RDGL 10-Q Quarterly Report March 31, 2018 | Alphaminr
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RDGL 10-Q Quarter ended March 31, 2018

Balance Sheet
Cash Flow
Income Statement
VIVOS INC
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10-Q 1 vivos10q_mar312018.htm QUARTERLY REPORT 10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 2018
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 000-53497
VIVOS INC
(Exact name of registrant as specified in its charter)
Delaware
80-0138937
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
719 Jadwin Avenue,
Richland, WA 99352
(Address of principal executive offices, Zip Code)
(509) 736-4000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [  ]
Accelerated filer [  ]
Non-accelerated filer [  ]
Smaller reporting company [X]
(Do not check if a smaller reporting company)
Emerging growth company [  ]
If an emerging growth company, indicate by check mark if the company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]
As of May 14, 2018, there were 80,897,370 shares of the registrant’s Common outstanding and 2,944,422 shares of the registrant’s Series A Convertible Preferred Stock outstanding.

TAB L E OF CONTENTS
Page
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18
18
19
PART I – FINAN C IAL INFORMATION
Item 1. Financial Statements.
Vivos Inc.
Condensed Balance Sheets
March 31,
2018
December 31,
2017
(unaudited)
(audited)
ASSETS
Current assets:
Cash
$ 16
$ 8,317
Prepaid expenses
-
6,711
Total current assets
16
15,028
Fixed assets, net of accumulated depreciation
-
-
Other assets:
Deposits
669
669
Total other assets
669
669
Total assets
$ 685
$ 15,697
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses
$ 905,342
$ 840,972
Related party accounts payable
39,988
57,297
Accrued interest payable
414,288
347,069
Payroll liabilities payable
144,236
85,786
Convertible notes payable, net
3,128,127
2,563,272
Loan from shareholder
40,000
-
Notes payable
32,279
-
Related party promissory note
383,771
383,771
Total current liabilities
5,088,031
4,278,167
Total liabilities
5,088,031
4,278,167
Commitments and contingencies
-
-
Stockholders’ equity (deficit):
Preferred stock, $.001 par value, 20,000,000 shares authorized; 3,204,422 and 3,778,622 shares issued and outstanding, respectively
3,204
3,779
Paid in capital, preferred stock
10,311,616
13,547,780
Common stock, $.001 par value; 2,000,000,000 shares authorized; 72,067,213 and 65,695,213 shares issued and outstanding, respectively
72,067
65,695
Paid in capital
49,715,119
46,408,443
Accumulated deficit
(65,189,352 )
(64,288,167 )
Total stockholders’ equity (deficit)
(5,087,346 )
(4,262,470 )
Total liabilities and stockholders’ equity (deficit)
$ 685
$ 15,697
The accompanying notes are an integral part of these condensed financial statements.
Vivos Inc.
Condensed State m ents of Operations
(unaudited)
Three months ended March 31,
2018
2017
Revenues
$ -
$ 4,054
Operating expenses
Sales and marketing expenses
10,000
25,998
Depreciation and amortization
-
740
Professional fees
70,058
134,604
Reserved stock units granted
52,094
-
Stock options granted
23,755
28,240
Payroll expenses
78,870
104,780
Research and development
32,814
-
General and administrative expenses
19,103
74,407
Total operating expenses
286,694
368,769
Operating loss
(286,694 )
(364,715 )
Non-operating income (expense)
Interest expense
(632,074 )
(527,951 )
Net gain on sale of assets
-
2,800
Grants received
17,583
-
Net gain (loss) on debt extinguishment
-
147,710
Net gain (loss) on derivative liability
-
325,390 )
Non-operating income (expense), net
(614,491 )
(52,051 )
Income (Loss) before Income Taxes
(901,185 )
(416,766 )
Income Tax Provision
-
-
Net Income (Loss)
$ (901,185 )
$ (416,766 )
Basic and Diluted Income (Loss) per Common Share
$ (0.014 )
$ (0.011 )
Basic and diluted weighted average common shares outstanding
66,514,118
38,021,103
The accompanying notes are an integral part of these condensed financial statements.
