Vivos Therapeutics, Inc.

good day everyone and welcome to the vivos therapeutics inc third quarter 2021 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 a replay of today's call will be available on the investor relations section of the vivos website and will remain posted there for the next 30 days i will now hand the call over to mr edward low

vivos investor relations officer for introductions in the reading of the safe harbor statement please go ahead sir thank you operator hello everyone and welcome to vivos therapeutics third quarter 2021 earnings conference call a copy of the company's earnings press release is available on the investor relations section of our website at www.vivoslife.com with us on today's call are kirk huntsman Vivos Chairman and Chief Executive Officer, and Brad Ammon, Chief Financial Officer. Today, we'll review the highlights and financial results for the third quarter of 2021, as well as more recent developments. Following these formal remarks, we will be prepared to answer your 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 in Section 21E of the Securities and Exchange Act of 1934 as amended concerning future results. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words in similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the company's control. Actual results, including the results of Vivos' growth strategies, operational plans, future potential results of operations or operating metrics, and other matters to be addressed by Vivos management in this conference call may differ materially from those expressed or implied by such forward-looking statements. 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's filings with the Securities and Exchange Commission, including our third quarter 2021 10Q, which is being filed today, as well as in our most recent Form 10-K, which can also be accessed on the VIVOS Investor Relations website. Except to the extent required by law, Vivos assumes no obligation to update statements as circumstances change. Now at this time, it is my pleasure to introduce Kirk Huntsman, Chairman and CEO of Vivos. Kirk, please go ahead, sir.

