INVO BioScience(INVO) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements and Industry Data This section provides important disclaimers regarding forward-looking statements and the reliability of industry data included in the report Forward-Looking Statements This section highlights that the Form 10-Q contains forward-looking statements, which are subject to substantial risks and uncertainties - Forward-looking statements are identified by terms like 'may,' 'should,' 'expects,' 'intends,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'potential,' 'continue,' or their negatives[8] - Actual results or events could differ materially from disclosed plans, intentions, and expectations due to substantial known and unknown risks and uncertainties[8] - The company does not undertake to update or revise any forward-looking statements to reflect actual results or changes in circumstances, except as required by law[9] Industry Data The report includes market and industry data obtained from various sources, believed reliable but not independently verified for accuracy - Market and industry data are sourced from internal surveys, market research, consultant surveys, public information, governmental agencies, and industry publications[10] - While believed to be reliable, the accuracy and completeness of third-party market and industry data are not guaranteed and have not been independently verified by the company[10] PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of the company's financial performance and condition Financial Statements (Unaudited) This section presents INVO Fertility, Inc.'s unaudited consolidated financial statements, including Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Assets | | | | Total current assets | $1,399,353 | $1,318,331 | | Property and equipment, net | $428,746 | $466,684 | | Intangible assets, net | $1,535,845 | $3,275,931 | | Goodwill | $5,878,986 | $5,878,986 | | Total assets | $19,319,239 | $46,449,182 | | Liabilities & Equity | | | | Total current liabilities | $12,463,211 | $17,926,441 | | Total liabilities | $16,687,766 | $26,244,709 | | Total stockholders' equity | $2,631,473 | $12,747,473 | - Total assets decreased significantly from $46.4 million at December 31, 2024, to $19.3 million at June 30, 2025, primarily due to the divestiture of NAYA Therapeutics and related reclassifications[13][24][32] - Total liabilities decreased from $26.2 million to $16.7 million, and total stockholders' equity decreased from $12.7 million to $2.6 million over the same period[13] Consolidated Statements of Operations This statement presents the company's revenues, expenses, and net loss for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $1,863,654 | $1,836,597 | $3,500,839 | $3,412,883 | | Total operating expenses | $4,853,742 | $3,689,510 | $7,690,455 | $6,773,833 | | Loss from operations | $(2,990,088) | $(1,852,913) | $(4,189,616) | $(3,360,950) | | Net loss from continuing operations | $(3,209,094) | $(2,245,170) | $(4,701,365) | $(3,841,683) | | Loss on discontinued operations | $(2,075,764) | $- | $(16,987,079) | $- | | Net loss | $(5,284,858) | $(2,245,170) | $(22,688,444) | $(3,841,683) | | Basic Loss per common share | $(13.30) | $(22.39) | $(75.85) | $(45.01) | - Net loss significantly increased for the six months ended June 30, 2025, to $22.7 million from $3.8 million in the prior year, primarily driven by a $17.0 million loss from discontinued operations related to NTI[16][288] - Total revenue for the six months ended June 30, 2025, increased slightly to $3.5 million from $3.4 million in the prior year, with clinic revenue being the primary driver[16][281] Consolidated Statements of Stockholders' Equity This statement details changes in the company's equity accounts for the six months ended June 30, 2025, and 2024 - Total stockholders' equity decreased from $12,747,473 as of December 31, 2024, to $2,631,473 as of June 30, 2025, primarily due to a net loss of $22,688,444 and preferred stock redemption of $4,000,000, partially offset by common stock issuances and additional paid-in capital[19][289] - The company underwent two reverse stock splits: 1-for-12 in March 2025 and 1-for-3 in July 2025, which are reflected as if they occurred at the earliest period presented[123][124] Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,263,155) | $(1,716,214) | | Net cash used in investing activities | $(30,096) | $(29,239) | | Net cash provided by financing activities | $5,101,036 | $2,455,963 | | Increase (decrease) in cash and cash