INVO Bioscience, Inc. — Form 10-Q summary
Reporting period: Quarter and six months ended June 30, 2022. 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), and its commercialization strategy combines device sales with dedicated INVO Centers. Three centers—in Birmingham, Atlanta and Monterrey—were operating during the period. Management’s claims that IVC can offer comparable outcomes at lower cost than IVF are company beliefs, not financial results reported in this filing.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $146,135 in 2022; $208,472 in 2021 | $308,733 in 2022; $892,995 in 2021 |
| Gross profit / margin | $67,883 / approximately 46% in 2022; $193,877 / approximately 93% in 2021 | $165,520 / approximately 54% in 2022; $815,655 / approximately 91% in 2021 |
| Net loss | $2,801,541 in 2022; $1,817,163 in 2021 | $5,575,853 in 2022; $4,270,632 in 2021 |
| Net loss per share | $0.23 in 2022; $0.17 in 2021 | $0.46 in 2022; $0.42 in 2021 |
| Operating cash used | $3,950,920 in first-half 2022, versus $2,909,137 in first-half 2021 |
Second-quarter revenue included $112,358 of clinic revenue, principally from the consolidated Georgia joint venture. First-half revenue included $218,206 of clinic revenue and $90,527 of product revenue. There was no license revenue in 2022.
At June 30, cash was $1,962,159, down from $5,684,871 at December 31, 2021. Current assets were $2,548,322 and current liabilities $1,279,885, yielding working capital of approximately $1.3 million. Total liabilities were $3,068,448; these included $2,014,173 of operating lease liabilities. The filing states all 2020 convertible notes had been converted or repaid by June 30, 2022. Stockholders’ equity was $3,356,425, versus $7,310,680 at year-end 2021.
First-half investing cash use was $86,792; financing provided $315,000, primarily from common-stock sales. Cash declined by $3,722,712 during the half. The company reported an accumulated deficit of approximately $44.5 million.
Material changes versus prior periods
- Revenue fell approximately 30% year over year in Q2 and 65% in the first half. The Ferring U.S. distribution agreement ended January 31, 2022, removing license revenue; first-half 2021 also included a bulk product order from Ferring.
- Gross margin declined sharply, reflecting the absence of high-margin Ferring license revenue and the addition of INVO Center costs.
- Operating expenses increased: Q2 SG&A rose about 25% to $2.6 million, and first-half SG&A rose about 26% to $5.3 million. R&D also increased, to $190,761 in Q2 and $294,941 in the first half.
- Losses widened, while operating cash use increased. First-half 2021 included substantial non-cash convertible-debt costs and $159,126 of income from forgiveness of the Paycheck Protection Program loan; these items were absent in 2022.
- Shares outstanding were 12,130,298 at June 30 and 12,169,714 at August 15. Options and warrants excluded from diluted loss per share totaled approximately 1.75 million at June 30.
Outlook, risks and unusual items
- No quantified revenue, earnings or cash-flow guidance is provided. Management planned to open additional INVO Centers over the next 12 months, announced plans for Tampa and Kansas City locations, and said it would selectively consider acquiring existing fertility practices.
- Management said it expects continued significant expenses and operating losses while expanding commercialization. It stated additional debt or equity financing may be needed and may not be available on reasonable terms, or at all.
- The 2021 auditor’s report included a going-concern qualification expressing substantial doubt about the company’s ability to continue as a going concern. The filing describes continued losses and cash needs; it does not provide a quantified cash runway.
- The company resumed direct U.S. sales after Ferring’s termination. It anticipated quarterly revenue fluctuations while expanding sales and partnerships.
- A prospective study for extending INVOcell labeling to day-five incubation had been put on hold during the COVID-19 pandemic; a separate retrospective-data 510(k) effort remained active in 2022. Regulatory timing and outcome are uncertain.
- Three centers and joint-venture investments entail start-up and operating costs. The company recorded $189,095 of equity-method joint-venture losses in the first half. It also identified risks involving regulatory approvals, market acceptance, third parties, competition, financing and the pandemic.
- No material legal proceedings were reported in the financial-statement note. Management reported disclosure controls were effective as of June 30, 2022, with no material changes to internal control over financial reporting.
Important facts for investors to verify
- Cash use, financing needs and the company’s ability to maintain operations; the filing does not quantify runway.
- Whether direct U.S. device sales and clinic revenue can replace former Ferring revenue and support improved gross margins.
- Actual operating performance, funding commitments and cash needs of the Atlanta, Alabama and Mexico ventures, and the timing and cost of planned center openings or acquisitions.
- Progress, evidence and regulatory requirements for the day-five labeling effort, including the retrospective-data 510(k) pathway.
- Potential dilution from outstanding options, warrants, equity compensation and future financing; also verify subsequent share-count changes.
- The nature and amount of obligations to affiliates and joint ventures, in addition to the disclosed operating lease liabilities.