{"url_path":"/sec/ivf/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-02","source_url":"https://www.sec.gov/Archives/edgar/data/1417926/0001493152-26-026775-index.html","accession_number":"0001493152-26-026775","cik":"0001417926","ticker":"IVF","issuer_name":"INVO Fertility, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1417926/0001493152-26-026775-index.html","primary_entity_key":"0001417926","primary_entity_name":"INVO Fertility, Inc."},"word_count":9971,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**\n\n \n\n**Forward-Looking\nStatements**\n\n \n\nThis\ndiscussion includes certain forward-looking statements about our business and our expectations, including statements relating to revenues,\ninternational revenues, revenue growth rates, gross margin, operating expenses, amortization expenses, earnings per share, available cash\nand operating cash flow. Any such statements are subject to risk that could cause the actual results to vary materially from expectations.\nFor a further discussion of the various risks that may affect our business and expectations, see the section titled “Risk Factors”\ncontained in Item 1A of Part I of this Annual Report on Form 10-K. The risks and uncertainties discussed therein do not reflect the potential\nfuture impact of any mergers, acquisitions or dispositions. In addition, any forward-looking statements represent our estimates only\nas of the day this Annual Report was filed with the SEC and should not be relied upon as representing our estimates as of any subsequent\ndate. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to\ndo so, even if our estimates change.\n\n \n\n35\n\n \n\n \n\n**Overview**\n\n \n\nWe are a healthcare services and technology\ncompany focused on the fertility marketplace and dedicated to expanding access to ART\ncare to patients in need. Our principal commercial strategy is focused on acquiring, establishing, and operating fertility clinics and\nrelated businesses and technologies. Our acquisition strategy focuses on US-based, profitable fertility clinics. Our clinics offer a\nvariety of fertility services including IVF and the IVC procedure\nenabled by INVOcell.  As of the date of this filing, we have four fertility clinics\nin the United States. We also continue to engage in the sale and distribution of our INVOcell technology solution into third-party owned\nand operated fertility clinics. We also intend to seek out additional, innovative fertility-focused technologies, to license or acquire\nin order to utilize within our clinics.\n\n \n\n*Fertility\nClinics*\n\n \n\nOn February 18, 2026, we completed our acquisition of Family Beginnings, an Indiana based fertility clinic that offers\nboth IVF and IVC. (See Item 1 for additional information on the acquisition of Family Beginnings).\n\n \n\nOn August 10, 2023, we consummated the first acquisition\nof an existing fertility clinic, WFI. As an established and profitable clinic, the closing\nof the WFI acquisition more than tripled our annual revenue and became a major part of our clinic-based operations. The acquisition accelerated\nour transformation from a medical device company to a healthcare services company and immediately added scale and a significant source\nof positive cash flow to our operations. The acquisition of profitable IVF clinics complements our efforts to build new INVO Centers,\nand we expect to continue this strategy to accelerate overall growth.\n\n \n\nOn March 10 and June 28, 2021, we established joint\nventures to open INVO Centers in Birmingham, Alabama, and Atlanta, Georgia, respectively. We established these clinics to increase use of the INVOcell, to accelerate the growth and awareness of the IVC procedure,\nand to expand the availability of statistical and clinical data supporting its use. These clinics also represent our initial entry into\nclinic-based fertility operations and enabled us to expand our revenue per fertility cycle from hundreds of dollars (from the sale of\neach INVOcell device) to thousands of dollars, and to significantly advance our path to building greater scale in our overall operations\nand to reaching profitability.\n\n \n\n*INVOcell\nDevice*\n\n \n\nOur proprietary INVOcell® device enables fertilization\nand early embryo development to occur in vivo within the woman’s body - the world’s first IVC technique of its kind. Unlike\nIVF, which relies on expensive laboratory incubators, the INVOcell allows fertilization and early embryo development to take place in\nthe woman’s body and has demonstrated equivalent pregnancy success and live birth rates as IVF.\n\n \n\nWhile INVOcell remains part of our efforts, our strategy\nhas expanded to focus more broadly on providing ART services through clinic operations.\n\n \n\n36\n\n \n\n \n\n**Operations**\n\n \n\nOur\ncritical management and leadership functions are carried out by our management team. In the Fertility Clinic segment, each clinic is\nseparately staffed with the people necessary to manage daily activities, while most administrative tasks are centralized and handled\nby the INVO corporate staff. With respect to the INVOcell Device segment, we have contracted out the manufacturing, assembly, packaging,\nand labeling to a medical manufacturing company, sterilization of the device to a sterilization specialist, and storage and shipping\nto a third part logistics company.\n\n \n\n*Wisconsin\nFertility Institute*\n\n \n\nAs\nan established and profitable clinic, WFI has a full staff, including a REI, an OBGYN trained to provide fertility treatment and full complement of medical, laboratory and\nadministration staff. The day to day clinical operations are handled by on site staff. Our corporate\nstaff manages finance, accounting, human resources and other overhead responsibilities.\n\n \n\n*Alabama\nJV*\n\n \n\nWe\nestablished the Alabama JV with HRCFG. The responsibilities of HRCFG’s principals include providing clinical practice expertise, performing recruitment functions,\nproviding all necessary training, and providing day-to-day management of the Alabama JV. Our responsibilities include providing\nfunding to the Alabama JV and being the exclusive provider of the INVOcell.\n\n \n\n*Georgia\nJV*\n\n \n\nWe formed a joint venture with Bloom to establish the Georgia JV. The responsibilities of Bloom include providing\nall medical services required for the operation of the Georgia JV. Our responsibilities include providing funding to the Georgia JV,\nlab services, quality management, and being the exclusive provider of the INVOcell.\n\n \n\n37\n\n \n\n \n\n*INVOcell*\n\n \n\nTo\ndate, we have completed a series of important steps in the successful development and manufacturing of the INVOcell:\n\n \n\n●\nManufacturing:\nWe are ISO 13485:2016 certified and manage all aspects of production and manufacturing with qualified suppliers. Our key suppliers,\nwhich include NextPhase Medical Devices, R.E.C. Manufacturing Corporation, and Casco Bay Molding, have been steadfast partners since\nour company first began and can provide us with virtually an unlimited capability to support our growth objectives, with all manufacturing\nperformed in the New England region of the U.S.\n\n●\nRaw\nMaterials: All raw materials utilized for the INVOcell are medical grade and commonly used in medical devices (e.g., medical\ngrade silicone, medical grade plastic). Our principal molded component suppliers, Casco Bay Molding and R.E.C. Manufacturing Corporation,\nare well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are\nsupplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified,\nand FDA registered.\n\n●\nUS\nMarketing Clearance: The safety and efficacy of the INVOcell has been demonstrated and cleared for marketing and use by the FDA\nin November 2015.\n\n●\nClinical:\nIn June 2023, we received FDA 510(k) clearance to expand the labeling on the INVOcell device and its indication for use to provide\nfor a 5-day incubation period. The data supporting the expanded 5-day incubation clearance demonstrated improved patient outcomes.