UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
For
the quarterly period ended
OR
For the transition period from ________________ to ________________
Commission
File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The
|
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 (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |||
| Smaller
reporting company |
Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 19, 2024, the Registrant had shares of common stock outstanding.
Explanatory Note
The impact of this error is limited to the Company’s assets and liabilities, and the error did not impact the Company’s revenue, results of operation, earnings (loss) per share, or net equity. The error has not resulted in any change to the Company’s business plan or operations and does not impact any regulatory requirements or management compensation.
This Amendment does not reflect events occurring after the filing of our Original Filing, or modify or update those disclosures, except as disclosed in our financial statement footnote subsequent event disclosures. The following sections of our Original Filing have been amended:
● Part I – Item 1 - Financial Information of our Original Filing has been amended; and
● Part II - Item 4 - Controls and Procedures
This Amendment has been signed as of a current date and all certifications of our Chief Executive Officer and Chief Financial Officer are given as of a current date. Accordingly, this Amendment should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing.
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, including, without limitation, the acquistion of NAYA Therapeutics, Inc. (“Legacy NAYA”); |
| ● | 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.
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NAYA BIOSCIENCES, INC. (FORMER NAME: INVO BIOSCIENCE, INC.)
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 (Restated) | 2023 (Restated) | |||||||
(unaudited) | (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 | ||||||||
| Investment in Legacy NAYA | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued compensation | ||||||||
| 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 | ||||||||
| Stockholders’ equity | ||||||||
| Series A Preferred Stock, $ par value; shares authorized; and issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Series B Preferred Stock, $ par value; shares authorized; and issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Common Stock, $ par value; shares authorized; and issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
NAYA BIOSCIENCES, INC. (FORMER NAME: INVO BIOSCIENCE, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| Clinic revenue | $ | $ | $ | $ | ||||||||||||
| Product revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Gain (loss) from equity method joint ventures | ( | ) | ||||||||||||||
| Gain (loss) on disposal of fixed assets | ( | ) | ||||||||||||||
| Gain on lease termination | ||||||||||||||||
| Loss on debt extinguishment | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency exchange loss | ( | ) | ( | ) | ||||||||||||
| 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.
| 4 |
NAYA BIOSCIENCES, INC. (FORMER NAME: INVO BIOSCIENCE, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | Additional Paid-in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued to directors and employees | - | - | ||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Proceeds from the sale of common stock, net of fees and expenses | - | - | ||||||||||||||||||||||||||||||||||
| Common stock issued with notes payable | - | - | ||||||||||||||||||||||||||||||||||
| Options exercised for cash | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Warrants issued with notes payable | - | - | - | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balances, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common stock issued to directors and employees | - | - | ||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Proceeds from the sale of common stock, net of fees and expenses | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees | - | - | - | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balances, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common stock issued to directors and/or employees | - | - | - | |||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Preferred stock issued | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balances, March 31 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common stock issued to directors and/or employees | - | - | - | |||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Preferred stock issued | - | - | ||||||||||||||||||||||||||||||||||
| Proceeds from the sale of common stock, net of fees and expenses | - | - | ||||||||||||||||||||||||||||||||||
| Warrants issued with notes payable | - | - | - | |||||||||||||||||||||||||||||||||
| Convertible note modification/extinguishment | - | - | - | |||||||||||||||||||||||||||||||||
| Warrants issued for services | ||||||||||||||||||||||||||||||||||||
| Debt conversion | - | - | ||||||||||||||||||||||||||||||||||
| Warrant exercise | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Deemed dividend | - | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balances, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
NAYA BIOSCIENCES, INC. (FORMER NAME: INVO BIOSCIENCE, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 (Restated) | |||||||
| Cash flows from 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 | ||||||||
| Loss (gain) from equity method investment | ( | ) | ||||||
| Loss from debt extinguishment | ||||||||
| 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 from investing activities: | ||||||||
| Payments to acquire property, plant, and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of fixed assets | ||||||||
| Investment in joint ventures | ( | ) | ||||||
| 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 | ||||||||
| Proceeds from option exercise | ||||||||
| Principal payments on note payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Increase (decrease) 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: | ||||||||
| Common stock issued upon conversion notes payable and accrued interest | $ | $ | ||||||
| Fair value of warrants issued with debt | ||||||||
| Deemed dividend | ||||||||
| Fair value of shares issued upon the conversion of debt | ||||||||
| Initial ROU asset and lease liability | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
NAYA BIOSCIENCES, INC. (FORMER NAME: INVO BIOSCIENCE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(UNAUDITED)
Note 1 – Summary of Significant Accounting Policies
Description of Business
NAYA Biosciences, Inc. a Nevada corporation formerly known as INVO Bioscience, Inc. (“NAYA” or the “Company”) is a healthcare services company dedicated to expanding access to fertility care around the world. The Company’s commercial strategy is primarily focused on operating fertility-focused clinics, which include the opening of “INVO Centers” dedicated primarily to offering the intravaginal culture (“IVC”) procedure enabled by its INVOcell® medical device (“INVOcell”) and the acquisition of US-based, profitable in vitro fertilization (“IVF”) clinics. The Company has two operational INVO Centers in the United States and completed its first IVF clinic acquisition in August 2023. The Company also continues to engage in the sale and distribution of its INVOcell technology solution into existing independently owned and operated fertility clinics.
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 June 30, 2024, 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.
| 7 |
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
| 8 |
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. There
was
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 June 30, 2024, 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. |
| 9 |
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 affiliated INVO Centers is typically recognized at the time the service is performed.
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 June 30, 2024, and 2023, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net loss (numerator) | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| Basic and diluted weighted-average number of common shares outstanding (denominator) | ||||||||||||||||
| Basic and diluted net loss per common share | ) | ) | ) | ) | ||||||||||||
| As of June 30, | ||||||||
| 2024 | 2023 | |||||||
| Options | ||||||||
| Convertible notes and interest | ||||||||
| Preferred stock | ||||||||
| Warrants and unit purchase options | ||||||||
| Total | ||||||||
Recently Adopted Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.
| 10 |
Note 2 - Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements
As a result of an internal review, the Company identified errors related to its borrowing rate for lease accounting in its previously issued (i) consolidated financial statements as of and for the years ended December 31, 2021, December 31, 2022, and December 31, 2023 included in its Annual Reports on Form 10-K for the years ended December 31, 2021, December 31, 2022, and December 31, 2023 (the “Annual Periods”) and (ii) unaudited condensed consolidated financial statements for the quarters ended June 30, 2021 through June 30, 2024 included in its Quarterly Reports on Form 10-Q for the periods ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 (the “Interim Periods”, which, together with the Annual Periods, the “Affected Periods”).
