Vivos Therapeutics Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 15, 2025

Key Takeaways

  • Business model pivot: Vivos is transitioning to strategic alliances and acquisitions of sleep medical providers to drive OSA appliance sales and diversify revenue, marking an “inflection point” in growth strategy.
  • Product sales surge: Quarterly product revenue rose 8% with a record 3,736 oral appliance arches shipped—an 87% increase year-over-year—led by strong pediatric guide appliance demand.
  • SCN acquisition: The $9 million Sleep Center of Nevada deal, expected to close in Q2, will add 3,000+ monthly sleep patients and is forecasted to be accretive to revenue and gross profit in Q3.
  • Service revenue decline: Total Q1 revenue fell to $3.0 million from $3.4 million in Q1 2024, primarily due to a $700 thousand drop in VIP enrollment fees following the sales team restructuring.
  • Cash burn continues: Vivos reported a $3.9 million net loss in Q1, cash balances dropped to $2.3 million, and the company needs new financing to fund the SCN transaction and bolster working capital.
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Earnings Conference Call
Vivos Therapeutics Q1 2025
00:00 / 00:00

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Operator

Good day, everyone, and welcome to the Vivo Therapeutics First Quarter twenty twenty five Earnings Call. At this time, participants are in a listen only mode. A question and answer session will follow management's remarks. This conference call is being recorded and replay for today's call will be available on the Investor Relations section of VIVO's website and will remain posted there for the next thirty days. I will now hand the call over to Brad Amman, Chief Financial Officer, for introductions and the reading of the safe harbor statement. Please go ahead.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Thank you, John. Hello, everyone, and welcome to our conference call. A copy of our earnings press release is available on the Investor Relations section of our website at www.vivos.com. With us on today's call are Kirk Huntsman, VIVO's Chairman and Chief Executive Officer and myself, VIVO's Chief Financial Officer. Today, we'll review the highlights and financial results for the first quarter twenty twenty five as well as more recent developments and VIVO's plans for the rest of 2025, including developments in our marketing and distribution strategy pivot.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Following these formal remarks, we will take questions. I would also like to remind everyone that today's call will contain certain forward looking statements from our management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended concerning future events. Words such as aim, may, could, should, seek, projects, expects, intends, plans, believes, anticipates, hopes, estimates, goal and variations of such words and similar expressions are intended to identify forward looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond the company's control. Actual results, including without limitation, the results of VIVO's pending acquisition of the Sleep Center of Nevada and other growth strategies, operational plans, including sales, marketing, acquisition and integration, research and development, regulatory initiatives, cost savings plans and plans to generate revenue as well as future potential results of operations or operating metrics such as the potential for VIVOS to achieve future positive cash flows and profitability and other matters about the future to be addressed by VIVOS management in this conference call may differ materially and adversely from those expressed or implied by such forward looking statements.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described in other disclosures contained in VIVOS' filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our Form 10 ks for the year ended 12/31/2024, and our other filings with the SEC, including our first quarter '10 Q filed with the SEC today, all of which are or will be accessible on the Investor Relations section of the VIVOS website as well as the SEC's website. Except to the extent required by law, VIVOS assumes no obligation to update statements as circumstances change. Finally, be aware that the U. S. Food and Drug Administration has given certain VIVOS appliances five ten clearance to treat mild to severe OSA in adults.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

With the FDA clearance for severe last November, treatment of patients with severe OSA is no longer needed to be performed off label at the clinical discretion of the treating doctor and is now an integral part of the Vivo's treatment protocol. That said, all Vivo's appliances should only be used within their FDA cleared uses. Now at this time, it's my pleasure to introduce Kirk Huntsman, Chairman and CEO of VIVOS. Kirk, please go ahead.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Thank you, Brad, and thank you all for joining us on today's conference call. In a moment, I'll turn the call back to Brad, who will walk us through the highlights of our first quarter of twenty twenty five financial and operating results. After that, we'll be happy to take your questions. But before I do that, I'll offer some brief remarks on our progress throughout the first quarter and provide an update on our important ongoing business model pivot and why we believe this is critical for our company's growth prospects and financial success, both this year and over the long term. Keep in mind that what we are seeing in the first quarter and what we expect to see continue in the second quarter is the inflection point in our business as we strategically transition over to our new model of creating strategic alliances with or outright acquisitions of sleep medical providers as a means of both driving sales of our cutting edge OSA treatment appliances and diversifying our revenue stream with diagnostic and consultative services.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