\n\n \n\n**Market\nOpportunity**\n\n \n\n*Fertility\nClinics and INVOcell Device*\n\n \n\nThe global ART marketplace is a large and growing,\nmulti-billion-dollar industry across the world as increased infertility rates, greater patient awareness and improving financial incentives,\nsuch as insurance and governmental assistance, continue to drive growth and demand. According to the European Society for Human Reproduction\n2024 ART Fact Sheet, one in six couples worldwide experience fertility challenges. Additionally, the worldwide market remains vastly underserved\nas a high percentage of patients in need of care continue to go untreated each year for many reasons, but key among them are capacity\nconstraints and cost barriers. There have been large increases in the use of IVF, with current estimates of approximately 4 million ART\ncycles performed globally each year, producing around 1 million babies. Regrettably, this only amounts to less than 5% of the infertile\ncouples worldwide being treated and less than 2% of such couples having a child though IVF. The industry remains capacity constrained\nwhich creates challenges in providing access to care at an affordable price for the volume of patients in need. A survey by “Resolve:\nThe National Infertility Association,” indicates the two main reasons couples do not use IVF is cost and geographical availability\n(and/or capacity).\n\n \n\nIn\nthe United States, infertility affects an estimated 10%-15% of the couples of childbearing-age, according to the American Society of\nReproductive Medicine (2017). According to the CDC, there are approximately 6.7 million women\nwith impaired fertility. Based on 2022 data from the CDC’s National ART Surveillance System, approximately 435,000 IVF cycles were\nperformed across ~500 IVF centers, leaving the U.S. with a large, underserved patient population, similar to most markets around the\nworld.\n\n \n\nOur corporate development strategy, which\nincludes acquiring established existing practices, building new clinics, and expanding our INVOcell device, is designed to take advantage\nof the attractive fertility market dynamics of supply and demand.\n\n \n\n38\n\n \n\n \n\n**Competitive\nAdvantages**\n\n \n\n*INVOcell\nDevice and Fertility Clinics*\n\n \n\nOver\nthe past several years, the principal focus of our commercial efforts has shifted from the distribution of our INVOcell device to the\nprovision of fertility clinic services through our network of clinics. For the most part, our clinical activities\nhave been focused on secondary markets where there is a greater imbalance between the need for ART treatment and the number of cycles\navailable. Combined with our ability to offer a wider range of advanced fertility care, including IVC, IVF and IUI, at multiple price\npoints, our clinics have the opportunity for differentiation from our competitors. As with our INVOcell technology, we continuously look\nfor new solutions that can create greater efficiency and effectiveness in the provision of fertility cycles and support our efforts to\ndemocratize fertility care.\n\n \n\nWhile\na much smaller part of our current business, we continue to believe that our INVOcell device, and the IVC procedure it enables, can\nplay a key role in making advanced fertility care more affordable and accessible. We continue to engage with sympathetic third-party\nclinics that share our same vision and that use our one-of-a-kind INVOcell device.\n\n \n\nUnlike\nIVF, where the oocytes and sperm develop into embryos in a laboratory incubator, the INVOcell allows fertilization and early embryo development\nto take place in the woman’s body. We believe that the IVC procedure can provide the following benefits:\n\n \n\n \n●\nMay\nreduce lab procedures, helping clinics and doctors to increase patient capacity, lower costs and offer a more affordable advanced\nfertility treatment option;\n\n \n \n \n\n \n●\nA\nnatural and stable incubation environment; and\n\n \n \n \n\n \n●\nA\nmore personal, intimate experience in creating a baby.\n\n \n\nIn\nboth current utilization of the INVOcell, and in clinical studies, the IVC procedure has demonstrated equivalent pregnancy success and\nlive birth rates as IVF and generally may be offered at a significant discount to IVF cycles.\n\n \n\n**Sales\nand Marketing**\n\n \n\n*Fertility\nClinics*\n\n \n\nOur four fertility clinics employ various\nstrategies to build awareness for their services and/or to maintain and grow patient flow and fertility cycle volume. The principal source\nof patient flow comes through social media marketing, OBGYN referrals, and patient word of mouth. Our clinical staff build and maintain\nrelationships with the local OBGYN community, regularly following up with patient OBGYNs to build additional referral flow. We also conduct\nregular social and other media campaigns to attract new patients and to build awareness.\n\n \n\nAt the corporate level, we seek to build general awareness\nfor our clinical activities and IVC procedure results with a view to drive patients to our centers and to grow demand for our INVOcell\ndevice. These efforts also support our ongoing work to acquire additional IVF clinics in the near term and open new fertility clinics\nlonger term.\n\n \n\nThe acquisition of existing fertility clinics requires\nless sales and marketing effort compared to opening new fertility clinics, as they have established patient flows that can be built upon.\nWhen entering a new market with a fertility clinic, we leverage the experience developed in establishing our Alabama and Georgia joint\nventures. We employ strategies to secure patient flow levels that can enable new fertility clinics to become profitable and contribute\neconomically to our overall business as soon as possible. Primarily, our fertility clinics seek to employ local, reputable physicians\nwith strong ties to the OBGYN community.\n\n \n\n39\n\n \n\n \n\n*INVOcell\nDevice*\n\n \n\nHistorically,\nour approach to marketing INVOcell was focused on identifying partners within targeted geographic regions that we believe could best\nsupport our efforts to expand access to advanced fertility treatment using the INVOcell and IVC procedure for the large number of underserved\ninfertile people around the world. Those efforts resulted in the execution of a series of distribution agreements with partners across\nthe globe. More recently, as we shifted our focus to opening INVO Centers and acquiring IVF clinics, which activities have been centered\nin the US, and as a result of the limited traction experienced in international markets, proactive marketing efforts for the INVOcell\nhave been limited to the United States. In our domestic market, we distribute the INVOcell directly to a number of third-party IVF clinics\nand we remain open to pursuing foreign markets that present a realistic opportunity for incremental revenue on a profitable basis.\n\n \n\n**Recent\nDevelopments**\n\n \n\n*JAG Amendment*\n\n* *\n\nOn May 27, 2026, we entered into a letter agreement\n(the “JAG May 2026 Letter”) with JAG Multi Investments LLC (“JAG”) pursuant to which (i) the maturity date of\ncertain previously issued convertible notes with a principal balance of $660,000 (the “JAG Notes”) was extended until December\n31, 2026, (ii) we agreed to repay the JAG Notes in monthly installments of $50,000 starting in April 2026 with a balloon payment\nat the end of December 2026, (iii) confirmation that if we raise more than $3,000,000 after the date of the JAG May 2026 Letter, we shall\npay ten percent (10%) of any proceeds in excess of $3,000,000 to accelerate repayment of the JAG Notes, (iv) the conversion price of the\nJAG Notes was reset to $1.60, (v) we agreed to issue to JAG a new warrant (the “JAG May 2026 Warrant”) to purchase up to 150,000\nshares of our common stock at an exercise price of $1.60 per share, exercisable for five years from the date of issuance, and (vi) we\nagreed to the reset of the conversion and exercise prices of the JAG Notes and JAG May 2026 Warrant, respectively, to equal the price\nof any future financing based on a share price that is lower than the conversion and exercise prices then in effect.