equivalents | $(192,215) | $710,510 | | Cash and cash equivalents at end of period | $549,181 | $942,934 | - Net cash used in operating activities increased significantly to $5.3 million for the six months ended June 30, 2025, from $1.7 million in the prior year, primarily due to the increased net loss from the consolidation of NTI[21][293] - Cash provided by financing activities was $5.1 million in 2025, mainly from $8.7 million in public offering proceeds, partially offset by a $4 million preferred stock redemption and $1.1 million debt repayment[21][295] Notes to the Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering significant accounting policies, business operations, liquidity, debt, equity, and recent events Note 1 – Summary of Significant Accounting Policies This note outlines the company's business operations, strategic focus on fertility, and key accounting policies for revenue recognition and consolidation - INVO Fertility, Inc. is a healthcare services and technology company focused on the fertility marketplace, aiming to expand access to assisted reproductive technology (ART) care[24] - The company's strategy involves building, acquiring, and operating fertility clinics, including 'INVO Centers' utilizing its INVOcell medical device and US-based profitable in vitro fertilization (IVF) clinics[24] - The company divested 80.1% of NAYA Therapeutics, Inc. (NTI) in Q2 2025 to focus exclusively on the fertility marketplace, retaining a 19.9% ownership[24][32] - Revenue from INVOcell sales is recognized upon shipment, while clinic and lab services revenue is recognized when services are performed[47] Note 2 – Liquidity This note discusses the company's liquidity position, historical reliance on financing, and the independent auditor's going concern qualification | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(22,688,444) | $(3,841,683) | | Accumulated deficit (as of June 30, 2025) | $(90,203,241) | N/A | | Cash (as of June 30) | $549,181 | $942,934 | | Net cash used in operating activities | $(5,263,155) | $(1,716,214) | - The company has historically relied on debt and equity financings to fund operations and investing activities, and will need additional funding to meet liquidity needs and execute its business strategy[52][54] - The independent auditor's report for December 31, 2024, included a going concern qualification, expressing substantial doubt about the company's ability to continue as a going concern due to significant operating losses[55] Note 3 – Business Combinations This note details the acquisition of NAYA Therapeutics, Inc. (NTI) and its subsequent divestiture, including the financial impact of these transactions - On October 11, 2024, the company acquired NAYA Therapeutics, Inc. (NTI) through a merger, issuing common stock, pre-funded warrants, Series C-1 and C-2 Preferred Stock, and a Convertible Debenture as consideration[56][57][58][59] - On June 2, 2025, the company divested an 80.1% ownership stake in NTI, redeeming all Series C-1 Preferred Stock and retaining a 19.9% interest, along with a secured convertible promissory note from NTI for $4,803,175[61] | Metric | Amount | | :--------------------------------- | :------------ | | Loss on disposition of 80.1% NTI ownership | $1,534,517 | | Loss on discontinued operations (6 months ended June 30, 2025) | $16,452,562 | | - Impairment loss (NTI goodwill) | $14,645,069 | Note 4 – Variable Interest Entities This note explains the company's accounting treatment for its joint ventures, consolidating Bloom INVO, LLC as a VIE and using the equity method for HRCFG INVO, LLC - The company consolidates Bloom INVO, LLC (Georgia JV) as a Variable Interest Entity (VIE) because it is the primary beneficiary, controlling activities and absorbing significant losses[65][69] - The company accounts for HRCFG INVO, LLC (Alabama JV) as an unconsolidated VIE using the equity method, as there is no primary beneficiary[70][71] | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Investment in unconsolidated VIEs (HRCFG INVO, LLC) | $645,944 | $740,759 | | Earnings (loss) from unconsolidated VIEs (6 months ended June 30, 2025) | $(4,815) | $17,950 | | Net profit (loss) of unconsolidated VIEs (6 months ended June 30, 2025) | $1,273 | $35,900 | Note 5 – Agreements and Transactions with VIE's This note details the company's revenue and outstanding balances from transactions with its Variable Interest Entities | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | INVOcell revenue from Bloom INVO, LLC | $9,000 | $13,500 | $15,000 | | INVOcell revenue from Unconsolidated VIEs | $- | $3,000 | $7,500 | | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Accounts receivable from Bloom INVO, LLC | $37,500 | $37,500 | | Notes payable to Bloom INVO, LLC | $504,573 | $497,321 | | Accounts receivable from Unconsolidated VIEs | $25,500 | $22,500 | Note 6 – Inventory This note provides a breakdown of the company's inventory components as of June 30, 2025, and December 31, 2024 | Inventory Component | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Raw materials | $51,501 | $53,537 | | Finished goods | $161,110 | $166,227 | | Total inventory | $212,611 | $219,764 | Note 7 – Property and Equipment This note details the company's property and equipment, net of accumulated depreciation, and related depreciation expenses | Property and Equipment, Net | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Manufacturing equipment | $132,513 | $132,513 | | Medical equipment | $506,672 | $483,145 | | Office equipment | $89,904 | $89,904 | | Leasehold improvements | $96,817 | $96,817 | | Less: accumulated depreciation | $(397,160) | $(335,695) | | Total equipment, net | $428,746 | $466,684 | - Depreciation expense for the six months ended June 30, 2025, was $61,465, compared to $25,963 for the same period in 2024[77] - The company recognized no loss on disposal of fixed assets for the six months ended June 30, 2025, compared to $511,663 in the prior year[78] Note 8 – Intangible Assets and Goodwill This note provides a breakdown of intangible assets and goodwill, including impairment losses and amortization expenses | Intangible Asset Component | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Tradename | $253,000 | $510,000 | | Noncompetition agreement | $1,980,500 | $3,961,000 | | Goodwill | $5,878,986 | $5,878,986 | | Less: accumulated amortization | $(697,655) | $(938,069) | | Total intangible assets | $7,414,831 | $9,411,917 | - An impairment loss of $1,397,353 was recognized on the Wisconsin Fertility Institute's noncompetition agreement due to the release of Dr. Pritts from her agreement as part of a settlement[79][181] - Goodwill of NTI was impaired by $14,645,069 as of March 31, 2025, due to a decline in the company's stock price, and these assets were derecognized upon NTI's disposition[81][82] - Amortization expenses for intangible assets were $342,733 for the six months ended June 30, 2025, compared to $204,375 in the prior year[81] Note 9 – Leases This note details the company's operating lease assets and liabilities, including future minimum lease payments and weighted average lease terms | Lease Component | June 30, 2025 | | :--------------------------------- | :------------ | | ROU assets – operating lease | $2,160,380 | | Current operating lease liability | $256,620 | | Long-term operating lease liability | $2,058,063 | | Total lease liabilities | $2,314,683 | | Future Minimum Lease Payments | Amount | | :--------------------------------- | :------------ | | 2025 | $255,902 | | 2026 | $518,972 | | 2027 | $489,807 | | 2028 | $379,172 | | 2029 and beyond | $1,950,150 | | Total future minimum lease payments | $3,594,003 | | Less: Interest | $(1,279,320) | | Total operating lease liabilities | $2,314,683 | - The weighted average remaining lease term for operating leases was 91 months, and the weighted average discount rate was 12.2% for the six months ended June 30, 2025[84] Note 10 – Notes Payable This note provides a detailed breakdown of the company's notes payable, including related party notes, convertible notes, and debentures | Notes Payable Component | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Related party demand notes | $880,000 | $880,000 | | Convertible notes payable | $50,000 | $235,000 | | Cash advance agreement | $6,106 | $258,202 | | Note payable (35%-115% cumulative interest) | $1,131,579 | $1,280,986 | | Convertible debenture payable (7% annual interest) | $2,753,175 | $4,434,146 | | Less debt discount and financing costs | $(10,421) | $(141,328) | | Total, net of discount | $4,810,439 | $7,466,784 | | Less current portion | $3,768,947 | $6,338,071 | | Long-term portion of notes payable | $1,041,492 | $1,128,713 | - The company's notes payable decreased from $7.47 million at December 31, 2024, to $4.81 million at June 30, 2025, primarily due to repayments and conversions[87] - The 7.0% Senior Secured Convertible Debenture was exchanged for an Amended and Restated Debenture on May 23, 2025, with a principal of $4,803,175 and a maturity date of February 11, 2026[105][111] Note 