The review was prompted by the Company’s receipt of comments issued by the staff of the SEC upon its review of the Company’s annual and quarterly reports. After review of the staff’s comments, discussions with the staff, and investigation and further analysis, the Company determined that it had made an error in the application of generally accepted accounting principles by incorrectly utilizing the applicable federal rates as the discount rates for the valuation of the ROU asset and corresponding lease liability, rather than the Company’s incremental borrowing rates.
The Company evaluated the materiality of these misstatements both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of correcting these misstatements was material to the Affected Periods. As a result of the material misstatements, the Company has restated its consolidated financial statements for the Affected Periods in accordance with ASC 250, Accounting Changes and Error Corrections (the “Restated Consolidated Financial Statements”).
A reconciliation from the amounts previously reported for the Affected Periods to the restated amounts in the Restated Consolidated Financial Statements is provided for the impacted financial statement line items below for the consolidated balance sheets as of March 31, 2024 and June 30, 2024. The amounts labeled “Restatement Adjustments” represent the effects of the Restatement Adjustments.
The Restatement Adjustments for the periods ending June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023 can be found in the Company’s amended Form 10-K for the year ending December 31, 2023, filed on November 19, 2024.
March 31, 2024 | ||||||||||||
| As Previously | Restatement | As | ||||||||||
| Stated | Adjustments | Restated | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| ASSETS | ||||||||||||
| Lease right of use | $ | $ | ( | ) | $ | |||||||
| Total assets | $ | $ | ( | ) | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||
| Current liabilities | ||||||||||||
| Lease liability, current portion | $ | $ | ( | ) | $ | |||||||
| Total current liabilities | $ | $ | ( | ) | $ | |||||||
| Lease liability, net of current portion | $ | $ | ( | ) | $ | |||||||
| Total liabilities | $ | $ | ( | ) | $ | |||||||
June 30, 2024 | ||||||||||||
| As Previously | Restatement | As | ||||||||||
| Stated | Adjustments | Restated | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| ASSETS | ||||||||||||
| Lease right of use | $ | $ | ( | ) | $ | |||||||
| Total assets | $ | $ | ( | ) | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||
| Current liabilities | ||||||||||||
| Lease liability, current portion | $ | $ | ( | ) | $ | |||||||
| Total current liabilities | $ | $ | ( | ) | $ | |||||||
| Lease liability, net of current portion | $ | $ | ( | ) | $ | |||||||
| Total liabilities | $ | $ | ( | ) | $ | |||||||
Note 3 – Liquidity
Historically,
the Company has funded its cash and liquidity needs primarily through revenue collection and debt and equity financings. For the six
months ended June 30, 2024, and 2023, 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 six months of 2024, the Company received $
Although the Company’s audited consolidated financial statements for the year ended December 31, 2023 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 financial statements for the year ended December 31, 2023 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 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 4 – Business Combinations
Wisconsin Fertility Institute
On
August 10, 2023, the Company, through Wood Violet Fertility LLC, a Delaware limited liability company (“Wood Violet”) and wholly owned
subsidiary of INVO Centers LLC (“INVO CTR”), a Delaware company wholly-owned by the Company, consummated its acquisition of the
Wisconsin Fertility Institute (“WFI”) for a combined purchase price of $
WFI was comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owned, operated, and managed WFI’s fertility practice that provided direct treatment to patients focused on fertility, gynecology, and obstetrics care and surgical procedures, and employed physicians and other healthcare providers to deliver such services and procedures. FLOW provided WFRSA with related laboratory services.
The Company purchased the non-medical assets of WFRSA and one hundred percent of FLOW’s membership interests through Wood Violet. Concurrently, Wood Violet and WFRSA entered into a management services agreement pursuant to which WFRSA outsourced all its non-medical activities to Wood Violet. As a result, post-closing, WFI is comprised of (a) WFRSA, which only employs physicians to provide medical services, and (b) Wood Violet, which employs all other clinic personnel and provides all non-medical services, including laboratory services. FLOW is no longer operational as its operations were absorbed by Wood Violet.
The Company’s consolidated financial statements for the six months ended June 30, 2024 include WFI’s results of operations. The Company’s condensed consolidated financial statements reflect the final 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: | ||||
| Cash | ||||
| Holdback | ||||
| Additional payments | ||||
| Assets and liabilities acquired: | ||||
| FLOW intercompany receivable | ||||
| Accounts receivable | ||||
| Property and equipment, net | ||||
| Other current assets | ||||
| Tradename | ||||
| Noncompetition agreement | ||||
| Goodwill | ||||
| Deferred revenue | ( | ) | ||
| WFRSA intercompany note | ( | ) | ||
| 12 |
Note 5 – 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 June 30, 2024, 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 June 30, 2024, the Company invested $
Positib Fertility, S.A. de C.V.
On September 24, 2020, INVO CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) to establish a joint venture, formed as Positib Fertility, S.A. de C.V. (the “Mexico JV”), under which the Shareholders sought to commercialize INVOcell and the related IVC procedure and to offer related medical treatments in Mexico through the establishment of an INVO Center in Monterrey, Mexico (the “Monterrey Clinic”). Each Shareholder owns one-third of the Mexico JV.
The Monterrey Clinic opened to patients on November 1, 2021.