\n\n \n\n*Nasdaq*\n\n \n\nOn April 23, 2026, we received a letter (the “10-K\nLetter”) from the Listing Qualifications staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating\nthat we failed to file our Annual Report on Form 10-K for the year ended December 31, 2025 (the “10- K Filing”), on a timely\nbasis and, as such, no longer satisfies Nasdaq Listing Rule 5250(c)(1) (the “Timely Filing Rule”)\n\n \n\nOn May 27, 2026 we receive an additional letter (the\n“10-Q Letter”) from the Staff indicating that we failed to file our Quarterly Report on Form 10-Q for the period ended March\n31, 2026 (the “10-Q Filing”), on a timely basis.\n\n \n\nNeither letter had an immediate effect on the listing\nof our common stock.\n\n \n\nBoth letters also stated that, in accordance with\nNasdaq rules, we have 60 calendar days from the date of the 10-K Letter to submit a plan to regain compliance with the Timely Filing Rule.\nShould the Staff accept such plan, it could grant an exception of up to 180 calendar days from the 10-K Filing’s due date, or until\nOctober 13, 2026, to regain compliance.\n\n  \n\n*Reverse\nStock Split (March 2026)*\n\n \n\nOn\nMarch 25, 2026, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock\nat a ratio of 1-for-5, and our authorized common stock was proportionately reduced to 50,000,000 shares from 250,000,000 shares. The\nreverse stock split took effect on March 27, 2026. All share information included in this Form 10-K has been reflected as if the reverse\nstock split occurred as of the earliest period presented.\n\n* *\n\n*Closing\nof Family Beginnings Acquisition*\n\n \n\nOn\nFebruary 18, 2026, we completed the acquisition of Family Beginnings P.C., a fertility clinic located in Indianapolis, Indiana. The transaction\nwas executed through our wholly owned subsidiary Wood Violet. The total purchase price was approximately $760,000, consisting of $360,000\nin cash (net of a holdback) and $400,000 in Series D Preferred Stock.\n\n \n\nAs\npart of the acquisition structure, we acquired the clinic’s non-medical business assets through Wood Violet, while the clinic’s\nmedical assets were acquired by Fertility, P.A., which entered into a long-term Management Services Agreement with Wood Violet. Under\nthis agreement, Wood Violet will provide management, administrative, laboratory, and operational support services to the clinic for an\ninitial 10-year term, renewable for additional five-year periods.\n\n \n\nIn\nconnection with the acquisition, we also entered into a lease for approximately 4,387 square feet of clinic and office space in Indianapolis,\neffective March 1, 2026, with an initial term through July 31, 2033.\n\n \n\nFounded\nmore than a decade ago, Family Beginnings has built a strong reputation for delivering comprehensive fertility services with a highly\npersonalized, patient-first approach. The clinic offers a full suite of reproductive services, including in vitro fertilization, intravaginal\nculture (as an early adopter of our INVOcell solution), ovulation induction, intrauterine insemination, fertility preservation, and diagnostic\ntesting, supported by an experienced clinical and embryology team. The acquisition expands INVO’s clinical footprint and is expected\nto support continued growth of our fertility services platform.\n\n \n\n*Warrant\nInducement (January 2026)*\n\n* *\n\nOn\nJanuary 28, 2026, we entered into the January 2026 Inducement Letter Agreement with an institutional investor and the Holder of the Common\nWarrants.\n\n \n\n40\n\n \n\nThe\nissuance of the shares of common stock upon exercise of such the Common Warrants was registered pursuant to a registration statement\non Form S-1 (File No. 333-292206), which was declared effective by the SEC on December 29, 2025.\n\n \n\nPursuant\nto the January 2026 Inducement Letter Agreement, the Holder agreed to exercise the Common Warrants for cash at the exercise price of\n$7.95 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 1,893,492 shares\nof common stock at an exercise price of $7.95 per share. Such new warrants will become exercisable upon receipt of such approval as may\nbe required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO\nwith respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof and have a term of five\nand one-half years from the date stockholder approval is obtained.\n\n \n\nWe\nregistered the resale of the shares underlying such new warrants pursuant to a registration statement on Form S-1 (File No.\n333-293135), which was declared effective by the SEC on February 12, 2026, and we agreed to observe customary limitations on\nadditional issuances of common stock and variable-rate financing arrangements for a limited period following the warrant inducement\ntransaction.\n\n \n\nThe\naggregate gross proceeds to us from the exercise of such existing warrants was approximately $7.5 million, before deducting offering\nexpenses payable by us.\n\n \n\nMaxim\nacted as our financial advisor in connection with the inducement transaction.\n\n \n\n*Increase\nin Authorized Common Stock (Jan 2026)* \n\n \n\nOn\nJanuary 22, 2026, our stockholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our number\nof authorized shares of common stock from 6,250,000 to 250,000,000 and we filed a Certificate of Amendment to our Articles of Incorporation\nto increase our authorized shares of common stock for the same.\n\n \n\n*Private\nPlacement (December 2025)*\n\n \n\nOn December 2, 2025, we entered into a securities purchase agreement with\nan institutional investor for a private placement of approximately $4 million in securities, comprised of 47,000 shares of common stock,\npre-funded warrants, and common warrants (the “Armistice Warrants”). The Common Warrants became exercisable on January 22,\n2026 upon receipt of such approval as required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor\nentity) from the stockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise\nthereof, expired five years thereafter, and carried an exercise price of $8.45 per share. The Pre-Funded Warrants were immediately exercisable\nat $0.0005 per share until exercised in full.\n\n \n\nIn\nconnection with the foregoing private placement, we entered into a placement agency agreement with Maxim on a reasonable best efforts\nbasis, pursuant to which we agreed to pay the Placement Agent a fee equal to 8.0% of gross proceeds, warrants to purchase 23,669 shares\nof Common Stock at $10.5625 per share, and reimbursement of expenses up to $50,000.\n\n \n\nNet\nproceeds from the private placement are being used to support our growth and liquidity needs, including funding a portion of the Family\nBeginnings P.C. acquisition, paying certain outstanding debt obligations, and providing additional working capital.\n\n \n\n*Reverse\nStock Split (Nov 2025)*\n\n \n\nOn\nNovember 26, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common\nstock at a ratio of 1-for-8, and our authorized common stock was proportionately reduced to 6,250,000 shares from 50,000,000 shares.\nThe reverse stock split took effect on November 28, 2025. All share information included in this Form 10-K has been reflected as if the\nreverse stock split occurred as of the earliest period presented.\n\n \n\n41\n\n \n\n* *\n\n*Pritts\nLitigation and Binding Settlement Term Sheet*\n\n \n\nOn\nMay 7, 2025, Dr. Pritts and Pritts Trust filed a complaint in the Circuit Court of the State of Wisconsin, Dane County, against us and\nour subsidiaries INVO CTR, Wisconsin Fertility and Reproductive Surgery Associates, S.C., and Wood Violet. Dr. Pritts and the Pritts\nTrust have asserted causes of action arising out of the WFI Documents for breach of contract, breach of the implied covenant of good\nfaith and fair dealing, tortious interference with contract (or, in the alternative, veil piercing), and unjust enrichment.