UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________________ to ________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
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| Large accelerated filer ☐ | Accelerated filer ☐ | |||
| Smaller reporting company |
Emerging growth company |
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As of May 20, 2025, the Registrant had shares of common stock outstanding.
INVO FERTILITY, INC. FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates, and projections about our company, are not guarantees of future results or performance, and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions, or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding the following:
| ● | our business strategies; |
| ● | the timing of regulatory submissions; |
| ● | our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain; |
| ● | risks relating to the timing and costs of clinical trials and the timing and costs of other expenses; |
| ● | risks related to market acceptance of products; |
| ● | the ultimate impact of a health epidemic on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole; |
| ● | intellectual property risks; |
| ● | risks associated with our reliance on third-party organizations; |
| ● | our competitive position; |
| ● | our industry environment; |
| ● | our anticipated financial and operating results, including anticipated sources of revenues; |
| ● | assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches; |
| ● | management’s expectation with respect to future acquisitions; |
| ● | statements regarding our goals, intentions, plans, and expectations, including the introduction of new products and markets; and |
| ● | our cash needs and financing plans. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates, or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes, or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies, and industry publications, articles, and surveys. Industry surveys, publications, consultant surveys, and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
| 3 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INVO FERTILITY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (audited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Lease right of use | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Equity investments | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued compensation | ||||||||
| Convertible notes payable – current portion, net | ||||||||
| Notes payable – related parties, net | ||||||||
| Deferred revenue | ||||||||
| Lease liability, current portion | ||||||||
| Additional payments for acquisition, current portion | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Lease liability, net of current portion | ||||||||
| Additional payments for acquisition, net of current portion | ||||||||
| Total liabilities | ||||||||
| Mezzanine equity | ||||||||
| Series C-2 Preferred Stock $ par value; shares authorized; and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Stockholders’ equity | ||||||||
| Series C-1 Preferred Stock, $ par value; shares authorized; and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Common Stock, $ par value; shares authorized; and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, mezzanine equity, and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
INVO FERTILITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months | ||||||||
| Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue: | ||||||||
| Clinic revenue | $ | $ | ||||||
| Product revenue | ||||||||
| Total revenue | ||||||||
| Operating expenses | ||||||||
| Cost of revenue | ||||||||
| Selling, general and administrative expenses | ||||||||
| Research and development expenses | ||||||||
Loss on disposal of fixed assets | ||||||||
| Impairment loss | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain (loss) from equity method joint ventures | ||||||||
| Gain on lease termination | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
INVO FERTILITY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Stockholders’ Equity | Mezzanine Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | Series C-1 Preferred Stock | Additional Paid-in | Accumulated | Series C-2 Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued to directors and employees | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock issued | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net of fees and expenses | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redemption | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Warrant exercise - cashless | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Warrant exercise - prefunded | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividend on preferred stock | - | - | - | - | - | - | - | - | - | (305,245 | ) | (305,245 | ) | - | - | |||||||||||||||||||||||||||||||||||||
| Rounding for reverse split | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
INVO FERTILITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows used in operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock compensation issued for services | ||||||||
| Stock compensation issued to directors and employees | ||||||||
| Fair value of stock options issued to employees | ||||||||
| Non-cash compensation for services | ||||||||
| Amortization of discount on notes payable | ||||||||
| Gain from equity method investment | ( | ) | ( | ) | ||||
| Impairment loss | ||||||||
| Loss from disposal of assets | ||||||||
| Gain on lease termination | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued compensation | ( | ) | ||||||
| Deferred revenue | ||||||||
| Leasehold liability | ||||||||
| Accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash used in investing activities: | ||||||||
| Payments to acquire property, plant, and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of fixed assets | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash from financing activities: | ||||||||
| Proceeds from the sale of notes payable | ||||||||
| Proceeds from the sale of common stock, net of offering costs | ||||||||
| Proceeds from sale of preferred stock | ||||||||
| Proceeds from warrant exercise | ||||||||
Preferred stock redemption | ( | ) | ||||||
| Principal payments on notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Noncash activities: | ||||||||
| Accrued dividends on preferred stock | $ | $ | ||||||
| Preferred stock redemption adjustment | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
INVO FERTILITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(UNAUDITED)
Note 1 – Summary of Significant Accounting Policies
Description of Business
INVO Fertility, Inc., (“INVO” or the “Company”) is a healthcare services company focused on the fertility marketplace and dedicated to expanding access to assisted reproductive technology (“ART”) care for patients in need. The Company’s principal commercialization strategy is focused on building, acquiring and operating fertility clinics, including “INVO Centers” dedicated primarily to offering the intravaginal culture (“IVC”) procedure enabled by its INVOcell medical device (“INVOcell”) and US-based, profitable in vitro fertilization (“IVF”) clinics. As of the date of this filing, the Company has two operational INVO Centers and one IVF clinic in the United States. The Company also continues to engage in the sale and distribution of its INVOcell technology solution into third-party owned and operated fertility clinics. The Company’s proprietary technology, INVOcell, is a revolutionary medical device that allows fertilization and early embryo development to take place in vivo within the woman’s body. This treatment solution is the world’s first IVC technique for the incubation of oocytes and sperm during fertilization and early embryo development. The Company also owns NAYA Therapeutics, Inc. (“NTI”), a clinical-stage oncology and autoimmune technology business. To focus exclusively on the fertility marketplace, the Company is in the process of divesting a majority stake in NTI.
Basis of Presentation
The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries and controlled affiliates. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets and the amount of consolidated net income (loss) that is attributable to the Company and to the noncontrolling interest in its consolidated statement of operations. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company uses the equity method of accounting when it owns an interest in an entity whereby it can exert significant influence over but cannot control the entity’s operations.
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
The Company considers events or transactions that have occurred after the consolidated balance sheet date of March 31, 2025, but prior to the filing of the consolidated financial statements with the SEC in this Quarterly Report on Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q.
Reclassifications
Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.
Business Segments
The Company operates in
Business Acquisitions
The Company accounts for all business acquisitions at fair value and expenses acquisition costs as they are incurred. Any identifiable assets acquired and liabilities assumed are recognized and measured at their respective fair values on the acquisition date. If information about facts and circumstances existing as of the acquisition date is incomplete at the end of the reporting period in which a business acquisition occurs, the Company will report provisional amounts for the items for which the accounting is incomplete. The measurement period ends once the Company receives sufficient information to finalize the fair values; however, the period will not exceed one year from the acquisition date. Any adjustments to provisional amounts that are identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined.
Variable Interest Entities
The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities (“VIE”), where the Company is the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC 810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the primary beneficiary has both: (i) the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The Company reconsiders whether an entity is still a VIE only upon certain triggering events and continually assesses its consolidated VIEs to determine if it continues to be the primary beneficiary. See “Note 3 – Variable Interest Entities” for additional information on the Company’s VIEs.
| 8 |
Equity Method Investments
Investments in unconsolidated affiliates, over which the Company exerts significant influence but does not control or otherwise consolidate, are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in loss from equity method joint venture in the accompanying consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit, and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.
Inventory
Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value, using the first-in, first-out method as a cost flow method.
Property and Equipment
The Company records property and equipment at cost.
Property and equipment are depreciated using the straight-line method over the estimated economic lives of the assets, which are from
| 9 |
Long- Lived Assets
Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the non-discounted future cash flows of the asset are less than their carrying amount, their carrying amounts are reduced to fair value and an impairment loss recognized.
Fair Value of Financial Instruments
ASC 825-10-50, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.
Effective January 1, 2008, the Company adopted ASC 820-10, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Income Taxes
The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. To the extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.
Concentration of Credit Risk
Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (“FDIC”) limits. As of March 31, 2025, the Company had cash balances in excess of FDIC limits.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:
| 1. | Identify the contract with the customer. |
| 2. | Identify the performance obligations in the contract. |
| 3. | Determine the total transaction price. |
| 4. | Allocate the total transaction price to each performance obligation in the contract. |
| 5. | Recognize as revenue when (or as) each performance obligation is satisfied. |
| 10 |
Revenue generated from the sale of INVOcell is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations.
Revenue generated from clinical and lab services related at the Company’s fertility clinics is typically recognized at the time the service is performed.
The Company’s Therapeutics segment does not currently generate revenue.
The Company accounts for stock-based compensation under the provisions of Accounting Standards Codification (“ASC”) subtopic 718-10, Compensation (“ASC 718-10”). This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or based on performance goals in exchange for the award, which is usually the vesting period.
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similarly to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2025, and 2024, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss (numerator) | $ | ( | ) | ( | ) | |||
| Basic and diluted weighted-average number of common shares outstanding (denominator) | ||||||||
| Basic and diluted net loss per common share | ) | ) | ||||||
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Options | ||||||||
| Convertible notes and interest | ||||||||
| Warrants and unit purchase options | ||||||||
| Total | ||||||||
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, or ASU 2023-07, which requires an enhanced disclosure of segments on an annual and interim basis, including the title of the chief operating decision maker, significant segment expenses, and the composition of other segment items for each segment’s reported profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted this standard during the year ended December 31, 2024.
Note 2 – Liquidity
Historically, the Company has funded its cash and
liquidity needs primarily through revenue collection and debt and equity financings. For the three months ended March 31, 2025, and 2024,
the Company incurred a net loss of approximately $
| 11 |
The Company has been dependent on raising
capital from debt and equity financings to meet its needs for cash used in operating and investing activities. During the first
three months of 2025, the Company received $
Although the Company’s audited consolidated financial statements for the year ended December 31, 2024 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s independent registered public accounting firm that accompanies the Company’s consolidated financial statements for the year ended December 31, 2024 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the consolidated financial statements at that time. Specifically, as noted above, the Company has incurred significant operating losses and the Company expects to continue to incur significant expenses and operating losses as it continues to ramp up the commercialization of INVOcell and develop new INVO Centers. These prior losses and expected future losses have had, and will continue to have, an adverse effect on the Company’s financial condition. If the Company cannot continue as a going concern, its stockholders would likely lose most or all of their investment in the Company.
Note 3 – Business Combinations
NAYA Therapeutics
On October 11, 2024 (the “Effective Time”), the Company, a wholly owned subsidiary (“Merger Sub”), and NTI entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”) and consummated the transactions contemplated thereby (the “Merger”). Upon the terms and subject to the conditions set forth in the A&R Merger Agreement, Merger Sub merged with and into NTI, with NTI continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the Effective Time and as a result of the consummation of the Merger:
● Each share of Class A common stock, par value $ per share, and Class B common stock, par value $ per share, of NTI (“NTI common stock”) outstanding immediately prior to the Effective Time, other than certain excluded shares held by NTI as treasury stock or owned by the Company or Merger Sub, automatically converted into the right to receive shares of the Company’s common stock and shares of the Company’s newly-designated Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”). See “Note 12 – Stockholders’ Equity” for additional information on the Series C-1 Preferred.
● Certain
outstanding debt obligations of NTI, including a portion of an amended and restated senior secured convertible debenture issued to
Five Narrow Lane LP (“FNL”), with a combined principal balance of $
● The remaining
balance of the amended and restated senior secured convertible debenture issued to FNL in the amount of $
The Company’s consolidated financial statements for the three months ended March 31, 2025 include NTI’s results of operations. The Company’s consolidated financial statements reflect the purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date.
