Business Context and Reporting Period
Company: Vivos Therapeutics, Inc. (VVOS)
Filing Type: Form 8-K (Current Report)
Date of Report: June 14, 2024
Event Date: June 10, 2024
Context: The Company entered into a Securities Purchase Agreement (SPA) with V-CO Investors LLC (an affiliate of New Seneca Partners Inc.) and executed related strategic and management agreements to secure capital and expand its sleep apnea treatment network.
Key Financial Metrics and Transaction Details
- Gross Proceeds: $7,500,000 raised via private placement.
- Securities Issued:
- 169,498 shares of Common Stock.
- Pre-Funded Warrant for 3,050,768 shares (Exercise Price: $0.0001).
- Common Stock Purchase Warrant for 3,220,266 shares (Exercise Price: $2.204; 5-year term).
- Purchase Price: $2.329 per share/Pre-Funded Warrant share.
- Use of Proceeds: General working capital and corporate purposes.
- Management Fee Obligation: $37,500 per quarter for 3 years (minimum $25,000 cash, remainder cash or stock).
- Profit Participation: Quarterly cash payments based on net positive cash flow from the Strategic Alliance Agreement, payable only after the Company achieves consolidated cash flow positivity.
Material Changes and Agreements
The filing details three material definitive agreements executed on June 10, 2024:
- Securities Purchase Agreement (SPA):
- Seneca (via V-CO) receives observer rights at Board meetings for 3 years (notice, materials, non-voting attendance).
- Company must file a resale registration statement (Form S-3) by July 25, 2024, and seek effectiveness by September 8, 2024.
- Strategic Alliance Agreement (SAA):
- Joint marketing and distribution with Rebis Health Holdings, LLC for sleep apnea treatment.
- Vivos subsidiary (VSI) provides access to licensed dental professionals; Rebis receives a percentage of patient payments less fees.
- Initial term of 2 years with automatic 1-year renewals.
- Management Services Agreement (MSA):
- V-CO provides management, consulting, and advisory services related to the SAA.
- Term lasts until June 10, 2027, or until V-CO receives 2x its original investment, whichever is later.
- Includes a "Participation Trigger Event" where profit sharing payments are deferred until the Company is cash flow positive from operations.
Outlook, Risks, and Contingencies
- Registration Risk: The Company is contractually obligated to file and make effective a resale registration statement by specific dates in late 2024; failure could breach the SPA.
- Liquidity Contingency: Profit participation payments to V-CO are contingent on the Company achieving consolidated cash flow positivity, which is not currently stated as achieved.
- Ownership Dilution: The issuance of warrants and pre-funded warrants increases the potential share count significantly if exercised.
- Strategic Dependency: Future revenue growth is partially tied to the success of the new alliance with Rebis Health and the ability to recruit additional sleep center operators.
Investor Verification Checklist
- Verify the filing status and effectiveness date of the required Form S-3 resale registration statement (deadline: September 8, 2024).
- Confirm the Company's current consolidated cash flow from operations status to assess the timing of future profit participation payments to V-CO.
- Review the specific "agreed upon percentage" for profit participation and revenue sharing in the SAA and MSA, as exact figures were not disclosed in this text.
- Monitor the Company's ability to maintain Nasdaq listing requirements given the issuance of pre-funded warrants and warrants.
- Assess the financial impact of the quarterly management fees ($37,500) on the Company's working capital burn rate.