\n\n \n\nOn\nMay 14, 2025, INVO, Dr. Pritts, the Pritts Trust, and certain of their respective affiliates entered into the Term Sheet to settle all\ndisputes between the parties pursuant to the Terms. The parties agreed to cooperate in good faith to prepare and enter into the Settlement\nAgreement based on the terms set forth in the Term Sheet; provided, however, that unless and until the Settlement Agreement is executed,\nthe Terms are binding on the parties. Under the Terms, Wood Violet agreed to pay Dr. Pritts $6,000,000 in full and final settlement and\nsatisfaction of all obligations to Dr. Pritts and her affiliates under the WFI Documents, of which $525,000 was paid concurrently with\nthe execution of the Term Sheet, and the remainder of which is payable as follows: $475,000 due June 30, 2025, $750,000 due September\n30, 2025, $750,000 due December 31, 2025, $1,000,000 due March 31, 2026, $2,000,000 due June 30, 2026, and $500,000 due December 31,\n2026. INVO shall provide Wood Violet with use of 25% of all gross funding proceeds above $2,000,000 raised within any six-month period\nto accelerate the payment of scheduled settlement payments in chronological order. The parties will enter into a consent judgment to\nresolve the complaint that would come into effect upon any breach of the Settlement Agreement. The parties agreed to settle all disputes,\nincluding those related to employment, acquisition, tax, and related matters, the termination of all employment, consulting, and similar\nagreements with Dr Pritts, and other customary terms, including, without limitation, indemnification and release of claims. On September\n30, 2025 we executed the Settlement Agreement.\n\n \n\n \n\n*FNL\nFinancing Transactions*\n\n* *\n\nOn\nOctober 11, 2024, we issued the Debenture to FNL. We became a party to the Securities Purchase Agreement, pursuant to the Joinder Agreement.\nFNL was entitled to convert any portion of the outstanding principal and accrued interest into shares of our common stock at a conversion\nprice of $1,339.992 per share, subject to adjustment, following stockholder approval, provided that conversion could not result in FNL\nbeneficially owning more than 4.99% of our outstanding common stock. Commencing March 14, 2025, we were required to redeem $437,127.24\nof principal, plus accrued interest, on the 14th of each month until maturity.\n\n \n\nEffective\nMay 23, 2025, we entered into the May 2025 Amendment and Exchange Agreement, pursuant to which the parties agreed to (a) exchange outstanding\nshares of Series C-1 Preferred held by FNL for shares of Series C-2 Preferred, (b) amend the Series C-2 Certificate of Designation pursuant\nto the Certificate of Amendment to the Series C-2 Certificate of Designation, (c) exchange the Debenture for the Amended and Restated\nDebenture, and (d) amend the Securities Purchase Agreement to grant FNL the Additional Investment Right, exercisable at any time and\nfrom time to time beginning on or after May 23, 2025, to purchase up to $10,000,000 of aggregate stated value of AIR Preferred Shares,\nexercisable in minimum amounts of $500,000. The AIR Preferred Shares carry the same terms as the Series C-2 Preferred then outstanding,\nexcept that the conversion price upon issuance is deemed to be the lowest of (i) the conversion price then in effect, and (ii) the greater\nof (x) the Floor Price (as defined in the Certificate of Amendment to the Series C-2 Certificate of Designation) and (y) 85% of the arithmetic\naverage of the three lowest VWAPs during the ten trading days prior to exercise. In consideration of the foregoing, we issued 1,029 additional\nshares of Series C-2 Preferred to FNL.\n\n \n\nOn\nJune 30, 2025, we entered into an Amendment to the Securities Purchase Agreement (the “June 2025 Amendment”) with FNL to\npermit FNL to elect, when exercising its Additional Investment Right, to either purchase AIR Preferred Shares for cash (an “AIR\nPurchase”) or exchange them for all or a portion of the Amended and Restated Debenture, with the aggregate stated value of AIR\nPreferred Shares received in such exchange equal to the principal amount so exchanged plus accrued and unpaid interest thereon (an “AIR\nExchange”). The Amendment also reduced the minimum exercise amount to $200,000. On the same date, we entered into the AIR Exercise\nand Reload Agreement, pursuant to which FNL exercised its Additional Investment Right to acquire 1,800 shares of Series C-2 Preferred\nwith an aggregate stated value of $1,800,000 in exchange for $1,800,000 of principal, plus accrued and unpaid interest, under the Amended\nand Restated Debenture. In consideration thereof, we issued 630 additional shares of Series C-2 Preferred to FNL.\n\n \n\n42\n\n \n\n \n\nEffective\nAugust 21, 2025, we entered into the August 2025 Amendment and Exchange Agreement, pursuant to which the parties exchanged the Amended\nand Restated Debenture for the Second Amended and Restated Debenture, and removed the monthly redemption provisions. In connection therewith,\nthe parties agreed to reduce the outstanding principal by $1,300,000 in exchange for AIR Preferred Shares with an aggregate stated value\nof $1,300,000, and we issued 325 additional shares of Series C-2 Preferred to FNL.\n\n \n\nEffective\nSeptember 29, 2025, we entered into the September 2025 Exchange Agreement, pursuant to which FNL exchanged the Second Amended and Restated\nDebenture for 467 shares of Series C-2 Preferred with an aggregate stated value of $1,334,000. As a result, the Second Amended and Restated\nDebenture was paid in full and fully extinguished.\n\n \n\nIn\naddition to the exchanges of outstanding debenture principal, during 2025, FNL exercised the AIR for $2,850,000 in aggregate cash consideration,\nfor which we issued 2,850 shares of Series C-2 Preferred. As January 31, 2026, all outstanding shares of Series C-2 Preferred have been\nconverted into shares of our common stock, and all dividends owed under the Series C-2 Preferred have been settled in full.\n\n \n\n*Decathlon\nAmendment*\n\n* *\n\nOn\nSeptember 29, 2023, we, our CEO, Steven Shum as a Key Person (as defined in the Loan Agreement defined below), and the our wholly-owned\nsubsidiaries Bio X Cell, Inc, INVO Centers LLC, Wood Violet, Fertility Labs of Wisconsin LLC and Orange Blossom Fertility LLC as guarantors\n(the “Guarantors”), entered into the Loan Agreement with the Lender under which the Lender advanced a gross amount of $1,500,000.00\nto us.\n\n \n\nOn\nSeptember 24, 2024, we, the Lender, Steven Shum and the Guarantors entered into the First Amendment to the Loan Agreement, pursuant to\nwhich (i) the Lender approved that certain Standard Merchant Cash Advance Agreement, dated September 25, 2024 between us and Cedar Advance\nLLC, and (ii) we agreed to increase the Minimum Interest multiples set forth therein by 0.15 effective as of December 1, 2024, if we\ndid not receive equity investment of at least $1,000,000 by November 30, 2024.\n\n \n\nOn\nOctober 11, 2024, we, the Lender, Steven Shum and the Guarantors entered into the Second Amendment to the Loan Agreement, pursuant to\nwhich we agreed, among other things, to pay down its loan by at least $500,000 and increase its monthly payments by up to $30,000 if\nwe close a private offering of its securities. We also agreed to retain an investment banker to pursue a financing or a sale if it fails\nto meet certain liquidity covenants.\n\n \n\nOn\nAugust 13, 2025, we, the Lender, Steven Shum and the Guarantors entered into the Third Amendment to the Loan Agreement, pursuant to which\n(a) the Lender consented to the change of our name to INVO Fertility, Inc., (b) the Lender waived the event of default that would result\nfrom the entry of judgment pursuant to the Term Sheet with Dr. Pritts and the Pritts Trust, (c) the parties agreed to an adjusted repayment\nschedule whereby the monthly payment under the Loan Agreement increased by $20,000, and (d) we agreed to reimburse the Lender for approximately\n$17,500 in fees and expenses incurred in connection with the Third Amendment to the Loan Agreement.