The following allocation of the purchase price is as follows:
| Consideration given: | ||||
| Common Stock | $ | |||
| NAYA Acquisition Pre-funded Warrants | ||||
| Series C-1 Preferred | ||||
| Series C-2 Preferred | ||||
| Convertible Debenture | ||||
| Assets and liabilities acquired: | ||||
| Cash | ||||
| Other current assets | ||||
| Tradename | ||||
| In process R&D | ||||
| Goodwill | ||||
| AP & accrued liabilities | ( | ) | ||
| Debt | ( | ) | ||
| 12 |
Note 4 – Variable Interest Entities
Consolidated VIEs
Bloom INVO, LLC
On June 28, 2021, INVO CTR entered into a limited liability company agreement (the “Bloom Agreement”) with Bloom Fertility, LLC (“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center in the Atlanta, Georgia metropolitan area (the “Atlanta Clinic”).
In consideration for the Company’s commitment
to contribute up to $
The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR also performs all required, industry specific compliance and accreditation functions, and product documentation for product registration.
The Bloom Agreement provides Bloom with a “profits
interest” in the Georgia JV and, in connection with such profits interest, states that profits and losses be allocated to its members
based on a hypothetical liquidation of the Georgia JV. In such a scenario, liquidation proceeds would be distributed in the following
order: (a) to INVO CTR until the difference between its capital contributions and distributions equals $
The Atlanta Clinic opened to patients on September 7, 2021.
The Company determined the Georgia JV is a VIE, and
that the Company is its primary beneficiary because the Company has an obligation to absorb losses that are potentially significant and
the Company controls the majority of the activities that impact the Georgia JV’s economic performance, specifically control of the
INVOcell and lab services quality management. As a result, the Company consolidated the Georgia JV’s results with its own. As of
March 31, 2025, the Company invested $
Unconsolidated VIEs
HRCFG INVO, LLC
On March 10, 2021, INVO CTR entered into a limited
liability company agreement with HRCFG, LLC (“HRCFG”) to establish a joint venture, formed as HRCFG INVO, LLC (the “Alabama
JV”), for the purpose of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center in
Birmingham, Alabama (the “Birmingham Clinic”). The Company also provides certain funding to the Alabama JV. INVO CTR and HRSCGF
party owns
The Birmingham clinic opened to patients on August 9, 2021.
The Company determined the Alabama JV is a VIE, and
that there is no primary beneficiary. As a result, the Company uses the equity method to account for its interest in the Alabama JV. As
of March 31, 2025, the Company invested $
| 13 |
The following table summarizes our investments in unconsolidated VIEs:
| Carrying Value as of | ||||||||||||||
| Location | Percentage Ownership | March 31, 2025 | December 31, 2024 | |||||||||||
| HRCFG INVO, LLC | Alabama, United States | % | $ | |||||||||||
| Total investment in unconsolidated VIEs | $ | |||||||||||||
Earnings from investments in unconsolidated VIEs were as follows:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| HRCFG INVO, LLC | $ | $ | ||||||
| Total earnings (loss) from unconsolidated VIEs | ||||||||
The following tables summarize the combined unaudited financial information of our unconsolidated VIEs:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Statements of operations: | ||||||||
| Operating revenue | $ | $ | ||||||
| Operating expenses | ( | ) | ( | ) | ||||
| Net profit (loss) | ||||||||
March 31, 2025 | December 31, 2024 | |||||||
| Balance sheets: | ||||||||
| Current assets | $ | |||||||
| Long-term assets | ||||||||
| Current liabilities | ( | ) | ( | ) | ||||
| Net assets | $ | |||||||
Note 5 – Agreements and Transactions with VIE’s
The Company sells INVOcells to its consolidated and unconsolidated VIEs and anticipates continuing to do so in the ordinary course of business. All intercompany transactions with consolidated entities are eliminated in the Company’s consolidated financial statements. Pursuant to ASC 323-10-35-8, the Company eliminates any sales to an unconsolidated VIE for INVOcell inventory that the VIE still has remaining on the books at period end.
The following table summarizes the Company’s transactions with VIEs:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Bloom INVO, LLC | ||||||||
| INVOcell revenue | $ | $ | ||||||
| Unconsolidated VIEs | ||||||||
| INVOcell revenue | $ | $ | ) | |||||
The Company had balances with VIEs as follows:
March 31, 2025 | December 31, 2024 | |||||||
| Bloom INVO, LLC | ||||||||
| Accounts receivable | $ | |||||||
| Notes payable | ||||||||
| Unconsolidated VIEs | ||||||||
| Accounts receivable | $ | |||||||
| 14 |
Note 6 – Inventory
Components of inventory are as follows:
March 31, 2025 | December 31, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
Note 7 – Property and Equipment
The estimated useful lives and accumulated depreciation for equipment are as follows as of March 31, 2025, and December 31, 2024:
Estimated Useful Life | ||||
| Manufacturing equipment | ||||
| Medical equipment | ||||
| Office equipment | ||||
| March 31, 2025 | December 31, 2024 | |||||||
| Manufacturing equipment | $ | $ | ||||||
| Medical equipment | ||||||||
| Office equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total equipment, net | $ | $ | ||||||
During the three months ended March 31, 2025, and
2024, the Company recorded depreciation expense of $
For the three months ended March 31, 2025, and 2024,
the Company recognized a loss on disposal of fixed assets of $
Note 8 – Intangible Assets and Goodwill
Components of intangible assets are as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| Tradename | $ | $ | ||||||
| Noncompetition agreement | ||||||||
| In-process research & development | ||||||||
| Goodwill | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets | $ | $ | ||||||
As part of the WFI acquisition, that closed on August
10, 2023, the Company acquired a tradename valued at $
As part of the NTI acquisition, that closed on October
11, 2024, the Company acquired a tradename valued at $
During the three months ended March 31, 2025, and
2024, the Company recorded amortization expenses related to intangible assets of $
Goodwill has an indefinite useful life and is therefore
not amortized. The Company performed an impairment analysis as of March 31, 2025 and determined the goodwill of NTI was impaired by $
The Company determined an impairment analysis was needed for the NTI goodwill
due to an overall decline in the Company’s stock price as of March 31, 2025. The Company engaged an independent third party valuation
specialist to complete the impairment analysis. The valuation specialist used a discounted cash flow method to determine the fair value
of NTI was less than the carrying value and therefore goodwill was impaired by $
| 15 |
Note 9 – Leases
The Company has various operating lease agreements in place for its office and joint ventures. Per FASB’s ASU 2016-02, Leases Topic 842 (“ASU 2016-02”), effective January 1, 2019, the Company is required to report a right-of-use asset and corresponding liability to report the present value of the total lease payments, with appropriate interest calculation. The Company utilitizes the incremental borrowing rate for each lease by developing a synthetic credit rating for the Company as of the commencement date of each lease, adjusting the synthetic credit rating to reflect the collateralized nature of the incremental borrowing rate, the Company’s borrowing rate under other debt facilities, and the market spread between secured and unsecured borrowings, and based on the adjusted synthetic rating and the various terms of the leases, selected the incremental borrowing rate based on the commencement date, duration of the lease, and a corresponding weight-adjusted corporate yield curve. Lease renewal options included in any lease are considered in the lease term if it is reasonably certain the Company will exercise the option to renew. The Company’s operating lease agreements do not contain any material restrictive covenants.
As of March 31, 2025, the Company’s lease components included in the consolidated balance sheet were as follows:
| Lease component | Balance sheet classification | March 31, 2025 | ||||
| Assets | ||||||
| ROU assets – operating lease | Other assets | $ | ||||
| Total ROU assets | $ | |||||
| Liabilities | ||||||
| Current operating lease liability | Current liabilities | $ | ||||
| Long-term operating lease liability | Other liabilities | |||||
| Total lease liabilities | $ | |||||
Future minimum lease payments as of March 31, 2025 were as follows:
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and beyond | ||||
| Total future minimum lease payments | $ | |||
| Less: Interest | ( | ) | ||
| Total operating lease liabilities | $ |
For the three months ended March 31, 2025, the weighted
average remaining lease term for operating leases was
For the three months ended March 31, 2025, and 2024,
the Company recognized a gain on lease termination of $ and $
| 16 |
Note 10 – Notes Payable
Notes payables consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Related party demand notes with a | $ | $ | ||||||
| Convertible notes payable. | ||||||||
| Convertible note payable. | ||||||||
| Cash advance agreement | ||||||||
| Note payable. | ||||||||
| Convertible debenture payable. | ||||||||
| Note payable. | ||||||||
| Other debt | ||||||||
| Less debt discount and financing costs | ( | ) | ( | ) | ||||
| Total, net of discount | $ | $ | ||||||
Related Party Demand Notes
In the fourth quarter of 2022, the Company received
$
In consideration for subscribing to the JAG Note for
$
In the fourth quarter of 2022, the Company received
$
The financing fees for all demand notes were recorded as a debt discount and, as of March 31, 2025, the Company had fully amortized the discount.
For the three months ended March 31, 2025, the Company
incurred $
| 17 |
Standard Merchant Cash Advance
On September 25, 2024, the Company entered into a
Standard Merchant Cash Advance Agreement (the “Sept 24 Cash Advance Agreement”) with Cedar under which Cedar purchased $
The financing fees were recorded as a debt discount.
For the three months ended March 31, 2025, the Company amortized $
Revenue Loan and Security Agreement
On September 29, 2023, the Company, Steven Shum, as
a Key Person, and the Company’s wholly-owned subsidiaries Bio X Cell, Inc, INVO CTR, Wood Violet Fertility LLC, FLOW and Orange
Blossom Fertility LLC as guarantors (the “Guarantors”), entered into a Revenue Loan and Security Agreement (the “Loan
Agreement”) with Decathlon Alpha V LP (the “Lender”) under which the Lender advanced a gross amount of $
The financing fees for the RSLA Loan were recorded
as a debt discount. For the three months ended March 31, 2025, the Company amortized $
On September 24, 2024, the Company, the Lender, Steven
Shum and the Guarantors entered into an amendment to the Loan Agreement, pursuant to which the Lender approved the Sept 24 Cash Advance
Agreement and the Company agreed to increase the “Minimum Interest” (as defined in the Loan Agreement) by 0.15x effective
as of December 1, 2024, if the Company did not receive equity investment of at least $
Future Receipts Agreement
On February 26, 2024, the
Company finalized an Agreement for the Purchase and Sale of Future Receipts (the “Future Receipts Agreement”) with a buyer
(the “Buyer”) under which the Buyer purchased $
The financing fees were recorded as a debt discount. As of March 31, 2025, the debt discount was fully amortized.
FirstFire Convertible Note
On April 5, 2024, the Company entered into a purchase
agreement with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which FirstFire agreed to purchase, and
the Company agreed to issue and sell, (i) a promissory note with an aggregate principal amount of $
The FirstFire Note carried an interest rate of twelve
percent (
The financing fees for the FirstFire Note were recorded
as a debt discount. For the three months ended March 31, 2025, the Company amortized $
On October 14, 2024, $
| 18 |
7.0% Senior Secured Convertible Debenture
In connection with the Merger, on October 11, 2024,
the Company issued the Convertible Debenture to FNL in an exchange of an outstanding note of NTI held by FNL. The Convertible Debenture carries an interest rate
of seven percent (
Conversion. At any time after the Company’s
stockholders approve the issuance of any Company common stock upon conversion of the Convertible Debenture, the holder of the Convertible Debenture will be entitled
to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares of Company common stock at a conversion
price of $
Prepayment. The Company may not prepay the Convertible Debenture without the prior written consent of FNL.
