INVO Bioscience, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing was signed April 16, 2024. Although the request identifies 2023 Q4, the filing reports annual results; it does not provide a clear standalone fourth-quarter financial summary.
Business context
INVO is shifting from a medical-device-centered business toward fertility services, combining INVO Centers using its INVOcell intravaginal culture procedure, sales and distribution of INVOcell, and acquisitions of IVF clinics. It acquired Wisconsin Fertility Institute (WFI) on August 10, 2023; WFI’s results are included from that date. The company also reported three operational INVO Centers in North America.
Key financial results
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $3.02 million | $0.82 million |
| Cost of revenue | $1.93 million | $0.85 million |
| Gross profit / (loss) | $1.09 million; approximately 36% gross margin | $(0.03) million; approximately (3)% gross margin |
| Operating expenses | $9.79 million | $11.45 million |
| Operating loss | $(6.77) million | $(10.63) million |
| Net loss | $(8.03) million | $(10.89) million |
| Cash used in operating activities | $(4.76) million | $(6.60) million |
| Cash used in investing activities | $(2.49) million | $(0.08) million |
| Cash provided by financing activities | $7.39 million | $1.09 million |
WFI and the consolidated Georgia joint venture generated $2.86 million of clinic revenue in 2023; product revenue was $158,000. The revenue increase of approximately 267% was primarily attributable to WFI. SG&A fell 25% to $7.49 million, while R&D declined to $166,000 after completion of the FDA label-expansion work. Interest expense rose to $926,000, principally due to financing costs, debt discounts and interest on convertible notes.
At year-end, cash was $232,424, total current assets were $1.26 million, and current liabilities were $8.22 million, implying negative working capital of approximately $6.96 million. Stockholders’ equity was $893,000, compared with a deficit of $978,000 a year earlier. The balance sheet reported total liabilities of $19.99 million, including $5.92 million of lease liabilities and $7.50 million of remaining WFI acquisition payments. Notes payable, net of discounts, totaled $2.76 million.
Material changes and unusual items
- WFI was acquired for a stated combined purchase price of $10 million: $2.5 million due at closing and $7.5 million in three annual installments. Sellers may elect to receive some or all of the latter installments in common stock. The remaining acquisition payments are secured by liens on acquired assets.
- The company’s NAYA investment received in the 2023 share exchange was recorded at $2.172 million, not the $6 million value cited in the transaction, after management concluded it could not support the higher valuation. The filing also recorded a $89,794 impairment of the Mexico joint-venture investment and a $163,278 loss on debt extinguishment.
- Net loss improved by approximately $2.86 million year over year, while operating cash use declined by approximately $1.85 million. The company nevertheless remained loss-making and dependent on external financing.
- The 2023 cash-flow statement reports $7.39 million of financing inflows, including net common-stock proceeds and note proceeds. The August 2023 offering raised approximately $4 million gross, and its proceeds funded WFI’s initial payment, a $1 million Armistice fee, debt repayment and working capital.
Outlook, financing and principal risks
Management plans to grow WFI and pursue additional established IVF-clinic acquisitions, while continuing to develop INVO Centers and sell INVOcell. No specific revenue, earnings or cash-flow guidance is provided. Management says additional debt or equity funding will be needed until operations generate sufficient cash; it cautions financing may not be available on acceptable terms.
The independent auditor included a going-concern qualification, citing operating losses and a capital deficiency and stating that substantial doubt exists about the company’s ability to continue as a going concern. The company reported an accumulated deficit of $57.8 million and stated its year-end cash was insufficient to fund operations for the next 12 months.
The proposed NAYA merger remained subject to closing conditions and was extended to April 30, 2024. The amended terms called for at least $2 million of interim preferred-stock funding, plus any additional amount agreed to support operations and past-due payables. By the filing date, NAYA had purchased approximately $806,000, including $500,000 in January and $306,000 in April. Merger completion, funding, dilution, governance changes and continued Nasdaq listing are material uncertainties.
Other subsequent financing disclosures include a future-receipts arrangement that provided $225,000 net in February 2024 in exchange for $13,797 weekly payments until repaid; a Triton agreement for up to $850,000 from common-stock sales at $0.85 per share, with 75,000 shares purchased and 185,000 returned after the stock traded below the purchase price; and an April 2024 FirstFire transaction involving $250,000 purchase proceeds, a $275,000 principal convertible note bearing 12% interest, and warrants. These transactions post-date year-end and are not included in 2023 results.
INVO regained Nasdaq stockholders’ equity compliance in November 2023 but is subject to a one-year panel monitor; another equity-rule deficiency during that period could result in a delisting determination. Additional risks include the $7.5 million WFI installments, potential dilution from equity and convertible financing, thin trading, clinic integration and execution, regulatory and reimbursement uncertainty, and privacy/cybersecurity exposure. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Current liquidity, cash burn, overdue payables, and the availability and terms of funding after April 16, 2024.
- Status and final terms of the NAYA merger, required interim and closing financing, and any effects on ownership, voting power or Nasdaq listing.
- Funding plan and payment schedule for the remaining $7.5 million WFI acquisition consideration, including any stock-payment elections or security interests.
- WFI’s post-acquisition revenue, profitability and cash contribution, and the performance of the Alabama, Georgia and Mexico operations.
- Fully diluted share count and potential dilution from preferred stock, outstanding warrants, convertible notes and subsequent financing agreements. The filing reports 2,743,031 common shares outstanding on April 16, 2024, versus 2,492,531 at December 31, 2023.