\n\n \n\nOn\nSeptember 22, 2025, we, the Lender, Steven Shum, and the Guarantors entered into the Restated Third Amendment to the Loan Agreement,\npursuant to which and in addition to amendments set forth in the Third Amendment, since we did not raise the above stated $1 million\nby November 30, 2024 as required under the Loan Agreement, the Loan Agreement was amended to reflect an increase of 0.15 to the Minimum\nInterest multiples set forth in the Loan Agreement.\n\n \n\n43\n\n \n\n* *\n\n*Side\nLetter Agreement*\n\n \n\nEffective\nas of August 21, 2025, we entered into the Side Letter Agreement pursuant to which, among other things, the parties agreed to extend\nthe deadline by which we must file a registration statement with the SEC for the resale of shares of our common stock (i) issuable upon\nconversion of the Second Amended and Restated Debenture, (ii) issuable upon conversion of shares of our Series C-2 Preferred Stock held\nby FNL, and (iii) issuable upon exercise of warrants held by FNL, to August 29, 2025. The parties further agreed to extend the deadline\nby which such registration statement must be declared effective by the SEC to the earlier of the (A) September 30, 2025 (or, in the event\nof a “full review” by the SEC, October 31, 2025) and (B) the 2nd business day after the date the Company is notified (orally\nor in writing, whichever is earlier) by the SEC that such registration statement will not be reviewed or will not be subject to further\nreview.\n\n \n\n*Increase\nin Authorized Common Stock (July 2025)*\n\n* *\n\nOn\nJuly 23, 2025, our stockholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our number of\nauthorized shares of common stock from 1,388,888 to 50,000,000 and we filed a Certificate of Amendment to our Articles of Incorporation\nto increase our authorized shares of common stock for the same.\n\n* *\n\n*Reverse\nStock Split (July 2025)*\n\n \n\nOn\nJuly 18, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock\nat a ratio of 1-for-3, and our authorized common stock was proportionately reduced to 1,388,888 shares from 4,166,667 shares. The reverse\nstock split took effect on July 21, 2025. All share information included in this Form 10-K has been reflected as if the reverse stock\nsplit occurred as of the earliest period presented.\n\n* *\n\n*Series\nC-2 Preferred Amendments*\n\n \n\nOn\nMay 23, 2025, the Company filed a Certificate of Amendment that, among other changes, allows holders of Series C-2 Preferred to receive\ndividends payable in additional shares of Series C-2 Preferred, subject to specified equity-related conditions. The amendment also updated\nthe mechanics for adjusting the conversion price of the Series C-2 Preferred in connection with any future issuances of AIR Preferred\nShares.\n\n \n\nOn\nJune 27, 2025, the Company filed a second amendment to the Series C-2 Certificate of Designation, which restated the rights and preferences\nof the Series C-2 Preferred and authorized 20,000 shares with a stated value of $1,000 per share. This amendment also removed certain\nredemption features, including the “Bankruptcy Triggering Event” and “Change of Control” redemption rights, as\ndefined therein.\n\n \n\n*NTI\nDivesture*\n\n* *\n\nOn\nOctober 11, 2024, we acquired NAYA Therapeutics, Inc. with the intent to expand beyond fertility into a broader healthcare portfolio\ncombining our commercial-stage fertility business with a clinical-stage oncology and autoimmune technology business. Following insufficient\nstockholder support for key elements of the transaction at a March 2025 stockholder meeting, and upon advice of counsel, our proxy solicitation\nfirm, and general stakeholder feedback, we elected to re-focus exclusively on our fertility business.\n\n \n\nEffective\nJune 2, 2025, we divested a majority stake in NAYA Therapeutics, Inc. by redeeming all outstanding shares of Series C-1 Preferred at\na redemption price of 113.8558 shares of NAYA Therapeutics Class A Common Stock per share of Series C-1 Preferred redeemed. We retained\n6,300 shares of Series A Preferred Stock of NAYA Therapeutics, representing 19.9% of outstanding common stock on an as-converted basis,\nand hold a secured convertible promissory note issued by NAYA Therapeutics on May 28, 2025 in the principal amount of $4,803,175.* *\n\n \n\n*Series\nC-1 Preferred Amendment*\n\n \n\nOn\nMay 28, 2025, we filed with the Nevada Secretary of State a certificate of amendment to the Series C-1 Certificate of Designation pursuant\nto which, we are entitled to redeem at our option at any time or from time to time upon not less than 2 calendar days written notice\nto the holders prior to the date fixed for redemption thereof, at a redemption price of 113.8558 shares of Class A Common Stock of NTI\nfor each share of Series C-1 Preferred being redeemed.\n\n* *\n\n44\n\n \n\n \n\n*Warrant\nInducement (April 2025)*\n\n \n\nOn\nApril 30, 2025, we entered into the April 2025 Inducement Letter Agreement with an institutional investor and existing holder of certain\nexisting warrants to purchase up to 3,882 shares of our common stock. Such existing warrants were originally issued on January 14, 2025,\nwith an exercise price of $1,008.00 per share.\n\n \n\nThe\nissuance of the shares of common stock upon exercise of such existing warrants was registered pursuant to a registration statement on\nForm S-3 (File No. 333-283872), which was declared effective by the SEC on January 14, 2025.\n\n \n\nPursuant\nto the April 2025 Inducement Letter Agreement, FNL agreed to exercise such existing warrants for cash at the exercise price of\n$193.20 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 5,823\nshares of common stock at an exercise price of $193.20 per share (“FNL Inducement Warrants”). Such new warrants would become exercisable upon receipt of such\napproval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the\nstockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof\nand have a term of five years from the date stockholder approval would be obtained. We received stockholder approval for the\nissuance of shares of common stock upon exercise of such new warrants on July 23, 2025.\n\n \n\nThe\naggregate gross proceeds to us from the exercise of such existing warrants was approximately $750,000, before deducting offering expenses\npayable by us.\n\n \n\n*Name\nChange*\n\n \n\nOn\nApril 14, 2025, we changed our corporate name to INVO Fertility, Inc., pursuant to an Amendment to Articles of Incorporation filed with\nthe Nevada Secretary of State on April 14, 2025 (the “Name Change”). Pursuant to Nevada law, a stockholder vote was not necessary\nto effectuate the Name Change.\n\n \n\nOn\nApril 28, 2025, our common stock ceased trading under the ticker symbol “NAYA” and began trading under our new ticker symbol,\n“IVF”, on the Nasdaq Capital Market.\n\n \n\n45\n\n \n\n \n\n*Reverse\nStock Split (March 2025)*\n\n \n\nOn\nFebruary 24, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common\nstock at a ratio of 1-for-12, and our authorized common stock was proportionately reduced to 4,166,667 shares from 50,000,000 shares.\nThe reverse stock split took effect on March 18, 2025. All share information included in this Form 10-K has been reflected as if the\nreverse stock split occurred as of the earliest period presented.\n\n \n\n*Public\nOffering*\n\n \n\nOn\nJanuary 14, 2025, we consummated the January 2025 Offering of 9,455 units (“Units”), each consisting of either one share\nof common stock, or one January 2025 PFWs in lieu thereof, and one January 2025 Warrant. The January 2025 Warrants are exercisable from\nand after the date of their issuance and expire on the five-year anniversary of such date, at an exercise price of $1,008.00 per share\nof common stock. Each January 2025 PFW is immediately exercisable at an exercise price of $0.144 per share and may be exercised at any\ntime until all of the January 2025 PFWs are exercised in full. In connection with the January 2025 Offering, we entered into the January\n2025 SPA with certain institutional investors who purchased Units in this January 2025 Offering.