Monthly Redemption. Commencing March 14, 2025 and on the 14th of each month thereafter until the Maturity Date, the Company shall redeem $, plus accrued but unpaid interest and other fees, of the principal amount of the Convertible Debenture.
Mandatory Redemption. While any portion
of the Convertible Debenture is outstanding, if the Company receives gross proceeds of more than $ from any equity or debt financings (other
than a public offering as described herein), the Company shall, at the option of the holder, apply one-third (1/3) of such gross proceeds
to the redemption of the principal amount of the Convertible Debenture, except that if such equity or debt financing is a public offering of the Company’s
securities pursuant to a registration statement on Form S-1, the Company shall, at the option of the holder, apply one hundred percent
(100%) of such gross proceeds, not to exceed $
The Convertible Debenture contains events representations, warranties,
covenants, and events of default that are customary for similar transactions. Upon an event of default, the Convertible Debenture becomes immediately
due and payable, and the Borrower is subject to a default rate of interest of
In November 2024, the Company received an
additional $
For the three months ended
March 31, 2025, the Company incurred $
NAYA Therapeutics Debt
Cytovia Notes
NTI and Cytovia, entered into a loan agreement on
August 1, 2023, pursuant to which Cytovia shall make available to NTI a term loan for up to $
On May 15, 2024, NTI entered into a loan agreement
with Cytovia, under which NTI will make available to Cytovia a term loan of up to $
Other Debt
During 2024, certain parties advanced NTI $
Note 11 – Related Party Transactions
In the fourth quarter of 2022, the Company issued
a series of demand promissory notes in the aggregate principal amount of $
In consideration for subscribing to the JAG Note for
$
| 19 |
In the fourth quarter of 2022, the Company issued
demand promissory notes in the aggregate principal amount of $
For the three months ended March 31, 2025, the Company
incurred $
As of March 31, 2025, the Company owed accrued compensation
of $
NAYA Therapeutics Related Party Transactions
NTI and Cytovia, entered into a loan agreement on
August 1, 2023, pursuant to which Cytovia made available to NTI a term loan for up to $
On October 18, 2023, NTI entered into an asset purchase
agreement with Cytovia Therapeutics Holdings, Inc. and Cytovia Therapeutics, LLC (collectively, “Cytovia”) to acquire the
rights to the two bifunctional antibodies CYT303 and CYT338 (now known as NY-303 and NY-338). The fixed purchase price consists of
shares of common stock of NTI (valued by the parties at approximately $
On May 17, 2024, NTI and Cytovia entered into an amendment
to the asset purchase agreement. Pursuant to this amendment, the parties agreed that NTI would not assume any liabilities of Cytovia.
The parties further agreed that the purchase price would consist of shares of common stock of NTI (valued by the parties at
approximately $
Note 12 – Stockholders’ Equity
Reverse Stock Split (March 2025)
When the Reverse Stock Split became effective, every 12 shares of common stock issued and outstanding were automatically reclassified and combined into one share of common stock, without any change in the par value per share, and a proportionate adjustment was made to our authorized shares of common stock such that the Company now has shares of authorized common stock. In addition, a proportionate adjustment has been made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of common stock and the number of shares reserved for issuance pursuant to our equity incentive compensation plans. No fractional shares of common stock were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of common stock had their holdings rounded up to the next whole share.
All share information included in this Form 10-Q has been reflected as if the reverse stock split occurred as of the earliest period presented.
Series C-1 Preferred
On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation (the “Series C-1 Certificate of Designation”) of Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”) which sets forth the rights, preferences, and privileges of the Series C-1 Preferred. Thirty thousand three hundred seventy five () shares of Series C-1 Preferred with a stated value of $ per share were authorized under the Series C-1 Certificate of Designation.
Each share of Series C-1 Preferred has a stated value
of $, which is convertible into shares of the Company’s common stock at a conversion price equal to $
| 20 |
Commencing on the ninety-first (91st) day after the
first issuance of any Series C-1 Preferred, the holders of Series C-1 Preferred shall be entitled to receive dividends on the stated value
at the rate of two percent (
The Series C-1 Preferred ranks senior to the Company’s common stock and junior to the Series C-2 Preferred (as defined below). Subject to the rights of the holders of any senior securities, in the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of the Company, each holder of Series C-1 Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to the amount as would be paid on the Company’s common stock issuable upon conversion of the Series C-1 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
Other than those rights provided by law, the Series C-1 Preferred has no voting rights. The Series C-1 Preferred is not redeemable and is therefore classified as permanent equity.
Series C-2 Preferred Stock
On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation (the “Series C-2 Certificate of Designation”) of Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”) which sets forth the rights, preferences, and privileges of the Series C-2 Preferred. Eight thousand five hundred seventy six () shares of Series C-2 Preferred with a stated value of $ per share were authorized under the Series C-2 Certificate of Designation.
Each share of Series C-2 Preferred has a stated value
of $, which, along with any additional amounts accrued thereon pursuant to the terms of the Series C-2 Certificate of Designation
(collectively, the “Conversion Amount”) is convertible into shares of the Company’s common stock at a conversion price
equal to $
Commencing on the ninety-first (91st) day after the
first issuance of any Series C-2 Preferred, the holders of Series C-2 Preferred shall be entitled to receive dividends on the stated value
at the rate of ten percent (
The Series C-2 Preferred ranks senior to the Company’s
common stock and to the Series C-1 Preferred. Subject to the rights of the holders of any senior securities, in the event of any voluntary
or involuntary liquidation, dissolution, or winding up, or sale of the Company, each holder of Series C-2 Preferred shall be entitled
to receive its pro rata portion of an aggregate payment equal to the greater of (a)
Other than those rights provided by law, the Series C-2 Preferred has no voting rights. The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger. Due to the Series C-2 Preferred being redeemable under these triggering events it is classified as mezzanine equity.
As of March 31, 2025, the Series C-2 Preferred had accrued dividends of
$
NAYA Therapeutics Acquisition
As a result of the consummation of the NTI Merger:
● Each share of NTI common
stock outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by NTI as treasury stock
or owned by the Company or Merger Sub, automatically converted into the right to receive shares of the Company’s common stock
and shares of the Series C-1 Preferred.
● Certain outstanding debt
obligations of NTI, including a portion of an amended and restated senior secured convertible debenture issued to FNL, with a combined
principal balance of $
| 21 |
January 2025 Public Offering
On January 14, 2025, the Company, consummated
a public offering (the “Jan 2025 Offering”) of
units, each consisting of either one share of common stock, or one pre-funded warrant to purchase one share of
common stock (“Jan 2025 PFW”) in lieu thereof, and one warrant to purchase one share of common stock at an
offering price of $
per unit. The warrants are exercisable from and after the date of their issuance and expire on the five-year anniversary of such
date, at an exercise price of $
Also in connection with the Jan 2025 Offering,
on January 13, 2025, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement Agent”),
pursuant to which
The Company received net proceeds of $
In connection with the Jan 2025 Offering, the Company entered into a Preferred
Stock Redemption Agreement with a holder of the Company’s Series C-2 Convertible Preferred Stock pursuant to which the Company agreed
to purchase and acquire from the holder shares of C-2 Preferred Stock for $
Three Months Ended March 31, 2025
In January 2025, the Company issued shares of common stock as part of the Jan 2025 Offering. The securities issued offered pursuant to the Company’s registration statement on Form S-1, initially filed by the Company with the SEC under the Securities Act on December 17, 2024 and declared effective on January 8, 2025.
In January 2025, the Company issued
During the first three months of 2025, the Company issued shares of common stock upon the exercise of the January 2025 PFW. These shares were issued pursuant to the Company’s registration statement on Form S-1, as amended (File No. 333-283872) initially filed by the Company with the SEC on December 17, 2024 and declared effective on January 13, 2025.
Equity Incentive Plans
In October 2019, the Company adopted the 2019 Plan. Under the 2019 Plan, the Company’s board of directors is authorized to grant stock options to purchase common stock, restricted stock units, and restricted shares of common stock to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of shares. In January 2024, the number of available shares increased by shares, bringing the total shares available under the 2019 Plan to .
Options granted under the 2019 Plan generally have a life of to years and exercise prices equal to or greater than the fair market value of the common stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a three-year period. For the three months ended March 31, 2025, the Company incurred $ in expense related to the vesting of options.
Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Canceled | ( | ) | ||||||||||
| Balance as of March 31, 2025 | $ | $ | ||||||||||
| Exercisable as of March 31, 2025 | $ | $ | ||||||||||
Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Risk-free interest rate range | % | % | ||||||
| Expected life of option-years | - | |||||||
| Expected stock price volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. Expected volatility is based upon the average historical volatility of the common stock over the period commensurate with the expected term of the related instrument. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups, executives and non-executives, within the Company. The Company does not currently pay dividends on its common stock, nor does it expect to do so in the foreseeable future.
| 22 |
Total Intrinsic Value of Options Exercised | Total Fair Value of Vested | |||||||
| Year ended December 31, 2024 | $ | $ | ||||||
| Three months ended March 31, 2025 | $ | $ | ||||||
For the three months ended March 31, 2025, there were no options granted. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through March 31, 2025, the weighted average remaining service period is year.
Restricted Stock and Restricted Stock Units
In the three months ended March 31, 2025, the Company did not grant any restricted stock units or shares of restricted stock to employees, directors, or consultants under the 2019 Plan. Restricted stock issued to employees, directors, and consultants generally vest either at grant or vest over a period of one year from the date of grant.
Note 14 – Unit Purchase Options and Warrants
The following table sets forth the activity of unit purchase options:
Number of Unit Purchase Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2024 | $ | $ | $ | |||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Canceled | ||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | |||||||||
The following table sets forth the activity of warrants:
Number of Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Canceled | ||||||||||||
| Balance as of March 31, 2025 | $ | $ | ||||||||||
| 23 |
January 2025 Offering Warrants
On January 14, 2025, the Company, consummated a public
offering (the “Jan 2025 Offering”) of units, each consisting of either one share of common stock, or one pre-funded
warrant to purchase one share of common stock (“Jan 2025 PFW”) in lieu thereof, and one warrant to purchase one share of common
stock at an offering price of $ per unit. The warrants are exercisable from and after the date of their issuance and expire on the
five-year anniversary of such date, at an exercise price of $
Also in connection with the Jan 2025 Offering, on January 13, 2025, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement Agent”),
pursuant to which
Note 15 – Segment Reporting
The Company’s Chief Operating Decision Maker (“CODM”) as defined under GAAP is the Company’s Chief Executive Officer.
The Company defines its segments on the basis of the way in which internally reported financial information is regularly reviewed by the CODM to analyze financial performance, make decisions, and allocate resources. The Company has analyzed its operations per ASC 280 and identified three operating segments: Clinic Services, INVOcell Device and Therapeutics. The three segments align with the Company’s distinct product and service lines. For the three months ended March 31, 2025 the Company did not have any sales or operations outside of the United States.