11 – Related Party Transactions This note discloses outstanding demand promissory notes and accrued compensation with related parties, including entities controlled by the CEO and CFO - The company has outstanding demand promissory notes totaling $880,000 with related parties, including JAG Multi Investments LLC and entities controlled by its CEO and CFO, accruing 10% annual interest[118][120] - Interest incurred on these demand notes for the six months ended June 30, 2025, was $40,222, with a total outstanding balance of $1,085,010 including principal and accrued interest[121] - As of June 30, 2025, accrued compensation owed was $365,694, primarily for accrued paid time off[122] Note 12 – Stockholders' Equity This note details changes in stockholders' equity, including reverse stock splits, preferred stock redemptions, and public offerings - The company executed two reverse stock splits: 1-for-12 effective March 18, 2025, and 1-for-3 effective July 21, 2025, and increased authorized common stock to 50,000,000 shares on July 23, 2025[123][124][125] - Series C-1 Preferred Stock was redeemed on June 2, 2025, at a redemption price of 113.855837742504 shares of NTI Class A Common Stock per share[132] - Series C-2 Preferred Stock, initially classified as mezzanine equity due to redemption triggers, was reclassified to permanent equity after an amendment on June 27, 2025, removed 'Bankruptcy Triggering Event' and 'Change of Control' redemption rights[137][141] - The company completed a public offering in January 2025, raising $8.7 million in net proceeds, which were partially used to redeem $4 million of Series C-2 Preferred Stock and repay debt[147][149] Note 13 – Equity-Based Compensation This note provides information on the company's stock incentive plan, stock option activity, and related compensation expenses - The 2019 Stock Incentive Plan was amended on June 25, 2025, to increase the number of shares available for issuance to 400,000[155] | Stock Options Activity | Number of Shares | Weighted Average Exercise Price | | :--------------------------------- | :--------------- | :------------------------------ | | Outstanding as of December 31, 2024 | 2,749 | $548.05 | | Canceled | (677) | $2,313.11 | | Balance as of June 30, 2025 | 2,072 | $515.34 | | Exercisable as of June 30, 2025 | 1,940 | $1,724.51 | - For the six months ended June 30, 2025, the company incurred $82,530 in expense related to the vesting of options[156] Note 14 – Unit Purchase Options and Warrants This note details the company's warrant activity, including grants, exercises, and proceeds from warrant exercises | Warrants Activity | Number of Warrants | Weighted Average Exercise Price | | :--------------------------------- | :----------------- | :------------------------------ | | Outstanding as of December 31, 2024 | 127,422 | $68.50 | | Granted | 937,508 | $3.85 | | Exercised | (536,732) | $2.42 | | Balance as of June 30, 2025 | 528,198 | $27.30 | - In January 2025, the company issued 378,199 units in a public offering, each including a warrant exercisable at $25.20 per share, expiring in five years[162] - In April 2025, an institutional investor exercised existing warrants for cash at $4.83 per share, resulting in gross proceeds of approximately $927,102, and received new unregistered warrants[164][166][167] Note 15 – Segment Reporting This note provides financial information by segment, including revenue and profit (loss) for Fertility Clinic Services, INVOcell Device, and Therapeutics - The company operates in three segments: Clinic Services (WFI, Atlanta Clinic), INVOcell Device (manufacture and sales of INVOcell), and Therapeutics (NTI, divested 80.1% in Q2 2025)[169][170] | Metric (Six months ended June 30, 2025) | Fertility Clinic Services | INVOcell Device | Therapeutics | Total | | :--------------------------------- | :------------------------ | :-------------- | :----------- | :---------- | | Revenue from external customers | $3,453,647 | $47,192 | $- | $3,500,839 | | Intersegment revenues | $- | $13,500 | $- | $13,500 | | Segment profit (loss) | $(1,137,084) | $48,782 | $(16,452,562) | $(17,554,365) | | Metric (Six months ended June 30, 2024) | Fertility Clinic Services | INVOcell Device | Therapeutics | Total | | :--------------------------------- | :------------------------ | :-------------- | :----------- | :---------- | | Revenue from external customers | $3,345,120 | $67,763 | $- | $3,412,883 | | Intersegment revenues | $- | $15,000 | $- | $15,000 | | Segment profit (loss) | $572,690 | $69,177 | $- | $626,867 | Note 16 – Income Taxes This note describes the company's accounting for income taxes, including deferred tax assets, valuation allowances, and effective tax rates - The company uses the asset and liability method for income taxes, recognizing deferred tax assets and liabilities for temporary differences[173] - A valuation allowance is established for all deferred tax assets and carryforwards due to uncertainty regarding their recoverability[173] - Income tax expense was $0 for the six months ended June 30, 2025, compared to $1,836 for the same period in 2024, with a 0% effective income tax rate for 2025[174] Note 17 – Commitments and Contingencies This note outlines the company's legal proceedings and commitments, including a significant settlement related to the WFI acquisition - The company is not subject to any material legal proceedings as of June 30, 2025, but may face claims in the ordinary course of business[177] - A binding term sheet was entered into on May 14, 2025, to settle disputes with Dr. Pritts and the Pritts Trust regarding the WFI acquisition, involving a $5,000,000 settlement payment schedule[180] - The settlement resulted in a gain on settlement of $714,500 and an impairment loss of $1,397,353 due to the release of Dr. Pritts from her non-compete agreement[181] Note 18 – Subsequent Events This note details significant events that occurred after June 30, 2025, including equity transactions, stock authorizations, and amendments to loan agreements - Subsequent to June 30, 2025, an institutional investor exercised its Additional Investment Right multiple times, acquiring Series C-2 Preferred shares for cash, leading to adjustments in the conversion price[182][183][184][185] - The company's authorized common stock was increased to 50,000,000 shares on July 23, 2025[187] - Since June 30, 2025, the company issued 3,534,906 shares of common stock upon conversion of 5,784 shares of Series C-2 Preferred, without receiving cash proceeds[188] - On August 13, 2025, the Loan Agreement with Decathlon Alpha V LP was amended, increasing monthly payments and waiving a default event related to the Pritts settlement[189] - On August 13, 2025, the JAG Notes were amended, extending the maturity date, outlining repayment acceleration terms based on future funding, and allowing conversion into common stock at $2.00 per share, along with a warrant issuance[190] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows, highlighting key business strategies, recent developments, and critical accounting policies Overview This overview describes INVO Fertility, Inc.'s business model, strategic shift to focus on fertility, and the market opportunity for its INVOcell device - INVO Fertility, Inc. is a healthcare services and technology company focused on expanding access to assisted reproductive technology (ART) care, primarily through operating fertility clinics and its INVOcell medical device[193] - The company acquired NAYA Therapeutics in October 2024 but divested an 80.1% ownership interest in May 2025 to refocus exclusively on the fertility marketplace, changing its name and ticker symbol to 'INVO Fertility, Inc.' and 'IVF'[194][201] - The INVOcell device enables intravaginal culture (IVC) procedures, offering a natural, intimate, and affordable alternative to traditional IVF with comparable pregnancy success rates[197][198][215] - The global ART market is large and growing, with significant unmet patient needs due to capacity constraints and cost barriers, which the company aims to address through its strategy of acquiring profitable IVF clinics and opening new INVO Centers[209][210][211] Recent Developments This section highlights key corporate actions and financial events, including stock splits, the NTI divestiture, and litigation settlements - The company's authorized common stock was increased to 50,000,000 shares on July 23, 2025, following stockholder approval[221] - A 1-for-3 reverse stock split was approved on June 30, 2025, and became effective on July 21, 2025, following a previous 1-for-12 reverse split in March 2025[222][248] - The majority stake in NTI was divested on June 2, 2025, with the company retaining a 19.9% interest and receiving a secured convertible promissory note[224] - An Additional Investment Right agreement with FNL allows FNL to purchase up to $10,000,000 of Series C-2 Preferred Shares for cash or in exchange for portions of the Amended and Restated Debenture[225][227] - The company settled litigation with Dr. Pritts and the Pritts