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Vivos (RDGL) Slays the Dragon
Initially Posted: February 3, 2019 2:30 p.m. PST   

As most of you know, I have been a Corporate Advisor to Vivos inc. (RDGL) since October. When I began my service to the company, it was trying to claw its way out of a mess. In fact, it was probably days away from being bankrupt. That would have been a shame, because RDGL really does have a viable treatment for cancerous tumors. That has already been proven in at least two dogs and several cats.

Unfortunately, the company's future had been mortgaged through toxic debt. Vivos management doesn't like to point fingers (and we had quite an argument over this), but I will. The toxic debt was piled onto the company by former CEO, James Katzaroff, almost exclusively to pay the salaries of his wife and himself, as well as take a bunch of pointless and expensive trips to places like Russia, albeit purportedly for the company's benefit, but to no avail. The Katzaroffs had taken as much as a million dollars out of Vivos over the final few years of Jim's tenure as CEO. In contrast, current CEO, Dr. Mike Korenko, has deferred his salary until the company is viable, and in fact, has paid a lot of the company's bills with his own credit cards.

Under Jim Katzaroff, the company made very little progress while having its viability placed into jeopardy, all in the name of a paycheck. Katzaroff could have raised money under more responsible terms, but taking on toxic debt was easier and the simpler route to ensure he and his wife got paid. Toxic borrowing is almost always for the benefit of management, so that they are ensured that their pockets are lined--under the guise of salary and usually for doing nothing--without regard to the retail shareholder.

In short, Katzaroff was in breach of his fiduciary duties to Vivos.

For those that don't understand toxic debt, it is effectively a loan that is collateralized by the company's stock. This in itself is not necessarily an issue, however under a toxic (or death spiral) loan, the terms of the loan conversion are not fixed, but at a variable discount to the share price. So when a loan becomes due, the toxic lender converts a certain amount of his debt into stock which he promptly dumps into the market, almost always causing the share price to take a significant hit. Then he converts more of his loan into more stock--now at a cheaper price--immediately dumps it, and the share price takes another hit. And so on and so on. This is why it is called death spiral financing, because the share price will get killed into oblivion as an enormous amount of stock is created to satisfy the loan. All the while, the remaining principal continues to accrue interest.

Now consider that Katzaroff subjected Vivos to not one, but seven toxic lenders concurrently, having borrowed well over a million dollars, and with each lender fighting the other to dump stock faster. This is why the share price took a hit every time Vivos issued a good press release. Interest in Vivos was generated by the release, but the toxic lenders would take advantage of the increased buying volume by dumping more stock. It was like trying to climb out of a manhole with no ladder.

Why toxic lending is legal is beyond me, as it is usurious and will hurt the retail shareholder every time. But that is a topic for another time.

At the end of last summer, things were coming to a head for Vivos. Stuck under the thumb of the toxic lenders and unable to fund the company due to a spiraling share price, the company made a series of bold moves. One of them was hiring me as Corporate Advisor. They almost didn't. My aggressive, no nonsense style is very much in contrast to the demeanor of current management. By way of example, when Jim Katzaroff was fired, management chose to quietly come to terms through a Separation Agreement, where I would have sued the bastard for breach of fiduciary duty and fraud. Yes fraud, because the directors' signatures on Katzaroff's employment agreement were forged and the minutes of the directors meeting which were design to approve the agreement were concocted, i.e. it never happened. Anyway, when I came on board, it was essentially under two conditions: (1) things would be done the right way; and (2) the benefit of the shareholders would be a priority. Nobody is going to manipulate this company during my tenure.

Last autumn, Vivos was able to negotiate its way out from the remaining toxic debt, by converting the balance to common shares @ $.004/share. There was to be no more variable share conversion. This created about 1.2 billion new shares in one shot, and the toxic lenders still had about 200 million previously converted shares that were yet unsold. Under this Path Forward Agreement, the toxic lenders would be limited to selling no more than 15% of their holdings in any one month, whenever the share price was under $.01. This is why there was increased selling at the beginning of January and on Friday, February 1st. The toxic lenders were getting their 15% allotment onto the street.

The other critical goal that Vivos was able to accomplish last autumn, was the raising of about $750,000 in equity financing to get the company through to the end of the year. This was required to bring relief to the outstanding accounts payable and fund the treatment of the next couple of patients, as well as bring the Vista clinic online. Developing a treatment for a disease is an expensive endeavor, and the cost of materials is astronomical. The equity financing was accomplished @ $.005/share, creating 150 million new shares, and there is a restriction on trading of those share for a period of one year.