This pivot is less than a year old, but we are very excited about its prospects and the position we believe it puts VIVOS in for a new era of growth. As expected, our service revenues in the first quarter have declined as we eliminated our VIP enrollment sales team and the active recruitment of VIP dentists. Also as expected, product sales have been growing nicely, especially in our pediatric guide appliance line. Total Arches shipped grew 87% in the quarter from 1996 in the same period last year to 3,736 this year. Product revenue for the quarter was up 8% due to the lower price points on certain pediatric products, but the overall sales volume trend is very positive, as more patients than ever before are receiving Vivos treatment.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Currently, we are expecting to close on our previously announced acquisition of Sleep Center of Nevada, or SCN, in the next month or two. When closed, this acquisition is expected to be accretive to our revenue and gross profit in the near term as SCN sees approximately 3,000 sleep patients a month. Also as disclosed in our 10 Q today, we have signed a non binding term sheet for a $7,500,000 senior loan, which we expect to use to close the SCN transaction and for working capital, and things appear to be on track with that. The lender is requiring a simultaneous equity infusion of at least 1,500,000.0 And as we are in active discussions and we are also in active discussions to bring in at least that amount as part of the SCN closing. We are very confident that we will be able to close this transaction.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

So in addition to so in addition, our operations team has been on the ground in Las Vegas working overtime to ensure that once the transaction is closed, we can immediately begin generating revenue from SCN. Over 100 patient visits have already been booked starting in early June, and several hundred more SCN patients are in process of being booked by our team. In short, we plan to hit the ground running to get the most we can out of this acquisition as quickly as possible. It is probably worth restating the importance of this SCN transaction for Vivo's. In a prior communication, I used the term transformational.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

The closer we get to actually executing the transaction and beginning operations, the more that term seems appropriate. We continue to believe it will be a total game changer for Vibos. Simply put, we strongly believe SCN and future transactions like SCN, which we are actively exploring as well, is the fastest path to getting the most OSA patients into Vivo's treatment at the highest level of revenue and profit per case to the company. Now let me walk you through once again why we are so bullish on this transaction. Number one, As mentioned, SCN tests over three thousand new patients per month for obstructive sleep apnea and other sleep disorders.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Approximately ninety percent of those patients test positive for OSA or related conditions. At least to start, logistically, we may not be able to capture all of those folks for Vivo's appliance treatment, but we expect to convert a good number of them as well as capture diagnostic revenue. Why do we believe this? This is point number two. In our experience with our first strategic alliance with Rebus Health right here in Colorado, we have seen seven out of ten patients selecting some form of Vivo's treatment over CPAP at an average revenue per case exceeding $4,500 After months of intense due diligence and analysis at SCN, we see no reason we would not ultimately realize similar levels of case acceptance and revenue there.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Point number three. In fact, our plan is to add several new diagnostic and therapeutic services to our overall patient offerings, which we expect will yield even higher levels of revenue at SCN as compared to Rebus Health, which admittedly has progressed more slowly than we would have liked due to internal issues at Rebus that were beyond our control. Point number four. The net contribution margins for SCN revenue is expected to be 50% or better. Point number five.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Simple math tells the story. Even if we cut the above forecast figures in half, this transaction holds the prospect of solving our cash burn and generating significant positive cash flows and profits by the end of twenty twenty five, as we seek to ramp up to full capacity over the next six months. With a successful transaction closing and launch, we will also be proving out our thesis around the tremendous untapped potential for us in working directly with sleep labs and sleep medicine specialists. There are literally thousands of sleep medicine doctors with ties to sleep centers across the country who are in need of additional viable treatment options for their OSA patients. Moreover, no other company can bring to such marginally profitable sleep testing operations the kind of comprehensive state of the art technology, the kinds of hands on operational experience, and the kind of high margin profit opportunity that Vivos brings.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Not to mention that in our experience, we represent the most patient friendly and preferred treatment modalities on the market today, making Vivos attractive not only to sleep center owners, but their patients as well. As we have previously mentioned, our business development and M and A team has been extremely busy fielding inquiries and calling on target companies across the country to explain our extraordinary value proposition. The reception across the sleep medicine community has exceeded our expectations, and we are finding a lot of interest in Vivos. We are currently in active negotiations with several groups for affiliation or acquisition opportunities. Some groups are larger than SCN, and some are smaller, yet each holds significant upside potential for VIVOS.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