The Clinics Services operating segment consists of financial information for WFI and the Atlanta Clinic. The INVOcell Device operating segment consists of financial information relating to the Company’s manufacture and sales of the INVOcell. The Therapeutics segment consists of financial information relating to the Company’s recently acquired subsidiary, NTI.
The tables below provide information about the Company’s segments and include a reconciliation to income before taxes:
| Three Months Ended March 31, 2025 | Fertility Clinic Services | INVOcell Device | Therapeutics | Total | ||||||||||||
| Revenue from external customers | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||
| Elimination of intersegment revenue | ( | ) | ||||||||||||||
| Total consolidated revenue | ||||||||||||||||
| Less: | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Impairment loss | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Segment profit (loss) | ( | ) | ( | ) | ||||||||||||
| Reconciliation of net loss | ||||||||||||||||
| Other income (loss) | ||||||||||||||||
| Interest expense | ( | ) | ||||||||||||||
| Unallocated amounts: | ||||||||||||||||
| Other corporate expenses | ( | ) | ||||||||||||||
| Loss before taxes | ( | ) | ||||||||||||||
| Assets | ||||||||||||||||
| 24 |
| Three Months Ended March 31, 2024 | Fertility Clinic Services | INVOcell Device | Therapeutics | Total | ||||||||||||
| Revenue from external customers | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||
| Elimination of intersegment revenue | ||||||||||||||||
| Total consolidated revenue | ||||||||||||||||
| Less: | ||||||||||||||||
| Cost of revenue | ( | ) | ||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Segment profit (loss) | ||||||||||||||||
| Reconciliation of net loss | ||||||||||||||||
| Other income (loss) | ||||||||||||||||
| Interest expense | ( | ) | ||||||||||||||
| Unallocated amounts: | ||||||||||||||||
| Other corporate expenses | ( | ) | ||||||||||||||
| Loss before taxes | ( | ) | ||||||||||||||
| Assets | ||||||||||||||||
No single customer comprised
Note 16 – Income Taxes
The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company decides as to whether the carryforward will be utilized in the future. Currently, a valuation allowance is established for all deferred tax assets and carryforwards as their recoverability is deemed to be uncertain. If the Company’s expectations for future operating results at the federal or at the state jurisdiction level vary from actual results due to changes in healthcare regulations, general economic conditions, or other factors, it may need to adjust the valuation allowance, for all or a portion of the Company’s deferred tax assets. The Company’s income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in the Company’s valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on the Company’s future earnings.
Income tax expense was $ for the three months ended
March 31, 2025, compared to $
Note 17 – Commitments and Contingencies
Insurance
The Company’s insurance coverage is carried with third-party insurers and includes (i) general liability insurance covering third-party exposures, (ii) statutory workers’ compensation insurance, (iii) excess liability insurance above the established primary limits for general liability and automobile liability insurance, (iv) property insurance, which covers the replacement value of real and personal property and includes business interruption, and (v) insurance covering our directors and officers for acts related to our business activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are common for companies with similar types of operations.
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Legal Matters
As of March 31, 2025, the Company was not subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings that it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
WFI Negotiations
In June 2024, Wood Violet, pursuant to its
rights under the WFI acquisition transaction documents (the “WFI Documents”), transferred ownership of WFRSA from Dr.
Elizabeth Pritts MD (“Dr. Pritts”) to a new medical doctor. Upon completion of such transfer, WFRSA terminated Dr.
Pritts’ employment. Since then, various disputes among the parties have arisen under the WFI Documents, including, without
limitation, Wood Violet’s non-payment of the second installment of the purchase consideration of $
On May 7, 2025, Dr. Pritts and The Elizabeth Pritts Revocable Living Trust (the “Pritts Trust”) commenced a legal action against the Company and certain of its subsidiaries. On May 14, 2025, the Company entered into a binding term sheet to settle the action and related disputes with Dr. Pritts and the Pritts Trust. See “Note 18 – Subsequent Events” for additional information.
Seline Miller
On October 7, 2024, Seline Miller, a former NTI employee that had resigned, filed a complaint against NTI alleging that she is entitled to severance and other benefits pursuant to a good reason paragraph in her employment agreement. The Company denies the allegations of wrongdoing in the complaint and intends to vigorously defend the matter. Since this case is in an early stage, the Company is unable to predict the ultimate outcome of the matter and cannot reasonably estimate the potential loss or range of loss it may incur.
Note 18 – Subsequent Events
Nasdaq Compliance - Timely Filing
On April 16, 2025, the Company, received a letter from the Staff indicating that the Company failed to file its Annual Report on Form 10-K for the year ended December 31, 2024 (the “Filing”), on a timely basis and, as such, no longer satisfies Nasdaq Listing Rule 5250(c)(1) (the “Timely Filing Rule”).
The letter had no immediate effect on the listing of the Company’s common stock.
The letter also stated that, in accordance with Nasdaq rules, the Company has 60 calendar days from the date of the letter to submit a plan to regain compliance with the Timely Filing Rule. Should the Staff accept such plan, it could grant an exception of up to 180 calendar days from the Filing’s due date, or until October 13, 2025, to regain compliance.
On April 30, 2025, the Company completed the Filing and, on May 8, 2025, was notified by the Staff that it had regained compliance with the Timely Filing Rule and that the matter was now closed.
Name Change
On April 14, 2025, the Company changed its corporate name to INVO Fertility, Inc., pursuant to an Amendment to Articles of Incorporation filed with the Nevada Secretary of State on April 14, 2025 (the “Name Change”). Pursuant to Nevada law, a stockholder vote was not necessary to effectuate the Name Change.
The Company also announced that it intends for its common stock to cease trading under the ticker symbol “NAYA” and begin trading under its new ticker symbol, “IVF”, on the Nasdaq Capital Market, on April 28, 2025.
Common Stock Issuances
Between April 1, 2025 and the date of this
filing, the Company has issued a total of
shares of common stock for net proceeds of $
In May 2025, the Company issued shares of common stock to consultants in consideration of services rendered. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).
On
May 5, 2025, the Company issued
Warrant Inducement
On April 30, 2025, the Company
entered into an inducement letter agreement (the “Inducement Letter Agreement”) with an institutional investor and existing
holder (the “Holder”) of certain existing warrants (the “Existing Warrants”) to purchase up to shares
of the Company’s common stock (the “Common Stock”). The Existing Warrants were originally issued on January 14, 2025,
with an exercise price of $
The issuance of the shares of Common Stock upon exercise of the Existing Warrants is registered pursuant to a registration statement on Form S-3 (File No. 333-283872), which was declared effective by the Securities and Exchange Commission (the “SEC”) on January 14, 2025.
Pursuant to the Inducement
Letter Agreement, the Holder agreed to exercise the Existing Warrants for cash at the exercise price of $
On May 1, 2025, the Company issued
shares upon the exercise of the Existing Warrants. On May 5, 2025 the Company issued an additional shares of common stock
upon the exercise of additional Existing Warrants. The aggregate
gross proceeds to the Company from the exercise of the Existing Warrants was approximately $
Pritts Litigation and Binding Settlement Term Sheet
On May 7, 2025, Dr. Pritts and the Pritts Trust filed a complaint in the Circuit Court of the State of Wisconsin, Dane County, against the Company and its subsidiaries INVO Centers LLC, Wisconsin Fertility and Reproductive Surgery Associates, S.C., and Wood Violet Fertility LLC. Dr. Pritts and the Pritts Trust have asserted causes of action arising out of the WFI Documents for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract (or, in the alternative, veil piercing), and unjust enrichment.
On May 14, 2025, the Company, Dr. Pritts, the Pritts
Trust, and certain of their respective affiliates entered into binding term sheet (the “Term Sheet”) to settle all disputes
between the parties pursuant to the terms set forth in the Term Sheet (the “Terms”). The parties agreed to cooperate in good
faith to prepare and enter into a final settlement agreement (the “Settlement Agreement”) based on the terms set forth in
the Term Sheet; provided, however, that unless and until the Settlement Agreement is executed, the Terms are binding on the parties.
Under the Terms, Wood Violet agreed to pay Dr. Pritts $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as may be amended, supplemented, or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” “INVO,” or “INVO Fertility, Inc.” refer to INVO Fertility, Inc.
Overview
We are, primarily, a healthcare services company focused on the fertility marketplace and dedicated to expanding access to assisted reproductive technology (“ART”) care for patients in need. Our principal commercial strategy is focused on building, acquiring and operating fertility clinics, including “INVO Centers” dedicated primarily to offering the intravaginal culture (“IVC”) procedure enabled by our INVOcell® medical device (“INVOcell”) and US-based, profitable in vitro fertilization (“IVF”) clinics. As of the date of this filing, we have two operational INVO Centers and one IVF clinic in the United States. We also continue to engage in the sale and distribution of our INVOcell technology solution into third-party owned and operated fertility clinics.
In October 2024, we acquired a 100% interest in Naya Therapeutics, Inc. (“NAYA Therapeutics” or “NTI”), a clinical-stage oncology and autoimmune technology company. As further described below, we recently announced our strategic decision to divest a majority ownership stake in this wholly owned subsidiary, rather than attempt to integrate it with our existing operations. As such, we will return to an exclusive focus on the fertility marketplace, as reflected by our name and ticker symbol changes to “INVO Fertility, Inc.” and “IVF”, respectively. Post-divestiture, it is our intention to retain our minority interest in NAYA Therapeutics.
Fertility Clinics
On August 10, 2023, we consummated the first acquisition of an existing IVF clinic, the Wisconsin Fertility Institute (“WFI”). As an established and profitable clinic, the closing of the WFI acquisition more than tripled our annual revenue and became a major part of our clinic-based operations. The acquisition accelerated our transformation from a medical device company to a healthcare services company and immediately added scale and a significant source of positive cash flow to our operations. The acquisition of profitable IVF clinics complements our efforts to build new INVO Centers, and we expect to continue this strategy to accelerate overall growth.
On March 10 and June 28, 2021, we established joint ventures to open INVO Centers in Birmingham, Alabama, and Atlanta, Georgia, respectively. We established these clinics to increase use of the INVOcell, to accelerate the growth and awareness of the IVC procedure and to expand the availability of statistical data supporting its use. These clinics also enabled us to expand our revenue per fertility cycle from hundreds of dollars (from the sale of each INVOcell device) to thousands of dollars, and to significantly advance our path to profitability. We believe a dedicated INVO Centers requires less investment than a traditional IVF clinic and are operationally efficient, making them ideal for underserved secondary markets. We plan on opening additional, wholly owned INVO Centers in the coming years.
INVOcell Device
Our proprietary technology, INVOcell®, is an innovative medical device that allows fertilization and early embryo development to take place in vivo within the woman’s body. This treatment solution is the world’s first intravaginal culture technique for the incubation of oocytes and sperm during fertilization and early embryo development and provides patients with a natural, intimate, and affordable experience. As reflected in available data, we believe the IVC procedure can deliver comparable results at a lower cost than traditional IVF and is a significantly more effective treatment than intrauterine insemination (“IUI”).