Thank you, Ed, and thank you everyone for joining us today on our third quarter 2021 earnings conference call. I'm eager to review our quarterly results and provide you with an update on our progress. Afterwards, our Chief Financial Officer, Brad Ammon, will review the highlights of our third quarter financial results. Following that, we'll be happy to take your questions. The third quarter was an exciting period for Vivos. We recorded strong year-over-year quarterly revenue growth of over 38%, a substantial increase from the prior year, and also a 28% increase for the nine months ended September 30, 2021, versus the same period last year. During the quarter, we benefited from a material increase in appliance sales driven by our core of VIPs. And we also generated revenue from additional sources like our billing intelligence services and myocorrect myofunctional therapy, which we didn't have last year. While we experienced a late summer dip in VIP enrollments due in part to the COVID-19 Delta variant resurgence, enrollment revenue was actually up due to a recognition of revenue from prior periods. Overall, we believe this growth demonstrates the increasing recognition and adoption of our vivo system and related products and services by dentists as a treatment for patients suffering from sleep disorder breathing, including obstructive sleep apnea, known as OSA. We also believe our sales growth also highlights the benefits of our strategic growth initiatives, including our expanded sales and marketing activities and collaborations with third parties, which I will discuss in further detail in a moment. In addition to our revenue results, I'm pleased to report that for the third quarter of 2021, we reported gross profit of approximately $3.2 million, up 23% compared to gross profit of approximately $2.6 million for the same period in 2020. We recorded gross margin of 70% compared to 78% for the third quarter of 2020. The year-over-year decrease reflects higher costs associated with VIP enrollments. We ended the quarter with cash and cash equivalents of $28.5 million. During the third quarter, we surpassed $22,000 in total patients treated with Avivo system, compared to just over $13,000 as of the third quarter of 2020. And as of September 30, 2021, we have trained over 1,350 dentists globally in the use and application of the VIVO system, providing our VIPs with training and other related value-added services, compared to just over 1,000 as of the third quarter of 2020. We are very pleased with these results. Brad will review our financial highlights with you in more detail later on. Digging a little deeper here, in addition to the revenue from our core business of VIP enrollment revenue and appliances, We also saw growing activity and brand development as well as revenue contributions from the value added services we offer dentists that are enrolled in our vivos integrated practice or VIP program and their patients, including our vivos score diagnostic product and mild correct therapy service as well as some management revenue from our medical integration division or MID. As for vivos score, our home sleep apnea test that we introduced earlier this year, we have continued to see increased usage of this product throughout our VIP members. We consider VivoScore, powered by sleep image technology, to be a breakthrough screening and diagnostic tool to promote increased diagnoses of sleep apnea. Strategically, VivoScore has taken center stage as a powerful marketing tool to generate greater awareness and usage of the Vivo system. So seeing vivos scores increase usage not only indicates greater awareness of OSA, it also helps to promote specific recognition for vivos products and services. Complementing this, we have continued our efforts to expand dentist awareness of vivos and potential VIP enrollment by engaging with dental support organizations, also known as DSOs. For those of you less familiar with DSOs, DSOs acquire and operate multiple dental practices to provide critical business management and support. These DSOs control thousands of general dental and specialty practices across North America, and their recommendations to their affiliated providers carry substantial weight. As more people become aware of the health issues associated with sleep disorder breathing, DSOs are anxious to provide more support and education for their affiliated dentists who wish to treat OSA. In addition, DSOs are constantly looking for new and profitable services they can offer to patients. We believe our vivos sleep treatment program represents the largest single profit opportunity for DSOs since the introduction of implants over 20 years ago. Given these prevailing trends and our extensive industry relationships, we see great benefits and accelerated growth potential in engaging with these organizations and educating them on the benefits of the vivo system. We continue to have active discussions with several leading DSOs representing nearly 4,000 affiliated dental offices and expect to launch pilot programs within target markets beginning here in the fourth quarter and even more as we move into 2022. Concurrently with our engagement with DSOs, we are also actively expanding our social media marketing outreach to engage more directly with consumers, medical providers, and large employers. Beyond our financial results and our success with these strategic initiatives, we also celebrated a number of significant milestones in the quarter. Since we spoke with you on our last earnings call and partially in response to discussions we have on a regular basis with the investment community, we reported more detailed survey and study data highlighting certain rather striking clinical benefits of our products. For example, in July, we announced results from a national study commissioned by Vivos to assess patients' airway function and OSA symptoms after undergoing the Vivos treatment. In the study, one in four, or 28%, of the 74 adult patients treated with our FDA Class I DNA appliance for certain oral facial anomalies reported no remaining OSA symptoms, which is defined as patients having an apnea hypopnea index, or AHI score, of less than five post-treatment. Now, there are some doctors out there who would say that patients who have their AHI scores reduced to less than five are effectively cured of their sleep apnea. Regardless, to the best of our knowledge and belief, no one has ever before reported eliminating or reducing OSA symptoms down to within normal limits non-surgically and without ongoing intervention. We believe this data furthers the case we've been making that our products are both highly effective and highly differentiated, and that our technology represents a significant breakthrough in the battle against OSA and its related health conditions. In August, we announced more detailed data from this study, which reported that prior to treatment, 20 patients had severe OSA. which from an AHI perspective improved post-treatment or is improving mid-treatment by 53%. Of these 20 patients, none have reported worsening of their OSA symptoms, while three patients still have severe OSA, 12 have moderate OSA, four have mild OSA, and one has no OSA. The study data also showed that for the 18 patients who began the study with moderate OSA, the average percent improvement in HI scores were 64%. Although future results may differ from this study data, we think these positive results are quite impressive, and we are extremely happy to provide our investors with this real-world data about our devices. For those of you interested in reviewing the more detailed summary of these national study results, This is available on our company website at www.vivoslife.com under the investor relations section. In addition to these national study results, during the quarter we officially opened our Vivos Institute International Training Center in Denver, Colorado. This 15,000 square foot state-of-the-art facility complements our online training programs and was established to offer advanced postgraduate education and training to dentists, dental teams, and other healthcare professionals from