Vivos Inc.
Condensed S t atements of Cash Flow
(Unaudited)
Three months ended March 31,
2018
2017
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss
$ (901,185 )
$ (416,766 )
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation of fixed assets
-
740
Amortization of convertible debt discount
564,865
462,928
Gain on sale of assets
-
(2,800 )
Common stock issued for services
449
-
Stock options and warrants issued for services
23,755
28,240
Reserved stock units issued for services
52,094
Gain (loss) on derivative liability
-
(325,390 )
Loss on settlement of debt
-
(147,711 )
Changes in operating assets and liabilities:
Prepaid expenses
6,711
11,990
Accounts payable
96,650
109,110
Accounts payable from related parties
(17,309 )
-
Payroll liabilities
58,450
(57,424 )
Accrued interest
67,219
61,425
Net cash used by operating activities
(48,301 )
(275,658 )
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of fixed assets
-
2,800
Net cash from investing activities
-
2,800
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shareholder advances
40,000
137,000
Proceeds from convertible debt
-
131,669
Net cash provided by financing activities
40,000
268,669
Net decrease in cash
(8,301 )
(4,189 )
Cash, beginning of period
8,317
27,889
CASH, END OF PERIOD
$ 16
$ 23,700
Supplemental disclosures of cash flow information:
Cash paid for interest
$ -
$ -
Cash paid for income taxes
$ -
$ -
The accompanying notes are an integral part of these condensed financial statements.
Vi v os Inc.
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed financial statements of Vivos Inc. (the “ Company ”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the three months ended March 31, 2018, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2018 and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018.
In April of 2017, the Company filed a Certificate of Merger with the Delaware Division of Corporations in order to merge the Company’s wholly-owned subsidiary, IsoPet Solutions Corporation, with and into the Company. The Company therefore no longer prepares Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2018 and December 31, 2017, the balances reported for cash, prepaid expenses, accounts receivable, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Reclassifications
Certain account balances from prior periods have been reclassified in the current period financial statements so as to conform to current period classifications.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that the Company has not yet adopted that they believe are applicable or would have a material impact on the financial statements of the Company.
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered recurring losses and used significant cash in support of its operating activities and the Company’s cash position is not sufficient to support the Company’s operations. Research and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities as well as a series of grants. The Company requires funding of approximately $1.5 million annually to maintain current operating activities. Over the next 12 to 24 months, the Company believes it will cost approximately $5.0 million to $10.0 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products, and (2) initiate regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises.
Following receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing, distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate its global commercialization strategy.
In the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other illnesses
Based on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception. If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business strategy and may not be able to continue operations.
As of March 31, 2018, the Company has $16 cash on hand. There are currently commitments to vendors for products and services purchased, plus, the employment agreements of the CEO and CFO of the Company that will necessitate liquidation of the Company if it is unable to raise additional capital. The current level of cash is not enough to cover the fixed and variable obligations of the Company.
Assuming the Company is successful in the Company’s sales/development effort, it believes that it will be able to raise additional funds through strategic agreements or the sale of the Company’s stock to either current or new stockholders. There is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.
The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3: FIXED ASSETS
Fixed assets consist of the following at March 31, 2018 and December 31, 2017:
March 31,
2018
December 31,
2017
Production equipment
$ 15,182
$ 15,182
Less accumulated depreciation
(15,182 )
(15,182 )
$ -
$ -
Depreciation expense for the above fixed assets for the three months ended March 31, 2018 and 2017, respectively, was $0 and $740.