If not for the negotiated settlement of the debt of the toxic lenders and the raising of funds, Vivos would not be in business today. This is a fact.  Vivos has indeed slayed the dragon.

So now we come to the reverse split.

Right now, there is approximately 2 billion shares issued and outstanding on a fully diluted basis. What's worse is that there is still about 500 million shares in the hands of the toxic lenders just waiting to be dumped. That only adds to the pressure on the share price. It is not the business model of toxic lenders to invest in companies, but to take advantage of those in dire straits and flip a quick profit. It is a testament to the accomplishments and future prospects of Vivos that the toxic lenders were prepared to negotiate a set price conversion of their debt to stock. This is unheard of within the penny stock market.

Vivos needs $5 million this year to continue development of RadioGel/IsoPet, open new clinics, and so on. To raise this money under the current share structure would require the issuance of at least 3 billion (restricted) new shares. Probably more. And then the share price would never get anywhere.

In order to get funding under more beneficial terms, Vivos needs to reduce the liquidity of the stock. This is going to require a reverse split. We spent weeks discussing this, as nobody wanted to subject the loyal retail shareholders (we don't care about flippers), to a reverse split. Then we agreed to the one for eight ratio because it would enable the shareholders to maintain a holding in the company, while reducing the selling pressure. In this way, the toxic lenders would be left with something over 60 million shares to sell, while limiting their selling to less than 10 million shares per month, a number that is more easily absorbed into the market.

Everyone knows that I hate reverse splits. But this is one that I believe will ultimately benefit the shareholders, because I believe that the share price will be better able to rise in the near term, and because Vivos will be able to obtain more equity funding under better terms. This is not a reverse split that wipes out the shareholders like many penny stock scams execute for the singular purpose of defrauding the public under a wash-rinse-repeat scenario (see my previous posts on CXBS).

This is a reverse split that keeps the shareholders well-being in mind. And for the record, the funders that provided the approximately $750,000 Vivos needed last autumn in exchange for stock that is restricted for one year, all pre-approved the reverse split. I insisted that we receive their approval because I felt it was unfair not to give them a voice on this course of action just three months after we took their money.

Issuing shares for financing is the cost of doing business. There isn't a public company out there, including the big companies, that doesn't dilute their stock in the name of progress, sometimes for acqusisitions, sometimes as compensation. This is why the A/S was not reduced by the same ratio as the O/S. At the end of the day, hopefully, the shareholder is left with a smaller piece of a bigger pie. As for finding development partners to take on some of the cost for a piece of ownership, that is indeed in the plan, once RadioGel/IsoPet have crossed certain thresholds.

When will the reverse split occur? Probably within a month. We have not filed the required paperwork yet, but felt that shareholders and pending shareholders had the right to know our plans as soon as they had been resolved upon by management. That is why we issued the press release on Friday. When I came on board, I insisted on complete transparency, and management agrees. At any rate, I expect that the Informational Filing will be completed in the coming week.

A word about the third dog which was recently treated with IsoPet. We have been getting a lot of questions about her status. We have not discussed her progress because the Doctors at the University of Missouri that have been performing the procedures have a policy regarding publicity that we have been admonished to follow (I think the words "or else" were implied). Therefore, Vivos has elected to follow their guidelines as to the release of information regarding a patient. We will release a progress report as soon as we can. All that having been said, I will remind you that as was stated in the December 4th press release, the patient is in an advanced state of disease and has a half pound tumor. This is outside of the scope of IsoPet's targeted patient qualifications. However, we agreed to treat her for humanitarian reasons and to discover any residual effect on metastasized cells in her body. Her prognosis was poor prior to her treatment.

And on a final note, a lot of people have been referring to RadioGel/IsoPet as a cure for cancer. This is simply not the case. It is a treatment for cancerous tumors, much like radiation is. In fact, RadioGel/IsoPet is a delivery system for radioactive isotopes to radiate the tumor much the same way that conventional therapies do, but without the damage to healthy cells. So far, RadioGel/IsoPet has been proven to be effective in the killing of treated cancerous tumors. However, much as in conventional radiation therapies, it does not mean that tumors will not reoccur.

Enjoy the Super Bowl.

Note: I wrote this blog post on my own accord and without the consent of Vivos management. While the facts are irrefutable, the company prefers to issue non-combatitive press releases, while I prefer to inform the public of the facts.

~ George