DEF: INVO Fertility Seeks Shareholder Approval for Major Capital Structure Overhaul and Strategic Refocus on Fertility Business

INVO Fertility, Inc. is calling its 2025 Annual Meeting of Stockholders to vote on critical proposals including a significant increase in authorized common stock, conversion of preferred shares and debentures, and amendments to its stock incentive plan, following a strategic divestment of its NAYA TX biopharma holdings and a prior financial restatement.

Summary

• INVO Fertility, Inc. (IVF) will hold its 2025 Annual Meeting of Stockholders virtually on June 25, 2025, to vote on eight key proposals.
• The company is seeking to increase its authorized common stock from 4,166,666 to 50,000,000 shares to provide flexibility for future financing, strategic investments, and equity incentive plans.
• Shareholders will vote on the issuance of common stock upon conversion of outstanding Series C-2 Non-Voting Convertible Preferred Stock, which currently amounts to 7,789 shares convertible into 4,837,888 common shares at a conversion price of $1.61 per share.
• Approval is also sought for the issuance of common stock upon conversion of a 7.0% Senior Secured Convertible Debenture with a principal balance of $4,803,175, convertible into 2,983,339 common shares at $1.61 per share.
• The company is requesting approval for the issuance of common stock upon exercise of Inducement Warrants, totaling 698,760 shares at an exercise price of $1.61 per share.
• An amendment to the 2019 Stock Incentive Plan is proposed to increase the shares available for issuance to 1,200,000, representing approximately 10% of the total issued and outstanding stock on a fully-diluted basis.
• The company recently re-focused exclusively on its fertility business, changing its name to INVO Fertility, Inc. and ticker symbol to IVF, and divested a majority of its holdings in NAYA Therapeutics, Inc. (NAYA TX).
• A financial restatement was performed on November 19, 2024, for periods ended June 30, 2024, and prior, to correct discount rates for right-of-use assets and lease liabilities, though this did not impact revenue, results of operations, earnings per share, or net equity.
• As of June 3, 2025, 2,161,131 shares of common stock were issued and outstanding, with 3,207,256 shares issued or reserved for issuance, leaving 959,410 shares available for future issuance under the current authorization.
• The Board of Directors recommends voting FOR all proposals, including the election of five directors, ratification of M&K CPAS, PLLC as auditors, and all capital structure and equity plan amendments.

Sentiment

Score: 3

Explanation: The sentiment is moderately negative due to significant potential dilution from multiple conversion proposals and a large increase in authorized shares, coupled with a recent financial restatement and past meeting postponement. While the strategic refocus on fertility is positive, the financial overhangs and past issues weigh heavily on the overall outlook.

Positives

• The company is strategically re-focusing on its core fertility business, which could streamline operations and improve focus.
• The Board of Directors is actively seeking shareholder approval for significant capital structure changes, demonstrating adherence to corporate governance and Nasdaq listing rules.
• The company has adopted a Clawback Policy and a Code of Business Conduct and Ethics, enhancing corporate governance and accountability.
• The financial restatement, while a negative event, was limited to assets and liabilities and did not impact revenue, results of operation, earnings (loss) per share, or net equity, nor management compensation, suggesting a contained issue.

Negatives

• The proposed increase in authorized common stock from 4,166,666 to 50,000,000 shares represents a significant potential for shareholder dilution.
• The conversion of Series C-2 Preferred Stock (4,837,888 common shares) and the Amended and Restated Debenture (2,983,339 common shares) will lead to substantial dilution if approved and converted.
• The issuance of Inducement Warrants (698,760 shares) also contributes to potential future dilution.
• Several executive officers and directors deferred portions of their salaries and fees in 2024, indicating potential cash flow constraints or a desire to conserve cash (e.g., Steven Shum deferred $69,540, Andrea Goren deferred $51,948, Michael Campbell deferred $194,323, and directors deferred cumulative totals ranging from $66,825 to $92,325).
• The company had to restate previously issued financial statements due to an accounting error related to discount rates for lease liabilities, indicating past financial reporting inaccuracies.
• The postponement of the 2024 Annual Meeting of Stockholders and the nullification of prior votes suggest organizational challenges or difficulties in securing necessary approvals.

Risks

• The sale into the public market of common stock underlying the Series C-2 Preferred, Amended and Restated Debenture, and Inducement Warrants could materially and adversely affect the market price of the company's common stock due to significant dilution.
• The availability of additional authorized shares for issuance may have the effect of discouraging a merger, tender offer, proxy contest, or other attempt to obtain control.
• The company's ability to raise equity capital in the future is dependent on market conditions and investor appetite, which could be impacted by the significant dilution from current conversion proposals.
• The company's reliance on related party financing (e.g., demand promissory notes to JAG, CEO, and CFO entities totaling $1,044,786 outstanding as of December 31, 2024) indicates potential financial vulnerability and conflicts of interest.
• The company's ability to achieve cash flow breakeven is dependent on additional acquisitions of in vitro fertilization clinics, which require capital and successful integration.
• The NAYA TX divestment, while a strategic refocus, could imply a failed or underperforming prior acquisition, raising questions about future M&A strategy and execution.

Future Outlook

The company anticipates issuing additional shares of common stock in the future for financing transactions (public or private offerings), strategic investments, mergers, acquisitions, licenses, partnerships, and other general corporate purposes. A primary objective for raising equity capital is to acquire additional in vitro fertilization clinics to reach cash flow breakeven as soon as possible. The company also plans to file a registration statement for the resale of shares issuable upon exercise of the Inducement Warrants within 30 calendar days following stockholder approval.