NOTE 4: RELATED PARTY TRANSACTIONS
Related Party Convertible Notes Payable
In March 2017, the Company combined Outstanding Notes owed to a director and major stockholder, along with $51,576 of accrued interest payable, into one promissory note (the “ Related Party Note ”). The Related Party Note accrues interest at a rate of 10% and was due and payable on December 31, 2017. The note holder agreed to an extension of the due date until May 9, 2018. As of March 31, 2018 and December 31, 2017 the balance of the Related Party Note was $383,771 and $383,771, respectively, and the accrued interest payable on the Related Party Note was $38,693 and $29,230, respectively.
Preferred Shares Issued to Officers
During 2017, the Company issued 100,000 shares of its Series A Preferred to its CEO, in exchange for $32,308 of accrued payroll, $67,692 of accounts payable, and wages valued at $199,690.
During 2017, the Company issued 83,279 shares of its Series A Preferred to its CFO, in exchange for $83,280 of accrued payroll and wages valued at $166,299.
Rent Expenses
The Company was renting office space from a significant shareholder and director of the Company on a month-to-month basis with a monthly payment of $1,500. This rental agreement was terminated as of April 1, 2017.
Rental expense was $0 and $4,500 for each of the three months ended March 31, 2018 and 2017 and is recorded in general and administrative expense.
NOTE 5: CONVERTIBLE NOTES PAYABLE
As of March 31, 2018 and December 31, 2017 the Company had the following convertible notes outstanding:
March 31, 2018
December 31, 2017
Principal(net)
Accrued Interest
Principal (net)
Accrued Interest
July and August 2012 $1,060,000 Notes convertible into common stock at $4.60 per share, 12% interest, due December 2013 and January 2014
$ 45,000
$ 30,546
$ 45,000
29,218
May through October 2015 $605,000 Notes convertible into preferred stock at $1 per share, 8-10% interest, due September 30, 2015
-
17,341
-
17,341
October through December 2015 $613,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016, net of debt discount of $0 and $0, respectively
-
5,953
-
5,953
January through March 2016 $345,000 Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016
-
696
-
696
May 2017 $2,378,155 Notes convertible into common stock after April 15, 2018 at a $0.20 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $164,720 and $544,845, respectively
2,213,435
178,304
1,833,310
178,304
May 2017 $820,420 Notes convertible into common stock after April 15, 2018 at a $0.12 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $44,543 and $147,335, respectively
603,495
52,832
500,703
52,831
May 2017 $110,312 Notes convertible after April 15, 2018 into common stock at a $0.13 conversion price (subject to adjustment), 7.5% interest, due May 2018, net of debt discounts of $7,584 and $25,085, respectively
102,728
15,773
85,227
15,773
November 2017 $166,666 Note convertible at maturity or upon the issuance of a variable security at a $0.12 conversion price (subject to adjustment), with a one-time interest charge of 10%, due April 15, 2018, net of debt discounts of $10,666 and $74,662, respectively
156,000
71,667
92,004
16,667
January 2018 $32,279 one year Promissory Note, 18% interest
32,279
1,429
-
-
January 2018 $40,000 shareholder advance with no stated terms
40,000
-
-
-
Penalties on notes in default
7,470
-
7,028
-
Total Convertible Notes Payable, Net
$ 3,200,407
$ 374,541
$ 2,563,272
$ 316,784
NOTE 6: COMMON STOCK OPTIONS AND WARRANTS
Common Stock Options
The Company recognizes in the financial statements compensation related to all stock-based awards, including stock options and warrants, based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation expense only for those awards expected to vest. All compensation is recognized by the time the award vests.
The following schedule summarizes the changes in the Company’s stock options:
Weighted
Weighted
Options Outstanding
Average
Average
Number
Exercise
Remaining
Aggregate
Exercise
Of
Price
Contractual
Intrinsic
Price
Shares
Per Share
Life
Value
Per Share
Balance at December 31, 2017
1,222,500
$ 0.50-15
2.91 years
$ -
$ 1.08
Options granted
-
$ -
-
$ -
Options exercised
-
$ -
-
$ -
Options expired
-
$ -
-
$ -
Balance at March 31, 2018
1,222,500
$ 0.50-15
2.66 years
$ -
$ 1.08
Exercisable at March 31, 2018
1,162,966
$ 0.50-15
2.64 years
$ -
$ 1.10
During the three months ended March 31, 2018 the Company recognized $23,755 worth of stock based compensation related to the vesting of its stock options.
