Vivos Therapeutics, Inc.

Good day, everyone, and welcome to the Vivos Therapeutics first quarter 2023 earnings conference call. At this time, participants are in 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 Vivos' website and will remain posted there for the next 30 days. I will now hand the call over to Julie Gannon, Vivos' investor relations officer, for introductions and the reading of the safe harbor statement. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our conference call. A copy of our earnings press release is available on the investor relations section of our website at www.vivos.com. With us on today's call are Kirk Huntsman, Vivos chairman and chief executive officer, and Brad Ammon, chief financial officer. Today we'll review the highlights and financial results for the first quarter of 2023 as well as more recent developments and vivos plans for the remainder of 2023. Following these formal remarks, we will be happy to take questions. I would also like to remind everyone that today's call will contain certain forward-looking statements from our management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21 of the Securities and Exchange Act of 1934, as amended, concerning future events. Words such as aim, may, could, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, goals, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant risks, uncertainties, and contingencies, and many of which are beyond the company's control. Actual results, including without limitation, the results of Devo's growth strategies, operational plans, including sales, marketing, product acquisition, and integration, Research and development, regulatory initiatives, cost savings plans, and plans to generate revenue, as well as future potential results of operations or operating metrics, such as potential for future positive cash flows and other matters to be addressed by vivos management in this conference call, may differ materially and adversely from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described and other disclosures contained in VIVO's filings with the Security and Exchange Commission, including the risk factors and other disclosures in our Form 10-K for the year ended December 31, 2022, and our other filings with the SEC, all of which are or will be accessible on the Investor Relations section of vivos website as well as the SEC's website. Except to the extent required by law, vivos assumes no obligation to update statements as circumstances change. Finally, please be aware that the U.S. Food and Drug Administration has given certain vivos appliances 510 clearance to treat mild to moderate OSA. Any reference herein regarding vivos treatment or the vivos method should be viewed in that context. Treatment of patients with severe OSA is performed off-label at the sole clinical discretion of the treating doctor and is not part of the vivos treatment protocol. Now, at this time, it is my pleasure to introduce Kirk Huntsman, Chairman and CEO of vivos. Kirk, please go ahead.

Thank you, Julie. I want to thank you all for joining us on today's conference call. Just a moment, I'll turn the call over to our Chief Financial Officer, Brad Ammon, who will walk you through the highlights of our first quarter 2023 financial and operating results. Once Brad is finished, I'll come back on and speak with you about the highlights of what we accomplished at Vivos during the first quarter and in the past few weeks following the quarter end, including our acquisition of product rights and patents from Advanced Facial Dontics. This has expanded our product portfolio even further, allowing vivos trained providers to treat a much larger percentage of their patients, which ultimately increases the revenue potential for vivos. I'll also talk about our progress with the FDA, as well as ongoing R&D efforts. In more recent news, I'll talk about some of the actions we took to improve our organizational infrastructure and highlight how we took steps to increase operational efficiencies, reduce expenses, and position us to take advantage of the growth opportunities that are available to us. I'm pleased to say that due to these initiatives, we can reiterate that we remain on target to achieve our goal of positive cash flow for the first quarter of 2024, which is a full quarter earlier than the target we provided you on our last earnings call in March. Our goal is to achieve this key target without having to raise any further equity capital if possible. Following that, I'll talk about our plans going forward in 2023 how we intend to build upon what we've already done, and what we have planned for the rest of the year, as well as into 2024. After that, we'll take your questions. Now, let me turn it over to Brad to review our financials. Brad, please go ahead.