\n\n \n\nThe\nsecurities issued in the January 2025 Offering were offered pursuant to our registration statement on Form S-1, as amended (File No.\n333-283872), initially filed by us with the SEC, on December 17, 2024 and declared effective on January 13, 2025.\n\n \n\nWe\nclosed the January 2025 Offering on January 14, 2025, raising gross proceeds of approximately $9.5 million before deducting placement\nagent fees and other offering expenses payable.\n\n \n\nAlso\nin connection with the January 2025 Offering, on January 13, 2025, we entered into the January 2025 PAA with Maxim, pursuant to which\n(i) Maxim agreed to act as lead placement agent on a “best efforts” basis in connection with the January 2025 Offering, and\n(ii) we agreed to pay Maxim an aggregate fee equal to 6.5% of the gross proceeds raised in the January 2025 Offering (or 5.0% in the\ncase of certain investors) and the Maxim January 2025 Warrants. The Maxim January 2025 Warrants are exercisable at any time after the\nsix-month anniversary of the closing date, from time to time, in whole or in part, until five (5) years from the commencement of sales\nof the securities in the January 2025 Offering. Additionally, we reimbursed Maxim for certain expenses and legal fees up to $90,000.\n\n \n\nIn\nconnection with the January 2025 Offering, on January 13, 2025, we entered into a Class C-2 Preferred Stock Redemption Agreement with\nFNL, pursuant to which we agreed to purchase and acquire from FNL 4,000 shares of our C-2 Preferred Stock for $4,000,000. Accrued dividends,\nplus any other accrued payments under the Certificate of Designations for the C-2 Preferred Stock, remained outstanding.\n\n \n\n**Results\nof Operations**\n\n \n\nDuring fiscal 2025, we worked to stabilize and build\nthe business, strengthen the balance sheet and seek out additional acquisition opportunities. We successfully advanced these key goals,\nwith substantial progress in the early part of 2026. We now have a robust pipeline of acquisitions opportunities and recently closed\non the acquisition of Family Beginnings in Indiana (see Recent Developments for additional information on this acquisition).\n\n \n\nLooking ahead, we expect our fertility operations\nto expand further, both through organic growth of our existing clinics and through the acquisition of additional, profitable fertility\nclinics. Our active pursuit of additional acquisitions is aimed at accelerating our growth, building scale in our operations, and driving\nour overall business to cash flow break even and beyond to profitability. \n\n \n\nAlthough we anticipate our clinic operations will\ndominate our commercial efforts and revenue, we also will continue to work on growing INVOcell, both within our own clinics as well as\nto third party fertility clinics. We also intend to seek out additional, innovative technologies that we can utilize to benefit patients\nand enhance our clinic operations.\n\n \n\nFrom a macro perspective, we believe we will benefit\nfrom the ongoing growth in the ART market, which continues to experience positive trends, including (1) an under-served patient population,\n(2) increasing infertility rates around the world, (3) growing awareness and education of fertility treatment options, (4) a growing acceptance\nof fertility treatment, (5) improvements in procedure techniques and hence improvements in pregnancy success rates, (6) generally improving\ninsurance (private and public) reimbursement trends, and (7) an administration that supports increased access to fertility treatments.\n\n \n\nAs previously described, we completed the acquisition\nof NAYA Therapeutics in October of 2024. The original goal behind this transaction was to expand our business activities beyond fertility\nand to create a healthcare portfolio company initially focused on a commercial-stage fertility business\ncombined with a unique clinical-stage oncology and autoimmune technology business.\n\n \n\nIn April 2025, not having received sufficient shareholder\nsupport for key elements of the NAYA Therapeutics acquisition, upon advice of counsel as well as general feedback from stakeholders, we\nelected to re-focus exclusively on our fertility business. As such, we changed our name and ticker symbol to “INVO Fertility, Inc.”\nand “IVF”, respectively, and, in May 2025, divested a majority interest in NAYA Therapeutics.\n\n \n\nWe remain enthusiastic about NAYA Therapeutics’\nprospects and will retain a minority stake, which we hope to monetize in the future through value appreciation that could be generated\nfrom the clinical development of its bifunctional antibodies.\n\n \n\nWe believe that our renewed focus on our core fertility\noperations best serves our growth objectives.\n\n \n\n46\n\n \n\n \n\n**Comparison\nof the years ended December 31, 2025 and 2024**\n\n \n\n*Revenues*\n\n \n\nRevenue\nfor the years ended December 31, 2025 and 2024 was $6.8 million and $6.5 million, respectively. Of the $6.8 million in revenue for 2025,\n$6.7 million was related to clinic revenue from the consolidated Georgia JV and WFI. The increase of approximately $0.3 million, or approximately\n5%, was primarily related to increased clinical revenue.\n\n \n\n*Cost\nof Services*\n\n \n\nCost\nof services for the years ended December 31, 2025 and 2024 was $4.3 million and $3.6 million, respectively. The increase in our cost\nof services was primarily related to an increase in clinical personnel expenses.\n\n \n\n*Cost of Goods Sold*\n\n \n\nCost of goods sold for the years ended December 31, 2025 and 2024 was $31 thousand and $12 thousand, respectively.\nThe increase in our cost of goods sold was primarily related to an increase in product revenue.\n\n \n\n*Selling,\nGeneral, and Administrative Expenses*\n\n \n\nSelling,\ngeneral and administrative expenses for the years ended December 31, 2025 and 2024 were $7.7 million and $8.1 million, respectively,\nof which $1.5 million and $1.6 million, respectively, was for non-cash, stock-based compensation expense. The decrease of $0.4 million\nor 5% was primarily the result of decreased corporate personnel expenses.\n\n \n\n*Impairment of Intangible Assets*\n\n* *\n\nImpairment of intangible assets for the years ended December 31, 2025 and 2024 were $1.4 million and $0, respectively.\nWe recognized an impairment of $1,397,353 in our Clinic Services segment on the noncompetition agreement as we agreed to release Dr. Pritts\nfrom her noncompetition agreement as part of a settlement and binding term sheet entered into with Dr. Pritts on May 14, 2025. See Pritts\nLitigation and Binding Settlement Term Sheet in Recent Developments for additional information on the settlement and binding term sheet.\n\n \n\n*Gain on Changes in Fair Value*\n\n \n\nGain on changes in fair value for the years ended\nDecember 31, 2025 and 2024 were $5.2 million and $0, respectively. We recognized gain of $0.2 million related to the change in fair value\nof the NAYA Note Receivable from the time of issuance to December 31, 2025, a gain of $3.8 million related to the change in\nthe fair value of the FNL Inducement Warrants and the Armistice Warrants, and a gain of $1.1 million related to the change in fair value of the embedded derivative in the FNL Debenture.\n\n* *\n\n*Loss\nFrom Debt Extinguishment*\n\n \n\nLoss from debt extinguishment for the years ended December 31, 2025 and\n2024, was $2.1 million and $0.04 million, respectively. The increase of approximately $1.8 million was primarily non-cash equity issued\nin conjunction with the convertible debentures issued to FNL and updated JAG Notes (as defined in the financial statements contained herein).\n\n \n\n*Gain on Settlement of Liability*\n\n* *\n\nGain on settlement of liability for\nthe years ended December 31, 2025 and 2024 was $0.9\nmillion and $0, respectively. We recognized a gain of $0.9 million as\npart of a settlement and binding term sheet entered into with Dr. Pritts on May 14, 2025. See Pritts Litigation and Binding Settlement\nTerm Sheet in Recent Developments for additional information on the settlement and binding term sheet.