The
Company determined the Mexico 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 Mexico JV. During the fourth quarter of 2023, our Mexico JV partner informed the Company that the
primary physician onsite had resigned. The Company elected to impair the investment at year end 2023 in this JV due to the uncertainty
and possibility that the Mexico JV may offer reduced services or suspend operations. The total impairment for 2023 was approximately
$
| 13 |
The following table summarizes our investments in unconsolidated VIEs:
| Carrying Value as of | ||||||||||||||
| Location | Percentage Ownership | June 30, 2024 | December 31, 2023 | |||||||||||
| HRCFG INVO, LLC | Alabama, United States | % | $ | |||||||||||
| Positib Fertility, S.A. de C.V. | Mexico | % | ||||||||||||
| Total investment in unconsolidated VIEs | $ | |||||||||||||
Earnings from investments in unconsolidated VIEs were as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| HRCFG INVO, LLC | $ | $ | $ | $ | ||||||||||||
| Positib Fertility, S.A. de C.V. | ( | ) | ( | ) | ||||||||||||
| Total earnings (loss) from unconsolidated VIEs | ( | ) | ||||||||||||||
The following tables summarize the combined unaudited financial information of our unconsolidated VIEs:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Statements of operations: | ||||||||||||||||
| Operating revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net profit (loss) | ( | ) | ( | ) | ||||||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Balance sheets: | ||||||||
| Current assets | $ | |||||||
| Long-term assets | ||||||||
| Current liabilities | ( | ) | ( | ) | ||||
| Long-term liabilities | ( | ) | ( | ) | ||||
| Net assets | $ | |||||||
Note 6 – 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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Bloom INVO, LLC | ||||||||||||||||
| INVOcell revenue | $ | $ | $ | $ | ||||||||||||
| Unconsolidated VIEs | ||||||||||||||||
| INVOcell revenue | $ | $ | $ | $ | ||||||||||||
The Company had balances with VIEs as follows:
June 30, 2024 | December 31, 2023 | |||||||
| Bloom INVO, LLC | ||||||||
| Accounts receivable | $ | |||||||
| Notes payable | ||||||||
| Unconsolidated VIEs | ||||||||
| Accounts receivable | $ | |||||||
| 14 |
Note 7 – Inventory
Components of inventory are as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
Note 8 – Property and Equipment
The estimated useful lives and accumulated depreciation for equipment are as follows as of June 30, 2024, and December 31, 2023:
Estimated Useful Life | ||||
| Manufacturing equipment | ||||
| Medical equipment | ||||
| Office equipment |
| June 30, 2024 | December 31, 2023 | |||||||
| Manufacturing equipment | $ | $ | ||||||
| Medical equipment | ||||||||
| Office equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total equipment, net | $ | $ | ||||||
During
the three months ended June 30, 2024, and 2023, the Company recorded depreciation expense of $
During
the six months ended June 30, 2024, and 2023, the Company recorded depreciation expense of $
For
the three months ended June 30, 2024, the Company recognized a gain on disposal of fixed assets of $
For
the six months ended June 30, 2024, the Company recognized a loss on disposal of fixed assets of $
Note 9 – Intangible Assets & Goodwill
Components of intangible assets are as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Tradename | $ | $ | ||||||
| Noncompetition agreement | ||||||||
| 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 $
During
the three months ended June 30, 2024, and 2023, the Company recorded amortization expenses related to intangible assets of $
During
the six months ended June 30, 2024, and 2023, the Company recorded amortization expenses related to intangible assets of $
Goodwill has an indefinite useful life and is therefore not amortized. The Company reviewed and found no indicators for impairment of the intangible assets related to the acquisition of WFI as of June 30, 2024.
| 15 |
Note 10 – 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. Historically, the Company utilized the applicable federal rate as of the commencement of the lease; however the Company has determined that utilization of the applicable federal rate was not its comparable incremental borrowing rate. The Company has since calculated 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 June 30, 2024, the Company’s lease components included in the consolidated balance sheet were as follows:
| Lease component | Balance sheet classification | June 30, 2024 | ||||||||||||
| As Previously Stated | Restatement Adjustment | As Restated |
||||||||||||
| 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 June 30, 2024 were as follows:
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 and beyond | |||||
| Total future minimum lease payments | $ | ||||
| Less: Interest | ( | ) | |||
| Total operating lease liabilities | $ |
For
the six months ended June 30, 2024, the weighted average remaining lease term for operating leases was
For
the six months ended June 30, 2024, the Company recognized a gain on lease termination of $
See Note 2 – Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements for additional information.
Note 11 – Notes Payable
Notes payables consisted of the following:
June 30, 2024 | December 31, 2023 | |||||||
| Note payable. | $ | $ | ||||||
| Related party demand notes with a | ||||||||
| Convertible notes. | ||||||||
| Convertible note. | ||||||||
| Cash advance agreement | ||||||||
| Less debt discount and financing costs | ( | ) | ( | ) | ||||
| Total, net of discount | $ | $ | ||||||
Related Party Demand Notes
In
the fourth quarter of 2022, the Company received $
| 16 |
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 June 30, 2024, the Company had fully amortized the discount.
For
the six months ended June 30, 2024, the Company incurred $
January and March 2023 Convertible Notes
In
January and March 2023, the Company issued $
The
cumulative fair value of the warrants at issuance was $
Interest
on these notes accrues at a rate of ten percent (
All amounts due under these notes are convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders into the common stock at a fixed conversion price for the notes as described above.
As
of December 27, 2023, the Company secured written consent by the note holders of the Q1 23 Convertible Notes for the maturity date
to be extended to June 30, 2024. As an incentive for the Q1 23 Convertible Note holders to approve the extension, the Company agreed
to lower both the Q1 23 Convertible Notes fixed conversion price and the related warrant exercise price to $
As
of June 28, 2024, the Company secured written consent by the note holders for the Q1 23 Convertible Notes for the maturity date to
be extended to December 31, 2024. As an incentive for the note holders to approve the extension, the Company agreed (a) to lower
both the Q1 23 Convertible Notes fixed conversion price and the related warrant exercise price to $
During
the second quarter of 2024, $
February 2023 Convertible Debentures
On
February 3 and February 17, 2023, the Company entered into securities purchase agreements (the “February Purchase Agreements”)
with accredited investors (the “February Investors”) for the purchase of (i) convertible debentures of the Company in the
aggregate original principal amount of $
The
cumulative fair value of the warrants at issuance was $
Pursuant
to the February Debentures, interest on the February Debentures accrued at a rate of eight percent (
All amounts due under the February Debentures were convertible at any time after the issuance date, in whole or in part, at the option of the February Investors into common stock at an initial price of $ per share. This conversion price was subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments and is subject to a floor price.