We consider some of those negotiations to be in advanced stages, and we hope to be able to announce additional transactions from that pipeline in the future. Now, I would also remind everyone that our management team here at VIVOS has extensive experience in targeting, acquiring, and rolling up professional practices across the country. We've done this very thing quite successfully in a prior company in the dental space. I and senior members of the management team launched and grew one of the very first dental service organizations, or DSOs, back in 1995, and built it from scratch to over $250,000,000 in revenue with over 165 locations when we sold it in 02/2008. To get to 165 locations, we acquired nearly 400 independent dental practices throughout our market footprint.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Today, the overall DSO business in The United States is a multi billion dollar market with tens of thousands of affiliated DSO offices around the country. Yet here at Vivos, we see this opportunity in sleep medicine as having even greater financial upside than our previous focus exclusively on dentistry. In sum, having successfully weaned ourselves off of our prior VIP driven model, we now feel that SCN is just beginning of a very promising time for VIVOS, and we look forward to continuing the rollout and execution of our new strategy. Now let me turn the call back over to our Chief Financial Officer, Brad Ammon, to review in greater detail our first quarter financial results. Brad?

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Thank you, Kirk, and good afternoon, everyone. Today, I will review the highlights of our financial results for the first quarter of twenty twenty five. For further information on our results for the three month period ended 03/31/2025, please see our earnings release, which was distributed earlier today and our quarterly report on Form 10 Q, which is available on the SEC filings portion of the Investor Relations section of our website.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Today, we reported first quarter twenty twenty five total revenue of $3,000,000 compared to $3,400,000 for the first quarter of twenty twenty four. Year over year decrease was due to lower service revenue, in particular VIP enrollment revenue resulting from VIVOS' change in our marketing and sales strategy as Kirk discussed. Specifically, revenue generated from VIP enrollments decreased $700,000 which was offset by an increase of approximately $100,000 in VIVO's product sales and $200,000 from sponsorship, conference and training revenue. We sold 3,736 oral appliance arches during the first quarter of twenty twenty five for a total of approximately $1,800,000 compared to '19 '90 '6 during the first quarter of twenty twenty four for 1,700,000.0 The eight percent year over year increase in product sales is attributable in part to higher volume in sales of our guides, which are lower revenue generating products compared to our VIVOS Care appliances. Lastly, during the first quarters of twenty twenty four and 2025, our billing intelligence service and myofunctional therapy service revenue remained relatively unchanged at $200,000 in each of those areas during these respective periods.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Also, during the first quarters of twenty twenty five and 2024, we recognized $300,000 in sleep testing service revenue. Cost of sales remained relatively constant for the comparable periods at $1,500,000 This related to higher costs associated with appliances, driven by the higher product sales, offset by lower costs associated with medical reporting expenses and VIP membership support costs as a result of not having any VIP enrollments during the period. Gross profit was $1,500,000 for the first quarter of twenty twenty five compared to gross profit of $1,900,000 for the comparable period in 2024. The decrease was primarily attributable to the decrease in revenue and partially offset by a decrease in cost of sales, driven by the lower VIP enrollments and higher sales of appliances. Gross margin for the first quarter of twenty twenty five was 50% compared to 57% for the first quarter of twenty twenty four due to the decrease in VIP service revenue.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Sales and marketing expenses were $400,000 for the first quarter of twenty twenty five compared to $700,000 in the comparable prior year period. This decrease in cost reflects lower sales commissions and marketing expenses as we pivot to our new marketing and distribution model. General and administrative expenses decreased slightly by 1% with $4,900,000 for both the first quarters of twenty twenty five and 2024. Total operating expenses for the first quarter of twenty twenty five decreased $300,000 or 5% versus the first quarter of twenty twenty four. This is mainly due to the cost cutting initiatives we have taken beginning in 2023 and throughout 2024, which is important as we continue the pivot to our new model.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Operating loss for the first quarter of twenty twenty five was approximately $3,900,000 compared to $3,800,000 loss for the first quarter of twenty twenty four. The slight decrease in operating loss was primarily from lower total sales offset by lower operating expenses from the cost cutting initiatives. Net loss for the first quarter of twenty twenty five was $3,900,000 compared to a loss of $3,800,000 for the first quarter of twenty twenty four. Turning to our statement of cash flows. Cash used in operations for the quarter ended 03/31/2025 was $3,800,000 a $1,300,000 increase compared to $2,500,000 during the comparable prior year period.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