\n\n \n\n*Interest\nExpense and Financing Fees*\n\n \n\nInterest\nexpense and financing fees for the years ended December 31, 2025 and 2024 were $1.3 million and $1.0 million, respectively. The increase\nof approximately $0.3 million, or approximately 26%, was primarily non-cash and due to the debt discount on the FNL Debenture.\n\n \n\n47\n\n \n\n \n\n*Income\nTaxes*\n\n \n\nAs\nof December 31, 2025, we had unused federal net operating loss carryforwards (“NOLs”) of $43.5 million. These losses expire\nin various amounts at varying times beginning in 2029 with a portion carrying on indefinitely. Unless expiration occurs, these NOLs may\nbe used to offset future taxable income and thereby reduce our income taxes.\n\n \n\nWe\nrecorded a valuation allowance against our deferred tax assets at December 31, 2025 and 2024 totaling $12.5 million and $8.9 million,\nrespectively.\n\n \n\n*Discontinued O*perations\n\n* *\n\nLoss from discontinued operations, inclusive of the loss on disposition, for the years ended December 31, 2025 and\n2024 was $18.0 million and $0, respectively. The loss from discontinued operations was from the divesture of NTI which was completed on\nMay 2, 2025.\n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nFor the years ending December 31, 2025, and 2024,\nwe had net losses from continuing operations of approximately $5.3 million and $7.7 million, respectively. We had negative working capital\nof approximately $7.4 million as of December 31, 2025, compared to negative working capital of approximately $12.2 million as of December\n31, 2024. As of December 31, 2025, we had stockholder’s equity of approximately $7.3 million compared to stockholder’s equity\nof approximately $12.6 million as of December 31, 2024. Cash used in operations for the year ending December 31, 2025 was approximately\n$7.0 million, compared to approximately $3.0 million for the year ending December 31, 2024.\n\n \n\nWe\nhave been dependent on raising capital through debt and equity financing to secure the cash required to fund our operating expenses and\ninvesting activities. During 2025, we received net proceeds of approximately $2.9 million from the sale of preferred stock, net proceeds\nof approximately $1.1 million from the exercise of warrants, and net proceeds of approximately $12.4 million for the sale of our common\nstock, of which $4 million was used to redeem preferred stock. During 2024, we received proceeds of approximately $1.3 million from notes,\nnet proceeds of approximately $1.6 million from the sale of preferred stock, net proceeds of approximately $0.9 million from the exercise\nof warrants, and net proceeds of approximately $0.2 million for the sale of our common stock. In January 2026 we raised an additional\n$7.5 million from the exercise of warrants in a warrant inducement.\n\n \n\nOver the next 12 months, our plan includes growing our clinic revenue organically and pursuing additional profitable fertility\nclinic acquisitions. Until we can generate a sufficient amount of cash from operations, we will need to raise additional funding to\nmeet our liquidity needs and to execute our business strategy. As in the past, we will seek debt and/or equity financing, which may\nnot be available on reasonable terms, if at all.\n\n \n\nThese factors, among others, raise substantial\ndoubt about our ability to continue as a going concern. If we are unable to raise additional funding to meet our working capital needs\nin the future, we will be forced to delay or reduce the scope of our growth and acquisition plans and/or limit or cease our operations.\nIf we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in INVO. Our financial statements\ndo not include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n**Cash\nFlows**\n\n \n\nThe\nfollowing table shows a summary of our cash flows for the year ended December 31:\n\n \n\n  \n2025  \n2024 \n\nCash (used in) provided by: \n    \n   \n\nOperating activities \n (7,014,485) \n (2,974,400)\n\nInvesting activities \n (2,745,481) \n 363,895 \n\nFinancing activities \n 11,096,412  \n 3,119,477 \n\n \n\n*Cash\nFlows from Operating Activities*\n\n \n\nAs\nof December 31, 2025, we had approximately $2.1 million in cash compared to approximately $0.6 million as of December 31, 2024. Net cash\nused in operating activities in 2025 was approximately $7.0 million, compared to approximately $3.0 million for the same period in 2024.\nThe increase in net cash used in operations was primarily due to an increase in net loss and a decrease in accounts payable.\n\n \n\n48\n\n \n\n \n\n*Cash\nFlows from Investing Activities*\n\n \n\nDuring the year ended December 31, 2025, cash used\nin investing activities of approximately $2.7 million was primarily related to payments due on the WFI acquisition. During the year ended\nDecember 31, 2024, cash provided by investing activities of approximately $0.4 million was primarily related to the cash acquired in the\nNAYA Therapeutics acquisition.\n\n \n\n*Cash\nFlows from Financing Activities*\n\n \n\nDuring\nthe year ended December 31, 2025, cash provided by financing activities of approximately $11.1 million was related to proceeds from\nthe sale of common stock, the sale of preferred stock, and warrant exercises. During the year ended December 31, 2024,\ncash provided by financing activities of approximately $3.1 million was related to proceeds from notes payable, the sale of\npreferred stock, and proceeds from warrant exercises.\n\n \n\n*Financing\nActivities*\n\n \n\nPublic Offering (Jan 2025)\n\n \n\nOn January 14, 2025, we consummated the January 2025 Offering of 9,455 units, each consisting of either one share\nof common stock or one January 2025 Pre-Funded Warrant in lieu thereof, and one January 2025 Warrant, raising gross proceeds of approximately\n$9.5 million before deducting placement agent fees and other offering expenses. The January 2025 Warrants are exercisable immediately\nupon issuance, expire five years from issuance, and carry an exercise price of $1,008.00 per unit.\n\n \n\nWarrant\nInducement (April 2025)\n\n \n\nOn April 30, 2025, we entered into the April 2025 Inducement Letter Agreement with an institutional investor and\nexisting holder of warrants to purchase up to 3,882 shares of common stock, originally issued January 14, 2025 at an exercise price of\n$1,008.00 per share. Pursuant to the agreement, the investor agreed to exercise such warrants for cash at a reduced exercise price of\n$193.20 per share in consideration for our issuance of new unregistered warrants to purchase up to 5,823 shares of common stock at an\nexercise price of $193.20 per share, with a five-year term commencing upon stockholder approval. We received stockholder approval on July\n23, 2025. Aggregate gross proceeds from the warrant exercise were approximately $750,000, before deducting offering expenses.\n\n \n\nFNL\nAmendment and Exchange Agreements & Additional\nInvestment Right\n\n \n\nOn October 11, 2024, we issued the Debenture to FNL\npursuant to the Joinder Agreement, entitling FNL to convert outstanding principal and accrued interest into common stock at $1,339.992\nper share, subject to adjustment and stockholder approval, provided that conversion could not result in FNL beneficially owning more than\n4.99% of our outstanding common stock. Commencing March 14, 2025, we were required to redeem $437,127.24 of principal plus accrued interest\non the 14th of each month until maturity.\n\n \n\nThrough a series of amendments and exchange agreements\nentered into between May and September 2025, we restructured and ultimately extinguished the Debenture. These transactions included exchanging\nthe Debenture for the Amended and Restated Debenture, subsequently for the Second Amended and Restated Debenture with principal reduced\nto $1,751,344 and monthly redemption provisions removed, and ultimately exchanging the remaining outstanding principal for shares of Series\nC-2 Preferred. In connection with these transactions, we also granted FNL the Additional Investment Right to purchase up to $10,000,000\nof AIR Preferred Shares. During 2025, FNL exercised the AIR for $2,850,000 in aggregate cash consideration, for which we issued 2,850\nshares of Series C-2 Preferred. As a result of these transactions, the Second Amended and Restated Debenture was paid in full and fully\nextinguished.