10-K: INVO Bioscience Reports Full Year 2023 Results, Highlights Strategic Shift to Clinic Operations and NAYA Merger

INVO Bioscience's 2023 annual report details a strategic shift towards clinic-based operations, including the acquisition of Wisconsin Fertility Institute, and a pending merger with NAYA Biosciences.

Summary

• INVO Bioscience's 2023 annual report highlights a transition from a medical device company to a healthcare services provider focused on fertility clinics.
• The company acquired Wisconsin Fertility Institute (WFI) in August 2023, which more than tripled its annual revenues and added positive cash flow.
• INVO is also pursuing a merger with NAYA Biosciences, which is expected to close by April 30, 2024, pending certain conditions.
• The company's proprietary INVOcell technology remains a key part of its strategy, offering a lower-cost alternative to traditional IVF.
• As of December 31, 2023, INVO had 2,492,531 shares of common stock outstanding, held by 188 stockholders of record.
• The company has authorized 50,000,000 shares of common stock and 100,000,000 shares of preferred stock.
• The company has options to purchase 106,753 shares of common stock at a weighted average exercise price of $1.90 per share.
• The company has warrants to purchase 3,488,620 shares of common stock at a weighted average exercise price of $3.95 per share.
• The company has unit purchase options to purchase 4,649 shares of common stock at an exercise price of $64.00 per share.
• The company has a revenue loan and security agreement with Decathlon Alpha V LP for $1,500,000 with a maturity date of June 29, 2028.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive developments such as the WFI acquisition and the NAYA merger, the company's financial instability and dependence on future capital raises create significant risks. The going concern warning is a major concern.

Positives

• The acquisition of WFI has transformed INVO into a healthcare services company with increased revenue and positive cash flow.
• The merger with NAYA Biosciences is expected to provide additional capital and leadership.
• The FDA clearance for the 5-day incubation period for INVOcell may improve patient outcomes.
• The company has successfully raised capital through public offerings and debt financing.
• The company has regained compliance with Nasdaq's minimum stockholders equity requirement, ensuring continued listing.
• The company has secured a revenue loan and security agreement for $1,500,000.

Negatives

• The company has a history of net operating losses and an accumulated deficit of $57.5 million.
• The company's financial situation raises substantial doubt about its ability to continue as a going concern.
• The company is dependent on raising additional capital, which may not be available on acceptable terms.
• The merger with NAYA is subject to various closing conditions and may not be completed.
• The company may not be able to successfully integrate NAYA and WFI and achieve the expected benefits.
• The company may fail to make the required $7.5 million in additional payments for the WFI acquisition.
• The company is subject to significant competition in the fertility industry.
• The company is subject to risks associated with doing business globally.
• The company is subject to significant domestic and international governmental regulations.

Risks

• The company's financial situation creates doubt about its ability to continue as a going concern.
• The company needs to raise additional funding, which may not be available on acceptable terms.
• The potential merger with NAYA Biosciences may not close.
• The company may not be able to successfully integrate NAYA and WFI.
• The company may fail to make the required $7.5 million in additional payments for the WFI acquisition.
• The company is subject to significant competition in the fertility industry.
• The company is subject to risks associated with doing business globally.
• The company is subject to significant domestic and international governmental regulations.
• The company's products incorporate intellectual property rights that may be difficult to protect.
• The company may face liability as a provider of a medical device.
• The company may not be able to develop or continue its business if it fails to retain key personnel.
• The company is subject to risks relating to federal and state healthcare fraud, waste, and abuse laws.
• The company is subject to requirements of HIPAA, and failure to comply could materially harm its business.
• The company may be subject to risks related to changes in laws regarding abortion.
• The company's shares of common stock are thinly traded, and the price may not reflect its value.
• The company does not expect to pay any dividends to shareholders.
• The company's revenue and operating results could fluctuate significantly from quarter to quarter.
• The company may have difficulty raising the necessary capital to fund operations and the required $7.5 million in additional payments for the WFI acquisition because of the thin market and market price volatility for its shares of common stock.
• Shareholders may be diluted significantly through the company's efforts to obtain financing and from issuance of additional shares of its common stock.
• Failure to comply with internal control attestation requirements could lead to loss of public confidence in the company's consolidated financial statements and negatively impact its stock price.

Future Outlook

The company anticipates continuing to pursue additional acquisitions of established and profitable existing fertility clinics as part of its ongoing strategy to accelerate overall growth. The company also anticipates continuing to work on providing the INVOcell to other existing fertility clinics. The company expects its clinic operations will dominate its commercial efforts and revenues.

Industry Context

The document highlights the growing global ART market, driven by increased infertility rates and patient awareness. INVO's strategy to expand access to care through lower-cost alternatives and increased capacity aligns with industry trends.

Comparison to Industry Standards

• The document mentions that the IVC procedure can be offered for less than IVF due to lower costs of supplies, labor, capital equipment and general overhead.
• The document states that the IVC procedure is currently being offered at several IVF clinics at a price range of $5,000 $11,000 per cycle and from $4,500 to $7,000 at the existing INVO Centers, thereby making it more affordable than conventional IVF (which tends to average $11,000 to $15,000 per cycle or higher).
• The document estimates that by adopting the INVOcell, IVF clinics can increase fertility cycle volume by up to 30% without adding to personnel, space and/or equipment costs.
• The document states that the principal ART medical device competitor for INVOcell is an intrauterine device called AneVivo, developed by Anecova, a Swiss life sciences company. The principal difference between the INVOcell and AneVivo is its placement inside the womans uterus for early embryo development.

Related Party Transactions

• The company has demand notes with a related party, JAG Multi Investments LLC, where the CFO is a beneficiary.
• The company has demand notes with its Chief Executive Officer and Chief Financial Officer.

Stakeholder Impact

• Shareholders face the risk of dilution and potential loss of investment due to the company's financial instability.
• Employees may be affected by potential changes in management and operations due to the merger.
• Customers may benefit from increased access to fertility treatments through INVO's expanded clinic network.
• Suppliers may see increased demand for their products and services as INVO expands its operations.
• Creditors face the risk of non-payment due to the company's financial instability.

Next Steps

• Complete the merger with NAYA Biosciences.
• Pursue additional acquisitions of established and profitable existing fertility clinics.
• Continue to develop and expand INVO Centers.
• Continue to work on providing the INVOcell to other existing fertility clinics.
• Obtain stockholder approval for the FirstFire Purchase Agreement.

Key Dates

Keywords

INVO Bioscience, fertility, IVF, INVOcell, Wisconsin Fertility Institute, NAYA Biosciences, merger, acquisition, healthcare services, assisted reproductive technology, ART, clinic operations, FDA clearance, capital raise, stock offering