| 17 |
The
Company could prepay the February Debentures at any time in whole or in part by paying a sum of money equal to
While
any portion of each February Debenture remained outstanding, if the Company received cash proceeds of more than $
The
February Warrants included anti-dilution protection whereby a subsequent offering priced below the February Warrants’ strike price
then in effect would entitle the February Investors to a reduction of such strike price to the price of such subsequent offering and
an increase in the February Warrant Shares determined by dividing the dollar amount for which the February Warrants are exercisable by
such lower strike price. As a result of the $
Standard Merchant Cash Advance
On
July 20, 2023, the Company entered into a Standard Merchant Cash Advance Agreement (the “Cash Advance Agreement”) with Cedar
Advance LLC (“Cedar”) under which Cedar purchased $
On
August 31, 2023, the Company refinanced the Initial Advance through the purchase by Cedar of $
The
financing fees were recorded as a debt discount. For the six months ending June 30, 2024, the Company amortized $
Revenue Loan and Security Agreement
On
September 29, 2023, the Company, its Chief Executive Officer, 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 six months ending June 30, 2024, the Company amortized $
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 $ of our future sales for a gross purchase price of $
The
financing fees were recorded as a debt discount. For the six months ending June 30, 2024, the Company 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 carries an interest rate of twelve percent (
The
financing fees for the FirstFire Note were recorded as a debt discount. For the six months ending June 30, 2024, the Company amortized
$
| 18 |
Note 12 – 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 $
In
the fourth quarter of 2022, the Company issued demand promissory notes in the aggregate principal amount of $
For
the six months ended June 30, 2024, the Company incurred $
As
of June 30, 2024, the Company owed accounts payable to related parties totaling $
Note 13 – Stockholders’ Equity
Reverse Stock Split
On
June 28, 2023, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of
1-for-20 and also approved a proportionate decrease in its authorized common stock to shares from . On July 26,
2023,
Increase in Authorized Common Stock
On October 13, 2023, stockholders of the Company approved an increase to the number of authorized shares of the Company’s common stock from shares to shares as set forth below. On October 13, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation to increase its authorized shares of common stock from shares to shares.
Series A Preferred Stock
On November 20, 2023, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Company’s Series A Preferred Stock (the “Series A Preferred”). One million () shares of Series A Preferred with a stated value of $ per share were authorized under the Series A Certificate of Designation.
Each
share of Series A Preferred has a stated value of $
and is convertible into shares of the Company’s
common stock at a fixed conversion price equal to $
| 19 |
Each share of Series A Preferred stock shall automatically convert into common stock upon the closing of a merger (the “Merger”) of INVO Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”), with and into Legacy NAYA pursuant to an Agreement and Plan of Merger, as amended, by and among the Company, Merger Sub, and Legacy NAYA (the “Merger Agreement”).
The holders of Series A Preferred shall be entitled to receive a pro-rata portion, on an as-if converted basis, of any dividends payable on common stock.
In the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of the Company (other than the Merger), each holder of Series A Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to (i) $, multiplied by (ii) the total number of shares of Series A Preferred Stock issued under the Series A Certificate of Designation.
Other than those rights provided by law, the holders of Series A Preferred shall not have any voting rights.
Since the conversion of the Series A Preferred Stock is contingent on the closing of the Merger, it is not considered a mandatorily redeemable financial instrument until the closing of the Merger and therefore is not considered a liability under ASC 480. Additionally, since the Series A Preferred Stock is redeemable for the Company’s common stock upon an event within the Company’s control, it is classified as permanent equity.
On December 29, 2023, the Company entered into securities purchase agreement (the “Preferred Series A SPA”) with Legacy NAYA for the purchase of shares of the Company’s Series A Preferred Stock at a purchase price of $ per share. The parties agreed that Legacy NAYA’s purchases would be made in tranches in accordance with the following schedule: (1) $ no later than December 29, 2023; (2) $ no later than January 19, 2024; (3) $ no later than February 2, 2024; (4) $ no later than February 16, 2024; and (5) an additional amount as may be required prior to closing of the Merger, and to be determined in good faith by the parties to adequately support the Company’s fertility business activities per an agreed forecast, as well as for a period of twelve (12) months post-closing including a catch-up on the Company’s past due accrued payables still outstanding. The Preferred Series A SPA contains customary representations, warranties, and covenants of the Company and Legacy NAYA.
On
January 4, 2024, the Company and Legacy NAYA closed on
shares of Series A Preferred Stock in the first tranche of this private offering for gross proceeds of $
Effective as of May 1, 2024, the Company entered into an Amendment (the “SPA Amendment”) to the Series A Preferred SPA. Pursuant to the SPA Amendment, the parties agreed to the following closing schedule for Legacy NAYA’s purchases of the remaining shares of the Company’s Series A Preferred Stock at a purchase price of $ per share:
| Closing Date | Shares | Aggregate Purchase Price | ||||||
| May 10, 2024 | $ | |||||||
| May 17, 2024 | $ | |||||||
| May 24, 2024 | $ | |||||||
| May 31, 2024 | $ | |||||||
| June 7, 2024 | $ | |||||||
| June 14, 2024 | $ | |||||||
| June 21, 2024 | $ | |||||||
| June 28, 2024 | $ | |||||||
| July 5, 2024 | $ | |||||||
| On or before the closing of the Merger Agreement, to be determined in good faith by the Subscriber and the Company | $ | |||||||
During
the second quarter of 2024, the Company and Legacy NAYA closed on additional
shares of Series A Preferred Stock for additional gross proceeds of $
Series B Preferred Stock
On November 20, 2023, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series B Convertible Preferred Stock (the “Series B Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Company’s Series B Preferred Stock (the “Series B Preferred”). One million two hundred () shares of Series B Preferred with a stated value of $ per share were authorized under the Series B Certificate of Designation.
Each
share of Series B Preferred has a stated value of $, which is convertible into shares of the Company’s common stock at a fixed
conversion price equal to $ per share, subject to adjustment. The Company may not effect the conversion of any shares of Series B
Preferred if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own more
than
Each share of Series B Preferred stock shall automatically convert into common stock upon the closing of the Merger.
The holders of Series B Preferred shall be entitled to receive a pro-rata portion, on an as-if converted basis, of any dividends payable on common stock.
