INVO Bioscience, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. The filing identifies the registrant as INVO Bioscience, Inc.
Business context
INVO is a commercial-stage fertility company. Its INVOcell device enables intravaginal culture (IVC), an alternative to conventional IVF. The company is shifting from primarily device sales toward fertility services, with three North American INVO Centers operating, clinic partnerships, and a strategy to acquire IVF clinics. The U.S. distribution agreement with Ferring ended January 31, 2022.
Financial results and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $0.82 million | $4.16 million |
| Gross profit / margin | $0.49 million / 60% | $4.02 million / 97% |
| Operating expenses | $11.12 million | $9.23 million |
| Operating loss | $(10.63) million | $(5.22) million |
| Net loss | $(10.89) million; $(0.90) per share | $(6.65) million; $(0.63) per share |
| Cash used in operating activities | $6.60 million | $6.03 million |
| Cash at year-end | $90,135 | $5.68 million |
| Working capital | $(2.8) million | $5.1 million |
| Stockholders’ equity (deficit) | $(0.98) million | $7.31 million |
Revenue fell about 80%, primarily because 2021 included $3.57 million of Ferring license revenue recognized following termination of that agreement. Product revenue was $0.21 million versus $0.54 million; clinic revenue increased to $0.61 million from $0.04 million. Excluding Ferring, management reported revenue increased from approximately $0.6 million to $0.8 million. Gross margin declined as the revenue mix shifted from high-margin license revenue to clinic services.
SG&A rose 17% to $10.57 million; R&D increased to $0.54 million from $0.22 million, largely related to FDA work on a proposed five-day incubation label expansion. Interest expense fell to $0.06 million from $1.27 million, mainly due to lower non-cash debt discount and issuance-cost amortization. The balance sheet reported $0.76 million of notes payable, net, including related-party notes; operating lease liabilities totaled approximately $1.90 million.
Material changes, outlook and risks
- Management reported substantial doubt about the company’s ability to continue as a going concern. The company had an accumulated deficit of approximately $49.8 million, and stated that year-end cash was not sufficient for the next 12 months or to fund its planned operations and acquisition strategy. Additional financing is needed and may not be available on acceptable terms.
- Management plans to open more INVO Centers, pursue additional clinic acquisitions, and expand INVOcell distribution. It described Wisconsin Fertility Institute as a potential acquisition expected to add revenue and profit, but did not provide a quantified forecast or guarantee of closing or performance.
- In March 2023, the company signed agreements to acquire Wisconsin Fertility for $10 million, payable in four $2.5 million installments; it disclosed that it had not secured sufficient funds for the initial payment. Sellers may elect stock for later installments at specified prices.
- Post-year-end financing included $410,000 of convertible notes in January and March 2023 and $500,000 principal of February convertible debentures sold for $450,000. A March 2023 registered direct offering raised approximately $3 million gross and included shares and warrants; exercise of all March warrants could yield approximately $3.5 million additional gross proceeds. These financings carry potential dilution. The company also obtained a conditional equity purchase facility of up to $10 million, with share purchase pricing tied to market prices.
- Nasdaq had notified the company of deficiencies in stockholders’ equity and minimum bid price. The equity-compliance extension ran to May 22, 2023; the bid-price compliance period ran to July 10, 2023. Delisting remained a risk if deficiencies were not cured.
- Other principal risks include continuing losses and cash burn, reliance on external financing, execution and integration risks for acquisitions and joint ventures, competition, regulatory and reimbursement uncertainty, dependence on third-party manufacturing, and possible dilution. The company reported no material legal proceedings.
- The auditor issued an unqualified opinion on the financial statements but included a going-concern explanatory paragraph. Management reported disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal control effectiveness.
Important facts for investors to verify
- Current cash, cash runway, debt balances and repayment status after the reported 2023 financings and debenture prepayments.
- Whether Nasdaq equity and minimum-bid-price deficiencies were cured, and whether the listing remains in good standing.
- Whether the Wisconsin Fertility acquisition closed, how it was financed, and the remaining installment obligations and related security interests.
- Actual clinic-level revenue, procedure volumes, margins, and cash needs at the three operating INVO Centers and joint ventures.
- Potential share issuance and dilution from convertible securities, warrants, the equity purchase facility, and acquisition consideration.
- Progress and regulatory outcome of the proposed five-day INVOcell label expansion.