The increase is due primarily to a reduction in our contract liability of $900,000 and a decrease in accrued expenses and accounts payable of 800,000 offset by an increase in other liabilities of $400,000 For the quarter ended 03/31/2024, net cash used in investing activities of 100,000 consisted of capital expenditures for software related to the development of ordering software for internal use, which was placed in service during the quarter. This compares to net cash used in investing activities of $200,000 in the comparable 2024 period, arising from capital expenditures for the ordering software. Note that our ordering software was placed into service during the quarter. No cash was provided by financing activities for the three months ended 03/31/2025, as compared to $3,600,000 of net cash provided in financing activities for the three months ended 03/31/2024, attributable to the proceeds of $3,900,000 from the issuance of common stock, net of approximately $300,000 of professional fees and other issuance costs from the February 2024 warrant inducement transaction. As of 03/31/2025, we had approximately $2,300,000 in cash and cash equivalents compared to $6,300,000 as of 12/31/2024.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

As Kirk mentioned, we are actively sinking financing to close the SCN transaction and bolster our cash position. Thank you all again for joining us in today's conference call. Now let me turn the call back over to Kirk.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Thank you, Brad. That concludes our prepared remarks. Now we'll be happy to take questions. Operator?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch tone phone. Your line is now open.

Do Kim
Senior Biotech Analyst at Water Tower Research LLC

Great. Hi, Kirk and Brad. Thanks for taking my questions, and congrats on the SCN acquisition. Kirk, I was hoping that you could expand a little bit more on the experience with the Rebus Alliance and how its contribution has been so far and what that is in comparison to your expectations when the partnership started?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Yeah, that's a great question. I appreciate you asking that. Look, it's gone a lot slower than what we had expected when we signed up with them a little about a year ago. You know, quite honestly, Rebus has had some very difficult things that they've been working through internally, just sort of with their change of ownership and some management issues going on internal to them. And as a result, top of the funnel that we had expected from Rebus, where they would be referring a certain number of patients over to us has just never materialized.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And it's frustrating because we haven't seen the volumes that we were expecting. So what focused on quite honestly though, is we focused on just making sure that we were accomplishing the things we had control over, which meant that every patient became even more precious and every patient got a lot of attention because we didn't have the high volume. But what we learned there was really important because we basically proved our thesis. One of the key thesis that we had going into this venture with Rebus was that we could take patients out of a sleep lab testing orientation, sleep testing facility, and that we could basically, when we would present those patients with a full spectrum of treatment opportunities or treatment options rather, that they would treat that a large portion of those patients would select VIVOS. And we've proven that, right?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

We have, instead of several thousand patients, we have several hundred patients that are the data points that we have. So the cohort of opportunities has not been as great, but the core thesis that seventy, I think the number seventy one percent, the last I checked, seventy one percent of patients who had been presented with VIVOS as an alternative to CPAP selected VIVOS, some form of VIVOS treatment. We have a variety of different treatments, not just our VIVOS care devices, but across the spectrum, right? And so knowing that, we are extremely encouraged by what we have that we're about to step into down in Las Vegas, Because if we can convert that number of patients under somewhat adverse circumstances, or let's just say less than ideal circumstances at Rebus, then we think when we can control the funnel top to bottom by actually owning the center, then I think we have a much better shot at a comparable or even greater percentage of patients taking VIVO. There are some Rebus revenues incorporated into our first quarter earnings and but they're not material, they're not necessarily as significant obviously as we'd hope.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