Common Stock Warrants
The following schedule summarizes the changes in the Company’s stock warrants:
Weighted
Weighted
Warrants Outstanding
Average
Average
Number
Exercise
Remaining
Aggregate
Exercise
Of
Price
Contractual
Intrinsic
Price
Shares
Per Share
Life
Value
Per Share
Balance at December 31, 2017
304,200
$ 0.40-10
1.19 years
$ -
$ 2.63
Warrants granted
-
$ -
-
$
Warrants exercised
-
$ -
-
$
Warrants expired/cancelled
-
$ -
-
$
Balance at March 31, 2018
304,200
$ 0.40-10
.94 years
$ -
$ 2.63
Exercisable at March 31, 2018
304,200
$ 0.40-10
.94 years
$ -
$ 2.63
Restricted Stock Units
The following schedule summarizes the changes in the Company’s restricted stock units:
Weighted
Number
Average
Of
Grant Date
Shares
Fair Value
Balance at December 31, 2017
5,740,000
$ 0.07
RSU’s granted
-
$ -
RSU’s vested
(620,000 )
$ -
RSU’s forfeited
-
$ -
Balance at March 31, 2018
5,120,000
$ 0.07
During the three months ended March 31, 2018 the Company recognized $52,094 worth of expense related to the vesting of its RSU’s. As of March 31, 2018, the Company had $302,335 worth of expense yet to be recognized for RSU’s not yet vested.
NOTE 7: STOCKHOLDERS’ EQUITY
Common Stock
During the three months ending March 31, 2018 the Company issued 10,000 shares of its common stock valued at $449 for services, 5,742,000 shares of its common stock valued at $3,236,738 for conversions of 574,200 shares of Series A Preferred, and 620,000 shares of its common stock valued at $620 in the form of Restricted Stock Units.
NOTE 8: SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ending March 31, 2018 the Company had the following non-cash investing and financing activities:
Exchanged $32,279 of accounts payable for a one year, 18% Promissory note.
●
Issued 5,742,000 shares of common stock in exchange for 574,200 shares of Series A Preferred decreasing preferred stock by $3,236,738, increasing common stock by $5,742, and increasing paid in capital by $3,230,996.
●
Increased common stock and decreased paid in capital by $620 due to the vesting of restricted stock units.
NOTE 9: COMMITMENTS AND CONTINGENCIES
Effective June 21, 2017, the Company entered into a separation agreement with an individual previously associated with the Company, at times as a consultant and as an employee at other times. Pursuant to the agreement, the Company agreed to pay regular bi-weekly checks beginning July 7, 2017 and ending September 15, 2017, for a total of six checks in the aggregate amount of $28,846. This obligation was fully paid as of September 30, 2017.
NOTE 10: SUBSEQUENT EVENTS
●
In May 2018, the Company received $28,484 as a loan from a Director.
●
In April and May 2018, the Company issued 6,230,157 shares of common stock in exchange for $50,000 of convertible debt.

●
In April and May 2018, the Company issued 2,600,000 shares of common stock for 260,000 shares of Series A Preferred.

●
In May 2017 the Company signed Secured Convertible Debentures due May 8, 2018 with conversion prices ranging from $0.12 to $0.20. The debentures allowed for a conversion price after April 15, 2018 of: (A) the Initial Conversion Price and (B) 60% of the lowest trading prices of the Common Stock on the Trading Market in the ten (10) Trading Days prior to the date of conversion (the “Alternate Conversion Price”). The Company is in negotiations with the Debenture holders to extend the May 8, 2018 due date and the April 15, 2018 conversion date to November 15, 2018.

