INVO Bioscience, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. The filing identifies the registrant as INVO Bioscience, Inc. (ticker: INVO); “INVO Fertility, Inc.” is not the name shown on the filing.
Business context
INVO is a commercial-stage fertility company focused on its INVOcell device and intravaginal culture (IVC) procedure. Its strategy combines device sales and distribution with dedicated INVO Centers and potential clinic acquisitions. Three centers—in Birmingham, Atlanta and Monterrey—were operational; the company said it planned further expansion.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $235,321 | $218,874 | $544,054 | $1,111,869 |
| Gross profit / margin | $126,205 / 54% | $198,456 / 91% | $291,725 / 54% | $1,014,111 / 91% |
| Operating loss | $2,525,418 | $2,273,726 | $7,908,177 | $5,720,079 |
| Net loss | $2,549,623 | $2,481,326 | $8,125,476 | $6,751,958 |
| Net loss per share, basic and diluted | $0.21 | $0.24 | $0.67 | $0.66 |
At September 30, cash was $285,697, versus $5.68 million at December 31, 2021. Current assets were $942,290 and current liabilities $1.66 million; management reported negative working capital of approximately $0.7 million, compared with positive working capital of $5.1 million at year-end 2021. Total assets were $4.68 million, total liabilities $3.39 million, and stockholders’ equity $1.29 million. The company reported $1.96 million of operating lease liabilities; it stated its 2020 convertible notes had all been converted or repaid.
For the first nine months, operating cash use was $5.60 million, investing cash use $89,800, and financing cash provided $289,800, principally from stock sales. Cash declined by $5.40 million over the period. Accumulated deficit was $47.0 million.
Changes versus comparable periods
- Q3 revenue rose about 8%, mainly from clinic activity and higher U.S. device sales, partly offset by the absence of Ferring license revenue.
- Nine-month revenue fell about 51%, reflecting lower product sales compared with a prior-year bulk Ferring order and the loss of Ferring license revenue. Clinic revenue contributed $394,601 for the nine months in 2022.
- Gross margin declined to 54% from 91% in both comparisons, with no Ferring license revenue and clinic-related costs contributing to the decline.
- Nine-month SG&A increased about 17% to $7.73 million, and R&D rose to $470,208 from $152,674. Higher operating expenses contributed to the larger nine-month operating and net losses.
- Interest expense fell substantially year over year because convertible-note discounts, issuance costs and interest had been fully amortized; the prior-year period also included $159,126 of PPP loan forgiveness income.
Outlook, risks and unusual items
- No quantified revenue, earnings or cash-flow guidance was provided. Management planned to open additional centers over the following 12 months, pursue direct U.S. clinic sales and selectively consider acquisitions; it described a clinic acquisition letter of intent as non-binding.
- Management said the company will need additional debt or equity financing unless operations generate sufficient cash, and cautioned that financing 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.
- In October and November 2022, the company received $350,000 in related-party demand notes from JAG Multi Investments. The notes are callable on 10 days’ notice after an initial 30-day period; amounts outstanding past December 31 accrue 10% annual interest and carry a 10% financing fee at maturity. The CFO is a JAG beneficiary, but the filing says he does not control its investment decisions.
- The Ferring U.S. distribution agreement terminated January 31, 2022, and INVO resumed direct U.S. distribution. The filing describes ongoing efforts to pursue a day-5 INVOcell label expansion; the clinical trial had been paused during COVID-19, while a retrospective-data 510(k) effort remained active.
- The company reported no material legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective as of September 30, 2022.
Important facts for investors to verify
- Whether the $350,000 related-party demand notes were repaid, remained callable, or accrued interest and fees after year-end.
- Cash burn, near-term financing needs, and the status of subsequent financing or other liquidity measures given the low quarter-end cash balance and going-concern warning.
- Whether center expansion and clinic acquisition plans progressed, and whether clinic revenue can scale enough to offset operating costs.
- The status and regulatory pathway for the day-5 label expansion, and the commercial impact of the ended Ferring agreement.
- Share count and potential dilution: 12,165,964 common shares were outstanding as of November 14, 2022; the filing also reports outstanding options and warrants.