INVO Bioscience, Inc. (INVO) - Q2 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2024. INVO Bioscience, Inc. is a healthcare services company focused on expanding access to fertility care through the operation of "INVO Centers" (utilizing the INVOcell device for intravaginal culture) and the acquisition of profitable in vitro fertilization (IVF) clinics. The company completed its first major IVF clinic acquisition, the Wisconsin Fertility Institute (WFI), in August 2023, which now drives the majority of its revenue.
Key Financial Metrics
| Metric | Q2 2024 (3 Months) | YTD 2024 (6 Months) | YTD 2023 (6 Months) |
|---|---|---|---|
| Total Revenue | $1,836,597 | $3,412,883 | $663,927 |
| Net Loss | $(2,245,170) | $(3,841,683) | $(4,791,390) |
| Loss Per Share (Basic/Diluted) | $(0.62) | $(1.25) | $(7.07) |
| Cash and Cash Equivalents | $942,934 (as of June 30, 2024) | - | - |
| Working Capital | $(5,592,735) | - | - |
| Total Liabilities | $16,668,243 | - | - |
| Stockholders' Equity | $1,363,516 | - | - |
Note: Working Capital calculated as Total Current Assets ($2,396,063) minus Total Current Liabilities ($7,988,798).
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 481% in Q2 2024 compared to Q2 2023, and 414% on a year-to-date basis. This growth is primarily attributed to the consolidation of the Wisconsin Fertility Institute (WFI) acquired in August 2023.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses increased in Q2 2024 due to a $1.0 million increase in non-cash professional services expenses, partially offset by reduced personnel costs. Stock-based compensation was $1.2 million in Q2 2024 versus $0.4 million in Q2 2023.
- Asset Disposal: The company recognized a $50,000 gain on the disposal of fixed assets in Q2 2024 related to the termination of the Tampa, Florida INVO Center project. On a YTD basis, this resulted in a net loss of $511,663 on disposal of assets, offset by a $94,551 gain on lease termination.
- Debt Restructuring: The company recognized a $40,491 loss on debt extinguishment in Q2 2024 following the extension and repricing of Q1 2023 Convertible Notes.
Guidance, Outlook, and Risks
- Merger with NAYA Biosciences: INVO is pursuing a merger with NAYA Biosciences, Inc. The agreement requires an "Interim PIPE" (private investment in public equity) of at least $2.0 million in Series A Preferred Stock. As of the filing date, NAYA has purchased $1.5 million of the required stock. The End Date for the merger was extended to June 30, 2024, and the company is in negotiations to further amend the agreement as funding levels were not fully met.
- Liquidity and Going Concern: The company reported a net loss of $3.8 million for the six months ended June 30, 2024, and an accumulated deficit of $61.9 million. The independent auditor previously expressed substantial doubt about the company's ability to continue as a going concern. Management states it will need to raise additional debt or equity funding to meet liquidity needs and execute its strategy.
- Nasdaq Compliance: INVO received a notice from Nasdaq regarding non-compliance with the minimum stockholders' equity requirement ($2.5 million). The company appealed and was granted an extension until October 14, 2024, to demonstrate compliance with initial listing standards, contingent on the proposed merger.
- Strategic Shift: The company is prioritizing the acquisition of profitable IVF clinics over new-build INVO Centers. The Mexico JV has halted services due to the resignation of the primary physician, and the investment was impaired to $0 in 2023.
Investor Verification Checklist
- Merger Status: Verify the current status of the NAYA merger negotiations and whether the remaining funding requirements for the Interim PIPE have been secured.
- Nasdaq Listing: Monitor the company's progress in regaining compliance with Nasdaq listing rules by the October 14, 2024 deadline to avoid delisting.
- Debt Obligations: Review the terms of the various convertible notes, demand notes, and merchant cash advances, noting the high interest rates and potential for dilution upon conversion.
- Warrant Repricing: Note the reduction of the exercise price for August 2023 Warrants from $2.85 to $1.20, which resulted in a $250,635 deemed dividend and potential future dilution.
- WFI Integration: Confirm the operational stability of the Wisconsin Fertility Institute following the transfer of the medical practice ownership to a new owner in June 2024.