The Company has evaluated subsequent events through the date of this filing pursuant to ASC Topic 855 and has determined that, except as disclosed herein, there are no additional subsequent events to disclose.

Item 2. Manage m ent’s Discussion and Analysis of Financial Condition and Results of Operations.
Except for statements of historical fact, certain information described in this Form 10-K report contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would” or similar words. The statements that contain these or similar words should be read carefully because these statements discuss the Company’s future expectations, including its expectations of its future results of operations or financial position, or state other “forward-looking” information. Vivos Inc. believes that it is important to communicate its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict or to control. Further, the Company urges you to be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses. The risk factors in the section captioned “Risk Factors” in Item 1A of the Company’s previously filed Form 10-K, as well as other cautionary language in this Form 10-Q report, describe such risks, uncertainties and events that may cause the Company’s actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The occurrence of any of the events described as risk factors could have a material adverse effect on the Company’s business, results of operations and financial position.
General Statement of Business
Vivos Inc. (the “Company” or “we” ) was incorporated under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (“ SMSC ”). On December 28, 2017, the Company changed its name from Advanced Medical Isotope Corp. to Vivos Inc. The Company has authorized capital of 2,000,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share.
Our principal place of business is 719 Jadwin Avenue, Richland, Washington 99352. Our telephone number is (509) 736-4000. Our corporate website address is http://www.radiogel.com. Our common stock is currently listed for quotation on the OTC Pink Marketplace under the symbol “RDGL.”
Overview
The Company is a radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers, collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s development efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by providing them with new isotope technologies that offer safe and effective treatments for cancer.
The Company’s current focus is on the development of our RadioGel™ device candidate, including obtaining approval from the Food and Drug Administration (“ FDA ”) to market and sell RadioGel™ as a Class II medical device. RadioGel™ is an injectable particle-gel for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the gel are small, one micron, yttrium-90 phosphate particles (“ Y-90 ”). Once injected, these inert particles are locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactivity drops to 5% of its original value after ten days.
The Company’s lead brachytherapy products, including RadioGel™, incorporate patented technology developed for Battelle Memorial Institute (“ Battelle ”) at Pacific Northwest National Laboratory, a leading research institute for government and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing, processing and applications of RadioGel™ (the “ Battelle License ”). This exclusive license is to terminate upon the expiration of the last patent included in this agreement. Other intellectual property protection includes proprietary production processes and trademark protection in 17 countries. The Company plans to continue efforts to develop new refinements on the production process, and the product and application hardware, as a basis for future patents.
Regulatory History
Human Therapy
RadioGel™ has a long regulatory history with the Food and Drug Administration (“ FDA ”). Initially, the Company submitted a presubmission (Q130140) to obtain FDA feedback about the proposed product. The FDA requested that the Company file a request for designation with the Office of Combination Products (RFD130051), which led to the determination that RadioGel™ is a device for human therapy for non-resectable cancers, which must be reviewed and ultimately regulated by the Center for Devices and Radiological Health (“ CDRH ”). The Company then submitted a 510(k) notice for RadioGel™ (K133368), which was found Not Substantially Equivalent due to the lack of a suitable predicate, and RadioGel™ was assigned to the Class III product code NAW (microspheres). Class III products or devices are generally the highest risk devices and are therefore subject to the highest level of regulatory review, control and oversight. Class III products or devices must typically be approved by FDA before they are marketed. Class II devices represent lower risk products or devices than Class III and require fewer regulatory controls to provide reasonable assurance of the product’s or device’s safety and effectiveness. In contrast, Class I products and devices are deemed to be lower risk than Class I or II, and are therefore subject to the least regulatory controls.