\n\n \n\nAs of January 31, 2026, all outstanding shares of\nSeries C-2 Preferred have been converted into shares of our common stock and all dividends owed thereunder have been settled in full.\n\n \n\nPrivate\nPlacement (Dec 2025)\n\n \n\nOn December 2, 2025, we completed a private placement\nwith an institutional investor, raising approximately $4.0 million in gross proceeds. The financing included the issuance of 47,000 shares\nof common stock, pre-funded warrants to purchase 426,373 shares, and common stock warrants to purchase 946,746 shares at an exercise\nprice of $8.45 per share, exercisable upon receipt of stockholder\napproval.\n\n \n\nWarrant\nInducement (Jan 2026)\n\n \n\nOn\nJanuary 28, 2026, we entered into the January 2026 Inducement Letter Agreement with an institutional investor and the Holder of the Common\nWarrants.\n\n \n\nPursuant\nto the January 2026 Inducement Letter Agreement, the Holder agreed to exercise the Common Warrants for cash at the exercise price of\n$7.95 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 1,893,492 shares\nof common stock at an exercise price of $7.95 per share. Such new warrants will become exercisable upon receipt of such approval as may\nbe required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO\nwith respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof and have a term of five\nand one-half years from the date stockholder approval is obtained.\n\n \n\nThe aggregate gross proceeds\nto us from the exercise of such existing warrants was approximately $7.5 million, before deducting offering expenses payable by us.\n\n \n\n49\n\n \n\n** **\n\n**Critical\nAccounting Policies and Estimates**\n\n \n\nThe\ndiscussion and analysis of our financial condition presented in this section is based upon our audited consolidated financial statements,\nwhich have been prepared in accordance with generally accepted accounting principles in the United States. During the preparation of\nthe financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue\nand expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate, based on historical experience\nand on various other assumptions that are believed to be reasonable under the circumstances, our results, which allows us to form a basis\nfor making judgments on the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results\nmay differ from these estimates based on variance with our assumptions and conditions. A summary of significant accounting policies is\nincluded below. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable\nfinancial information about our operating results and financial condition.\n\n \n\nSee\nNote 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant\naccounting policies and the effect on our consolidated financial statements.\n\n \n\n**Business\nAcquisitions**\n\n \n\nThe\nCompany accounts for all business acquisitions at fair value and expenses acquisition costs as they are incurred. Any identifiable assets\nacquired and liabilities assumed are recognized and measured at their respective fair values on the acquisition date. If information\nabout facts and circumstances existing as of the acquisition date is incomplete at the end of the reporting period in which a business\nacquisition occurs, the Company will report provisional amounts for the items for which the accounting is incomplete. The measurement\nperiod ends once the Company receives sufficient information to finalize the fair values; however, the period will not exceed one year\nfrom the acquisition date. Any adjustments to provisional amounts that are identified during the measurement period are recognized in\nthe reporting period in which the adjustment amounts are determined.\n\n** **\n\n**Discontinued\nOperations**\n\n \n\nThe\nCompany accounted for the divesture of its NAYA Therapeutics (“NTI”) subsidiary in accordance with Accounting Standards\nCodification (“ASC”) 205 *Discontinued Operations*(“ASC 205”). ASC 205 requires that a component of an entity that has\nbeen disposed of or is classified as held for sale, has operations and cash flows that can be clearly distinguished from the rest of\nthe entity, and represents a strategic shift that has (or will have) a major effect on the reporting entity’s financial\nresults must be reported as discontinued operations. The divesture of NTI met the held-for-sale criteria as defined in ASC\n205.\n\n \n\nIn\nthe period a component of an entity is classified as a discontinued operation, the results of operations for the periods presented are\nreclassified into separate line items in the unaudited condensed consolidated statements of operations and the assets and liabilities\nof the discontinued operation are also reclassified into separate line items on the related condensed consolidated balance sheets. Prior\nperiod amounts are also adjusted to reflect discontinued operations presentation. All amounts included in the notes to the unaudited\ncondensed consolidated financial statements relate to continuing operations unless otherwise noted.\n\n* *\n\n**Variable\nInterest Entities**\n\n \n\nThe\nCompany’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest\nentities (“VIE”), where the Company is the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC\n810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the primary beneficiary\nhas both: (i) the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) the obligation\nto absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The Company reconsiders\nwhether an entity is still a VIE only upon certain triggering events and continually assesses its consolidated VIEs to determine if it\ncontinues to be the primary beneficiary. See “Note 4 – Variable Interest Entities” for additional information on the\nCompany’s VIEs.\n\n \n\n**Equity\nMethod Investments**\n\n \n\nInvestments\nin unconsolidated affiliates, over which the Company exerts significant influence but does not control or otherwise consolidate, are\naccounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment\nin joint ventures in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments\nis reported in loss from equity method joint venture in the accompanying consolidated statements of operations. The Company monitors\nits investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating\nperformance of the investees and records reductions in carrying values when necessary.\n\n \n\n**Fair\nValue of Financial Instruments**\n\n \n\nThe Company’s financial instruments consist\nprimarily of cash, accounts receivable, accounts payable, notes payable, convertible preferred stock, and warrants. The carrying value\nof cash, accounts receivable, accounts payable and notes payable, as reflected in the balance sheets, approximate fair value because of\nthe short-term maturity of these instruments. The Company measures the fair value of its liability-classified warrants at the end of each\nreporting period using a Black-Scholes option pricing model, and changes in fair value are recognized in the consolidated statements of\noperations.\n\n \n\n**Derivatives**\n\n \n\nThe Company reviews the conversion features of all liability and equity\ninstruments based on the requirements of ASC 815, “Derivatives and Hedging” to determine if the conversion feature represents\nan embedded derivative. The Company determined certain warrants issued during the fiscal year ending December 31, 2025 that were classified\nas derivative intstrument, see Note 15 – Unit Purchase Options and Warrants for additional information.\n\n \n\n**Recent Accounting Pronouncements**\n\n \n\nSee Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K\nfor a summary of significant accounting policies and the effect on our consolidated financial statements."}