Thank you, Kirk, and good afternoon, everyone. Today, I'll review the financial highlights of our first quarter 2023 financial results. For information on our results for the three-month period ended March 31st, 2023, I'll refer you to our earnings release, which was distributed earlier today, and our quarterly report on Form 10-Q, which is available in the SEC filings portion of the investor relations section of the Beavis website at beavis.com forward slash investor dash relations. At the outset, I want to say thank you for your patience as we switched auditors for the first quarter, which led to a delay in our 10-Q filing. I am pleased to report that our relationship with our new auditor, Moss Adams, is off to a very positive start, and we are looking for a smooth and productive relationship with him. Today, we report first quarter 2023 total revenue of $3.9 million compared to $3.6 million for the first quarter of 2022. The overall year-over-year increase was due to higher revenue from Vivos Integrated Provider or VIP enrollments, as well as increased sleep testing service revenue and increase in conference and training-related revenue. This was offset by lower revenue generated year over year from appliance sales, billing intelligence services, and center revenue. Our VIP enrollments were up in the first quarter, with 38 VIPs enrolled versus 32 enrolled in the same period last year. For the first quarter of 2023, we recognized BIP revenue of approximately $1.3 million, an increase of $400,000 or 42% in enrollment revenue compared to $900,000 for the first quarter of 2022. It should be noted that first quarter of 2022, BIP revenue was negatively affected by a $300,000 adjustment that rose from the prior year impact of our change in revenue recognition policy. We also saw an increase of approximately $200,000 in revenue recognized from our home sleep test ring lease program, as well as an increase of approximately $100,000 in conference and training-related revenue. The increase in total revenue was partially offset by lower product revenue. During the first quarter of 2023, we sold 2,369 oral appliance arches for a total of approximately $1.7 million compared to 2,965 during the first quarter of 2022 for approximately $1.9 million. And for the first quarter of 2023, we recognized approximately $200,000 in our billing intelligence service revenue compared to $400,000 in the same period the prior year. We also had approximately $100,000 in center revenue compared to approximately $200,000 during the last year's first quarter. Gross profit was $2.3 million for the first quarter of 2023 compared to gross profit of $2.6 million for the comparable period in 2022. Gross margin for the first quarter of 2023 was 61% compared to 70% during the last year's first quarter. primarily driven by higher costs associated with VIP enrollment and training, as well as costs related to our new programs, including the sale and leasing of sleep testing rings. We continue to refine our sales, marketing, and promotional efforts with potential VIPs, not only to increase enrollment and revenue, but to improve our gross profits and margins. This includes utilizing targeted social media and digital marketing efforts specifically designed to drive sales. As of the first quarter, we are now starting to see the benefits of these efforts with increased VIP enrollments on a year-over-year basis. Sales and marketing expense was $600,000 for the first quarter of 2023, a decrease of approximately $200,000 compared to $800,000 for the first quarter of 2022. This year-over-year decrease was primarily due to decreased sales commissions and a reduction in associated sales-related expenses. Importantly, G&A expenses decreased approximately $1.7 million, or 21%, to $6.5 million for the first quarter of 2023, compared to 6.3 million for the first quarter of 2022, reflecting the substantial impact our cost-cutting efforts are beginning to make. We believe these important efforts will reduce our cash burn as we seek to ramp revenues and move toward cash flow positive operations. Operating loss was 5 million for the first quarter of 2023 compared to 6.6 million for the first quarter of 2022. This year-over-year decrease in operating loss was primarily from lower G&A expenses due to expense cuts and the factors I just discussed. Net loss was $1.7 million for the first quarter of 2023 compared to $5.3 million for the first quarter of 2022. The reduction in net loss was due in part to cost-cutting, but also during the quarter we recognized approximately $6.5 million as a one time, non-operating expense related to the difference between excess fair value from warrants issued in our January 2023 private placement and the net proceeds we received. The change in fair value of the warrant liability over the quarter was $9.6 million net of issuance costs of $600,000. The net impact of the private placement warrants for the three months ended March 31st, 2023 was approximately $3.2 million of non-cash other income. Please refer to our 10-Q for further details regarding this. Turning to our statement of cash flows, cash burned from operations for the quarter ended March 31st, 2023 was $3.5 million, a decrease of approximately $2.6 million compared to approximately $6.1 million during the comparable prior year period. This is further evidence of the positive impact of our expense reduction initiatives. For the quarter ended March 31, 2023, net cash used in investing activities consisted of capital expenditures for software of $300,000 related to the development of software for internal use, which is expected to be placed into service in mid-2023, as well as a purchase of patents and other intellectual property in February of 2023. This compares to net cash used in investing activities of $100,000 in the comparable 2022 period arising from capital expenditures for internally developed software. As I mentioned earlier, in January of 2023, we strengthened our balance sheet by closing a private placement with a single institutional investor for net proceeds of approximately $7.4 million. The private placement consisted of shares of common stock and pre-funded warrants together with five and a half year common stock purchase warrants with an exercise price of $1.20 a share. The effective purchase price per share of common stock or pre-funded warrants in lieu thereof and associated warrant was $1.20 per share. As of March 31st, 2023, we had $7 million in cash. With the financing we completed in January, as well as the strategic initiatives we have applied to reduce our expenses, we continue to anticipate having the necessary financial resources to meet our capital needs. fund our operations, and continue executing on our near-term growth strategy. In the short term, we expect these changes will result in relatively flat revenues sequentially for the first half of 2023. This also takes into consideration our new ASC 606 revenue recognition policy. Afterwards, we anticipate top-line quarter-over-quarter revenue growth will resume starting in the third quarter of this year. Further, as Kirk mentioned earlier, we believe these initiatives will allow us to accelerate our target time for reaching positive cash flow by a full quarter now in the first quarter of 2024. With that, I'll turn the call back over to Kirk.