Management Comments

• "Our Board believes that the election or reelection of each director nominee identified above is advisable and in the best interests of the Company and our stockholders."
• "Our Board believes that it is in the best interests of our Company to increase the number of authorized shares of our common stock in order to give us greater flexibility in considering and planning for potential business needs."
• "At this time, we do not have any plans, proposals, or arrangements, written or oral, to issue any of the proposed additional authorized shares of our common stock for general corporate or any other purposes."
• "The Board believes that the availability of additional authorized shares of our common stock will afford us needed flexibility in acting upon financing transactions to strengthen our financial position and/or engaging in strategic activities without using cash."
• "Our Compensation Committee conducted a recovery analysis under the Clawback Policy and determined that, due to the limited impact of the accounting error, the compensation received by our executives during the lookback period would have been the same as if it had calculated based on the restated financial statements."

Industry Context

INVO Fertility, Inc. is re-focusing its operations exclusively on the fertility business, divesting its recent acquisition in the biopharma sector (NAYA TX). This strategic shift aims to concentrate resources on the in vitro fertilization (IVF) market, which is a growing segment within healthcare. The company's stated objective to acquire additional IVF clinics suggests a strategy of consolidation and expansion within this specialized industry. The need for significant capital raises and the associated dilution risks are common challenges for smaller companies in capital-intensive healthcare sectors, particularly those pursuing growth through acquisitions.

Management Changes

Corporate Governance

Legal Proceedings

• The company's previously issued financial statements were restated following comments issued by the staff of the SEC upon its review of annual and quarterly reports, indicating regulatory scrutiny and a need for corrective action in financial reporting.

Related Party Transactions

• In Q4 2022, the company issued demand promissory notes totaling $550,000 (for a purchase price of $500,000) to JAG, a company where the CFO is a beneficiary but has no control over investment decisions. These notes accrue 10% annual interest.
• On July 10, 2023, an additional demand promissory note of $110,000 (for a purchase price of $100,000) was issued to JAG. A warrant to purchase 1,459 shares of common stock at $120.00 per share was issued to JAG.
• In Q4 2022, the company issued demand promissory notes totaling $220,000 (for a purchase price of $200,000) to its Chief Executive Officer ($100,000) and an entity controlled by its Chief Financial Officer ($100,000), accruing 10% annual interest.
• As of December 31, 2024, the total outstanding balance on these demand notes, including principal and accrued interest, was $1,044,786.
• As of December 31, 2024, the company owed accounts payable to related parties totaling $292,338, primarily for unpaid employee expense reimbursements and board fees.
• As of December 31, 2024, accrued compensation to related parties totaled $2,123,340, primarily for deferred wages and accrued paid time off.
• NAYA TX (a former subsidiary) entered into a loan agreement with Cytovia Therapeutics Holdings, Inc. (Cytovia) on August 1, 2023, for up to $1,000,000 at 5% interest, amended on June 17, 2024, to be due upon next funding.
• NAYA TX acquired rights to two bifunctional antibodies (NY-303 and NY-338) from Cytovia for 1,609,098 shares of NAYA TX common stock (valued at $30 million) and $1.7 million cash, with potential future milestone payments of $2 million per product at Phase II and $8 million per product at Phase II/IIa data read-out.
• As part of the NAYA TX divestment, NAYA TX issued a secured convertible promissory note in the principal amount of $4,803,175 to INVO Fertility, Inc., carrying a 7% annual interest rate and maturing on November 28, 2026.

Stakeholder Impact

• Shareholders face significant potential dilution from the proposed increase in authorized common stock and the conversion of preferred shares, debentures, and warrants, which could adversely affect the market price of their common stock.
• Shareholders are being asked to approve critical capital structure changes that will enable the company to pursue its strategic objectives, including acquisitions, which could lead to long-term value creation if successful.
• Employees and management are impacted by the proposed increase in shares available under the stock incentive plan, which can serve as an incentive for retention and performance.
• Creditors holding the Series C-2 Preferred Stock and the Amended and Restated Debenture will have their debt converted into equity if proposals are approved, changing their position from debt holders to equity holders.
• The strategic refocus on the fertility business could lead to a more streamlined and focused company, potentially benefiting customers through specialized services and improved outcomes.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders virtually on June 25, 2025, to vote on the proposed matters.
• If approved, file the certificate of amendment to the restated Articles of Incorporation with the Secretary of State of Nevada as soon as practicable after the Annual Meeting to increase authorized common stock.
• If approved, proceed with the conversion of Series C-2 Preferred Stock, Amended and Restated Debenture, and exercise of Inducement Warrants into common stock.
• File a registration statement on Form S-3 (or other appropriate form) for the resale of shares issuable upon exercise of the Inducement Warrant within 30 calendar days following stockholder approval.
• If stockholder approval for Inducement Warrants is not obtained at the 2025 annual meeting, call a meeting every 90 days thereafter to seek such approval until it is obtained or the warrant is no longer outstanding.
• Continue to pursue additional acquisitions of in vitro fertilization clinics to reach cash flow breakeven.
• File a current report on Form 8-K within four business days after the Annual Meeting to announce preliminary or final voting results.

Key Dates

Recommendation

Keywords

Proxy Statement, Shareholder Meeting, Common Stock Increase, Convertible Preferred Stock, Convertible Debenture, Warrants, Stock Incentive Plan, Dilution, Corporate Governance, Financial Restatement, Fertility Business, SEC Filing, Capital Raise, Executive Compensation