there is a significant decline in gross receipts

is determined by identifying the first quarter in 2020 in which the gross receipts are less than 50% of its gross receipts for the same

period in 2019.

The employee retention credit is available only to eligible employers.

Section 2301(c)(2)(A) of the CARES Act defines

the term “eligible employer” as any employer carrying on a trade or business during calendar year 2020, and, with respect

to any calendar quarter, for which (1) the operation of the trade or business carried on during calendar year 2020 is fully or partially

suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social,

religious, or other purposes) due to COVID-19, or (2) such calendar quarter is within the period in which the employer had a significant

decline in gross receipts, as described in section 2301(c)(2)(B) of the CARES Act.

VIP dentists and potential VIPs were forced to close

their offices during 2020 as a result of COVID-19.

Therefore, the Company qualifies as an eligible employer under this under the CARES

2301(c)(3)(A)(ii) of the CARES Act also provides that if an eligible employer averaged 100 or fewer employees in 2019 (a “small

eligible employer”), qualified wages are those wages paid by the eligible employer with respect to an employee during any period

described in section 2301(c)(2)(A)(ii)(I) of the CARES Act (relating to a calendar quarter for which the operation of a trade or business

is fully or partially suspended due to a governmental order) or during a calendar quarter within the period described in section 2301(c)(2)(A)(ii)(II)

of the CARES Act (relating to a significant decline in gross receipts).

The Company averaged fewer than 80 employees in 2019 and is therefore

considered a small eligible employer under the CARES Act.

plan expenses were not included in the analysis, although they are eligible if an employee has paid health insurance through their paycheck.

Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and

maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from

the gross income of employees by reason of section 106(a) of the Code.

The Company pays the first $500 of healthcare insurance for each

employee, which generally covers the monthly cost of their insurance.

Because of this, the Company conservatively did not include any

of the cost of insurance in its analysis.

Additionally, PPP loan amounts were deducted from the amount of total wages paid before calculating

the qualified ERTC wages.

The Company applied for the ERTC using Vivos Therapeutics Inc.’s payroll, which covers 95% of its employees.

indicated above, for 2020, companies were eligible for a credit equal to 50 percent of the first ten thousands of qualified wages paid

per employee in the aggregate of each eligible quarter.

Therefore, the maximum ERTC for the Company for 2020 is five thousand ($5,000)

per employee.

For the second and fourth quarters of 2020, the total eligible credit was limited to approximately $0.5 million.

2021, the ERTC was 70% of the first ten thousand qualified wages paid per employee each quarter.

Accordingly, the credit was limited

to approximately $0.7 million.

As there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit

business entities, the Company accounted for the ERTC by analogy to ASC 450, Contingencies .

Accordingly, under ASC 450, entities

would treat the ERTCs (whether received in cash or as an offset to current or future payroll taxes) as if they were gain contingencies.

When applying ASC 450-30, entities would not consider the probability of complying with the terms of the ERC program but, rather, would

defer any recognition in the income statement until all uncertainties are resolved and the income is “realized” or “realizable”

(i.e., upon receipt of the funds or formal notice by the IRS that the company is entitled to such funds).

In our case, the Company elected

to follow a more conservative approach and instead of recognizing a receivable for amounts to be received when the amended tax forms

were filed in 2022, it was decided to wait for the notice from IRS and cash was received.

As for financial statement presentation, it

is believed that either classifying the amounts as a reduction to payroll tax expense (expense off-set is however contrary to U.S.

or as other income to be acceptable with appropriate disclosure of the election made by the company.

However, the IRS issued a renewed

warning regarding the ERTC on March 7, 2023 urging taxpayers to carefully review the ERTC guidelines.

The Company continues to evaluate

additional information from the IRS, and elected to disclose the funds received as a separate line item under long-term liabilities on

the balance sheet, until more information becomes available from the IRS.

As a result, for the year ended December 31, 2023, approximately

$1.2 million was recorded under long-term liabilities.

and Gain Contingencies

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

An estimated loss contingency

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

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

accrues that amount.

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

Company accrues the lowest amount in the range.

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

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

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

the reason why it cannot estimate the range of loss.

The Company regularly evaluates current information available to it to determine

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

Legal fees related

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

Contingencies that may result in gains are not recognized

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

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 or cancellation occurs, rather than estimating the number of awards that are not

expected to vest in accounting for stock-based compensation.

and Development

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

and enhancements to existing products.

Research and development costs incurred were less than $0.1 million and less than $0.2 million

for the years ended December 31, 2023 and 2022, respectively.

These are recorded on the statement of operations under general and administrative

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

and non-current portion in our balance sheets.

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

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

Operating lease ROU assets and liabilities are recognized

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

In determining the present value of

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

in the lease is not readily determinable.

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

available at lease commencement.

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

exclude lease incentives.

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

will exercise such options.

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

Lease agreements

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

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

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

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.

indicators of impairment that occurred for the year ended December 31, 2024, accordingly no impairment was required.

account 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, we consider tax regulations of the jurisdictions in which

we operate, estimates of future taxable income, and available tax planning strategies.

If tax regulations, operating results, or the

ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required.

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

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

allowance could materially change.

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

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

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

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

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

and Diluted Net Loss Per Share

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

shares outstanding for each period presented.

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

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

Company accounts for its warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions

of each instrument, in accordance with ASC 815, Derivatives and Hedging .

Warrants classified as equity are recorded at fair value

as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made.

Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities are recorded on the

Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance

The recorded valuation

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

In accounting for uncertainty in income taxes, we recognize 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.

We recognize interest and penalties accrued on

any unrecognized tax benefits as a component of income tax expense.

account for our warrants and financial instruments as either equity or liabilities based upon the characteristics and provisions of each

instrument, in accordance with ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity .

classified as equity are recorded at fair value as of the date of issuance on our consolidated balance sheets and no further adjustments

to their valuation are made.

Warrants classified as liabilities and other financial instruments that require separate accounting as liabilities

are recorded on our consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance

sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other

4 unchanged sentences

Accounting Pronouncements

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

Adopted Standards.

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

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

Measurement of Credit Losses on Financial Instruments.

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

This guidance requires use of an impairment model (known as the “current expected credit losses”, or CECL model)

that is based on expected losses rather than incurred losses.

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

of expected credit losses.

The Company adopted the new accounting standard on January 1, 2023.

The adoption of this standard did not

have a material impact on the Company’s consolidated financial statements.

discussion of recent accounting pronouncements is included in Note 1 to our financial statements contained in this Annual Report on Form

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis