| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED JULY 31, 2023 |
INVO Bioscience, Inc.
Up to Completion, December 28, 2009
As filed with the U.S. Securities and Exchange Commission on July 31, 2023
Registration No. 333-273174
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
AMENDMENT NO.1 TO
to
FORM S-1
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
INVO BIOSCIENCE, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 3841 | 20-4036208 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | ( Identification |
5582 Broadcast CourtSarasota, Florida, 34240
(978)878-9505
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Steve Shum
Chief Executive Officer
INVO Bioscience, Inc.
5582 Broadcast Court
Sarasota, Florida34240
(978)878-9505
(Name, address including zip code, and telephone number, including area code, of agent for service)
With copies to:
Greg Carney
Sheppard, Mullin, Richter & Ecker, P.A.
333 South Hope Street, 43rd Floor
Los Angeles, CA 90071
(213) 620-1780
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of thisIf any of the securities being registered on this Form are beingto be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2l2b-2 of the Exchange Act. (Check one):
The Registrantregistrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrantregistrant shall file a further amendment which specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statementregistration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. WeThese securities may not sell these securitiesbe sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer orofferor sale is not permitted
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED JULY 31, 2023 |
INVO Bioscience, Inc.
Up to Completion, December 28, 2009
One Shares of Common Stock
One Pre-Funded Warrant to Purchase One Share of Common Stock
and
Two Warrants, each to Purchase One Share Common Stock
This prospectus relates to the sale by INVO Bioscience, Inc. (the “Company”, “INVO”, “we”, “us” or “our”) of up to 1,585,000 units (“Units”), each consisting of one share of common stock, par value $0.0001per share (the “Common Stock”) and two warrants, each to purchase one share of our Common Stock at an assumed public offering price of $4.59 per Unit. The warrants are exercisable from and after the date of their issuance and expire on the anniversary of such date, at an exercise price of $4.59 per share of common stock, which is equal to 100% of the public offering price per Unit in this offering.
We are also offering to each purchaser whose purchase of Units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding shares of common stock immediately following the consummation of INVO Bioscience, Inc.this offering, the opportunity to purchase, if the purchaser so chooses, Units each consisting of one pre-funded warrant to purchase one share of common stock (“Pre-Funded Warrants”) (in lieu of one share of common stock) and two warrants. Each Pre-Funded Warrant will be exercisable for one share of common stock. The purchase price of a Unit that mayincludes a Pre-Funded Warrant will equal the price per Unit that includes a share of common stock, minus $0.01, and the exercise price of each Pre-Funded Warrant will be sold by AGS Capital Group, LLC (“AGS”)$0.01 per share. For each Unit including a Pre-Funded Warrant purchased (without regard to any limitation on exercise set forth therein), the selling shareholder identified in this prospectus.number of Units including a share of common stock we are offering will be decreased on a one-for-one basis. The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The shares of common stock offered(or Pre-Funded Warrants) and the warrants comprising the Units are immediately separable and will be issued separately in this offering
Our common stock is currently trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “INVO” The last reported sale price for our common stock as reported on Nasdaq on July 28, 2023 was $4.59 per share. We do not intend to apply to list the Pre-Funded Warrants or the warrants on Nasdaq or any other national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Pre-Funded Warrants and the warrants will be limited.
The public offering price Unit will be determined between us, Maxim Group LLC, our exclusive placement agent (the “Placement Agent”) and investors based on market conditions at the time of pricing, and may be at a discount to the current market price of our common stock. Therefore, the recent market price used throughout this prospectus by AGS are issuable to AGS pursuant to a Reserved Equity Financing Agreement (“REF”) between AGS and us dated October 28, 2009. We are registering the offer and salemay not be indicative of the sharesactual combined public offering price.
There is no minimum number of Units or minimum aggregate amount of proceeds for this offering to satisfy registration rightsclose. We expect this offering to be completed not later than two business days following the commencement of this offering and we will deliver all securities to be issued in connection with this offering by delivery versus payment upon receipt of investor funds. Accordingly, neither we nor the Placement Agent have grantedmade any arrangements to AGS. Weplace investor funds in an escrow account or trust account since the Placement Agent will not receive any proceeds from the sale of these shares by AGS. This registration statement covers only a portion of the shares of common stock that may be issuable pursuant to the REF. We may file subsequent registration statements covering the resale of additional shares of common stock issuable pursuant to the REF with AGS beginning approximately 60 days after we have substantially completed the sale to AGS under the REF of the shares subject to this registration statement. We will bear all costs associated with this registration statement.
We have engaged the Placement Agent as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The Placement Agent is not purchasing or selling any of the common stock duringsecurities we are offering and is not required to arrange for the five consecutive trading days immediately followingpurchase or sale of any specific number or dollar amount of the date of our noticesecurities. Because there is no minimum offering amount required as a condition to AGS of our electionclosing in this offering, the actual offering amount, the Placement Agent’s fee and proceeds to sell sharesus, if any, are not presently determinable and may be substantially less than the total maximum offering amounts described throughout this prospectus. We have agreed to AGS pursuantpay the Placement Agent the Placement Agent fees set forth in the table below and to provide certain other compensation to the REF.
Investing in our common stock was $0.33 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Per Unit | Per Unit that includes a Pre-Funded Warrant | Total | ||||||||||
| Public offering price | $ | $ | $ | |||||||||
| Placement Agent Fees (1) | $ | $ | $ | |||||||||
| Proceeds to us, before expenses (2) | $ | $ | $ | |||||||||
| (1) | See “Plan of Distribution” for a complete description of the compensation arrangements for the Placement Agent. |
| (2) | We estimate the total expenses of this offering, excluding the Placement Agent fees and expenses, will be approximately $223,111. |
We expect to deliver the Common Stock, Pre-Funded Warrants and related warrants against payment on or complete. Any representation to the contrary is a criminal offense.
Sole Placement Agent
MAXIM GROUP LLC
The date of this prospectus is December 28, 2009
ABOUT THIS PROSPECTUS
In this prospectus, unless the context suggests otherwise, references to “the Company,” “INVO Bioscience,” “INVO,” “we,” “us,” and “our” refer to INVO Bioscience, Inc. and its consolidated subsidiaries.
This prospectus describes the specific details regarding this offering, the terms and conditions of the securities being offered hereby and the risks of investing in the Company’s securities. You should read this prospectus and the additional information about the Company described in the section entitled “Where You Can Find More Information” before making your investment decision.
Neither the Company, nor any of its officers, directors, agents, representatives or the Placement Agent make any representation to you about the legality of an investment in the Company’s common stock. You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in the Company’s securities.
ADDITIONAL INFORMATION
You should rely only on the information contained or incorporated by reference intoin this prospectus. We have not,prospectus and the selling shareholderin any accompanying prospectus supplement. No one has not,been authorized anyone to provide you with different or additional or different information. These securitiesThe shares of common stock and warrants are not being offered in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate only as of any date other than the date on the front of such documents.
TRADEMARKS AND TRADE NAMES
This prospectus includes trademarks that are protected under applicable intellectual property laws and are the document and that any information we have incorporated by reference is accurate only asCompany’s property or the property of one of the dateCompany’s subsidiaries. This prospectus also contains trademarks, service marks, trade names and/or copyrights of other companies, which are the document incorporated by reference, regardlessproperty of the time of delivery of this prospectus or of any sale of our common stock. Unless the context otherwise requires, referencestheir respective owners. Solely for convenience, trademarks and trade names referred to “we,” “our,” “us,” or the “Company” in this prospectus mean INVO Bioscience, Inc. a Nevada corporation.
INDUSTRY AND MARKET DATA
Unless otherwise indicated, information described more fully elsewherecontained in this prospectus. You should readprospectus concerning the entire prospectus carefully, including the risk factors, the financial statementsCompany’s industry and the notes tomarkets in which it operates, including market position and market opportunity, is based on information from management’s estimates, as well as from industry publications and research, surveys and studies conducted by third parties. The third-party sources from which the financial statements included herein. Investing our securities involves risks. Therefore, please carefully considerCompany has obtained information generally state that the information providedcontained therein has been obtained from sources believed to be reliable, but the Company cannot assure you that this information is accurate or complete. The Company has not independently verified any of the data from third-party sources nor has it verified the underlying economic assumptions relied upon by those third parties. Similarly, internal company surveys, industry forecasts and market research, which the Company believes to be reliable, based upon management’s knowledge of the industry, have not been verified by any independent sources. The Company’s internal surveys are based on data it has collected over the past several years, which it believes to be reliable. Management estimates are derived from publicly available information, its knowledge of the industry, and assumptions based on such information and knowledge, which management believes to be reasonable and appropriate. However, assumptions and estimates of the Company’s future performance, and the future performance of its industry, are subject to numerous known and unknown risks and uncertainties, including those described under the heading “Risk Factors” included herein.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any amendment and the clinician; it is less expensive and simpler to perform than current infertility treatments. The simplicityinformation incorporated by reference into this prospectus contain various forward-looking statements within the meaning of Section 27A of the INVO procedure relatesSecurities Act and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), which represent our expectations or beliefs concerning future events. Forward-looking statements include statements that are predictive in nature, which depend upon or refer to the ability to potentially perform the infertility procedure in a physician’s practice rather than in a specialized facility at a much lower cost overall thanfuture events or conditions, and/or which include words such as “believes,” “plans,” “intends,” “anticipates,” “estimates,” “expects,” “may,” “will” or similar expressions. In addition, any statements concerning future financial performance, ongoing strategies or prospects, and possible future actions including any potential strategic transaction involving us, which may be provided by our management, are also forward-looking statements. Forward-looking statements are based on current infertility treatments, including in vitro fertilization (“IVF”). Therefore, we believe that the INVO procedure will be available in many more locations than conventional IVF especially outside the United States. INVO also allows conceptionexpectations and embryo development to take place inside the woman's body; an attractive feature for most couples.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus or incorporated by reference into this prospectus. This summary does not contain all of the late fall 2008.
On July 28, 2023, we effectuated a 1-for-20 reverse split of our website is www.INVOBioscience.com. Information on our website is not part of this prospectus.
Company Overview
We are a commercial-stage fertility company dedicated to expanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and inclusive to people around the world. Our flagship product is INVOcell, a revolutionary medical device that allows fertilization and early embryo development to take place in vivo within the woman’s body. Our primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. This treatment solution is the world’s first intravaginal culture technique for the incubation of oocytes and sperm during fertilization and early embryo development. This technique, designated as “IVC”, provides patients a more natural, intimate and more affordable experience in comparison to other ART treatments. The IVC procedure can deliver comparable results at a lower cost than traditional in vitro fertilization (“IVF”) and is a part (the “Registration Statementsignificantly more effective treatment than intrauterine insemination (“IUI”). Our commercialization strategy is focused on the opening of dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational) and the acquisition of existing IVF clinics, in addition to continuing to sell our technology solution into existing fertility clinics.
Operations
We operate with a core internal team and outsource certain operational functions in order to help accelerate our efforts as well as reduce internal fixed overhead needs and in-house capital equipment requirements. Our most critical management and leadership functions are carried out by our core management team. We have contracted out the manufacturing, packaging/labeling and sterilization of the device to a contract medical manufacturing company that completes final product manufacturing as well as manages the gamma sterilization process at a U.S. Food and Drug Administration (“FDA”) registered contract sterilization facility.
Market Opportunity
The global ART marketplace is a large, multi-billion industry growing at a strong pace in many parts of the world as increased infertility rates, increased patient awareness, acceptance of treatment options, and improving financial incentives such as insurance and governmental assistance continue to drive demand. According to the European Society for Human Reproduction 2020 ART Fact Sheet, one in six couples worldwide experience infertility problems. 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. While there have been large increases in the use of IVF, there are still only approximately 2.6 million ART cycles, including IVF, IUI and other fertility treatments, performed globally each year, producing around 500,000 babies. This amounts to less than 3% of the infertile couples worldwide being treated and only 1% having a child though IVF. The industry remains capacity constrained which creates challenges in providing access to care to 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, according to the American Society of Reproductive Medicine (2017), affects an estimated 10%-15% of the couples of childbearing-age. According to the Centers for Disease Control (“CDC”), there are approximately 6.7 million women with impaired fertility. Based on preliminary 2020 data from the CDC’s National ART Surveillance System, approximately 326,000 IVF cycles were performed at 449 IVF centers, leaving the U.S. with a large, underserved patient population, which is similar to most markets around the world.
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Competitive Advantages
We believe that the INVOcell, and the IVC procedure it enables, have the following key advantages:
Lower cost than IVF with equivalent efficacy. The IVC procedure can be offered for less than IVF due to lower cost of supplies, labor, capital equipment and general overhead. The laboratory equipment needed to perform an IVF cycle is expensive and requires ongoing costs as compared to what is required for an IVC cycle. As a result, we may,also believe INVOcell and the IVC procedure enable a clinic and its laboratory to be more efficient as compared to conventional IVF.
The IVC procedure is currently being offered at practicing clinics at a range of $5,000 - $11,000 per cycle and from time$4,500 to time,$7,000 at our discretion,the existing INVO Centers, thereby making it more affordable than conventional IVF (which tends to average $12,000 to $17,000 per cycle or higher).
Improved efficiency providing for greater capacity and subjectimproved access to certain conditionscare and geographic availability. In many parts of the world, including the U.S., IVF clinics tend to be concentrated in higher population centers and are often capacity constrained in terms of how many patients a center can treat, with volume often limited by the number of capital-intensive incubators available in IVF clinic labs. With the significant number of untreated patients along with the growing interest and demand for services, the industry remains challenged to provide sufficient access to care and to do so at an economical price. We believe INVOcell, and the IVC procedure it enables, can play a significant role in helping to address these challenges. According to the 2020 CDC Report, there are approximately 449 IVF centers in the U.S. We estimate that by adopting the INVOcell, IVF clinics can increase fertility cycle volume by up to 30% without adding to personnel, space and/or equipment costs. Our own INVO Centers also address capacity constraints by adding to the overall ART cycle capacity and doing so with comparable efficacy to IVF outcomes as well as at a lower per cycle price. Moreover, we believe that we must satisfy, draw down fundsare uniquely positioned to drive more significant growth in fertility treatment capacity in the future by partnering with existing OB/GYN practices. In the U.S., there are an estimated 5,000 OB/GYN offices, many of which offer fertility services (usually limited to consultation and IUI, but not IVF). Since the IVC procedure requires a much smaller lab facility, less equipment, and fewer lab personnel (in comparison to conventional IVF), it could potentially be offered as an extended service in an OB/GYN office. With proper training and a lighter lab infrastructure, the INVOcell could expand the business for these physicians and allow them to treat patients that are unable to afford IVF and provide patients with a more readily accessible, convenient, and cost-effective solution. With our three-pronged strategy (IVF clinics, INVO Centers and OB/GYN practices), in addition to lowering costs, we believe INVOcell and the IVC procedure can address our industry’s key challenges, capacity and cost, by their ability to expand and decentralize treatment and increase the number of points of care for patients in need. This powerful combination of lower cost and added capacity has the potential to dramatically open up access to care for patients around the world.
Greater patient involvement. With the IVC procedure, the patient uses their own body for fertilization, incubation and early embryo development which creates a greater sense of involvement, comfort and participation. In some cases, this may also free people from barriers related to ethical or religious concerns, or fears of laboratory mix-ups.
Corporate History
We were formed on January 5, 2007 under the REFlaws of the Commonwealth of Massachusetts under the name Bio X Cell, Inc. to acquire the assets of Medelle Corporation (“Medelle”). Dr. Claude Ranoux purchased all of the assets of Medelle, and then he contributed those assets, including four patents (which have since expired) relating to the INVOcell technology, to Bio X Cell, Inc. upon its formation in January 2007.
On December 5, 2008, Bio X Cell, Inc., doing business as INVO Bioscience, and each of the shareholders of INVO Bioscience entered into a share exchange agreement and consummated a share exchange with Emy’s Salsa AJI Distribution Company, Inc., a Nevada corporation (“Emy’s”). Upon the closing of the share exchange on December 5, 2008, the INVO Bioscience shareholders transferred all of their shares of common stock in INVO Bioscience to Emy’s. In connection with the share exchange, Emy’s changed its name to INVO Bioscience, Inc. and Bio X Cell, Inc. became a wholly owned subsidiary of Emy’s (re-named INVO Bioscience, Inc.).
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On November 2, 2015 we were notified by the FDA that the INVOcell and INVO Procedure were granted clearance via the de novo classification (as a Class II device) allowing us to market the INVOcell in the United States. Following this approval, we began marketing and selling INVOcell in many locations across the U.S. We currently have approximately 140 trained clinics or satellite facilities in the U.S. where patients can receive guidance and treatment for the INVO Procedure.
Recent Developments
July 2023 Standard Merchant Cash Advance Agreement
On July 19, 2023, we entered into a Standard Merchant Cash Advance Agreement with Cedar Advance LLC (“Cedar”) under which Cedar purchased $543,750 of our receivables for a gross purchase price of $375,000. We received net proceeds of $356,250. Until the purchase price has been repaid, we agreed to pay Cedar $19,419.64 per week. If we repay the purchase price within 30-days then the amount payable shall be reduced to $465,000. In addition, we granted Cedar a security interest in our accounts, including deposit accounts and accounts receivable. We intend to use the proceeds for working capital and general corporate purposes.
Amendment to Armistice SPA
On July 7, 2023, we entered into an Amendment to Securities Purchase Agreement (the “Armistice Amendment”) with Armistice Capital Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities Purchase Agreement (the “Armistice SPA”) with Armistice pursuant to which we agreed that from March 23, 2023 until 45 days after the effective date of the Resale Registration Statement (as defined below) we would not (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, other than the prospectus supplement filed in connection with that offering and the Resale Registration Statement (the “Subsequent Equity Financing Provision”). In consideration of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent Equity Financing Provision from the Armistice SPA, we agreed to pay Armistice a fee a $1,000,000 (the “Armistice Amendment Fee”) within two days of the closing of this Offering. Additionally, we agreed to include a proposal in our proxy statement for our 2023 Annual Meeting of Stockholders for the purpose of obtaining the approval of the holders of a majority of our outstanding voting common stock, to effectuate the reduction of the exercise price set forth in Section 2(b) of the Common Stock Purchase Warrants issued to Armistice on March 27, 2023 (the “Existing Warrants”) to the per unit public offering price of this Offering, in accordance with Nasdaq Rule 5635(d) (the “Shareholder Approval”) with the recommendation of our board of directors that such proposal be approved. We also agreed to solicit proxies from our shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and that all management-appointed proxyholders shall vote their proxies in favor of such proposal. Further, if we do not obtain Shareholder Approval at the first meeting, we will call a meeting every six (6) months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is obtained or the Existing Warrants are no longer outstanding. Until such approval is obtained, the exercise price of the Existing Warrants will remain unchanged.
Reverse Stock Split
On June 28, 2023, our board of directors approved a reverse stock split of our common stock at a ratio of 1-for-20 and also approved a proportionate decrease in our authorized common stock to AGS6,250,000 shares from 125,000,000. Pursuant to Nevada Revised Statutes, a company may effect a reverse split without stockholder approval if both the number of authorized shares of common stock and the number of outstanding shares of common stock are proportionally reduced as a result of the reverse split, the reverse split does not adversely affect any other class of stock of the company, and the company does not pay money or issue scrip to stockholders who would otherwise be entitled to receive a fractional share as a result of the reverse split, We intend to file a certificate of change with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to (i) decrease the number of authorized shares of common stock from 125,000,000 to 6,250,000 shares and (ii) effectuate a 1-for-20 reverse stock split of the outstanding common stock prior to effectiveness of this registration statement. On July 27, 2023, we received notice from Nasdaq that the reverse split would take effect at the open of business on July 28, 2023 and the reverse stock split took effect on that date.
510(k) FDA Clearance
On June 22, 2023, we received U.S. Food and Drug Administration (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.
March 2023 Registered Direct Offering
On March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering (the “RD Offering”), 69,000 shares of Common Stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $0.20 per share, and (ii) in a concurrent private placement (the “March Warrant Placement”), a common stock purchase warrant (the “March Warrant”), exercisable for an aggregate of up to 276,000 shares of Common Stock, at an exercise price of $12.60 per share. The securities to be issued in the RD Offering (priced at the marked under Nasdaq rules) were offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-255096), initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. The Pre-Funded Warrant is exercisable upon issuance and will remain exercisable until all of the shares underlying the Pre-Funded Warrant are exercised in full. All Pre-Funded Warrants were exercised by the investor in June 2023.
The March Warrant (and the shares of Common Stock issuable upon the exercise of the Private Warrants) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On March 27, 2023, the Company closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by the Company. In the event the March Warrant is fully exercised for cash, the Company would receive additional gross proceeds of approximately $3.5 million. The Company used $383,879 in proceeds to repay a portion of the convertible debenture issued in February 2023 and the remainder of the proceeds are being used for working capital and general corporate purposes.
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Under the March Purchase Agreement, the Company is required within 30 days of the closing date of the March Warrant Placement to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrant. The Company is required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full review by the SEC), and to keep the Resale Registration Statement effective at all times until no shares of Common Stock remain exercisable under the March Warrant.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from the date of the RD Offering and March Warrant Placement, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
Execution of Definitive Agreements to Acquire the Wisconsin Fertility Institute
On March 16, 2023, INVO Bioscience Inc., a Nevada corporation (“INVO”), through Wood Violet Fertility LLC, a Delaware limited liability company (“Buyer”) and wholly owned subsidiary of INVO Centers LLC, a Delaware company wholly-owned by INVO, entered into binding purchase agreements to acquire Wisconsin Fertility Institute (the “Clinic”) for a combined purchase price of $10 million. million, including an asset purchase agreement with Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”) and The Elizabeth Pritts Revocable Living Trust and a Membership Interest Purchase Agreement with Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”)., IVF Science, LLC owned by Wael Megid Ph.D. and Dr. Elizabeth Pritts as trustee for the Elizabeth Pritts Revocable Living Trust.
The purchase price is payable in four installments of these shares will$2.5 million each (which payments may be 92%offset by assumption of certain Clinic liabilities, payable at closing and on each of the “VWAP”subsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock valued at $125.00, $181.80, and $285.80, for the second, third, and final installments, respectively. The additional $7.5 million in payments are secured by the Clinic having a lien on the assets purchased to acquire the Clinic.
The Clinic is comprised of (a) a medical practice, WFRSA, and (b) a laboratory services company, FLOW. WFRSA owns, operates and manages the Clinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services. The combined financial statements of WFRSA and FLOW are incorporated by reference into this prospectus as further described under “Experts” on page 50.
On July 7, 2023 Buyer entered into closing agreements with the Clinic under which Buyer agreed to complete the closing of the acquisition by July 31, 2023 which closing agreements further provide that unless a new closing date is agreed to in writing the acquisition agreements would automatically terminate if the closing does not occur on or before July 31, 2023.
The Buyer and the Clinic have agreed in principle to extend the closing date of the acquisition to August 10, 2023 and we expect to have executed written amendments to the closing agreements to memorialize such agreement prior to the closing of this offering.
Notices from Nasdaq of Failure to Satisfy Continued Listing Rules.
Notice Regarding Non-Compliance with Minimum Stockholders’ Equity
On November 23, 2022, we received notice from The Nasdaq Stock Market LLC (“Nasdaq”) advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000 (the “Stockholders’ Equity Requirement”). In our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, we reported stockholders’ equity of $1,287,224, which is below the Stockholders’ Equity Requirement for continued listing. Additionally, as of the date of the notice, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years.
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The notice had no immediate effect on the listing of our common stock and our common stock continues to trade on The Nasdaq Capital Market under the symbol “INVO” subject to our compliance with the other continued listing requirements.
Pursuant to the notice, Nasdaq gave us 45 calendar days, or until January 7, 2023, to submit to Nasdaq a plan to regain compliance. We submitted our plan within the prescribed time and, on January 18, 2023, we received a letter from Nasdaq stating that based on our submission that Nasdaq had determined to grant us an extension of time to regain compliance with the Equity Rule until May 22, 2023.
On May 23, 2023, we were notified by the Listing Qualifications department (the “Staff”) of Nasdaq that, based upon the Company’s non-compliance with the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Global Market, as set forth in the Equity Rule, as of May 22, 2023, the Company’s common stock was subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).
We requested a hearing before the Panel, which stayed any further action by Nasdaq at least until the hearing process was concluded and any extension that may be granted by the Panel has expired.
On July 6, 2023, we had our hearing before the Panel at which time we provided the Panel our plan to regain compliance under the Equity Rule.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule as well as Nasdaq Listing Rule 5550(a)(2) (to maintain a minimum bid price of $1; the “Price Rule”) on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the five consecutive trading days afterexception period we give AGS aprovide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of an advanceany event that may call into question our ability to meet the terms of funds (an “Advance”) under the REF (the “Pricing Period”). “VWAP” generally means, as of any date,exception granted.
Notice Regarding Failure to Maintain Minimum Bid Price
On January 11, 2023, we received a letter from the daily dollar volume weighted averagestaff indicating that, based upon the closing bid price of our common stock as reported by Bloomberg, L.P. or comparable financial news service. The amount of an Advance will automatically be reduced by 50% if on any day during the Pricing Period, the VWAP for that day does not meet or exceed 85% of the VWAP for the five tradinglast 30 consecutive business days, priorwe were not in compliance with the requirement to the notice of Advance (the “Floor Price”).
The notice of Advance.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until July 10, 2023, to regain compliance with the minimum bid price requirement. If at any time before July 10, 2023, the closing bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq would provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. If we did not regain compliance prior to July 10, 2023, then Nasdaq may grant us a second 180 calendar day period to regain compliance, provided we (i) meet the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency within such second 180 calendar day period, by effecting a reverse stock split, if necessary.
We were unable to regain compliance by July 10, 2023 and accordingly on July 11, 2023, we received a notice from Staff of Advance,Nasdaq that, based upon our non-compliance with the following conditions, noneminimum bid price requirement set forth in the Price Rule. We presented our plan to regain compliance with the minimum bid price requirement at our hearing with the Panel on July 6, 2023.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of whichNasdaq subject to us demonstrating compliance with the Equity Rule and the Price Rule on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
Available Information
Our principal executive offices 5582 Broadcast Court Sarasota, Florida 34240 and our telephone number is (978) 878-9505.
Our common stock trades on the Nasdaq Capital Market under the symbol “INVO”.
Our principal internet address is www.invobio.com. Information contained on, or that can be accessed through, our website, is not, and shall not be deemed to be, incorporated in AGS’s control, must be met:
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THE OFFERING
Up to a maximum of 1,585,000 Units, each consisting of one share of common stock and The Units will not be certificated or issued in | ||
| Warrants offered by us | Warrants, each to purchase one share of | |
| Pre-funded warrants offered by us | We are also offering to investors in Units that would otherwise result in the investor’s beneficial ownership exceeding 4.99% of our outstanding common stock immediately following the consummation of this offering the opportunity to invest in Units consisting of one Pre-Funded Warrant to purchase one share of common stock in lieu of one share of common stock and two warrants. Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be | |
| For each Unit we sell that includes a Pre-Funded Warrant we sell, the number of Units that include a share of common stock we are offering will be decreased on a one-for-one basis. | ||
| This prospectus also relates to the issuance of the shares of our common stock issuable upon exercise of the Pre-Funded Warrants. To better understand the terms of the Pre-Funded Warrants, you should carefully read the “Description of Securities” section of this prospectus. You should also read the form of Pre-Funded Warrant, which is filed as an exhibit to the registration statement of this prospectus forms a part. | ||
| Best Efforts Offering | We have agreed to offer and sell the Units offered hereby directly to the purchasers. We have retained Maxim Group LLC to act as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase the securities offered by | |
| Assumed public offering price | $4.59 per Unit, which is the assumed public offering price and | |
| Common stock to be outstanding immediately after this offering | 2,428,267 shares assuming that the maximum number of Units offered hereby are sold (and assuming no sale of Units that include Pre-Funded Warrants). | |
| Placement Agent Warrants | We have agreed to issue to the Placement Agent, warrants (the “Placement Agent Warrants”) to purchase a number of common stock equal to 7.0% of the Units sold in this offering. The Placement Agent Warrants will have an exercise price equal to 110.0% of the offering price of the Units sold in this offering and may be exercised on a cashless basis. The Placement Agent Warrants are exercisable commencing on a date which is the later of (i) one hundred eighty days from the effective date of the registration statement for this offering of which this prospectus forms a part and (ii) the date on which we file an amendment to our articles of incorporation to increase the number of authorized shares of our common stock and will terminate five (5) years after such date. The Placement Agent Warrants are |
| Use of Proceeds | We estimate that the net proceeds from this offering will be approximately $6.54 million, if the maximum number of Units being offered hereby are sold. after deducting the placement agent fees and estimated offering expenses payable by us. | |
| We intend to utilize (i) up to $2,125,000 of the net proceeds to fund the initial installment of the purchase price required to consummate our acquisition of the Wisconsin Fertility Institute (net of a $350,000 holdback); (ii) $1,000,000 of the net proceeds of this offering to pay Armistice the Armistice Amendment Fee for agreeing to remove the Subsequent Equity Financing Provision from the Armistice SPA; (iii) up to $543,750 to repay our Standard Merchant Advance Agreement with Cedar Advance LLC; (iv) $100,000 to repay that certain 8% Debenture with a maturity date of February 3, 2024 issued to Peak One Opportunity Fund LP plus accrued interest and fees of approximately $7,609; and (v) $39,849 to repay that certain 8% Debenture with a maturity date of February 17, 2024 issued to First Fire Global Opportunities Fund, LLC, plus accrued interest and fees of approximately $3,058. We intend to use the remaining net proceeds from this offering for working capital and general corporate purposes. Additionally, we may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets. However, we have no commitments to use the proceeds from this Offering for any such acquisitions or investments at this time. See “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering. | ||
| Dividend Policy | The Company has never declared any cash dividends on its common stock. The Company currently intends to use all available funds and any future earnings for use in financing the growth of its business and does not anticipate paying any cash dividends for the foreseeable future. See “Dividend Policy.” | |
| Trading Symbol | Our common stock is currently trading on the Nasdaq Capital Market under the symbol of “INVO.” We do not intend to list the Pre-Funded Warrants or the warrants offered hereby on Nasdaq or any other national securities exchange. | |
| Reverse Stock Split | On July 28, 2023, we effectuated a 1-for-20 reverse split of our outstanding shares of common stock prior to effectiveness of the registration statement of which this prospectus forms a part. No fractional shares will be | |
| Risk Factors | You should carefully consider the information set forth in this prospectus and, in particular, the |
| Lock-up | We and our directors, officers and holder of |
The Registration Statement covers only 8,790,000 shares of common stock under the REF. The entire share requirement for the full $10 million under the REF would be approximately 32,938,000 based on an assumed VWAP of $0.33 less the 8% discount. However, we have decided to limit ourselves to 8,790,000 shares available, or $2,668,000, based on current market prices. If our share price rises, we will be able to draw down in excess of $2,668,000. If we decide to issue more than 8,790,000 shares, we will need to file one or more additional registration statements with the SEC covering those additional shares.
| Draw Down | Price to be Paid by | Number of Shares | ||||||||||||||||
| Amount | VWAP | % Discount | AGS | to be Issued | ||||||||||||||
| $ | 50,000 | $ | 0.33 | 8 | % | $ | 0.30 | 164,690 | ||||||||||
| ● | 348,127 shares of common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $15.11 per share; | |
| ● | 121,241 shares of common stock issuable upon exercise of outstanding options with a weighted average exercise price of $42.00 per share; | |
| ● | 54,570 shares of common stock issuable upon conversion of outstanding convertible notes with a weighted average exercise price of $10.53 per share; | |
| ● | 10,141 shares of common stock reserved for future issuance under the 2019 Stock Incentive Plan; | |
| ● | up to 3,170,000 shares of common stock issuable upon the exercise of the warrants offered hereby; and | |
| ● | up to 332,850 shares of common stock issuable upon the exercise of the Placement Agent Warrants. |
Except as otherwise indicated herein, all information in order to have the same draw down amount of $50,000 would be larger, as shown by the following table:
| Draw Down | Price to be Paid by | Number of Shares | ||||||||||||||||
| Amount | VWAP | % Discount | AGS | to be Issued | ||||||||||||||
| $ | 50,000 | $ | 0.30 | 8 | % | $ | 0.276 | 181,160 | ||||||||||
| Price Decreases By | ||||||||||||||||
| 12/11/2009 | 25% | 50% | 75% | |||||||||||||
| VWAP during the Purchase Period (as defined above) | $ | 0.33 | $ | 0.248 | $ | 0.165 | $ | 0.083 | ||||||||
| Purchase Price (defined above as 92% of the VWAP) | $ | 0.304 | $ | 0.228 | $ | 0.152 | $ | 0.076 | ||||||||
| Number Subject to the REF if 100% of the REF is Executed. | 32,938,076 | 43,917,435 | 65,876,152 | 131,752,306 | ||||||||||||
| ● | a one-for-twenty reverse stock split of our common stock effected on July 28, 2023. | |
| ● | no exercise of the outstanding options or warrants described above; | |
| ● | no sale of any Pre-Funded Warrants | |
| no exercise of the Placement Agent Warrants; and | ||
| ● | no exercise of the |
RISK
FACTORSAn investment in the securities offered under this prospectus involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this prospectus and in the documents that we incorporate by reference herein before you decide to invest in our shares of common stock is very risky. Before making an investment decision,securities. In particular, you should carefully consider alland evaluate the risks and uncertainties described under the heading “Risk Factors” in this prospectus and in the documents incorporated by reference herein. Investors are further advised that the risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also negatively impact our business operations or financial results. Any of the risks described in this prospectus. If any of the risks discussedand uncertainties set forth in this prospectus actually occur,and in the documents incorporated by reference herein, as updated by annual, quarterly and other reports and documents that we file with the SEC and incorporate by reference into this prospectus, could materially and adversely affect our business, financial condition and results of operations and financial condition, which in turn could be materially and adversely affected,affect the pricevalue of our shares could decline significantly, and you might lose all or a partsecurities.
Risks Related to the Proposed Acquisition of your investment. The risk factors described below arethe Wisconsin Fertility Institute
Our potential acquisition of the Wisconsin Fertility Institute may not close.
On March 16, 2023, we signed definitive acquisition agreement to acquire the only ones that may affect us. Our forward-looking statements in this prospectus are alsoWisconsin Fertility Clinic (“WFI”). This transaction is subject to the following risks and uncertainties. In deciding whether to purchase our shares, you should carefully consider the following factors, among others,certain customary closing conditions, as well as information contained in this prospectus.
We may not be no assuranceable to successfully integrate the Wisconsin Fertility Institute into INVO Bioscience and achieve the benefits expected to result from the acquisition.
The proposed acquisition of the Wisconsin Fertility Institute may present challenges to management, including the integration of the operations, and personnel of INVO Bioscience and the Wisconsin Fertility Institute and special risks, including possible unanticipated liabilities, unanticipated integration costs and diversion of management attention.
We cannot assure you that we will besuccessfully integrate or profitably manage WFI’s business. Even if we are able to obtain such insurance on commercially reasonable terms inintegrate and profitably manage WFI’s business, we cannot assure you that, following the futuretransaction, our business will achieve sales levels, profitability, efficiencies or synergies that justify the acquisition or that the acquisition will result in increased earnings for us in any such insurance will provide adequate coverage against potential claims. In addition, a claim asserted against us could be costly to defend, could consume management resources and could adversely affectfuture period.
If we close our reputation and business, regardlessacquisition of the merit or eventual outcomeWisconsin Fertility Institute and fail to make the required $7.5 million in additional payments, our business would be adversely affected.
Following closing of such claim.
We may incur debt financing to provide the cash proceeds necessary to acquire the Wisconsin Fertility Institute. If we were unable to service any such debt, our business would be adversely affected.
In order to finance our proposed acquisition of the Wisconsin Fertility Institute, we may look to secure debt financing. Any such debt financing would likely require us to pledge all or substantially all of our assets as collateral. If we were unable to any such debt obligation and fail to maintain adequate quality standards for our products, our business maypay such debt obligations in a timely fashion, we would be adversely affectedin default under such debt financing agreement and our reputation harmed.
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Risks Related to Our Need for Additional Capital
We will need to raise additional funding, which may not be available on acceptable terms, or prospects. at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate operations.
We do not maintain key man life insurance on the lives of these individuals.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to pay for fertility treatment arounddevelop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the world.
If we are unable to comply withobtain funding on a timely basis, we may be required to significantly curtail, delay or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.
The capital markets have been unpredictable in the internal controls requirementspast for unprofitable companies such as ours. In addition, it is generally difficult for development stage companies to raise capital under current market conditions. The amount of the Sarbanes-Oxley Act,capital that a company such as ours is able to raise often depends on variables that are beyond our control. As a result, we may not be able to obtainsecure financing on terms attractive to us, or at all. If we are able to consummate a financing arrangement, the independent accountant certificationsamount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected.
Risks Related to this Offering and Ownership of Shares of our Common Stock
This is a reasonable best efforts offering, in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans.
The Placement Agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering, and there can be no assurance that the offering contemplated hereby will ultimately be consummated. Even if we sell securities offered hereby, because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount is not presently determinable and may be substantially less than the maximum amount set forth on the cover page. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us. Thus, we may not raise the Sarbanes-Oxley Act.amount of capital we believe is required for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us.
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The Sarbanes-Oxley Act and new rules subsequently implemented bysecurities sold in this Offering, as well as the SEC have required changes in corporate governance practicesresale of public companies. As a public entity, we expect these rules and regulations to increase compliance costs and to make certain activities more time consuming and costly. As a public entity, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurancethose securities in the future, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Aswill constitute a result, it may be more difficult for us to attract and retain qualified persons to serve as directors or as executive officers.
Sales of a part for issuancesubstantial number of our shares of common stock in the public markets pursuant to the REF. The saleterms of these shares intothis Offering, or the public market by AGSperception that such sales could occur, could depress the market price of our common stock. As of September 30, 2009, there were 55,247,833 shares of our common stock issued and outstanding.
Percent below market price as of 12/11/09 | Price per share (1) | Number of shares issuable (2) | Shares outstanding (3) | Percent of outstanding shares (4) | ||||||||||||||
| 5 | % | .288 | 34,671,659 | 92,674,422 | 37 | % | ||||||||||||
| 10 | % | .273 | 36,597,863 | 94,600,626 | 39 | % | ||||||||||||
| 25 | % | .228 | 43,917,435 | 101,920,198 | 43 | % | ||||||||||||
| 50 | % | .152 | 65,876,153 | 123,878,916 | 53 | % | ||||||||||||
Our stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurances that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may bevolatile following this Offering.
Historically, following an offering of a lowsubstantial number of a company’s securities, the volatility related to the market price of such securities increases. An increase in the volatility or fluctuations in the market price for our shares of common stock, many brokerage firms may not be willing to effect transactions in our securities. Even if an investor finds a broker willing to effect a transaction inadversely affect the sharestrading price of our common stock,stock.
Due to the combinationamount of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutionssecurities being offered, it is possible that a change of control could occur.
Prior to this offering, we will not permit the use of suchhave 843,267 shares of common stock as collateral for any loans.
Assuming that we are able to sell the maximum number of Units in management, or limitingthis offering, we expect that the abilityconsummation of this offering could cause the price of our other stockholdersCommon Stocks to approvedecline.
In this offering, are offering up to 1,585,000 Units at an assumed price per Unit $4.59. Assuming that we are able to sell the maximum number of Units offered hereby (and assuming the sale of no Units that include Pre-Funded Warrants), immediately following the completion of the offering, based on the number of shares outstanding as of July 28, 2023, we will have 2,428,267 shares of common stock outstanding. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.
The shares of common stock included in the Units offered in the offering may be resold in the public market immediately without restriction, unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act, which may be resold only if registered under the Securities Act or in accordance with the requirements of Rule 144 or another applicable exemption from the registration requirements of the Securities Act. Shares of common stock held by our directors and executive officers will be subject to the lock-up agreements described in the “Plan of Distribution” section of this prospectus. If, after the period during which such lock-up agreements restrict sales of our common stock or if the Placement Agent waives the restrictions set forth therein (which may occur at any time), one or more of these securityholders sell substantial amounts of common stock in the public market, or the market perceives that such sales may occur, the market price of our common stock and our ability to raise capital through an issue of equity securities in the future could be adversely affected.
We will have broad discretion in the use of the net proceeds from this offering and may fail to apply these proceeds effectively.
Our management will have broad discretion in the application of the net proceeds of this offering, including using the proceeds to conduct operations, expand the Company’s business lines and for general working capital. The Company may also use the net proceeds of this offering to acquire or invest in complementary businesses, products, or technologies, or to obtain the right to use such complementary technologies. We have no commitments with respect to any acquisition or investment; however, we seek opportunities and transactions that they may deem to be in their best interest. For example, our controlling stockholdersmanagement believes will be ableadvantageous to control the saleCompany and its operations or prospects. We cannot specify with certainty the actual uses of the net proceeds of this offering. You may not agree with the manner in which our management chooses to allocate and spend the net proceeds. We may invest the net proceeds from this offering in a manner that does not produce income or that loses value. The failure by our management to apply these funds effectively could harm our business, financial condition and results of operations.
There is no public market for the warrants or the Pre-Funded Warrants being offered in this offering.
There is no established public trading market for the warrants or the Pre-Funded Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants or the Pre-Funded Warrants on any national securities exchange or other dispositionnationally recognized trading system, including The NASDAQ Capital Market. Without an active market, the liquidity of the warrants and the Pre-Funded Warrants will be limited.
Holders of our operating businesseswarrants and subsidiariesour Pre-Funded Warrants will have no rights as a common stockholder until they acquire our common stock.
Until you acquire shares of our common stock upon exercise of the warrants or Pre-Funded Warrants, you will have no rights with respect to another entity.shares of our common stock issuable upon exercise of such warrants or Pre-Funded Warrants. Upon exercise of your warrants or Pre-Funded Warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.
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The warrants are speculative in nature.
The warrants offered hereby merely represent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders of the warrants may acquire the common stock issuable upon exercise of such warrants at an assumed exercise price of $4.59 per share. Moreover, following this offering, the market value of the warrants is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their public offering price. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the warrants and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.
The Pre-Funded Warrants are speculative in nature.
The Pre-Funded Warrants do not confer any rights of common stock ownership on their respective holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price. Commencing on the date of issuance, holders of the Pre-Funded Warrants may exercise their right to acquire the common stock and pay the stated exercise price per share.
You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
If you purchase Units in this offering, the value of the shares of common stock included in the Units based on our actual book value will immediately be less than the price you paid. This reduction in the value of your equity is known as dilution. This dilution occurs in large part because our existing stockholders paid less than the assumed public offering price when they acquired their shares of common stock. Based upon the issuance and sale of 1,585,000 Units by us in this offering at an assumed public offering price of $4.59 per Unit, you will incur immediate dilution of $3.14 in the net tangible book value per share of common stock. For more information, see “Dilution.”
The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of revenues,profits, which could lead to wide fluctuations in our share price. The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers,the shares of larger, more established companies that have large public floats, and we expect that our share price will continue to be more volatile than a seasoned issuerthe shares of such larger, more established companies for the indefinite future. In fact,future, although such fluctuations may not reflect a material change to our financial condition or operations during the period from January 1, 2009 until September 30, 2009, the high and low sale prices of a share of our common stock were $0.05 and $5.50, respectively. Theany such period. Such volatility in our share price iscan be attributable to a number of factors. First, as noted above, our common stock is, compared to the shares of our common stock aresuch larger, more established companies, sporadically and/orand thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our sharescommon stock could, for example, decline precipitously in the event that a large number of shares of our common stockshares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price.
In addition to being highly volatile, our common stock could be subject to wide fluctuations in response to a number of factors that are beyond our control, including, but not limited to:
| ● | variations in our revenues and operating expenses; |
| ● | actual or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally; |
| ● | market conditions in our industry, the industries of our customers and the economy as a whole; |
| ● | actual or expected changes in our growth rates or our competitors’ growth rates; |
| ● | developments in the financial markets and worldwide or regional economies; |
| ● | announcements of innovations or new products or services by us or our competitors; |
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| ● | announcements by the government relating to regulations that govern our industry; |
| ● | sales of our common stock or other securities by us or in the open market; |
| ● | changes in the market valuations of other comparable companies; and |
| ● | other events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the COVID-19 pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability. |
In addition, if the market for healthcare stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of our common stock. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.
We cannothave been notified by Nasdaq of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with all applicable continued listing requirements and standards of Nasdaq, our common stock could be delisted from Nasdaq. Additionally, if Nasdaq does not grant us an extension or if a favorable decision is not obtained from a hearings panel, or the Panel, after the hearing, our common stock would be delisted from Nasdaq.
Our common stock is currently listed on Nasdaq. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements.
On November 23, 2022, we received notice from The Nasdaq Stock Market LLC (“Nasdaq”) advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000 (the “Stockholders’ Equity Requirement”). In our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, we reported stockholders’ equity of $1,287,224, which is below the Stockholders’ Equity Requirement for continued listing. Additionally, as of the date of the notice, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years.
The Notice had no immediate effect on the listing of our common stock and our common stock continues to trade on The Nasdaq Capital Market under the symbol “INVO” subject to our compliance with the other continued listing requirements.
Pursuant to the notice, Nasdaq gave us 45 calendar days, or until January 7, 2023, to submit to Nasdaq a plan to regain compliance. We submitted our plan within the prescribed time and, on January 18, 2023, we received a letter from Nasdaq stating that based on our submission that Nasdaq had determined to grant us an extension of time to regain compliance with the Equity Rule until May 22, 2023.
| -11- |
On May 23, 2023, we were notified by the Listing Qualifications department (the “Staff”) of Nasdaq that, based upon the Company’s non-compliance with the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Global Market, as set forth in the Equity Rule, as of May 22, 2023, the Company’s common stock was subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).
We requested a hearing before the Panel, which stayed any further action by Nasdaq at least until the hearing process was concluded and any extension that may be granted by the Panel has expired.
On July 6, 2023, we had our hearing before the Panel at which time we provided the Panel our plan to regain compliance under the Equity Rule.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule as well as Nasdaq Listing Rule 5550(a)(2) (to maintain a minimum bid price of $1; the “Price Rule”) on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any predictionssignificant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
In addition, on January 11, 2023, we received a letter from the Staff indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing under the Price Rule.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or projectionsuntil July 10, 2023, to regain compliance with the minimum bid price requirement. If at any time before July 10, 2023, the closing bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq would provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. If we did not regain compliance prior to July 10, 2023, then Nasdaq may grant us a second 180 calendar day period to regain compliance, provided we (i) meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency within such second 180 calendar day period, by effecting a reverse stock split, if necessary.
We were unable to regain compliance by July 10, 2023 and accordingly on July 11, 2023, we received a notice from Staff of Nasdaq that, based upon our non-compliance with the Price Rule. We presented our plan to regain compliance with the minimum bid price requirement at our hearing with the Panel on July 6, 2023.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule and the Price Rule on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
In the event that our common stock is delisted from Nasdaq, as a result of our failure to whatcomply with either the prevailingStockholders’ Equity Requirement or the Minimum Bid Price Requirement, or as a result of Nasdaq not granting us an extension or the Panel not granting us a favorable decision, or due to our failure to continue to comply with any other requirement for continued listing on Nasdaq, and is not eligible for listing on another exchange, trading in the shares of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, willand it would likely be at any time, including asmore difficult to whetherobtain coverage by securities analysts and the news media, which could cause the price of our common stock will sustain itsto decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a national exchange.
| -12- |
In the event that our Common Stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our Common Stock because they may be considered penny stocks and thus be subject to the penny stock rules.
The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-l, 15g-l, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers for sales of penny stocks may discourage such broker-dealers from effecting transactions in shares of our Common Stock, which could severely limit the market price,liquidity of such shares and impede their sale in the secondary market.
A U.S. broker-dealer selling penny stock to anyone other than an established customer or as“accredited investor” (generally, an individual with a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to what effect that the transaction prior to sale, of sharesunless the broker-dealer or the availabilitytransaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.
Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include: (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
You may experience future dilution as a result of future equity offerings and other issuances of our common stock for sale at any time will have on the prevailing market price.
In order to raise additional capital, we have had a limited trading volumemay in the future offer additional shares of our common stock. As longstock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share in this condition continues,offering. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the saleprice per share paid by the investor in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of a significant numberour common stock or securities convertible into common stock in future transactions may be higher or lower than the price per share in this offering. You will incur dilution upon exercise of any outstanding stock options, warrants or upon the issuance of shares of common stock at any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered.under our stock incentive programs. In addition, the sale of shares in this offering and any future sales of a substantial amountsnumber of shares of our common stock including shares issued uponin the exercise of outstanding options and warrants, under SEC Rule 144public market, or otherwisethe perception that such sales may occur, could adversely affect the price of our common stock. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares for sale will have on the market price of our common stock.
| -13- |
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price of our common stock to decline, and any issuance of additional common stock, or securities convertible into common stock, could dilute common stockholders. We may issue additional common stock, or securities convertible into common stock, pursuant to our shelf registration statement (including our at-the-market facility), upon exercise of outstanding warrants, for additional financing purposes, in connection with strategic transactions such as acquisitions or collaboration agreements, or otherwise, any of which could result in dilution to existing stockholders.
The sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Shares of our common stock held by certain other of our stockholders are eligible for resale, subject to volume, manner of sale and other limitations under Rule 144 under the Securities Act (“Rule 144”). By exercising their registration rights and selling a large number of shares, these stockholders could cause the prevailing market price of our common stock to decline.
As restrictions on resale end or if these stockholders exercise their registration rights, the market price of shares of our common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of shares of our common stock or other securities.
In addition, the shares of our common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. We have filed registration statements on Form S-8 under the Securities Act to register shares of our common stock issuable pursuant to our equity incentive plan and our employee stock purchase plan and may in the future file one or more additional registration statements on FormS-8 for the same or similar purposes. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.
Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
We expect that significant additional capital will be needed in the near future to continue our planned operations. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital at that time through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our securities. On December 11, 2009, approximately 39,500,000 sharesshares.
We have financed our operations, and we expect to continue to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity, warrants and/or convertible securities, which could significantly reduce the percentage ownership of our existing stockholders. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. Additionally, we may finance strategic alliances and/or acquisitions by issuing our equity or equity-linked securities, which may result in additional dilution. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock became subject to resale under Rule 144 asand in any event may have a result ofdilutive impact on your ownership interest, which could cause the expiration of the one-year period following our filing of the From 8-K reporting our share exchange. Sales of a substantial number of such shares could adversely affect our stock price.
| -14- |
We could contribute to a declineissue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing their voting rights; and provisions in our stock price. The registration rights agreement entered into in connection with the REF requirescharter documents could discourage a takeover that we use commercially reasonable efforts to ensure that the registration statement in connection with the REF remains effective for the termstockholders may consider favorable.
Our Articles of such agreement. As of the date hereof, we have not drawn down funds and have not issued shares of our common stock under our REF. Our ability to draw down funds and sell shares under the REF requires the continued effectiveness of and the ability to use the registration statement that we filed registering the resale of any shares issuable to AGS under the REF.
We do not intend to pay dividends on shares of our common stock at a later time, each investor’s ownership interest in our stock would be proportionally reduced. No investor will have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
We have identified in this prospectus some of the factors that may cause actual results to differ materially from those expressed or assumed in any of our forward-looking statements. There may be other factors not so identified. You should not place undue reliance on our forward-looking statements. As you read this prospectus, you should understand that these statements are not guarantees of performance or results. Further, any forward-looking statement speaks only as of the date on which it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect and it is not possible for us to predict all of them. Factors that may cause actual results to differ materially from those expressed or implied by our forward-looking statements include, but are not limited to, those described under the heading “Risk Factors” beginning on page 6.
Proceeds if 100%, or 8,790,000 shares, are sold At an assumed price of $0.304 | Proceeds if 50% of 8,790,000 shares sold | |||||||
| Gross proceeds | $ | 2,669,000 | $ | 1,334,500 | ||||
| Offering expenses: | ||||||||
| Legal fees | 30,000 | 30,000 | ||||||
| Accounting and auditing fees | 10,000 | 10,000 | ||||||
| State securities fees | 2,000 | 2,000 | ||||||
| Transfer agent fees | 10,000 | 10,000 | ||||||
| Broker’s fees | 160,100 | 80,100 | ||||||
| Miscellaneous expenses | 5,000 | 5,000 | ||||||
| Total offering expenses | 217,100 | 137,100 | ||||||
| Net proceeds | $ | 2,451,900 | $ | 1,197,400 | ||||
| Price | |||||||
| High | Low | ||||||
| 2009 | |||||||
| First Quarter | $ | 5.50 | $ | 0.40 | |||
| Second Quarter | $ | 1.01 | $ | 0.05 | |||
| Third Quarter | $ | 0.46 | $ | 0.08 | |||
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $6.54 million if the maximum number of Units being offered are sold, after deducting the Placement Agent fees and estimated offering expenses payable by us.
We intend to utilize (i) up to $2,125,000 of the net proceeds to fund the initial installment of the purchase price required to consummate our acquisition of the Wisconsin Fertility Institute (net of a $350,000 holdback); (ii) $1,000,000 of the net proceeds of this offering to pay Armistice the Armistice Amendment Fee for agreeing to remove the Subsequent Equity Financing Provision from the Armistice SPA; (iii) up to $543,750 to repay our Standard Merchant Advance Agreement with Cedar Advance LLC; (iv) $100,000 to repay that certain 8% Debenture with a maturity date of February 3, 2024 issued to Peak One Opportunity Fund LP, plus accrued interest and fees of approximately $7,609; and (v) $39,849 to repay that certain 8% Debenture with a maturity date of February 17, 2024 issued to First Fire Global Opportunities Fund, LLC, plus accrued interest and fees of approximately $3,058 We intend to use the remaining net proceeds of this offering for general corporate purposes, which could include future acquisitions, capital stock.expenditures and working capital. Pending these uses, we may invest the net proceeds in short-and intermediate-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government.
The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. See “Risk Factors—Risks Related to this Offering and the Ownership of Our Common Stock— We will have broad discretion in the use of the net proceeds from this offering and may fail to apply these proceeds effectively.”
DIVIDEND POLICY
We have never declared or paid any dividends on our Common Stock. We currently intend to retain all available funds and any future earnings for funding growththe operation and expansion of our business and, therefore, we do not expect to pay anyanticipate declaring or paying dividends in the foreseeable future. The payment of dividends will be at the discretion of our Board and will depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our future debt agreements, and other factors that our Board may deem relevant.
| -15- |
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2009:
| ● | on an actual |
| on a pro forma basis to | ||
| ● | on a pro forma as adjusted basis to give effect to: (a) the issuance and sale by us of 1,585,000 Units at an offering price of $4.59 per |
You should be read the following table in conjunction with our Management’s Discussion and Analysis or Plan“Use of Operation and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.
| September 30, 2009 | ||||||||||
| Actual | Adjusted | |||||||||
| Capitalization: | ||||||||||
| Preferred Stock, $.0001 par value; 100,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||||
Common Stock, $0.0001 par value; 200,000,000 share authorized; 55,247,833 issued and outstanding and 66,792,763(1) issued and outstanding as adjusted. | $ | 2,213,878 | $ | 4,665,768 | (1) | |||||
| Stock subscription receivable | (205,000 | ) | (205,000 | ) | ||||||
| Accumulated deficit during the development stage | (6,586,312 | ) | (6,586,312 | ) | ||||||
| Total Capitalization | $ | (4,577,434 | ) | $ | (2,125,544 | ) | ||||
| As of March 31, 2023 | ||||||||||||
| Capitalization in U.S. Dollars | Actual | Pro Forma | Pro Forma As Adjusted (1) | |||||||||
| Current Debt | ||||||||||||
| Related party demand notes | $ | 770,000 | $ | 870,000 | $ | 870,000 | ||||||
| Convertible notes | 740,000 | 549,849 | 410,000 | |||||||||
| Cash advance | - | 543,750 | - | |||||||||
| Total debt | 1,510,000 | 1,963,599 | 1,280,000 | |||||||||
| Shareholders’ Equity | ||||||||||||
| Common stock, $.0001 par value, 6,250,000 authorized, 698,565, 843,267, and 2,428,267 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis, respectively | 70 | 84 | 243 | |||||||||
| Additional paid-in capital | 52,422,808 | 52,596,545 | 59,139,166 | |||||||||
| Accumulated deficit | (52,334,412 | ) | (52,334,412 | ) | (52,334,412 | ) | ||||||
| Total shareholders’ equity | 88,466 | 262,217 | 6,804,997 | |||||||||
| Total capitalization | $ | 1,598,466 | $ | 2,225,816 | $ | 8,084,997 | ||||||
| (1) | The number of shares of our common stock to be outstanding after this offering is based on 843,267 shares of our common stock outstanding as of July 28, 2023, excludes the following: |
| ● | 59,771 shares of common stock reserved as of March 31, 2023 for future issuance under our 2019 Equity Incentive Plan; | |
| ● | 70,628 shares of common stock issuable upon exercise of outstanding options as of March 31, 2023 with a weighted average exercise price of $62.80 per share; | |
| ● | 348,127 shares of common stock issuable upon exercise of outstanding warrants as of March 31, 2023 with a weighted average exercise price of $15.11 per share; | |
| ● | 73,679 shares of common stock issuable upon conversion of outstanding convertible notes with a weighted average exercise price of $10.54 per share; | |
| ● | up to 332,850 shares of common stock issuable upon the exercise of the Placement Agent Warrants; and | |
| ● | up to 3,170,000 shares of common stock underlying the warrants issued in this offering. |
| -16- |
DILUTION
If you invest in our Units in this offering, your ownership interest will be diluted to the extent of the difference between the assumed offering price per share of our common stock and the as adjusted net tangible book value per share of its common stock immediately after the offering. Historical net tangible book value per share represents the amount of the Company’s total tangible assets less total liabilities, divided by the number of shares of its common stock outstanding.
The historical net tangible book value (deficit) of our common stock as of March 31, 2023 was approximately $(2.8) million or $(4.06) per share based upon shares of common stock outstanding on such date. Historical net tangible book value (deficit) per share represents the amount of its total tangible assets reduced by the amount of its total liabilities, divided by the total number of shares of common stock outstanding.
After giving effect to (a) the issuance of 115,000 shares of common stock upon the exercise of prefunded warrants at an exercise price of $0.01; (b) repayment of $200,000 of convertible notes; (c) 13,316 shares of common stock issued in consideration for services rendered; (d) $543,750 cash advance against future receivables; (e) $100,000 in related party demand notes; and (f) 16,250 shares of common stock issued in consideration of a settlement with an unrelated third party, the Company’s pro forma as adjusted net tangible book value as of March 31, 2023 would have been approximately $(3.0) million or $(3.58) per share.
After giving effect to the Company’s sale of all of the 1,585,000 Units offered in this offering (assuming that no units that include Pre-Funded Warrants are sold) at an assumed public offering price of $4.59 per Unit after deducting estimated placement agent fees and the Company’s estimated offering expenses, the Company’s pro forma as adjusted net tangible book value as of March 31, 2023 would have been approximately $3.5 million or $1.45 per share. This represents an immediate increase in net tangible book value of $5.03 per share to the Company’s existing stockholders, and an immediate dilution in net tangible book value of $3.14 per share to new investors. The following table illustrates this per share dilution:
| Assumed public offering price per share | $ | 4.59 | ||||||
| Pro forma net tangible book value per share as of March 31, 2023 | $ | (3.58 | ) | |||||
| Increase in net tangible book value per share attributable to new investors in this offering | 5.03 | |||||||
| Pro forma, as adjusted net tangible book value, after this offering | 1.45 | |||||||
| Dilution per share to new investors in this offering | $ | 3.14 |
The information discussed above is illustrative only, and the dilution information following this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed public offering price of $4.59 per Unit would increase (decrease) the pro forma as adjusted net tangible book value by $0.65 per share and increase (decrease) the dilution to new investors by $0.35 per share, assuming the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated Placement Agent fees and estimated expenses payable by us. An increase of 100,000 Units offered by it would increase the pro forma as adjusted net tangible book value by $0.12 per share and decrease the dilution to new investors by $0.12 per share, assuming the assumed public offering price of $4.59 per Unit remains the same and after deducting the estimated Placement Agent fees and estimated expenses payable by the Company. Similarly, a decrease of 100,000 Units offered by the Company would decrease the pro forma as adjusted net tangible book value by $0.14 per share and increase the dilution to new investors by $0.14 per share, assuming the assumed public offering price of $4.59 per Unit remains the same and after deducting the estimated Placement Agent fees and estimated expenses payable by us.
The above discussion and table are based on 843,267 shares of common stock issued and outstanding as of July 28, 2023, and excludes the following:
| ● | 348,127 shares of common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $15.11 per share; |
| ● | 121,241 shares of common stock issuable upon exercise of outstanding options with a weighted average exercise price of $42.00 per share. |
| ● | 54,570 shares of common stock issuable upon conversion of outstanding convertible notes with a weighted average exercise price of $10.53 per share; | |
| ● | 10,141 shares of common stock reserved for future issuance under the 2019 Stock Incentive Plan. | |
| ● | up to 3,170,000 shares of common stock issuable upon the exercise of the warrants offered in this offering and | |
| ● | up to 332,850 shares of common stock issuable upon the exercise of the Placement Agent Warrants |
Except as otherwise indicated herein, all information in this prospectus reflects or assumes:
| ● | a one-for-twenty reverse stock split of our common stock effected immediately prior to the consummation of this offering; | |
| ● | no exercise of the outstanding options or warrants described above; | |
| ● | no sale of any pre-funded warrants; | |
| ● | no exercise of the Placement Agent Warrants; and | |
| ● | no exercise of the warrants offered by us in this offering. |
| -17- |
| For the Nine | Year | From January 5, 2007 | ||||||||||
| Months Ended | Ended | (Inception) to | ||||||||||
| September 30, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||
| Revenue: | ||||||||||||
| Product Revenue | $ | 56,298 | $ | 37,955 | $ | - | ||||||
| Cost of Goods Sold: | ||||||||||||
| Product Costs | 30,528 | 10,088 | - | |||||||||
| Gross Margin: | 25,770 | 27,907 | - | |||||||||
| Operating Expenses: | ||||||||||||
| Research and development | 4,950 | 51,761 | 33,350 | |||||||||
| Selling, general and administrative | 1,394,592 | 1,837,606 | 77,170 | |||||||||
| Total Operating Expenses | 1,399,542 | 1,889,367 | 210,520 | |||||||||
| Loss from operations | (1,373,772 | ) | (1,861,460 | ) | (210,520 | ) | ||||||
| Other Expenses: | ||||||||||||
Change in fair value of derivative liability | 380,036 | - | - | |||||||||
| Interest and financing expenses | 2,745,010 | 11,945 | 3,569 | |||||||||
| Total other expenses | 3,125,046 | 11,945 | 3,569 | |||||||||
| Loss before income taxes | (4,498,818 | ) | (1,873,405 | ) | (214,089 | ) | ||||||
| Provisions for income taxes | - | - | - | |||||||||
| Net Loss | $ | (4,498,818 | ) | $ | (1,873,405 | ) | $ | (214,089 | ) | |||
| Basic and diluted net loss per weighted average shares of common stock | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.01) | ||||
| Basic and diluted Weighted average number of shares of common stock | 53,849,481 | 36,691,176 | 24,649,031 |
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSYou should read the following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto, as well as the notes to those statements“Risk Factors” and “Description of Business” sections included elsewhere or incorporated by reference in this prospectus. ThisThe following discussion includescontains forward-looking statements that involve riskreflect our plans, estimates and uncertainties. As a result of many factors, such as those set forth in this prospectus under “Risk Factors,”beliefs. Our actual results maycould differ materially from those anticipateddiscussed in thesethe forward-looking statements.
Overview
We are a development stagecommercial-stage fertility company dedicated to expanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and inclusive to people around the world. Our primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. Our flagship product is INVOcell, a revolutionary medical device that has recently begun to commercialize our provenallows fertilization and patented technology that we believe will revolutionize the treatment of infertility. Our device, the INVOcell, and the INVO procedure are designed to provide an alternative infertility treatment for the patient and the clinician; it is less expensive and simpler to perform than current infertility treatments. The simplicity of the INVO procedure relates to the ability to potentially perform the infertility procedure in a physician’s practice rather than in a specialized facility at a much lower cost overall than current infertility treatments, including in vitro fertilization (“IVF”). Therefore, we believe that the INVO procedure will be available in many more locations than conventional IVF especially outside the United States. INVO also allows conception andearly embryo development to take place insidein vivo within the woman's body; an attractive feature for most couples.
While the INVOcell remains central to our efforts, our commercialization and corporate development strategy was expanded to focus primarily on providing ART services to the significantly underserved patient population seeking access to affordable fertility treatment. The Company is now largely focused on the opening of dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational) and the acquisition of existing IVF clinics, in addition to continuing to distribute and sell our technology solution into existing IVF clinics.
Unlike IVF where the oocytes and sperm develop into embryos in an expensive laboratory incubator, the INVOcell allows fertilization and early embryo development to take place in the woman’s body. This allows for many benefits in the IVC procedure, including:
| ● | Eliminates expensive and time-consuming lab procedures, allowing clinics and doctors to increase patient capacity and reduce costs; | |
| ● | Provides a natural, stable incubation environment; | |
| ● | Offers a more personal, intimate experience in creating a baby; and | |
| ● | Reduces the risk of errors and wrong embryo transfers. |
In both current utilization of the INVOcell, device and in clinical studies, the INVO technology to assist infertile couples in having a baby. Our patentedIVC procedure has demonstrated equivalent pregnancy success and proven INVOcell technology is an effective low cost alternative to current treatments. Along with being offeredlive birth rates as an option in traditional IVF clinics, the INVO technique may be provided in a physician’s office or a small labwhen comparing similar incubation periods and therefore, may be offered by physicians around the world to couples who do not have access to IVF facilities. INVO uses a device, the INVOcell, which we currently sell to distributors around the world (outside of the U.S.) at prices ranging from $75 to $400. Currently, we are only authorized to sell the INVOcell device in certain international markets. We do not expect to be able to sell the device in the United States until the first quarter of 2011, assuming we receive the necessary capital to complete our clinical trial and receive FDA clearance by such date. We are establishing agreements with distributors and beginning to train physicians around the world in places such as South America, Europe, Africa and the Middle East. While we penetrate the infertility markets in Europe and Canada along with certain developing countries, we anticipate pursuing the completion of the U.S. Federal Food and Drug Administration’s (“FDA”) “510(k)” process. We have completed the first step for medical device companies who manufacture Class 2 devices and the filing of a Premarket Notification with the FDA (i.e., an FDA 510(k) submission). Technically, the FDA does not “approve” Class 1 and 2 medical devices for sale in the U.S. they give “clearance” for them to be sold. We are hoping to receive clearance to market in the U.S. by the end of 2010 upon completion of our clinical trial, which we will commence sometime after the start of funding from our REF with AGS Capital Group, LLC. However, there can be no assurance that we will receive such clearance by that date or ever.
Operations
We operate by outsourcing many keywith a core internal team and outsource certain operational functions in the developmentorder to help advance our efforts as well as reduce fixed internal overhead needs and manufacturing of the INVOcell device to keep fixed costs to a minimum.and in-house capital equipment requirements. Our most critical management and leadership functions are carried out by our core management team. We have contracted out the following functions: manufacturing, packaging/assembly, packaging, labeling, and sterilization of the INVOcell device to a certified manufacturer to mold the parts; to a medical manufacturing company to assemble packages and label the product and to a sterilization specialist to perform the gamma sterilization process.
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 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.. |
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| ● | 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 are well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are supplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified, and U.S. Food & Drug Administration (“FDA”) registered. |
| ● | CE Mark: INVO Bioscience received the CE Mark in October 2019. The CE Mark permits the sale of devices in Europe, Australia and other countries that recognize the CE Mark, subject to local registration requirements. |
| ● | 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: we are actively seeking to expand the labeling on our device, the indication for use, to cover a day 5 incubation period, in addition to the currently approved use of day 3 incubation. This may be accomplished with a prospective clinical study, which we previously designed and had the Institutional Review Board (“IRB”) approve to evaluate the modified INVOcell system for effectiveness of achieving fertilization, implantation, embryo development, clinical pregnancy, and live birth after day 5 continuous vaginal incubation (clinicaltrials.gov identifier: NCT04246268). The objective of this study would be to assess the efficacy, safety, comfort and retention of the INVOcell with the retention device and demonstrate superior efficacy following day 5 vaginal incubation as compared to the current day 3 vaginal incubation indication. As a result of the COVID-19 pandemic, we elected to place the trial on hold, but expect to move it forward with some improved design parameters this year. In the meantime, and as a result of available retrospective, real-market usage (day 5) data, we initiated an effort to pursue a 510(k) filing utilizing retrospective data as a separate effort to achieve our label enhancement. On June 22, 2023, we received U.S. Food and Drug Administration (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
The global ART marketplace is a large, multi-billion industry growing at a strong pace in many parts of the world as increased infertility rates, increased patient awareness, acceptance of treatment options, and improving financial incentives such as insurance and governmental assistance continue to drive demand. According to the European Society for Human Reproduction 2020 ART Fact Sheet, one in six couples worldwide experience infertility problems. 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. While there have been large increases in the use of IVF, there are still only approximately 2.6 million ART cycles, including IVF, IUI and other fertility treatments, performed globally each year, producing around 500,000 babies. This expedites productionamounts to less than 3% of the infertile couples worldwide being treated and eliminatesonly 1% having a child though IVF. The industry remains capacity constrained which creates challenges in providing access to care to 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, according to the American Society of Reproductive Medicine (2017), affects an estimated 10%-15% of the couples of childbearing-age. According to the Centers for Disease Control (“CDC”), there are approximately 6.7 million women with impaired fertility. Based on preliminary 2020 data from CDC’s National ART Surveillance System, approximately 326,000 IVF cycles were performed at 449 IVF centers, leaving the U.S. with a large, underserved patient population, similar to most markets around the world.
We estimate that approximately 200 of the United States IVF clinics are single-location, owner operated, and of these that approximately 80 to 100 clinics represent suitable acquisitions for the Company.
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Competitive Advantages
We believe that the INVOcell, and the IVC procedure it enables, have the following key advantages:
Lower cost than IVF with equivalent efficacy. The IVC procedure can be offered for less than IVF due to lower cost of supplies, labor, capital equipment and general overhead. The laboratory equipment needed to perform an IVF cycle is expensive and requires ongoing costs as compared to what is required for an IVC cycle. As a result, we also believe INVOcell and the IVC procedure enable a clinic and its laboratory to be more efficient as compared to conventional IVF.
The IVC procedure is currently being offered at several IVF clinics at a price range of $5,000 - $11,000 per cycle and from $4,500 to $7,000 at the existing INVO Centers, thereby making it more affordable than IVF (which tends to average $12,000 to $17,000 per cycle or higher).
Improved efficiency providing for greater capacity and improved access to care and geographic availability. In many parts of the world, including the U.S., IVF clinics tend to be concentrated in higher population centers and are often capacity constrained in terms of how many patients a center can treat, since volume is limited by the number of capital-intensive incubators available in IVF clinic labs. With the significant number of untreated patients along with the growing interest and demand for services, the industry remains challenged to provide sufficient access to care and to do so at an economical price. We believe INVOcell and the IVC procedure it enables can play a significant role in helping to address these challenges. According to the 2020 CDC Report, there are approximately 449 IVF centers in the U.S. We estimate that by adopting the INVOcell, IVF clinics can increase fertility cycle volume by up to 30% without adding to personnel, space and/or equipment costs. Our own INVO Centers also address capacity constraints by adding to the overall ART cycle capacity and doing so with comparable efficacy to IVF outcomes as well as at a lower per cycle price. Moreover, we believe that we are uniquely positioned to drive more significant growth in fertility treatment capacity in the future by partnering with existing OB/GYN practices. In the U.S., there are an estimated 5,000 OB/GYN offices, many of which offer fertility services (usually limited to consultation and IUI, but not IVF). Since the IVC procedure requires a much smaller lab facility, less equipment and fewer lab personnel (in comparison to conventional IVF), it could potentially be offered as an extended service in an OB/GYN office. With proper training and a lighter lab infrastructure, the INVOcell could expand the business for these physicians and allow them to treat patients that are unable to afford IVF and provide patients with a more readily accessible, convenient, and cost-effective solution. With our three-pronged strategy (IVF clinics, INVO Centers and OB/GYN practices), in addition to lowering costs, we believe INVOcell and the IVC procedure can address our industry’s key challenges, capacity and cost, by their ability to expand and decentralize treatment and increase the number of points of care for patients in need. This powerful combination of lower cost and added capacity has the potential to open up access to care for underserved patients around the world.
Greater patient involvement. With the IVC procedure, the patient uses their own body for fertilization, incubation, and early embryo development which creates a greater sense of involvement, comfort, and participation. In some cases, this may also free people from barriers related to due to ethical or religious concerns, or fears of laboratory mix-ups.
INVOcell Sales and Marketing
Our approach to market is focused on identifying partners within targeted geographic regions that we believe can best promote support our efforts to expand access to advanced fertility treatment for the large number of underserved infertile people hoping to have a baby. We believe that the INVOcell-based IVC procedure is an effective and affordable treatment option that greatly reduces the need for in-housemore expensive IVF lab facilities and allows providers to pass on related savings to patients without compromising efficacy. We have been cleared to sell the INVOcell in the United States since November 2015 after receiving de novo class II clearance from the FDA. Our primary focus over the past two years has been on establishing INVO Centers in the U.S. and abroad to promote the INVOcell and the IVC procedure and acquiring existing U.S.-based IVF clinics where we can integrate the INVOcell. While we continue selling the INVOcell directly to IVF clinics and via distributors and other partners around the world, we have transitioned INVO from being a medical device company to one that is mostly focused on providing fertility services.
International Distribution Agreements
We have entered into exclusive distribution agreements for a number of international markets. These agreements usually have an initial term with renewal options and require the distributors to meet minimum annual purchases, which vary depending on the market. We are also required to register the product in each market before the distributor can begin importing, a process and timeline that can vary widely depending on the market.
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The following table sets forth a list of our current international distribution agreements:
INVOcell Registration | ||||||||
| Market | Distribution Partner | Date | Initial Term | Status in Country | ||||
| Mexico (a) | Positib Fertility, S.A. de C.V. | Sept 2020 | TBD** | Completed | ||||
| Malaysia | iDS Medical Systems | Nov 2020 | 3-year | Completed | ||||
| Pakistan | Galaxy Pharma | Dec 2020 | 1-year | In process | ||||
| Thailand | IVF Envimed Co., Ltd. | April 2021 | 1-year | Completed | ||||
| Sudan | Quality Medicines, Cosmetics & Medical Equipment Import | Sept 2020 | 1-year | In process | ||||
| Ethiopia | Quality Medicines, Cosmetics & Medical Equipment Import | Sept 2020 | 1-year | In process | ||||
| Uganda | Quality Medicines, Cosmetics & Medical Equipment Import | Sept 2020 | 1-year | Not required | ||||
| Nigeria | G-Systems Limited | Sept 2020 | 5-year | Completed | ||||
| Iran | Tasnim Behboud | Dec 2020 | 1-year | Completed | ||||
| Sri Lanka | Alsonic Limited | July 2021 | 1-year | In process | ||||
| China | Onesky Holdings Limited | May 2022 | 5-year | In process |
| (a) | Our Mexico JV. Please note that the registration is temporarily in the name of Proveedora de Equipos y Productos, S.A. de C.V. and will be transferred to Positib Fertility as soon as practicable. |
Investment in Joint Ventures and Partnerships
As part of our commercialization strategy, we entered into a number of joint ventures and partnerships designed to establish new INVO Centers.
The following table sets forth a list of our current joint venture arrangements:
| Affiliate Name | Country | Percent (%) Ownership | ||||||
| HRCFG INVO, LLC | United States | 50 | % | |||||
| Bloom Invo, LLC | United States | 40 | % | |||||
| Positib Fertility, S.A. de C.V. | Mexico | 33 | % | |||||
Alabama JV Agreement
On March 10, 2021, our wholly owned subsidiary, INVO Centers, LLC (“INVO CTR”), entered into a limited liability company agreement with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of establishing an INVO Center in Birmingham, Alabama. The name of the joint venture LLC is HRCFG INVO, LLC (the “Alabama JV”). The responsibilities of HRCFG’s principals include providing clinical practice expertise, performing recruitment functions, providing all necessary training, and providing day-to-day management of the clinic. The responsibilities of INVO CTR include providing certain funding to the Alabama JV and providing access to and being the exclusive provider of the INVOcell to the Alabama JV. INVO CTR will also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration.
The Alabama JV opened to patients on August 9, 2021.
The Alabama JV is accounted for using the equity method in our financial statements. As of March 31, 2023 we invested $1.6 million in the Alabama JV in the form of a note. For the three months ended March 31, 2023 and 2022, the Alabama JV recorded net losses of $37 thousand and $110 thousand, respectively, of which we recognized losses from equity method investments of $18 thousand and $55 thousand, respectively.
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Georgia JV Agreement
On June 28, 2021, INVO CTR entered into a limited liability company agreement (the “Bloom Agreement”) with Bloom Fertility, LLC (“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center, (the “Atlanta Clinic”) in the Atlanta, Georgia metropolitan area.
In consideration for INVO’s commitment to contribute up to $800,000 within the 24-month period following execution of the Bloom Agreement to support the start-up operations of the Georgia JV, the Georgia JV issued 800 of its units to INVO CTR and in consideration for Bloom’s commitment to contribute physician services having an anticipated value of up to $1,200,000 over the course of a 24-month vesting period, the Georgia JV issued 1,200 of its units to Bloom.
The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR will also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration.
The Georgia JV opened to patients on September 7, 2021.
The results of the Georgia JV are consolidated in our financial statements. As of March 31, 2023, INVO invested $0.9 million in the Georgia JV in the form of capital equipment expenditures.contributions as well as $0.5 million in the form of a note. For the three months ended March 31, 2023 and 2022, the Georgia JV recorded net losses of $32 thousand and $0.2 million respectively. Noncontrolling interest in the Georgia JV was $0. See Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on the Georgia JV.
Mexico JV Agreement
Effective September 24, 2020, INVO CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) under which the Shareholders will commercialize the IVC procedure and offer related medical treatments in Mexico. Each party owns one-third of the Mexican incorporated company, Positib Fertility, S.A. de C.V. (the “Mexico JV”).
The Mexico JV will operate in Monterrey, Nuevo Leon, Mexico and any other cities and places in Mexico as approved by the Mexico JV’s board of directors and Shareholders. In addition, the Shareholders agreed that the Mexico JV will be our exclusive distributor in Mexico. The Shareholders also agreed not to compete directly or indirectly with the Mexico JV in Mexico.
The Mexico JV opened to patients on November 1, 2021.
The Mexico JV is accounted for using the equity method in our financial statements. As of March 31, 2023, INVO invested $0.1 million in the Mexico JV. For the three months ended March 31, 2023, the Mexico JV recorded net losses of $27 thousand and $49 thousand, respectively, of which we recognized a loss from equity method investments of $9 thousand and $16 thousand, respectively.
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Terminated JV Agreements
As of May 15, 2023, the Company’s JV agreements to establish INVO Centers in the Republic of North Macedonia and in the Bay Area of California were terminated due to lack of progress.
Recent Developments
July 2023 Standard Merchant Cash Advance Agreement
On July 19, 2023, we entered into a Standard Merchant Cash Advance Agreement with Cedar Advance LLC (“Cedar”) under which Cedar purchased $543,750 of our receivables for a gross purchase price of $375,000. We anticipatereceived net proceeds of $356,250. If we repay the purchase price within 30-days then the amount payable shall be reduced to $465,000. Until the purchase price has been repaid, we agreed to pay Cedar $19,419.64 per week. In addition, we granted Cedar a security interest in our accounts, including deposit accounts and accounts receivable. We intend to use the proceeds for working capital and general corporate purposes.
Amendment to Armistice SPA
On July 7, 2023, we entered into an Amendment to Securities Purchase Agreement (the “Armistice Amendment”) with Armistice Capital Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities Purchase Agreement (the “Armistice SPA”) with Armistice pursuant to which we agreed that from March 23, 2023 until 45 days after the effective date of the Resale Registration Statement (as defined below) we would not (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, other than the prospectus supplement filed in connection with that offering and the Resale Registration Statement (the “Subsequent Equity Financing Provision”). In consideration of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent Equity Financing Provision from the Armistice SPA, we agreed to pay Armistice a fee a $1,000,000 (the “Armistice Amendment Fee”) within two days of the closing of this Offering. Additionally, we agreed to include a proposal in our proxy statement for our 2023 Annual Meeting of Stockholders for the purpose of obtaining the approval of the holders of a majority of our outstanding voting common stock, to effectuate the reduction of the exercise price set forth in Section 2(b) of the Common Stock Purchase Warrants issued to Armistice on March 27, 2023 (the “Existing Warrants”) to the per unit public offering price of this Offering, in accordance with Nasdaq Rule 5635(d) (the “Shareholder Approval”) with the recommendation of our board of directors that such proposal be approved. We also agreed to solicit proxies from our shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and that all management-appointed proxyholders shall vote their proxies in favor of such proposal. Further, if we do not obtain Shareholder Approval at the first meeting, we will experience significant quarterly fluctuationscall a meeting every six (6) months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is obtained or the Existing Warrants are no longer outstanding. Until such approval is obtained, the exercise price of the Existing Warrants will remain unchanged.
Reverse Stock Split
On June 28, 2023, our board of directors approved a reverse stock split of our common stock at a ratio of 1-for-20 and also approved a proportionate decrease in our salesauthorized common stock to 6,250,000 shares from 125,000,000. Pursuant to Nevada Revised Statutes, a company may effect a reverse split without stockholder approval if both the number of authorized shares of common stock and revenuesthe number of outstanding shares of common stock are proportionally reduced as a result of our effortsthe reverse split, the reverse split does not adversely affect any other class of stock of the company, and the company does not pay money or issue scrip to stockholders who would otherwise be entitled to receive a fractional share as a result of the reverse split, We intend to file a certificate of change with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to (i) decrease the number of authorized shares of common stock from 125,000,000 to 6,250,000 shares and (ii) effectuate a 1-for-20 reverse stock split of the outstanding common stock prior to effectiveness of this registration statement. On July 27, 2023, we received notice from Nasdaq that the reverse split would take effect at the open of business on July 28, 2023 and the reverse stock split took effect on that date.
510(k) FDA Clearance
On June 22, 2023, we received U.S. Food and Drug Administration (FDA) 510(k) clearance to expand the saleslabeling 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.
March 2023 Registered Direct Offering
On March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering (the “RD Offering”), 69,000 shares of Common Stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $0.20 per share, and (ii) in a concurrent private placement (the “March Warrant Placement”), a common stock purchase warrant (the “March Warrant”), exercisable for an aggregate of up to 276,000 shares of Common Stock, at an exercise price of $12.60 per share. The securities to be issued in the RD Offering (priced at the marked under Nasdaq rules) were offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-255096), initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. The Pre-Funded Warrant is exercisable upon issuance and will remain exercisable until all of the INVO technology to new markets. Operating results will depend upon andshares underlying the Pre-Funded Warrant are exercised in full. All Pre-Funded Warrants were exercised by the investor in June 2023.
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The March Warrant (and the shares of Common Stock issuable upon the timingexercise of signingthe Private Warrants) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of new distributor contractsthe Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On March 27, 2023, the Company closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by the Company. In the event the March Warrant is fully exercised for cash, the Company would receive additional gross proceeds of approximately $3.5 million. The Company used $383,879 in proceeds to repay a portion of the convertible debenture issued in February 2023 and the trainingremainder of the proceeds are being used for working capital and general corporate purposes.
Under the March Purchase Agreement, the Company is required within 30 days of the closing date of the March Warrant Placement to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrant. The Company is required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full review by the SEC), and to keep the Resale Registration Statement effective at all times until no shares of Common Stock remain exercisable under the March Warrant.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from the date of the RD Offering and March Warrant Placement, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
Execution of Definitive Agreements to Acquire the Wisconsin Fertility Institute
On March 16, 2023, INVO, through Wood Violet Fertility LLC, a Delaware limited liability company (“Wood Violet”) and wholly owned subsidiary of INVO Centers LLC, a Delaware company (“INVO CTR”) wholly owned by INVO, entered into binding purchase agreements to acquire Wisconsin Fertility Institute (“Wisconsin Fertility”) for a combined purchase price of $10 million.
The purchase price is payable in four installments of $2.5 million each (which payments may be offset by assumption of certain Wisconsin Fertility liabilities, payable at closing and on each of the subsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock par value $0.0001 per share (“Common Stock”) valued at $125.00, $181.80, and $285.80, for the second, third, and final installments, respectively.
On July 7, 2023 Wood Violet entered into closing agreements with the Clinic under which Wood Violet agreed to complete the closing of the acquisition by July 31, 2023 which closing agreements further provide that unless a new closing date is agreed to in writing the acquisition agreements would automatically terminate if the closing does not occur on or before July 31, 2023.
Wood Violet and the Clinic have agreed in principle to extend the closing date of the acquisition to August 10, 2023 and we expect to have executed written amendments to the closing agreements to memorialize such agreement prior to the closing of this offering.
Wisconsin Fertility is comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owns, operates and manages the Clinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care and surgical procedures, and employs physicians and their staffsother healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services.
Notices from Nasdaq of Failure to Satisfy Continued Listing Rules.
Notice Regarding Non-Compliance with Minimum Stockholders’ Equity
On November 23, 2022, we received notice from The Nasdaq Stock Market LLC (“Nasdaq”) advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000 (the “Stockholders’ Equity Requirement”). In this Quarterly Report on Form 10-Q, we reported stockholders’ deficit of $16,090, which, although improved from the $977,612 deficit recorded as of December 31, 2022, is below the Stockholders’ Equity Requirement for continued listing. Additionally, we do not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing operations in the INVO procedure. International salesmost recently completed fiscal year, or in two of the three most recently completed fiscal years.
The notice had no immediate effect on the listing of our Common Stock and our Common Stock continues to trade on The Nasdaq Capital Market under the symbol “INVO” subject to our compliance with the other continued listing requirements.
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Pursuant to the notice, Nasdaq gave us 45 calendar days, or until January 7, 2023, to submit to Nasdaq a plan to regain compliance We submitted our plan within the prescribed time and, on January 18, 2023, we received a letter from Nasdaq stating that based on our submission that Nasdaq had determined to grant us an extension of time to regain compliance with the Equity Rule until May 22, 2023.
On May 23, 2023, we were notified by the Listing Qualifications department (the “Staff”) of Nasdaq that, based upon the Company’s non-compliance with the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Global Market, as set forth in the equity Rule, as of May 22, 2023, the Company’s common stock was subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).
We requested a hearing before the Panel, which stayed any further action by Nasdaq at least until the hearing process was concluded and any extension that may be granted by the Panel has expired.
On July 6, 2023, we had our hearing before the Panel at which time we provided the Panel our plan to regain compliance under the Equity Rule.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule and Nasdaq Listing Rule 5550(a)(2) (to maintain a minimum bid price of $1; the “Price Rule”) on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
Notice Regarding Failure to Maintain Minimum Bid Price
On January 11, 2023, we received a letter from the Staff indicating that, based upon the closing bid price of our Common Stock for the previous 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing under the Price Rule.
The notice had no immediate effect on the listing of our Common Stock, and our Common Stock will continue to trade on The Nasdaq Capital Market under the symbol “INVO.”
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until July 10, 2023, to regain compliance with the minimum bid price requirement. If at any time before July 10, 2023, the closing bid price of our Common Stock closed at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq would provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. If we did not regain compliance prior to July 10, 2023, then Nasdaq may grant us a second 180 calendar day period to regain compliance, provided we (i) meet the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency within such second 180 calendar day period, by effecting a reverse stock split, if necessary.
We were unable to regain compliance by July 10, 2023 and accordingly on July 11, 2023, we received a notice from Staff of Nasdaq that, based upon our only sourcenon-compliance with the minimum bid price requirement set forth in the Price Rule. We presented our plan to regain compliance with the minimum bid price requirement at our hearing with the Panel on July 6, 2023.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule and Price Rule on or before September 29, 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
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Results of Operations
During the first quarter of 2023, we achieved several important developments. Our existing three INVO Centers made steady progress producing record quarterly revenue on a combined basis. We also made important progress toward opening our planned Tampa INVO Center. With respect to our previously announced acquisition strategy, we reached a major milestone by signing binding agreements to acquire Wisconsin Fertility Institute (“WFI”). WFI is a well-established and profitable clinic that would substantially increase the size and scope of our operations. We expect to close the acquisition during August 2023.
Looking ahead, we anticipate opening additional INVO Centers in key domestic, and select international, markets, and pursuing additional acquisitions. With respect to INVO Centers, we have selected an initial list or about 20 markets in the U.S. that we believe are excellent potential locations, and we believe the universe of suitable acquisition targets for INVO exceeds 80 clinics in the U.S. We also continue to work on the expansion of INVOcell distribution into existing fertility clinics.
From a market strategy perspective, our commercialization efforts will continue to focus on the substantial, underserved patient population and on expanding access to advanced fertility treatments. We believe our solutions can help address the key challenges of affordability and capacity to provide care to the vast number of patients that go untreated every year. This represents the major opportunity for INVOcell and the IVC procedure it enables. Despite the COVID pandemic, the fertility industry continues to expand, and we believe our growing volume of partners (both distributors and JV INVO Centers) affords us strong forward-looking opportunities. We believe our INVO Center approach and our plans to implement IVC procedures in acquired clinics can help to add much needed capacity and affordability and aligns with our key mission to open access to care to the underserved patient population.
The ART market also continues to benefit from a number of industry tailwinds, including 1) the large under-served potential patient population, 2) increasing infertility rates around the world 3) growing awareness and education of fertility treatment options, 4) a growing acceptance of fertility treatment, 5) improvements in procedure techniques and hence improvements in pregnancy success rates and 6) generally improving insurance (private and public) reimbursement trends.
Comparison of the Three Months Ended March 31, 2023, and 2022
Revenue
Revenue for the three months ended March 31, 2023, was approximately $348 thousand compared to approximately $163 thousand for the three months ended March 31, 2022. Of the $348 thousand in revenue for the comingfirst three months of 2023, approximately $297 thousand was related to clinic revenue from the consolidated Georgia JV. The increase of approximately $185 thousand, or approximately 114%, was primarily related to increased revenue from the Georgia JV.
Gross Profit
Gross profit for the three months ended March 31, 2023, was approximately $275 thousand compared to approximately $98 thousand for the three months ended March 31, 2022. Gross margins were approximately 79% and 60% for the three months ended March 31, 2023, and 2022, respectively. The gross margin improvement is primarily due to increased efficiencies at the Georgia JV.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2023, were approximately $2.5 million compared to approximately $2.7 million for the three months ended March 31, 2022. The decrease of approximately $0.2 million, or approximately 7%, was primarily the result of decreased non-cash, stock-based compensation expense, which was $0.5 million in the period, compared to $0.7 million for the same period in the prior year.
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Research and Development Expenses
We are aware of many significant international opportunities, and we expect international revenuesbegan to continue to grow. International sales are, however, difficult to forecast. Subject to having available financial resources, we are committed in our ongoing sales, marketingfund additional research and development activities(“R&D”) efforts in 2020 as part of our 5-day label expansion efforts. R&D expenses were approximately $74 thousand and $104 thousand for the three months ended March 31, 2023, and March 31, 2022, respectively.
Loss from equity investment
Loss from equity investments for the three months ended March 31, 2023, was approximately $27 thousand compared to sustain$71 thousand for the three months ended March 31, 2022. The decrease in loss is due to an increase in revenue in the equity method JV’s and growa decrease in expenses associated with one-time startup costs.
Interest Expense and Financing Fees
Interest expense and financing fees were approximately $217 thousand for the three months ended March 31, 2023, compared to approximately $0.1 thousand for the three months ended March 31, 2022. The expense in 2023 was primarily non-cash and due to the debt discount, debt issuance cost and interest from convertible notes.
Comparison of the years ended December 31, 2022 and 2021
Revenues
Revenue for the years ended December 31, 2022 and 2021 was $0.8 million and $4.2 million, respectively, representing a decrease of $3.4 million, or 80% in the year ended December 31, 2022. The decrease was due to the termination of our salesagreement with Ferring, which resulted in the full recognition, in 2021, of the remaining $3.6 million in deferred revenue related to the Ferring agreement and revenues from our products and services.
Gross Profit
Gross profit for the years ended December 31, 2022 and 2021 was $0.5 million and $4.0 million, respectively. Gross margin was 60% and 97% for the years ended December 31, 2022 and 2021, respectively. The decrease in strategic markets utilizing our limited resourcesgross margin was attributable to the change in the most economical fashion possible. We focused our efforts on South America and parts of Europerevenue mix as we see these as our best opportunities to introduce the INVO procedure to many willing physicians quickly. During this period, we reduced our travel and planned trips furtherno longer have license revenue in advance to benefit from travel discounts, which reduced our travel expenses considerably. We had a presence at the World Congress of Gynecology and Obstetrics held in Cairo, Egypt in October 2009, as we continued to introduce the INVOcell across new regions of the Middle East and Africa. This annual meeting is the largest infertility conference of physicians in Northern Africa and was felt to be an essential component in gaining name recognition and traction in this part of the world.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were $10.6 million and $9.0 million, respectively, of which $2.2 million and $2.7 million, respectively, was for non-cash, stock-based compensation expense. The increase of approximately $1.6 million or 17% was primarily the result of approximately $1.0 million in increased personnel expense, approximately $0.7 million in increased expenses related to the full-year operations of the consolidated Georgia JV, approximately $0.4 million in increased marketing spend and was partially offset by an approximate $0.3 million decrease in legal and startup costs related to new and potential INVO Centers and an approximate $0.6 million decrease in professional fees.
Research and Development Expenses
We began to fund additional research and development (“R&D”) efforts in 2020 as part of our 5-day label expansion efforts. R&D expenses were $0.5 million and $0.2 million, for the years ended December 31, 2022 and 2021, respectively. The increase of approximately $0.3 million was primarily related to our FDA response efforts on the 5-day label expansion.
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Loss from equity investment
Loss from equity investments for the years ended December 31, 2022 and 2021, was $0.2 million and $0.3, respectively. The decrease in loss is due to the Alabama JV and Mexico JV being in start-up mode and operational for only a portion of 2021.
Other Income
Other income for the years ended December 31, 2022 and 2021, was nil and $0.2 million, respectively. The decrease of $0.2 million was the result of our Paycheck Protection Program note and related interest being forgiven in 2021.
Interest Expense and Financing Fees
Interest expense and financing fees were for the years ended December 31, 2022 and 2021 were $0.1 million and $1.3 million, respectively. The decrease of approximately $1.2 million, or approximately 96%, was primarily due to a decrease in non-cash amortization of discount, debt issuance cost and interest on convertible notes.
Income Taxes
As of December 31, 2022, we had unused federal net operating loss carryforwards (“NOLs”) of $32.8 million. These losses expire in various amounts at varying times beginning in 2027 with a portion carrying on indefinitely. Unless expiration occurs, these NOLs may be used for regional marketing campaigns. In addition to these developments,offset future taxable income and thereby reduce our income taxes.
We recorded a valuation allowance against our deferred tax assets at December 31, 2022 and 2021 totaling $9.3 million and $6.8 million, respectively.
Liquidity and Capital Resources
For the three months ended March 31, 2023, and 2022, we are continuinghad net losses of approximately $2.6 million and $2.8 million, respectively, and an accumulated deficit of approximately $52.3 million as of March 31, 2023. Approximately $0.9 million of the net loss was related to plan sales and training trips actively. We believe that we will begin increasing revenues in the future; however, our growth is limited by both the registration processes that we must undertake as well as our limited capital resources, and therefore we anticipate that revenues will continue to be lower than originally anticipatednon-cash expenses for the next few quarters.three months ended March 31, 2023, compared to $0.9 million for the three months ended March 31, 2022. We had negative working capital of approximately $1.6 million as of March 31, 2023, compared to negative working capital of approximately $2.8 million as of December 31, 2022. As of March 31, 2023, we had stockholder’s equity of approximately $88 thousand compared to negative stockholder’s equity of approximately $1.0 million as of December 31, 2022.
For the years ending December 31, 2022, and 2021, we had net losses of approximately $10.9 million and $6.7 million, respectively. The registration process differsincrease in net loss primarily was due to the increase in operating loss resulting from a clinical approval, which the INVOcell hasabsence of license revenue in the form2022 and an increase in operating expenses. Approximately $3.0 million of the CE mark; instead,net loss was related to non-cash expenses for the process is more akinyear ended December 31, 2022, compared to a governmental tracking$4.2 million for the year ended December 31, 2021. We had negative working capital of approximately $2.8 million as of December 31, 2022, compared to monitor what products are sold and used within its borders.
We have been dependent on raising capital from debt and equity financings to meet our needs for cash required to fund our planned operations. This amount may increase asoperating expenses and investing activities. During the first three months of 2023, we expandreceived proceeds of approximately $2.7 million for the sale of our salesCommon Stock and marketing efforts$0.7 million in proceeds from the sale of convertible notes. During the first three months of 2022, we received approximately $0.3 million for the sale of Common Stock. Over the next 12 months, our plan includes opening additional INVO Centers, completing the acquisition of Wisconsin Fertility Institute and develop new products and services; however, ifpursuing additional IVF clinic acquisitions. Until we do notcan generate positive cash from operations, we will need to raise additional capital in the near future we will havefunding to curtailmeet our spendingliquidity needs and downsize our operations. Our cash needs are primarily attributable to funding our clinical trial, sales and marketing efforts, strengthening our training capabilities, satisfying existing obligations and building an administrative infrastructure, including costs and professional fees associated with being a public company.
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Although our audited financial statements for the REF with AGS Capital Group, LLC, although no assurances can be madeyear ended December 31, 2022 were prepared under the assumption that we will be able to draw down onwould continue operations as a going concern, the REF. We also seek other sources of capital through private placementsreport of our securities. The exact amount of funds raised, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake,independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2022 contains a going concern qualification in which such as initiating the final required FDA clinical trial. No assurance can be given that we will be able to raise additional capital when needed. If we are unable to raise additional capital, we will be required to substantially curtail or cease operations.
Cash Flows
The following table shows a summary of our cash flows for the three months ended September 30, 2009,March 31, 2023 and 2022:
| 2023 | 2022 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | (1,148,461 | ) | (2,078,119 | ) | ||||
| Investing activities | (8,447 | ) | (81,890 | ) | ||||
| Financing activities | 3,255,018 | 315,000 | ||||||
The following table shows a summary of our cash flows for the year ended December 31:
| 2022 | 2021 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | (6,603,319 | ) | (6,029,914 | ) | ||||
| Investing activities | (81,217 | ) | (2,153,512 | ) | ||||
| Financing activities | 1,089,800 | 3,770,537 | ||||||
Cash Flows from Operating Activities
As of March 31, 2023, we had approximately $2.2 million in cash compared to the nine months ended September 30, 2008
Cash Flows from Investing Activities
During the nine-month periodthree months ended September 30, 2009, we incurred significant non-cash financing liability expenseMarch 31, 2023, cash used in investing activities of $8 thousand was primarily related to the convertible loans with detachable warrants that we issued to raise capital during the period. We incurred $3,100,000 in non-cash expense primarily from the common stock market price appreciation compared to the conversion feature of $0.10 per share and warrant price per share of $0.20. We had net interest expense of $24,600a loss on equity method for the nineJVs. During the three months ended September 30, 2009, as comparedMarch 31, 2022, cash used in investing activities of approximately $0.1 million was primarily related to $5,900a loss on equity method for the nine months ended September 30, 2008 as a result of having higher loans including the convertible loans in 2009 versus 2008.
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Cash Flows from Financing Activities
During the purchase of patents to protect our proprietary products. During 2009, we maintained our current patents across the globe and currently do not believe it is necessary to expand any of them at this time. Also during 2008, we purchased manufacturing molds and a telephone system.
Critical Accounting Policies and are dependent on securing additional equityEstimates
The discussion and debt financing to support our business efforts. These factors among others may raise substantial doubt about our ability to continue as a going concern.
See Note 1 of the consolidated financial statements as soon as they became known. Based onNotes to Consolidated Financial Statements for the period ended March 31, 2023 for a critical assessmentsummary of oursignificant accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.
Stock Based Compensation
We account for stock-based compensation under the provisions of FASB ASC 718 “Compensation-Stock Compensation.”-10 Share-Based Payment (formerly SFAS 123R). This statement requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or performance goals in exchange for the award, which is usually theimmediate but sometimes over a vesting period.
Revenue Recognition
We will recognize revenue on arrangements in accordance with SecuritiesASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases,amount of revenue is recognized only whento recognize under the price is fixed and determinable, persuasive evidence of an arrangement exists,new revenue standard. The model has a five-step approach:
| 1. | Identify the contract with the customer. |
| 2. | Identify the performance obligations in the contract. |
| 3. | Determine the total transaction price. |
| 4. | Allocate the total transaction price to each performance obligation in the contract. |
| 5. | Recognize as revenue when (or as) each performance obligation is satisfied. |
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Variable Interest Entities
The Company’s consolidated financial statements include the service is performed and collectabilityaccounts of the resulting receivable is reasonably assured.
Equity Method Investments
Investments in unconsolidated affiliates in which we exert significant influence but do not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. Our share of the VIEprofits and losses from these investments is required to consolidatereported in loss from equity method investment in the VIE. SFAS 167, which is referencedaccompanying consolidated statements of operations. Management 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 ASC 105-10-65, hascarrying values when necessary.
Recently Issued Accounting Standards Not Yet Effective or Adopted
Management does not believe that any recently issued, but not yet beeneffective accounting pronouncements, if adopted, into the Codification and remains authoritative. This statement is effective for fiscal years beginning after November 15, 2009. We plan to adopt SFAS 167 effective January 1, 2010. The adoption of SFAS 167 is not expected towould have a material impact on ourthe accompanying condensed consolidated financial position and results of operations.
EXECUTIVE COMPENSATION
Summary Compensation Committee, Nominating Committee, or any other committee of the Board of Directors. The responsibilities of these committees are fulfilled by our Board of Directors and all of our directors participate in such responsibilities. In addition, we do not currently have an "audit committee financial expert" as such term is defined in the Securities Act, as our financial constraints have made it extremely difficult to attract and retain qualified outside Board members. We hope to add qualified independent members of our Board of Directors in 2010, depending upon our ability to reach and maintain financial stability.
The following Summary Compensation Table sets forth, for the years indicated, all cash compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by the Company’s chief“named executive officer, president and chief financial officer who received or was entitled to receive remuneration in excess of $100,000 during the stated periods. As reflected below, none of our officers received cash compensation during fiscal 2007.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary | Bonus ($) | Stock Award ($) | Option Award ($) | Non-Equity Incentive Plan Compensation Earnings ($) | Non-Qualified Deferred Compensation Earnings ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||||||||
| Kathleen Karloff, CEO/Director(1) (2) | 2009 | $ | 131,252 | - | - | - | - | - | - | $ | 131,252 | |||||||||||||||||||||||
| 2008 | $ | 93,074 | - | - | - | - | - | - | $ | 93,074 | ||||||||||||||||||||||||
| 2007 | $ | - | - | $ | 4,498 | - | - | - | - | $ | 4,498 | |||||||||||||||||||||||
| Claude Ranoux, President/Director(2) (3) | 2009 | $ | 131,252 | - | - | - | - | - | - | $ | 131,252 | |||||||||||||||||||||||
| 2008 | $ | 91,974 | - | - | - | - | - | - | $ | 91,974 | ||||||||||||||||||||||||
| 2007 | $ | - | - | $ | 19,731 | - | - | - | - | $ | 19,731 | |||||||||||||||||||||||
| Robert Bowdring, CFO (2) | 2009 | $ | 108,750 | - | - | - | - | - | - | $ | 108,750 | |||||||||||||||||||||||
| 2008 | $ | 24,518 | - | - | - | - | - | - | $ | 24,518 | ||||||||||||||||||||||||
| 2007 | $ | - | - | - | - | - | - | - | $ | - | ||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||||
| Steven Shum | 2022 | 260,000 | (2) | - | 72,601 | (3) | 169,400 | (4) | - | 502,001 | ||||||||||||||||||
| Chief Executive Officer (1) | 2021 | 260,000 | 37,500 | - | - | - | 297,500 | |||||||||||||||||||||
| Andrea Goren | 2022 | 215,000 | (5) | - | 19,353 | (6) | 361,468 | (7) | - | 595,821 | ||||||||||||||||||
| Chief Financial Officer | 2021 | 171,458 | (8) | 76,275 | (9) | 36,875 | (10) | - | - | 284,608 | ||||||||||||||||||
| Michael Campbell | 2022 | 220,000 | (11) | - | 55,002 | (12) | 55,002 | (13) | - | 330,004 | ||||||||||||||||||
| Chief Operating Officer | 2021 | 220,000 | 110,000 | - | - | - | 330,000 | |||||||||||||||||||||
| Vice President, Business Development | ||||||||||||||||||||||||||||
| (1) | |
| (2) | As of |
| (3) | Amounts reflect the aggregate grant date fair value of the |
| (4) | Amounts reflect the aggregate grant date fair value of |
| (7) | Amounts reflect the aggregate grant date fair value of |
| (8) | Mr. Goren received $50,000 in salary as advisor to CEO and $121,458 salary as CFO. |
| (9) | Mr. Goren received $25,000 bonus as advisor to the CEO and $61,275 bonus as CFO. |
| (10) | Amounts reflect the aggregate grant date fair value of the 250 shares of common stock. This amount does not reflect the actual economic value realized by Mr. Goren. The restricted stock grant issued to Mr. Goren provide for equal monthly vesting over a 12-month period based on continued employment during that time. |
| (11) | As of December 31, 2022, Mr. Campbell deferred $15,369 of his salary, which the Company expects to pay before the end of 2023. |
| (12) | Amounts reflect the aggregate grant date fair value of the 762 shares of common stock. The restricted stock grant issued to Mr. Campbell provide for 50% vesting at |
| (13) | Amounts reflect the aggregate grant date fair value of the 926 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Campbell. The options issued to Mr. Campbell provide for equal monthly vesting over a 3-year period based on continued employment during that time. |
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Narrative Disclosure to compensate certain officers, employees and service providersSummary Compensation Table
Except as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from the Company with commonrespect to any named executive officer, that would result in payments to such person because of his resignation, retirement or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
OUTSTANDING EQUITY AWARDS AT END OF 2022
The following table provides information about outstanding stock or options to acquire common stock. Asissued by the Company held by each of our NEOs as of December 31, 2008, a total2022. None of 857,000 shares of common stock and options to purchase an additional 440,000 shares of common stock were agreed to be issued. As of September 30, 2009, we have issuedour NEOs held any other equity awards from the 857,000 shares of common stock against its previously recorded accrued liability. However,Company as of September 30, 2009, we terminated 70,000 ofDecember 31, 2022.
| Option Awards | Stock Awards | |||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Has Not Yet Vested | Market Value of Stock that has not Yet Vested | ||||||||||||||||
| Steve Shum | 7,027 | 4,980 | 72.2-161.4 | 12/05/30-01/14/32 | 503 | 4,262 | ||||||||||||||||
| Andrea Goren | 7,550 | 4,961 | 61.4-161.4 | 08/10/30-01/14/32 | 135 | 1,136 | ||||||||||||||||
| Michael Campbell | 12,188 | 3,393 | 61.4-161.4 | 01/17/30-01/14/32 | 381 | 3,228 | ||||||||||||||||
Employment Agreements
Steven Shum
On October 16, 2019, the options and agreed to issue an additional 300,000 to two employees hired during 2009 bringing the total options to 670,000 as of this date. We have not yet adopted a formal stock option plan and, consequently, the options to purchase 670,000 shares of common stock are deemed not yet issued.
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Andrea Goren
On June 14, 2021, the Board of Directors, has executedCompany entered into an employment agreement with INVO Bioscience effectiveAndrea Goren (the “Goren Employment Agreement”), pursuant to which Mr. Goren was hired as of February 1, 2008.the Company’s chief financial officer. The agreementGoren Employment Agreement provides for an annual base salary of $175,000$215,000 and healtha target annual incentive bonus of up to 50% of base salary if the Company achieves goals and lifeobjectives determined by the Board. In connection with the Goren Employment Agreement, on June 14, 2021 the Company granted Mr. Goren a stock option under the 2019 Plan to purchase 3,625 shares of the Company common stock (the “Goren Option”). The Goren Option vests in equal monthly installments over a 3-year period, has a term of 10 years and can be exercised at a price of $104.10 per share. Also, in connection with the Goren Employment Agreement, as of July 1, 2021, Mr. Goren was granted a restricted stock award for 250 share of Company common stock (the “Goren RSA”). The Goren RSA vested in equal monthly installments over a 12-month period. Mr. Goren is also entitled to customary benefits, including health insurance and retirement plan along withparticipation in employee benefit plans. The Goren Employment Agreement provides that if Mr. Goren terminates the reimbursement of expenses. In the event that Dr. Ranoux’s employment is terminated other thanGoren Employment Agreement for good cause“cause” (as defined in the employment agreement),Goren Employment Agreement) or the Company terminates the Goren Employment Agreement without “cause,” then he will continue to receive his base salary for three months after termination and full medicalcertain insurance benefits for twelve (12) months thereafter.
Michael Campbell
On January 15, 2020, the Company entered into an employment agreement (the “Campbell Employment Agreement”) with INVO Bioscience effectiveMichael Campbell to serve as the Company’s chief operating officer and vice president of October 27, 2008.business development. The agreementCampbell Employment Agreement provides for an annual base salary of $150,000$220,000, and healtha target annual incentive bonus of up to 50% of base salary if the Company achieves goals and lifeobjectives determined by the Board. In connection with the Campbell Employment Agreement, on January 17, 2020, the Company granted Mr. Campbell 1,563 shares of Company common stock, and an option to purchase 6,250 shares of Company common stock (the “Campbell Option”) at an exercise price of $136.82 per share. One quarter of the Campbell Option vested upon grant, and the remainder vested in monthly increments over a period of two years from the date of grant. Mr. Campbell is also entitled to customary benefits, including health insurance and retirement plan along withparticipation in employee benefit plans. The Campbell Employment Agreement provides that if Mr. Campbell terminates the reimbursement of expenses. In the event that Mr. Bowdring’s employment is terminated other thanCampbell Employment Agreement for cause“cause” (as defined in the employment agreement),Campbell Employment Agreement) or the Company terminates the Campbell Employment Agreement without “cause,” then he will continue to receive a severance package of two months ofhis base salary and full medicalcertain insurance benefits per service year
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
If Mr. Shum is involuntarily terminated without cause or constructively terminated (in each case, as defined in the Shum Employment Agreement), then he is entitled to 12 months’ severance and continued vesting of his shares for a formal stock option plan. Accordingly,
If (i) Mr. Goren terminates his employment agreement for cause, (ii) the Company provides notice not to sustain its operations since January 5, 2007 (inception). Dr. Ranoux’s total cumulative loans at September 30, 2009 were $70,462. On March 26, 2009,renew his employment agreement on any anniversary date, or (iii) the Company terminates his employment agreement without cause, then he is entitled to three months’ severance and Dr. Ranoux agreed to amend theinsurance benefits.
If (i) Mr. Campbell terminates his employment agreement to a non-convertible note payable bearing interest at 5% per annum and extended the repayment date to March 31, 2010. The Company and Dr. Ranoux can jointly decide to repay the loan earlier without prepayment penalties. During the three months and nine months ended September 30, 2009, $26,000 was repaid on the principal of the loan.
The following table sets forth quantitative information with respect to potential payments to be made to either Mr. Shum, Mr. Goren and Mr. Campbell upon termination in various circumstances. The potential payments are based on the terms of each of the employment agreements discussed above. For a more detailed description of the employment agreements, see the “Employment Agreements” section above.
| Name | Potential Payment Upon Termination | |||||||
| ($) | Option Awards (#) | |||||||
| Steven Shum | $ | 260,000 | (1) | 4,980 | (2) | |||
| Andrea Goren | $ | 53,750 | (3) | 4,962 | (4) | |||
| Michael Campbell | $ | 55,000 | (5) | 3,393 | (6) | |||
| (1) | Mr. Shum is entitled to twelve months’ severance at the then applicable base salary rate. Mr. Shum’s current base salary is $260,000 per annum. |
| (2) | Represents the number of unvested options at December 31, 2022. Mr. Shum’s options vest equally over a 36-month period. At December 31, 2022, there were 12 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Shum’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (3) | Mr. Goren is entitled to three months’ severance at the then applicable base salary rate. Mr. Goren’s current base salary is $215,000 per annum. |
| (4) | Represents the number of unvested options at December 31, 2022. Mr. Goren’s options vest equally over a 36-month period. At December 31, 2022, there were 7 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Goren’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (5) | Mr. Campbell is entitled to three months’ severance at the then applicable base salary rate. Mr. Campbell’s current base salary is $220,000 per annum. |
| (6) | Represents the number of unvested options at December 31, 2022. Mr. Campbell’s options vest equally over a 36-month period. At December 31, 2022, there were 12 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Campbell’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
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Disclosure of Equity Awards Based on Material Nonpublic Information: None
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance metrics. The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how we or the compensation committee view the link between financial performance and the compensation actually received or realized by our named executive officers. All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.
The table below presents information on the compensation of our Chief Executive Officer and other named executive officers in comparison to certain performance metrics for 2022 and 2021. These metrics are not those that the compensation committee uses when setting executive compensation. The use of the term Compensation Actually Paid (CAP) is required by the rules and regulations of the SEC, and under such rules, CAP was calculated by adjusting the Summary Compensation Table (“SCT”) Total values for the applicable year as described in the footnotes to the table.
| Year | Summary Compensation Table Total for PEO (1)(2) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Non-PEO NEOs (1)(2) | Average Compensation Actually Paid to Non-PEO NEOs (3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return | Net Income | ||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||
| 2022 | 502,001 | 53,054 | 462,913 | (22,301 | ) | 14 | (10,892,511 | ) | ||||||||||||||||
| 2021 | 297,500 | 381,828 | 307,304 | 414,742 | 110 | (6,654,940 | ) | |||||||||||||||||
| (1) | The Principal Executive Officer (“PEO”) information reflected in columns (a) and (b) relates to our CEO, Steven Shum. The non-Principal Executive Officer (“non-PEO”) NEOs information reflected in columns (c) and (d) above relates to our CFO Andrea Goren and our COO Michael Campbell. |
| (2) | The amounts shown in this column are the amounts of total compensation reported for Steven Shum or the average total compensation reported for the non-PEO NEOs, as applicable, for each corresponding year in the “Total” column of the Summary Compensation. Please refer to “Executive Compensation—Compensation Tables—Summary Compensation Table.” |
| (3) | The amounts shown have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually realized or received by the Company’s PEO and non-PEO NEOs. In accordance with the requirements of Item 402(v) of Regulation S-K, adjustments were made to Mr. Shum’s total compensation, or the average total compensation of the non-PEO NEOs, as applicable, as described in the tables below. |
PEO SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards | Less Option Awards | Fair Value Adjustments to SCT Total | CAP | |||||||||||||||
| 2022 | $ | 502,001 | $ | 72,601 | $ | 169,400 | $ | (206,946 | ) | $ | 53,054 | |||||||||
| 2021 | 297,500 | - | - | 84,328 | 381,828 | |||||||||||||||
Average Non-PEO NEOs SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards | Less Option Awards | Fair Value Adjustments to SCT Total | CAP | |||||||||||||||
| 2022 | $ | 462,913 | $ | 37,178 | $ | 208,235 | $ | (239,801 | ) | $ | (22,301 | ) | ||||||||
| 2021 | 307,304 | 18,438 | - | 125,876 | 414,472 | |||||||||||||||
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PEO Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, | Change in Fair Value of Prior Years’ Awards Unvested at December 31, | Change in Fair Value of Prior Years’ Awards Vested through the Year Ended December 31, | Change in Fair Value of Prior Years’ Awards Failed to Vest through the Year Ended | Equity Value Included in CAP | |||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2022 | $ | 14,953 | $ | (159,116 | ) | $ | 31,772 | $ | (94,556 | ) | $ | (206,946 | ) | |||||||
| 2021 | - | 42,470 | - | 41,858 | 84,328 | |||||||||||||||
Average Non-PEO NEOs Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, | Change in Fair Value of Prior Years’ Awards Unvested at December 31, | Change in Fair Value of Prior Years’ Awards Vested through the Year Ended December 31, | Change in Fair Value of Prior Years’ Awards Failed to Vest through the Year Ended | Equity Value Included in CAP | |||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2022 | $ | 12,550 | $ | (191,259 | ) | $ | 38,928 | $ | (100,021 | ) | $ | (239,801 | ) | |||||||
| 2021 | 4,856 | 41,360 | 3,802 | 75,858 | 125,876 | |||||||||||||||
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Compensation of Directors
DIRECTOR COMPENSATION TABLE
| Name | Year | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | All other compensation ($) | Total ($) | ||||||||||||||||||
| Trent Davis | 2022 | 42,500 | (1) | 32,000 | 31,613 | - | 106,113 | |||||||||||||||||
| 2021 | 42,500 | 32,000 | 32,000 | - | 106,000 | |||||||||||||||||||
| Barbara Ryan | 2022 | 41,250 | (2) | 31,000 | 30,267 | - | 102,877 | |||||||||||||||||
| 2021 | 40,000 | 31,002 | 31,000 | - | 102,002 | |||||||||||||||||||
| Matthew Szot | 2022 | 55,000 | (3) | 37,000 | 36,552 | - | 128,552 | |||||||||||||||||
| 2021 | 55,000 | 37,002 | 37,002 | - | 129,004 | |||||||||||||||||||
| Rebecca Messina | 2022 | 41,250 | (4) | 30,000 | 29,638 | - | 100,888 | |||||||||||||||||
| 2021 | 22,417 | 20,666 | 22,897 | - | 65,980 | |||||||||||||||||||
| Jeffrey Segal | 2022 | 37,500 | (5) | 29,000 | 28,651 | - | 95,151 | |||||||||||||||||
| Former Director | 2021 | 30,000 | 27,000 | 27,001 | - | 84,001 | ||||||||||||||||||
| Kevin Doody | 2022 | 25,978 | 27,000 | 26,673 | - | 79,651 | ||||||||||||||||||
| Former Director | 2021 | 25,000 | 25,002 | 25,000 | - | 75,002 | ||||||||||||||||||
| (1) | As of December 31, 2022, Mr. Davis deferred $10,625 of fees earned, which the Company expects to pay before the end of 2023. |
| (2) | As of December 31, 2022, Ms. Ryan deferred $11,250 of fees earned, which the Company expects to pay before the end of 2023. |
| (3) | As of December 31, 2022, Mr. Szot deferred $13,750 of fees earned, which the Company expects to pay before the end of 2023. |
| (4) | As of December 31, 2022, Ms. Messina deferred $9,375 of fees earned, which the Company expects to pay before the end of 2023. |
| (5) | As of December 31, 2022, Mr. Segal deferred $8,750 of fees earned, which the Company expects to pay before the end of 2023. |
Director Compensation Program
Our current director compensation program is designed to align our director compensation program with the long-term interests of our stockholders by implementing a program comprised of cash and equity compensation.
In setting director compensation, we consider the amount of time that directors expend in fulfilling their duties to the Company as well as the skill level and experience required by our board of directors. We also consider board compensation practices at similarly situated companies, while keeping in mind the compensation philosophy of us and the stockholders’ interests. The directors also receive reimbursement for expenses, including reasonable travel expenses to attend board and committee meetings, reasonable outside seminar expenses, and other special board related expenses.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table shows information regarding our equity compensation plans as of December 31, 2022.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
| Equity compensation plans approved by security holders (1) | 64,851 | (2) | $ | 68.00 | 33,117 | |||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 64,851 | $ | 68.00 | 33,117 | ||||||||
(1) 2019 Stock Incentive Plan. On October 3, 2019, our Board adopted the 2019 Stock Incentive Plan (as amended, the “Plan”). The purpose of our Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan, including 20,641 shares approved at our shareholders meeting on October 12, 2022, is 125,000 shares, subject to annual increases of six percent (6%) of the total number of shares of outstanding Common Stock on December 31st of the preceding calendar year.
(2) We granted 10,206 shares subject to restricted stock grants under the Plan in the year ended December 31, 2022.
Our Board administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our Board arising out of or in connection with the interpretation and administration of the plan is final and conclusive.
The Board, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the Board or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our Board or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.
In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.
Our Board may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our Board may deem appropriate and in our best interest.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes set forth the beneficial ownership of ourthe common stock of the Company as of December 11, 2009, (i) by each of our directors; (ii)July 28, 2023, by each person who was known by usthe Company to beneficially own beneficially more than five percent5% of ourthe common stock; (iii)stock, by theeach director and named executive officer, named in the Summary Compensation Table set forth in "Executive Compensation" and (iv) by all of our directors and executive officers as a group. Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated bythe rules of the SEC and includes voting or dispositive power with respect to the securities. Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and dispositive power with respect to their shares of our common stock, except to the extent authority is shared by spouses under the Securities Exchange Act of 1934, as amended.applicable law. Unless otherwise noted, the address of all of the individuals and entities named below is c/o INVO Bioscience, Inc., 5582 Broadcast Court Sarasota, Florida, 34240.
The following table sets forth the beneficial ownership of our common stock as of July 28, 2023 for:
| ● | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common shares; | |
| ● | each of our named executive officers; | |
| ● | each of our directors; and | |
| ● | all of our current executive officers and directors as a group. |
The percentage ownership information is based upon 843,267 shares of common stock outstanding as of July 28, 2023. The percentage ownership information shown in the table after this offering is based upon 1,585,000 Units offered in this offering (and 2,428,267 shares of common stock outstanding after the offering). We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or groupshared voting power or investment power with respect to those securities. Unless otherwise indicated, the persons or entities identified possessesin this table have sole voting and investment power with respect to theall shares shown as beneficially owned by them, subject to applicable community property laws where applicable. The percentage of shares beneficially owned priorlaws. Unless otherwise indicated the address for persons listed in the table is c/o INVO Bioscience, Inc., 5582 Broadcast Court, Sarasota, FL 34240.
| Name and Address of Beneficial Owner (1) | Number of Shares | Percentage of Common Stock | Percentage of Common Stock Beneficially Owned After this Offering | |||||||||
| 5% Stockholders: | ||||||||||||
| None | - | - | - | |||||||||
| Officers and Directors | ||||||||||||
| Andrea Goren | 18,965 | (2) | 2.22 | % | 0.78 | % | ||||||
| Michael Campbell | 18,353 | (3) | 2.14 | % | 0.75 | % | ||||||
| Steve Shum | 16,492 | (4) | 1.93 | % | 0.68 | % | ||||||
| Matthew Szot | 5,634 | (5) | 0.67 | % | 0.23 | % | ||||||
| Trent Davis | 5,201 | (6) | 0.63 | % | 0.22 | % | ||||||
| Barbara Ryan | 5,021 | (7) | 0.61 | % | 0.21 | % | ||||||
| Rebecca Messina | 4,092 | (8) | 0.48 | % | 0.17 | % | ||||||
| All directors and executive officers as a group (7 persons) | 73,759 | 8.64 | % | 3.03 | % | |||||||
| (1) | Unless otherwise indicated, the business address of each current director or executive officer is INVO Bioscience, Inc. 5582 Broadcast Court Sarasota, Florida 34240. |
| (2) | Includes: 11,505 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
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| (3) | Includes: 14,945 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
| (4) | Includes: 10,573 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
| (5) | Includes: 3,675 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
| (6) | Includes: 3,520 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
| (7) | Includes: 3,442 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
| (8) | Includes: 2,942 shares of common stock under options (either presently exercisable or within 60 days of July 28, 2023). |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions Policy and Procedures
We have adopted a written policy with respect to the review, approval, and ratification of related party transactions. Under the policy, any transactions where the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any related person has or will have a direct or indirect material interest, other than equity and other compensation, termination and other arrangements which are described under the headings “Compensation of Directors” and “Executive and Director Compensation,” is defined as a related party transaction. Any such related party transactions are reviewed and must be approved by the Company’s board of directors.
Certain Related Party Transactions
In October 2021, Paulson Investment Company served as a placement agent for the Company’s registered direct offering and received fees and commissions for such role in the amount of $323,584. Trent Davis, one of the Company’s directors, is based on 58,002,763President of Paulson Investment Company. Mr. Davis did not receive any compensation related to the fees and commissions received by Paulson. Steve Shum and Andrea Goren, the CEO and CFO of the Company, respectively, each purchased 1,534 shares in the registered direct offering for gross proceeds of $199,994.
In the fourth quarter of 2022, the Company received $700,000 through the issuance of demand notes from related parties, as follows: (a) $500,000 from JAG; (b) $100,000 from our chief executive officer, Steve Shum; and (c) $100,000 from our chief financial officer, Andrea Goren. The Company’s CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. See Note 9 of the Notes to Consolidated Financial Statements for additional information.
As of December 31, 2022 the Company owed accounts payable to related parties totaling $76,948, primarily related to unpaid employee expense reimbursements and unpaid board fees.
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DESCRIPTION OF SECURITIES
The following description of the Company’s capital stock and provisions of its Articles of Incorporation and Bylaws are summaries and are qualified by reference to the Company’s Articles of Incorporation and Bylaws.
General
Our Articles of Incorporation authorizes the issuance of 106,250,000 shares of capital stock, 6,250,000 shares of which are designated as common stock, par value $0.0001 per share, and 100,000,000 of which are designated as preferred stock, par value $0.0001 per share. As of July 28, 2023, we have 843,267 shares of common stock issued and outstanding and no shares of preferred stock issued or outstanding.
Common Stock
Each stockholder of our common stock actually outstanding asis entitled to a pro rata share of December 11, 2009.
| Name of Principal Shareholder | Number of Shares Owned | Percent of Shares Outstanding | ||||||
| Dr. Claude Ranoux | 25,501,473 | 44.0 | % | |||||
| Kathleen Karloff | 5,862,159 | 10.1 | % | |||||
| Christopher Esposito | 3,931,763 | 6.8 | % | |||||
| Phillip Warren | 3,457,778 | 6.0 | % | |||||
| All Officers and Directors as a Group (two persons) | 31,363,632 | 54.1 | % | |||||
Name of Beneficial Owner | Shares Beneficially Owned Prior to the Offering | Number of Shares Offered | Shares Beneficially Owned After the Offering | ||||||||||||||
| Number | Percent | Number | Percent | ||||||||||||||
| AGS Capital Group, LLC(1) | 8,790,000 | (2) | % | 8,790 ,000 | — | — | |||||||||||
Preferred Stock
The board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue up to an aggregate of 100,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of INVO Bioscience. We have no present plans to issue any shares of preferred stock.
Options
As of July 28, 2023, we have options to purchase up to 121,241 shares of our common stock issued and outstanding at a weighted average exercise price of $42.00 per share.
Unit Purchase Options
As of July 28, 2023, we have unit purchase options to purchase up to 4,645 shares of our common stock at an exercise price of $64.00 per share.
Warrants
As of July 28, 2023, we have warrants to purchase up to 343,482 shares of our common stock issued and outstanding at an exercise price between $10.00 and $192.00 per share.
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Warrants Offered in this Offering
The following summary of certain terms and provisions of the warrants to shares coveredpurchase common stock that are being offered hereby (not including the Placement Agent Warrants, as described in the section of this prospectus titled “Plan of Distribution”) is not complete and is subject to, and qualified in its entirety by, thisthe provisions of the warrants, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and prospectus –shares soldprovisions of the form of warrant for a complete description of the terms and conditions of the warrants. The warrants will be issued in certificated form.
Duration and Exercise Price
The warrants are exercisable from and after the date of their issuance and expire on the anniversary of such date, at an exercise price per share of common stock equal to 100% of the public offering price per Unit in this offering. The holder of a warrant will not be deemed a holder of our underlying common stock until the warrant is exercised. No fractional shares of common stock will be issued in connection with the Reserve Equity Financing Agreement,exercise of warrant. Instead, for any such fractional share that would have otherwise been issued upon exercise of a warrant, we will round such fraction down to the next whole share.
Exercisability
The warrants will be exercisable, at the option of each holder, in whole or REF,in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with AGS Capitalits affiliates) may not exercise any portion of the warrant to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of beneficial ownership of outstanding stock after exercising the holder’s warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants and Delaware law. Purchasers of warrants in this offering may also elect prior to the issuance of the warrants to have the initial exercise limitation set at 9.99% of our outstanding common stock.
Cashless Exercise
If, at the time a holder exercises its warrants, a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the warrants.
Transferability
Subject to applicable laws, a warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriate instruments of transfer.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of warrant. Rather, the number of shares of common stock to be issued will be rounded to the nearest whole number.
Trading Market
There is no established public trading market for the warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the warrants will be limited.
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Right as a Stockholder
Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights or privileges of holders of our common stock with respect to the shares of common stock underlying the warrants, including any voting rights, until they exercise their warrants. The warrants will provide that holders have the right to participate in distributions or dividends paid on our common stock.
Fundamental Transaction
In the event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.
Pre-Funded Warrants Issued in this Offering
The following summary of certain terms and provisions of the pre-funded warrants that are being offered hereby in lieu of a share of common stock is not complete and is subject to, and qualified in its entirety by, the provisions of the pre-funded warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
Duration and Exercise Price.
Each pre-funded warrant offered hereby will have an initial exercise price per share equal to $0.01. The pre-funded warrants will be immediately exercisable and may be exercised at any time until the pre-funded warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price.
Exercisability.
The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). There is no expiration date for the pre-funded warrants. A holder (together with its affiliates) may not exercise any portion of the pre-funded warrant to the extent that the holder would own more than 4.99% (or at the election of the holder prior to the issuance of any pre-funded warrants, 9.99%) of the outstanding shares of common stock immediately after exercise. Any holder may increase such percentage to any percentage not in excess of 9.99% upon at least 61 days’ prior notice to us. No fractional shares of common stock will be issued in connection with the exercise of a pre-funded warrant. In lieu of fractional shares of common stock, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price of such pre-funded warrant or round up to the next whole share.
Cashless Exercise.
In lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the pre-funded warrants.
Fundamental Transaction.
In the event of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of common stock, or 50% or more of the voting power of our common equity, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the pre-funded warrants immediately prior to such fundamental transaction.
Transferability.
Subject to applicable laws, a pre-funded warrant may be transferred at the option of the holder upon surrender of the pre-funded warrant to us together with the appropriate instruments of transfer.
Exchange Listing.
We do not intend to list the pre-funded warrants on any securities exchange or nationally recognized trading system.
Rights as a Stockholder.
Except as otherwise provided in the pre-funded warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the pre-funded warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their pre-funded warrants
PLAN OF DISTRIBUTION
Pursuant to a placement agency agreement, we have engaged Maxim Group LLC. LLC to act as our exclusive placement agent to solicit offers to purchase the securities offered by this prospectus. The Placement Agent is not purchasing or selling any securities, nor is it required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use its “reasonable best efforts” to arrange for the sale of the securities by us. Therefore, we may not sell the entire amount of securities being offered. The placement agency agreement also provides that the Placement Agent’s obligations are subject to conditions contained in the placement agency agreement. We will enter into a securities purchase agreement directly with the investors, at the investor’s option, who purchase our securities in this offering. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection with the purchase of our securities in this offering. The Placement Agent may engage one or more subagents or selected dealers in connection with this offering.
We are offering up to a maximum of 1,585,000 Units in this offering. There will be no minimum amount of proceeds as a condition to closing of this offering. The actual amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum amount of securities being offered in this prospectus.
In connection with establishingthis offering, the REFPlacement Agent may distribute prospectuses electronically.
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Placement Agent, Commissions and Expenses
Upon the closing of this offering, we will pay the Placement Agent a cash transaction fee equal to seven percent (7.0%) of the aggregate gross cash proceeds to us from the sale of the securities in the offering. In addition, we will reimburse the Placement Agent for its out-of-pocket expenses incurred in connection with AGS,this offering, including the fees and expenses of the counsel for the Placement Agent of up to $90,000.
The following table shows the public offering price, Placement Agent fees and proceeds, before expenses, to us.
Per Share and Accompanying Warrants | Per Pre-Funded Warrant | Total | ||||||||||
| Public offering price | $ | $ | $ | |||||||||
| Placement Agent’s fee | $ | $ | $ | |||||||||
| Proceeds, before expenses, to us | $ | $ | $ | |||||||||
We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding Placement Agent fees and the Placement Agent’s accountable expense, will be approximately $[●], all of which are payable by us.
Placement Agent Warrants
We have also agreed to issue to the Placement Agent warrants (the “Placement Agent Warrants”) to purchase a number of common stock equal to 7.0% of the Units sold in this offering. The Placement Agent Warrants will have an exercise price equal to 110.0% of the offering price of the Units sold in this offering and may be exercised on a cashless basis. The Placement Agent Warrants are exercisable commencing on a date which is the later of (i) one hundred eighty days from the effective date of the registration statement for this offering of which this prospectus forms a part and (ii) the date on which we entered intofile an amendment to our articles of incorporation to increase the number of authorized shares of our Common Stock and will terminate five (5) years from the effective date of the registration statement for this offering of which this prospectus forms a part. The Placement Agent Warrants are not redeemable by us. We have agreed to one demand registration at our expense, an additional demand registration at the warrant holders’ expense, and unlimited “piggyback” registration rights of the common stock underlying the Placement Agent Warrants at our expense for a period of five (5) years after the closing of this offering. The Placement Agent Warrants and the shares underlying the Placement Agent Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1) of FINRA. The Placement Agent (or permitted assignees under the Rule) may not sell, transfer, assign, pledge or hypothecate the warrants or the shares underlying the warrants, nor will they be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the warrants or the underlying shares for a period of 180 days from the effective date of the registration statement for this offering, except to any FINRA member participating in the offering and their bona fide officers or partners or as otherwise permitted under FINRA Rule 5110(e)(2). The Placement Agent Warrants will provide for adjustment in the number and price of such warrants (and the shares underlying such warrants) in the event of recapitalization, merger or other structural transaction to prevent mechanical dilution or in the event of a future financing undertaken by us.
Lock-Up Agreements
We, all of our directors and officers, and the holders of 5% or more of our outstanding Common Stock (and all holders of securities exercisable for or convertible into shares of common stock), have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our Common Stock or other securities convertible into or exercisable or exchangeable for our Common Stock for a period of six (6) months after this offering is completed without the prior written consent of the Placement Agent.
The Placement Agent may in its sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up period. When determining whether or not to release shares from the lock-up agreements, the Placement Agent will consider, among other factors, the security holder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time.
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Right of First Refusal
Upon the closing of this offering, until December 27, 2024, we shall grant the Placement Agent the right of first refusal to act as sole managing underwriter and sole book runner, sole placement agent, or sole sales agent, for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which the Company retains the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such period of the Company, or any successor to or any subsidiary of the Company. The Company shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which it offers to retain the Placement Agent. Such offer shall be made in writing in order to be effective. The Placement Agent shall notify the Company within ten (10) business days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If the Placement Agent should decline such retention, the Company shall have no further obligations to the Placement Agent with respect to the offering for which it has offered to retain the Placement Agent.
Indemnification
We have agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the Placement Agent may be required to make for these liabilities.
Tail
If there is a closing of this offering, or if our agreement with AGS. Pursuantthe Placement Agent is terminated prior to closing of this offering, then if within twelve (12) months following such time, the Company completes any financing of equity, equity-linked, convertible or debt or other capital raising activity with, or receives any proceeds from, any of the investors contacted or introduced by the Placement Agent during the term of the engagement agreement, then the Company will pay the Placement Agent upon the closing of such financing or receipt of such proceeds a cash transaction fee equal to seven percent (7.0%) of the aggregate gross cash proceeds of such transaction, Placement Agent Warrants in an amount equal to 7% of the number of securities sold in that financing plus accountable expenses not to exceed $90,000.
Regulation M
The Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the Placement Agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the placement agent acting as principal. Under these rules and regulations, the Placement Agent (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
Determination of Offering Price
The actual offering price of the securities were negotiated between us, the Placement Agent and the investors in the offering based on the trading of our Common Stock prior to the registration rights agreement,offering, among other things. Other factors considered in determining the public offering price of the securities we filedare offering, include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Electronic Distribution
A prospectus in electronic format may be made available on a website maintained by the Placement Agent. In connection with the offering, the Placement Agent or selected dealers may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
Other than the prospectus in electronic format, the information on the Placement Agent’s website and any information contained in any other website maintained by the Placement Agent is not part of the prospectus or the registration statement of which this prospectus forms a part, withhas not been approved and/or endorsed by us or the SecuritiesPlacement Agent in its capacity as placement agent and Exchange Commission. Weshould not be relied upon by investors.
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Certain Relationships
The Placement Agent and its affiliates have agreed to use our commercially reasonable efforts to cause this registration statement to be declared effective by the Securities and Exchange Commission. The effectiveness of this registration statement is a condition precedent to our ability to sell the shares of common stock subject to this registration statement to AGS under the REF. This registration statement covers only a portion of the shares of our common stock issuable pursuant to the REF. We will file subsequent registration statements covering the resale of additional shares of our common stock issuable pursuant to the REF beginning approximately 60 days after we have substantially completed the sale to AGS under the REF of the shares subject to this registration statement. These subsequent registration statements are subject to our ability to prepare and file them, and may be subject to review and comment by the Staff of the Securities and Exchange Commission, as well as consent by our independent registered accounting firm. Therefore, the timing of effectiveness of these subsequent registration statements cannot be assured. The effectiveness of these subsequent registration statements is a condition precedent to our ability to sell the shares of common stock subject to these subsequent registration statements to AGS under the REF.
Selling Restrictions
Other than in the United States of America, no action has been taken by us or the Placement Agent that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer someand sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
European Economic Area
In relation to each Member State of the European Economic Area (each, a Member State), no Common Shares have been offered or will be offered pursuant to this offering to the public in that Member State prior to the publication of a prospectus in relation to our Common Shares which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
| (a) | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; |
| (b) | by the placement agent to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior written consent of the representatives for any such offer; or |
| (c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of our Common Shares shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
Each person in a Member State who initially acquires any of our Common Shares or to whom any offer is made will be deemed to have represented, acknowledged, and agreed with us and the representatives that it is a qualified investor within the meaning of the Prospectus Regulation.
In the case of any of our Common Shares are being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the Common Shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in a Member State to qualified investors, in circumstances in which the prior written consent of the representatives has been obtained to each such proposed offer or resale.
We, the placement agent, and their affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgments, and agreements.
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For the purposes of this provision, the expression an “offer to the public” in relation to any of our Common Shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any of our Common Shares to be offered so as to enable an investor to decide to purchase or subscribe for our Common Shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
No shares have been offered or will be offered pursuant to this offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
| (a) | to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; |
| (b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
| (c) | in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000, or FSMA; |
provided that no such offer of the shares shall require the us or any placement agent to publish a prospectus pursuant to Section 85 of common stock through brokers, dealersthe FSMA or agents who may receive compensationsupplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of discounts, concessionssufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or commissionssubscribe for any shares and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the selling stockholder and/prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the placement agent are not required to comply with the disclosure requirements of NI 33-105 regarding placement agent conflicts of interest in connection with this offering.
Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the purchasersSecurities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of common stockjoint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, placement agent, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for whomtheir own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
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Hong Kong
Our Common Shares may act as agent. In effecting sales, broker-dealers that are engagednot be offered or sold in Hong Kong by means of any document other than (1) in circumstances which do not constitute an offer to the selling stockholder may arrange for other broker-dealerspublic within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to participate. AGS is an “underwriter”the public within the meaning of the Securities Act. Any brokers, dealersand Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or agents who participatethe Securities and Futures Ordinance, or (2) to “professional investors” as defined in the distributionSecurities and Futures Ordinance and any rules made thereunder, or (3) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to our Common Shares may be issued or may be in the possession of any person for the sharespurpose of common stock may also be deemedissue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be “underwriters,”accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any profits onrules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the saleMonetary Authority of the shares of common stock by themSingapore. Accordingly, this prospectus and any discounts, commissionsother document or concessions received by any such brokers, dealersmaterial in connection with the offer or agents may be deemed to be underwriting discounts and commissions under the Securities Act. AGS has advised us that it may effect resalessale, or invitation for subscription or purchase, of our common stock through any oneCommon Shares may not be circulated or more registered broker-dealers. Becausedistributed, nor may our Common Shares be offered or sold, or be made the selling stockholder is deemedsubject of an invitation for subscription or purchase, whether directly or indirectly, to bepersons in Singapore other than (1) to an underwriter, the selling stockholder will be subject to the prospectus delivery requirementsinstitutional investor (as defined under Section 4A of the Securities and Futures Act, and may be subject to certain statutory liabilitiesChapter 289 of including but not limited to, Sections 11, 12 and 17Singapore, or the SFA) under Section 274 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Where our Common Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for six months after that corporation has acquired our Common Shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to applicable law.
Where our Common Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that trust has acquired our Common Shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
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Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under Rule 144 rather thanthe laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to this prospectus. In addition,an exemption from the selling stockholder may transfer the shares by other means not described in this prospectus.
Dubai International Financial Centre
This prospectus relates to an “Exempt Offer” in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or the DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on the Nasdaq Capital Market, on the over-the-counter market, in privately-negotiated transactionsby, any other person. The DFSA has no responsibility for reviewing or otherwise at market prices prevailing at the time of sale or at negotiated prices, andverifying any documents in connection with such resales may pay to or receive from the purchasers of such shares commissions computed as described above. To the extent required under the Securities Act, an amendment toExempt Offers. The DFSA has not approved this prospectus or a supplemental prospectus will be filed, disclosing:
Switzerland
Our Common Shares may not be publicly offered in Switzerland and
Neither this document nor any other persons participating in the saleoffering or distribution of the shares will be subjectmarketing material relating to the applicable provisions of the Exchange Act and the rules and regulations thereunder including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of, purchases by the selling stockholderthis offering, our company or other personsour Common Shares have been or entities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to special exceptions or exemptions. Regulation M may restrict the ability of any person engaged in the distribution of the securities to engage in market-making and certain other activities with respect to those securities. In addition, the anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market. All of these limitations may affect the marketability of the shares and the ability of any person to engage in market-making activities with respect to the securities.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to this offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the “Corporations Act”, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of required additional information with respectour Common Shares may only be made to persons, or “Exempt Investors”, who are “sophisticated investors” (within the distributionmeaning of section 708(8) of the sharesCorporations Act), “professional investors” (within the meaning of common stock. We may suspendsection 708(11) of the sale of shares by the selling stockholderCorporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer our Common Shares without disclosure to investors under Chapter 6D of the Corporations Act.
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Our Common Shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under this offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring our Common Shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation, or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus for certain periodsis appropriate to their needs, objectives, and circumstances, and, if necessary, seek expert advice on those matters.
We have not engaged counsel outside of time for certain reasons, including if the prospectus is requiredUnited States to be supplemented or amended to include additional material information.
LEGAL MATTERS
The validity of the issuance of the common stocksecurities offered hereby will be passed upon for us by Shulman, Rogers, Gandal PordySheppard Mullin Richter & Ecker, P.A..
EXPERTS
The consolidated financial statements of INVO Bioscience, Inc. for the two most recent fiscal years ended December 31, 20072022 and 2008,December 31, 2021 have been audited by Webb & Company, P.A. and RBSM, LLP respectively,included herein in reliance upon the reports of M&K CPAs, PLCC, independent registered public accounting firms, tofirm, upon the extent and for the periods set forth in their report, whichauthority of said firm as experts (which contains an explanatory paragraph regarding ourrelating to the Company’s ability to continue as a going concern appearing elsewhere hereinas described in Note 2 to the consolidated financial statements). The combined financial statements of Wisconsin Fertility and Reproductive Surgery Associates, S.C. and Fertility Labs of Wisconsin, LLC as of December 31, 2022 and 2021 and for each of the two years in the registration statement,period ended December 31, 2022 incorporated into this prospectus and are includedthe Registration Statement on Form S-1 of which it forms a part by reference to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on June 21, 2023, have been so incorporated in reliance upon suchon the report of M&K CPAs, PLCC, an independent registered public accounting firm, given uponon the authority of said firmsfirm as experts in auditing and accounting.
This prospectus constitutes a part of a registration statement on Form S-1 filed under the Securities Act that registersAct. As permitted by the sharesSEC’s rules, this prospectus and any prospectus supplement, which form a part of our common stock to be sold in this offering. Thethe registration statement, includingdo not contain all the attached exhibits and schedules, contains additional relevant information about us and our capital stock. The rules and regulations of the SEC allow us to omit from this prospectus certain informationthat is included in the registration statement. For furtherYou will find additional information about us in the registration statement and our common stock,its exhibits. Any statements made in this prospectus or any prospectus supplement concerning legal documents are not necessarily complete and you should referread the documents that are filed as exhibits to the registration statement and the exhibits and schedulesor otherwise filed with the SEC for a more complete understanding of the document or matter.
You can read our electronic SEC filings, including such registration statement. With respectstatement, on the internet at the SEC’s website at www.sec.gov. We are subject to the statements contained in this prospectus regarding the contents of any agreement or any other document, in each instance, the statement is qualified in all respects by the complete textinformation reporting requirements of the agreement or document, a copy of which has been filed as an exhibit to the registration statement.
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INCORPORATION OF DOCUMENTS BY REFERENCE
We incorporate by reference the filed documents listed below (excluding those portions of any Current Report on Form 8-K that are not deemed “filed” pursuant to the information providedGeneral Instructions of Form 8-K), except as superseded, supplemented or modified by this Prospectus Supplement or any subsequently filed document incorporated by reference herein as described below:
| ● | our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 17, 2023 and our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022 filed with the SEC on April 27,2023; |
| ● | our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2023, filed with the SEC on May 15, 2023; |
| ● | our Current Reports on Forms 8-K filed with the SEC on January 5, 2023,January 5, 2023, January 12, 2023, January 23, 2023, February 9, 2023, February 23, 2023, March 20, 2023, March 20, 2023, March 23, 2023, March 28, 2023, March 30, 2023, April 4, 2023, May 30, 2023;June 21, 2023:June 30, 2023July 7, 2023; July 13, 2023;July 21, 2023;July 24, 2023; and July 27, 2023 (except for Item 2.02 and Item 7.01 of any Current Report on Form 8-K which are not deemed “filed” for purposes of Section 18 of the Exchange Act and are not incorporated by reference in this prospectus); and |
| ● | the description of the Registrant’s securities, which is contained in the Registrant’s Registration Statement on Form 8-A filed with the SEC on November 12, 2020 under Section 12(b) of the Exchange Act, including any amendments or reports filed for the purpose of updating such description, as amended and Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K form 10-K for the year ended December 31, 2022 filed on April 17, 2023. |
We also incorporate by reference in this prospectus supplement and the accompanying prospectus any future filings we make with the SEC under Sections 13(a), 13(c), 14 or any prospectus supplement. We have not authorized anyone else to provide you with different information. We are not making an offer to sell, nor soliciting an offer to buy, these securities in any jurisdiction where that would not be permitted or legal. Neither15(d) of the delivery of this prospectus nor any sales made hereunderExchange Act after the date hereof but before the completion or termination of this prospectus shall create an implication thatoffering (excluding any information not deemed “filed” with the informationSEC).
Any statement contained in a document incorporated by reference herein or therein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this Prospectus Supplement and the Base Prospectus or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference herein or therein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus Supplement and the Base Prospectus. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:
INVO Bioscience, Inc.
5582 Broadcast Court
Sarasota, Florida 34240
(978) 878-9505
legal@invobio.com
Copies of these filings are also available through the “Investor Relations” section of our affairs have not changed since the date hereof.website at www.invobio.com. For other ways to obtain a copy of these filings, please refer to “Where You Can Find More Information” above.
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INDEX TO FINANCIAL STATEMENTS
INVO BIOSCIENCE, INC.
TABLE OF CONTENTS
AUDITED FINANCIAL STATEMENTS
| F-2 | ||
| F-3 | ||
| F-4 | ||
| Consolidated Statements of Stockholders’ Deficiency for the | F-5 | |
| F-6 | ||
| Notes to Consolidated Financial Statements | F-7 |
UNAUDITED FINANCIAL STATEMENTS
| F-1 |
Stockholders of INVO BIOSCIENCE, INC.
As of September 30, 2009 | As of December 31, 2008 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 194,405 | $ | 15,716 | ||||
| Accounts receivable, net | 66,889 | 34,195 | ||||||
| Other receivable | - | 7,500 | ||||||
| Inventory | 66,545 | 70,722 | ||||||
| Prepaid expenses | 11,250 | 73,785 | ||||||
| Total current assets | 339,089 | 201,918 | ||||||
| Property and equipment, net | 34,939 | 41,245 | ||||||
| Other Assets: | ||||||||
| Capitalized patents, net | 64,167 | 68,392 | ||||||
| Total other assets | 64,167 | 68,392 | ||||||
| Total assets | $ | 438,195 | $ | 311,555 | ||||
| Liabilities and Stockholders' Deficiency | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 650,193 | $ | 226,861 | ||||
| Accrued expenses and salaries | 561,583 | 614,799 | ||||||
| Notes payable- related party | 158,462 | - | ||||||
| Line of credit | 50,000 | 50,000 | ||||||
| Convertible notes, net of debt discount of $543,023 and $0, respectively | 1,977 | - | ||||||
| Derivative liabilities | 3,593,414 | - | ||||||
| Total current liabilities | 5,015,629 | 891,660 | ||||||
| Long Term Liabilities: | ||||||||
| Note payable - related party | - | 96,462 | ||||||
| Total long term liabilities | - | 96,462 | ||||||
| Total liabilities | 5,015,629 | 988,122 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Deficiency: | ||||||||
| Preferred Stock, $.0001 par value; 100,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||
Common Stock, $.0001 par value; 200,000,000 shares authorized; 55,247,833 and 53,620,000 issued and outstanding as of September 30, 2009 and December 31, 2008, respectively. | 5,525 | 5,362 | ||||||
| Additional paid-in capital | 2,208,353 | 1,855,565 | ||||||
| Stock subscription receivable | (205,000) | (450,000) | ||||||
| Accumulated deficit during the development stage | (6,586,312 | ) | (2,087,494 | ) | ||||
| Total stockholders' deficiency | (4,577,434 | ) | (676,567 | ) | ||||
| Total liabilities and stockholders' deficiency | $ | 438,195 | $ | 311,555 | ||||
Three months ended September 30, 2009 | Three months ended September 30, 2008 | From January 5, 2007 (Inception) to September 30, 2009 | ||||||||||
| Revenue: | ||||||||||||
| Product Revenue | $ | 2,852 | $ | - | $ | 94,292 | ||||||
| Cost of Goods Sold: | ||||||||||||
| Product Costs | 3,682 | 1,765 | 40,616 | |||||||||
| Gross Margin: | (830 | ) | (1,765 | ) | 53,676 | |||||||
| Operating Expenses: | ||||||||||||
| Research and development | (17,500 | ) | 90,061 | |||||||||
| Selling, general and administrative | 293,588 | 365,121 | 3,409,367 | |||||||||
| Total Operating Expenses | 293,588 | 347,621 | 3,499,428 | |||||||||
| Loss from operations | (294,418 | ) | (349,386 | ) | (3,445,752 | ) | ||||||
| Other Expenses: | ||||||||||||
| Change in fair value of derivative liability | 380,036 | 380,036 | ||||||||||
| Interest and financing expenses | 2,734,579 | 1,907 | 2,760,524 | |||||||||
| Total other expenses | 3,114,615 | 1,907 | 3,140,560 | |||||||||
| Loss before income taxes | (3,409,033 | ) | (351,293 | ) | (6,586,312 | ) | ||||||
| Provisions for income taxes | - | - | - | |||||||||
| Net Loss | $ | (3,409,033 | ) | $ | (351,293 | ) | $ | (6,586,312 | ) | |||
| Basic and diluted net loss per weighted average shares of common stock | $ | (0.06 | ) | $ | (0.01 | ) | ||||||
| Basic and diluted Weighted average number of shares of common stock | 54,114,000 | 36,419,937 | - | |||||||||
We have audited the accompanying notes are an integral partconsolidated balance sheets of these unaudited condensed consolidated financial statements.
| Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | From January 5, 2007 (Inception) to September 30, 2009 | ||||||||||
| Revenue: | ||||||||||||
| Product Revenue | $ | 56,298 | $ | - | $ | 94,292 | ||||||
| Cost of Goods Sold: | ||||||||||||
| Product Costs | 30,528 | 1,765 | 40,616 | |||||||||
| Gross Margin: | 25,770 | (1,765 | ) | 53,676 | ||||||||
| Operating Expenses: | ||||||||||||
| Research and development | 4,950 | - | 90,061 | |||||||||
| Selling, general and administrative | 1,394,592 | 660,875 | 3,409,367 | |||||||||
| Total Operating Expenses | 1,399,542 | 660,875 | 3,499,428 | |||||||||
| Loss from operations | (1,373,772 | ) | (662,640 | ) | (3,445,752 | ) | ||||||
| Other Expenses: | ||||||||||||
| Change in fair value of derivative liability | 380,036 | 380,036 | ||||||||||
| Interest and financing expenses | 2,745,010 | 5,933 | 2,760,524 | |||||||||
| Total other expenses | 3,125,046 | 5,933 | 3,140,560 | |||||||||
| Loss before income taxes | (4,498,818 | ) | (668,573 | ) | (6,586,312 | ) | ||||||
| Provisions for income taxes | - | - | - | |||||||||
| Net Loss | $ | (4,498,818 | ) | $ | (668,573 | ) | $ | (6,586,312 | ) | |||
| Basic and diluted net loss per weighted average shares of common stock | $ | (0.08 | ) | $ | (0.02 | ) | ||||||
| Basic and diluted Weighted average number of shares of common stock | 53,849,481 | 32,493,732 | ||||||||||
For the nine months ended September 30, 2009 | For the nine months ended September 30, 2008 | From January 5, 2007 (Inception) to September 30, 2009 | ||||||||||
| Net Loss | $ | (4,498,818 | ) | $ | (668,573 | ) | $ | (6,586,312 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Non-cash stock compensation issued for services | 352,950 | 13,051 | 404,535 | |||||||||
| In kind contribution to employees | - | 160,821 | 251,686 | |||||||||
| Bad debt expense | 2,600 | - | 6,400 | |||||||||
| Interest expense - related party | 4,168 | 3,690 | 10,156 | |||||||||
| Depreciation and amortization | 10,531 | 8,952 | 24,192 | |||||||||
| Derivative liabilities | 3,050,391 | - | 3,050,391 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Receivables | (35,294 | ) | - | (73,289 | ) | |||||||
| Inventories | 4,177 | (22,340 | ) | (66,545 | ) | |||||||
Prepaid expenses and other current assets | 70,035 | (15,486 | ) | (23,100 | ) | |||||||
| Accounts payable | 423,332 | 112,705 | 649,922 | |||||||||
| Accrued salaries | 407,355 | - | 407,355 | |||||||||
| Other accrued expense | (464,738) | 32,123 | 88,626 | |||||||||
| Net cash used in operating activities | (673,311 | ) | (375,057 | ) | (1,855,982 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of equipment | - | (23,801 | ) | (42,858 | ) | |||||||
| Purchase of intangible assets | - | (20,384 | ) | (77,742 | ) | |||||||
| Net cash used in investing activities | - | (44,185 | ) | (120,600 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from demand note payable | - | 779 | 50,000 | |||||||||
| Proceeds from convertible loan | 545,000 | - | 545,000 | |||||||||
| Proceeds from loan payable- insurance | - | - | 70,587 | |||||||||
| Proceeds from loan payable- related party | 88,000 | 2,916 | 190,889 | |||||||||
| Repayment of loan payable- related party | (26,000) | - | (32,427 | ) | ||||||||
| Proceeds from issuance of common stock | - | 442,000 | 1,101,938 | |||||||||
| Proceeds from subscription receivable | 245,000 | - | 245,000 | |||||||||
| Net cash provided by financing activities | 852,000 | 445,695 | 2,170,987 | |||||||||
| Net increase in cash and cash equivalents | $ | 178,689 | $ | 26,453 | $ | 194,405 | ||||||
| Cash and cash equivalents at beginning of period | $ | 15,716 | $ | - | $ | - | ||||||
| Cash and cash equivalents at end of period | $ | 194,405 | $ | 26,453 | $ | 194,405 | ||||||
| Supplemental disclosure of non-cash financing activity: | ||||||||||||
| Cash paid for interest | $ | 18,538 | $ | 5,933 | $ | 25,945 | ||||||
| Cash paid for taxes | $ | 456 | $ | - | $ | 456 | ||||||
Going Concern
The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our 2008 Annual Report filed on Form 10-K on April 15, 2009. The condensed consolidated balance sheet as of December 31, 2008 was derived from the audited financial statements for the year then ended.
September 30, 2009 | December 31, 2008 | |||||||
| Raw Materials | $ | - | $ | - | ||||
| Work in Process | 49,507 | 55,465 | ||||||
| Finished Goods | 17,038 | 15,257 | ||||||
| Total Inventory | $ | 66,545 | $ | 70,722 | ||||
September 30, 2009 | December 31, 2008 | |||||||
| Manufacturing Equipment- Molds | $ | 35,263 | $ | 35,263 | ||||
| Accumulated Depreciation | (5,387 | ) | (980 | ) | ||||
| Network/IT Equipment | 7,595 | 7,595 | ||||||
| Accumulated Depreciation | (2,532 | ) | (633 | ) | ||||
| $ | 34,939 | $ | 41,245 | |||||
September 30, 2009 | December 31, 2008 | |||||||
| Total Patents | $ | 77,743 | $ | 77,743 | ||||
| Accumulated Amortization | (13,576 | ) | (9,351 | ) | ||||
| Patent costs, net | $ | 64,167 | $ | 68,392 | ||||
Basis for the shares of the Company’s common stock issued. Opinion
These options were agreed to be issued in lieu of cash compensation for services performed.
| Options Outstanding | Options Exercisable | |||||||||||||||||
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Number Exercisable | Weighted Average Exercise Price | ||||||||||||||
| $ | 1.00 | 70,000 | 2.9 | $ | - | $ | - | |||||||||||
Number of Shares | Weighted Average Price Per Share | |||||||
| Outstanding at December 31, 2007 | - | $ | - | |||||
| Granted | 140,000 | 1.00 | ||||||
| Exercised | - | - | ||||||
| Canceled or expired | - | - | ||||||
| Outstanding at December 31, 2008 | 140,000 | $ | 1.00 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Canceled or expired | 70,000 | 1.00 | ||||||
| Outstanding at September 30, 2009 | 70,000 | $ | 1.00 | |||||
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||
| Average | Weighted | Average | ||||||||||||||||||
| Remaining | Average | Remaining | ||||||||||||||||||
| Exercise | Number | Contractual | Exercise | Number | Contractual | |||||||||||||||
| Prices | Outstanding | Life (years) | Price | Exercisable | Life (years) | |||||||||||||||
| $ | 0.20 | 5,750,000 | 4.09 | $ | 0.20 | 5,750,000 | 4.09 | |||||||||||||
| 5,750,000 | 4.09 | 5.750,000 | 4.09 | |||||||||||||||||
| Number of Shares | Weighted Average Price Per Share | |||||||
| Outstanding at December 31, 2008 | - | $ | - | |||||
| Granted | 5,750,000 | 0.20 | ||||||
| Exercised | - | - | ||||||
| Cancelled or expired | - | - | ||||||
| Outstanding at September 30, 2009 | 5,750,000 | $ | 0.20 | |||||
| Liabilities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | at fair value | |||||||||||||
| Line of credit and Notes payable – related party Convertible notes | $ | 208,500 | $ | - | $ | 545,000 | $ | 753,500 | ||||||||
| Derivative liability | - | - | 3,593,400 | 3,593,400 | ||||||||||||
| Total | $ | 208,500 | $ | - | $ | 4,138,400 | $ | 4,346,900 | ||||||||
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our auditaudits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements referredthat was communicated or required to above present fairly, in allbe communicated to the audit committee and that: (1) relates to accounts or disclosures that are material respects,to the financial position of Invo Bioscience, Inc. a development stage company, at December 31, 2008 and the results of its operations and its cash flows for the year ended December 31, 2008 and for the period January 5, 2007 (date of inception) through December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
Investments/Variable Interest Entities
As discussed in Note 2,1 & 3 to the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regards to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Auditing management’s evaluation of the need to consolidate the entities associated with the investments involves significant judgment, given the fact that the agreements require management’s evaluation ownership percentages, influence, control and whether or not the Company is the primary beneficiary.
To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to their application of the development stage with no operationsguidance outlined in ASC 810 and has a net loss of $214,089, stockholders’ deficiency of $100,926, and cash used in operations of $116,041ASC 323.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2019.
Houston, TX
April 17, 2023, except for the period from January 5, 2007 (inception) to December 31, 2007. This raises substantial doubt about its ability to continue as a going concern. These factors raise substantial doubt abouteffect of the Company's ability to continue as a going concern. Management's plans concerning these matters are also describedCompany’s reverse stock split disclosed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-2 |
INVO Bioscience, Inc. | ||||||||
| (A DEVELOPMENT STAGE COMPANY) | ||||||||
| Consolidated Balance Sheets | ||||||||
| Assets | ||||||||
| December 31, | December 31, | |||||||
| 2008 | 2007 | |||||||
| Current Assets: | ||||||||
| Cash | $ | 15,716 | $ | - | ||||
| Accounts receivable | 34,195 | |||||||
| Other receivable | 7,500 | |||||||
| Inventory | 70,722 | - | ||||||
| Prepaid expenses | 73,785 | 3,349 | ||||||
| Total current assets | 201,918 | 3,349 | ||||||
| Property and equipment, net | 41,245 | - | ||||||
| Other Assets: | ||||||||
| Deferred financing costs, net | - | 9,153 | ||||||
| Capitalized patents, net | 68,392 | 43,270 | ||||||
| Total other assets | 68,392 | 52,423 | ||||||
| Total assets | $ | 311,555 | $ | 55,772 | ||||
| Liabilities and Stockholders' Deficiency | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 226,861 | $ | 10,351 | ||||
| Accrued expenses | 614,799 | 3,581 | ||||||
| Line of credit | 50,000 | 49,221 | ||||||
| Total current liabilities | 891,660 | 63,153 | ||||||
| Long Term Liabilities: | ||||||||
| Note payable- related party | 96,462 | 93,545 | ||||||
| Total long term liabilities | 96,462 | 93,545 | ||||||
| Total liabilities | 988,122 | 156,698 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Deficiency: | ||||||||
Preferred Stock, $.0001 par value; 100,000,000 shares authorized; No shares issued and outstanding as of December 31, 2008 and 2007 | - | - | ||||||
Common Stock, $.0001 par value; 200,000,000 shares authorized; 53,620,000 and 24,991,379 issued and outstanding as of December 31, 2008 and 2007, respectively. | 5,362 | 2,499 | ||||||
| Additional paid-in capital | 1,855,565 | 110,664 | ||||||
| Stock subscription receivable | (450,000) | - | ||||||
| Accumulated deficit during the development stage | (2,087,494 | ) | (214,089 | ) | ||||
| Total stockholders' deficiency | (676,567 | ) | (100,926 | ) | ||||
| Total liabilities and stockholders' deficiency | $ | 311,555 | $ | 55,772 | ||||
INVO BIOSCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
| 2022 | 2021 | |||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 90,135 | $ | 5,684,871 | ||||
| Accounts receivable | 77,149 | 50,470 | ||||||
| Inventory | 263,602 | 287,773 | ||||||
| Prepaid expenses and other current assets | 190,201 | 282,751 | ||||||
| Total current assets | 621,087 | 6,305,865 | ||||||
| Property and equipment, net | 436,729 | 501,436 | ||||||
| Intangible assets, net | - | 132,093 | ||||||
| Lease right of use | 1,808,034 | 2,037,052 | ||||||
| Investment in joint ventures | 1,237,865 | 1,489,934 | ||||||
| Total assets | $ | 4,103,715 | $ | 10,466,380 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 1,349,038 | $ | 443,422 | ||||
| Accrued compensation | 946,262 | 581,689 | ||||||
| Notes payable, net | 100,000 | - | ||||||
| Notes payable - related party, net | 662,644 | - | ||||||
| Deferred revenue | 119,876 | 5,900 | ||||||
| Lease liability, current portion | 231,604 | 221,993 | ||||||
| Total current liabilities | 3,409,424 | 1,253,004 | ||||||
| Lease liability, net of current portion | 1,669,954 | 1,901,557 | ||||||
| Deferred tax liability | 1,949 | 1,139 | ||||||
| Total liabilities | 5,081,327 | 3,155,700 | ||||||
| Stockholders’ equity (deficit) | ||||||||
| Common Stock, $par value; shares authorized; and issued and outstanding as of December 31, 2022, and 2021, respectively | 61 | 60 | ||||||
| Additional paid-in capital | 48,805,860 | 46,201,642 | ||||||
| Accumulated deficit | (49,783,533 | ) | (38,891,022 | ) | ||||
| Total stockholders’ equity (deficit) | (977,612 | ) | 7,310,680 | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 4,103,715 | $ | 10,466,380 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
INVO Bioscience, Inc. | ||||||||||||
| (A DEVELOPMENT STAGE COMPANY) | ||||||||||||
| Consolidated Statements of Losses | ||||||||||||
| Year | From January 5, 2007 | From January 5, 2007 | ||||||||||
| Ended | (Inception)to | (Inception) to | ||||||||||
| December 31, 2008 | December 31, 2007 | December 31, 2008 | ||||||||||
| Revenue: | ||||||||||||
| Product Revenue | $ | 37,995 | $ | - | $ | 37,995 | ||||||
| Cost of Goods Sold: | ||||||||||||
| Product Costs | 10,088 | 10,088 | ||||||||||
| Gross Margin: | 27,907 | 27,907 | ||||||||||
| Operating Expenses: | ||||||||||||
| Research and development | 51,761 | 33,350 | 85,111 | |||||||||
| Selling, general and administrative | 1,837,606 | 177,170 | 2,014,776 | |||||||||
| Total Operating Expenses | 1,889,367 | 210,520 | 2,099,887 | |||||||||
| Loss from operations | (1,861,460 | ) | (210,520 | ) | (2,071,980 | ) | ||||||
| Other Expenses: | ||||||||||||
| Interest expense | 11,945 | 3,569 | 15,514 | |||||||||
| Total other expenses | 11,945 | 3,569 | 15,514 | |||||||||
| Loss before income taxes | (1,873,405 | ) | (214,089 | ) | (2,087,494 | ) | ||||||
| Provisions for income taxes | - | - | - | |||||||||
| Net Loss | $ | (1,873,405 | ) | $ | (214,089 | ) | $ | (2,087,494 | ) | |||
| Basic and diluted net loss per weighted average shares of common stock | $ | (0.05 | ) | $ | (0.01 | ) | $ | |||||
| Basic and diluted Weighted average number of shares of common stock | 36,691,176 | 24,649031 |
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| 2022 | 2021 | |||||||
| For the Years | ||||||||
| Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue: | ||||||||
| Product revenue | $ | 207,342 | 544,942 | |||||
| Clinic revenue | 614,854 | 43,745 | ||||||
| License revenue | - | 3,571,429 | ||||||
| Total revenue | 822,196 | 4,160,116 | ||||||
| Cost of revenue: | ||||||||
| Cost of revenue | 286,923 | 126,326 | ||||||
| Depreciation | 44,600 | 18,726 | ||||||
| Total cost of revenue | 331,523 | 145,052 | ||||||
| Gross profit | 490,673 | 4,015,064 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 10,573,111 | 9,015,158 | ||||||
| Research and development expenses | 544,043 | 216,430 | ||||||
| Total operating expenses | 11,117,154 | 9,231,588 | ||||||
| Loss from operations | (10,626,481 | ) | (5,216,524 | ) | ||||
| Other income (expense): | ||||||||
| Loss from equity method joint ventures | (200,558 | ) | (327,542 | ) | ||||
| Gain on extinguishment of debt | - | 159,126 | ||||||
| Interest income | 308 | 3,657 | ||||||
| Interest expense | (59,445 | ) | (1,265,359 | ) | ||||
| Foreign currency exchange loss | (3,463 | ) | (3,534 | ) | ||||
| Total other expenses | (263,158 | ) | (1,433,652 | ) | ||||
| Net loss before income taxes | (10,889,639 | ) | (6,650,176 | ) | ||||
| Income taxes | 2,872 | 4,764 | ||||||
| Net loss | $ | (10,892,511 | ) | $ | (6,654,940 | ) | ||
| Net loss per common share: | ||||||||
| Basic | (17.97 | ) | (12.52 | ) | ||||
| Diluted | (17.97 | ) | (12.52 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 606,131 | 531,621 | ||||||
| Diluted | 606,131 | 531,621 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
INVO Bioscience, Inc. | ||||||||||||||||||||||
| Consolidated Statement of Stockholders' Deficiency | ||||||||||||||||||||||
| For the Period January 5, 2007 (Date of Inception) to December 31, 2008 | ||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||
| Shares | Amount | Additional Paid in Capital | Subscription Receivable | Accumulated Deficit during Development Stage | Total | |||||||||||||||||
| Stock issuance to founder in January 2007 | 24,991,379 | $ | 2,499 | $ | 17,501 | - | $ | 20,000 | ||||||||||||||
| In Kind contribution of services in December 2007 | - | - | 90,865 | - | 90,865 | |||||||||||||||||
| In Kind contribution of interest in December 2007 | - | - | 2,298 | - | 2,298 | |||||||||||||||||
| Net Loss for the period January 5, 2007 (Inception)to December 31, 2007 | - | - | - | $ | (214,089 | ) | (214,089 | ) | ||||||||||||||
| Balance, December 31, 2007 | 24,991,379 | $ | 2,499 | $ | 110,664 | $ | (214,089 | ) | $ | (100,926 | ) | |||||||||||
Common stock issued for services in March 2008 | 10,728,442 | 1,073 | 11,978 | - | 13,051 | |||||||||||||||||
| Common stock issued for cash in April 2008 | 312,392 | 31 | 31,969 | - | 32,000 | |||||||||||||||||
| Common stock issued for cash in May 2008 | 365,588 | 37 | 54,963 | - | 55,000 | |||||||||||||||||
| Common stock issued for cash in June 2008 | 431,994 | 43 | 64,957 | - | 65,000 | |||||||||||||||||
| Common stock issued for cash in July 2008 | 399,148 | 40 | 59,960 | - | 60,000 | |||||||||||||||||
Common stock issued for cash in August 2008 | 365,588 | 37 | 54,963 | - | 55,000 | |||||||||||||||||
| Common stock issued for cash in September 2008 | 1,136,751 | 114 | 174,886 | - | 175,000 | |||||||||||||||||
| In Kind Contribution of services in September 2008 | - | - | 160,821 | - | 160,821 | |||||||||||||||||
| In Kind Contribution of interest in September 2008 | - | - | 3,690 | - | 3,690 | |||||||||||||||||
Common stock issued for cash in October 2008 | 1,118,186 | 112 | 199,826 | - | 199,938 | |||||||||||||||||
| Common stock issued for services in November 2008 | 265,623 | 27 | 40,029 | - | 40,056 | |||||||||||||||||
| Forfeited common stock for services not fully rendered during 2008 | (2,239,585 | ) | (224 | ) | (1,568 | ) | - | (1,792 | ) | |||||||||||||
| Common stock issued for cash in November 2008 | 431,994 | 43 | 64,957 | - | 65,000 | |||||||||||||||||
| Common stock issued to Registrant’s shareholders in December 2008 | 14,937,500 | 1,494 | 448,506 | (450,000 | ) | - | - | |||||||||||||||
| Common stock issued for Cash in December 2008 | 375,000 | 38 | 374,962 | - | 375,000 | |||||||||||||||||
Net Loss, for the year ended December 31, 2008 | - | - | - | - | $ | (1,873,405 | ) | (1,873,405 | ) | |||||||||||||
| Balance, December 31, 2008 | 53,620,000 | $ | 5,362 | $ | 1,855,565 | $ | (450,000 | ) | $ | (2,087,494 | ) | $ | (676,567 | ) | ||||||||
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balances, December 31, 2020 | 481,963 | $ | 48 | $ | 37,979,140 | $ | (32,236,082 | ) | $ | 5,743,106 | ||||||||||
| Common stock issued to directors and employees | 2,490 | - | 360,153 | - | 360,153 | |||||||||||||||
| Common stock issued for services | 11,888 | 1 | 804,123 | - | 804,124 | |||||||||||||||
| Conversion of notes payable and accrued interest | 23,341 | 2 | 1,493,786 | - | 1,493,788 | |||||||||||||||
| Proceeds from the sale of common stock, net of offering costs | 62,037 | 6 | 3,650,691 | - | - | |||||||||||||||
| Proceeds from warrant exercise | 1,955 | - | 123,562 | - | 123,562 | |||||||||||||||
| Proceeds from unit purchase option exercise | 3,872 | 1 | 246,277 | - | 246,278 | |||||||||||||||
| Cashless warrant exercise | 4,585 | 1 | (1 | ) | - | - | ||||||||||||||
| Cashless unit purchase option exercise | 4,326 | 1 | (1 | ) | - | - | ||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | 1,543,912 | - | 1,543,912 | |||||||||||||||
| Net Loss | - | - | - | (6,654,940 | ) | (6,654,940 | ) | |||||||||||||
| Balances, December 31, 2021 | 596,457 | $ | 60 | $ | 46,201,642 | $ | (38,891,022 | ) | $ | 7,310,680 | ||||||||||
| Common stock issued to directors and employees | 4,360 | 1 | 484,806 | - | 484,807 | |||||||||||||||
| Common stock issued for services | 3,063 | - | 123,211 | - | 123,211 | |||||||||||||||
| Proceeds from the sale of common stock, net of fees and expenses | 4,731 | - | 289,800 | - | 289,800 | |||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | 1,616,401 | - | 1,616,401 | |||||||||||||||
| Warrants issued with notes payable | - | - | 90,000 | - | 90,000 | |||||||||||||||
| Net loss | - | - | - | (10,892,511 | ) | (10,892,511 | ) | |||||||||||||
| Balances, December 31, 2022 | 608,611 | 61 | 48,805,860 | (49,783,533 | ) | (977,612 | ) | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
INVO Bioscience, Inc | ||||||||||||
| (A DEVELOPMENT STAGE COMPANY) | ||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||
| For the Year | From January 5, 2007 | From January 5, 2007 | ||||||||||
Ended December 31, 2008 | (Inception) to December 31, 2007 | (Inception) to December 31, 2008 | ||||||||||
| Net Loss | $ | (1,873,405 | ) | $ | (214,089 | ) | $ | (2,087,494 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Non-cash stock compensation issued for services | 51,585 | - | 51,585 | |||||||||
| In kind contribution to employees | 160,821 | 90,865 | 251,686 | |||||||||
| In kind interest on loan payable- related party | 3,690 | 2,298 | 5,988 | |||||||||
| Depreciation and amortization | 7,509 | 6,152 | 13,661 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
Receivables | (41,695 | ) | - | (41,695 | ) | |||||||
| Inventories | (70,721 | ) | - | (70,721 | ) | |||||||
| Prepaid expenses and other current assets | (70,436 | ) | (15,199 | ) | (85,635 | ) | ||||||
| Accounts payable | 216,240 | 10,351 | 226,591 | |||||||||
| Other accrued expenses | 549,784 | 3,581 | 553,365 | |||||||||
| Net cash used in operating activities | (1,066,629 | ) | (116,041 | ) | (1,182,670 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of property and equipment | (42,858 | ) | - | (42,858 | ) | |||||||
| Purchase of intangible assets | (31,017 | ) | (46,725 | ) | (77,742 | ) | ||||||
| Net cash used in investing activities | (73,875 | ) | (46,725 | ) | (120,600 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from demand note payable | 779 | 49,221 | 50,000 | |||||||||
| Proceeds from loan payable- insurance | 70,587 | - | 70,587 | |||||||||
| Proceeds from loan payable- related party | 9,344 | 93,545 | 102,889 | |||||||||
| Repayment of loan payable- related party | (6,428 | ) | - | (6,24 | 8) | |||||||
| Proceeds from the issuance of common stock | 1,081,938 | 20,000 | 1,101,938 | |||||||||
| Net cash provided by financing activities | 1,156,221 | 162,766 | 1,318,986 | |||||||||
| Net increase in cash and cash equivalents | 15,716 | - | 15,716 | |||||||||
| Cash and cash equivalents at beginning of period | - | - | - | |||||||||
| Cash and cash equivalents at end of period | 15,716 | - | 15,716 | |||||||||
| Supplemental disclosure of non-cash financing activity: | ||||||||||||
| Cash paid for interest | 8,255 | 1,243 | 9,498 | |||||||||
| Cash paid for taxes | - | - | - | |||||||||
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2022 | 2021 | |||||||
| For the Years | ||||||||
| Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (10,892,511 | ) | $ | (6,654,940 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Non-cash stock compensation issued for services | 123,211 | 804,124 | ||||||
| Non-cash stock compensation issued to directors and employees | 484,807 | 360,153 | ||||||
| Fair value of stock options issued to employees | 1,616,401 | 1,543,912 | ||||||
| Non-cash compensation for services | 120,000 | - | ||||||
| Amortization of discount on notes payable | 52,644 | 1,188,310 | ||||||
| Amortization of leasehold right of use asset | 229,018 | 138,322 | ||||||
| Gain on extinguishment of debt | - | (159,126 | ) | |||||
| Loss on impairment of intangible assets | 132,227 | - | ||||||
| Loss from equity method investment | 200,558 | 327,542 | ||||||
| Depreciation and amortization | 77,301 | 27,760 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (26,679 | ) | (28,771 | ) | ||||
| Inventory | 24,171 | (22,401 | ) | |||||
| Prepaid expenses and other current assets | 92,550 | (124,811 | ) | |||||
| Accounts payable and accrued expenses | 904,060 | 114,495 | ||||||
| Accrued compensation | 364,573 | 54,363 | ||||||
| Deferred revenue | 113,976 | (3,565,529 | ) | |||||
| Leasehold liability | (221,992 | ) | (53,846 | ) | ||||
| Accrued interest | 1,556 | 20,921 | ||||||
| Income taxes payable | - | (392 | ) | |||||
| Deferred tax liabilities | 810 | - | ||||||
| Net cash used in operating activities | (6,603,319 | ) | (6,029,914 | ) | ||||
| Cash from investing activities: | ||||||||
| Payments to acquire property, plant, and equipment | (10,785 | ) | (415,710 | ) | ||||
| Payments to acquire intangible assets | (1,943 | ) | (38,939 | ) | ||||
| Investment in joint ventures | (68,489 | ) | (1,698,863 | ) | ||||
| Net cash used in investing activities | (81,217 | ) | (2,153,512 | ) | ||||
| Cash from financing activities: | ||||||||
| Proceeds from notes payable | 100,000 | - | ||||||
| Proceeds from option exercises | - | - | ||||||
| Proceeds from notes payable – related parties | 700,000 | - | ||||||
| Proceeds from the sale of common stock, net of offering costs | 289,800 | 3,650,697 | ||||||
| Proceeds from warrant exercise | - | 123,562 | ||||||
| Proceeds from unit purchase option exercise | - | 246,278 | ||||||
| Principal payment on notes payable | - | (250,000 | ) | |||||
| Net cash provided by financing activities | 1,089,800 | 3,770,537 | ||||||
| Increase in cash and cash equivalents | (5,594,736 | ) | (4,412,889 | ) | ||||
| Cash and cash equivalents at beginning of period | 5,684,871 | 10,097,760 | ||||||
| Cash and cash equivalents at end of period | $ | 90,135 | $ | 5,684,871 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | - | $ | 52,603 | ||||
| Taxes | $ | 800 | $ | 3,307 | ||||
| Noncash activities: | ||||||||
| Fair value of warrants issued with debt | $ | 90,000 | $ | - | ||||
| Common stock issued upon note payable and accrued interest conversion | $ | - | $ | 1,493,788 | ||||
| Cashless exercise of warrants | $ | - | $ | 1 | ||||
| Cashless exercise of unit purchase options | $ | - | $ | 1 | ||||
| Initial ROU asset and lease liability | $ | - | $ | 2,096,055 | ||||
| Fixed assets transferred to investment in joint venture | $ | - | $ | 20,529 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 and DECEMBER 31, 2007
Note 1 – Summary of Significant Accounting Policies
Description of Business
INVO Bioscience, Inc. (“INVO” or the Company”“Company”) intendsis a commercial-stage fertility company dedicated to commercialize its provenexpanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and patented technology that will revolutionizeinclusive to people around the treatment of infertility.world. The Company’s primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. The Company’s flagship product is INVOcell, a revolutionary medical device the INVOcellthat allows fertilization and the INVO procedure are designed to be simple for the patient and the clinician, less expensive and simpler to perform than conventional in vitro fertilization. The simplicity of INVO means that it may be performed in a physician’s practice and therefore it will be available in many more locations than conventional IVF. INVO also allows conception andearly embryo development to take place insidein vivo within the woman's body; an attractive feature for most women.
Basis of Presentation
The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries.subsidiaries and controlled affiliates. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets and the amount of consolidated net income (loss) that is attributable to the Company and to the noncontrolling interest in its consolidated statement of operations. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company uses the equity method of accounting when it owns an interest in an entity whereby it can exert significant influence over but cannot control the entity’s operations.
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
The Company considers events or transactions that have occurred after the consolidated balance sheet date of December 31, 2022, but prior to the filing of the consolidated financial statements with the SEC in this Annual Report on Form 10-K, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Annual Report on Form 10-K.
Business Segments
The Company operates in onesegment and therefore segment information is not presented.
Variable Interest Entities
The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities (“VIE”), where the Company is the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC 810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the primary beneficiary has both: (i) the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The Company reconsiders whether an entity is still a VIE only upon certain triggering events and continually assesses its consolidated VIEs to determine if it continues to be the primary beneficiary. See “Note 3 – Variable Interest Entities” for additional information on the Company’s VIEs.
| F-7 |
Equity Method Investments
Investments in unconsolidated affiliates, 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 DECEMBER 31, 2008the investees and DECEMBER 31, 2007
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid temporary cash investments with an original maturitymaturities of three months or less to be cash equivalents. As of December 31, 2008 and 2007, the Company had $15,716 and $0 cash equivalents respectively.
Inventory
Inventories consist of raw materials, work in process and finished productsgoods and are stated at the lower of cost or market;net realizable value, using the first-in, first-out (FIFO) method as a cost flow convention.
Property and Equipment
The Company records property and equipment at cost. DepreciationProperty and amortization are providedequipment is depreciated using the straight-line method over the estimated economic lives of the assets, which are from 3 to 7 10 years. The Company capitalizes the expenditures for major renewals and improvements that extend the useful lives of property and equipment. Expenditures for maintenance and repairs are charged to expense as incurred. The Company reviews the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by a comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Long- Lived Assets
Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for stock-based compensation underimpairment whenever circumstances and situations change such that there is an indication that the provisionscarrying amounts may not be recoverable. If the non-discounted future cash flows of SFAS 123R, Share-Based Payment (“SFAS 123R”). This statement requires the Companyasset are less than their carrying amount, their carrying amounts are reduced to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value and an impairment loss recognized. There was an impairment of the award. That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period.
| F-8 |
Fair Value of Financial Instruments
ASC 825-10-50, “Disclosures Aboutabout Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.
Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, FairASC 820-10, “Fair Value Measurements (SFAS 157)Measurements”, which provides a framework for measuring fair value under GAAP. SFAS 157ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Income Taxes
The Company accountsis subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. The Company uses the asset and liability method to account for income taxes under the Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”).taxes. Under SFAS 109,this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109,The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.
Concentration of Credit Risk
Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (“FDIC”) limits. As of December 31, 2022, the Company did not have cash balances in excess of FDIC limits.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:
| 1. | Identify the contract with the customer. |
| 2. | Identify the performance obligations in the contract. |
| 3. | Determine the total transaction price. |
| 4. | Allocate the total transaction price to each performance obligation in the contract. |
| 5. | Recognize as revenue when (or as) each performance obligation is satisfied. |
| F-9 |
Revenue generated from the sale of INVOcell is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations.
Revenue generated from clinical and lab services related at the Company’s affiliated INVO Centers is typically recognized at the time the service is performed.
On November 12, 2018, the Company entered into a U.S. Distribution Agreement (the “Ferring Agreement”) with Ferring International Center S.A. (“Ferring”), pursuant to which it granted Ferring an exclusive license in the United States market only, with rights to sublicense under patents related to our proprietary intravaginal culture device (INVOcell), together with the retention device and any other applicable accessories (collectively, the “Licensed Product”) to market, promote, distribute and sell the Licensed Product with respect to all therapeutic, prophylactic and diagnostic uses of medical devices or pharmaceutical products involving reproductive technology (including fertility treatment) in humans.
On November 2, 2021, Ferring notified the Company of its intention to terminate the Ferring Agreement, which requires 90-days prior written notice. Accordingly, the Ferring Agreement officially terminated on January 31, 2022.
The Ferring license was deemed to be a functional license that provides a customer with a “right to access” to the Company’s intellectual property during the subscription period and accordingly, under ASC 606-10-55-60 revenue is recognized over a period of time, which is generally the subscription period. The initial upfront payment of $5,000,000 which was received upon the signing of the agreement was being recognized as income over the 7-year term.
As of December 31, 2022, the Company had no deferred revenue related to the Ferring Agreement as it was recognized in the fourth quarter of fiscal year 2021 in relation to the contract termination. Per ASC 606-10-55-48 the likelihood of Ferring exercising its rights became remote at the time notice of termination was received so INVO recognized the full remaining amount of the deferred revenue.
The Company accounts for stock-based compensation under the provisions of Accounting Standards Codification (“ASC”) subtopic 718-10, Compensation (“ASC 718-10”). This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or based on performance goals in exchange for the award, which is usually the vesting period.
Basic loss per share calculations are computed by dividing net loss attributable to the Company’s common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2022, and 2021, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Net loss (numerator) | $ | (10,892,511 | ) | $ | (6,654,940 | ) | ||
| Basic and diluted weighted-average number of common shares outstanding (denominator) | ||||||||
| Basic and diluted net loss per common share | ) | ) | ||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
| 2022 | 2021 | |||||||
| As of December 31, | ||||||||
| 2022 | 2021 | |||||||
| Options | 64,850 | 52,795 | ||||||
| Unit purchase options and warrants | 30,508 | 13,008 | ||||||
| Total | 95,358 | 65,803 | ||||||
| Antidilutive securities | 95,358 | 65,803 | ||||||
| F-10 |
Recently Adopted Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.
Note 2 – Liquidity
Historically, the Company has funded its cash and liquidity needs through operating cash flow, equity financings, and notes payable. For the years ended December 31, 2022 and 2021, the Company incurred a net loss of approximately $10.9million and $6.7million, respectively, and has an accumulated deficit of approximately $49.8million as of December 31, 2022. Approximately $3.0 million of the net loss was related to non-cash expenses for the year ended December 31, 2022, compared to $4.2 million for the year ended December 31, 2021
The Company has been dependent on raising capital through debt and equity financings to meet its needs for cash used in operating and investing activities. During 2021, the Company received proceeds of approximately $3.7 million from the sale of stock, converted approximately $1.5 million of outstanding debt to equity and received approximately $0.4 million of proceeds from unit purchase option and warrant exercises. During 2022, the Company received proceeds of $0.8 million from demand notes and net proceeds of approximately $0.3million for the sale of its common stock. Over the next 12 months, the Company’s plan includes opening additional INVO Centers, completing the acquisition of Wisconsin Fertility Institute and pursuing additional IVF clinic acquisitions. Until the Company can generate a sufficient amount of cash from operations, it will need to raise additional funding to meet its liquidity needs and to execute its business strategy. As in the past, the Company will seek debt and/or equity financing, which may not be available on reasonable terms, if at all.
Although the Company’s audited consolidated financial statements for the year ended December 31, 2022 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s independent registered public accounting firm that accompanies the Company’s consolidated financial statements for the year ended December 31, 2022 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the consolidated financial statements at that time. Specifically, as noted above, the Company has incurred significant operating losses and the Company expects to continue to incur significant expenses and operating losses as it continues to ramp up the commercialization of INVOcell and develop new INVO Centers. These prior losses and expected future losses have had, and will continue to have, an adverse effect on the Company’s financial condition. If the Company cannot continue as a going concern, its stockholders would likely lose most or all of their investment in the Company.
Note 3 – Variable Interest Entities
Consolidated VIEs
Bloom INVO, LLC
On June 28, 2021, INVO Centers LLC, a Delaware limited liability company (“INVO CTR”) entered into a limited liability company operating agreement (the “Bloom Agreement”) with Bloom Fertility, LLC (“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center, (the “Atlanta Clinic”) in the Atlanta, Georgia metropolitan area.
In consideration for INVO’s commitment to contribute up to $800,000 within the 24-month period following execution of the Bloom Agreement to support the start-up operations of the Georgia JV, the Georgia JV issued 800 of its units to INVO CTR and in consideration for Bloom’s commitment to contribute physician services having an anticipated value of up to $1,200,000 over the course of a 24-month vesting period, the Georgia JV issued 1,200 of its units to Bloom.
The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR will also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration.
| F-11 |
The Bloom Agreement provides Bloom with a “profits interest” in the Georgia JV and, in connection with such profits interest, states that profits and losses be allocated to its members based on a hypothetical liquidation of the Georgia JV. In such a scenario, liquidation proceeds would be distributed in the following order: (a) to INVO CTR until the difference between its capital contributions and distributions (the “Hurdle Amount”) equals $0; (b) to Bloom until its distributions equal 150% of the liquidation amounts distributed to INVO CTR (a “catch-up” to rebalance the distributions between members); and (c) thereafter on a pro rata basis. The Georgia JV had no assets or liabilities at the time the units were issued, and, as of December 31, 2022, INVO CTR had made capital contributions greater than the net loss of the Georgia JV. As such, the entire net loss was allocated to INVO CTR, and no loss was allocated to the noncontrolling interest of Bloom.
The Georgia JV opened to patients on September 7, 2021.
The Company determined the Georgia JV is a VIE, and that the Company is its primary beneficiary because the Company has an obligation to absorb losses that are potentially significant and the Company controls the majority of the activities that impact the Georgia JV’s economic performance, specifically control of the INVOcell and lab services quality management. As a result, the Company consolidated the Georgia JV’s results with its own. As of December 31, 2022, the Company invested $0.9 million in the Georgia JV in the form of capital contributions as well as $0.5 million in the form of a note. For the years ended December 31, 2022 and 2021, the Georgia JV recorded net losses of $0.6 million and $0.4 million, respectively. Noncontrolling interest in the Georgia JV was $0.
Unconsolidated VIEs
HRCFG INVO, LLC
On March 10, 2021, INVO CTR entered into a limited liability company agreement with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of establishing an INVO Center in Birmingham, Alabama. The name of the joint venture entity is HRCFG INVO, LLC (the “Alabama JV”). The Company also provides certain funding to the Alabama JV. Each party owns 50% of the Alabama JV.
The Alabama JV opened to patients on August 9, 2021.
The Company determined the Alabama JV is a VIE, and that there is no primary beneficiary. As a result, the Company will use the equity method to account for its interest in the Alabama JV. As of December 31, 2022, the Company invested $1.6 million in the Alabama JV in the form of a note. For the years ended December 31, 2022 and 2021, the Alabama JV recorded net losses of $0.3 million and $0.6 million, respectively, of which the Company recognized losses from equity method investments of $0.2 million and $0.3 million, respectively.
Positib Fertility, S.A. de C.V.
On September 24, 2020, INVO CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) under which the Shareholders will commercialize the IVC procedure and offer related medical treatments in Mexico. Each party owns one-third of the Mexican incorporated company, Positib Fertility, S.A. de C.V. (the “Mexico JV”).
The Mexico JV opened to patients on November 1, 2021.
The Company determined the Mexico JV is a VIE, and that there is no primary beneficiary. As a result, the Company will use the equity method to account for its interest in the Mexico JV. As of December 31, 2022, the Company invested $0.1 million in the Mexico JV. For the years ended December 31, 2022 and 2021, the Mexico JV recorded net losses of $0.1 million and $0.04 million, respectively, of which the Company recognized a loss from equity method investments of $0.05 million and $0.01 million, respectively.
| F-12 |
The following table summarizes our investments in unconsolidated VIEs:
Schedule of Investments in Unconsolidated Variable Interest Entities
| Carrying Value as of | ||||||||||||||
| Location | Percentage Ownership | December 31, 2022 | December 31, 2021 | |||||||||||
| HRCFG INVO, LLC | Alabama, United States | 50 | % | $ | 1,106,905 | 1,387,495 | ||||||||
| Positib Fertility, S.A. de C.V. | Mexico | 33 | % | 130,960 | 102,439 | |||||||||
| Total investment in unconsolidated VIEs | $ | 1,237,865 | 1,489,934 | |||||||||||
Earnings from investments in unconsolidated VIEs were as follows:
Schedule of Earnings from Investments in Unconsolidated Variable Interest Entities
| 2022 | 2021 | |||||||
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| HRCFG INVO, LLC | $ | (154,954 | ) | (313,033 | ) | |||
| Positib Fertility, S.A. de C.V. | (45,604 | ) | (14,509 | ) | ||||
| Total earnings from unconsolidated VIEs | $ | (200,558 | ) | (327,542 | ) | |||
The following tables summarize the combined unaudited financial information of our investments in unconsolidated VIEs:
Schedule of Financial Information of Investments in Unconsolidated Variable Interest Entities
| 2022 | 2021 | |||||||
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Statements of operations: | ||||||||
| Operating revenue | $ | 822,490 | 151,672 | |||||
| Operating expenses | (1,316,199 | ) | (821,705 | ) | ||||
| Net loss | $ | (493,709 | ) | (670,033 | ) | |||
| December 31, 2022 | December 31, 2021 | |||||||
| Balance sheets: | ||||||||
| Current assets | $ | 261,477 | 456,967 | |||||
| Long-term assets | 1,094,490 | 1,302,067 | ||||||
| Current liabilities | (396,619 | ) | (404,155 | ) | ||||
| Long-term liabilities | (107,374 | ) | (142,321 | ) | ||||
| Net assets | $ | 851,974 | 1,212,558 | |||||
Note 4 – Agreements and Transactions with VIE’s
The Company sells the INVOcell to its consolidated and unconsolidated VIEs and anticipates continuing to do so in the ordinary course of business. All intercompany transactions with consolidated entities are eliminated in the Company’s consolidated financial statements. Per ASC 323-10-35-8 the Company eliminates any sales to an unconsolidated VIE for INVOcell inventory that the VIE still has remaining on the books at period end.
The following table summarizes the Company’s transactions with VIEs:
Summary of Transaction with Variable Interest Entities
| 2022 | 2021 | |||||||
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Bloom Invo, LLC | ||||||||
| INVOcell revenue | $ | 13,500 | 21,600 | |||||
| Unconsolidated VIEs | ||||||||
| INVOcell revenue | $ | 30,000 | 16,310 | |||||
The Company had balances with VIEs as follows:
Summary of Balances with Variable Interest Entities
| December 31, 2022 | December 31, 2021 | |||||||
| Bloom Invo, LLC | ||||||||
| Accounts receivable | $ | 13,500 | 21,600 | |||||
| Notes payable | 468,031 | 453,406 | ||||||
| Unconsolidated VIEs | ||||||||
| Accounts receivable | $ | 46,310 | 16,310 | |||||
| F-13 |
Note 5 – Inventory
Components of inventory are:
Schedule of Inventory
| December 31, 2022 | December 31, 2021 | |||||||
| Raw materials | $ | 68,723 | $ | 67,605 | ||||
| Finished goods | 194,879 | 220,168 | ||||||
| Total inventory | $ | 263,602 | $ | 287,773 | ||||
Note 6 – Property and Equipment
The estimated useful lives and accumulated depreciation for equipment are as follows as of December 31, 2022, and December 31, 2021:
Schedule of Estimated Useful Lives of Property and Equipment
| Estimated Useful Life | ||
| Manufacturing equipment | 6 to 10 years | |
| Medical equipment | 10 years | |
| Office equipment | 3 to 7 years |
Schedule of Property and Equipment
| December 31, 2022 | December 31, 2021 | |||||||
| Manufacturing equipment | $ | 132,513 | $ | 132,513 | ||||
| Medical equipment | 283,065 | 275,423 | ||||||
| Office equipment | 77,601 | 74,891 | ||||||
| Leasehold improvements | 96,817 | 96,817 | ||||||
| Less: accumulated depreciation | (153,267 | ) | (78,208 | ) | ||||
| Total equipment, net | $ | 436,729 | $ | 501,436 | ||||
During each of the years ended December 31, 2022, and 2021, the Company recorded depreciation expense of $75,492 and $25,952, respectively.
Note 7 – Intangible Assets
Components of intangible assets are as follows:
Schedule of Finite-Lived Intangible Assets
| December 31, 2022 | December 31, 2021 | |||||||
| Trademarks | $ | - | $ | 110,842 | ||||
| Patents | - | 95,355 | ||||||
| Accumulated amortization | - | (74,104 | ) | |||||
| Total patent costs, net | $ | - | $ | 132,093 | ||||
The Company capitalizes the initial expense related to establishing patents by country and then amortizes the expense over the life of the patent, typically 20 years. It then expenses annual filing fees to maintain the patents. The Company regularly reviews the value of its patents in the marketplace in proportion to the expense it must spend to maintain the patent.
During the years ended December 31, 2022, and 2021, the Company recorded amortization expenses related to patents of $1,809 and $1,809, respectively.
The trademarks have an indefinite life and therefore are not amortized. Trademarks are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable.
As of December 31, 2022 the Company recorded an impairment loss of $132,227 related to trademarks and patents.
| F-14 |
Note 8 – Leases
The Company has various operating lease agreements in place for its office and joint ventures. Per FASB’s ASU 2016-02, Leases Topic 842 (“ASU 2016-02”), effective January 1, 2019, the Company is required to report a right-of-use asset and corresponding liability to report the present value of the total lease payments, with appropriate interest calculation. Per the terms of ASU 201-02, the Company can use its implicit interest rate, if known, or applicable federal rate otherwise. Since the Company’s implicit interest rate was not readily determinable, the Company utilized the applicable federal rate, as of the commencement of the lease. Lease renewal options included in any lease are considered in the lease term if it is reasonably certain the Company will exercise the option to renew. The Company’s operating lease agreements do not contain any material restrictive covenants.
As of December 31, 2022, the Company’s lease components included in the consolidated balance sheet were as follows:
Schedule of Lease Components
| Lease component | Balance sheet classification | December 31, 2022 | ||||
| Assets | ||||||
| ROU assets - operating lease | Other assets | $ | 1,808,034 | |||
| Total ROU assets | $ | 1,808,034 | ||||
| Liabilities | ||||||
| Current operating lease liability | Current liabilities | $ | 231,604 | |||
| Long-term operating lease liability | Other liabilities | 1,669,954 | ||||
| Total lease liabilities | $ | 1,901,558 | ||||
Future minimum lease payments as of December 31, 2022 were as follows:
Schedule of Future Minimum Lease Payments
| 2023 | 264,108 | |||
| 2024 | 251,671 | |||
| 2025 | 247,960 | |||
| 2026 | 253,235 | |||
| 2027 and beyond | 1,063,010 | |||
| Total future minimum lease payments | $ | 2,079,984 | ||
| Less: Interest | (178,426 | ) | ||
| Total operating lease liabilities | $ | 1,901,558 |
| F-15 |
Note 9 – Notes Payable
Notes payables consisted of the following:
Schedule of Notes Payable
| December 31, 2022 | December 31, 2021 | |||||||
| Related party demand notes with a 10% financing fee. 10% annual interest starting January 31, 2023. Notes are callable starting March 31, 2023 | 770,000 | - | ||||||
| Demand notes. 10% annual interest. | 100,000 | - | ||||||
| Less debt discount | (107,356 | ) | - | |||||
| Total, net of discount | 762,644 | - | ||||||
Paycheck Protection Program
On July 1, 2020, the Company received a loan in the principal amount of $157,620 pursuant to the U.S. Small Business Administration’s Paycheck Protection Program. The loan matured 18 months from the date of funding, was payable over 18 equal monthly installments, and had an interest of 1% per annum. Up to 100% of the principal balance of the loan was forgivable based upon satisfaction of certain criteria under the Paycheck Protection Program.On June 16, 2021, the principal of the loan as well as $1,506 of accrued interest was forgiven and the note was extinguished. The Company recognized a gain of $159,126 on extinguishment of debt during the year ended December 31, 2021.
Related Party Demand Notes
In the fourth quarter of 2022, the Company received $500,000 through the issuance of five demand notes (the “JAG Notes”) from a related party, JAG Multi Investments LLC (“JAG”). The Company’s CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. If paid prior to December 31, 2022 for the initial 3 notes and January 31, 2023 for the last two months, the JAG Notes are interest free. For any amount that remains outstanding past such dates, 10% annual interest accrues from the date of issuance. The notes currently are callable with 10 days prior written notice, which may be delivered to the Company starting on March 31, 2023. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest, if any. The financing fees were recorded as a debt discount and as of December 31, 2022 the Company had amortized $40,333 of the discount.
In consideration for subscribing to the JAG Note for $100,000 dated December 29, 2022, and for agreeing to extend the date on which the other JAG Notes are callable to March 31, 2023, the Company issued JAG a warrant to purchase 17,500 shares of Company common stock. The warrant may be exercised for a period of five (5) years from issuance at a price of $ per share. The financing fees and the fair value of the warrants issued were capped at the total proceeds. The relative fair value of the warrants were recorded as a debt discount and as of December 31, 2022 the Company had amortized $2,903 of the discount.
In the fourth quarter of 2022, the Company received $200,000 through the issuance of demand promissory notes of which (1) $100,000 was received from our chief executive officer, Steven Shum ($60,000 on November 29, 2022, $15,000 on December 2, 2022, and $25,000 on December 13, 2022) and (2) $100,000 was received from an entity controlled by our chief financial officer, Andrea Goren ($75,000 on November 29, 2022 and $25,000 on December 13, 2022). If paid prior to January 31, 2023, these notes are interest free until January 31, 2023. For any amount that remains outstanding past January 31, 2023, 10% annual interest accrues from the date of issuance. These notes are callable with 10 days prior written notice, which may be delivered to the Company starting 30 days from issuance. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest, if any.
The financing fees were recorded as a debt discount and as of December 31, 2022 the Company had amortized $9,419 of the discount.
Demand Notes
In the fourth quarter of 2022, the Company received $100,000 through the issuance of two demand notes. On January 4th, 2023 these notes were reissued as convertible notes with a fixed conversion prices of $10.00 and (ii) 5-year warrants to purchase shares of the Company’s common stock at an exercise price of $(subject to adjustments).
Interest on the notes accrues at a rate of ten percent (10%) per annum and is payable at the holder’s option either in cash or in shares of the Company’s common stock at the conversion price set forth in the notes on December 31, 2023, unless converted earlier.
All amounts due under the notes are convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders into the Company’s common stock at a fixed conversion price for the notes as described above.
Note 10 – Related Party Transactions
In October 2021, Paulson Investment Company served as a placement agent for the Company’s registered direct offering and received fees and commissions for such role in the amount of $323,584. Trent Davis, one of the Company’s directors, is President of Paulson Investment Company. Mr. Davis did not receive any compensation related to the fees and commissions received by Paulson. Steve Shum and Andrea Goren, the CEO and CFO of the Company, respectively, each purchased shares in the registered direct offering for gross proceeds of $199,994.
In the fourth quarter of 2022, the Company received $700,000 through the issuance of demand notes from related parties, as follows: (a) $500,000 from JAG; (b) $100,000 from our chief executive officer, Steve Shum; and (c) $100,000 from our chief financial officer, Andrea Goren. The Company’s CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. See Note 9 of the Notes to Consolidated Financial Statements for additional information.
As of December 31, 2022 the Company owed accounts payable to related parties totaling $76,948, primarily related to unpaid employee expense reimbursements and unpaid board fees.
| F-16 |
Note 11 – Stockholders’ Equity
Reverse Stock Splits
On December 16, 2019, the Company’s stockholders approved a reverse stock split at a ratio of between 1-for-5 and 1-for-25, with discretion for the exact ratio to be approved by the Company’s board of directors. On February 19, 2020, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20. On May 21, 2020, the Company filed a certificate of change (with an effective date of May 26, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. The reverse split took effect at the open of business on May 26, 2020.
On October 22, 2020, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 5-for-8 and also approved a proportionate decrease in the Company’s authorized common stock to shares from . On November 5, 2020, the Company filed a certificate of change (with an effective date of November 9, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 5-for-8 reverse stock split of its outstanding common stock. As a result of the reverse stock split, shares were issued in lieu of fractional shares. On November 6, 2020, the Company received notice from FINRA/OTC Corporate Actions that the reverse split would take effect at the open of business on November 9, 2020, and the reverse stock split took effect on that date.
On June 28, 2023, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20 and also approved a proportionate decrease in its authorized common stock to 6,250,000 shares from 125,000,000. On July 26, 2023, the Company filed a certificate of change (with an effective date of July 28, 2023) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. On July 27, 2023, the Company received notice from Nasdaq that the reverse split would take effect at the open of business on July 28, 2023, and the reverse stock split took effect on that date.
The consolidated financial statements presented reflect the reverse splits.
| F-17 |
Public offerings
On October 1, 2021, the Company and certain institutional and accredited investors and members of the Company’s management team (the “Investors”) entered into a securities purchase agreement pursuant to which the Company agreed to issue and sell to the Investors shares of its common stock, in a registered direct offering (the “Direct Offering”) for aggregate gross proceeds of $4,044,803. The purchase price for each share in the Direct Offering was $. The net proceeds to the Company from the Direct Offering, after deducting placement agent fees and the Company’s estimated offering expenses, were approximately $3.65 million. Paulson Investment Company served as a placement agent for the Direct Offering and received a fee for its role in the amount of $323,584, as well as warrants to purchase 1,862 shares of the Company’s common stock at an exercise price of $78.24 per share.
Year Ended December 31, 2022
During 2022, the Company issued shares of common stock to directors and shares of common stock to consultants with a fair value of $218,196 and $95,851, respectively. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).
During 2022, the Company granted restricted stock units to employees that vest % at six months from grant date and % at twelve months from grant date. The shares were granted under the 2019 Plan. During 2022, the Company had issued vested shares and recognized stock-based compensation expense of $associated with the equity grants.
During 2022, the Company issued shares of its common stock to consultants in consideration of services rendered with a fair value of $27,360. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from this issuance.
In January 2022, the Company issued shares of its common stock for net proceeds of $289,800.
Equity Incentive Plans
In October 2019, the Company adopted the 2019 Plan. Under the 2019 Plan, the Company’s board of directors is authorized to grant both incentive and non-qualified stock options to purchase common stock, as well as restricted stock awards to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of shares. In January 2022, the number of available shares increased by shares and on October 12, 2022 shareholders approved an amendment to the plan to add an additional shares bringing the total shares available under the 2019 Plan to .
Options granted under the 2019 Plan generally have a life of to years and exercise prices equal to or greater than the fair market value of the common stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a -year period.
| F-18 |
Schedule of Stock Options Activity
| Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2021 | 52,795 | $ | 101.80 | $ | 17,250 | |||||||
| Granted | 22,686 | 71.80 | - | |||||||||
| Exercised | - | - | - | |||||||||
| Canceled | (10,630 | ) | 159.20 | - | ||||||||
| Balance as of December 31, 2022 | 64,851 | 68.00 | - | |||||||||
| Exercisable as of December 31, 2022 | 40,928 | $ | 87.80 | $ | - | |||||||
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions
| Years ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Risk-free interest rate range | to | % | % to | % | ||||
| Expected life of option-years | to | to | ||||||
| Expected stock price volatility | to | % | % to | % | ||||
| Expected dividend yield | % | % | ||||||
The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. Expected volatility is based upon the average historical volatility of the Company’s common stock over the period commensurate with the expected term of the related instrument. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups, executives and non-executives, within the Company. The Company does not currently pay dividends on its common stock, nor does it expect to do so in the foreseeable future.
| Total Intrinsic Value of Options Exercised | Total Fair Value of Options Vested | |||||||
| Year ended December 31, 2021 | $ | - | $ | 1,543,912 | ||||
| Year ended December 31, 2022 | $ | - | $ | 1,616,401 | ||||
For the year ended December 31, 2022, the weighted average grant date fair value of options granted was $per share. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through December 31, 2022, the weighted average remaining service period is years.
Restricted Stock and Restricted Stock Units
In the year ended December 31, 2022, the Company granted in restricted stock units to certain employees, directors, and consultants under the 2019 Plan. Restricted stock issued to employees, directors, and consultants generally vest either at grant or vest over a period of from the date of grant.
Schedule of Aggregate Restricted Stock Awards and Restricted Stock Unit Activity
Number of Unvested Shares | Weighted Average Grant Date | Aggregate Value of Shares | ||||||||||
| Balance as of December 31, 2021 | 487 | $ | 74.40 | $ | 36,148 | |||||||
| Granted | 10,206 | 58.40 | 595,846 | |||||||||
| Vested | (7,159 | ) | 61.40 | (423,077 | ) | |||||||
| Forfeitures | - | - | - | |||||||||
| Balance as of December 31, 2022 | 3,534 | 8.40 | 29,949 | |||||||||
| F-19 |
Note 13 – Unit Purchase Options and Warrants
The following table sets forth the activity of unit purchase options:
Schedule of Unit Purchase Stock Options Activity
| Number of Unit Purchase Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2021 | 4,645 | $ | 64.00 | $ | 5,647 | |||||||
| Granted | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Canceled | - | - | - | |||||||||
| Balance as of December 31, 2022 | 4,645 | 64.00 | - | |||||||||
The following table sets forth the activity of warrants:
Schedule of Warrants Activity
| Number of Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2021 | 8,364 | $ | 72.40 | $ | 16,029 | |||||||
| Granted | 17,500 | 10.00 | - | |||||||||
| Exercised | - | - | - | |||||||||
| Canceled | - | - | - | |||||||||
| Balance as of December 31, 2022 | 25,864 | $ | 30.20 | $ | - | |||||||
| F-20 |
Note 14 – Income Taxes
The provision for income taxes consists of the following for the year ended December 31, 2022, and 2021:
Schedule of Components of Income Tax Expense (Benefit)
| December 31 | ||||||||
| 2022 | 2021 | |||||||
| Federal income taxes: | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | 315 | (280 | ) | |||||
| Total federal income taxes | 315 | (280 | ) | |||||
| State income taxes: | ||||||||
| Current | 2,062 | 4,094 | ||||||
| Deferred | 496 | 390 | ||||||
| Total state income taxes | 2,558 | 4,484 | ||||||
| Total income taxes | $ | 2,872 | $ | 4,764 | ||||
The effective income tax rate is lower than the U.S. federal and state statutory rates primarily because of the valuation allowance and, to a lesser extent, permanent items. A reconciliation of the 2022 and 2021 federal statutory rate as compared to the effective income tax rate is as follows:
Schedule of Effective Income Tax Rate Reconciliation
| December 31 | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Pre-Tax Book Income at Statutory Rate | $ | (2,202,718 | ) | 21.00 | % | $ | (1,363,829 | ) | 21.00 | % | ||||||
| State Tax Expense, net | 1,629 | -0.02 | % | 3,624 | -0.06 | % | ||||||||||
| Permanent Items | 348,768 | -3.33 | % | 425,318 | -6.55 | % | ||||||||||
| Hanging Credit | 811 | -0.01 | % | - | - | |||||||||||
| True-Ups | (36,554 | ) | 0.35 | % | 713,398 | -10.98 | % | |||||||||
| Change in Federal Valuation Allowance | 1,890,936 | -18.03 | % | 226,255 | -3.48 | % | ||||||||||
| Total Expense | $ | 2,872 | -0.03 | % | $ | 4,764 | -0.07 | % | ||||||||
Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax. Significant components of the deferred tax assets and liabilities as of December 31, 2022 and 2021, are as follows:
Schedule of Deferred Tax Assets and Liabilities
| December 31 | ||||||||
| 2022 | 2021 | |||||||
| Deferred tax assets: | ||||||||
| Accrued Compensation | $ | 243,056 | $ | 150,952 | ||||
| Lease (ASC 842) | 342,254 | 365,602 | ||||||
| Charitable Contributions | 2,771 | 136 | ||||||
| Stock Option Expense | 117,099 | 75,590 | ||||||
| Restricted Stock Unit | 62,090 | 12,929 | ||||||
| Net Operating Losses | 8,395,160 | 6,406,223 | ||||||
| Org Costs | 81,255 | 72,455 | ||||||
| -IRC Sec. 174 Expense | 275,519 | - | ||||||
| Investment in HRCFG INVO, LLC | 123,217 | 81,234 | ||||||
| Equity in earnings - Positib | 19,950 | 3,765 | ||||||
| Gross deferred tax assets | 9,662,371 | 7,168,886 | ||||||
| Deferred tax liabilities: | ||||||||
| Fixed Assets | (21,560 | ) | (26,907 | ) | ||||
| ROU Lease (ASC 842) | (5,858 | ) | (353,551 | ) | ||||
| Trademark Amortization | (327,946 | ) | (4,309 | ) | ||||
| Deferred Revenue | (47 | ) | - | |||||
| Tax Amortization of Org Cost | (7,222 | ) | - | |||||
| Gain/Loss on sale of assets | (2,561 | ) | - | |||||
| Gross deferred tax liability | (365,194 | ) | (384,767 | ) | ||||
| Less: valuation allowance | (9,299,126 | ) | (6,785,258 | ) | ||||
| Net deferred tax liability | $ | (1,949 | ) | $ | (1,139 | ) | ||
| F-21 |
The Company recorded a full valuation allowance against its net deferred tax asset at December 31, 2022 and 2021 totaling $9.3 million and $6.8 million, respectively. A naked credit resulting from indefinite lived intangibles was valued at December 31, 2022, and 2021 totaling $(1,949) and ($1,139), respectively.
As of December 31, 2022, the Company has federal net operating loss carryforwards of approximately $32.8 million. Of that amount, $10.8 million will expire, if not utilized, in various years beginning in 2028 and which are also subject to the limitations of IRC §382. The remaining carryforward amount of $15.0 million, has no expiration period and can be applied to 80% of taxable income per year in future periods. State net operating loss carryforwards total $8.9 million. Of that amount, $3.5 million will begin to expire in 2033 and are subject to the limitations of IRC §382. The remaining $20.0 million of state net operating loss carryforwards are similar to the federal net operating loss in that it has no expiration period and can be applied to 100% of state taxable income per year.
Note 15 – Commitments and Contingencies
Insurance
The Company’s insurance coverage is carried with third-party insurers and includes: (i) general liability insurance covering third-party exposures; (ii) statutory workers’ compensation insurance; (iv) excess liability insurance above the established primary limits for general liability and automobile liability insurance; (v) property insurance, which covers the replacement value of real and personal property and includes business interruption; and (vi) insurance covering our directors and officers for acts related to our business activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are common for companies with similar types of operations.
Legal Matters
The Company is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
Note 16 – Subsequent Events
January and March 2023 Convertible Note and Warrant Financings
In January and March 2023, we sold unsecured convertible notes of the Company in the aggregate original principal amount of $410,000 (the “Convertible Notes”) with a fixed conversion prices of $10.00 (for the $275,000 of January 2023 Notes) and $12.00 (for the $135,000 of March 2023 Notes) and (ii) 5-year warrants (the “Note Warrants”) to purchase 19,375 shares of the Company’s common stock at an exercise price of $20.00 (subject to adjustments) (the “Note and Warrant Private Placement”). The proceeds were used for working capital and general corporate purposes.
Interest on the Convertible Notes accrues at a rate of ten percent (10%) per annum and is payable at the holder’s option either in cash or in shares of the Company’s common stock at the conversion price set forth in the Convertible Notes on December 31, 2023, unless converted earlier.
All amounts due under the Convertible Notes are convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders into the Company’s common stock at a fixed conversion price for the Notes as described above.
Upon any issuance by the Company of any of its equity securities in an underwritten offering, including Common Stock, for cash consideration, indebtedness or a combination thereof after the date hereof (a “Subsequent Equity Financing”), each holder shall have the option to convert the outstanding principal and accrued but unpaid interest of its Convertible Note into the number of fully paid and non-assessable shares of securities issued in the Subsequent Equity Financing equal to the product of unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder, divided by the price per share paid by the investors in the Subsequent Equity Financing multiplied by 80%, provided however, that any conversion shall only be allowed if the Subsequent Equity Financing conversion price is equal to or greater than the Minimum Price (as defined in the Convertible Notes) including an appropriate allocation any warrants offered.
A Convertible Note may not be converted and shares of common stock may not be issued under the Convertible Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of % of the Company’s outstanding ordinary shares.
The Company may prepay the Convertible Notes at any time in whole or in part by paying a s sum of money equal to 100% of the principal amount to be redeemed, together with accrued and unpaid interest.
The Company entered into a registration rights agreement with the holders of and of even date with the Convertible Notes (the “Note RRA”). Pursuant to the terms of Note RRA, if the Company determines to register any of its securities, either for its own account or the account of a changesecurity holder or holders, other than (i) a registration relating solely to employee benefit plans on Form S-8 (or any successor form) or (ii) a registration relating solely to a Commission Rule 145 transaction on Form S-4 (or any successor form), the Company will include in tax rates is recognizedsuch registration, and in incomeany underwriting involved therein, the shares underlying the Convertible Notes and Note Warrants delivered pursuant to the Note and Warrant Purchase Agreements, subject to, in the periodcase of an underwritten registration, the discretion of the managing underwriter to reduce any or all piggyback registration shares if in its good faith judgment such inclusion would affect the successful marketing of the underwritten offering.
| F-22 |
February 2023 Convertible Debentures
On February 3, and February 17, 2023, the Company entered into securities purchase agreements (the “February Purchase Agreements”) with accredited investors (the “February Investors”) for the purchase of (i) convertible debentures of the Company in the aggregate original principal amount of $500,000 (the “February Debentures”) for a purchase price of $, (ii) warrants (the “February Warrant”) to purchase 12,500 shares (the “February Warrant Shares”) of the Company’s common stock par value $per share (“Common Stock”) at an exercise price of $15.00 per share, and (iii) shares of Common Stock (the “February Commitment Shares”) issued as an inducement for issuing the Debentures. The proceeds, net of placement agent and legal fees, are being used for working capital and general corporate purposes.
Pursuant to the February Debentures, interest on the February Debentures accrues at a rate of eight percent (8%) per annum and is payable at maturity, one year from the date of the February Debentures.
All amounts due under the February Debentures are convertible at any time after the issuance date, in whole or in part, at the option of the February Investors into Common Stock at an initial price of $ per share. This conversion price is subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments and is subject to a floor price.
The Company may prepay the February Debentures at any time in whole or in part by paying a sum of money equal to 105% of the principal amount to be redeemed, together with accrued and unpaid interest.
While any portion of each February Debenture remains outstanding, if the Company receives cash proceeds of more than $2,000,000 (the “Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the February Investors shall have the right in their sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company above the Minimum Threshold to repay the outstanding amounts owed under the February Debentures.
The Company entered into a Registration Rights Agreement (the “February RRA”) with the February Investor that includessigned its purchase agreement on February 3, 2023 (the “Feb 3 Investor”). Pursuant to the enactmentterms of February RRA, the Company has agreed to file with the SEC an initial registration statement on Form S-3 (or Form S-1 if S-3 is not available) covering the resale of all of the securities acquired by the Feb 3 Investor under its February Purchase Agreement. The filing of such initial registration statement is to occur within 90 days of February 3, 2023.
On March 31, 2023, having received notice from the February Investor that signed its purchase agreement on February 17, 2023 (the “Feb 17 Investor”) requesting repayment of its February Debenture, the Company paid the Feb 17 Investor $170,000, including interest and the prepayment premium. After such payment, the principal due the Feb 17 Investor under its debenture was reduced from $200,000 to $39,849.
On April 3, 2023, having received notice from the Feb 3 requesting repayment of its February Debenture, the Company paid the Feb 3 Investor $213,879, including interest and the prepayment premium. After such payment, the principal due the Feb 3 Investor under its debenture was reduced from $300,000 to $100,000.
February 2023 Equity Purchase Agreement
On February 3, 2023, the Company entered into an equity purchase agreement (the “ELOC”) and registration rights agreement (the “ELOC RRA”) with the Feb 3 Investor pursuant to which the Company has the right, but not the obligation, to direct the Feb 3 Investor to purchase up to $10.0 million (the “Maximum Commitment Amount”) of shares of Common Stock, in multiple tranches. Further, under the ELOC and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit notices to the Feb 3 Investor to purchase shares of Common Stock (i) in a minimum amount of not less than $25,000 and (ii) in a maximum amount of up to the lesser of (a) $750,000 or (b) 200% of the Company’s average daily trading value of the Common Stock.
Also on February 3, 2023, the Company issued to the Feb 3 Investor 7,500 shares of Common Stock for its commitment to enter into the ELOC.
The obligation of the Feb 3 Investor to purchase shares of Common Stock pursuant to the ELOC ends on the earlier of (i) the date on which the purchases under the ELOC equal the Maximum Commitment Amount, (ii) 24 months after the date of the ELOC (February 3, 2025), (iii) written notice of termination by the Company, (iv) the date that the ELOC RRA is no longer effective after its initial effective date, or (v) the date that the Company commences a voluntary case or any person or entity commences a proceeding against the Company pursuant to or within the meaning of federal or state bankruptcy law, a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors (the “Commitment Period”).
During the Commitment Period, the price that Feb 3 Investor will pay to purchase the shares of Common Stock that it is obligated to purchase under the ELOC shall be 97% of the “market price,” which is defined as the lesser of (i) the lowest closing price of our Common Stock during the 7 trading day-period following the clearance date associated with the applicable put notice from the Company or (ii) the lowest closing bid price of the Common Stock on the principal trading market for the Common Stock (currently, the Nasdaq Capital Market) on the trading day immediately preceding a put date.
| F-23 |
Wisconsin Fertility Institute Acquisition
On March 16, 2023, INVO, through Wood Violet Fertility LLC, a Delaware limited liability company (“Wood Violet”) and wholly owned subsidiary of INVO Centers LLC, a Delaware company wholly-owned by INVO, entered into binding purchase agreements to acquire Wisconsin Fertility Institute (“Wisconsin Fertility”) for a combined purchase price of $10 million.
The purchase price is payable in four installments of $2.5 million each (which payments may be offset by assumption of certain Wisconsin Fertility liabilities, payable at closing and on each of the FASB issued FIN 48, “Accountingsubsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock valued at $125.00, $181.80, and $285.80, for Uncertainty in Income Taxes-an interpretationthe second, third, and final installments, respectively.
Wisconsin Fertility is comprised of FASB Statement No. 109”(a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“FIN 48”WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). FIN 48 clarifiesWFRSA owns, operates and manages the recognition thresholdClinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and measurementobstetrics care and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services.
March 2023 Registered Direct Offering
On March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering, shares (the “March Shares”) of Common Stock, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $0.20 per share, and (ii) in a tax position takenconcurrent private placement, common stock purchase warrants (the “March Warrants”), exercisable for an aggregate of up to shares of Common Stock, at an exercise price of $per share. The securities to be issued in the registered direct offering (priced at the marked under Nasdaq rules) were offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-255096) (the “Shelf Registration Statement”), initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. The Pre-Funded Warrants are exercisable upon issuance and will remain exercisable until all of the Pre-Funded Warrants are exercised in full.
The March Warrants (and the shares of Common Stock issuable upon the exercise of the Private Warrants) were not registered under the Securities Act and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrants are immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a tax return. FIN 48cashless basis.
On March 27, 2023, the Company closed the offering, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by the Company. In the event that all March Warrants are exercised for cash, the Company would receive additional gross proceeds of approximately $3.5 million. Under the March Purchase Agreement, the Company may use a portion of the net proceeds of the offering to (a) repay February Debentures, and (b) to pay the down payment for Wisconsin Fertility acquisition. The remainder of the net proceeds will be used for working capital, capital expenditures, and other general corporate purposes.
Under the March Purchase Agreement, the Company is required within 30 days of the closing date of the offering to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrants. The Company is required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full-review by the SEC), and to keep such registration statement effective at all times until no March Warrants remain outstanding.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for fiscal years beginning after December 15, 2006. FIN 48 also requires expanded disclosurea period of 180 days from the date of the offering, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the uncertaintyregistration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
Stock Incentive Plan Issuances
During the first quarter of 2023, the Company issued shares of common stock to employees and consultants under the 2019 Stock Incentive Plan.
Reverse Stock Split
Subsequent to year end the Company effected a 1-for-20 reverse stock split of its outstanding common stock, please see Note 11 for more details.
On July 11, 2023, the Company issued shares of common stock in consideration of a settlement with an unrelated third party.
INVO BIOSCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (audited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 2,188,245 | $ | 90,135 | ||||
| Accounts receivable | 99,720 | 77,149 | ||||||
| Inventory | 270,919 | 263,602 | ||||||
| Prepaid expenses and other current assets | 250,878 | 190,201 | ||||||
| Total current assets | 2,809,762 | 621,087 | ||||||
| Property and equipment, net | 417,642 | 436,729 | ||||||
| Lease right of use | 1,750,175 | 1,808,034 | ||||||
| Investment in joint ventures | 1,173,577 | 1,237,865 | ||||||
| Total assets | $ | 6,151,156 | $ | 4,103,715 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 1,847,208 | $ | 1,349,038 | ||||
| Accrued compensation | 1,220,682 | 946,262 | ||||||
| Notes payable, net | 331,321 | 100,000 | ||||||
| Notes payable – related parties, net | 770,000 | 662,644 | ||||||
| Notes payable | 770,000 | 662,644 | ||||||
| Deferred revenue | 46,746 | 119,876 | ||||||
| Lease liability, current portion | 234,050 | 231,604 | ||||||
| Total current liabilities | 4,450,007 | 3,409,424 | ||||||
| Lease liability, net of current portion | 1,610,734 | 1,669,954 | ||||||
| Deferred tax liability | 1,949 | 1,949 | ||||||
| Total liabilities | 6,062,690 | 5,081,327 | ||||||
| Stockholders’ equity (deficit) | ||||||||
| Common Stock, $par value; shares authorized; and issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 70 | 61 | ||||||
| Additional paid-in capital | 52,422,808 | 48,805,860 | ||||||
| Accumulated deficit | (52,334,412 | ) | (49,783,533 | ) | ||||
| Total stockholders’ equity (deficit) | 88,466 | (977,612 | ) | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 6,151,156 | $ | 4,103,715 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-25 |
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| 2023 | 2022 | |||||||
| For the Three Months | ||||||||
| Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue: | ||||||||
| Product revenue | $ | 50,644 | 56,750 | |||||
| Clinic revenue | 297,381 | 105,848 | ||||||
| Total revenue | 348,025 | 162,598 | ||||||
| Cost of revenue: | ||||||||
| Cost of revenue | 61,291 | 57,533 | ||||||
| Depreciation | 11,263 | 7,428 | ||||||
| Total cost of goods sold | 72,554 | 64,961 | ||||||
| Gross profit | 275,471 | 97,637 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | 2,508,371 | 2,694,395 | ||||||
| Research and development expenses | 73,520 | 104,180 | ||||||
| Total operating expenses | 2,581,891 | 2,798,575 | ||||||
| Loss from operations | (2,306,420 | ) | (2,700,938 | ) | ||||
| Other income (expense): | ||||||||
| Loss from equity method joint ventures | (27,735 | ) | (71,117 | ) | ||||
| Interest income | - | 225 | ||||||
| Interest expense | (216,589 | ) | (1,456 | ) | ||||
| Foreign currency exchange loss | (135 | ) | (1,026 | ) | ||||
| Total other income (expense) | (244,459 | ) | (73,374 | ) | ||||
| Net loss | $ | (2,550,879 | ) | (2,774,312 | ) | |||
| Net loss per common share: | ||||||||
| Basic | $ | (4.10 | ) | (4.60 | ) | |||
| Diluted | $ | (4.10 | ) | (4.60 | ) | |||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 622,504 | 602,535 | ||||||
| Diluted | 622,504 | 602,535 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-26 |
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balances, December 31, 2021 | 596,457 | $ | 60 | $ | 46,201,642 | $ | (38,891,022 | ) | $ | 7,310,680 | ||||||||||
| Common stock issued to directors and employees | 2,576 | - | 243,362 | - | 243,362 | |||||||||||||||
| Common stock issued for services | 1,075 | - | 66,850 | - | 66,850 | |||||||||||||||
| Proceeds from sale of common stock, net of fees and expenses | 4,731 | - | 315,000 | - | 315,000 | |||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | 428,488 | - | 428,488 | |||||||||||||||
| Net loss | - | - | - | (2,774,312 | ) | (2,774,312 | ) | |||||||||||||
| Balances, March 31, 2022 | 604,839 | $ | 60 | $ | 47,255,342 | $ | (41,665,334 | ) | $ | 5,590,068 | ||||||||||
| Balances, December 31, 2022 | 608,611 | $ | 61 | $ | 48,805,860 | $ | (49,783,533 | ) | $ | (977,612 | ) | |||||||||
| Balances | 608,611 | $ | 61 | $ | 48,805,860 | $ | (49,783,533 | ) | $ | (977,612 | ) | |||||||||
| Common stock issued to directors and employees | 3,490 | - | 46,503 | - | 46,503 | |||||||||||||||
| Common stock issued for services | 13,000 | 1 | 149,899 | - | 149,900 | |||||||||||||||
| Proceeds from the sale of common stock, net of fees and expenses | 69,000 | 7 | 2,708,635 | - | 2,708,642 | |||||||||||||||
| Common stock issued with notes payable | 1 | 56,312 | - | 56,313 | ||||||||||||||||
| Options exercised for cash | 297 | - | 2,376 | - | 2,376 | |||||||||||||||
| Stock options issued to directors and employees as compensation | - | - | 325,834 | - | 325,834 | |||||||||||||||
| Warrants issued with notes payable | - | - | 327,389 | - | 327,389 | |||||||||||||||
| Net loss | - | - | - | (2,550,879 | ) | (2,550,879 | ) | |||||||||||||
| Balances, March 31, 2023 | 698,565 | $ | 70 | $ | 52,422,808 | $ | (52,334,412 | ) | $ | 88,466 | ||||||||||
| Balances | 698,565 | $ | 70 | $ | 52,422,808 | $ | (52,334,412 | ) | $ | 88,466 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-27 |
INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| 2023 | 2022 | |||||||
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (2,550,879 | ) | $ | (2,774,312 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Non-cash stock compensation issued for services | 149,900 | 66,850 | ||||||
| Non-cash stock compensation issued to directors and employees | 46,503 | 243,362 | ||||||
| Fair value of stock options issued to employees | 325,834 | 428,488 | ||||||
| Non-cash compensation for services | 45,000 | - | ||||||
| Amortization of discount on notes payable | 178,380 | - | ||||||
| Amortization of leasehold right of use asset | 57,859 | 56,899 | ||||||
| Loss from equity method investment | 27,735 | 71,117 | ||||||
| Depreciation and amortization | 19,087 | 15,547 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (22,571 | ) | (8,250 | ) | ||||
| Inventory | (7,317 | ) | (6,858 | ) | ||||
| Prepaid expenses and other current assets | (60,677 | ) | 54,573 | |||||
| Accounts payable and accrued expenses | 498,169 | 18,789 | ||||||
| Accrued compensation | 274,420 | (189,812 | ) | |||||
| Deferred revenue | (73,130 | ) | (107 | ) | ||||
| Leasehold liability | (56,774 | ) | (54,405 | ) | ||||
| Net cash used in operating activities | (1,148,461 | ) | (2,078,119 | ) | ||||
| Cash from investing activities: | ||||||||
| Payments to acquire property, plant, and equipment | - | (5,654 | ) | |||||
| Payments to acquire intangible assets | - | (910 | ) | |||||
| Investment in joint ventures | (8,447 | ) | (75,326 | ) | ||||
| Net cash used in investing activities | (8,447 | ) | (81,890 | ) | ||||
| Cash from financing activities: | ||||||||
| Proceeds from the sale of notes payable | 714,000 | - | ||||||
| Proceeds from the sale of common stock, net of offering costs | 2,708,642 | 315,000 | ||||||
| Proceeds from option exercise | 2,376 | - | ||||||
| Principal payments on note payable | (170,000 | ) | - | |||||
| Net cash provided by financing activities | 3,255,018 | 315,000 | ||||||
| Increase (decrease) in cash and cash equivalents | 2,098,110 | (1,845,009 | ) | |||||
| Cash and cash equivalents at beginning of period | 90,135 | 5,684,871 | ||||||
| Cash and cash equivalents at end of period | $ | 2,188,245 | $ | 3,839,862 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Taxes | $ | - | $ | - | ||||
| Noncash activities: | ||||||||
| Fair value of warrants issued with debt | $ | 327,389 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-28 |
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(UNAUDITED)
Note 1 – Summary of Significant Accounting Policies
Description of Business
INVO Bioscience, Inc. (“INVO” or the “Company”) is a commercial-stage fertility company dedicated to expanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and inclusive to people around the world. The Company’s primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. The Company’s flagship product is INVOcell, a revolutionary medical device that, in a procedure referred to as “IVC” (intravaginal culture), allows fertilization and early embryo development to take place in vivo within the woman’s body, instead of occurring in a lab incubator as with conventional in vitro fertilization (“IVF”). The Company’s commercialization strategy involves the opening of dedicated “INVO Centers” focused on offering the INVOcell and IVC procedure (with three centers in North America now operational) and the acquisition of existing IVF clinics, as well as selling its technology solution into existing fertility clinics.
Basis of Presentation
The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries and controlled affiliates. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets and the amount of consolidated net income taxes.
The Company uses the equity method of accounting when it owns an interest in an entity whereby it can exert significant influence over but cannot control the entity’s operations.
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
The Company considers events or transactions that have occurred after the consolidated balance sheet date of March 31, 2023, but prior to the filing of the consolidated financial statements with the SEC in this Quarterly Report on Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q.
Business Segments
The Company operates in onesegment and therefore segment information is not presented.
Variable Interest Entities
The Company’s consolidated financial statements include the accounts of Credit Risk
| F-29 |
Equity Method Investments
Investments in unconsolidated affiliates, 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 times has cashcost. These investments are included in banksinvestment in excessjoint ventures in the accompanying consolidated balance sheets. The Company’s share of FDIC insurance limits.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 had nomonitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.
Inventory
Inventories consist of raw materials, work in excessprocess and finished goods and are stated at the lower of FDIC insurance limitscost or net realizable value, using the first-in, first-out method as of December 31, 2008a cost flow method.
Property and December 31, 2007.
The Company will recognize revenue on arrangementsrecords property and equipment at cost. Property and equipment is depreciated using the straight-line method over the estimated economic lives of the assets, which are from 3 to 10 years. The Company capitalizes the expenditures for major renewals and improvements that extend the useful lives of property and equipment. Expenditures for maintenance and repairs are charged to expense as incurred. The Company reviews the carrying value of long-lived assets for impairment at least annually or whenever events or changes in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only whencircumstances indicate that the price is fixed and determinable, persuasive evidencecarrying amount of an arrangement exists,asset may not be recoverable. The recoverability of long-lived assets is measured by a comparison of its carrying amount to the serviceundiscounted cash flows that the asset or asset group is performed and collectabilityexpected to generate. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the resulting receivable is reasonably assured.property, if any, exceeds its fair market value.
| F-30 |
Long- Lived Assets
Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the non-discounted future cash flows of the enterpriseasset are less than their carrying amount, their carrying amounts are reduced to the fair value and an impairment loss recognized. There was noimpairment recorded during the three months ended March 31, 2023, and 2022.
Fair Value of Financial Instruments
ASC 825-10-50, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.
Effective January 1, 2008, the Company adopted ASC 820-10, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Income Taxes
The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from January 5, 2007 (inception)all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.
Concentration of Credit Risk
Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (“FDIC”) limits. As of March 31, 2023, the Company had cash balances in excess of FDIC limits.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to December 31, 2008.recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:
| 1. | Identify the contract with the customer. |
| 2. | Identify the performance obligations in the contract. |
| 3. | Determine the total transaction price. |
| 4. | Allocate the total transaction price to each performance obligation in the contract. |
| 5. | Recognize as revenue when (or as) each performance obligation is satisfied. |
| F-31 |
Revenue generated from the sale of INVOcell is typically recognized at the time the product is shipped, at which time the title passes to the customer, and Development
Revenue generated from clinical and lab services related at the Company’s affiliated INVO Centers is typically recognized at the time the service is performed.
The Company accounts for research and development costs in accordance withstock-based compensation under the Financialprovisions of Accounting Standards Board's Statement of Financial Accounting Standards No. 2Codification (“SFAS 2”ASC”), “Accounting for Research and Development Costs.” Research and development costs include expenses incurred by the Company for research, design and development of our proprietary technology and are charged to operations as incurred. Accordingly, internal research and development costs are expensed as incurred. Total expenditures on research and product development for 2008 and 2007 were approximately $52,000 and $33,000 respectively.
Basic loss per share calculations are computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2023, and cash flows. SFAS 161 applies to all derivative instruments within2022, as the scopeinclusion of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.
| 2023 | 2022 | |||||||
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net loss (numerator) | $ | (2,550,879 | ) | (2,774,312 | ) | |||
| Basic and diluted weighted-average number of common shares outstanding (denominator) | ||||||||
| Basic and diluted net loss per common share | ) | ) | ||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
| 2023 | 2022 | |||||||
| As of March 31, | ||||||||
| 2023 | 2022 | |||||||
| Options | 70,627 | 73,730 | ||||||
| Convertible notes and interest | 70,481 | - | ||||||
| Unit purchase options and warrants | 453,383 | 13,008 | ||||||
| Total | 594,491 | 86,738 | ||||||
| Antidilutive Securities | 594,491 | 86,738 | ||||||
| F-32 |
Recently Adopted Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements, and it ranks FASB Statements of Financial Accounting Concepts, which are subject todoes not believe the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of PCAOB Auditing Standard No. 6, Evaluating Consistency of Financial Statements (AS/6). Thefuture adoption of FASB 162 is not expected toany such pronouncements will have a material impact on its financial condition or the results of its operations.
Note 2 – Liquidity
Historically, the Company has funded its cash and liquidity needs primarily through revenue collection, equity financings, and convertible notes. For the three months ended March 31, 2023, and 2022, the Company incurred a net loss of approximately $2.6 million and $2.8 million, respectively, and has an accumulated deficit of approximately $52.3million as of March 31, 2023. Approximately $0.9 million of the net loss was related to non-cash expenses for the three months ended March 31, 2023, compared to $0.9 million for the three months ended March 31, 2022.
The Company has been dependent on raising capital from debt and equity financings to meet its needs for cash flow used in operating and investing activities. During the first three months of 2023, the Company received net proceeds of approximately $2.7 million for the sale of its common stock par value $per share (“Common Stock”) as well as approximately $0.7 million from the sale of convertible notes. During the first three months of 2022, the Company received proceeds of approximately $0.3 million for the sale of Common Stock. Over the next 12 months, the Company’s financial position.
Although the Company’s audited financial position.
Note 3 – Variable Interest Entities
Consolidated VIEs
Bloom INVO, LLC
On June 28, 2021, INVO CTR entered into a limited liability company agreement (the “Bloom Agreement”) with Bloom Fertility, LLC (“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center (the “Atlanta Clinic”) in the Atlanta, Georgia metropolitan area.
In consideration for INVO’s commitment to contribute up to $800,000 within the 24-month period following the execution of the Bloom Agreement to support the start-up operations of the Georgia JV, the Georgia JV issued 800 of its units to INVO CTR and in consideration for Bloom’s commitment to contribute physician services having an anticipated value of up to $1,200,000 over the course of a 24-month vesting period, the Georgia JV issued 1,200 of its units to Bloom.
| F-33 |
The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR also performs all required, industry specific compliance and accreditation functions, and product documentation for product registration.
The Bloom Agreement provides Bloom with a “profits interest” in the Georgia JV and, in connection with such profits interest, states that profits and losses be allocated to its members based on a hypothetical liquidation of the Georgia JV. In such a scenario, liquidation proceeds would be distributed in the following order: (a) to INVO CTR until the difference between its capital contributions and distributions equals $0; (b) to Bloom until its distributions equal 150% of the liquidation amounts distributed to INVO CTR (a “catch-up” to rebalance the distributions between members); and (c) thereafter on a pro rata basis. The Georgia JV had no assets or liabilities at the time the units were issued, and, as of March 31, 2023, INVO CTR had made capital contributions greater than the net loss of the Georgia JV. As such, the entire net loss was allocated to INVO CTR, and no loss was allocated to the noncontrolling interest of Bloom.
The Georgia JV opened to patients on September 7, 2021.
The Company determined the Georgia JV is dependenta VIE, and that the Company is its primary beneficiary because the Company has an obligation to absorb losses that are potentially significant and the Company controls the majority of the activities that impact the Georgia JV’s economic performance, specifically control of the INVOcell and lab services quality management. As a result, the Company consolidated the Georgia JV’s results with its own. As of March 31, 2023, the Company invested $0.9 million in the Georgia JV in the form of capital contributionsas well as $0.5 million in the form of a note. For the three months ended March 31, 2023 and 2022, the Georgia JV recorded net losses of $32 thousand and $0.2 million respectively. Noncontrolling interest in the Georgia JV was $0.
Unconsolidated VIEs
HRCFG INVO, LLC
On March 10, 2021, INVO CTR entered into a limited liability company agreement with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of establishing an INVO Center in Birmingham, Alabama. The name of the joint venture entity is HRCFG INVO, LLC (the “Alabama JV”). The Company also provides certain funding to the Alabama JV. Each party owns 50% of the Alabama JV.
The Alabama JV opened to patients on August 9, 2021.
The Company determined the Alabama JV is a VIE, and that there is no primary beneficiary. As a result, the Company will use the equity method to account for its interest in the Alabama JV. As of March 31, 2023, the Company invested $1.6 million in the Alabama JV in the form of a note. For the three months ended March 31, 2023 and 2022, the Alabama JV recorded net losses of $37 thousand and $110 thousand, respectively, of which the Company recognized losses from equity method investments of $18 thousand and $55 thousand, respectively.
Positib Fertility, S.A. de C.V.
On September 24, 2020, INVO CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) under which the Shareholders will commercialize the IVC procedure and offer related medical treatments in Mexico. Each party owns one-third of the Mexican incorporated company, Positib Fertility, S.A. de C.V. (the “Mexico JV”).
The Mexico JV opened to patients on November 1, 2021.
The Company determined the Mexico JV is a VIE, and that there is no primary beneficiary. As a result, the Company will use the equity method to account for its interest in the Mexico JV. As of March 31, 2023, the Company invested $0.1 million in the Mexico JV. For the three months ended March 31, 2023, the Mexico JV recorded net losses of $27 thousand and $49 thousand, respectively, of which the Company recognized a loss from equity method investments of $9 thousand and $16 thousand, respectively.
| F-34 |
The following table summarizes our investments in unconsolidated VIEs:
Schedule of Investments in Unconsolidated Variable Interest Entities
| Carrying Value as of | ||||||||||||||
| Location | Percentage Ownership | March 31, 2023 | December 31, 2022 | |||||||||||
| HRCFG INVO, LLC | Alabama, United States | 50 | % | $ | 1,048,872 | 1,106,905 | ||||||||
| Positib Fertility, S.A. de C.V. | Mexico | 33 | % | 124,705 | 130,960 | |||||||||
| Total investment in unconsolidated VIEs | $ | 1,173,577 | 1,237,865 | |||||||||||
Earnings from investments in unconsolidated VIEs were as follows:
Schedule of Earnings from Investments in Unconsolidated Variable Interest Entities
| 2023 | 2022 | |||||||
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| HRCFG INVO, LLC | $ | (18,670 | ) | $ | (54,920 | ) | ||
| Positib Fertility, S.A. de C.V. | (9,065 | ) | (16,197 | ) | ||||
| Total earnings from unconsolidated VIEs | (27,735 | ) | (71,117 | ) | ||||
The following tables summarize the combined unaudited financial information of our unconsolidated VIEs:
Schedule of Financial Information of Investments in Unconsolidated Variable Interest Entities
| 2023 | 2022 | |||||||
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Statements of operations: | ||||||||
| Operating revenue | $ | 349,326 | $ | 169,835 | ||||
| Operating expenses | (413,866 | ) | (328,756 | ) | ||||
| Net loss | (64,540 | ) | (158,921 | ) | ||||
March 31, 2023 | December 31, 2022 | |||||||
| Balance sheets: | ||||||||
| Current assets | $ | 395,561 | 261,477 | |||||
| Long-term assets | 1,082,606 | 1,094,490 | ||||||
| Current liabilities | (466,667 | ) | (396,619 | ) | ||||
| Long-term liabilities | (114,824 | ) | (107,374 | ) | ||||
| Net assets | $ | 896,676 | 851,974 | |||||
Note 4 – Agreements and Transactions with VIE’s
The Company sells the INVOcell to its consolidated and unconsolidated VIEs and anticipates continuing to do so in the ordinary course of business. All intercompany transactions with consolidated entities are eliminated in the Company’s consolidated financial statements. Per ASC 323-10-35-8 the Company eliminates any sales to an unconsolidated VIE for INVOcell inventory that the VIE still has remaining on the books at period end.
The following table summarizes the Company’s ability to raise additional capital and implement its business plan.
Summary of Transaction with Variable Interest Entities
| 2023 | 2022 | |||||||
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Bloom Invo, LLC | ||||||||
| INVOcell revenue | $ | 4,500 | $ | - | ||||
| Unconsolidated VIEs | ||||||||
| INVOcell revenue | $ | 3,000 | $ | 7,500 | ||||
The Company had balances with VIEs as follows:
Summary of Balances with Variable Interest Entities
March 31, 2023 | December 31, 2022 | |||||||
| Bloom Invo, LLC | ||||||||
| Accounts receivable | $ | 18,000 | 13,500 | |||||
| Notes payable | 471,637 | 468,031 | ||||||
| Unconsolidated VIEs | ||||||||
| Accounts receivable | $ | 49,310 | 46,310 | |||||
| F-35 |
Note 5 – Inventory
Components of December 31, 2008inventory are:
Schedule of Inventory
March 31, 2023 | December 31, 2022 | |||||||
| Raw materials | $ | 61,251 | $ | 68,723 | ||||
| Finished goods | 209,668 | 194,879 | ||||||
| Total inventory | $ | 270,919 | $ | 263,602 | ||||
Note 6 – Property and 2007, the Company recorded the following inventory balances:
December 31, 2008 | December 31, 2007 | |||||
| Raw Materials | $ | - | $ | - | ||
| Work in Process | 55,466 | - | ||||
| Finished Goods | 15,257 | - | ||||
| Total Inventory | $ | 70,722 | $ | - | ||
The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows:
Schedule of Estimated Useful Lives of Property and Equipment
| Estimated Useful Life | |||
| Manufacturing equipment | 6 to 10 years | ||
| Medical equipment | 7 to 10 years | ||
| Office equipment | 3 to 7 years |
Schedule of Property and Equipment
March 31, 2023 | December 31, 2022 | |||||||
| Manufacturing equipment | $ | 132,513 | $ | 132,513 | ||||
| Medical equipment | 283,065 | 283,065 | ||||||
| Office equipment | 77,601 | 77,601 | ||||||
| Leasehold improvements | 96,817 | 96,817 | ||||||
| Less: accumulated depreciation | (172,354 | ) | (153,267 | ) | ||||
| Total equipment, net | $ | 417,642 | $ | 436,729 | ||||
During the three months ended March 31, 2023, and 2022, the Company recorded depreciation expense of $19,087 and $15,095, respectively.
Note 7 – Intangible Assets
The Company capitalizes the initial expense related to establishing patents by country and then amortizes the expense over the life of the patent, typically 20 years. It then expenses annual filing fees to maintain the patents. The Company regularly reviews the value of its patents in the marketplace in proportion to the expense it must spend to maintain the patent. The Company fully impaired its patents as of December 31, 2022.
During the three months ended March 31, 2023, and 2022, the Company recorded amortization expenses related to patents of $nil and $452, respectively.
The trademarks have an indefinite life and therefore are not amortized. Trademarks are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. The Company fully impaired its trademarks as of December 31, 2022.
| F-36 |
Note 8 – Leases
The Company has various operating lease agreements in place for its office and joint ventures. Per FASB’s ASU 2016-02, Leases Topic 842 (“ASU 2016-02”), effective January 1, 2019, the Company is required to report a right-of-use asset and corresponding liability to report the present value of the total lease payments, with appropriate interest calculation. Per the terms of ASU 2016-02, the Company can use its implicit interest rate, if known, or applicable federal rate otherwise. Since the Company’s implicit interest rate was not readily determinable, the Company utilized the applicable federal rate, as of the commencement of the lease. Lease renewal options included in any lease are considered in the lease term if it is reasonably certain the Company will exercise the option to renew. The Company’s operating lease agreements do not contain any material restrictive covenants.
As of March 31, 2023, the Company’s lease components included in the consolidated balance sheet were as follows:
Schedule of Lease Components
| Lease component | Balance sheet classification | March 31, 2023 | ||||
| Assets | ||||||
| ROU assets – operating lease | Other assets | $ | 1,750,175 | |||
| Total ROU assets | $ | 1,750,175 | ||||
| Liabilities | ||||||
| Current operating lease liability | Current liabilities | $ | 234,050 | |||
| Long-term operating lease liability | Other liabilities | 1,610,734 | ||||
| Total lease liabilities | $ | 1,844,784 | ||||
Future minimum lease payments as of March 31, 2023 were as follows:
Schedule of Future Minimum Lease Payments
| 2023 | 198,835 | |||
| 2024 | 251,671 | |||
| 2025 | 247,960 | |||
| 2026 | 253,235 | |||
| 2027 and beyond | 1,063,010 | |||
| Total future minimum lease payments | $ | 2,014,711 | ||
| Less: Interest | (169,927 | ) | ||
| Total operating lease liabilities | $ | 1,844,784 |
Note 9 – Notes Payable
Notes payables consisted of the following:
Schedule of Notes Payable
March 31, 2023 | December 31, 2022 | |||||||
| Related party demand notes with a 10% financing fee. 10% annual interest starting January 31, 2023. Notes are callable starting March 31, 2023 | $ | 770,000 | $ | 770,000 | ||||
| Convertible notes. 10% annual interest. Conversion price of $10.00 | 410,000 | 100,000 | ||||||
| Convertible debentures. 8% interest. Conversion price of $10.40 | 330,000 | - | ||||||
| Less debt discount | (408,679 | ) | (107,356 | ) | ||||
| Total, net of discount | $ | 1,101,321 | $ | 762,644 | ||||
Related Party Demand Notes
In the fourth quarter of 2022, the Company received $500,000 through the issuance of five demand notes (the “JAG Notes”) from a related party, JAG Multi Investments LLC (“JAG”). The Company’s CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. The JAG Notes accrue 10% annual interest from the date of issuance. The JAG Notes currently are callable with 10 days prior written notice. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest.
December 31, 2008 | December 31, 2007 | |||||
| Manufacturing Equipment- Molds | $ | 35,263 | $ | - | ||
| Less: Accumulated Depreciation | 980 | |||||
| Network/IT Equipment | 7,595 | - | ||||
| Less: Accumulated Depreciation | 633 | |||||
| $ | 41,245 | $ | - | |||
In consideration for subscribing to the periodsJAG Note for $100,000 dated December 29, 2022, and for agreeing to extend the date on which the other JAG Notes are callable to March 31, 2008 and 2007,2023, the Company issued JAG a warrant to purchase 17,500 shares of Common Stock. The warrant may be exercised for a period of five (5) years from issuance at a price of $per share. The financing fees for said JAG Note and the fair value of the warrant issued were capped at the total proceeds. The relative fair value of the warrant was recorded $1,613as a debt discount and $0 in depreciation expense, respectively.
| December 31, 2008 | December 31, 2007 | |||||||
| Total Patents | $ | 77,743 | $ | 46,725 | ||||
| ACCUMULATED AMORTIZATION | (9,351 | ) | (3,455 | ) | ||||
| Patent costs, net | $ | 68,392 | $ | 43,270 | ||||
In the fourth quarter of 2022, the Company received $200,000 through the issuance of demand promissory notes of which (1) $100,000 was received from our chief executive officer, Steven Shum ($60,000 on November 29, 2022, $15,000 on December 2, 2022, and $25,000 on December 13, 2022) and (2) $100,000 was received from an entity controlled by our chief financial officer, Andrea Goren ($75,000 on November 29, 2022 and $25,000 on December 13, 2022). These notes accrue 10% annual interest accrues from the date of issuance. These notes are callable with 10 days prior written notice. At maturity, the Company agreed to pay outstanding principal, a $50,000 working capital line10% financing fee and accrued interest.
The financing fees for all demand notes were recorded as a debt discount and as of creditMarch 31, 2023 the Company had fully amortized the discount.
For the three months ended March 31, 2023, the Company incurred $25,064 in interest related to these demand notes.
Jan and March 2023 Convertible Notes
In January and March 2023, the Company issued $410,000 of convertible notes, for $310,000 in cash and the conversion of $100,000 of demand notes from the fourth quarter of 2022. These convertible notes were issued with Century Bank, interestfixed conversion prices of $10.00 (for the $275,000 issued in January 2023) and $12.00 (for the $135,000 issued in March 2023) and (ii) 5-year warrants to purchase shares of the Common Stock at an exercise price of $.
The cumulative fair value of the warrants at issuance was $132,183. This was recognized as a debt discount and will be amortized on a straight-line basis over the life of the respective notes. For the three months ending March 31, 2023 the Company amortized $23,162 of the debt discount and as of March 31, 2023 had a remaining debt discount balance of $109,021.
Interest on these notes accrues at a rate of ten percent (10%) per annum and is payable monthly 0.24% aboveat the bank’s prime lending rateholder’s option either in cash or in shares of the Common Stock at the conversion price set forth in the notes on 12/31/08 the rate was 3.79%, maturing May 31, 2010. At December 31, 20082023, unless converted earlier. For the three months ended March 31, 2023 the Company incurred $5,537 in interest related to these convertible notes.
All amounts due under these notes are convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders into the Common Stock at a fixed conversion price for the notes as described above.
February 2023 Convertible Debentures
On February 3, and 2007, the balance outstanding on the line of credit was $50,000 and $49,221, respectively.
The cumulative fair value of the warrants at issuance was $291,207. This was recognized as a debt discount and will be amortized on a straight-line basis over the life of the respective notes. For the three months ending March 31, 2023 the Company amortized $47,862 of the debt discount and as of March 31, 2023 had loaned fundsa remaining debt discount balance of $299,658.
Pursuant to the February Debentures, interest on the February Debentures accrues at a rate of eight percent (8%) per annum and is payable at maturity, one year from the date of the February Debentures. For the three months ended March 31, 2023 the Company incurred $5,600 in interest on the February Debentures.
All amounts due under the February Debentures are convertible at any time after the issuance date, in whole or in part, at the option of the February Investors into Common Stock at an initial price of $per share. This conversion price is subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments and is subject to a floor price.
| F-38 |
The Company may prepay the February Debentures at any time in whole or in part by paying a sum of money equal to 105% of the principal amount to be redeemed, together with accrued and unpaid interest.
While any portion of each February Debenture remains outstanding, if the Company receives cash proceeds of more than $2,000,000 (the “Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the February Investors shall have the right in their sole discretion to require the Company to sustain its operations since January 5, 2007 (inception). Ranoux’s total cumulative investment at December 31, 2008 is $96,462 (“the Principal Amount”) in INVO Bioscience. On December 1, 2008, Dr. Ranoux executed a letter agreement withimmediately apply up to 50% of all proceeds received by the Company to amendabove the Promissory Note to allow conversion into shares of Emy’s common stock following the Closing. On March 26, 2009, the Company and Dr Ranoux agreed to re-write the agreement to a non-convertible note payable bearing interest at 5% per annum and extended the repayment date to March 31, 2010. The Company and Dr. Ranoux can jointly decideMinimum Threshold to repay the loan earlier without prepayment penalties.
The February Warrants include anti-dilution protection whereby a subsequent offering priced below the period from January 5, 2007 (inception) through December 31, 2007, BioXcell (INVO Bioscience) issued 70,000 sharesFebruary Warrants’ strike price then in effect would entitle the February Investors to a reduction of common stock for $20,000, at $.2857/share. This was retroactively restated to 24,991,379 shares duesuch strike price to the reverse merger on December 29, 2008.
Note 10 – Related Party Transactions
In the fourth quarter of 2022, the Company received $700,000 through the issuance of demand notes from related parties, as follows: (a) $500,000 from JAG; (b) $100,000 from our chief executive officer, Steve Shum; and (c) $100,000 from our chief financial officer, Andrea Goren. The investorsCompany’s CFO is a beneficiary of JAG but does not have piggyback registration rights that permit themany control over JAG’s investment decisions with respect to register their common stock on any registration statement filed by the Company.
As of March 31, 2023 the Company issued an aggregateowed accounts payable to related partiestotaling $122,219, primarily related to unpaid employee expense reimbursements and unpaid board fees.
Note 11 – Stockholders’ Equity
Reverse Stock Split
On June 28, 2023, the Company’s board of 4,561,641 shares of commondirectors approved a reverse stock for cash totaling $706,938 for share prices ranging from $0.15 to $1.50.
February 2023 Equity Purchase Agreement
On February 3, 2023, the Company entered into an equity purchase agreement (the “ELOC”) and registration rights agreement (the “ELOC RRA”) with an accredited investor (the “Feb 3 Investor”) pursuant to which the Company has the right, but not issued the committedobligation, to direct the Feb 3 Investor to purchase up to $10.0 million (the “Maximum Commitment Amount”) of shares of Common Stock, in multiple tranches. Further, under the ELOC and has recorded an accrued liability of $313,500. As of December 31, 2008,subject to the Maximum Commitment Amount, the Company has the right, but not obtained shareholder approvalthe obligation, to submit notices to the Feb 3 Investor to purchase shares of Common Stock (i) in a minimum amount of not less than $25,000 and (ii) in a maximum amount of up to the lesser of (a) $750,000 or (b) 200% of the Company’s average daily trading value of the Common Stock.
Also on February 3, 2023, the Company issued to the Feb 3 Investor shares of Common Stock for its commitment to enter into the ELOC.
The obligation of the Feb 3 Investor to purchase shares of Common Stock pursuant to the ELOC ends on the earlier of (i) the date on which the purchases under the ELOC equal the Maximum Commitment Amount, (ii) 24 months after the date of the ELOC (February 3, 2025), (iii) written notice of termination by the Company, (iv) the date that the ELOC RRA is no longer effective after its initial effective date, or (v) the date that the Company commences a voluntary case or any person or entity commences a proceeding against the Company pursuant to or within the meaning of federal or state bankruptcy law, a custodian is appointed for the employee incentive stock option plan and has not deemedCompany or for all or substantially all of its property, or the 500,000 options as granted untilCompany makes a general assignment for the plan is approved.
During the Commitment Period, the price that Feb 3 Investor will pay to purchase the shares of Common Stock that it is obligated to purchase under the ELOC shall be 97% of the “market price,” which is defined as the lesser of (i) the lowest closing price of our Common Stock during the 7 trading day-period following the clearance date associated with the applicable put notice from the Company or (ii) the lowest closing bid price of the Common Stock on the principal trading market for the Common Stock (currently, the Nasdaq Capital Market) on the trading day immediately preceding a put date.
March 2023 Registered Direct Offering
On March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering (the “RD Offering”), shares of Common Stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $0.20 per share, and (ii) in a concurrent private placement (the “March Warrant Placement”), a common stock purchase warrant (the “March Warrant”), exercisable for an aggregate of up to shares of Common Stock, at an exercise price of $per share. The securities to be issued in the RD Offering (priced at the marked under Nasdaq rules) were offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-255096), initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. The Pre-Funded Warrant is exercisable upon issuance and will remain exercisable until all of the shares underlying the Pre-Funded Warrant are exercised in full.
The March Warrant (and the shares of Common Stock issuable upon the exercise of the March Warrant) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On March 27, 2023, the Company closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by the Company. In the event the March Warrant is fully exercised for cash, the Company would receive additional gross proceeds of approximately $3.5 million. Under the March Purchase Agreement, the Company may use a portion of the net proceeds of the offering to (a) repay February Debentures, and (b) to pay the down payment for Wisconsin Fertility acquisition. The remainder of the net proceeds will be used for working capital, capital expenditures, and other general corporate purposes. The Company used $383,879 in proceeds to repay a portion of the February Debentures and the remainder of the proceeds are being used for working capital and general corporate purposes.
Under the March Purchase Agreement, the Company is required within 30 days of the closing date of the March Warrant Placement to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrant. The Company is required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full review by the SEC), and to keep the Resale Registration Statement effective at all times until no shares of Common Stock remain exercisable under the March Warrant.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from the date of the RD Offering and March Warrant Placement, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
| F-39 |
Three Months Ended March 31, 2023
During the three months ended March 31, 2023, the Company issued shares of Common Stock to employees and directors and shares of Common Stock to consultants with a fair value of $46,503 and $56,900, respectively. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).
During the three months ended March 31, 2023, the Company issued shares of Common Stock upon the exercise of options. The Company received proceeds of $2,376.
In February 2023, the Company issued shares of Common Stock with a fair value of $56,313 as inducement for issuing the February Debentures. The fair value of the shares was recognized as a discount to the February Debentures and will be amortized over the life of the notes.
In February 2023, the Company shares of Common Stock in connection with the ELOC with a fair value of $93,000 that was expensed in the period.
In March 2023, the Company issued shares of Common Stock in the RD Offering and March Warrant Placement. The Company received net proceeds of approximately $2.7 million.
Equity Incentive Plans
In October 2019, the Company adopted the 2019 Plan. Under the 2019 Plan, the Company’s board of directors is authorized to grant stock options to purchase Common Stock, restricted stock units, and restricted shares of Common Stock to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of shares. . In January 2023, the number of available shares increased by shares bringing the total shares available under the 2019 Plan to .
Options granted under the 2019 Plan generally have a life of to years and 2007,exercise prices equal to or greater than the fair market value of the Common Stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a period.
Schedule of Stock Options Activity
Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2022 | 64,850 | $ | 68.00 | $ | - | |||||||
| Granted | 7,230 | 12.40 | 3,904 | |||||||||
| Exercised | (297 | ) | 8.00 | 1,419 | ||||||||
| Canceled | (1,157 | ) | 79.00 | - | ||||||||
| Balance as of March 31, 2023 | 70,626 | 62.80 | 18,038 | |||||||||
| Exercisable as of March 31, 2023 | 53,446 | $ | 76.80 | $ | 18,038 | |||||||
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions
Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Risk-free interest rate range | - | % | to | % | ||||
| Expected life of option-years | to | |||||||
| Expected stock price volatility | - | % | to | % | ||||
| Expected dividend yield | % | % | ||||||
| F-40 |
The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. Expected volatility is based upon the average historical volatility of the Common Stock over the period commensurate with the expected term of the related instrument. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups, executives and non-executives, within the Company. The Company does not currently pay dividends on its Common Stock, nor does it expect to do so in the foreseeable future.
Total Intrinsic Value of Options Exercised | Total Fair Value of Options Vested | |||||||
| Year ended December 31, 2022 | $ | - | $ | 1,616,401 | ||||
| Three months ended March 31, 2023 | $ | 1,419 | $ | 594,966 | ||||
For the three months ended March 31, 2023, the weighted average grant date fair value of options granted was $ per share. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through March 31, 2023, the weighted average remaining service period is year.
Restricted Stock and Restricted Stock Units
In the three months ended March 31, 2023, the Company recorded related party contributed servicesgranted restricted stock units and interestshares of $164,511restricted stock to certain employees, directors, and $93,163, respectively.
Schedule of Aggregate Restricted Stock Awards and the related prices for the shares of the Company’s common stock issued. These options were granted in lieu of cash compensation for services performed.
Number of Unvested Shares | Weighted Average Grant Date Fair Value | Aggregate Value of Shares | ||||||||||
| Balance as of December 31, 2022 | 3,533 | $ | 8.40 | $ | 29,949 | |||||||
| Granted | 6,207 | 10.60 | 65,367 | |||||||||
| Vested | (8,990 | ) | 27.00 | 242,185 | ||||||||
| Forfeitures | - | - | - | |||||||||
| Balance as of March 31, 2023 | 750 | $ | 23.60 | $ | 17,764 | |||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||
| Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Number Exercisable | Weighted Average Exercise Price | ||||||||||||||
| $ | 1.00 | 140,000 | 2.9 | $ | - | $ | - | |||||||||||
Number of Shares | Weighted Average Price Per Share | |||||
| Outstanding at January 5, 2007 | - | $ | - | |||
| Granted | - | - | ||||
| Exercised | - | - | ||||
| Canceled or expired | - | - | ||||
| Outstanding at December 31, 2007 | - | $ | - | |||
| Granted | 140,000 | 1.00 | ||||
| Exercised | - | - | ||||
| Canceled or expired | - | - | ||||
| Outstanding at December 31, 2008 | 140,000 | $ | 1.00 | |||
| F-41 |
Note 13 – Unit Purchase Options and Warrants
The following table sets forth the activity of unit purchase options:
Schedule of Unit Purchase Stock Options Activity
Number of Unit Purchase Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2022 | 4,645 | $ | 64.00 | $ | - | |||||||
| Granted | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Canceled | - | - | - | |||||||||
| Balance as of March 31, 2023 | 4,645 | $ | 64.00 | $ | - | |||||||
The following table sets forth the activity of warrants:
Schedule of Warrants Activity
Number of Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2022 | 25,864 | $ | 30.20 | $ | - | |||||||
| Granted | 422,875 | 12.60 | 92,293 | |||||||||
| Exercised | - | - | - | |||||||||
| Canceled | - | - | - | |||||||||
| Balance as of March 31, 2023 | 448,739 | $ | 14.00 | $ | 140,943 | |||||||
Note 14 – Income Taxes
The Company has adopted Financial Accounting Standard number 109, which requiresuses the recognition of deferred tax liabilitiesasset and assetsliability method to account for the expected future tax consequences of events that have been included in the financial statement or tax returns.income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and assets are determined based on the difference between financial statements andtheir respective tax basis ofbases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in effect for the yearyears in which thethose temporary differences are expected to reverse. Temporary differences between taxablebe recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income reportedin the period that includes the enactment date. If a carryforward exists, the Company decides as to whether the carryforward will be utilized in the future. Currently, a valuation allowance is established for financial reporting purposesall deferred tax assets and carryforwards as their recoverability is deemed to be uncertain. If the Company’s expectations for future operating results at the federal or at the state jurisdiction level vary from actual results due to changes in healthcare regulations, general economic conditions, or other factors, it may need to adjust the valuation allowance, for all or a portion of the Company’s deferred tax assets. The Company’s income tax purposes are insignificant.
Income tax expense was $0for each of the three months ended March 31, 2023 and 2022. The annual forecasted effective income tax reporting purposes,rate for 2023 is 0%, with a year-to-date effective income tax rate for the Company's aggregate unused net operating losses approximate $1,800,000, expire at various times through 2028,three months ended March 31, 2023, of 0%.
Note 15 – Commitments and Contingencies
Insurance
The Company’s insurance coverage is carried with third-party insurers and includes: (i) general liability insurance covering third-party exposures; (ii) statutory workers’ compensation insurance; (iv) excess liability insurance above the established primary limits for general liability and automobile liability insurance; (v) property insurance, which covers the replacement value of real and personal property and includes business interruption; and (vi) insurance covering our directors and officers for acts related to our business activities. All coverage is subject to limitationscertain limits and deductibles, the terms and conditions of Section 382which are common for companies with similar types of operations.
Legal Matters
The Company is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the Internal Revenue Code, as amended. The deferred tax asset relatedoutcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
Note 16 – Subsequent Events
On May 10, 2023, the carry forward is approximately $540,000. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earning history ofpartnership agreement between the Company itand Lyfe Medical I, LLC was terminated by mutual agreement.
On May 12, 2023 the joint venture agreement between the Company and Ginekaliks Dooel Skopje was terminated by mutual agreement.
Subsequent to quarter end the Company effected a 1-for-20 reverse stock split of its outstanding common stock and proportionate decrease in its authorized common stock to 6,250,000 shares, please see Note 11 for more details.
INVO Bioscience, Inc.
Up to 1,585,00 Units each consisting of One Share of Common Stock
or One Pre-Funded Warrant to Purchase One Share of Common Stock
and Two Warrants , each to purchase One Share of Common Stock
PROSPECTUS
Sole Placement Agent
MAXIM GROUP LLC
The date of this prospectus is more likely than not that the benefits will not be realized.
| Fiscal Year | Minimum Future Lease Payments | |||
| 2009 | $ | 24,847 | ||
| 2010 | $ | 24,847 | ||
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemizationestimate of variousthe fees and expenses all of which we will pay, in connection withrelating to the saleissuance and distribution of the securities being registered.registered hereby, other than Placement Agent fees, all of which shall be borne by the registrant. All of such fees and expenses, except for the SEC registration fee, are estimated:
| SEC registration fee | $ | 5,340.85 | ||
| FINRA Fees | $ | 7,769.65 | ||
| Transfer agent and registrar fees and expenses | $ | 5,000.00 | ||
| Legal fees and expenses | $ | 180,000.00 | ||
| Printing fees and expenses | $ | 5,000.00 | ||
| Accounting fees and expenses | $ | 15,000.00 | ||
| Miscellaneous fees and expenses | $ | 5,000.00 | ||
| Total | $ | 223,110.50 |
Item 14. Indemnification of Officers and Directors.
We are a Nevada corporation and generally governed by the Nevada Private Corporations Code, Title 78 of the Nevada Revised Statutes (the “NRS”).
Section 78.138 of the NRS provides that, unless the corporation’s articles of incorporation provide otherwise, a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud, or a knowing violation of the law. Our articles of incorporation provide the personal liability of our directors is eliminated to the fullest extent permitted under the NRS.
Section 78.7502 of the NRS permits a company to indemnify its directors and officers against expenses, judgments, fines, and amounts shownpaid in settlement actually and reasonably incurred in connection with a threatened, pending, or completed action, suit, or proceeding, if the officer or director (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 of the NRS requires a corporation to indemnify a director or officer that has been successful on the merits or otherwise in defense of any action or suit. Section 78.7502 of the NRS precludes indemnification by the corporation if the officer or director has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines that in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for such expenses and requires a corporation to indemnify its officers and directors if they have been successful on the merits or otherwise in defense of any claim, issue, or matter resulting from their service as a director or officer.
Section 78.751 of the NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit, or proceeding as they are estimates, exceptincurred and in advance of final disposition thereof, upon determination by the Securitiesstockholders, the disinterested board members, or by independent legal counsel. If so provided in the corporation’s articles of incorporation, bylaws, or other agreement, Section 78.751 of the NRS requires a corporation to advance expenses as incurred upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of the NRS further permits the company to grant its directors and Exchange Commission registration fee.
| Securities and Exchange Commission Registration Fee | $ | 200.57 | ||
| Accounting Fees and Expenses | 10,000.00 | |||
| Legal Fees and Expenses | 30,000.00 | |||
| State securities fees | 2,000.00 | |||
| Transfer agent fees | 10,000.00 | |||
| Miscellaneous | 5,000.00 | |||
| Total | $ | 57,200.57 |
Section 78.752 of the NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee, or agent of the company, or is or was serving at the request of the company as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee, or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
Our Articlesarticles of Incorporation and By-lawsincorporation provide for indemnification of our officers and directors to the fullest extent permissible under Nevada law. Additionally, we have entered intoGeneral Corporation Law, in accordance with the Company’s Bylaws. Our Bylaws provide for indemnification agreements with each of our officers and Directors, and therefore purchasers of these securities may have a more limited right of action than they would have except for this limitation in the Articles of Incorporation and By-laws. These agreements provide, in general, that we shall indemnify and hold harmless such directors and officers to the fullest extent permittednot prohibited by law againstthe Nevada; provided however, that the Company may modify the extent of such indemnification by individual contracts with its directors and officers; and provided, further, that the Company shall not be required to indemnify any judgments, fines, amounts paid in settlement, and expenses, including attorneys' fees and disbursements, incurreddirector or officer in connection with orany proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law; (ii) the proceeding was authorized by the board of directors; (iii) such indemnification is provided by the Company, in any way arising out of, any claim, action or proceeding against, or affecting,its sole discretion, pursuant to the powers vested in the corporation under the Nevada General Corporation Law or; (iv) such directors and officers resulting from, relating to or in any way arising outindemnification is a result of the serviceenforcement of a contractual right.
| II-1 |
See “Item 17. Undertakings” for a description of the SEC’s position regarding such persons as our directors and officers.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
In November 2020, pursuant to Section 4(a)(2) of the Securities Act, we issued 6 shares of common stock in exchange for services. Forconsideration of consulting services rendered. We did not receive any proceeds from the following issuancesissuance.
In November 2020, pursuant to Section 3(a)(9) of the Securities Act, we issued 22,685 shares of common stock with fair value of $1,366,249 are the result of the conversion of notes payables and accrued interest.
In November 2020, pursuant to Section 4(a)(2) of the Securities Act, we issued 1,113 shares of common stock with a fair value of $70,562 in consideration of consulting services rendered. We did not receive any proceeds from the issuance.
In March 2021, we issued 555 shares of our securities, we claimedcommon stock upon conversion of $35,513.60 of accrued interest under certain of our convertible notes. We did not receive any proceeds upon conversion. We relied on the exemption from registration set forth inprovided by Section 4(2)3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
In March 2021, we issued 4,279 shares of our common stock upon exercise of outstanding unit purchase options. The unit purchase options were issued to purchase 6,556 shares and were exercised in full on a cashless basis and accordingly 2,278 shares were withheld by us at the rules thereunder, as private transactions not involving a public distribution. The facts wemarket price of $184.00 per share less the exercise price of $64.00 per share to fund the exercise price. We relied upon to claimon the exemption include: (i) the purchasers represented that they purchased shares from the Company for investment and not with a view to distribution to the public; (ii) each certificate issued for unregistered securities contains a legend stating that the securities have not been registered underregistration provided by Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act and setting forthof 1933, as amended.
In March 2021, we issued 6,556 warrants upon the restrictionsexercise in full of 6,556 unit purchase options. We did not receive any proceeds upon exercise. We relied on the transferability and the saleexemption from registration provided by Section 3(a)(9) and/or Section 4(a)(2) of the securities; (iii)Securities Act of 1933, as amended.
In March 2021, we issued 4,538 shares of our common stock upon exercise of outstanding warrants. The warrants were issued to purchase 6,953 shares and were exercised in full on a cashless basis and accordingly 2,416 shares were withheld by us at the purchasers as well as mostmarket price of those who received shares for services represented that they were accredited investors and sophisticated and all were familiar with our business activities; and (iv)$184.00 per share less the purchasers and service providers were given full and complete accessexercise price of $64.00 per share to any corporate information requestedfund the exercise price. We relied on the exemption from registration provided by them.
During 2021, we issued 4,875 shares of our common stock to consultants and employees in consideration of services rendered. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. We did not receive any proceeds from this issuance.
In November 2021, we issued 1,500 shares of our common stock in consideration for purchasing Effortless IVF with a share exchange agreement (the “Share Exchange Agreement”) and consummatedfair value of $117,600. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. We did not receive any proceeds from this issuance.
In December 2021, we issued 3,907 shares of our common stock upon conversion of $250,000 of a share exchange (the “Share Exchange”) withconvertible promissory note. We did not receive any proceeds upon conversion. We relied on the exemption from registration provided by Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
In January 2022, the Company which was then known as Emy’s Salsa Aji Distribution Company, Inc. (“Emy’s”). Upon the closing of the Share Exchange on December 5, 2008 (the “Closing”), the INVO Bioscience Shareholders transferred all of theirissued 4,732 shares of common stock to Paradigm Opportunities Fund, LP (“Paradigm”). The shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company received $315,000 in INVO Bioscience to Emy’s. proceeds from this issuance.
In exchange,February 2022, we issued 150 shares of common stock to consultants in consideration of services rendered. These shares were issued pursuant to the INVO Bioscience Shareholders an aggregateexemption from registration provided by Section 4(a)(2) of 38,307,500the Securities Act of 1933, as amended. We did not receive any cash proceeds from this issuance.
In February 2023, we issued 11,667 shares of Emy’s common stock (the “common stock”), $0.0001 par value per share, representing 71.9%to consultants in consideration of services rendered. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the sharesSecurities Act of 1933, as amended. We did not receive any cash proceeds from this issuance.
| II-2 |
On March 27, 2023, we issued and outstanding immediately after the Closing. As a result of the Share Exchange, INVO Bioscience became a wholly-owned subsidiary of Emy’s.
On March 2009,27, 2023, we issued an aggregate of 83,333common stock purchase warrants to purchase 7,360 shares of common stock Wakabayashi Fund, LLC for investor relations services in the Asian markets totaling $37,500.
In May 2023, we issued warrants to purchase 5,750,000 shares of the Company’s common stock at a price of $0.20 per share.
In September 2009, the CompanyJuly 2023, we issued an aggregate of 857,00016,250 shares of common stock forin consideration of a number of different services which renderedsettlement with a total of $299,950. The services included investor relations from College Stock LLC which received the majority of these shares (500,000), 140,000third party. These shares were issued pursuant to two former employees per their employment agreement, the balanceexemption from registration provided by Section 4(a)(2) of the shares were distributedSecurities Act of 1933, as amended. We did not receive any cash proceeds from this issuance.
Item 16. Exhibits.
The list of exhibits in the Exhibit Index to 7 other individuals for engineeringthis registration statement is incorporated herein by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
provided, however, that the undertakings set forth in paragraphs (1)(i), (1)(ii) and manufacturing support (25,000 shares), sales consulting (102,000 shares), legal guidance (50,000 shares) and technical assistance (40,000 shares),
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser: |
| (i) | Each prospectus filed by the registrant pursuant to Rule 424 (b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and |
| (ii) | Each prospectus required to be filed pursuant to Rule 424 (b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(l)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933, as amended, shall be deemed to be part of and included in the registration statement as of the earlier of the date such prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; |
| II-3 |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser; |
| (6) | That, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
| (7) | Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. |
| II-4 |
SIGNATURES
Pursuant to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| INVO BIOSCIENCE, INC. | ||
| By: | /s/ Steven Shum | |
| Steven Shum | ||
| Chief Executive Officer | ||
Pursuant to sign any and all amendments (including post-effective amendments) to this Registration Statement (or any other Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute may lawfully do or cause to be done by virtue hereof.
| Signature | Title | Date | ||
| Chief Executive Officer and Director | July 31, 2023 | |||
| Steven Shum | (principal executive officer) | |||
| /s/ Andrea Goren | Chief Financial Officer | July 31, 2023 | ||
| Andrea Goren | (principal financial officer) | |||
| * | Director | July 31, 2023 | ||
| Trent Davis | ||||
| * | Director | July 31, 2023 | ||
| Matthew Szot | ||||
| * | Director | July 31, 2023 | ||
| Barbara Ryan | ||||
| * | Director | July 31, 2023 | ||
| Rebecca Messina |
| *By: | /s/ Steven Shum | |
| Steven Shum, Attorney-in-Fact | ||
| Date: | July 31, 2023 |
| II-5 |
EXHIBIT INDEX
| II-6 |
| II-7 |
| II-8 |
* Filed herewith
** Furnished herewith
***To be filed by amendment
****Previously filed
| II-9 |