INVO Bioscience, Inc. — Form 10-Q Summary
Period and filing caveat: The supplied filing covers the unaudited quarter and nine months ended September 30, 2016—not 2016 Q1 as indicated in the request metadata. The company name in the filing is INVO Bioscience, Inc. The report was signed September 5, 2017 and contains later events; verify the filing’s actual SEC filing date and period before relying on it.
Business context and results
The company was commercializing INVOcell, an FDA-cleared intravaginal culture device and fertility procedure. It reported sales in the U.S. and India and said eight U.S. physician offices or IVF-center satellite facilities could offer the treatment. The filing describes a small, early-stage business with minimal revenue.
| Metric | Three months ended Sep. 30, 2016 | Nine months ended Sep. 30, 2016 | Comparable 2015 period |
|---|---|---|---|
| Revenue | $17,831 | $41,384 | $2,513 quarter; $11,689 nine months |
| Gross profit (margin) | $11,377 (64%) | $29,383 (71%) | $(1,899) ((76)%) quarter; $5,535 (47%) nine months |
| SG&A | $218,749 | $1,869,502 | $116,865 quarter; $363,582 nine months |
| Net loss | $210,822 | $1,847,843 | $123,195 quarter; $4,715,121 nine months |
| Operating cash used | Not separately presented | $225,405 | $49,065 used in nine months |
Financial position and changes
- At September 30, 2016, cash was $258,599, versus $492,004 at December 31, 2015. Current assets were $362,381 and current liabilities $4,599,033; the company disclosed a $4,236,652 working-capital deficit.
- Total liabilities were $4,730,755, including $210,888 in related-party notes, $10,000 in convertible notes, $131,722 in long-term notes payable, and $3,477,390 in accrued compensation. Stockholders’ deficiency was $4,341,236.
- Cash declined by $233,405 over the nine months. Investing activities used $8,000; there were no financing cash proceeds in the 2016 period. The company reported $145,000 of stock-sale proceeds in the comparable 2015 period.
- Revenue grew from a low base, and nine-month gross margin improved. The nine-month net loss narrowed largely because 2015 included a $4.33 million debt-settlement loss. In 2016, SG&A rose sharply, including $1,263,608 of noncash stock compensation; the company issued 3 million shares to officers and 511,000 shares to service providers.
Outlook, risks, and unusual matters
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern. It said operations depended on raising additional capital; absent financing, it might further cut spending, downsize operations, or pursue exit strategies. No specific financing commitment or quantified forecast is provided.
- Management said quarterly sales could fluctuate and depended on physician training and adoption. It reported no onsite U.S. training during the third quarter because its sole training resource could not travel, and described a slowdown in South American procedures associated with Zika concerns. It planned further market development, regulatory approvals, insurance outreach, and product work, subject to funding.
- Management estimated quarterly operating needs at approximately $75,000, but said spending would increase with adequate funding. It stated cash and other resources were not sufficient to support operations through fiscal 2016 and into 2017.
- Disclosure controls and internal control over financial reporting were deemed ineffective at September 30, 2016; a previously identified material weakness had not been remediated. Management cited limited staffing and resources and described control improvements in progress.
- Long-running litigation concerning the sale of a predecessor’s assets remained subject to appeal, according to the later updates included in the report. The company said it intended to oppose the appeal; the filing does not provide a clear estimate of potential financial exposure.
- Related-party arrangements included notes payable and below-market, month-to-month office rent from an entity owned by a director’s brother. The $545,000 of 2009 bridge notes were past due; the filing reports that $300,000 of principal and accrued interest had been converted to shares in 2015.
Important facts for investors to verify
- Confirm the SEC filing date, reporting period, and reason for the delay: the supplied text identifies a September 30, 2016 quarter, while the request says Q1 and the report is signed in 2017.
- Check subsequent filings for financing, cash runway, operating status, and whether the going-concern risk was resolved.
- Verify the status and potential exposure of the appealed litigation and the status of related-party and past-due debt obligations.
- Review remediation of the disclosed control weaknesses and reconcile the filing’s share-count dates and amounts; it lists 140,596,646 shares outstanding at September 30, 2016 and separately gives 140,596,646 at November 14, 2016 and 141,284,808 at August 31, 2017.