around the world in a live, hands-on setting. The Institute focuses on educating healthcare providers about OSA and vivos' treatments for OSA within their practice areas, along with training on vivos' related practice management tools for dentists. While we pivoted and had success last year and this year with online training, We continually hear that live, hands-on training is preferable to many practitioners, and we agree. Creating and opening the Vivos Institute was a major strategic objective for our company in 2021, which we were pleased to have completed and opened with a great kickoff, notwithstanding the COVID-related challenges. Moreover, we are extremely excited about the future of this facility and believe this dedicated, state-of-the-art forum will be a core hub where we can train independent dentists with patients suffering from dental facial malformations that may be associated with OSA and introduce them to the VEVO system as a treatment option. In August, we achieved another important business milestone with the US FDA granting VEVO's 510K market clearance for our MMRNA device for treating mild to moderate OSA, sleep disorder breathing, and snoring in adults. This is quite a boon for us and for those suffering from OSA. Today, more than 1 billion people worldwide and 54 million in the United States suffer from sleep apnea. What's more disturbing is that over 80% of these people still remain undiagnosed and continue to suffer in silence. This 510 market clearance is extremely important as it opens the door for patients to have a viable, patient-friendly, and most often permanent treatment option to the current standard of care. Also, it paves the way for expanded insurance reimbursement coverage for the MMRNA device, including Medicare, as well as for potential future government contracts and reimbursement from commercial payers that follow Medicare guidelines. This opens up the vivo system to a much wider audience of potential patients. Also, in August, we announced a new cooperative relationship with Empower Sleep, Once again, the importance of this relationship cannot be overstated as it helps our vivos dentists overcome an important barrier to getting patients properly diagnosed and into treatment. Empower is a San Bernardino, California-based company that provides patients with affordable, accessible, and personalized telemedicine sleep care and supplies critical diagnostic and medical consultation services to people across North America who suffer from OSA. By leveraging our VivoScore diagnostic technology and combining it with Empower Sleep's telemedicine model, providers and patients now have easy access to confirming diagnoses of their sleep disorders in an easily accessible and affordable manner. This relieves dentists from having to seek out and cultivate local sleep specialists who may not be as easy to work with or as convenient for patients. Most importantly, patients will be able to receive the appropriate treatment for any sleep-related breathing disorder they may be experiencing, including mild to moderate OSA. Towards the end of the quarter, in September, we announced the formation of the Vivos Medical Consortium. This physician working group, led by Drs. Clete Kushida of Stanford University and Cecilia Wu of the University of Alberta, will collaborate to advance Vivos' OSA technology capabilities. Together they lead a team of multidisciplinary physicians from prominent academic institutions across the U.S. and Canada with specialties including sleep medicine, neurology, pediatrics, pulmonology, anesthesiology, pain medicine, otolaryngology, obstetrics and gynecology, cardiology, and forensic pathology. The key reason for taking such a multidisciplinary approach in constituting the medical consortium is that sleep apnea affects the clinical care and treatment of patients across many medical specialties. The Vivos Medical Consortium will assist us with the planning, dissemination, and conduct of key research initiatives, enhancing physician-dental collaborations, and expanding novel applications of the Vivos technology for additional medical conditions. We are optimistic that our medical consortium will enhance our scientific progress and research endeavors, as well as raise further awareness of our technology within the medical community. Subject to quarter end, in October, we announced that results from a peer-reviewed published study by Dr. Toshi Hart, an independent Bevos clinical advisor, found that found a significant reduction of tooth decay in pediatric patients after undergoing treatment using our FDA Class I registered VivosGuide, a flexible BPA-free base polymer intraoral device. The VivosGuide is a preformed oral appliance intended to prevent a child's teeth from shifting position and has been shown to be helpful in converting mouth-breathing children to nose-breathing. Data from the study demonstrated that the risk reduction of tooth decay per child in the treatment group versus the control group at six months and at 12 months after beginning vivos guide use was lowered by 76.4% and 57.9% respectively. Both of those figures, by the way, were statistically significant. The vivos guide was well tolerated by the children in the study with no reported complaints from children or their caregivers. We are extremely happy with the results from this study, which helps to show how the DivosGuide internal device may promote nasal breathing and reduce tooth decay. And more recently, in October, we announced a strategic collaboration with CandidCare, a digital platform for oral healthcare, primarily focused in orthodontics. Through this relationship, we will look to provide patients with a comprehensive, whole-mouth solution to diagnose and treat obstructive sleep apnea in adult patients, and provide orthodontic treatment from the same provider network. At the core of this collaboration, Vivos and Candid will market each other's products and areas of expertise to deliver a comprehensive sleep and oral health solution to patients in the United States and Canada. The focus of the collaboration will be Candid Pro Clear Aligner for straightening teeth and the Vivos system for treating OSA. The two companies will also share educational resources, training, and key opinion leaders to bridge the gap between airway health and orthodontic therapy. Additionally, under the terms of the agreement, Vivos and Candid will join forces to explore new research and development opportunities for device development and other alliances related to orthodontics, OSA, and snoring. Candid will also conduct specialized training sessions at our Vivos Institute. We are thrilled to be working with Candid, and our companies look forward to combining our dual strengths to offer a full-service solution for patients suffering from OSA. So all in all, the third quarter was an exciting and productive period for Vivos. We delivered solid financial results despite some COVID-related headwinds. While seeing increased usage of our VivoScore sleep apnea test, we also continued to actively engage with DSOs, and expect to share further developments with you on this front by the end of this calendar year. Additionally, we celebrated a number of significant milestones as our strategic initiatives come online and begin to reap benefits for our company. With our progress and achievements to date, we believe we have established a strong foundation for our continued and future growth. Going forward, we will continue to advance our strategic growth actions to drive VIP enrollment growth and appliance sales. while working to foster greater recognition and adoption of the vivo system as well as our expanded product offerings. By following this path, we will enable many more patients to receive the care they need for their OSA so they can improve their overall health and lead happier, fuller lives. We are very proud of what we've already achieved so far and look forward to updating you on our continued progress. This concludes my opening remarks. Now I'll pass the call on to Brad, who will review our financial results. Brad? Thank you, Kirk, and good afternoon, everyone.