Unlike IVF, where the oocytes and sperm develop into embryos in an expensive laboratory incubator, the INVOcell allows fertilization and early embryo development to take place in the woman’s body. The IVC procedure can provide many benefits, including the following:
| ● | May reduce lab procedures, helping clinics and doctors to increase patient capacity, lower costs and offer an affordable advanced fertility treatment option; | |
| ● | Provide a natural, stable incubation environment; | |
| ● | Offer a more personal, intimate experience in creating a baby; and | |
| ● | Reduce the risk of errors and wrong embryo transfers. |
In both current utilization of the INVOcell, and in clinical studies, the IVC procedure has demonstrated equivalent pregnancy success and live birth rates as IVF.
While INVOcell remains part of our efforts, our commercial and corporate development strategy within the fertility market has expanded to focus more broadly on providing ART services through our emphasis on operating clinics.
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NAYA Therapeutics
On October 11, 2024, we acquired NAYA Therapeutics with the intent to expand our business activities beyond fertility and to create a healthcare portfolio company initially focused on a commercial-stage fertility business combined with a unique clinical-stage oncology and autoimmune technology business.
In April 2025, not having received sufficient shareholder support for key elements of the NAYA Therapeutics transaction at a shareholder meeting scheduled for March 10, 2025 (further detail available below under Recent Developments – 2024 Annual Meeting), upon advice of counsel and of our proxy solicitation firm, as well general feedback from stakeholders, we elected to re-focus exclusively on our fertility business. As such, we recently changed our name to “INVO Fertility, Inc.” and our ticker symbol to “IVF”, and we expect to divest a majority interest in NAYA Therapeutics. This planned divestiture is subject to completing definitive transaction documents and key closing conditions, including receipt of necessary approvals. We anticipate completing the transaction during the second quarter of 2025.
We remain enthusiastic about its prospects and will retain a minority stake in NAYA Therapeutics, which we hope to monetize in the future through value appreciation that could be generated from the clinical development of its bifunctional antibodies. We intend to retain this minority stake in NTI as an asset on our balance sheet.
NAYA Therapeutics is advancing a portfolio of highly-competitive clinical candidates including NY-303, a first-in-class GPC3 x NKp46 bifunctional antibody for the treatment of hepatocellular carcinoma (HCC) with a unique mode of action targeting non-responders to the current immunotherapy standard of care (approximately 70% of the current treatable market) cleared to enroll patients in a Phase 1/2a monotherapy trial in 2025, NY-500, an AI-Optimized bifunctional antibody aiming to be the first PD1 x VEGF therapeutic to market in HCC, and NY-338, a CD38 x NKp46 bifunctional antibody for the treatment of multiple myeloma with a differentiated safety and efficacy profile.
Operations
Our critical management and leadership functions are carried out by our management team. In the Fertility Clinic segment, each clinic is separately staffed with the people necessary to manage daily activities, while most administrative tasks are centralized and handled by the INVO corporate staff. With respect to the INVOcell Device segment, we have contracted out the manufacturing, assembly, packaging, and labeling to a medical manufacturing company, sterilization of the device to a sterilization specialist, and storage and shipping to a third part logistics company. In the Therapeutics Segment, we have a separate staff dedicated to the development of our intellectual property.
Wisconsin Fertility Institute
On August 10, 2023, we consummated the first acquisition of an existing IVF clinic, WFI. As an established and profitable clinic, WFI has a full staff, including a reproductive and endocrinology and infertility medical doctor (“REI”), an OBGYN trained to provide fertility treatment and full complement of medical, laboratory and administration staff. In June 2024, we replaced WFI’s REI with an REI that had previously worked at the clinic and was well acquainted with its staff and procedures. WFI’s staff manages most day-to-day activities, which, except for medical matters, is overseen by our VP operations. Upon closing the acquisition, our corporate staff assumed finance, accounting, human resources and other overhead responsibilities.
Alabama JV
On March 10, 2021, our wholly owned subsidiary, INVO Centers, LLC (“INVO CTR”) formed a joint venture with HRCFG, LLC (“HRCFG”) to establish an INVO Center in Birmingham, Alabama. The name of the joint venture is HRCFG INVO, LLC (the “Alabama JV”). The responsibilities of HRCFG’s principals include providing clinical practice expertise, performing recruitment functions, providing all necessary training, and providing day-to-day management of the INVO Center. Our responsibilities include providing funding to the Alabama JV and being the exclusive provider of the INVOcell. We also perform all required, industry-specific compliance and accreditation functions, and product documentation for product registration. The Birmingham INVO Center opened to patients on August 9, 2021.
Georgia JV Agreement
On June 28, 2021, INVO CTR formed a joint venture with Bloom Fertility, LLC (“Bloom”) to establish an INVO Center in Atlanta, Georgia. The name of the joint venture is Bloom INVO LLC (the “Georgia JV”). The responsibilities of Bloom include providing all medical services required for the operation of the INVO Center. Our responsibilities include providing funding to the Georgia JV, lab services, quality management, and being the exclusive provider of the INVOcell. We also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration. The Atlanta INVO Center opened to patients on September 7, 2021.
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INVOcell
To date, we have completed a series of important steps in the successful development and manufacturing of the INVOcell:
| ● | Manufacturing: We are ISO 13485:2016 certified and manage all aspects of production and manufacturing with qualified suppliers. Our key suppliers, which include NextPhase Medical Devices, R.E.C. Manufacturing Corporation, and Casco Bay Molding, have been steadfast partners since our company first began and can provide us with virtually an unlimited capability to support our growth objectives, with all manufacturing performed in the New England region of the U.S. |
| ● | Raw Materials: All raw materials utilized for the INVOcell are medical grade and commonly used in medical devices (e.g., medical grade silicone, medical grade plastic). Our principal molded component suppliers, Casco Bay Molding and R.E.C. Manufacturing Corporation, are well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are supplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified, and U.S. Food & Drug Administration (“FDA”) registered. |
| ● | US Marketing Clearance: The safety and efficacy of the INVOcell has been demonstrated and cleared for marketing and use by the FDA in November 2015. |
| ● | Clinical: In June 2023, we received FDA 510(k) clearance to expand the labeling on the INVOcell device and its indication for use to provide for a 5-day incubation period. The data supporting the expanded 5-day incubation clearance demonstrated improved patient outcomes. |
NAYA Therapeutics
On October 11, 2024, we acquired NAYA Therapeutics, which has its own staff of experts, advisors and management with a long history in the development of biotechnology assets. The operational approach is based on a diversified intellectual property portfolio that is managed through early stages of development before partnering with large pharmaceutical companies for clinical trial completion and commercialization.
Market Opportunity
Fertility Clinics and INVOcell Device
The global ART marketplace is a large and growing, multi-billion-dollar industry across the world as increased infertility rates, greater patient awareness and improving financial incentives, such as insurance and governmental assistance, continue to drive demand. According to the European Society for Human Reproduction 2024 ART Fact Sheet, one in six couples worldwide experience fertility challenges. Additionally, the worldwide market remains vastly underserved as a high percentage of patients in need of care continue to go untreated each year for many reasons, but key among them are capacity constraints and cost barriers. There have been large increases in the use of IVF, with current estimates of approximately 4 million ART cycles performed globally each year, producing around 1 million babies. Regrettably, this only amounts to less than 5% of the infertile couples worldwide being treated and less than 2% of such couples having a child though IVF. The industry remains capacity constrained which creates challenges in providing access to care for the volume of patients in need. A survey by “Resolve: The National Infertility Association,” indicates the two main reasons couples do not use IVF is cost and geographical availability (and/or capacity).
In the United States, infertility affects an estimated 10%-15% of the couples of childbearing-age, according to the American Society of Reproductive Medicine (2017). According to the Centers for Disease Control (“CDC”), there are approximately 6.7 million women with impaired fertility. Based on 2022 data from the CDC’s National ART Surveillance System, approximately 435,000 IVF cycles were performed across ~500 IVF centers, leaving the U.S. with a large, underserved patient population, similar to most markets around the world.
Our corporate development strategy is aimed at taking advantage of the fertility market’s imbalance between supply and demand. We have identified a number of locations in the United States with attractive demographics and fertility service levels that would be ideal for the opening of new INVO Centers. Similarly, we have identified several profitable US-based IVF practices suitable for acquisition.
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NAYA Therapeutics
According to international market research firm, Research and Markets, the global bispecific antibodies market is projected to witness over 40% compound annual growth rate and reach over $80 billion by 2030.
The development of bispecific antibodies began when scientists recognized the potential of monoclonal antibodies. This marked the start of a new era in therapeutics in the late 1990s. Bispecific antibodies offer multiple benefits, including dual targeting of different antigens, improved specificity, enhanced targeting ability, reduced dose-limiting toxicities, and the potential for drug-drug or drug-to-protein conjugates. These antibodies provide diversity by targeting two different tumor and/or immune cell antigens or epitopes simultaneously.
NAYA Therapeutics’ addressable market is significant. According to a Delveinsight July 2023 report on the multiple myeloma, the global market size in 2022 for multiple myeloma treatments was $20 billion and is expected to continue to grow significantly with the introduction of new products. The current market leader, CD38 targeting monoclonal antibody, Darzalex (daratumumab) reached $8 billion in global sales in 2022.
Market growth is supported by the FDA’s recent approvals for bispecific antibodies, including BCMA targeting CARVYKTI™, TECVAYLI™ in 2022 and GPRC5D targeting Talvey in 2023 from Johnson & Johnson. The new BCMA targeting bispecific antibody from Pfizer, Elrexfio, was approved in August 2023. Additional bispecific antibodies from Abbvie, Regeneron and Roche are in early stage of clinical development. There also are several other GPC3-targeting antibodies or cell therapies being developed by AstraZeneca, Takeda, Legend Biotech, and Adicet Bio in collaboration with Regeneron.
According to Polaris Market Research, the market size for liver cancer treatment was $2.44 billion in 2022 and is expected to grow a compounded annual growth rate of 20% to reach $10.48 billion in 2030. Market growth is supported by increased incidence and the 2022 approval of a new standard of care, Merck’s Keytruda and a combination of two biological drugs commercialized by Genentech Roche, Telecentriq and Avastatin.
Competitive Advantages
INVOcell Device and INVO Centers
Over the past several years, the principal focus of our commercial efforts has shifted from the distribution of our INVOcell device to the provision of fertility clinic services through our INVO Centers and IVF clinic acquisition. For the most part, our clinical activities have been focused on secondary markets where there is a greater imbalance between the need for ART treatment and the number of cycles available. Combined with our ability to offer a wider range of advanced fertility care, including IVC, IVF and IUI, at multiple price points, our clinics have the opportunity for differentiation from our competitors. As with our INVOcell technology, we continuously look for new solutions that can create greater efficiency and effectiveness in the provision of fertility cycles and support our efforts to democratize fertility care.
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While a smaller part of our current business, we continue to believe that our INVOcell device, and the IVC procedure it enables, can play a key role in making advanced fertility care more affordable and accessible. We continue to engage with sympathetic third-party clinics that share our same vision and that use our one-of-a-kind INVOcell device.
Unlike IVF, where the oocytes and sperm develop into embryos in a laboratory incubator, the INVOcell allows fertilization and early embryo development to take place in the woman’s body. We believe that the IVC procedure can provide the following benefits:
| ● | May reduce lab procedures, helping clinics and doctors to increase patient capacity, lower costs and offer a more affordable advanced fertility treatment option; | |
| ● | A natural and stable incubation environment; | |
| ● | A more personal, intimate experience in creating a baby; and | |
| ● | A reduced risk of errors and wrong embryo transfers. |
In both current utilization of the INVOcell, and in clinical studies, the IVC procedure has demonstrated equivalent pregnancy success and live birth rates as IVF and generally may be offered at a significant discount to IVF cycles.