But when show seventy one percent in an average patient revenue per case of about $4,500 and we then apply that those same metrics to what we are what we are walking into down there in Las Vegas. I mean, the numbers just look really, really strong. So I guess good news, bad news on the Rebus front, not giving up on that thing yet exactly. We're our Seneca private equity partner, a large shareholder here at Vivos. Seneca has a significant investment in Rebus and they are working diligently to shore up the management team to help correct some of the internal challenges that Rebus has faced.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And we're hopeful. We're still hopeful there, but I think it remains to be seen how that's all going to unfold. So I think for our focus and our purposes, money shot is really in Las Vegas for us right now.

Do Kim
Senior Biotech Analyst at Water Tower Research LLC

That makes sense. And it sounds like you anticipate the integration of the Sleep Center of Nevada to go a lot better than Rebus. You've already booked, I think you said, over 100 patients for June. When you look at the first strategic alliance with Rebus, what can you take away when you're negotiating other potential partners or acquisition targets, are there certain elements or the conditions of these fleet centers that you would have to take a much closer look at to proceed with that transaction?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Yeah, I think that's another really good question. So, I mean, look, we have, as I mentioned also earlier, we have a long history. This management team has a long history of successfully acquiring and integrating professional practices into a larger corporate organization. And so the truth of the matter is though, that sometimes you just get circumstances that are hard to foresee in the beginning, but you just get circumstances that you have to work through. And sometimes things don't go as smoothly or as quickly as you would like.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And I think that's kind of what we have up there. But as far as what we've learned, yeah, I think we have learned some things. We've learned a lot about optimizing in a medical insurance orientated environment. We've learned a lot about how to optimize revenues, how to optimize sort of the services that are offered to these patients, because patients are sensitive many times to what their insurance is going to pay and what their status is. And we've learned to evaluate that and sort of work with and sometimes around some of the constraints that some of the payers put on their patients.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

All of that is really positive learnings for us as we go down to Las Vegas. And as we look at some of the other partnering type relationships, which we have, again, we have some of those in the pipeline here. We're looking at those things now with a real close eye of scrutiny around what kind of a partner do we expect these people are going to be and how are we, we've actually changed and modified a couple of things in the documents that give us just a little more control over the flow and the process so that we don't get bogged down in things that we ought not to get bogged down in. And we can ensure the steady stream of patients just sort of making sure that all the roadblocks are taken away. But I think there have been some learnings.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

It's hard for me to articulate exactly what they all might be, but there's definitely things from an operation standpoint and a deal structure standpoint that we've taken away.

Do Kim
Senior Biotech Analyst at Water Tower Research LLC

Thanks for taking my questions Kirk and I look forward to your progress on the Las Vegas acquisition.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

All right, Doh. Thank you.

Operator

Your next question comes from the line of Lucas Ward from Ascendiant Capital Markets. Your line is now open.

Lucas Ward
Senior Research Analyst at Ascendiant Capital Markets, LLC

Thank you. Good afternoon, gentlemen.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Hi, Lucas.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Hello, Lucas.

Lucas Ward
Senior Research Analyst at Ascendiant Capital Markets, LLC

I was wondering if you could help us understand the impact on the P and L of the acquisition. So for instance, in Q3, like, how much revenue would be added from SCN's revenues and how much cost and when would you expect the acquisition to become accretive?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Brad, you wanna take the first half of that and I'll take the second half?