Today I'll review our third quarter 2021 financial results. We reported total revenue of $4.5 million for the third quarter of 2021, a 38% increase compared to $3.3 million for the third quarter of 2020. The increase was related to revenue from VIP enrollments appliance sales due to volume increases, billing intelligence service subscriptions, initial management fees from our medical integration division or MID program, and from the introduction of our myocorrect oral facial myofunctional therapy or OMT services. Third quarter 2021 revenue growth was partially attributable to the negative impact of COVID-19 on our revenue during the third quarter of 2020. As Kirk mentioned, we experienced a late summer dip in VIP enrollments due in part to the Delta variant resurgence, but enrollment revenue was actually up year over year due to recognition of revenue from prior periods. During the third quarter, we enrolled 56 VIPs, net of cancellations, and recognized revenue of approximately $2.3 million compared to 64 VIPs and revenue of $1.7 million during the same period last year. During the three months ended September 30, 2021, we sold 2,996 total oral appliance arches for revenue of approximately $1.6 million. An increase from the three months ended September 30, 2020, where we sold 2,245 total oral appliance arches for revenue of $1.3 million, The increase in appliance revenue is due to volume increases. For the nine month ended September 30th, 2021, revenue increased 28% to approximately $12.5 million compared to 9.8 million for the nine months ended September 30th, 2020. The increase was attributable to the same factors I just mentioned. During the nine months ended September 30th, 2021, We enrolled 162 VIPs net of cancellations for revenue of $6.4 million compared to 194 VIPs and revenue of $5.8 million for 2020. Additionally, our billing intelligence service revenues increased from $400,000 for the nine months ended September 30th, 2020 to approximately $700,000 for the nine months ended September 30, 2021. During the nine months ended September 30, 2021, we sold 8,648 total oral appliance arches for revenue of $4.5 million, and for the nine months ended September 30, 2020, we sold 5,610 oral appliance arches for revenue of $3.2 million. Again, the increase in appliance revenue is due to volume increases. I will note that our Appliance revenue is coming from a relatively concentrated core of dedicated VIPs, and we are working very hard not only to increase our VIP enrollment overall, but also to get more VIPs to be more active and consistent in case starts, which will only augment our appliance revenue potential. Gross profit was $3.2 million for the third quarter of 2021. and $9.5 million for the nine months ended September 30th, 2021, compared to gross profit of $2.6 million and $7.7 million for the comparable periods last year. Gross margin for the third quarter was 70% compared to 78% during the last year's third quarter, reflecting higher costs associated with VIP enrollments. Gross margin for the nine months ended September 30th, 2021, was 76% compared to 79% for the nine months ended last year, we should note that we are continually refining our sales and marketing and promotional efforts with potential VIPs in order to not only drive revenue, but to maintain our gross profit and margins. This includes our expanded social media marketing outreach that Kurt mentioned earlier. Sales and marketing expense increased by approximately $1.5 million to $2 million for the third quarter of 2021, compared to $400,000 for the third period of 2020. This increase was primarily due to approximately $600,000 increase in marketing expenses due to the deployment of VivoScore rings as demos to be used as different marketing events and marketing campaigns and approximately half a million dollar increase in new marketing campaigns, updating marketing materials for investors and consumers, improving the Vivos website, and promoting conferences and events taking place in 2021, such as the Vivos Institute grand opening. Additionally, we had about $300,000 increase in conference expenses as a result of one conference hosted in Dallas and our grand opening of the Vivos Institute in Denver, Colorado. Lastly, there was approximately $100,000 in sales commissions on increased sales. Sales and marketing expenses increased by approximately $2.7 million to $4.2 million for the nine months ended September 30th, 2021, compared to $1.5 million for the nine months ended September 30, 2020. This increase was primarily due to the factors I described earlier for the three-month periods. General and administrative expenses were approximately $6.5 million for the third quarter of 2021 and $17.7 million for the nine months ended September 30, 2021. compared to $3.8 million and $11.5 million for the three and nine-month periods ended September 30, 2020, respectively. The year-over-year increase was mainly due to our higher headcount and expenses related to supporting our sales growth, as well as our status as a public company, which started in late 2020. Additionally, these increased expenses are related to higher revenues from our core business, as well as initial revenue from our new products and services, including our BVO score diagnostic product, myocorrect therapy services, management B revenue from our MIT division, and sponsorship revenue, all of which accounted for approximately 6% of third quarter revenue. On the whole, we were satisfied with the deployment of proceeds from our IPO and underwritten follow-on offering this last spring. to both our sales and marketing efforts and our general administrative expenses. That is because we believe these investments have already started to provide us with returns in the form of strong revenue growth. In addition, we believe these initiatives will enhance our long-term growth potential. Net loss was approximately $5.5 million for the third quarter of 2021 compared to $1.8 million for the third quarter of 2020. The year-over-year increase was primarily due to higher G&A and sales and marketing expense due to the factors I just discussed. Net loss for the nine months ended September 30th, 2021 was approximately $12.9 million compared to $5.8 million for the nine months ended September 30th, 2020. Turning to our balance sheet now, at September 30th, 2021, our cash and cash equivalents were approximately $28.5 million compared to cash and cash equivalents of approximately $18.2 million at December 31st of 2020. With the proceeds from our December IPO and follow-on offering we completed in the second quarter of this year, we anticipate having ample financial resources to meet our capital requirements, fund our operations and continued execution on our growth strategy for the foreseeable future. In summary, During the third quarter, we continue to see strong year-over-year sales growth, reflecting growing demand and expanded usage of Vivos products and services. This rising demand speaks to the growing awareness and acceptance of the benefits of the Vivos system for the treatment of OSA in both the dental and medical communities, which has been driven in no small part by our targeted sales and marketing efforts, including, most importantly, the development the deployment of our VivoScore home sleep test rings. Further, our revenue growth in the third quarter came not only from our core business, but also from newer revenue streams. This includes our recently introduced products and services such as MyoCorrect and the MID, as well as increased adoption of our value-added services such as billing intelligence services. Looking ahead, we are looking for sales momentum to continue here in the fourth quarter and into the coming year, notwithstanding any potential impact related to COVID-19. We remain very excited about our growth prospects and look forward to providing you with further updates and our continued progress. That concludes our prepared remarks. Now we'd like to open the call for questions. Operator, please go ahead.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 to ask a question. And we'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll take our first question from Alex Nowak with Craig Allen Capital Group.

