8-K: Vivos Therapeutics Secures $5M Convertible Note

Vivos Therapeutics obtained a convertible promissory note for up to $5 million from V-Co Investors 3 LLC to support a proposed $5.5 million equity financing.

Summary

• Vivos Therapeutics, Inc. (VVOS) entered into an unsecured convertible promissory note with V-Co Investors 3 LLC for a maximum base principal amount of up to $5,000,000.
• The note includes a 10% original issuance discount (OID) as a financing fee, making the maximum principal amount, inclusive of OID, up to $5,500,000.
• An initial $900,000 was funded on January 15, 2026, with an additional $90,000 OID, totaling $990,000 in principal.
• The purpose of this note is to provide short-term advanced funding for a proposed equity financing of up to $5,500,000 (the "Subsequent Financing").
• The Subsequent Financing is expected to be completed no later than February 16, 2026 (the "Outside Date").
• The note does not bear interest unless an Event of Default occurs, in which case interest accrues at a simple rate of 15% per annum.
• Upon completion of the Subsequent Financing prior to the Outside Date, the note will automatically convert dollar-for-dollar into the equity instruments issued in that financing.
• V-Co Investors 3 LLC is an affiliate of New Seneca Partners Inc., an existing private equity investor in, and advisor to, the Company.
• The proceeds from the loan are to be used solely for general working capital purposes.

Sentiment

Score: 6

Explanation: The filing indicates a proactive step to secure bridge funding and pursue a larger equity financing, which is positive for liquidity. However, the 10% OID and 15% default interest rate highlight the cost of capital and potential risks if the subsequent financing is delayed or fails. The reliance on a future event (Subsequent Financing) introduces uncertainty.

Positives

• Secured up to $5,000,000 in short-term advanced funding, providing immediate capital for general working capital.
• The funding supports a larger proposed equity financing of up to $5,500,000, indicating potential for further capital infusion.
• The note automatically converts into equity upon successful completion of the Subsequent Financing, simplifying the capital structure post-financing.
• The lender, V-Co Investors 3 LLC, is an affiliate of an existing private equity investor and advisor, New Seneca Partners Inc., suggesting continued support from current stakeholders.

Negatives

• The note carries a 10% original issuance discount (OID), effectively increasing the cost of borrowing.
• Interest accrues at a high rate of 15% per annum upon an Event of Default, which could significantly increase liabilities if financial difficulties arise.
• The company is relying on a "proposed equity financing" to convert the note, and failure to complete this financing by the Outside Date (February 16, 2026) could leave the company with a demand note.
• The note is "unsecured," meaning the lender does not have a claim on specific assets in case of default, but it also means the company's general assets are exposed.

Risks

• Failure to complete Subsequent Financing: If the proposed equity financing of up to $5,500,000 is not completed by February 16, 2026, the note will not automatically convert, and the principal and any accrued interest become due on demand by the Lender.
• Event of Default: Failure to pay principal/interest on demand, material breach of covenants, or bankruptcy/insolvency proceedings could trigger a 15% annual interest rate and make all outstanding obligations immediately due and payable.
• High Cost of Bridge Financing: The 10% original issuance discount represents a significant upfront cost for the bridge funding.
• Unsecured Obligation: The note is unsecured, meaning the company's general assets are at risk if default occurs.

Future Outlook

The company expects to complete a proposed equity financing of up to $5,500,000 by February 16, 2026, which would result in the automatic conversion of the convertible promissory note into equity instruments. This indicates a strategic move towards strengthening the company's equity base.

Management Comments

• The purpose of this Note is to provide short-term advanced funding to the Company in connection with a proposed equity financing of the Company totaling up to $5,500,000.
• The proceeds of the loan from Lender evidenced by this Note shall be used solely for general working capital purposes.

Industry Context

This bridge financing suggests Vivos Therapeutics is actively seeking to shore up its capital structure, potentially in anticipation of growth initiatives or to address ongoing operational needs. In the medical device/therapeutics industry, securing financing, especially convertible debt, is a common strategy for companies that may not yet be consistently profitable or are in growth phases, allowing them to defer immediate dilution while working towards a larger equity raise. The involvement of an existing private equity investor (New Seneca Partners Inc. affiliate) indicates continued confidence from current stakeholders.

Comparison to Industry Standards

• Convertible notes are a common financing tool for early-stage or growth companies in the therapeutics sector, similar to how many biotech startups secure funding before larger Series A/B rounds.
• A 10% original issuance discount is on the higher side for bridge financing, reflecting the perceived risk or the urgency of the company's need for capital, though not uncommon for companies facing capital constraints.
• The 15% default interest rate is standard for high-risk debt instruments, comparable to rates seen in distressed debt or venture debt for companies with significant operational challenges.
• The structure, where the note automatically converts into the subsequent equity financing, is a typical feature designed to streamline the capital structure and provide a clear exit for the bridge lender.

Related Party Transactions

• V-Co Investors 3 LLC, the lender, is an affiliate of New Seneca Partners Inc., which is an existing private equity investor in, and advisor to, Vivos Therapeutics, Inc.

Stakeholder Impact

• Shareholders: Potential for future dilution if the convertible note converts into equity as part of the Subsequent Financing. The successful completion of the equity financing could provide necessary capital for growth, but failure could lead to increased debt burden.
• Creditors: The company is taking on additional unsecured debt, which could impact its overall credit profile.
• Employees/Operations: The proceeds are for general working capital, which supports ongoing operations and stability.

Next Steps

• Complete the proposed equity financing of up to $5,500,000 by February 16, 2026.
• Lender to advance additional funds up to the Maximum Principal Amount through the Outside Date.
• Automatic conversion of the note into equity instruments upon completion of the Subsequent Financing.

Key Dates

Recommendation

The company is securing bridge financing to support a larger, proposed equity raise. While securing capital is positive for liquidity and operations, the terms (10% OID, 15% default interest) suggest a higher cost of capital and potential financial strain. The success of the investment hinges on the completion of the "Subsequent Financing" by February 16, 2026. Until there is more clarity on the terms and success of this larger equity raise, a "hold" recommendation is appropriate. Investors should monitor the progress of the Subsequent Financing and its impact on dilution and the company's long-term financial health.

Keywords

Vivos Therapeutics, VVOS, Convertible Promissory Note, Equity Financing, Bridge Funding, Capital Raise, SEC Filing, 8-K, V-Co Investors, New Seneca Partners, Working Capital, Debt Financing, NASDAQ