A pre-submission meeting (Q140496) was held with the FDA on June 17, 2014, during which the FDA maintained that RadioGel™ should be considered a Class III device and therefore subject to pre-market approval. On December 29, 2014, the Company submitted a de novo petition for RadioGel™ (DEN140043). The de novo petition was denied by the FDA on June 1, 2015, with the FDA providing numerous comments and questions. On September 29, 2015, the Company submitted a follow-up pre-submission informational meeting request with the FDA (Q151569). This meeting took place on November 9, 2015, at which the FDA indicated acceptance of the Company’s applied dosimetry methods and clarified the FDA’s outstanding questions regarding RadioGel™. Following the November 2015 pre-submission meeting, the Company prepared a new pre-submission package to obtain FDA feedback on the proposed testing methods, intended to address the concerns raised by the FDA staff and to address the suitability of RadioGel™ for de novo reclassification. This pre-submission package was presented to the FDA in a meeting on August 29, 2017. During the August 2017 meeting, the FDA clarified their position on the remaining pre-clinical testing needed for RadioGel™. Specifically, the FDA addressed proposed dosimetry calculating techniques, dosimetry distribution between injections, hydrogel viscoelastic properties, and the details of the Company’s proposed animal testing.
The Company believes that its submissions to the FDA to date have taken into account all the FDA staff’s feedback over the past three years. Of particular importance, the Company has provided corresponding supporting data for proposed future testing of RadioGel™ to address any remaining questions raised by the FDA. We believe, although no assurances can be given, that the clinical testing modifications presented to the FDA in August 2017 will result in a de novo reclassification for RadioGel™ by the FDA. In addition, in previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies, referred to as Indication for Use. The FDA requested that the Company reduce its Indications for Use. To comply with that request, the Company expanded its Medical Advisory Board (“ MAB ”) and engaged doctors from respected hospitals who have evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy. (2) notable advantage over current therapies. and (3) probability of wide spread acceptance by the medical community.
The MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number confirms the wide applicability of the device and defines the path for future business growth. The Company’s application establishes a single Indication for Use - treatment of basal cell and squamous cell skin cancers. We anticipate that this initial application will facilitate each subsequent application for additional Indications for Use, and the testing for many of the subsequent applications could be conducted in parallel, depending on available resources.
In the event the FDA denies the Company’s application for de novo review, and therefore determines that RadioGel™ cannot be classified as a Class I or Class I1 device, the Company will then need to submit a pre-market approval application to obtain the necessary regulatory approval as a Class III device.
Animal Therapy
As noted above, the Office of Combination Products previously classified RadioGel TM as a device for human therapy for non-sectable cancers. In January 2018, the Center for Veterinary Medicine Product Classification Group ruled that RadioGel TM should be classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. In addition, the FDA also reviewed and approved our label, which is a requirement for any device used in animals. We expect the result of such classification and label approval is that no additional regulatory approvals are necessary for the use of RadioGel TM for the treatment of skin cancer in animals.
Based on the FDA’s recommendation, RadioGel TM will be marketed as “IsoPet™” for use by veterinarians to avoid any confusion between animal and human therapy. The Company already has trademark protection for the “IsoPet™” name. IsoPet™ and RadioGel TM are used synonymously throughout this document. As we stated the only distinction between the two is the FDA’s recommendation we use IsoPet™ for all veterinarian usage and reserve RadioGel TM for human therapy.
IsoPet Solutions
The Company’s IsoPet Solutions division was established in May 2016 to focus on the veterinary oncology market, namely engagement of university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the technology in private clinics. The Company has worked with four different university veterinarian hospitals on RadioGel™ testing and therapy. Colorado State University demonstrated the procedures and the CT and PET-CT imaging of RadioGel TM . Washington State University treated five cats for feline sarcoma. They concluded that the product was safe and effective in killing cancer cells. A contract was signed with University of Missouri to treat canine sarcomas and equine sarcoids starting early in 2019. The safety review at UC Davis is almost completed. They will be treating prostate and liver cancer in canines in 2019.
These animal therapies will generate the additional data required by the private veterinary clinics to assure them of the safety and efficacy of IsoPet™ to complement the previous work at Washington State University.