Thank you, Brad. The first quarter that we are reporting on here today may seem like a distant memory, but we believe it represents a significant watershed moment for the company and our future. First, in early January, we announced FDA 510K clearance for our flagship DNA oral appliance product. This represented the first time in history that the FDA recognized any mechanism of action in an oral appliance other than mandibular advancement for the treatment of mild to moderate obstructive sleep apnea. No oral appliance product has ever received such a clearance, and the significance of this breakthrough should not be underestimated. We fully believe that after several years of going back and forth with the FDA, they were finally persuaded by our submission of yet another round of compelling real-world data, this time showing a remarkable 80% of OSA patients seeing their symptoms completely resolved after treatment using the DNA appliance and the vivos method. Now, to be clear, this data showed that clinical OSA, meaning AHI scores of five or higher, was no longer present in four out of five patients after treatment and with no further intervention required. As far as we know, such clinical results are unprecedented in sleep medicine and unparalleled by any other product or therapy. We expect the full financial impact of that regulatory clearance on our sales to be realized over time as doctors alter their treatment plans to include more DNA appliances. Second, On the heels of our announcement regarding the FDA clearance for the DNA appliance, we raised an equity tranche with net proceeds of roughly $7.4 million from a single institutional investor. We immediately put this capital to good use in expanding our intellectual property and product suite through the acquisition of certain patents, trademarks, and trade secrets from Advanced Facial Dontics. We closed on this transaction towards the end of the first quarter. That acquisition not only ensures that Vivos will maintain its technological and market-leading position at the forefront of treatments for certain conditions closely linked to obstructive sleep apnea, such as TMD pain, bruxism, nasal resistance, migraine headaches, and other conditions, but it also fills a gap in our product suite and offerings to providers and patients. Nearly 40 million people in the United States suffer from TMD pain and related issues. Another 40 million suffer from migraine headaches or have difficulty breathing through their nose. Our new patented unilateral bite block technology has been shown to be highly effective in treating such conditions. Also during the first quarter, we accelerated the process of right-sizing our corporate staffing levels and reorganizing our management team in order to reduce our cash burn and push the company closer to cash flow breakeven, which, as Brad mentioned, we now expect to achieve during the first quarter of 2024. As a subsequent event, early here in the second quarter, we announced a reduction in force and further reductions in overhead. Again, we think these prudent and necessary actions will serve us well as we look to improve our results of operations. On the operations side, we made important progress in our current pilot tests with certain DSO organizations, known as DSOs, including the execution of new and existing pilots with eight regional and national DSOs representing over 1,000 locations nationwide. I'd like to highlight one particular DSO which operates in all 50 states under the name Toothpillow. Over the past 12 months, ToothPillow has been making exceptional strides forward in cultivating a direct-to-consumer channel exclusively geared towards use of our VivosGuides products for pediatric guided growth and development. An estimated 16 million children between the ages of 3 and 12 suffer from various oral, facial, and developmental issues associated with ADD, ADHD, behavioral problems, scholastic challenges, chronic allergies, mouth breathing, crooked and crowded teeth, bedwetting, and breathing-related sleep issues, all of which may be helped through proper oral growth and development. Toothpillow is a pioneering telehealth commercial partner of Vivos, and we are their exclusive oral appliance supplier. Toothpillow is set to redefine the field of pediatric dental and orthodontic treatment with a particular focus on breathing-related issues. This transformational relationship leverages Vivos' world-class pediatric oral appliances, underscoring the role of our cutting-edge products in advancing the delivery of dental and orthodontic care. Toothpillow boasts a strong national network of 48 Vivos-trained dentists that serve as virtual treating partners and a rapidly growing referral base of over 358 in-practice providers. The synergy between Vivos' premium pediatric oral appliances and Toothpillow's software and highly skilled practitioners is creating a holistic, accessible, and high-quality telehealth solution for at-risk patients aged 3 to 12. Over the past year, Toothpillow has been perfecting its proprietary virtual care platform. featuring a mobile app designed to facilitate seamless connections between patients and doctors. Despite not yet having launched its national marketing campaign, Toothpillow services have already been sought out by patients in 40 states, all through referrals with 64% of all new inquiries converting into paying patients. Vivos is excited about our relationship with Toothpillow. and we believe it not only showcases the effectiveness and versatility of our oral appliances, but also opens up a large and exciting new avenue for growth. We are confident that ToothPillow's