Trust related to the WFI acquisition, agreeing to a $5,000,000 payment schedule[241] - A public offering in January 2025 raised approximately $9.5 million gross proceeds, used partly for WFI acquisition, Series C-2 Preferred stock redemption, and debt obligations[258][259] Results of Operations This section analyzes the company's financial performance, including revenue, expenses, and net loss, for the three and six months ended June 30, 2025, and 2024 - Fertility revenue grew modestly in the first half of 2025, and the company expects further operational progress, actively pursuing acquisitions of profitable IVF clinics[265][266] - The company re-focused exclusively on its fertility business in April 2025 after insufficient shareholder support for NAYA Therapeutics transaction elements, divesting a majority interest in NTI[270] | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Revenue | $1.9 million | $1.8 million | +$0.1 million | | Cost of Revenue | $1.1 million | $0.9 million | +$0.2 million | | Selling, General, and Administrative Expenses | $2.2 million | $2.6 million | -$0.4 million | | Impairment Loss | $1.4 million | $- | +$1.4 million | | Loss from debt extinguishment | $0.7 million | $- | +$0.7 million | | Gain on settlement | $0.7 million | $- | +$0.7 million | | Interest Expense and Financing Fees | $0.2 million | $0.4 million | -$0.2 million | | Loss on Discontinued Operations | $2.1 million | $- | +$2.1 million | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :--------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Revenue | $3.5 million | $3.3 million | +$0.2 million | | Cost of Revenue | $2.1 million | $1.7 million | +$0.4 million | | Selling, General, and Administrative Expenses | $3.8 million | $4.1 million | -$0.3 million | | Impairment Loss | $1.4 million | $- | +$1.4 million | | Loss from debt extinguishment | $0.7 million | $- | +$0.7 million | | Gain on settlement | $0.7 million | $- | +$0.7 million | | Interest Expense and Financing Fees | $0.5 million | $0.6 million | -$0.1 million | | Loss on Discontinued Operations | $18.0 million | $- | +$18.0 million | Liquidity and Capital Resources This section discusses the company's cash position, working capital, and reliance on external financing to fund operations and strategic initiatives | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Net loss (6 months ended June 30, 2025) | $(22.7) million | N/A | | Accumulated deficit (as of June 30, 2025) | $(90.2) million | N/A | | Negative working capital | $(6.3) million | $(5.6) million | | Stockholder's equity | $2.5 million | $12.7 million | - The company relies on debt and equity financings to meet cash needs and will require additional funding to achieve positive cash flow from operations and execute its business strategy[290] - The independent auditor's report for December 31, 2024, included a going concern qualification, indicating substantial doubt about the company's ability to continue operations[291] | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(5,263,155) | $(1,716,214) | | Investing activities | $(30,096) | $(29,239) | | Financing activities | $5,101,036 | $2,455,963 | Critical Accounting Policies and Estimates This section outlines the significant accounting policies and estimates that are crucial to understanding the company's financial statements, including those for business combinations, discontinued operations, and revenue recognition - The company's financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts[296] - Key accounting policies include business acquisitions (fair value, expensing acquisition costs), discontinued operations (ASC 205 for NTI divestiture), variable interest entities (consolidation under ASC 810), and equity method investments[298][299][301][302] - Revenue recognition follows ASC 606, with a five-step approach, recognizing INVOcell sales upon shipment and clinic/lab services when performed[312][313][315] Quantitative and Qualitative Disclosures about Market Risks As a smaller reporting company, INVO Fertility, Inc. is exempt from providing quantitative and qualitative disclosures about market risks - The company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide information on market risks[317] Controls and Procedures This section details the company's evaluation of its disclosure controls and procedures and internal control over financial reporting, identifying material weaknesses and ongoing remediation efforts Evaluation of Disclosure Controls and Procedures This section reports the CEO