In the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of the Company (other than the previously announced merger with Legacy NAYA), each holder of Series B Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to (i) $, multiplied by (ii) the total number of shares of Series B Preferred Stock issued under the Series B Certificate of Designation.
Other than those rights provided by law, the holders of Series B Preferred shall not have any voting rights.
Since the conversion of the Series B Preferred Stock is contingent on the closing of the Merger, it is not considered a mandatorily redeemable financial instrument until the closing of the Merger and therefore is not considered a liability under ASC 480. Additionally, since the Series B Preferred Stock is redeemable for the Company’s common stock upon an event within the Company’s control, it is classified as permanent equity.
On November 19, 2023, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Cytovia Therapeutics Holdings, Inc., a Delaware corporation (“Cytovia”) for Cytovia’s acquisition of shares of the Company’s newly designated Series B Preferred Stock in exchange for shares of common stock of Legacy NAYA held by Cytovia (the “Share Exchange”). On November 20, 2023, the Company and Cytovia closed on the exchange of shares. As of June 30, 2024, the Company owns approximately % of the outstanding shares of Legacy NAYA’s common stock and had no significant control over Legacy NAYA therefore the asset is accounted for using the fair value method.
| 20 |
February 2023 Equity Purchase Agreement
On
February 3, 2023, the Company entered into an equity purchase agreement (the “ELOC”) and registration rights agreement (the
“ELOC RRA”) with an accredited investor (the “Feb 3 Investor”) pursuant to which the Company has the right, but
not the obligation, to direct the Feb 3 Investor to purchase up to $
Also on February 3, 2023, the Company issued to the Feb 3 Investor shares of common stock for its commitment to enter into the ELOC.
The obligation of the Feb 3 Investor to purchase shares of common stock pursuant to the ELOC ends on the earlier of (i) the date on which the purchases under the ELOC equal the Maximum Commitment Amount, (ii) 24 months after the date of the ELOC (February 3, 2025), (iii) written notice of termination by the Company, (iv) the date that the ELOC RRA is no longer effective after its initial effective date, or (v) the date that the Company commences a voluntary case or any person or entity commences a proceeding against the Company pursuant to or within the meaning of federal or state bankruptcy law, a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors (the “Commitment Period”).
During the Commitment Period, and subject to the shares of common stock underlying the ELOC be registered, the price that Feb 3 Investor will pay to purchase the shares of common stock that it is obligated to purchase under the ELOC shall be 97% of the “market price,” which is defined as the lesser of (i) the lowest closing price of our common stock during the 7 trading day-period following the clearance date associated with the applicable put notice from the Company or (ii) the lowest closing bid price of the common stock on the principal trading market for the common stock (currently, the Nasdaq Capital Market) on the trading day immediately preceding a put date.
To date, the Company has not been in a position to register the shares underlying the ELOC as a result of standstill agreements related to the RD Offering and the August 2023 Offering (both as defined below).
March 2023 Registered Direct Offering
On
March 23, 2023, the Company entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional
investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering (the “RD
Offering”), shares of common stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to
The March Warrant (and the shares of common stock issuable upon the exercise of the March Warrant) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On
March 27, 2023, the Company closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $
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August 2023 Public Offering
On
August 4, 2023, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional
and other investors, pursuant to which the Company agreed to issue and sell to such investors in a public offering (the “August
2023 Offering”), units (the “Units”) at a price of $ per Unit, with each Unit consisting of (i) one share
of common stock (the “Shares”) of the Company, and (ii) two common stock purchase warrants (the “August 2023 Warrants”),
each exercisable for one share of common stock at an exercise price of $
The
Company closed the Offering on August 8, 2023, raising gross proceeds of approximately $
In
connection with the August 2023 Offering, on August 4, 2023, the Company entered into a placement agency agreement (the “Placement
Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which (i) the Placement Agent agreed to
act as placement agent on a “best efforts” basis in connection with the August 2023 Offering and (ii) the Company agreed
to pay the Placement Agent an aggregate fee equal to
The
August 2023 Offering was facilitated by the Company entering into an Amendment to Securities Purchase Agreement on July 7, 2023 (the
“Armistice Amendment”) with Armistice Capital Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities
Purchase Agreement (the “Armistice SPA”) with Armistice pursuant to which we agreed that from March 23, 2023 until 45
days after the effective date of the Resale Registration Statement (as defined below) we would not (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 any amendment or supplement thereto, other than the prospectus supplement filed in connection
with that offering and the Resale Registration Statement (the “Subsequent Equity Financing Provision”). In consideration
of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent Equity Financing Provision from the
Armistice SPA, we agreed to pay Armistice a fee a $
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Triton Purchase Agreement
On
March 27, 2024, the Company entered into a purchase agreement (the “Triton Purchase Agreement”) with Triton Funds LP (“Triton”),
pursuant to which the Company agreed to sell, and Triton agreed to purchase, upon the Company’s request in one or more transactions,
up to shares of the Company’s common stock, par value $ per share, providing aggregate gross proceeds to the Company
of up to $
Among other limitations, unless otherwise agreed upon by Triton, each individual sale of shares of common stock will be limited to no more than the number of shares of common stock that would result in the direct or indirect beneficial ownership by Triton of more than 9.99% of the then-outstanding shares of common stock. In addition, the total cumulative number of shares of common stock that may be issued to Triton under the Triton Purchase Agreement may not exceed the requirements of Nasdaq Listing Rule 5635(d), except that such limitation will not apply if the Company obtains stockholder approval of the shares of common stock to be issued under the Triton Purchase Agreement, if necessary, in accordance with the requirements of Nasdaq Listing Rule 5635(d).
The Triton Purchase Agreement provides that the Company will file a prospectus supplement (the “Prospectus Supplement”) to its Registration Statement on Form S-3, which was declared effective on April 16, 2021 (File No. 333-255096) (the “Base Registration Statement”), covering the offering and sale of the shares of common stock to Triton pursuant to the Triton Purchase Agreement. Triton’s obligation to purchase shares of common stock under the Triton Purchase Agreement is conditioned upon, among other things, the filing of the Prospectus Supplement and the Base Registration Statement remaining effective.