Great. Good afternoon, everyone. To start on Brad's point there about oral arches coming from a concentration of VIPs, can you speak to your new marketing initiatives? You mentioned a bit in the prepared remarks, but just how are those campaigns resonating with dentists, with patients, and then how is the build-out of the sales team going? Are these reps live and active in the field?

Yeah, good question. We have built out now three sales teams, which is what we had forecast, I think. We feel like those three teams are trained up and capable of generating about 60 new enrollments a month as we go forward. We've also looked at, Brad mentioned that we were continually updating our model and we are actively looking at right now an update to our model that would be more appealing and more broadly accepted by members of the dental community. Our entry fee here for somebody to become a vivos provider is a pretty hefty lift. Not only are there fees that are payable up front and investments in capital equipment, but there's a learning curve. And what happened with COVID for a lot of these offices is that they trained up all their staff, and then when they came back from COVID, their staff didn't come back. And so they had to hire new staff, and that meant going through all the training all over again. So some of these practices have stumbled as they've come back from COVID with trying to get everything reinstituted as far as systems and policies. So what we're doing, Alec, is we are actually looking at a new program that will more broadly appeal to the masses of dentists. There's close to 200,000 dental practices in the U.S. and Canada. And what our goal is is to get as many of those doctors aware of and producing in one way or another. And what we're doing now is we're leading with our VivoScore We're putting the VIVO score screen and refer program into dental offices. The entry cost for this is extremely low. It gives an easy way for a dental office to participate in screening their patients for OSA, but they don't have the heavy capital lift of CapEx expenditures or the training lift of of training staff and the doctors clinically and what to do. All they have to do is use the VivoScore device powered by Sleep Image. They use that device and they screen their patients and they refer to an active VIP. Or they have the VIP come to their office and do the services. So we are continually to experiment with those. The reception level of our program continues to be very high among providers and patients. The challenges are around getting the staff and the doctors and the patients all on the same page. What we really have felt good about is the degree to which as we've rolled out this initiative through the hygiene program with hygienists using the vivo score rings in these practices, the number of tests that are being performed today are just outstripping every forecast that we had. We're very, very pleased with the way that the dental community has responded to the VivoScore technology. Patients like it. We're seeing a multiple fold increase in the rate of new diagnoses or screenings that we're doing on a monthly basis. Does that help?