success will further amplify Vivos' reputation in the industry, bringing us one step closer to our vision of training healthcare professionals and providing them with the very best treatment tools and technology available. Equally as important, ToothPillow is just one of several DSOs we have been speaking with and starting to do business with, and therefore it serves as an example of similar relationships we hope to enter into in 2023 and beyond. Also today, we are announcing the execution of our first non-exclusive distribution agreement for a 90-day pilot with a nationally recognized durable medical equipment company, or DME, that serves hundreds of thousands of CPAP patients nationwide who are seeking alternatives. If this pilot is successful, a national rollout is planned to follow, and we can provide more details at that time. Other similar agreements with potential distributors are in process. We continue to believe that the financial impact on top-line revenue from these efforts will begin to show up in the third and fourth quarters of this year. An integral part of this pilot is the treatment navigator program that we introduced last fall. This program was designed to effectively act as an extension of the VIP practice to help the dental office guide the patient through the many different steps of the patient journey, including coordinating diagnostic appointments, insurance pre-authorizations, further education, and generally coaching the patients through treatment under the direction of a treating doctor. Excuse me. Not only does the treatment navigator program remove significant workload from the practice, It helps mitigate the challenges associated with employee turnover within the practice. Dentists pay vivos up to $895 per case for treatment navigator services, which we expect will soon become a significant revenue contributor and profit center for us. We believe our latest rounds of cost cutting, coupled with an intense focus on creating new revenue streams, will allow us to achieve our stated goal of achieving positive cash flow by the first quarter of 2024. Our prior reliance on vivos-trained dentists to create demand from within their practices is now being augmented by vivos actively driving new patients into their offices through multiple distribution channels, including primary care and specialty medical doctors, medical equipment suppliers, large employers, men's health clinics, and more. We deliver more qualified new airway patients to Vivo as we deliver more qualified new airway patients to Vivo's trained providers. Our value proposition to potential new providers becomes more compelling and attractive. It's a virtuous cycle that creates the potential to organically fuel our growth. We expect to begin to see the impact of these strategic initiatives in the latter half of this year. With respect to our ongoing R&D efforts, the last year This past year has produced the single largest advancement towards proving the efficacy of our technology, with multiple studies and peer-reviewed papers being published in top quality journals, professional journals. We are pleased to announce today the recent execution of an agreement with Stanford University to begin a randomized control trial where our DNA appliances will be directly compared to CPAP. Additional university-based clinical trials on Vivos products are currently in process and are expected to start before year-end. Currently, there are no less than five additional new papers showing significant clinical results that have been submitted and are pending publication. The cumulative effect of this research is to establish beyond any reasonable doubt that Vivos possesses the single most advanced and effective treatment for breathing and sleep disorders on the market today. One final note on our product development front. For some time now, we have been actively engaged in the development of a patient-driven mobile app that will assist clinicians in collecting key diagnostic data and in monitoring patient compliance and progress, while also empowering patients to take charge of their own health and wellness. For example, patients can participate in taking periodic records, providing feedback, and actually receive coaching and interaction with their providers. The mobile platform also allows for remote delivery of certain clinical services, such as myofunctional therapy, breathing exercises, important notifications, and more. Our surveys and provider feedback leads us to believe that there is strong potential demand for such a product and that it can be commercialized and highly profitable for both vivos and vivos providers, while also taking a load off of dentists and their teams. We plan to have a beta version of the app ready for testing by the end of this month and expect to have a commercial product available by the fourth quarter of this year. Now, in closing, we have the evidence-based technology and products that can now address the needs of patients across the full spectrum of price points and needs. We have the FDA clearances. We have the nationwide network of trained providers. And now we have a growing brand awareness amongst both providers and patients. Through our new distribution networks, we will soon have access to more potential new patients than ever before. We believe the combined effects of our internal operating cost reductions and the strategic revenue initiatives outlined above will yield significant top line revenue growth and allow us to become self-sustaining in the first quarter of 2024. This concludes our prepared remarks. Now we'll be happy to take questions. Operator? Thank you.

Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your lines in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the start keys. One moment, please, while we pull for questions. And our first question comes from the line of Scott Henry with Roth Capital Partners. Please proceed.

Thank you, and good afternoon. I guess, you know, cash flow positive in the first quarter of 24 would be fantastic, so if you can achieve that goal. So I just wanted to drill a little bit into the assumptions. I know you expect flattish revenues in the first half of this year, but what sort of revenue run rate do you think would allow you to achieve that goal?

We believe that at 8 million run rate per quarter, we can hit that goal. Scott?

Okay. Thank you. That's helpful. And when I look at the expense items, obviously sales and marketing was way down. And I know there was layoffs recently. I want to hone in. First, is that sales and marketing level of $600,000, is that what we should think about going forward? And second of all, that G&A of $6.5 million, I imagine that's where the bulk of the cuts are going to come to. What should we think about as a G&A once all the cuts and everything has taken effect?

Well, if you look at quarter over quarter, Scott, last year we were at $8.3 million in the first quarter. We were at $6.5 million in G&A expenses in the first quarter of 2023. The marketing expenses stayed roughly flat. We were down about $100,000 quarter over quarter. As those take place, we believe on the personnel costs, we're going to have $500,000 a quarter go against that G&A expense. So that's roughly what we will save in terms of salaries, wages, taxes, and benefits.

Okay, thank you. That's helpful. Just a couple other small questions. Arches were down in the quarter, and if you calculate arches per dock, they were down significantly. How should we think about that number? I mean, I know the business model is always changing and the accounting is changing as well. Just trying to get a sense of how we should think about that number as far as arches, how we should interpret the first quarter 23 results and how we should think about that number going forward.

Well, first of all, I think there's a certain element of the macroeconomic economy that Other companies in the dental space have struggled with some of that and some of the results of that. So there's that that plays into it. There is a little bit of seasonality in Q1 that plays into it. But there was also an event that took place that was a little bit unfortunate towards the middle to later part of Q1 where there was some market confusion over a a product that made similar claims to some of our products out there in the marketplace. This product did not have FDA clearances, did not have research, did not have a lot of things behind it. It was a totally different type of product, but there was some market confusion over that. And frankly, a lot of our providers, until we were able to wrap our minds around that and really address that directly, we just saw and we've seen a little bit of a softening in the sales of our arches from that standpoint. But that seems to have passed. Things have picked up again here, and we're optimistic that we weathered that storm a little bit there, and that that contributed, especially in the latter part of the first quarter and into the second quarter. So we are seeing now, whereas we drive demand through some of these distribution channels that we're talking about that have never been there before, we have new ways of of helping doctors find patients to treat. And it appears to be significant revenue opportunities for the doctors and their new patients. And so we're very optimistic. So it's going to become a point where the old model where we just relied upon dentists to source their own cases through their own practices and to do that, we're taking the bull by the horns and we're driving patients to our very best providers. So we are actively pursuing through our treatment navigator, our airway alliance, and our distribution networks that we've talked about, we're actively working to drive patients into their offices. And that's a very different kind of paradigm shift that that we've, uh, forced, you know, into the marketplace. So, um, as you go forward, I think we'll, we hopefully we'll see those numbers pick back up as some of these other distribution channels, uh, kick in.