The Company anticipates that future profit will be derived from direct sales of RadioGel™ (under the name IsoPet™) and related services, and from licensing to private medical and veterinary clinics in the U.S. and internationally.
Based on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception. If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business strategy and not be able to continue operations.
Results of Operations
Comparison of the Three Months Ended March 31, 2018 and 2017
The following table sets forth information from our statements of operations for the three months ended March 31, 2018 and 2017.
Three Months Ended
March 31, 2018
Three Months Ended
March 31, 2017
Revenues
$ -
$ 4,054
Operating expenses
(286,694 )
(368,769 )
Operating loss
(286,694 )
(364,715 )
Non-operating income (expense):
Gain on sale of assets
-
2,800
Gain (loss) on debt extinguishment
-
147,710
Gain (loss) on derivative liability
-
325,390
Grants received
17,583
-
Interest expense
(632,074 )
(527,951 )
Net income (loss)
$ (901,185 )
$ (416,766 )
Revenue
Revenue was $0 for the three months ended March 31, 2018 and March 31, 2017. Revenue consists of consulting revenues, including providing a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the operations of radioisotope production facilities. No proprietary information belonging to our Company is shared during the process of this consulting.
Operating Expenses
Operating expenses for the three months ended March 31, 2018 and 2017 consists of the following:
Three months ended
March 31, 2018
Three months ended
March 31, 2017
Depreciation and amortization expense
$ -
$ 740
Professional fees
70,058
134,604
Reserved stock units granted
52,094
-
Stock options granted
23,755
28,240
Payroll expenses
78,870
104,780
Research and development
32,814
-
General and administrative expenses
19,103
74,407
Sales and marketing expense
10,000
25,998
$ 286,694
$ 368,769
Operating expenses for the three months ended March 31, 2018 and 2017 was $286,694 and $368,769, respectively. The decrease in operating expenses from 2017 to 2018 can be attributed to the decrease in payroll expense ($104,780 for the three months ended March 31, 2017 versus $78,870 for the three months ended March 31, 2018); decrease in professional fees expenses ($134,604 for the three months ended March 31, 2017 versus $70,058 for the three months ended March 31, 2018; and the decrease in general and administrative expense ($74,407 for the three months ended March 31, 2017 versus $19,103 for the three months ended March 31, 2018). These decreases in operating expenses were partially offset by an increase in reserved stock units granted ($52,094 for the three months ended March 31, 2018 versus $0 for the three months ended March 31, 2017); and the increase in research and development ($32,814 for the three months ended March 31, 2018 versus $0 for the three months ended March 31, 2017).
Non-Operating Income (Expense)
Non-operating income (expense) for the three months ended March 31, 2018 and 2017 consists of the following:
Three months ended
March 31, 2018
Three months ended
March 31, 2017
Interest expense
$ (632,074 )
$ (527,951 )
Net gain on sale of assets
-
2,800
Grants received
17,583
-
Net gain (loss) on debt extinguishment
-
147,710
Gain (loss) on derivative liability
-
325,390
$ (614,491 )
$ (52,051 )
Non-operating income (expense) for the three months ended March 31, 2018 varied from the three months ended March 31, 2017 primarily due to a gain on debt extinguishment of $147,710 for the three months ended March 31, 2017 versus a gain of $0 for the three months ended March 31, 2018; a gain on derivative liability for the three months ended March 31, 2017 of $325,390 versus $0 for the three months ended March 31, 2018; and an increase in interest expense from $527,951 for the three months ended March 31, 2017 to $632,074 for the three months ended March 31, 2018. The majority of the interest recorded by the Company consists of amortization of debt discount. This was partially offset by an increase in grant income from $0 for the three months ended March 31, 2017 to $17,583 for the three months ended March 31, 2018.
Net Loss
Our net income (loss) for the three months ended March 31, 2018 and 2017 was $(901,185) and $(416,766), respectively.