NAYA Therapeutics
Given the rapid growth of the bispecific antibody market, the competition has increased significantly. There are many companies developing bispecific antibodies including Amgen, AstraZeneca, Johnson & Johnson, Merus, Pfizer, Sanofi, Xencor, Zymeworks. We believe that NAYA is uniquely positioned to capitalize on the growing demand for multifunctional antibodies as the current and next generation of therapies demonstrate increased efficacy and safety over the legacy monoclonal antibodies, which are currently dominating the oncology and auto-immune disease market. NAYA Therapeutics’ NY-338, is, to the best of our knowledge, the first CD38-targeting NK engager to enter clinical trials, and the first bispecific antibody to target both NKp46 to redirect NK cells and CD38, with the potential to demonstrate both efficacy and safety advantages. We aim to differentiate ourselves from the companies and products as the first company to enter clinic trials with a GPC3 targeting NK engager bispecific antibody.
Sales and Marketing
Fertility Clinics
Our two INVO Centers and our Wisconsin IVF clinic employ various strategies to build awareness for their services and/or to maintain and grow patient flow and fertility cycle volume. The principal source of patient flow comes through OBGYN referrals and patient word of mouth. Our clinical staff maintain relationships with the local OBGYN community and organize virtual and in person events to showcase our centers’ services, fertility treatment effectiveness statistics and quality of our clinical personnel. We also conduct regular social and other media campaigns to attract new patients and to build awareness.
At the corporate level, we seek to build general awareness for our clinical activities and IVC procedure results with a view to drive patients to our centers and to grow demand for our INVOcell device. These efforts also support our ongoing work to open new INVO Centers and to acquire additional IVF clinics.
The acquisition of existing IVF clinics requires less sales and marketing effort compared to opening new INVO Centers, as they have established patient flows that can be built upon. When entering a new market with an INVO Center, we leverage the experience developed in establishing our Alabama and Georgia joint ventures. We employ fine-tuned strategies to secure patient flow levels that can enable new INVO Centers to become profitable and contribute economically to our overall business as soon as possible. Primarily, our INVO Centers seek to employ local, reputable physicians with strong ties to the OBGYN community.
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INVOcell Device
Historically, our approach to marketing INVOcell was focused on identifying partners within targeted geographic regions that we believe could best support our efforts to expand access to advanced fertility treatment using the INVOcell and IVC procedure for the large number of underserved infertile people around the world. Those efforts resulted in the execution of a series of distribution agreements with partners across the globe. More recently, as we shifted our focus to opening INVO Centers and acquiring IVF clinics, which activities have been centered in the US, and as a result of the limited traction experienced in international markets, proactive marketing efforts for the INVOcell have been limited to the United States. In our domestic market, we distribute the INVOcell directly to a number of third-party IVF clinics and we remain open to pursuing foreign markets that present a realistic opportunity for incremental revenue on a profitable basis.
NAYA Therapeutics
Given the early stage of development for NAYA Therapeutics’ technologies, our focus is entirely on clinical activities. Our strategy is to partner with large pharmaceutical companies for the commercialization of FDA-approved solutions.
Recent Developments
Warrant Inducement
On April 30, 2025, we entered into an inducement letter agreement (the “Inducement Letter Agreement”) with an institutional investor and existing holder (the “Holder”) of certain existing warrants (the “Existing Warrants”) to purchase up to 465,840 shares of our common stock. The Existing Warrants were originally issued on January 14, 2025, with an exercise price of $8.40 per share.
The issuance of the shares of common stock upon exercise of the Existing Warrants is registered pursuant to a registration statement on Form S-3 (File No. 333-283872), which was declared effective by the Securities and Exchange Commission (the “SEC”) on January 14, 2025.
Pursuant to the Inducement Letter Agreement, the Holder agreed to exercise the Existing Warrants for cash at the exercise price of $1.61 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 698,760 shares of common stock at an exercise price of $1.61 per share (the “New Warrant”). The New Warrants will be exercisable upon receipt of such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO with respect to issuance of all of the New Warrants and the shares of common stock upon the exercise thereof (Stockholder Approval, and such date, the “Stockholder Approval Date”) and have a term of five years from the Stockholder Approval Date.
The aggregate gross proceeds to us from the exercise of the Existing Warrants was approximately $750,000, before deducting offering expenses payable by us.
Name Change
On April 14, 2025, we changed our corporate name to INVO Fertility, Inc., pursuant to an Amendment to Articles of Incorporation filed with the Nevada Secretary of State on April 14, 2025 (the “Name Change”). Pursuant to Nevada law, a stockholder vote was not necessary to effectuate the Name Change.
On April 28, 2025, our common stock ceased trading under the ticker symbol “NAYA” and began trading under our new ticker symbol, “IVF”, on the Nasdaq Capital Market.
Reverse Split
On March 18, 2025, we filed a certificate of change (the “Certificate of Change”) with the Secretary of State of the State of Nevada to effectuate a 1-for-12 reverse stock split (the “Reverse Stock Split”) of our shares of common stock, par value $0.0001 per share (“Common Stock”). The Reverse Stock Split became effective at 12:01 a.m., Eastern Time, on Tuesday, March 18, 2025, and our Common Stock began trading on a split-adjusted basis when The Nasdaq Stock Market (“Nasdaq”) opened on March 18, 2025.
When the Reverse Stock Split became effective, every 12 shares of Common Stock issued and outstanding were automatically reclassified and combined into one share of Common Stock, without any change in the par value per share, and a proportionate adjustment was made to our authorized shares of Common Stock such that the Company now has 4,166,667 shares of authorized Common Stock. In addition, a proportionate adjustment has been made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of Common Stock and the number of shares reserved for issuance pursuant to our equity incentive compensation plans. No fractional shares of Common Stock were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of Common Stock had their holdings rounded up to the next whole share.
2024 Annual Meeting
On February 11, 2025, we filed a definitive proxy statement (the “February Proxy”) in connection with our annual meeting of stockholders (the “2024 ASM”). The 2024 ASM was scheduled for March 10, 2025, at 12 pm Eastern Time, and had a record date of January 24, 2025.
The February Proxy included standard proposals (the “Standard Proposals”) for stockholders (i) to elect five new directors (the “New Board Slate”) to our board of directors (the “Board”) and (i) to ratify the appointment of M&K CPAS, PLLC as our independent registered public accounting firm for the fiscal year ended December 31, 2024. The Standard Proposals customarily would have been voted on at a stockholder meeting in calendar year 2024. We opted to delay holding our 2024 annual stockholder meeting until 2025 to hold a single meeting that would cover both the Standard Proposals and a number of special proposals (the “Special Proposals”) requesting that the stockholders approve (i) the issuance, in accordance with Nasdaq Listing Rule 5635(a), of Common Stock, upon conversion of our outstanding Series C-1 and C-2 Non-Voting Convertible Preferred Stock, upon conversion of an outstanding 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Debenture”), and upon settlement of restricted stock units and exercise of stock options issued in exchange for restricted stock units and stock options that were previously granted to certain directors, employees, and consultants of the NAYA Therapeutics, (ii) an amendment to our Second Amended and Restated 2019 Stock Incentive Plan to increase the number of shares of Common Stock available for issuance thereunder to an amount of 8,200,000 (pre-reverse split), equal to approximately 15% of the total of the total issued and outstanding stock, including shares issued upon conversion of our Series C-1 and C-2 Non-Voting Convertible Preferred Stock, and (iii) an amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of Common Stock from 50,000,000 to 100,000,000 after a reverse split of our Common Stock approved by the Board at a ratio ranging from any whole number between 1-for-2 and 1-for-20, as determined by the Board in its discretion, subject to the Board’s authority to abandon such reverse stock split.
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While Standard Proposals received sufficient votes for approval, several Special Proposals did not garner the necessary votes required for approval. Upon advice of counsel and our proxy solicitation firm, the Board approved the postponement of the 2024 ASM to April 9, 2025, the fixing of a new record date on March 10, 2025, and the filing of a new definitive proxy statement (the “March Proxy”).
As a result of this postponement and of the new record date, all votes cast by stockholders with respect to the proposals included in the February Proxy became null and void. The March Proxy was delivered with a new proxy card pursuant to which stockholders were asked to vote again on the Standard Proposals.
The 2024 ASM was held solely to cover the Standard Proposals and to regain compliance under Nasdaq Rules 5620(a) and 5801(s)(2)(G) that require companies listed on Nasdaq to hold an annual meeting of stockholders within twelve months of the fiscal year’s end (the “ASM Rule”). Pursuant to the previously disclosed notice received from the staff (the “Staff”) of The Nasdaq Stock Market LLC, we had until February 25, 2025, to submit a plan to regain compliance under the ASM Rule. We submitted a plan to the Staff in a timely fashion and, on February 28, 2025, the Staff notified us that we were granted an extension until June 30, 2025, to regain compliance with the ASM Rule. On April 15, 2025, the Staff notified us that we were in compliance with the ASM Rule and the matter is now closed.
The Standard Proposals in the March Proxy included (a) the re-election of existing directors to the Board (as would have been submitted for approval had the 2024 ASM been held in calendar year 2024, and in lieu of the New Board Slate included in the February Proxy), and (b) ratification of M&K CPAs LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2024.
At the 2024 ASM, the stockholders approved the Standard Proposals in the March Proxy.
Nasdaq Compliance
Annual Meeting
On January 10, 2025, we received notice (the “ASM Notice”) from the Staff advising us that we no longer complied with the ASM Rule, as we did not hold an annual meeting of stockholders in the fiscal year ended December 31, 2024. The ASM Notice had no immediate effect on the listing of our common stock.
Pursuant to the ASM Notice, Nasdaq gave us 45 calendar days, or until February 24, 2025, to submit a plan to regain compliance. On February 24, 2025, we wrote to the Staff to present our plan to hold the 2024 ASM and, on February 28, 2025, we were granted our request for an extension until June 30, 2025. Having held the 2024 ASM on April 9, 2025, we have completed the required action to regain compliance with the ASM Rule and, on April 15, 2025, we received confirmation from the Staff that we have regained compliance under the ASM Rule.
Minimum Bid
On September 18, 2024, we received a letter from the Staff indicating that we failed to maintain a minimum closing bid price of $1.00 per share for the prior 34 consecutive days and, as such, no longer satisfied Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a grace period of 180 calendar days, or until March 17, 2025, to regain compliance with the Minimum Bid Rule.
On March 18, 2025, we effected a 1-for-12 reverse stock split (the “March 2025 Reverse Split”) in an effort to evidence compliance with the Minimum Bid Rule. To regain compliance with the Minimum Bid Rule, an issuer must evidence a closing bid price of at least $1.00 per share for a minimum of 10, but generally not more than 20, consecutive trading days.
On March 25, 2025, we were notified by the Staff that because we did not evidence compliance with the Minimum Bid Rule by March 17, 2025, the Staff determined that our securities should be delisted from Nasdaq.