Okay, great. Thank you. Final question, uh, Kirk, you know, Brad set a pretty high bar for you of getting to 8 million a quarter. Uh, how do you expect, you know, what are the levers you're going to pull to get to there from here? You know, how much do you get from, from the AFD acquisition? And, you know, is it the DMEs? Just, you know, big picture terms, you know, what are the levers you got to pull to get from here to there? Thank you.

Thank you, Scott. I think that's a great question. And all I can say is, is that, um, There is a huge challenge in the CPAP community and the CPAP world with patient compliance and with patients abandoning their treatment. And when patients abandon CPAP, which 90% of patients who are diagnosed with OSA get CPAP machines. In the first 90 days, a fourth of them will stop using their CPAP and eventually about half are known to stop using their CPAP machines. So there is a huge, huge number of people. It's in the millions of people out there in the United States, Canada, and around the world who have tried CPAP and are intolerant to it. They don't use it. They won't use it. They can't use it for a variety of reasons, some of them psychological, some of them physiological, some of them just preferential. They just hate having it. But what do those people do? Well, we've now unlocked the secret, if you will, to how to access those patients and what to do. We've established some really clear and very, I think, reasonable and market-based distribution agreements with people that know where those patients reside and who they are. And we're going to be going after them. And there's so much of that out there. It's really hard for us to say at this point how many of those patients will come in and convert into vivos therapy. But we and our distributors are very optimistic that that number will far exceed what we've been doing in the past. And we're very optimistic about it. So it's not inconceivable at all for us to hit those numbers or exceed those numbers as we go forward. Now, whether that happens in the fourth quarter of this year, the first quarter of next year, or the timeframes that we've given is hard to say, but as we look at it and we're in the trenches every day with these distributors, we're very optimistic about it and we'll see what happens. I mean, as we've talked before, it's time for this company to put up. And so we're moving every resource we have to make this happen and to demonstrate that we can grow this company. So that's why we're optimistic. So, yeah, it's a high bar, but we're very optimistic about it right now, and that's where we stand today.

Okay, great.

Thank you for taking the questions. You bet. Our next question comes from the line of Lucas Ward with Ascendia and Capital Markets.

Please proceed.

Thank you. Hi, guys, and congratulations on meeting your business goals, on getting closer to your goals. I'm also interested in the revenue aspect. I was wondering if you could quantify the impact of sales through the DME and the DSO channel, like near-term or in a few quarters, just so we can understand, like, how big that really is.

Yeah, so thank you for that. I think on the last call, we've been talking about DSOs now for a year and a half, and what we've learned, and we said in the very beginning that the opportunity with DSOs was huge. There's 40,000 dental offices across the United States that have corporate ownership in these organizations called DSOs. So the opportunity is huge. But these guys are also very cautious and it's a slow boil for that. And that's been exactly what's happened. The opportunity, as we now get into where some of our pilot tests are maturing and feedback is percolating up to the C-suite and these DSOs, we expect to start to see more expansion of that. But it is still going to be a very cautious and rollout and a slow boil, I expect that to be the case for another probably 12 months. At some point, we'll reach a tipping point with these guys where they will all collectively realize the opportunity that's before them in managing sleep, which is multi-billion dollar opportunity for these DSOs. The fact that we now have a product suite with simpler, easier, Better price points for DSO-type customers, patients, I think makes it infinitely easier for us to crack that market. On the DSO front, then, I would say expect it to be, you know, still continue to grow. We're still signing on new relationships. There are innovative new models, such I mentioned Toothpillow. I highlighted that because they're kind of an innovative direct-to-market type DSO or direct-to-consumer type DSO. And I would say that they will continue to contribute. And frankly, if you talk to the guys at Toothpillow, their goals for what the number of children they expect to be able to address in the first year is just off the charts. But they have established a baseline with influencers, social media influencers lined up, famous individuals with children that have been through treatment now and have had tremendous results. We've published a few papers. We're publishing some more on the efficacy of what we're doing with children. So we have a pending FDA clearance on that that we're hoping to get here real soon. So we have a number of things that's going to drive that market. That's the first thing. On the DME front, again, The magnitude of that opportunity is staggering, and it's hard to say just exactly how to quantify that. By the time that we convene our next earnings call, I think we'll have a much clearer picture of what that's going to entail. But when you think about the condition that millions and millions of patients are in who've been diagnosed with sleep apnea, who know they suffer from it, but who are in unable for a variety of reasons to use their CPAP machines, they really don't have any other options. Short of some type of radical surgery or an implant like Inspire or something else, it's very difficult for them to know what to do or how to treat their condition. And vivos represents a huge alternative first line of defense type opportunity. And I think we're creating relationships with payers and we're creating relationships with employers and we're creating relationships with these DME companies that are all going to be in a position to refer patients into vivos providers across the country. The fact that we have a network nationwide, the fact that we now have lower price point products and services, the fact that we have a differentiated technology is all very, very appealing to these groups. And I just think we're kind of at that inflection point where it's hard for us to predict, but we're cautiously optimistic about what we're seeing and the feedback we're getting. And as Scott rightly pointed out, the bar's been set pretty high and we're shooting for it. But I would say that by this time, By the time we report on Q2 and we start talking about what's going on with these new relationships, we'll start to be able to grasp what this is going to mean. But I think it's a definite inflection point for us, and we expect revenue and volume to increase dramatically here as we go into the second half of the year.