Yeah, it does help. Maybe to expand on VivoScore, we found in our checks as well that dentists do like VivoScore quite a lot, but they're not just using it from a screening perspective, it also seems like they're using it somewhat more throughout the treatment process. So I'm curious, I know VivoScore isn't an item that contributes much revenue today, Do you ever consider making that more of a revenue line item for Vivos in addition to, obviously, the ARCHES and the VIP enrollment?

Absolutely. We rolled it out as a product that we wanted to see just how this product would play in the market. We wanted to see what the response would be from both providers and patients. And we are now tweaking the model, let's say, in order to turn it into a profit center for us. We'll have some further reports for you on that as we close out the year and move into 2022. But I can say that it's going to always be an important part of our strategy, but it'll turn into a profit center here as we roll forward.

That's great. And then just last question from me, just any update on the status for the Stanford study? And actually two-part question, status on the Stanford study, and then just how are you thinking about sales growth going into 2022?

So the Stanford study is something that we have, it seems like we've been talking about that for over a year now. And it's, in fact, I think we even may have mentioned it in our IPO presentation. Stanford has had some administrative snafus that have just delayed things. We are ready to go. We stand ready to get started at any moment, and I think Stanford is in their administrative department. I think Stanford has checked all the boxes, and I think they're very, very close now. I mean, we believe that we could get the green light at any moment, and so I think we're right there on the cusp of having this happen. There's no budgetary things that I know of that are outstanding. There were some tweaks that were made here just in the last couple of weeks to the budget. I think we should be pretty much in agreement with them on all that now, and I think we're very, very close. So that should be something very close. As we think about our sales going forward into 2022, I would point to our penetration in the DSO market. The DSO market and leading with the VIVO score program in, in, in the, um, what we're calling the airway Alliance program, by the way, I don't know if I mentioned that earlier, but this, the, what the program I described before was we call it the airway Alliance program. And, and that's where we go into just general dentistry offices with the vivo score devices being distributed through the hygiene department. But we're taking that same program to the, to the DSOs and the DSOs have loved it because it's simple. It's easy to execute. and they can use a hub and spoke model to get their local practices to screen and refer into hubs that they actually have where they'll actually train up the doctors, train up their staff, complete the CapEx requirements, and then they'll have, in a given market, let's just take Orlando or Denver or any market, they might have 15 offices in that market, and they'll take three or four of them, turn them into vivos, centers of sleep treatment, And they will get the other offices in that market that they have under their watch and their control, and they'll have them screen and refer into those hubs. And so there's a lot of excitement out there. There's a lot of buzz in the DSO community about this. And we're in the C-suite, at the C-suite level, with all of the top DSOs that we've targeted so far.

That's great. Appreciate the update. Thank you.

Thank you, and next we'll move on to Scott Henry with Roth Capital.

