Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This discussion includes certain forward-looking statements about our business and our expectations, including statements relating to revenues, international revenues, revenue growth rates, gross margin, operating expenses, amortization expenses, earnings per share, available cash and operating cash flow. Any such statements are subject to risk that could cause the actual results to vary materially from expectations. For a further discussion of the various risks that may affect our business and expectations, see the section titled "Risk Factors" contained 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 future impact of any mergers, acquisitions or dispositions. In addition, any forward-looking statements represent our estimates only as 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 date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Overview

We are a healthcare services and technology company focused on the fertility marketplace and dedicated to expanding access to ART care to patients in need. Our principal commercial strategy is focused on acquiring, establishing, and operating fertility clinics and related businesses and technologies. Our acquisition strategy focuses on US-based, profitable fertility clinics. Our clinics offer a variety of fertility services including IVF and the IVC procedure enabled by INVOcell. As of the date of this filing, we have four fertility clinics in the United States. We also continue to engage in the sale and distribution of our INVOcell technology solution into third-party owned and operated fertility clinics. We also intend to seek out additional, innovative fertility-focused technologies, to license or acquire in order to utilize within our clinics.

Fertility Clinics

On February 18, 2026, we completed our acquisition of Family Beginnings, an Indiana based fertility clinic that offers both IVF and IVC. (See Item 1 for additional information on the acquisition of Family Beginnings).

On August 10, 2023, we consummated the first acquisition of an existing fertility clinic, WFI. As an established and profitable clinic, the closing of the WFI acquisition more than tripled our annual revenue and became a major part of our clinic-based operations. The acquisition accelerated our transformation from a medical device company to a healthcare services company and immediately added scale and a significant source of positive cash flow to our operations. The acquisition of profitable IVF clinics complements our efforts to build new INVO Centers, and we expect to continue this strategy to accelerate overall growth.

On March 10 and June 28, 2021, we established joint ventures to open INVO Centers in Birmingham, Alabama, and Atlanta, Georgia, respectively. We established these clinics to increase use of the INVOcell, to accelerate the growth and awareness of the IVC procedure, and to expand the availability of statistical and clinical data supporting its use. These clinics also represent our initial entry into clinic-based fertility operations and enabled us to expand our revenue per fertility cycle from hundreds of dollars (from the sale of each INVOcell device) to thousands of dollars, and to significantly advance our path to building greater scale in our overall operations and to reaching profitability.

INVOcell Device

Our proprietary INVOcell® device enables fertilization and early embryo development to occur in vivo within the woman's body - the world's first IVC technique of its kind. Unlike IVF, which relies on expensive laboratory incubators, the INVOcell allows fertilization and early embryo development to take place in the woman's body and has demonstrated equivalent pregnancy success and live birth rates as IVF.

While INVOcell remains part of our efforts, our strategy has expanded to focus more broadly on providing ART services through clinic operations.

Operations

Our critical management and leadership functions are carried out by our management team. In the Fertility Clinic segment, each clinic is separately staffed with the people necessary to manage daily activities, while most administrative tasks are centralized and handled by the INVO corporate staff. With respect to the INVOcell Device segment, we have contracted out the manufacturing, assembly, packaging, and labeling to a medical manufacturing company, sterilization of the device to a sterilization specialist, and storage and shipping to a third part logistics company.

Wisconsin Fertility Institute

As an 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 administration staff. The day to day clinical operations are handled by on site staff. Our corporate staff manages finance, accounting, human resources and other overhead responsibilities.

Alabama JV

We established the Alabama JV with HRCFG. The responsibilities of HRCFG's principals include providing clinical practice expertise, performing recruitment functions, providing all necessary training, and providing day-to-day management of the Alabama JV. Our responsibilities include providing funding to the Alabama JV and being the exclusive provider of the INVOcell.

Georgia JV

We formed a joint venture with Bloom to establish the Georgia JV. The responsibilities of Bloom include providing all medical services required for the operation of the Georgia JV. Our responsibilities include providing funding to the Georgia JV, lab services, quality management, and being the exclusive provider of the INVOcell.

INVOcell

To date, we have completed a series of important steps in the successful development and manufacturing of the INVOcell:

●	Manufacturing: We are ISO 13485:2016 certified and manage all aspects of production and manufacturing with qualified suppliers. Our key suppliers, which include NextPhase Medical Devices, R.E.C. Manufacturing Corporation, and Casco Bay Molding, have been steadfast partners since our company first began and can provide us with virtually an unlimited capability to support our growth objectives, with all manufacturing performed in the New England region of the U.S.
●	Raw Materials: All raw materials utilized for the INVOcell are medical grade and commonly used in medical devices (e.g., medical grade silicone, medical grade plastic). Our principal molded component suppliers, Casco Bay Molding and R.E.C. Manufacturing Corporation, are well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are supplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified, and FDA registered.
●	US Marketing Clearance: The safety and efficacy of the INVOcell has been demonstrated and cleared for marketing and use by the FDA in November 2015.
●	Clinical: In June 2023, we received FDA 510(k) clearance to expand the labeling on the INVOcell device and its indication for use to provide for a 5-day incubation period. The data supporting the expanded 5-day incubation clearance demonstrated improved patient outcomes.

Market Opportunity

Fertility Clinics and INVOcell Device

The global ART marketplace is a large and growing, multi-billion-dollar industry across the world as increased infertility rates, greater patient awareness and improving financial incentives, such as insurance and governmental assistance, continue to drive growth and demand. According to the European Society for Human Reproduction 2024 ART Fact Sheet, one in six couples worldwide experience fertility challenges. Additionally, the worldwide market remains vastly underserved as a high percentage of patients in need of care continue to go untreated each year for many reasons, but key among them are capacity constraints and cost barriers. There have been large increases in the use of IVF, with current estimates of approximately 4 million ART cycles performed globally each year, producing around 1 million babies. Regrettably, this only amounts to less than 5% of the infertile couples worldwide being treated and less than 2% of such couples having a child though IVF. The industry remains capacity constrained which creates challenges in providing access to care at an affordable price for the volume of patients in need. A survey by "Resolve: The National Infertility Association," indicates the two main reasons couples do not use IVF is cost and geographical availability (and/or capacity).

In the United States, infertility affects an estimated 10%-15% of the couples of childbearing-age, according to the American Society of Reproductive Medicine (2017). According to the CDC, there are approximately 6.7 million women with impaired fertility. Based on 2022 data from the CDC's National ART Surveillance System, approximately 435,000 IVF cycles were performed across ~500 IVF centers, leaving the U.S. with a large, underserved patient population, similar to most markets around the world.

Our corporate development strategy, which includes acquiring established existing practices, building new clinics, and expanding our INVOcell device, is designed to take advantage of the attractive fertility market dynamics of supply and demand.

Competitive Advantages

INVOcell Device and Fertility Clinics

Over the past several years, the principal focus of our commercial efforts has shifted from the distribution of our INVOcell device to the provision of fertility clinic services through our network of clinics. For the most part, our clinical activities have been focused on secondary markets where there is a greater imbalance between the need for ART treatment and the number of cycles available. Combined with our ability to offer a wider range of advanced fertility care, including IVC, IVF and IUI, at multiple price points, our clinics have the opportunity for differentiation from our competitors. As with our INVOcell technology, we continuously look for new solutions that can create greater efficiency and effectiveness in the provision of fertility cycles and support our efforts to democratize fertility care.

While a much smaller part of our current business, we continue to believe that our INVOcell device, and the IVC procedure it enables, can play a key role in making advanced fertility care more affordable and accessible. We continue to engage with sympathetic third-party clinics that share our same vision and that use our one-of-a-kind INVOcell device.

Unlike IVF, where the oocytes and sperm develop into embryos in a laboratory incubator, the INVOcell allows fertilization and early embryo development to take place in the woman's body. We believe that the IVC procedure can provide the following benefits:

	●	May reduce lab procedures, helping clinics and doctors to increase patient capacity, lower costs and offer a more affordable advanced fertility treatment option;
	●	A natural and stable incubation environment; and
	●	A more personal, intimate experience in creating a baby.

In both current utilization of the INVOcell, and in clinical studies, the IVC procedure has demonstrated equivalent pregnancy success and live birth rates as IVF and generally may be offered at a significant discount to IVF cycles.

Sales and Marketing

Fertility Clinics

Our four fertility clinics employ various strategies to build awareness for their services and/or to maintain and grow patient flow and fertility cycle volume. The principal source of patient flow comes through social media marketing, OBGYN referrals, and patient word of mouth. Our clinical staff build and maintain relationships with the local OBGYN community, regularly following up with patient OBGYNs to build additional referral flow. We also conduct regular social and other media campaigns to attract new patients and to build awareness.

At the corporate level, we seek to build general awareness for our clinical activities and IVC procedure results with a view to drive patients to our centers and to grow demand for our INVOcell device. These efforts also support our ongoing work to acquire additional IVF clinics in the near term and open new fertility clinics longer term.

The acquisition of existing fertility clinics requires less sales and marketing effort compared to opening new fertility clinics, as they have established patient flows that can be built upon. When entering a new market with a fertility clinic, we leverage the experience developed in establishing our Alabama and Georgia joint ventures. We employ strategies to secure patient flow levels that can enable new fertility clinics to become profitable and contribute economically to our overall business as soon as possible. Primarily, our fertility clinics seek to employ local, reputable physicians with strong ties to the OBGYN community.

INVOcell Device

Historically, our approach to marketing INVOcell was focused on identifying partners within targeted geographic regions that we believe could best support our efforts to expand access to advanced fertility treatment using the INVOcell and IVC procedure for the large number of underserved infertile people around the world. Those efforts resulted in the execution of a series of distribution agreements with partners across the globe. More recently, as we shifted our focus to opening INVO Centers and acquiring IVF clinics, which activities have been centered in the US, and as a result of the limited traction experienced in international markets, proactive marketing efforts for the INVOcell have been limited to the United States. In our domestic market, we distribute the INVOcell directly to a number of third-party IVF clinics and we remain open to pursuing foreign markets that present a realistic opportunity for incremental revenue on a profitable basis.

Recent Developments

JAG Amendment

On May 27, 2026, we entered into a letter agreement (the "JAG May 2026 Letter") with JAG Multi Investments LLC ("JAG") pursuant to which (i) the maturity date of certain previously issued convertible notes with a principal balance of $660,000 (the "JAG Notes") was extended until December 31, 2026, (ii) we agreed to repay the JAG Notes in monthly installments of $50,000 starting in April 2026 with a balloon payment at 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 pay 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 JAG 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 shares 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 agreed to the reset of the conversion and exercise prices of the JAG Notes and JAG May 2026 Warrant, respectively, to equal the price of any future financing based on a share price that is lower than the conversion and exercise prices then in effect.

Nasdaq

On April 23, 2026, we received a letter (the "10-K Letter") from the Listing Qualifications staff (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that 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 basis and, as such, no longer satisfies Nasdaq Listing Rule 5250(c)(1) (the "Timely Filing Rule")

On May 27, 2026 we receive an additional letter (the "10-Q Letter") from the Staff indicating that we failed to file our Quarterly Report on Form 10-Q for the period ended March 31, 2026 (the "10-Q Filing"), on a timely basis.

Neither letter had an immediate effect on the listing of our common stock.

Both letters also stated that, in accordance with Nasdaq 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. Should 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 October 13, 2026, to regain compliance.

Reverse Stock Split (March 2026)

On March 25, 2026, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock at 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 reverse stock split took effect on March 27, 2026. All share information included in this Form 10-K has been reflected as if the reverse stock split occurred as of the earliest period presented.

Closing of Family Beginnings Acquisition

On February 18, 2026, we completed the acquisition of Family Beginnings P.C., a fertility clinic located in Indianapolis, Indiana. The transaction was executed through our wholly owned subsidiary Wood Violet. The total purchase price was approximately $760,000, consisting of $360,000 in cash (net of a holdback) and $400,000 in Series D Preferred Stock.

As part of the acquisition structure, we acquired the clinic's non-medical business assets through Wood Violet, while the clinic's medical assets were acquired by Fertility, P.A., which entered into a long-term Management Services Agreement with Wood Violet. Under this agreement, Wood Violet will provide management, administrative, laboratory, and operational support services to the clinic for an initial 10-year term, renewable for additional five-year periods.

In connection with the acquisition, we also entered into a lease for approximately 4,387 square feet of clinic and office space in Indianapolis, effective March 1, 2026, with an initial term through July 31, 2033.

Founded more than a decade ago, Family Beginnings has built a strong reputation for delivering comprehensive fertility services with a highly personalized, patient-first approach. The clinic offers a full suite of reproductive services, including in vitro fertilization, intravaginal culture (as an early adopter of our INVOcell solution), ovulation induction, intrauterine insemination, fertility preservation, and diagnostic testing, supported by an experienced clinical and embryology team. The acquisition expands INVO's clinical footprint and is expected to support continued growth of our fertility services platform.

Warrant Inducement (January 2026)

On January 28, 2026, we entered into the January 2026 Inducement Letter Agreement with an institutional investor and the Holder of the Common Warrants.

The issuance of the shares of common stock upon exercise of such the Common Warrants was registered pursuant to a registration statement on Form S-1 (File No. 333-292206), which was declared effective by the SEC on December 29, 2025.

Pursuant to the January 2026 Inducement Letter Agreement, the Holder agreed to exercise the Common Warrants for cash at the exercise price of $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 of common stock at an exercise price of $7.95 per share. Such new warrants will become exercisable upon receipt of such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof and have a term of five and one-half years from the date stockholder approval is obtained.

We registered the resale of the shares underlying such new warrants pursuant to a registration statement on Form S-1 (File No. 333-293135), which was declared effective by the SEC on February 12, 2026, and we agreed to observe customary limitations on additional issuances of common stock and variable-rate financing arrangements for a limited period following the warrant inducement transaction.

The aggregate gross proceeds to us from the exercise of such existing warrants was approximately $7.5 million, before deducting offering expenses payable by us.

Maxim acted as our financial advisor in connection with the inducement transaction.

Increase in Authorized Common Stock (Jan 2026)

On January 22, 2026, our stockholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our number of 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 to increase our authorized shares of common stock for the same.

Private Placement (December 2025)

On December 2, 2025, we entered into a securities purchase agreement with an institutional investor for a private placement of approximately $4 million in securities, comprised of 47,000 shares of common stock, pre-funded warrants, and common warrants (the "Armistice Warrants"). The Common Warrants became exercisable on January 22, 2026 upon receipt of such approval as required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof, expired five years thereafter, and carried an exercise price of $8.45 per share. The Pre-Funded Warrants were immediately exercisable at $0.0005 per share until exercised in full.

In connection with the foregoing private placement, we entered into a placement agency agreement with Maxim on a reasonable best efforts basis, 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 of Common Stock at $10.5625 per share, and reimbursement of expenses up to $50,000.

Net proceeds from the private placement are being used to support our growth and liquidity needs, including funding a portion of the Family Beginnings P.C. acquisition, paying certain outstanding debt obligations, and providing additional working capital.

Reverse Stock Split (Nov 2025)

On November 26, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock 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. The reverse stock split took effect on November 28, 2025. All share information included in this Form 10-K has been reflected as if the reverse stock split occurred as of the earliest period presented.

Pritts Litigation and Binding Settlement Term Sheet

On May 7, 2025, Dr. Pritts and Pritts Trust filed a complaint in the Circuit Court of the State of Wisconsin, Dane County, against us and our subsidiaries INVO CTR, Wisconsin Fertility and Reproductive Surgery Associates, S.C., and Wood Violet. Dr. Pritts and the Pritts Trust have asserted causes of action arising out of the WFI Documents for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract (or, in the alternative, veil piercing), and unjust enrichment.

On May 14, 2025, INVO, Dr. Pritts, the Pritts Trust, and certain of their respective affiliates entered into the Term Sheet to settle all disputes between the parties pursuant to the Terms. The parties agreed to cooperate in good faith to prepare and enter into the Settlement Agreement based on the terms set forth in the Term Sheet; provided, however, that unless and until the Settlement Agreement is executed, the Terms are binding on the parties. Under the Terms, Wood Violet agreed to pay Dr. Pritts $6,000,000 in full and final settlement and satisfaction of all obligations to Dr. Pritts and her affiliates under the WFI Documents, of which $525,000 was paid concurrently with the execution of the Term Sheet, and the remainder of which is payable as follows: $475,000 due June 30, 2025, $750,000 due September 30, 2025, $750,000 due December 31, 2025, $1,000,000 due March 31, 2026, $2,000,000 due June 30, 2026, and $500,000 due December 31, 2026. INVO shall provide Wood Violet with use of 25% of all gross funding proceeds above $2,000,000 raised within any six-month period to accelerate the payment of scheduled settlement payments in chronological order. The parties will enter into a consent judgment to resolve the complaint that would come into effect upon any breach of the Settlement Agreement. The parties agreed to settle all disputes, including those related to employment, acquisition, tax, and related matters, the termination of all employment, consulting, and similar agreements with Dr Pritts, and other customary terms, including, without limitation, indemnification and release of claims. On September 30, 2025 we executed the Settlement Agreement.

FNL Financing Transactions

On October 11, 2024, we issued the Debenture to FNL. We became a party to the Securities Purchase Agreement, pursuant to the Joinder Agreement. FNL was entitled to convert any portion of the outstanding principal and accrued interest into shares of our common stock at a conversion price of $1,339.992 per share, subject to adjustment, following stockholder approval, provided that conversion could not result in FNL beneficially owning more than 4.99% of our outstanding common stock. Commencing March 14, 2025, we were required to redeem $437,127.24 of principal, plus accrued interest, on the 14th of each month until maturity.

Effective May 23, 2025, we entered into the May 2025 Amendment and Exchange Agreement, pursuant to which the parties agreed to (a) exchange outstanding shares 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 to the Certificate of Amendment to the Series C-2 Certificate of Designation, (c) exchange the Debenture for the Amended and Restated Debenture, and (d) amend the Securities Purchase Agreement to grant FNL the Additional Investment Right, exercisable at any time and from 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, exercisable in minimum amounts of $500,000. The AIR Preferred Shares carry the same terms as the Series C-2 Preferred then outstanding, except that the conversion price upon issuance is deemed to be the lowest of (i) the conversion price then in effect, and (ii) the greater of (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 average of the three lowest VWAPs during the ten trading days prior to exercise. In consideration of the foregoing, we issued 1,029 additional shares of Series C-2 Preferred to FNL.

On June 30, 2025, we entered into an Amendment to the Securities Purchase Agreement (the "June 2025 Amendment") with FNL to permit FNL to elect, when exercising its Additional Investment Right, to either purchase AIR Preferred Shares for cash (an "AIR Purchase") or exchange them for all or a portion of the Amended and Restated Debenture, with the aggregate stated value of AIR Preferred Shares received in such exchange equal to the principal amount so exchanged plus accrued and unpaid interest thereon (an "AIR Exchange"). The Amendment also reduced the minimum exercise amount to $200,000. On the same date, we entered into the AIR Exercise and Reload Agreement, pursuant to which FNL exercised its Additional Investment Right to acquire 1,800 shares of Series C-2 Preferred with an aggregate stated value of $1,800,000 in exchange for $1,800,000 of principal, plus accrued and unpaid interest, under the Amended and Restated Debenture. In consideration thereof, we issued 630 additional shares of Series C-2 Preferred to FNL.

Effective August 21, 2025, we entered into the August 2025 Amendment and Exchange Agreement, pursuant to which the parties exchanged the Amended and Restated Debenture for the Second Amended and Restated Debenture, and removed the monthly redemption provisions. In connection therewith, the parties agreed to reduce the outstanding principal by $1,300,000 in exchange for AIR Preferred Shares with an aggregate stated value of $1,300,000, and we issued 325 additional shares of Series C-2 Preferred to FNL.

Effective September 29, 2025, we entered into the September 2025 Exchange Agreement, pursuant to which FNL exchanged the Second Amended and Restated Debenture 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 Debenture was paid in full and fully extinguished.

In addition to the exchanges of outstanding debenture principal, during 2025, FNL exercised the AIR for $2,850,000 in aggregate cash consideration, for 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 converted into shares of our common stock, and all dividends owed under the Series C-2 Preferred have been settled in full.

Decathlon Amendment

On September 29, 2023, we, our CEO, Steven Shum as a Key Person (as defined in the Loan Agreement defined below), and the our wholly-owned subsidiaries Bio X Cell, Inc, INVO Centers LLC, Wood Violet, Fertility Labs of Wisconsin LLC and Orange Blossom Fertility LLC as guarantors (the "Guarantors"), entered into the Loan Agreement with the Lender under which the Lender advanced a gross amount of $1,500,000.00 to us.

On September 24, 2024, we, the Lender, Steven Shum and the Guarantors entered into the First Amendment to the Loan Agreement, pursuant to which (i) the Lender approved that certain Standard Merchant Cash Advance Agreement, dated September 25, 2024 between us and Cedar Advance LLC, and (ii) we agreed to increase the Minimum Interest multiples set forth therein by 0.15 effective as of December 1, 2024, if we did not receive equity investment of at least $1,000,000 by November 30, 2024.

On October 11, 2024, we, the Lender, Steven Shum and the Guarantors entered into the Second Amendment to the Loan Agreement, pursuant to which 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 we 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 to meet certain liquidity covenants.

On August 13, 2025, we, the Lender, Steven Shum and the Guarantors entered into the Third Amendment to the Loan Agreement, pursuant to which (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 from the entry of judgment pursuant to the Term Sheet with Dr. Pritts and the Pritts Trust, (c) the parties agreed to an adjusted repayment schedule whereby the monthly payment under the Loan Agreement increased by $20,000, and (d) we agreed to reimburse the Lender for approximately $17,500 in fees and expenses incurred in connection with the Third Amendment to the Loan Agreement.

On September 22, 2025, we, the Lender, Steven Shum, and the Guarantors entered into the Restated Third Amendment to the Loan Agreement, pursuant to which and in addition to amendments set forth in the Third Amendment, since we did not raise the above stated $1 million by November 30, 2024 as required under the Loan Agreement, the Loan Agreement was amended to reflect an increase of 0.15 to the Minimum Interest multiples set forth in the Loan Agreement.

Side Letter Agreement

Effective as of August 21, 2025, we entered into the Side Letter Agreement pursuant to which, among other things, the parties agreed to extend the deadline by which we must file a registration statement with the SEC for the resale of shares of our common stock (i) issuable upon conversion of the Second Amended and Restated Debenture, (ii) issuable upon conversion of shares of our Series C-2 Preferred Stock held by FNL, and (iii) issuable upon exercise of warrants held by FNL, to August 29, 2025. The parties further agreed to extend the deadline by which such registration statement must be declared effective by the SEC to the earlier of the (A) September 30, 2025 (or, in the event of a "full review" by the SEC, October 31, 2025) and (B) the 2nd business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be reviewed or will not be subject to further review.

Increase in Authorized Common Stock (July 2025)

On July 23, 2025, our stockholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our number of authorized shares of common stock from 1,388,888 to 50,000,000 and we filed a Certificate of Amendment to our Articles of Incorporation to increase our authorized shares of common stock for the same.

Reverse Stock Split (July 2025)

On July 18, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock at 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 stock split took effect on July 21, 2025. All share information included in this Form 10-K has been reflected as if the reverse stock split occurred as of the earliest period presented.

Series C-2 Preferred Amendments

On May 23, 2025, the Company filed a Certificate of Amendment that, among other changes, allows holders of Series C-2 Preferred to receive dividends payable in additional shares of Series C-2 Preferred, subject to specified equity-related conditions. The amendment also updated the mechanics for adjusting the conversion price of the Series C-2 Preferred in connection with any future issuances of AIR Preferred Shares.

On June 27, 2025, the Company filed a second amendment to the Series C-2 Certificate of Designation, which restated the rights and preferences of the Series C-2 Preferred and authorized 20,000 shares with a stated value of $1,000 per share. This amendment also removed certain redemption features, including the "Bankruptcy Triggering Event" and "Change of Control" redemption rights, as defined therein.

NTI Divesture

On October 11, 2024, we acquired NAYA Therapeutics, Inc. with the intent to expand beyond fertility into a broader healthcare portfolio combining our commercial-stage fertility business with a clinical-stage oncology and autoimmune technology business. Following insufficient stockholder support for key elements of the transaction at a March 2025 stockholder meeting, and upon advice of counsel, our proxy solicitation firm, and general stakeholder feedback, we elected to re-focus exclusively on our fertility business.

Effective June 2, 2025, we divested a majority stake in NAYA Therapeutics, Inc. by redeeming all outstanding shares of Series C-1 Preferred at a redemption price of 113.8558 shares of NAYA Therapeutics Class A Common Stock per share of Series C-1 Preferred redeemed. We retained 6,300 shares of Series A Preferred Stock of NAYA Therapeutics, representing 19.9% of outstanding common stock on an as-converted basis, and hold a secured convertible promissory note issued by NAYA Therapeutics on May 28, 2025 in the principal amount of $4,803,175.

Series C-1 Preferred Amendment

On May 28, 2025, we filed with the Nevada Secretary of State a certificate of amendment to the Series C-1 Certificate of Designation pursuant to 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 to 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 for each share of Series C-1 Preferred being redeemed.

Warrant Inducement (April 2025)

On April 30, 2025, we entered into the April 2025 Inducement Letter Agreement with an institutional investor and existing holder of certain existing warrants to purchase up to 3,882 shares of our common stock. Such existing warrants were originally issued on January 14, 2025, with an exercise price of $1,008.00 per share.

The issuance of the shares of common stock upon exercise of such existing warrants was registered pursuant to a registration statement on Form S-3 (File No. 333-283872), which was declared effective by the SEC on January 14, 2025.

Pursuant to the April 2025 Inducement Letter Agreement, FNL agreed to exercise such existing warrants for cash at the exercise price of $193.20 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 5,823 shares 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 approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof and have a term of five years from the date stockholder approval would be obtained. We received stockholder approval for the issuance of shares of common stock upon exercise of such new warrants on July 23, 2025.

The aggregate gross proceeds to us from the exercise of such existing warrants was approximately $750,000, before deducting offering expenses payable by us.

Name Change

On April 14, 2025, we changed our corporate name to INVO Fertility, Inc., pursuant to an Amendment to Articles of Incorporation filed with the Nevada Secretary of State on April 14, 2025 (the "Name Change"). Pursuant to Nevada law, a stockholder vote was not necessary to effectuate the Name Change.

On April 28, 2025, our common stock ceased trading under the ticker symbol "NAYA" and began trading under our new ticker symbol, "IVF", on the Nasdaq Capital Market.

Reverse Stock Split (March 2025)

On February 24, 2025, we filed a certificate of change with the Secretary of State of Nevada to effectuate a reverse split of our common stock 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. The reverse stock split took effect on March 18, 2025. All share information included in this Form 10-K has been reflected as if the reverse stock split occurred as of the earliest period presented.

Public Offering

On January 14, 2025, we consummated the January 2025 Offering of 9,455 units ("Units"), each consisting of either one share of common stock, or one January 2025 PFWs in lieu thereof, and one January 2025 Warrant. The January 2025 Warrants are exercisable from and after the date of their issuance and expire on the five-year anniversary of such date, at an exercise price of $1,008.00 per share of common stock. Each January 2025 PFW is immediately exercisable at an exercise price of $0.144 per share and may be exercised at any time until all of the January 2025 PFWs are exercised in full. In connection with the January 2025 Offering, we entered into the January 2025 SPA with certain institutional investors who purchased Units in this January 2025 Offering.

The securities issued in the January 2025 Offering were offered pursuant to our registration statement on Form S-1, as amended (File No. 333-283872), initially filed by us with the SEC, on December 17, 2024 and declared effective on January 13, 2025.

We closed the January 2025 Offering on January 14, 2025, raising gross proceeds of approximately $9.5 million before deducting placement agent fees and other offering expenses payable.

Also in connection with the January 2025 Offering, on January 13, 2025, we entered into the January 2025 PAA with Maxim, pursuant to which (i) Maxim agreed to act as lead placement agent on a "best efforts" basis in connection with the January 2025 Offering, and (ii) we agreed to pay Maxim an aggregate fee equal to 6.5% of the gross proceeds raised in the January 2025 Offering (or 5.0% in the case of certain investors) and the Maxim January 2025 Warrants. The Maxim January 2025 Warrants are exercisable at any time after the six-month anniversary of the closing date, from time to time, in whole or in part, until five (5) years from the commencement of sales of the securities in the January 2025 Offering. Additionally, we reimbursed Maxim for certain expenses and legal fees up to $90,000.

In connection with the January 2025 Offering, on January 13, 2025, we entered into a Class C-2 Preferred Stock Redemption Agreement with FNL, 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, plus any other accrued payments under the Certificate of Designations for the C-2 Preferred Stock, remained outstanding.

Results of Operations

During fiscal 2025, we worked to stabilize and build the business, strengthen the balance sheet and seek out additional acquisition opportunities. We successfully advanced these key goals, with substantial progress in the early part of 2026. We now have a robust pipeline of acquisitions opportunities and recently closed on the acquisition of Family Beginnings in Indiana (see Recent Developments for additional information on this acquisition).

Looking ahead, we expect our fertility operations to expand further, both through organic growth of our existing clinics and through the acquisition of additional, profitable fertility clinics. Our active pursuit of additional acquisitions is aimed at accelerating our growth, building scale in our operations, and driving our overall business to cash flow break even and beyond to profitability.

Although we anticipate our clinic operations will dominate our commercial efforts and revenue, we also will continue to work on growing INVOcell, both within our own clinics as well as to third party fertility clinics. We also intend to seek out additional, innovative technologies that we can utilize to benefit patients and enhance our clinic operations.

From a macro perspective, we believe we will benefit from the ongoing growth in the ART market, which continues to experience positive trends, including (1) an under-served patient population, (2) increasing infertility rates around the world, (3) growing awareness and education of fertility treatment options, (4) a growing acceptance of fertility treatment, (5) improvements in procedure techniques and hence improvements in pregnancy success rates, (6) generally improving insurance (private and public) reimbursement trends, and (7) an administration that supports increased access to fertility treatments.

As previously described, we completed the acquisition of NAYA Therapeutics in October of 2024. The original goal behind this transaction was to expand our business activities beyond fertility and to create a healthcare portfolio company initially focused on a commercial-stage fertility business combined with a unique clinical-stage oncology and autoimmune technology business.

In April 2025, not having received sufficient shareholder support for key elements of the NAYA Therapeutics acquisition, upon advice of counsel as well as general feedback from stakeholders, we elected to re-focus exclusively on our fertility business. As such, we changed our name and ticker symbol to "INVO Fertility, Inc." and "IVF", respectively, and, in May 2025, divested a majority interest in NAYA Therapeutics.

We remain enthusiastic about NAYA Therapeutics' prospects and will retain a minority stake, which we hope to monetize in the future through value appreciation that could be generated from the clinical development of its bifunctional antibodies.

We believe that our renewed focus on our core fertility operations best serves our growth objectives.

Comparison of the years ended December 31, 2025 and 2024

Revenues

Revenue for 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, $6.7 million was related to clinic revenue from the consolidated Georgia JV and WFI. The increase of approximately $0.3 million, or approximately 5%, was primarily related to increased clinical revenue.

Cost of Services

Cost of services for the years ended December 31, 2025 and 2024 was $4.3 million and $3.6 million, respectively. The increase in our cost of services was primarily related to an increase in clinical personnel expenses.

Cost of Goods Sold

Cost of goods sold for the years ended December 31, 2025 and 2024 was $31 thousand and $12 thousand, respectively. The increase in our cost of goods sold was primarily related to an increase in product revenue.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses for the years ended December 31, 2025 and 2024 were $7.7 million and $8.1 million, respectively, of which $1.5 million and $1.6 million, respectively, was for non-cash, stock-based compensation expense. The decrease of $0.4 million or 5% was primarily the result of decreased corporate personnel expenses.

Impairment of Intangible Assets

Impairment of intangible assets for the years ended December 31, 2025 and 2024 were $1.4 million and $0, respectively. We recognized an impairment of $1,397,353 in our Clinic Services segment on the noncompetition agreement as we agreed to release Dr. Pritts from her noncompetition agreement as part of a settlement and binding term sheet entered into with Dr. Pritts on May 14, 2025. See Pritts Litigation and Binding Settlement Term Sheet in Recent Developments for additional information on the settlement and binding term sheet.

Gain on Changes in Fair Value

Gain on changes in fair value for the years ended December 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 of the NAYA Note Receivable from the time of issuance to December 31, 2025, a gain of $3.8 million related to the change in the 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.

Loss From Debt Extinguishment

Loss from debt extinguishment for the years ended December 31, 2025 and 2024, was $2.1 million and $0.04 million, respectively. The increase of approximately $1.8 million was primarily non-cash equity issued in conjunction with the convertible debentures issued to FNL and updated JAG Notes (as defined in the financial statements contained herein).

Gain on Settlement of Liability

Gain on settlement of liability for the years ended December 31, 2025 and 2024 was $0.9 million and $0, respectively. We recognized a gain of $0.9 million as part of a settlement and binding term sheet entered into with Dr. Pritts on May 14, 2025. See Pritts Litigation and Binding Settlement Term Sheet in Recent Developments for additional information on the settlement and binding term sheet.

Interest Expense and Financing Fees

Interest expense and financing fees for the years ended December 31, 2025 and 2024 were $1.3 million and $1.0 million, respectively. The increase of approximately $0.3 million, or approximately 26%, was primarily non-cash and due to the debt discount on the FNL Debenture.

Income Taxes

As of December 31, 2025, we had unused federal net operating loss carryforwards ("NOLs") of $43.5 million. These losses expire in various amounts at varying times beginning in 2029 with a portion carrying on indefinitely. Unless expiration occurs, these NOLs may be used to offset future taxable income and thereby reduce our income taxes.

We recorded a valuation allowance against our deferred tax assets at December 31, 2025 and 2024 totaling $12.5 million and $8.9 million, respectively.

Discontinued Operations

Loss from discontinued operations, inclusive of the loss on disposition, for the years ended December 31, 2025 and 2024 was $18.0 million and $0, respectively. The loss from discontinued operations was from the divesture of NTI which was completed on May 2, 2025.

Liquidity and Capital Resources

For the years ending December 31, 2025, and 2024, we had net losses from continuing operations of approximately $5.3 million and $7.7 million, respectively. We had negative working capital of approximately $7.4 million as of December 31, 2025, compared to negative working capital of approximately $12.2 million as of December 31, 2024. As of December 31, 2025, we had stockholder's equity of approximately $7.3 million compared to stockholder's equity of approximately $12.6 million as of December 31, 2024. Cash used in operations for the year ending December 31, 2025 was approximately $7.0 million, compared to approximately $3.0 million for the year ending December 31, 2024.

We have been dependent on raising capital through debt and equity financing to secure the cash required to fund our operating expenses and investing activities. During 2025, we received net proceeds of approximately $2.9 million from the sale of preferred stock, net proceeds of approximately $1.1 million from the exercise of warrants, and net proceeds of approximately $12.4 million for the sale of our common stock, of which $4 million was used to redeem preferred stock. During 2024, we received proceeds of approximately $1.3 million from notes, net proceeds of approximately $1.6 million from the sale of preferred stock, net proceeds of approximately $0.9 million from the exercise of warrants, and net proceeds of approximately $0.2 million for the sale of our common stock. In January 2026 we raised an additional $7.5 million from the exercise of warrants in a warrant inducement.

Over the next 12 months, our plan includes growing our clinic revenue organically and pursuing additional profitable fertility clinic acquisitions. Until we can generate a sufficient amount of cash from operations, we will need to raise additional funding to meet our liquidity needs and to execute our business strategy. As in the past, we will seek debt and/or equity financing, which may not be available on reasonable terms, if at all.

These factors, among others, raise substantial doubt about our ability to continue as a going concern. If we are unable to raise additional funding to meet our working capital needs in 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. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in INVO. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

The following table shows a summary of our cash flows for the year ended December 31:

		2025				2024
Cash (used in) provided by:
Operating activities			(7,014,485	)			(2,974,400	)
Investing activities			(2,745,481	)			363,895
Financing activities			11,096,412				3,119,477

Cash Flows from Operating Activities

As of December 31, 2025, we had approximately $2.1 million in cash compared to approximately $0.6 million as of December 31, 2024. Net cash used in operating activities in 2025 was approximately $7.0 million, compared to approximately $3.0 million for the same period in 2024. The increase in net cash used in operations was primarily due to an increase in net loss and a decrease in accounts payable.

Cash Flows from Investing Activities

During the year ended December 31, 2025, cash used in investing activities of approximately $2.7 million was primarily related to payments due on the WFI acquisition. During the year ended December 31, 2024, cash provided by investing activities of approximately $0.4 million was primarily related to the cash acquired in the NAYA Therapeutics acquisition.

Cash Flows from Financing Activities

During the year ended December 31, 2025, cash provided by financing activities of approximately $11.1 million was related to proceeds from the sale of common stock, the sale of preferred stock, and warrant exercises. During the year ended December 31, 2024, cash provided by financing activities of approximately $3.1 million was related to proceeds from notes payable, the sale of preferred stock, and proceeds from warrant exercises.

Financing Activities

Public Offering (Jan 2025)

On January 14, 2025, we consummated the January 2025 Offering of 9,455 units, each consisting of either one share of common stock or one January 2025 Pre-Funded Warrant in lieu thereof, and one January 2025 Warrant, raising gross proceeds of approximately $9.5 million before deducting placement agent fees and other offering expenses. The January 2025 Warrants are exercisable immediately upon issuance, expire five years from issuance, and carry an exercise price of $1,008.00 per unit.

Warrant Inducement (April 2025)

On April 30, 2025, we entered into the April 2025 Inducement Letter Agreement with an institutional investor and existing holder of warrants to purchase up to 3,882 shares of common stock, originally issued January 14, 2025 at an exercise price of $1,008.00 per share. Pursuant to the agreement, the investor agreed to exercise such warrants for cash at a reduced exercise price of $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 exercise price of $193.20 per share, with a five-year term commencing upon stockholder approval. We received stockholder approval on July 23, 2025. Aggregate gross proceeds from the warrant exercise were approximately $750,000, before deducting offering expenses.

FNL Amendment and Exchange Agreements & Additional Investment Right

On October 11, 2024, we issued the Debenture to FNL pursuant to the Joinder Agreement, entitling FNL to convert outstanding principal and accrued interest into common stock at $1,339.992 per share, subject to adjustment and stockholder approval, provided that conversion could not result in FNL beneficially owning more than 4.99% of our outstanding common stock. Commencing March 14, 2025, we were required to redeem $437,127.24 of principal plus accrued interest on the 14th of each month until maturity.

Through a series of amendments and exchange agreements entered into between May and September 2025, we restructured and ultimately extinguished the Debenture. These transactions included exchanging the Debenture for the Amended and Restated Debenture, subsequently for the Second Amended and Restated Debenture with principal reduced to $1,751,344 and monthly redemption provisions removed, and ultimately exchanging the remaining outstanding principal for shares of Series C-2 Preferred. In connection with these transactions, we also granted FNL the Additional Investment Right to purchase up to $10,000,000 of AIR Preferred Shares. During 2025, FNL exercised the AIR for $2,850,000 in aggregate cash consideration, for which we issued 2,850 shares of Series C-2 Preferred. As a result of these transactions, the Second Amended and Restated Debenture was paid in full and fully extinguished.

As of January 31, 2026, all outstanding shares of Series C-2 Preferred have been converted into shares of our common stock and all dividends owed thereunder have been settled in full.

Private Placement (Dec 2025)

On December 2, 2025, we completed a private placement with an institutional investor, raising approximately $4.0 million in gross proceeds. The financing included the issuance of 47,000 shares of common stock, pre-funded warrants to purchase 426,373 shares, and common stock warrants to purchase 946,746 shares at an exercise price of $8.45 per share, exercisable upon receipt of stockholder approval.

Warrant Inducement (Jan 2026)

On January 28, 2026, we entered into the January 2026 Inducement Letter Agreement with an institutional investor and the Holder of the Common Warrants.

Pursuant to the January 2026 Inducement Letter Agreement, the Holder agreed to exercise the Common Warrants for cash at the exercise price of $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 of common stock at an exercise price of $7.95 per share. Such new warrants will become exercisable upon receipt of such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of INVO with respect to issuance of all of such new warrants and the shares of common stock upon the exercise thereof and have a term of five and one-half years from the date stockholder approval is obtained.

The aggregate gross proceeds to us from the exercise of such existing warrants was approximately $7.5 million, before deducting offering expenses payable by us.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition presented in this section is based upon our audited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. During the preparation of the financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, our results, which allows us to form a basis for making judgments on the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates based on variance with our assumptions and conditions. A summary of significant accounting policies is included below. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our consolidated financial statements.

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.

Discontinued Operations

The Company accounted for the divesture of its NAYA Therapeutics ("NTI") subsidiary in accordance with Accounting Standards Codification ("ASC") 205 Discontinued Operations ("ASC 205"). ASC 205 requires that a component of an entity that has been disposed of or is classified as held for sale, has operations and cash flows that can be clearly distinguished from the rest of the entity, and represents a strategic shift that has (or will have) a major effect on the reporting entity's financial results must be reported as discontinued operations. The divesture of NTI met the held-for-sale criteria as defined in ASC 205.

In the period a component of an entity is classified as a discontinued operation, the results of operations for the periods presented are reclassified into separate line items in the unaudited condensed consolidated statements of operations and the assets and liabilities of the discontinued operation are also reclassified into separate line items on the related condensed consolidated balance sheets. Prior period amounts are also adjusted to reflect discontinued operations presentation. All amounts included in the notes to the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted.

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 4 - Variable Interest Entities" for additional information on the Company's VIEs.

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.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable, notes payable, convertible preferred stock, and warrants. The carrying value of cash, accounts receivable, accounts payable and notes payable, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The Company measures the fair value of its liability-classified warrants at the end of each reporting period using a Black-Scholes option pricing model, and changes in fair value are recognized in the consolidated statements of operations.

Derivatives

The Company reviews the conversion features of all liability and equity instruments based on the requirements of ASC 815, "Derivatives and Hedging" to determine if the conversion feature represents an embedded derivative. The Company determined certain warrants issued during the fiscal year ending December 31, 2025 that were classified as derivative intstrument, see Note 15 - Unit Purchase Options and Warrants for additional information.

Recent Accounting Pronouncements

See Note 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 accounting policies and the effect on our consolidated financial statements.