Okay. Thanks, Kirk. One more question. You guys have mentioned that the AFD acquisition fills out an important product gap for you guys in terms of having more economical solutions for providers. Could you give us an update on the sales traction of the AFD devices?

Yeah. Yeah, that's going to be an easy one. Those are not yet reflected in any of our financials or returns. You know, we – These products are a little bit technical. They're a very different kind of technology than what we have in our, you know, historically. So what we've had to do is create a whole new training program. And what we do know is that because these products have been used by the advanced facial dentics doctors, they've been used for years and years. And there's there's really several thousand patients that have benefited from the use of these products. So we have a very good grasp of what the products do, how efficacious they are, and now it's time for us to train our doctors, retrain them on certain aspects of how to use products like the pod and the sleep pod and other devices. But these products They're simpler. They require less chair time than our traditional products do. They don't do all the things that our traditional products do, which is an important distinction. But from a doctor's standpoint, they can fill and meet a need. They can fill a gap and meet a need at a very, very cost-effective way with minimal chair time. and very high levels of patient satisfaction. So, as we mentioned, before, the product offering was a little bit binary in that a patient either agreed to an $8,000 to $10,000 treatment plan, or we really didn't have anything to offer. It was really the doctors, if they were going to take the case on, they were going to get paid well for it, or they weren't going to do it. Now, the doctor can say, well, you know, Mrs. Jones, if you're not quite ready for this treatment, we've got several other options for you here that might be more appealing. And while they don't do the same thing that the more expensive treatment does, we can still give you some relief and maybe relief from your migraine headaches, your TMD pain, your congested nasal passages. There's a number of different ways in which the patients can be benefited at a much lower price point. So instead of that patient walking out the door feeling like they couldn't afford the treatment, now they walk out the door with having spent $1,500 to $3,500 and it's affordable and it's Again, it might not do everything, but it's going to get the patient a long way to being better. So we feel very good about that. Our provider network is very excited about this. There's a buzz out there around the pod and what its potential is. We have started some research at some universities with – With the pod, we're in the process of starting that right now, as I mentioned. And so we've got some very exciting things to come on that. But I think it's the ability to offer a very cost-effective treatment protocol or treatment modality that will actually make the difference for our doctors. It gives them something else to do with patients who may not yet be ready to afford or pay for Even with insurance benefits, there's still an out-of-pocket portion there, and it just gives them an alternative. So I think that we're going to see some, and that's rolling out even as we speak. That's being rolled out right now. We finished our training preparations with videos and online training. all of the resource materials that needed to be done and created for that, and now it's being rolled out to our provider network. So, again, Q3, Q4, you're going to start to see the impact of the new product lines more fully realized in Q3 and Q4.

Okay, great. Thank you very much. Thank you.

Okay, ladies and gentlemen. There are no further questions at this time. I'd like to turn the call back over to management for closing remarks.

Well, thank you everyone for being here today. We, as you can probably tell, we feel like this is an exciting time in our history. We truly believe that someday we'll look back and see this particular time as a watershed moment in the history of this company. And we're excited about what the future holds in store. We appreciate all of your support and the patience you've had as we've gotten to this point. We look forward to sharing our continued progress with you in the future. So thank you very much and have a great evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.