The Triton Purchase Agreement contains customary representations, warranties, and covenants by each of the Company and Triton. Actual sales of shares of common stock to Triton will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations. Triton has no right to require any sales of shares of common stock by the Company but is obligated to make purchases of shares of common stock from the Company from time to time, pursuant to directions from the Company, in accordance with the Triton Purchase Agreement. During the term of the Triton Purchase Agreement, Triton has covenanted not to cause or engage in any short selling of shares of common stock.
On
March 27, 2024, the Company delivered a purchase notice for shares of common stock. The Company’s common stock traded below
the purchase price following the date of the purchase notice, giving Triton the right to return to the Company any of the shares.
On April 5, 2024, Triton notified the Company that it would return shares to the Company and closed the purchase of shares
pursuant to the Triton Purchase Agreement for net proceeds of $
On
April 16, 2024, the Company delivered a purchase notice for shares of common stock, which was subsequently closed on April 19,
2024 for net proceeds of $
Six Months Ended June 30, 2024
During
the six months of 2024, the Company issued shares of common stock to consultants in consideration of services rendered with a
fair value of $
On
January 31, 2024, the Company issued
shares of Series A Preferred Stock to Legacy NAYA for proceeds of $
In
April 2024, the Company issued of common stock for net proceeds of $
In
April 2024, the Company issued
shares of common stock for net proceeds of $
In
April 2024, the Company issued shares of common stock with a fair value of $
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Equity Incentive Plans
In October 2019, the Company adopted its 2019 Incentive Plan (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 six months ended June 30, 2024, 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, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Canceled | ( | ) | ||||||||||
| Balance as of June 30, 2024 | $ | $ | ||||||||||
| Exercisable as of June 30, 2024 | $ | $ | ||||||||||
Six months ended June 30, |
| |||||||
| 2024 | 2023 | |||||||
| 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.
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Total Intrinsic Value of Options Exercised | Total Fair Value
of Vested | |||||||
| Year ended December 31, 2023 | $ | $ | ||||||
| Six months ended June 30, 2024 | $ | $ | ||||||
For the six months ended June 30, 2024, 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 June 30, 2024, the weighted average remaining service period is year.
Restricted Stock and Restricted Stock Units
In the six months ended June 30, 2024, the Company did t 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 from the date of grant.
Number of Unvested Shares | Weighted Average Grant Date Fair Value | Aggregate Value of Shares | ||||||||||
| Balance as of December 31, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Vested | ||||||||||||
| Forfeitures | ||||||||||||
| Balance as of June 30, 2024 | $ | $ | ||||||||||
Note 15 – 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, 2023 | $ | $ | $ | |||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Canceled | ||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | |||||||||
The following table sets forth the activity of warrants:
Number of Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Canceled | ||||||||||||
| Balance as of June 30, 2024 | $ | $ | ||||||||||
Warrants related to January and March 2023 Convertible Notes
In
January and March 2023, the Company issued
Warrants related to February 2023 Convertible Debentures
On
February 3 and February 17, 2023, the Company issued warrants (the “February Warrants”) to purchase
The
February Warrants included anti-dilution protection whereby a subsequent offering priced below the February Warrants’ strike price
then in effect would entitle the February Investors to a reduction of such strike price to the price of such subsequent offering and
an increase in the February Warrant Shares determined by dividing the dollar amount for which the February Warrants are exercisable by
such lower strike price. As a result of the $ unit purchase price of the August 2023 Offering, following consummation of the August
2023 Offering, the February Warrants now entitle the February Investors to purchase a total
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Warrants related to March 2023 Registered Direct Offering
On
March 23, 2023, the Company entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional
investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering (the “RD
Offering”), shares of common stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to
The March Warrant (and the shares of common stock issuable upon the exercise of the March Warrant) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On
July 7, 2023, the Company entered into an Amendment to Securities Purchase Agreement (the “Armistice Amendment”) with Armistice Capital
Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities Purchase Agreement (the “Armistice SPA”) with Armistice
pursuant to which the Company agreed that from March 23, 2023 until 45 days after the effective date of the Resale Registration Statement (as
defined below) the Company would not (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 any amendment or supplement thereto, other than
the prospectus supplement filed in connection with that offering and the Resale Registration Statement (the “Subsequent Equity
Financing Provision”). In consideration of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent
Equity Financing Provision from the Armistice SPA, the Company agreed to pay Armistice a fee a $
Warrants related to August 2023 Public Offering
In
the August 2023 Offering, the Company issued and sold Units at a price of $ per Unit, with each Unit consisting of (i)
one Share, and (ii) two August 2023 Warrants, each exercisable for one share of common stock at an exercise price of $
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In
connection with the August 2023 Offering, on August 4, 2023, the Company issued to the Placement Agent Placement Agent Warrants to purchase
On
April 17, 2024, the Company reduced the exercise price of the August 2023 Warrants from $
In
April 2024, the Company issued shares of common stock for proceeds of $
Triton Private Placement Warrants
On
March 27, 2024, the Company issued to Triton private placement warrants (the “Triton Warrants”) to purchase up to
FirstFire Warrants
On
April 5, 2024, the Company entered into a purchase agreement with FirstFire pursuant to which FirstFire agreed to purchase, and the Company
agreed to issue and sell, (i) the FirstFire Note, (ii) a warrant (the “First Warrant”) to purchase
The First Warrant is to be immediately exercisable and will expire five years from the issuance date. The Second Warrant will only become exercisable if an event of default occurs under the FirstFire Note and will expire five years from the date on which such an event of default occurs (a “Triggering Event Date”). The Second Warrant includes a ‘Returnable Warrant’ clause, providing that the Second Warrant shall be cancelled and returned to the Company if the Note is fully extinguished before any Triggering Event Date.
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 $ and $
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.
| 27 |
Legal Matters
The Company is not currently 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 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.
