10-K/A: INVO Bioscience Files Amended 10-K, Citing Updated Auditor Consent and Non-Competition Agreement Adjustment
Sentiment:
Annual Results
INVO Bioscience has filed an amendment to its annual report to include an updated auditor consent and a change to the useful life of non-competition agreements.
Capital raiseThe company is dependent on raising capital through debt and equity financings.The company received proceeds of $3.2 million from notes and $5.7 million from the sale of common stock in 2023.The company is seeking additional funding to meet its liquidity needs and execute its business strategy.The company entered into a purchase agreement with Triton Funds LP to sell up to 1,000,000 shares of common stock for up to $850,000.The company entered into a purchase agreement with FirstFire Global Opportunities Fund, LLC for a promissory note, warrants and shares of common stock for $250,000.
Worse than expectedThe company's net loss of $8,034,612 and the auditor's going concern qualification indicate worse than expected financial results.
Summary
- INVO Bioscience filed an amendment to its annual report on Form 10-K for the fiscal year ended December 31, 2023.
- The amendment includes an updated consent from M&K CPAs PLLC, the company's independent registered public accounting firm.
- This consent relates to the incorporation of their audit report into previously filed registration statements.
- The amendment also revises Footnote 8 of the financial statements to change the useful life of non-competition agreements from 15 years to 5 years.
- No other changes were made to the original filing, and the original filing continues to speak as of its original date.
- The company's financial statements for 2023 and 2022 were audited by M&K CPAs, who expressed an opinion that the statements fairly present the company's financial position.
- The audit report includes a going concern qualification, noting the company's net losses and capital deficiency raise substantial doubt about its ability to continue as a going concern.
- The company's revenue for 2023 was $3,020,575, with a net loss of $8,034,612.
- The company's total assets were $20,887,787 and total liabilities were $19,994,962 as of December 31, 2023.
- The company acquired the Wisconsin Fertility Institute in August 2023 for a total purchase price of $10 million.
Sentiment
Score: 3
Explanation: The document highlights significant financial challenges, including substantial net losses and a going concern qualification, which overshadow any positive developments. The company's reliance on external funding and the uncertainty surrounding its future operations contribute to a negative sentiment.
Positives
- The company has acquired the Wisconsin Fertility Institute, which is expected to contribute to future revenue.
- The company has secured additional funding through notes and the sale of common stock.
- The company is actively pursuing additional IVF clinic acquisitions.
Negatives
- The company has incurred significant net losses from operations, with a net loss of approximately $8.0 million in 2023.
- The company has an accumulated deficit of approximately $57.8 million as of December 31, 2023.
- The company's independent auditor has expressed substantial doubt about the company's ability to continue as a going concern.
- The company is dependent on raising capital through debt and equity financings to meet its cash needs.
Risks
- The company's ability to continue as a going concern is uncertain due to its history of net losses and capital deficiency.
- The company may not be able to raise additional funding on reasonable terms, if at all.
- The company's stock price could be negatively impacted if it cannot continue as a going concern.
- The company is subject to risks associated with business acquisitions, including integration challenges and potential impairment of acquired assets.
- The company's revenue recognition practices are subject to scrutiny and require significant management judgment.
Future Outlook
The company plans to grow the Wisconsin Fertility Institute and pursue additional IVF clinic acquisitions. They will also seek debt and/or equity financing to meet liquidity needs and execute their business strategy.
Management Comments
- Management is responsible for the financial statements and internal controls.
- Management plans to grow the Wisconsin Fertility Institute and pursue additional IVF clinic acquisitions.
- Management will seek debt and/or equity financing to meet liquidity needs.
Industry Context
The company operates in the assisted reproductive technology (ART) market, which is experiencing growth due to increasing infertility rates and advancements in treatment options. The company's focus on making fertility care accessible and inclusive aligns with broader industry trends.
Comparison to Industry Standards
- The company's financial performance, particularly its net losses and going concern qualification, is concerning when compared to established players in the fertility industry.
- Companies like CooperSurgical and Vitrolife, which are leaders in the ART market, typically demonstrate stronger financial stability and profitability.
- The company's reliance on external financing is a significant risk compared to larger, more established companies that have access to internal funding.
- The acquisition of the Wisconsin Fertility Institute is a positive step, but its impact on the company's overall financial performance remains to be seen.