Liquidity and Capital Resources
At March 31, 2018, the Company had negative working capital of $5,088,015, as compared to $4,263,139 at December 31, 2017. During the three months ended March 31, 2018 the Company experienced negative cash flow from operations of $48,301 and it received $0 for investing activities while adding $40,000 of cash flows from financing activities. As of March 31, 2018, the Company had no commitments for capital expenditures.
Cash used in operating activities decreased from $275,658 for the three month period ending March 31, 2017 to $48,301 for the three month period ending March 31, 2018. Cash used in operating activities was primarily a result of the Company’s net loss, partially offset by non-cash items, such as loss on derivative liability and amortization and depreciation, included in that net loss and preferred and common stock issued for services and other expenses. The Company received $0 and $2,800 in cash from investing activities for the three month periods ended March 31, 2018 and 2017, respectively. Cash provided from financing activities decreased from $268,699 for the three month period ending March 31, 2017 to $40,000 for the three month period ending March 31, 2018. The decrease in cash provided from financing activities was primarily a result of decrease in proceeds from convertible debt, as well as a decrease in shareholder advances.
The Company has generated material operating losses since inception. The Company had a net loss of $901,185 for the three months ended March 31, 2018, and a net loss of $416,766 for the three months ended March 31, 2017. The Company expects to continue to experience net operating losses. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s business. The Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to curtail its business.
The Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to cease operations.
The Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12 to 24 months, the Company believes it will cost approximately $5.0 million to $10.0 million to fund: (1) the FDA approval process and initial deployment of RadioGel™ and other brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment of the Company’s brachytherapy products, including RadioGel™, and a worldwide regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies, which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises.
Although the Company is seeking to raise additional capital and has engaged in numerous discussions with investment bankers and investors, the Company has not received firm commitments for the required funding. Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding debt, pay past due payables and maintain its current operating activities, that the terms thereof will be materially dilutive to existing shareholders.
Recent geopolitical events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity in the capital markets, could impact the Company’s ability to obtain financing and its ability to execute its business plan.
Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. During the period ended March 31, 2018, we believe there have been no significant changes to the items disclosed as significant accounting policies in management’s notes to the consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2017, filed on April 2, 2018.
Off-Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.
Item 3. Quan t itative and Qualitative Disclosures About Market Risk.
This item is not applicable to us because we are a smaller reporting company as defined by Rule 12b-2 under the Securities Exchange Act of 1934.
Item 4. Con t rols and Procedures.
Disclosure Controls and Procedures
Based on an evaluation as of the date of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the disclosed material weaknesses in the Company’s internal control over financial reporting, the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the period ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
(a)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
(b)
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
(c)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.
P A RT II
Item 1. L e gal Proceedings
In 2016, the Company was awarded in the Superior Court of the State of Washington a total sum of $527,876 against BancLeasing. The Company is pursuing its options for collection of the awarded amount, however there can be no assurance as to any eventual collection.
Item 2. Un r egistered Sales of Equity Securities
During the three months ending March 31, 2018 the Company issued 10,000 common shares for services.
During the three months ending March 31, 2018 the Company issued 5,742,000 common shares in exchange for 574,200 shares Series A Preferred.
In connection with the above stock sales, we did not pay any underwriting discounts or commissions. None of the sales of securities described or referred to above was registered under the Securities Act of 1933, as amended (the “Securities Act”). We had or one of our affiliates had a prior business relationship with each of the purchasers, and no general solicitation was used in connection with the sales. In making the sales without registration under the Securities Act, we relied upon the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Item 6. Ex h ibits.
Exhibit
Number
Description

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith.
SIG N ATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Vivos Inc.
Date: May 22, 2018
By:
/s/ Michael Korenko
Name:
Michael K. Korenko
Title:
Chief Executive Officer
(Principal Executive Officer)
Date: May 22, 2018
By:
/s/ L. Bruce Jolliff
Name:
L. Bruce Jolliff
Title:
Chief Financial Officer
(Principal Financial and Accounting Officer)
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