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As of the close of business on March 31, 2025, we evidenced a closing bid price of at least $1.00 per share for 10 consecutive business days and, on March 31, 2025, the Staff determined that we had regained compliance with the Minimum Bid Rule. Accordingly, our securities are no longer subject to delisting under the Minimum Bid Rule and the listing matter has been closed.
Timely Filing
On April 16, 2025, we received a letter from the Staff indicating that we failed to file our Annual Report on Form 10-K for the year ended December 31, 2024 (the “10-K Filing”), on a timely basis and, as such, no longer satisfies Nasdaq Listing Rule 5250(c)(1) (the “Timely Filing Rule”).
The letter had no immediate effect on the listing of our common stock.
The letter also stated that, in accordance with Nasdaq rules, we had 60 calendar days from the date of the letter to submit a plan to regain compliance with the Timely Filing Rule. Should the Staff accept such plan, it could grant an exception of up to 180 calendar days from the Filing’s due date, or until October 13, 2025, to regain compliance.
On April 30, 2025, we filed the 10-K Filing and on May 8, 2025 we were notified by the Staff that we had regained compliance with the Timely Filing Rule and that the matter was now closed.
Public Offering
On January 14, 2025, we consummated a public offering (the “January 2025 Offering”) of 1,134,598 units (“Units”), each consisting of either one share of Common Stock, or one pre-funded warrant to purchase one share of Common Stock (the “January 2025 PFWs”) in lieu thereof, and one warrant to purchase one share of Common Stock at an offering price of $8.40 per Unit (the “January 2025 Warrants”). The January 2025 Warrants are exercisable from and after the date of their issuance and expire on the five-year anniversary of such date, at an exercise price of $8.40 per share of Common Stock. Each January 2025 PFW is immediately exercisable at an exercise price of $0.0012 per share and may be exercised at any time until all of the January 2025 PFWs are exercised in full. In connection with the January 2025 Offering, we entered into a securities purchase agreement (the “January 2025 SPA”) with certain institutional investors who purchased Units in this January 2025 Offering.
The securities issued in the January 2025 Offering were offered pursuant to our registration statement on Form S-1, as amended (File No. 333-283872) (the “January 2025 S-1”), initially filed by us with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), on December 17, 2024 and declared effective on January 13, 2025.
We closed the January 2025 Offering on January 14, 2015, raising gross proceeds of approximately $9.5 million before deducting placement agent fees and other offering expenses payable.
The stated intention for net proceed utilization included (i) up to $2,500,000 to fund the second installment of the purchase price for the WFI; (ii) $4,000,000 to redeem 4,000 shares of our Series C-2 preferred stock with a stated value of $4,000,000; (iii) up to $1,950,000 towards outstanding debt obligations that were payable prior to or upon completion of the January 2025 Offering and that we did not otherwise restructure or refinance, and (iv) the balance for clinical trials, product development, marketing, strengthening the corporate management team, working capital, and general corporate purposes.
Also in connection with the January 2025 Offering, on January 13, 2025, we entered into a placement agency agreement (the “January 2025 PAA”) with Maxim Group LLC (“Maxim”), pursuant to which (i) Maxim agreed to act as lead placement agent on a “best efforts” basis in connection with the January 2025 Offering, and (ii) we agreed to pay Maxim an aggregate fee equal to 6.5% of the gross proceeds raised in the January 2025 Offering (or 5.0% in the case of certain investors) and warrants to purchase up to 62,197 shares of Common Stock at an exercise price of $10.50 per share (the “Maxim January 2025 Warrants”). The Maxim January 2025 Warrants are exercisable at any time after the six-month anniversary of the closing date, from time to time, in whole or in part, until five (5) years from the commencement of sales of the securities in the January 2025 Offering. Additionally, we reimbursed Maxim for certain expenses and legal fees up to $90,000.
The January 2025 PAA and the January 2025 SPA contain customary representations, warranties and agreements made by us, customary conditions to closing, indemnification obligations by us, Maxim or the investors, as the case may be and other obligations of the parties.
Pursuant to the terms of the January 2025 SPAs and January 2025 PAA, we agreed that for a period of up to ninety (90) days from the closing of the January 2025 Offering, that neither we nor any subsidiary may (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents or (ii) file any registration statement or prospectus, or any amendment or supplement thereto, in each case, subject to certain exceptions. We also agreed not to effect or enter into an agreement to effect any issuance of Common Stock or Common Stock equivalents involving a Variable Rate Transaction, as defined in the January 2025 SPA, for a period of up to twelve (12) months following the closing of the January 2025 Offering, subject to certain exceptions.
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On January 14, 2025, we entered into a warrant agency agreement (the “January 2025 WAA”), with Transfer Online, Inc. appointing Transfer Online, Inc. as warrant agent for the January 2025 Warrants.
In connection with the January 2025 Offering, on January 13, 2025, we entered into a Class C-2 Preferred Stock Redemption Agreement (the “FNL C-2 Redemption Agreement”) with Five Narrow Lane, LP (“FNL”), pursuant to which we agreed to purchase and acquire from FNL 4,000 shares of our Series C-2 Convertible Preferred Stock (the “C-2 Preferred Stock”) for $4,000,000. Accrued dividends, plus any other accrued payments under the Certificate of Designations for the C-2 Preferred Stock, remain outstanding.
Pritts Litigation and Binding Settlement Term Sheet
On May 7, 2025, Dr. Pritts and the Pritts Trust filed a complaint in the Circuit Court of the State of Wisconsin, Dane County, against us and our subsidiaries INVO Centers LLC, Wisconsin Fertility and Reproductive Surgery Associates, S.C., and Wood Violet Fertility LLC. Dr. Pritts and the Pritts Trust have asserted causes of action arising out of the WFI Documents for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract (or, in the alternative, veil piercing), and unjust enrichment.
On May 14, 2025, INVO, Dr. Pritts, the Pritts Trust, and certain of their respective affiliates entered into binding term sheet (the “Term Sheet”) to settle all disputes between the parties pursuant to the terms set forth in the Term Sheet (the “Terms”). The parties agreed to cooperate in good faith to prepare and enter into a final settlement agreement (the “Settlement Agreement”) based on the terms set forth in the Term Sheet; provided, however, that unless and until the Settlement Agreement is executed, the Terms are binding on the parties. Under the Terms, Wood Violet agreed to pay Dr. Pritts $5,000,000 in full and final settlement and satisfaction of all obligations to Dr. Pritts and her affiliates under the WFI Documents, of which $525,000 was paid concurrently with the execution of the Term Sheet, and the remainder of which is payable as follows: $475,000 due June 30, 2025, $750,000 due September 30, 2025, $750,000 due December 31, 2025, $1,000,000 due March 31, 2026, $2,000,000 due June 30, 2026, and $500,000 due December 31, 2026. INVO shall provide Wood Violet with use of 25% of all gross funding proceeds above $2,000,000 raised within any six-month period to accelerate the payment of scheduled settlement payments in chronological order. The parties will enter into a consent judgment to resolve the complaint that would come into effect upon any breach of the Settlement Agreement. The parties agreed to settle all disputes, including those related to employment, acquisition, tax, and related matters, the termination of all employment, consulting, and similar agreements with Dr Pritts, and other customary terms, including, without limitation, indemnification and release of claims. We are seeking to finalize and execute the Settlement Agreement and related documentation in the second quarter of 2025; however, there can be no assurance that the Settlement Agreement will be finalized and executed in the second quarter of 2025, if at all.
Results of Operations
During the first quarter of 2025, our fertility revenue grew modestly compared to last year despite undergoing some planned downtime in the period. We also implemented certain new operational procedures in our largest clinic, Wisconsin, that caused a slight negative impact to our EBITDA for the quarter, but that we expect to deliver benefits moving forward.
Looking ahead to the rest of 2025, we expect our fertility operations to make further operational progress. As previously highlighted, our Wisconsin clinic, which we acquired in 2023 and which represented our first acquisition of an existing, profitable clinic, serves as a solid foundation for our business. We have resumed active pursuit of additional acquisitions of established and profitable IVF clinics with a view to accelerate our growth and drive our overall business to beyond cash flow break even and to profitability.
Although we anticipate our clinic operations will dominate our commercial efforts and revenue, we also will continue to work on expanding the distribution of the INVOcell to third party fertility clinics.
We expect to benefit from the ongoing growth in the ART market, which continues to experience positive trends, including (1) a large under-served potential patient population, (2) increasing infertility rates around the world, (3) growing awareness and education of fertility treatment options, (4) a growing acceptance of fertility treatment, (5) improvements in procedure techniques and hence improvements in pregnancy success rates, and (6) generally improving insurance (private and public) reimbursement trends.
As previously described, we completed the acquisition of NAYA Therapeutics in October of 2024. The original goal behind this transaction was to expand our business activities beyond fertility and to create a healthcare portfolio company initially focused on a commercial-stage fertility business combined with a unique clinical-stage oncology and autoimmune technology business.
In April 2025, not having received sufficient shareholder support for key elements of the NAYA Therapeutics transaction at a shareholder meeting scheduled for March 10, 2025 (further detail available above under Recent Developments – 2024 Annual Meeting), upon advice of counsel and of our proxy solicitation firm, as well as the hurdles to be overcome to receive shareholder approval, we elected to re-focus exclusively on our fertility business. This change in strategy involved a decision to divest a majority interest in NAYA Therapeutics and changing our name and ticker symbol to “INVO Fertility, Inc.” and “IVF”, respectively. We expect to complete this divestiture in the second quarter of 2025.
We remain enthusiastic about NTI’s prospects and will retain a minority stake, which we hope to monetize in the future through value appreciation that could be generated from the clinical development of its bifunctional antibodies.
Our revised corporate structure is intended to enable both businesses to focus on their respective opportunities and operations, with the existing management team and our board of directors set to lead the public company moving forward. NAYA Therapeutics will return to being a privately held biotechnology company led by its team and a separate board.
Comparison of the Three Months Ended March 31, 2025, and 2024
Revenue
Revenue for the three months ended March 31, 2025 was approximately $1.6 million, compared to approximately $1.6 million for the three months ended March 31, 2024.
Cost of Revenue
Cost of revenue for the three months ended March 31, 2025 was approximately $1.0 million, compared to approximately $0.9 million for the three months ended March 31, 2024. The increase in cost of revenue was primarily related to increased labor costs in the Wisconsin clinic.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the three months ended March 31, 2025 were approximately $2.6 million, compared to approximately $1.4 million for the three months ended March 31, 2024. The increase of approximately $1.2 million, or approximately 77%, was primarily related to the addition of NTI. Non-cash, stock-based compensation expense was $0.1 million in the period, compared to $0.2 million for the same period in the prior year.
Research and Development
Research and development costs for the three months ended March 31, 2025 were approximately $266 thousand compared to approximately $5 thousand for the three months ended March 31, 2024. The increase of approximately $261 thousand was primarily related to the addition of NTI.
Impairment Loss
Impairment loss for the three months ended March 31, 2025 were approximately $14.6 million compared to nil for the three months ended March 31, 2024. The increase of approximately $14.6 million is non cash and results from an impairment on the intangible assets related to the acquisition of NTI. We determined an impairment analysis was needed for the NTI goodwill due to an overall decline in our stock price as of March 31, 2025.