- The company's revenue growth is promising, but it needs to be coupled with improved cost management to achieve profitability.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Accounting Policy | The useful life of non-competition agreements was adjusted from 15 years to 5 years. | December 31, 2023 | This change will result in increased amortization expense in the future. |
Related Party Transactions
- The company received $700,000 through the issuance of demand notes from related parties in the fourth quarter of 2022.
- The company received an additional $100,000 through the issuance of a demand note from JAG Multi Investments LLC on July 10, 2023.
- The company's Chief Financial Officer is a beneficiary of JAG Multi Investments LLC.
- As of December 31, 2023, the company owed accounts payable to related parties totaling $228,907.
Stakeholder Impact
- Shareholders face the risk of losing most or all of their investment if the company cannot continue as a going concern.
- Employees may be impacted by potential cost-cutting measures or restructuring if the company's financial situation does not improve.
- Customers may be concerned about the company's ability to provide ongoing services if its financial stability is in question.
- Creditors face the risk of not being repaid if the company's financial situation deteriorates.
Next Steps
- The company will continue to grow the Wisconsin Fertility Institute.
- The company will pursue additional IVF clinic acquisitions.
- The company will seek debt and/or equity financing to meet its liquidity needs.
- The company will work towards completing the merger with NAYA Biosciences, Inc.
Key Dates
| Date | Description |
|---|---|
| 2019-10-31 | Date of the adoption of the Two Thousand Nineteen Stock Incentive Plan |
| 2021-03-10 | Date of the limited liability company agreement with HRCFG, LLC to form the Alabama JV |
| 2021-06-28 | Date of the limited liability company operating agreement with Bloom Fertility, LLC to establish the Georgia JV |
| 2022-10-01 | Start date of related party demand notes with JAG Multi Investments LLC |
| 2023-01-01 | Start of the fiscal year 2023 |
| 2023-02-03 | Date of securities purchase agreements with accredited investors for convertible debentures |
| 2023-02-17 | Date of securities purchase agreements with accredited investors for convertible debentures |
| 2023-03-23 | Date of the securities purchase agreement for the Registered Direct Offering |
| 2023-06-28 | Date of the board of directors approval of a reverse stock split |
| 2023-07-28 | Effective date of the 1-for-20 reverse stock split |
| 2023-08-04 | Date of the securities purchase agreements for the August 2023 Public Offering |
| 2023-08-08 | Closing date of the August 2023 Public Offering |
| 2023-08-10 | Date of the acquisition of the Wisconsin Fertility Institute |
| 2023-09-29 | Date of the Revenue Loan and Security Agreement |
| 2023-10-13 | Shareholders approved an increase to the number of authorized shares of the Companys common stock |
| 2023-10-22 | Date of the Agreement and Plan of Merger with NAYA Biosciences, Inc. |
| 2023-11-19 | Date of the share exchange agreement with Cytovia Therapeutics Holdings, Inc. |
| 2023-11-20 | Date of the filing of the Certificate of Designation of Series A and B Convertible Preferred Stock |
| 2023-12-27 | Date of the second amendment to the Merger Agreement with NAYA Biosciences, Inc. |
| 2023-12-29 | Date of the securities purchase agreement with NAYA for the purchase of Series A Preferred Stock |
| 2023-12-31 | End of the fiscal year 2023 |
| 2024-01-04 | Closing date of the first tranche of the private offering of Series A Preferred Stock with NAYA |
| 2024-02-26 | Date of the Agreement for the Purchase and Sale of Future Receipts |
| 2024-03-27 | Date of the purchase agreement with Triton Funds LP |
| 2024-04-05 | Date of the purchase agreement with FirstFire Global Opportunities Fund, LLC |
| 2024-04-15 | Closing date of additional shares of Series A Preferred Stock with NAYA |
| 2024-04-16 | Original filing date of the Annual Report on Form 10-K |
| 2024-04-17 | Date of the amended Annual Report on Form 10-K/A |
Keywords
INVO Bioscience, Annual Report, Form 10-K, Auditor Consent, Going Concern, Financial Statements, Net Loss, Revenue, Wisconsin Fertility Institute, Non-Competition Agreement, Intravaginal Culture, IVF Clinics, INVOcell
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