INVO Bioscience, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated March 20, 2023 (reporting events from March 16, 2023), details INVO Bioscience, Inc.'s entry into material definitive agreements to acquire the Wisconsin Fertility Institute. The transaction involves two separate agreements: an Asset Purchase Agreement (APA) for the medical practice and a Membership Interest Purchase Agreement (MIPA) for the laboratory services company.
Key Financial Metrics
Acquisition Price: The combined purchase price for the Clinic is $10 million.
Target Financial Performance (Wisconsin Fertility Institute):
- 2021 Revenue: Approximately $5.7 million.
- 2021 Net Income: Approximately $2.3 million.
- 2020 Revenue: Approximately $4.5 million.
- 2020 Net Income: Approximately $1.3 million.
Payment Structure: The $10 million price is payable in four installments of $2.5 million each. Sellers have the option to receive a portion of the final three installments in INVO common stock based on specific share counts and valuations outlined in the agreements.
INVO Financials: The filing text does not provide a clear value for INVO Bioscience's own revenue, profit, cash flow, or debt levels; it focuses exclusively on the target's historical financials.
Material Changes and Transaction Details
The primary material change is the strategic expansion into Wisconsin through the acquisition of two entities:
- WFRSA (Medical Practice): INVO is purchasing non-medical assets and will enter a management services agreement to outsource non-medical activities. Medical assets like patient records and permits are excluded from the purchase.
- FLOW (Laboratory Services): INVO is acquiring 100% of the membership interests.
The transaction includes a five-year non-compete and non-solicitation provision for the sellers. Closing is expected in the second calendar quarter of 2023, subject to standard conditions including no material adverse effect.
Outlook, Risks, and Contingencies
Outlook: Management expects to close the transaction in Q2 2023. The deal includes a mechanism for IVF Science, LLC to potentially exchange its interest in FLOW for an equivalent interest in the Buyer (Wood Violet Fertility LLC) rather than receiving cash, subject to negotiation.
Risks and Contingencies:
- Closing Conditions: The agreements are contingent on the performance of obligations and the absence of a material adverse effect.
- Price Adjustments: Both agreements contain post-closing purchase price adjustments based on working capital, debt, and other metrics, which could alter the final consideration.
- Holdbacks: A portion of the purchase price is held back ($280,000 for WFRSA and $70,000 for FLOW) to cover potential adjustments.
Investor Verification Checklist
- Verify the final closing date and whether the transaction closes in Q2 2023 as expected.
- Review the audited financial statements (Exhibit 99.1) and unaudited statements (Exhibit 99.2) for the target entities to confirm the $5.7M revenue and $2.3M net income figures.
- Monitor the election by sellers to receive cash versus INVO common stock for the deferred payments, which will impact INVO's share count and dilution.
- Confirm the outcome of the potential exchange transaction for IVF Science, LLC regarding its interest in FLOW.
- Assess the impact of the post-closing purchase price adjustments on the total acquisition cost.