INVO Bioscience, Inc. - 8-K Filing Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by INVO Bioscience, Inc. (trading as INVO) on October 5, 2023, reporting events that occurred on September 29, 2023. The filing details the entry into a material definitive agreement involving a new revenue-based loan facility.
Key Financial Metrics and Transaction Details
- Loan Amount: $1,500,000 gross advance from Decathlon Alpha V LP.
- Maturity Date: June 29, 2028.
- Repayment Structure: Fixed monthly installments with an interest factor ranging from 35% to 100% of the principal, depending on the speed of repayment (35% if repaid within 6 months; 100% if repaid after 30 months).
- Security Interest: Senior secured first-priority lien on substantially all assets of the Company and its subsidiaries.
- Use of Proceeds: $300,000 used to repay a portion of a Standard Merchant Cash Advance with Cedar Advance LLC; $7,500 for transaction costs; remaining proceeds for working capital and general corporate purposes.
Material Changes and Agreements
The Company entered into a Revenue Loan and Security Agreement, creating a direct financial obligation. Key structural changes include:
- Subordination: Existing lenders (Cedar Advance LLC) and demand note holders (including CEO Steven Shum, CFO Andrea Goren, and related entity JAG Multi Investments LLC) have subordinated their interests to the new Lender.
- Guarantees: Wholly-owned subsidiaries (Bio X Cell, Inc., INVO Centers, LLC, Wood Violet Fertility LLC, Fertility Labs of Wisconsin LLC, and Orange Blossom Fertility LLC) jointly and severally guaranteed the loan.
- Covenants: The agreement imposes restrictive covenants limiting additional indebtedness, asset transfers, new liens, creation of subsidiaries, and related party transactions.
Outlook, Risks, and Contingencies
The filing outlines specific financial penalties for non-compliance or default:
- Payment Event of Default: Increases the applicable minimum interest multiple by 0.015 on the payoff date.
- Indebtedness Covenant Breach: Triggers an increase in the minimum interest multiple by 0.10 and/or a service fee equal to 50% of the principal amount of unauthorized indebtedness incurred.
- Prepayment: The loan may be prepaid without penalty at any time.
Investor Verification Checklist
- Verify the exact repayment schedule and the specific interest factor applicable to the Company's projected cash flow timeline.
- Confirm the total outstanding balance of the subordinated debt held by Cedar Advance LLC and the demand note holders to assess total leverage.
- Review the full text of the Loan Agreement (Exhibit 10.1) for specific definitions of "Payment Event of Default" and "unauthorized indebtedness."
- Assess the impact of the new senior lien on the Company's ability to secure future financing or sell assets.