Thank you, and good afternoon. A couple questions. I'll start on the income statement. Gross margins declined from kind of 80% to 70%. Do you expect that to ramp back higher in the short term as in fourth quarter? And how should we think of that? I don't know if there's some mixed impacts. It sounds like there were some one-time events, but just trying to think about how to model that line going forward.

Yeah, so this was where Brad was referring to. Again, we're tweaking our marketing efforts and our sales efforts. And what we did in the third quarter here is we started bundling up some of the projects the sleep image, vivo score rings and services and putting them into the package as an inducement to doctors to get them to enroll. And we used that to see how that would work. That ended up having the effect of lowering our gross margins in the short run, but it also has led to what appears to us to be a more rapid onset of doctors getting in, starting to test patients, getting into dialogue with patients, and starting production. So it is something that did produce what we think is a short-term hit on our gross margins. I think we're finding ways now of being able to accomplish that without necessarily experiencing that. So as we've moved into the fourth quarter, We continue to tweak our enrollment offerings. And as we move into 2022, I would see those margins start to rebound back into the mid-70s or upper 70s. Brad, would you agree with that assessment?

Yeah. And, Scott, I think, you know, providing these five rings, BevoScore rings, to dentists really gives them a tool to help them assess their patients' OSAs. And although we have, you know, a medical doctor reviewing those once the test is done, it, you know, actually helps the dentist, you know, with their tool chest as to how they can start to increase the number of VIPs, you know, helps them to determine, you know, how many patients in their practice. have obstructive sleep apnea and can start taking more case starts faster. We've also increased the number of PAs that we have, and they're working closely with our VIPs in order to help them not only with the VivaScore devices, but also doing more cases and becoming more efficient as well.

Okay. Thank you for that, caller. And then... I guess I've got a big picture question and then a smaller or more targeted question. I guess I'll give them both to you at the same time, maybe you get a sense of where I'm going with it. So VIPs, you talk about three sales forces that could generate 60 new enrollments a month, which would equate to 180 per quarter. Obviously, we're not we're still in the double digits right now and kind of around the middle. I mean, I know there were some unique things in 3Q. So I guess the question is, to part one, when should we expect new enrollments to hit that 100 mark again? And two, as you add in this focus on the vivo score and screening more patients to grow that funnel bigger, I mean, is the revenue model just in general going to change? Maybe we're not going to see the growth in new VIPs. We're going to see it more in appliances. Just trying to get a sense of how we should model that and if some of these new strategy changes will change the model. Thank you.

Very good question. Very good question. Let me see if I can take a stab at it. First of all, I think we see... a lot of unrealized potential out there for enrollments. We were frustrated in the third quarter with the way that we were impacted by some of the attendance at some of our events that we held. We hold events every month to try to get doctors to attend. These are two and a half days of total immersion into all things vivos. Prior to the Delta variant sort of blow up that we had in July and August, we were seeing some really nice attendance with really high conversion rates. At one event in particular, we closed 80% of the attendees there. And then when the COVID variant hit, we ended up with expecting over 100 dentists in our Tampa event, for example, and we ended up with 30 that came. They just didn't want to travel. And so we rebounded nicely with our event in October where we had some really nice attendance. We were oversold for our Las Vegas Breathing Wellness Conference. We just didn't have the capacity to take all the people in who wanted to come in October. So between August and October, everything just flipped back again. So we're very optimistic about that. But I will have to tell you that I don't foresee... us getting in the near term, I don't see us getting up into the triple digits as far as monthly enrollees. I would say that a lot of our growth is going to come about from the DSO enrollments and also from the Airway Alliance program. The Airway Alliance program in our testing we've done so far has been extremely well received. by the community. They're excited about the opportunity to get to play the airway game without having the heavy lift that Vivos and other airway programs require. And it gives them a chance to just sort of see if that's something that they want to do. And if they don't want to do it, these dentists still have the opportunity to screen and refer their patients. And they can benefit from that financially. So I think you're going to see a very sort of pedestrian growth in our enrollments each month for the next few months, the next, say, six months. But I think you'll start to see that supplanted by a rapid rise in the rollout for DSOs and all the compensation that comes along with that. So there will be some... compensating factors here that will offset that. But I think we recognize that we're not going to win the game with 50 enrolling 50 doctors a month. That's just not going to win the game. And we are prepared to do whatever it takes to increase that level so that we broaden out the horizon. We get more doctors participating with us both medical doctors and referring dental practices. They all have patients that have this condition. They all need places to send them. And one of the things we glossed over a little bit that's also on the horizon here, we have begun to approach and have been approached by very large employers who have large populations that need to be screened and need treatment. We are working with some corporate initiatives with those large organizations. We'll have further data on those as we come across, as we get things actually buttoned down, but we're in active negotiations with a number of large employers and others with large patient populations that need what we have to offer. All of those things are on the horizon. If I was modeling this, I would not model up triple-digit enrollments in the near future. I don't see that happening.