Legacy NAYA Merger Agreement
On October 22, 2023, the Company, INVO Merger Sub Inc., a wholly owned subsidiary of the Company and a Delaware corporation (“Merger Sub”), and NAYA Therapeutics, Inc., a Delaware corporation formerly known as NAYA Biosciences, Inc. (“Legacy NAYA”), entered into an Agreement and Plan of Merger, as amended on October 25, 2023 (the “Merger Agreement”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub would merge (the “Merger”) with and into Legacy NAYA, with Legacy NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the effective time and as a result of the Merger, each share of Class A common stock, par value $ per share, of Legacy NAYA (the “Legacy NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by Legacy NAYA as treasury stock or owned by the Company or Merger Sub, would be converted into the right to receive (subject to adjustment as set forth in the Merger Agreement) shares of a newly designated series of common stock, par value $ per share, of the Company which shall be entitled to ten (10) votes per each share (“Company Class B common stock”) for a total of approximately shares of the Company (together with cash proceeds from the sale of fractional shares, the “Merger Consideration”).
Immediately following the effective time of the Merger, Dr. Daniel Teper, Legacy NAYA’s current chairman and chief executive officer, will be named chairman and chief executive officer of the Company, and the board of directors will be comprised of at least nine (9) directors, of which (i) one shall be Steven Shum, the Company’s current chief executive officer, and (ii) eight shall be identified by Legacy NAYA, of which seven (7) shall be independent directors.
The completion of the Merger is subject to satisfaction or waiver of certain customary mutual closing conditions,
including (1) the adoption of the Merger Agreement by the stockholders of the Company and Legacy NAYA, (2) the absence of any injunction
or other order issued by a court of competent jurisdiction or applicable law or legal prohibition prohibiting or making illegal the consummation
of the Merger, (3) the completion of due diligence, (4) the completion of a private sale of the Company’s preferred stock at a price
per share of $ per share, in a private offering resulting in an amount equal to at least $
| 28 |
The Merger Agreement contains termination rights for
each of the Company and Legacy NAYA, including, among others: (1) if the consummation of the Merger does not occur on or before December
31, 2023 (the “End Date”) (which has since been extended to April 30, 20204), except that any party whose material breach
of the Merger Agreement caused or was the primary contributing factor that resulted in the failure of the Merger to be consummated on
or before the End Date, (2) if any governmental authority has enacted any law or order making illegal, permanently enjoining, or otherwise
permanently prohibiting the consummation of the Merger, and (3) if the required vote of the stockholders of either the Company or Legacy
NAYA has not been obtained. The Merger Agreement contains additional termination rights for Legacy NAYA, including, among others: (1)
if the Company materially breaches its non-solicitation obligations or fails to take all action necessary to hold a stockholder meeting
to approve the transactions contemplated by the Merger Agreement, (2) if the aggregate of the liabilities of the Company, excluding certain
specified liabilities, exceed $
If all of Legacy NAYA’s conditions to closing
are satisfied or waived and Legacy NAYA fails to consummate the Merger, Legacy NAYA would be required to pay the Company a termination
fee of $
On December 27, 2023, the Company entered into second
amendment (“Second Amendment”) to the Merger Agreement. Pursuant to the Second Amendment, the parties agreed to extend the
End Date to October 14, 2024. The parties further agreed to modify the closing condition for the Interim PIPE from a private offering
of shares of Company common stock at a price that is a premium to the market price of the Company common stock in an estimated amount
of $
Since June 30, 2024, the Company entered into a third amendment and fourth amendment to the Merger Agreement, then amended and restated the Merger Agreement, and consummated the Merger pursuant to the amended and restated terms on October 11, 2024. See Note 18 – Subsequent Events.
Note 18 – Subsequent Events
Consulting Shares
In August 2024, the Company issued shares of common stock to consultants in consideration of services rendered. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from this issuance.
| 29 |
In October 2024, the Company issued shares of common stock to consultants in consideration of services rendered. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from this issuance.
Nasdaq Compliance – Minimum Equity Requirement
On November 4, 2024, the Company received a notice from Nasdaq, dated October 30, 2024, informing the Company that it demonstrated compliance with the Equity Rule for continued listing on The Nasdaq Capital Market, as required by the Panel’s decision dated June 18, 2024, as amended. The Company will be subject to a mandatory panel monitor for a period of one year from the date of the notification.
Nasdaq Compliance – Minimum Bid Price
On September 18, 2024, the Company received a letter from the Staff indicating that, based upon the closing bid price of the Company’s common stock for the last 34 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $ per share for continued listing under Nasdaq Listing Rule 5550(a)(2).
The notice has no immediate effect on the listing of the Company’s common stock, and its common stock will continue to trade on Nasdaq
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided an initial period of 180 calendar days, or until May 17, 2025, to regain compliance with the minimum bid price requirement. If at any time before May 17, 2025, the closing bid price of the Company’s common stock closes at or above $ per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance prior to May 17, 2025, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company (i) meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) notifies Nasdaq of its intent to cure the deficiency within such second 180 calendar day period, by effecting a reverse stock split, if necessary.
The Company will continue to monitor the closing bid price of its common stock and will consider implementing available options to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules. If the Company does not regain compliance with the minimum bid price requirement within the allotted compliance periods, the Company will receive a written notification from Nasdaq that its securities are subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance during either compliance period, or maintain compliance with the other Nasdaq listing requirements.
Standard Merchant Cash Advance Agreement
On
September 25, 2024, the Company entered into a Standard Merchant Cash Advance Agreement (the “Sept 2024 Cash Advance Agreement”)
with a buyer (the “Buyer”) under which the Buyer purchased $ of the Company’s future sales for a gross purchase
price of $
The
Company received approval from its senior secured lender, Decathlon to consummate the Transaction pursuant to an Amended and Restated
First Amendment (the “RSLA Amendment”) to Revenue Loan and Security Agreement, dated September 29, 2023 between the Company
and Decathlon (the “Revenue Loan and Security Agreement”). Pursuant to the Amendment, the minimum interest multiples set
forth in the Revenue Loan and Security Agreement will automatically increase by 0.15x as of December 1, 2024 if the Company does not
receive equity investments in the net amount of $
Decathlon, the Buyer, and the Company also signed a subordination agreement in which the Buyer subordinated its rights under the transaction to those of Decathlon.