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Gain (loss) from equity investment
Gain from equity investments for the three months ended March 31, 2025 was approximately $15 thousand, compared to a gain of approximately $104 for the three months ended March 31, 2024. The increase in gain is due to an increase in revenue from the equity method JV’s.
Interest Expense and Financing Fees
Interest expense and financing fees were approximately $0.3 million for the three months ended March 31, 2025, compared to approximately $0.2 million for the three months ended March 31, 2024.
Liquidity and Capital Resources
For the three months ended March 31, 2025, and 2024, we had net losses of approximately $17.4 million and $1.6 million, respectively, and an accumulated deficit of approximately $84.9 million as of March 31, 2025. Approximately $14.8 million of the net loss was related to non-cash expenses for the three months ended March 31, 2025, compared to $0.2 million for the three months ended March 31, 2024. We had negative working capital of approximately $17.1 million as of March 31, 2025, compared to negative working capital of approximately $16.6 million as of December 31, 2024. As of March 31, 2025, we had stockholder’s equity of approximately $2.8 million compared to stockholder’s equity of approximately $12.7 million as of December 31, 2024.
We have been dependent on raising capital from debt and equity financings to meet our needs for cash required to fund our operating expenses and investing activities. During the first three months of 2025, we received net proceeds of approximately $8.7 million for a public offering, which was partially used to redeem $4 million of preferred stock and repay approximately $1.1 million in debt. During the first three months of 2024, we received net proceeds of approximately $0.5 million for the sale of our preferred stock and $0.2 million in proceeds from the sale of notes payable. Until we can generate positive cash from operations, we will need to raise additional funding to meet our liquidity needs and to execute our business strategy. As in the past, we will seek debt and/or equity financing, which may not be available on reasonable terms, if at all.
Although our audited consolidated financial statements for the year ended December 31, 2024 were prepared under the assumption that we would continue operations as a going concern, the report of our independent registered public accounting firm that accompanies our consolidated financial statements for the year ended December 31, 2024 contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the consolidated financial statements at that time. Specifically, as noted above, we have incurred significant operating losses and we expect to continue to incur significant expenses and operating losses as we continue to acquire existing IVF clinics, develop the commercialization of our INVOcell solution and proceed with clinical trials of our newly acquired therapeutics. Prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.
Cash Flows
The following table shows a summary of our cash flows for the three months ended March 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | (3,545,534 | ) | (260,557 | ) | ||||
| Investing activities | (14,650 | ) | (24,108 | ) | ||||
| Financing activities | 3,659,195 | 527,366 | ||||||
Cash Flows from Operating Activities
As of March 31, 2025, we had approximately $0.8 million in cash, compared to approximately $0.5 million as of March 31, 2024. Net cash used in operating activities for the first nine months of 2025 was approximately $3.5 million, compared to approximately $0.3 million for the same period in 2024. The increase in net cash used in operating activities was primarily due to the increase in net loss related to the consolidation of NTI.
Cash Flows from Investing Activities
During the three months ended March 31, 2025, cash used in investing activities of $15 thousand was primarily related to the purchase of equipment for WFI. During the three months ended March 31, 2024, cash used in investing activities of $24 thousand was primarily related to the purchase of equipment for WFI.
Cash Flows from Financing Activities
During the three months ended March 31, 2025, cash provided by financing activities of approximately $3.7 million was primarily related to approximately $8.7 million of net proceeds from a public offering which was partially offset by a $4 million redemption of the C-2 Preferred Stock and approximately $1.1 million of debt repayment. During the three months ended March 31, 2024, cash provided by financing activities of approximately $0.5 million was primarily related to the sale of preferred stock and notes payable.
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Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition presented in this section is based upon our audited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. During the preparation of the financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, our results, which allows us to form a basis for making judgments on the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates based on variance with our assumptions and conditions. A summary of significant accounting policies is included below. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
See Note 1 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for a summary of significant accounting policies and the effect on our financial statements.
Stock Based Compensation
We account for stock-based compensation under the provisions of ASC 718-10 Share-Based Payment (formerly SFAS 123R). This statement requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or performance goals in exchange for the award, which is usually immediate but sometimes over a vesting period. Warrants granted to non-employees are recorded as an expense over the requisite service period based on the grant date and the estimated fair value of the grant, which is determined using the Black-Scholes option pricing model.
Revenue Recognition
We recognize revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:
| 1. | Identify the contract with the customer. |
| 2. | Identify the performance obligations in the contract. |
| 3. | Determine the total transaction price. |
| 4. | Allocate the total transaction price to each performance obligation in the contract. |
| 5. | Recognize as revenue when (or as) each performance obligation is satisfied. |
Variable Interest Entities
Our consolidated financial statements include the accounts of NAYA, its wholly owned subsidiaries and variable interest entities (“VIE”), where we are the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC 810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the primary beneficiary has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. We reconsider whether an entity is still a VIE only upon certain triggering events and continually assess our consolidated VIEs to determine if we continue to be the primary beneficiary.
Equity Method Investments
Investments in unconsolidated affiliates in which we exert significant influence but do not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. Our share of the profits and losses from these investments is reported in loss from equity method investment in the accompanying consolidated statements of operations. Management monitors our investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.
Business Acquisitions
We account for all business acquisitions at fair value and expenses acquisition costs as they are incurred. Any identifiable assets acquired and liabilities assumed are recognized and measured at their respective fair values on the acquisition date. If information about facts and circumstances existing as of the acquisition date is incomplete at the end of the reporting period in which a business acquisition occurs, we will report provisional amounts for the items for which the accounting is incomplete. The measurement period ends once we receive sufficient information to finalize the fair values; however, the period will not exceed one year from the acquisition date. Any adjustments to provisional amounts that are identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined.
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Recently Issued Accounting Standards Not Yet Effective or Adopted
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer previously concluded that our disclosure controls and procedures were not effective as of December 31, 2023 due solely to the events that led to the restatements of our financial statements for the periods ending June 30, 2021 through June 30, 2024. Our management determined a material weakness in our internal control over financial reporting existed due to the accounting treatment of our right-of-use (“ROU”) asset and corresponding lease liability for our operating leases on our balance sheet. Management’s review was insufficient to identify an error in the incremental borrowing rate that led to our restatement of our financial statements for the periods.
Our management, including the Chief Executive Officer and the Chief Financial Officer, has since carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. These disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weaknesses described below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (1992 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation of our internal control over financial reporting, management has concluded that, as of March 31, 2025, our internal control over financial reporting was not effective due to material weaknesses related to (1) a limited segregation of duties due to our lack of formal control documentation, limited resources, and the small number of employees, and (2) a lack of adequate accounting resources to properly account for complex accounting transactions. Management has determined that these control deficiencies constitute material weaknesses, which could result in material misstatements of significant accounts and disclosures that could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.
We are in the process of improving our internal control over financial reporting in an effort to remediate these deficiencies. We have added additional accounting resources to properly account for complex accounting transactions. In addition, we are also seeking to improve our formal control documentation, increase our resources, and additional accounting personnel to further segregate duties, improve supervision and increase training of our accounting staff with respect to generally accepted accounting principles, provide additional training to our management regarding use of estimates in accordance with generally accepted accounting principles, increase the use of contract accounting assistance, and increase the frequency of internal financial statement review. We will continue to take additional steps necessary to remediate the material weaknesses described above.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings other than as described below; however, we could be subject to legal proceedings and claims from time to time in the ordinary course of our business, or legal proceedings we considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
Elizabeth Pritts and the Elizabeth Pritts Revocable Living Trust
On May 7, 2025, Dr. Elizabeth Pritts (“Dr. Pritts”) and the Elizabeth Pritts Revocable Living Trust (the “Pritts Trust”) filed a complaint in the Circuit Court of the State of Wisconsin, Dane County, against the Company and its subsidiaries INVO Centers LLC, Wisconsin Fertility and Reproductive Surgery Associates, S.C., and Wood Violet Fertility LLC. Dr. Pritts and the Pritts Trust have asserted causes of action arising out of the WFI Documents for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract (or, in the alternative, veil piercing), and unjust enrichment.
On May 14, 2025, the Company, Dr. Pritts, the Pritts Trust, and certain of their respective affiliates entered into binding term sheet (the “Term Sheet”) to settle all disputes between the parties pursuant to the terms set forth in the Term Sheet (the “Terms”). The parties agreed to cooperate in good faith to prepare and enter into a final settlement agreement (the “Settlement Agreement”) based on the terms set forth in the Term Sheet; provided, however, that unless and until the Settlement Agreement is executed, the Terms are binding on the parties. Under the Terms, Wood Violet agreed to pay Dr. Pritts $5,000,000 in full and final settlement and satisfaction of all obligations to Dr. Pritts and her affiliates under the WFI Documents, of which $525,000 was paid concurrently with the execution of the Term Sheet, and the remainder of which is payable as follows: $475,000 due June 30, 2025, $750,000 due September 30, 2025, $750,000 due December 31, 2025, $1,000,000 due March 31, 2026, $2,000,000 due June 30, 2026, and $500,000 due December 31, 2026. The Company shall provide Wood Violet with use of 25% of all gross funding proceeds above $2,000,000 raised within any six-month period to accelerate the payment of scheduled settlement payments in chronological order. The parties will enter into a consent judgment to resolve the complaint that would come into effect upon any breach of the Settlement Agreement. The parties agreed to settle all disputes, including those related to employment, acquisition, tax, and related matters, the termination of all employment, consulting, and similar agreements with Dr Pritts, and (8) other customary terms, including, without limitation, indemnification and release of claims. The Company seeks to finalize and execute the Settlement Agreement and related documentation in the second quarter of 2025; however, there can be no assurance that the Settlement Agreement will be finalized and executed in the second quarter of 2025, if at all.
Seline Miller
On October 7, 2024, Seline Miller, a former employee of NAYA Therapeutics that had resigned, filed a complaint against NAYA Therapeutics alleging that she is entitled to severance and other benefits pursuant to a good reason clause in her employment agreement. We deny the allegations of wrongdoing in the complaint and intend to vigorously defend the matter. Since this case is in an early stage, we are unable to predict the ultimate outcome of the matter and cannot reasonably estimate the potential loss or range of loss we may incur.
Item 1A. Risk Factors
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Under that certain 7% senior secured convertible promissory debenture in the principal amount of $3,934,146 due December 11, 2025, events of default have occurred, to wit, the failure to make monthly interest payments, to redeem monthly debenture amounts, to file a resale registration statement, and to have such resale registration statement declared effective. As of the date of this filing, the total amount of the default in arrears, including principal and interest, is $1,483,806. The holder of the debenture has not elected to exercise any remedies upon occurrence of event of default and has agreed in principle to exchange the debenture for an amended and restated debenture. The parties seek to finalize and execute the definitive amended debenture in the near term.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
| (a) | None. |
| (b) | None. |
| (c) | Insider Adoption or Termination of Trading Arrangements |
During the fiscal quarter ended March 31, 2025, none
of our directors or officers informed us of the
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Item 6. Exhibits
| * Filed herewith. | ||
| ** Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 20, 2025.
| INVO Fertility, Inc. | ||
| Date: May 20, 2025 | By: | /s/ Steven Shum |
| Steven Shum, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 20, 2025 | By: | /s/ Andrea Goren |
| Andrea Goren, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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