and CFO's conclusion on the effectiveness of disclosure controls and procedures, noting identified material weaknesses - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses[320] - A material weakness was previously identified in internal control over financial reporting due to accounting treatment errors for right-of-use assets and lease liabilities, leading to financial statement restatements[319] Management's Report on Internal Control over Financial Reporting This section presents management's conclusion on the effectiveness of internal control over financial reporting, detailing identified material weaknesses and remediation efforts - Management concluded that internal control over financial reporting was not effective as of June 30, 2025, due to material weaknesses[321] - Identified material weaknesses include limited segregation of duties due to lack of formal control documentation, limited resources, and a small number of employees, as well as a lack of adequate accounting resources for complex transactions[321] - Remediation efforts include adding accounting resources, improving formal control documentation, increasing supervision and training, and increasing the frequency of internal financial statement review[322] Limitations on Effectiveness of Controls and Procedures This section acknowledges that control systems provide reasonable, but not absolute, assurance and can be subject to circumvention - Control systems provide only reasonable, not absolute, assurance and can be circumvented by individual acts, collusion, or management override[323] Changes in Internal Control over Financial Reporting This section confirms that no material changes to internal control over financial reporting occurred during the reporting period - There were no changes to internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, the controls[325] PART II. OTHER INFORMATION This section covers additional information not included in Part I, such as legal proceedings, equity sales, and exhibits Legal Proceedings This section outlines the company's legal matters, including a general statement on potential litigation and specific details regarding the settlement of the Dr. Pritts litigation - The company is not currently subject to any material legal proceedings, but may face claims in the ordinary course of business[326] - A binding term sheet was entered into on May 14, 2025, to settle disputes with Dr. Elizabeth Pritts and the Pritts Trust related to the Wisconsin Fertility Institute acquisition, involving a $5,000,000 payment schedule[327][328] Risk Factors As a smaller reporting company, INVO Fertility, Inc. is not required to provide a detailed discussion of risk factors in this quarterly report - Smaller reporting companies are exempt from providing the information required by this item[329] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's unregistered sales of equity securities, primarily through the exercise of Series C-2 Preferred Stock and conversion of debt into common stock - Subsequent to June 30, 2025, an institutional investor exercised rights to acquire Series C-2 Preferred shares for cash, with conversion prices adjusting accordingly[330][331] - During Q2 2025, 87,719 shares of common stock were issued upon conversion of $250,000 of the Amended and Restated Debenture, relying on Section 3(a)(9) of the Securities Act[331] - Since June 30, 2025, 3,534,906 shares of common stock were issued upon conversion of 5,784 shares of Series C-2 Preferred, also under Section 3(a)(9) exemption[333] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[334] Mine Safety Disclosure This item is not applicable to the company - This item is not applicable[335] Other Information This section confirms that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[335] Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to agreements, certifications, and XBRL-related documents - Exhibits include the Third Amendment to the RSLA, Demand Note Amendment Letter, Certifications of Principal Executive and Financial Officers, and Inline XBRL documents[337] Signatures This section contains the official signatures of the company's executive and financial officers, certifying the accuracy of the report Signatures The report is duly signed on behalf of INVO Fertility, Inc. by its Chief Executive Officer, Steven Shum, and Chief Financial Officer, Andrea Goren, on August 14, 2025 - The report was signed by Steven Shum, Chief Executive Officer, and Andrea Goren, Chief Financial Officer, on August 14, 2025[341]