Okay, now for clarity, I'm speaking on a quarterly basis, not on a monthly basis.

Right, right. Yeah, I get it. I think we're probably, you know, we have the capacity in our three groups to do 60 a month. Some of those, we may end up 60 to 80, but I just don't see a huge amount of that kind of growth in the near term. I may be wrong. I want to not be out over my skis when I tell you guys this, but that's how I see it. I do see... more than compensating balances happening in terms of growth through our DSOs. The DSOs have been extraordinarily receptive to our initial entrees. In fact, just prior to this call, we got a call back from one of the leading DSOs in the country, and they accelerated their desire to have a follow-on call with us and to set some actual for initiating our trial with them. So we have lots of things going on that are going to be our main growth strategy as we go forward into 2022. I think VivoScore will continue to be the tip of the spear. I think the DSO initiative will begin to overshadow and eventually overtake our current independent dentist enrollment initiatives, and that's how I would model it.

Okay, so Kirk, I certainly understand the alternative channels, and growing that market in other ways makes a lot of sense with the Vivo score. But the question is, how will we see the success of those alternative channels? Will we see it in sequential gains in the number of arches sold? Would that be a good place? Because in theory, if there's more volume, there should be more arches.

I think so. I think you'll start to see it. Now, initially, Scott, we're going to have, you know, there's a ramp up, right? We have to train these guys. We have to get them started. We have to do, you know, we have to get them all rolled out. And it takes a little while for everybody to get their systems in place and get their referral patterns in place and to get everything set up and running. So that's, you know, I don't, there's no, There's no magic bullet for the next few months, but I would expect to see. We charge the DSOs enrollment fees and training fees. They're not at the same level that we have with independent doctors, but we do charge for that service, and we do expect to see enrollment fees continue to remain fairly high. I just don't think that, I just feel like the DSO the DSO community has been so overwhelmingly positive in their reception. There's not a DSO out there today, and there's about 2,000 DSOs in the United States, and there's not a DSO that we're aware of that has any size to it at all that has a sleep program. So you're talking about 20,000 or 30,000 practices in the United States and Canada that are under the direct management and control of these DSO organizations and none of them have, none of them have, that we can find anyway, that have sleep programs. So this is a huge greenfield opportunity. The DSOs seem to have a great appetite for this. They see the revenue opportunities. Some of the DSOs have tried to implement sleep before and failed. And so when we introduce the products that we have, we showed them exactly why Our program has overcome all the weaknesses of the programs that have historically been out there on the market, and they've bought it. They've bought it. So we'll be starting in the next couple of weeks. We'll be starting our first pilot test with a large DSO, and we're just going to keep going with that, and I think that's what's going to drive the growth.

Okay, great, Kirk. Thank you for the color, and thank you for taking the questions.

Thanks for that. Thank you. I show no further questions in the queue. At this time, I'd like to turn the call over to Mr. Kirk Huntsman, Chairman and CEO, for closing remarks.

Thank you, Operator. I would like to thank everyone for joining us on today's call and for your continued interest in Vivos Therapeutics. As we've stated, we are optimistic about what 2022 holds, and we're pleased with what we've been able to do so far under the circumstances that we've had. We see a lot of bright lights ahead. We see a lot of good things happening and we are working diligently to make sure that we are translating those opportunities into financial results. So again, we thank you for your time and your interest in Vivos and we look forward to sharing our progress with you in the future. Thank you very much and have a great day. Operator?

Thank you. This does conclude today's call. We do appreciate your participation. You may now disconnect.