INVO Bioscience, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The filing identifies the registrant as INVO Bioscience, Inc. The company operates fertility clinics, sells and distributes its INVOcell device, and is shifting its focus toward clinic-based fertility services and acquisitions. Results include Wisconsin Fertility Institute (WFI), acquired in August 2023.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $1.576 million | $348,025 |
| Clinic revenue | $1.537 million | $297,381 |
| Product revenue | $39,087 | $50,644 |
| Cost of revenue | $850,234 | $231,005 |
| Gross profit / margin | $726,052 / 46.1% | $117,020 / 33.6% |
| Operating expenses | $2.523 million | $2.654 million |
| Operating loss | $(946,374) | $(2.306) million |
| Net loss | $(1.597) million | $(2.551) million |
| Basic and diluted loss per share | $(0.42) | $(4.10) |
| Cash used in operating activities | $(260,557) | $(1.148) million |
Revenue increased approximately 353%, primarily because of WFI. Selling, general and administrative expense declined 38% to $1.441 million, mainly reflecting lower personnel costs. The reported net loss included a $561,663 loss on disposal of fixed assets related to the Tampa clinic project and a $94,551 gain on lease termination. Interest expense was $181,295.
Financial position and liquidity
- Cash was $475,125 at March 31, 2024, versus $232,424 at year-end 2023. Cash increased during the quarter by $242,701, supported by $527,366 of financing cash flow, including $500,000 from preferred stock and $225,000 of note proceeds, partly offset by principal payments.
- Current assets were $1.725 million and current liabilities were $8.956 million, resulting in negative working capital of approximately $7.2 million. Total liabilities were $18.308 million.
- Stockholders’ equity was only $10,155, down from $892,825 at December 31, 2023; accumulated deficit was $59.415 million.
- Notes payable, net, totaled $2.889 million. This includes $880,000 of related-party demand notes, which the filing says are callable, and a $410,000 convertible note balance. Lease liabilities were $3.491 million. WFI acquisition payments remaining totaled $7.5 million, split between $2.5 million current and $5.0 million long-term.
- Management says the company depends on debt and equity financing until it generates positive operating cash flow. The 2023 auditor’s report expressed substantial doubt about the company’s ability to continue as a going concern; the filing says losses and funding needs remain significant.
Changes, outlook, and significant risks
- Management intends to grow WFI and pursue additional acquisitions of established, profitable U.S. fertility clinics. It expects to prioritize acquisitions in the near term while continuing to operate its Alabama and Georgia INVO Centers and sell INVOcell. No quantified revenue or earnings guidance is provided.
- Management reports that efforts at the Mexico clinic are limited following the departure of its primary physician; services could be reduced or halted. The Mexico investment had been impaired to zero in 2023.
- The company’s planned merger with NAYA remained pending. The merger agreement’s outside date was extended to June 30, 2024. Closing is conditional on required approvals, continued Nasdaq listing, and additional preferred-stock funding, among other conditions. As of the filing date, NAYA had purchased $906,000 of preferred stock; further funding was scheduled, but completion and merger closing were not assured.
- After quarter-end, Nasdaq notified the company that it did not meet the $2.5 million minimum stockholders’ equity requirement. The company appealed, and a hearing was scheduled for June 6, 2024; the shares continued trading while the appeal was pending. Delisting remained a risk.
- Other subsequent financing included a FirstFire transaction dated April 5, 2024: $250,000 purchase price for a $275,000 convertible note and warrants, with restrictive terms, potential dilution, and an exchange cap pending stockholder approval. The company also reported April warrant exercises that raised $968,400 after reducing the August 2023 warrant exercise price to $1.20.
- The Tampa lease was assigned on April 19 for $475,000; $356,547 was used for buildout and accrued rent, with the balance intended for working capital. This followed the quarter’s fixed-asset disposal loss and lease-termination gain.
- Management identified risks including the need for additional capital, financing availability and terms, acquisition execution, market acceptance, regulatory requirements, third-party reliance, and the uncertain merger and Nasdaq listing outcomes. Management concluded disclosure controls were effective at March 31, 2024; no material change in internal control over financial reporting was reported.
Key investor verification points
- Confirm current cash runway, weekly obligations under the future-receipts financing, and the availability and terms of any additional funding.
- Track Nasdaq’s decision on the equity-compliance appeal and whether the company maintains listing requirements.
- Verify completion of scheduled NAYA preferred-stock purchases, satisfaction of merger conditions, and whether the merger closed by its extended deadline.
- Assess WFI’s ongoing revenue, profitability, cash generation, and the company’s ability to fund the remaining $7.5 million acquisition payments.
- Review potential dilution from outstanding warrants, convertible securities, and subsequent financing arrangements; the filing reported 4,488,620 warrants outstanding at March 31, 2024.