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Yeah. The acquisition of SEN has some legacy revenue and legacy expenses that will be accretive to VIVOS. They are currently operating at net income position. We'll be able to leverage on to the patients as we've discussed in this call, we'll be able to utilize the 3,000 patients that they see on a monthly basis. And a portion of those test positive for OSA portion of the people that test positive will wanna go into VIVOS appliances.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

And we'll be selling basically at a retail price to the patients rather than a wholesale price to the dentist who turns around and marks up the price to the patient. So it may basically in this model take out the middleman. And so the economics on a revenue basis are much more favorable to VIVOS than they had been in the past. And that was really what's attractive about this model. In addition, we're paying the dentists as a salaried employee rather than treating them as a wholesaler.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

And so there'll be some additional costs associated with payroll and bringing those and that's part of our cost of sales. So that part cost of sales will increase, but the revenue will more than offset the additional cost of the having employees, doctors as employees. So, there's a huge advantage for Vivos in this model. And with that, I'll turn it back over to Kurt. Yes.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

I think the other part of your question, Lucas, which is

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

a good one, by the way. I think the other part of that had to do with like when should we expect the accretion to show up. And might be a little bit aggressive to say this, but I actually think that you're going to see this in the third quarter. There we expect to see coming right out of the gate, we are stacking I was out in Las Vegas just a week or two ago, and I was at the facility. We have built out probably 5,000 or 6,000 square feet adjacent to one of the main treatment centers or not treatment centers, but testing centers that SCN has there in Las Vegas.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And we have we're I mean, the place is just about finished, ready to rock and roll. We will be ready by the time we close and patients, like we said, are already being booked. I was standing in the lobby of the testing center upstairs and patients were six and eight deep being brought out by the doctors and enthusiastically being encouraged to set up an appointment to get treatment with VIVO, sort to get an evaluation. And we've put well over 100 patients on the books already for new appointments. I think our first week and a half is almost completely built booked out.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And so we're adding capacity and we're adding new patients on a daily basis. But I expect as a result of that, just some of the diagnostic services that we're adding to what SCN is already doing will be immediately accretive in some major ways. And so even with just the testing and diagnostic part of what we're bringing to the table, we should be we should see revenue revenue cycle turning into cash in Q3 rather significantly. So again, we have the potential here of in the very near term, just sort of eliminating our burn. And that's our goal is to make sure that we'd start turning cash flow positive as rapidly as possible.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

We see this as being the main way to do that. But it won't take six months for us to do that. It'll take a month or two. It'll be in the third quarter is our current forecast.

Lucas Ward
Senior Research Analyst at Ascendiant Capital Markets, LLC

Gotcha. That's great. I guess sort of a follow-up then, when we model operating expenses, we model a sequential they've been going down quarter on quarter for a while. Would they pick up in Q3 and Q4 because of the absorption?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Yes, I would estimate that they will because we have had to we were dropping personnel and dropping personnel and dropping SG and A and all kinds of things. And now we're having to just out of necessity, we've had to hire people out there. We've had to train them. We've had to prepare them. We've had to get the whole facility figured out and put together.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And so there will be in the early stages here, there's going to be an uptick in some of those kind of staffing level and doctor level expenses, as Brad alluded to. But the revenues will quickly account for that. So we do believe that the growth in revenues will very quickly outpace any incremental spending that we're going to have and leave us with some nice cash and cash flow that we can offset sort of our historical legacy burn and get us into a cash flow positive thing really quick. That's our objective. That's our goal.

Lucas Ward
Senior Research Analyst at Ascendiant Capital Markets, LLC

Okay. Thanks Kurt. So last question. According to press release, the acquisition price was 9,000,000. I'm just curious how you arrived at that. Like, how was how was it valued?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Well, we took a look at so we hired an accounting firm to to give us a quality of earnings report. And we looked at that quality of earnings report and we evaluated the analysis that they did. And we also looked at it from the standpoint of what kind of value add it would be for Veevos. And we ended up paying, I think, fairly good multiple on the overall transaction. But in reality, the primary analysis was how many patients were we going to be able to see out of there?