Legacy NAYA Merger Agreement
On October 11, 2024 (the “Effective Time”), the Company, Merger Sub, and Legacy NAYA, entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) and consummated and the transactions contemplated thereby. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Legacy NAYA, with Legacy NAYA 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 Legacy NAYA (“Legacy NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by Legacy NAYA 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”). The Series C-1 Preferred is not redeemable, has no voting rights, and may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred, such Series C-1 Preferred will automatically convert into approximately shares of the Company’s common stock, subject to adjustment if, as a result of such conversion if, after giving effect to the conversion or issuance, any single holder, together with its affiliates, would beneficially own in excess of 19.99% of the Company’s outstanding common stock. |
| 30 |
| ● | Certain
outstanding debt obligations of Legacy NAYA, including a portion of an amended and restated senior secured convertible debenture
issued to 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 $ |
| ● | Legacy NAYA has been renamed to “NAYA Therapeutics Inc.” |
In addition, Legacy NAYA stock options shall be converted into Company options to acquire a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA options multiplied by 8.9108 (the “Exchange Ratio”) (rounded up to the nearest whole share) at an exercise price per share of such Legacy NAYA stock option divided by the Exchange Ratio, and Legacy NAYA restricted stock units shall be converted into Company restricted stock units representing the right to receive a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA restricted stock unit multiplied by the Exchange Ratio. However, such options may not be exercised for shares of the Company’s common stock and such restricted stock units may not be settled for shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon exercise of such options and settlement of such restricted stock units.
Pursuant
to the Merger Agreement, the Company is required to hold a meeting of its stockholders to, among other things, (i) ratify the Merger
Agreement and the transactions contemplated thereby, including the Merger, (ii) approve the increase in the amount of authorized shares
under the Company’s Second Amended and Restated 2019 Stock Incentive Plan, (iii) approve the issuance of the Company’s common
stock issuable upon conversion of the Series C-1 Preferred and Series C-2 Preferred, and (iv) approve an amendment to the Company’s
articles of incorporation to (1) increase the number of shares of the Company’s authorized common stock to shares,
and (2)
The Company has agreed to file a registration statement with the SEC to register for resale the shares of the Company’s common stock issued pursuant to the Merger and the shares of common stock issuable upon exercise or conversion of the Series C-1 Preferred, the Series C-2 Preferred, and the Debenture, as applicable, as soon as practicable but in no event later than 30 days after the Closing Date.
7.0% Senior Secured Convertible Debenture
In
connection with the Merger, on October 11, 2024, the Company issued the Debenture to FNL in an exchange of an outstanding note of Legacy
NAYA held by FNL. The 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 Debenture,
the holder of the 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 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 $
Mandatory
Redemption. While any portion of the Debenture is outstanding, if the Company receives gross proceeds of more than $
The
Debenture contains events representations, warranties, covenants, and events of default that are customary for similar transactions.
Upon an event of default, the Debenture becomes immediately due and payable, and the Borrower is subject to a default rate of interest
of
Joinder Agreement
In connection with the Merger, the Company entered in a joinder agreement (the “Joinder Agreement”) with FNL dated as of October 11, 2024 to a certain securities purchase agreement dated as of January 3, 2024 by and between Legacy NAYA and FNL (the “FNL SPA”) pursuant to which the Company agreed to become a party to the FNL SPA.
Assignment and Assumption Agreement
In connection with the Merger, on October 11, 2024, the Company entered in an assignment and assumption agreement (the “Assignment Agreement”), pursuant to which the Company agreed to assume the rights, duties, and liabilities of Legacy NAYA under a certain registration rights agreement dated as of September 12, 2024 by and between Legacy NAYA and FNL, pursuant to which the Company agreed to register FNL’s resale of shares of Company common stock issuable upon conversion of the Debenture and the Series C-2 Preferred as well as certain commitment shares issued to FNL in connection with the transactions.
Second Amendment to Revenue Loan and Security Agreement
On
October 11, 2024, the Company entered into a second amendment to Revenue Loan and Security Agreement (the “Second Amendment”)
with Decathlon, the Company’s CEO, and certain subsidiaries of the Company (the “Guarantors”), pursuant to which Decathlon
consented to the Merger and Legacy NAYA becoming a subsidiary of the Company. Pursuant to the Second Amendment, Legacy NAYA joined the
Revenue Loan and Security Agreement as a Guarantor. The Company agreed to pay down its loan by at least $
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Name Change and Application for Symbol Change
On October 15, 2024, the Company changed its corporate name to NAYA Biosciences, Inc., pursuant to an Amendment to Articles of Incorporation filed with the Nevada Secretary of State on October 15, 2024 (the “Name Change”). Pursuant to Nevada law, a stockholder vote was not necessary to effectuate the Name Change.
On October 22, 2024 the Company’s common stock ceased trading under the ticker symbol “INVO” and begin trading under its new ticker symbol, “NAYA”, on the Nasdaq Capital Market.
Series C-1 Preferred
The Company’s Articles of Incorporation, as amended, authorizes the Company to issue shares of preferred stock, $ par value per share, issuable from time to time in or more series (“Preferred Stock”). On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series C-1 Convertible Preferred Stock (the “Series C-1 Certificate of Designation”) 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 (the
“Common Stock”) at a conversion price equal to $
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. 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.
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Series C-2 Preferred Stock
On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series C-2 Convertible Preferred Stock (the “Series C-2 Certificate of Designation”) 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 (the “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) 125% of the Conversion Amount with respect to such shares, and (b) the amount as would be paid on the Company’s common stock issuable upon conversion of the Series C-2 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
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.
Debt Conversion
On
October 14, 2024, the Company issued shares of common stock with a fair value of $
Departure of Officer
Effective November 15, 2024, Michael J. Campbell, the Company’s Chief Operating Officer and Vice President of Business Development, retired from the Company, and Mr. Campbell and the Company mutually agreed to terminate his employment agreement.
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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 management, including the Chief Executive Officer and the Chief Financial Officer, 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 June 30, 2024 due solely to the events that led to the restatements of our audited financial statements for the periods ending June 30, 2021 through June 30, 2024. As a result, 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, as described in Note 2 to the Notes to Financial Statements included in this Form 10-Q. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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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Item 6. Exhibits
| Exhibit No. |
Description | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 is formatted in Inline XBRL |
| * 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 November 19, 2024.
| NAYA Biosciences, Inc. | ||
| Date: November 19, 2024 | By: | /s/ Steven Shum |
| Steven Shum, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 19, 2024 | By: | /s/ Andrea Goren |
| Andrea Goren, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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