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

I mean, we could literally have doubled our price for this thing and still made it a very, very lucrative transaction. We didn't go crazy like that, but we did offer Doctor. Prabhu and his wife who owned this Sleep Center Nevada, we offered them a very fair price. We put some opportunities for them to earn a little bit more based on performance. We wanted to align the incentives.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And so, I think it was a combination of what that practice or what that business had as an intrinsic value in and of itself, how much revenue and profit it could throw off. And then, but primarily what we wanted to do is we wanted to see how many patients were going to be, they were going to generate. And frankly, have, we keep using 3,000 patients, but they've recently opened up some facilities that are not yet fully online and are just not even really reaching their potential. So that number could easily approach 4,000 or more as we go down the road. So we saw potential there.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

We saw existing patients in the confined market. We looked at other sleep groups. We've seen a few that are kind of national in scope that they didn't hold out the same appeal to us. They weren't worth as much to us, even though they saw that more volume on their tests. Their tests were scattered over a larger geographic area, some of them nationwide.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

That makes it really difficult when you don't have the concentration of patients in a single market or a single area. It makes it a lot more difficult to rationalize the value proposition. So, the fact that we had a single market that's a moderately sized market like Las Vegas, where we had a concentration, we had a market leader in that market. I mean, this is the go to sleep testing center for 37 hospitals in that market is really this group. So we've got literally hundreds and I don't know if it's thousands, but there's a lot of referral sources that are coming into and feeding this.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And so there was a whole lot of analysis that went into that. And again, it was a combination of some things. Doctor. Prabhu, the owner there is going to remain on, and the continuity of him being willing to remain on and stay with this is another factor that we had. Again, trying to derisk the whole transaction and make sure that we're we show the world that just the fact that we're now there with him and we're working hand in glove that that to me that says a lot and sends us a strong message to his referral sources that he's a 100% bought in on this and that he is behind us.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

So all of these things, I think went into that valuation. And then we just penciled it out, negotiated a few things, made a few adjustments frankly, and got to the $9,000,000 but we're that's where we are. So $6,000,000 of that, I think as you know, 6,000,000 of that is cash and the rest of it is either Vivo stock or some incentives to get him a little bit higher payout.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

Yeah. Lucas, just to put a little finer sharp sharpened pencil on that, the 6,000,000 of cash and 1 and a half million of equity is paid at the beginning. And then there's another 1,500,000.0 of equity, which is based on achievement of certain financial milestones. So it's contingent consideration to make up the full 9,000,000.

Brad Amman
Brad Amman
CFO at Vivos Therapeutics

So the last 1,500,000.0 is, you know, we we get doc the dark good doctors buy in because they'll want to achieve that. And so I think that's it makes up for a win win transaction for both parties.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

That's a good point, Brad. Thank you.

Lucas Ward
Senior Research Analyst at Ascendiant Capital Markets, LLC

Okay. Great. Thanks, gentlemen. Appreciate it.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Alright.

Operator

There are no further questions at this time. I will now turn the call over to Kirk Huntsman. Please continue.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

Thank you, operator. I just would like to thank everyone. I know some I recognize some of the names on this call. Some of you guys have been invested with VIVOS for quite a while. Some of you are new.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

But I just want to say how much we appreciate the way that our investors, our core investors have sort of hung in there with us as we've navigated this journey. VIVOS has an amazing technology. We've now treated, I think the number is up close to or over seventy thousand patients. And we continue to see miracles happening with this technology and lives being altered and really doing some good. And yet we haven't found a way to monetize this in a way that's deserving of what technology is bringing to the world.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

We do believe we now have this. And we do believe with all our hearts that this is the right place and the right time to be making this pivot. And we're grateful for the patience that the investment community has shown. We're grateful for the support of our private equity partner in particular. The group over at Seneca has been amazing to work with and been supportive all the way as we've gone through this.

Kirk Huntsman
Kirk Huntsman
Chairman & CEO at Vivos Therapeutics

And I think if you speak to them, you'll see an equal degree of enthusiasm and outlook a bright outlook for the future here. So again, you everyone for being here and listening today. We look forward to sharing our continued progress with each of you as we continue to execute on our plans throughout the remainder of this year. Thank you all and have a great evening.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Executives
    • Brad Amman
      Brad Amman
      CFO
    • Kirk Huntsman
      Kirk Huntsman
      Chairman & CEO
Analysts
    • Do Kim
      Senior Biotech Analyst at Water Tower Research LLC
    • Lucas Ward
      Senior Research Analyst at Ascendiant Capital Markets, LLC
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