INVO Bioscience, Inc. (“the Company”) offers novel solutions in assisted reproductive technologies while expanding geographic and affordable access to the global reproductive health care community. Our primary focus is the manufacture and sale of the INVOcell device and the INVO technology to assist infertile couples in having a baby. We designed our INVOcell device and our INVO procedure to provide an alternative infertility treatment for the patient and the clinician. The INVO procedure is less expensive and simpler to perform than most comparable infertility treatments currently. The simplicity of the INVO procedure relates to the ability to potentially perform the INVO procedure in a physician’s practice rather than in a specialized facility at a much lower cost overall than current infertility treatments.
We believe that the INVO procedure will make infertility treatment more readily available throughout the world. The INVO procedure is significantly less costly than conventional IVF. The INVOcell device and INVO procedure facilitates conception and embryo development inside the woman’s body, rather than in a dish in a laboratory, which is an attractive feature for most couples.
Through December 31, 2015, we have generated minimal revenues, have incurred significant expenses and have sustained losses. Consequently, our operations are subject to all the risks inherent in the establishment of a new business enterprise.
In May 2008, the Company received notice that the INVOcell product meets all of the essential requirements of the relevant European Directive(s), and received CE marking. The CE marking (also known as CE mark) is a mandatory conformity mark on many products placed on the single market in the Euro
pean Economic Area (EEA). The CE marking (an acronym for the French “Conformitй Europйenne”) certifies that a product has met EU health, safety and environmental requirements, which ensure consumer safety.
On November 3, 2015, the Company issued a press release reporting the U.S. Food and Drug Administration (“FDA”) has granted the Company’s de novo request for the INVOcell to allow the marketing, sale and use in the United States.
With CE Marking, the Company possess the necessary regulatory authority to distribute its product in the European Economic Area (Includes: The European Union, Canada, Australia, and New Zealand); we can also distribute in India, Africa and most parts of South America and the Middle East.
On December 5, 2008, the Company completed a share exchange with Emy’s Salsa Aji Distribution Company, Inc. (“Emy’s”), a publicly registered shell corporation with no significant assets or operations. Emy’s was incorporated on July 11, 2005, under the laws of the State of Nevada under the name Certiorari Corp. In connection with the share exchange, INVO Bioscience became Emy’s wholly-owned subsidiary and the INVO Bioscience shareholders acquired control of Emy’s.
The Company accounted for the transaction as a recapitalization and the Company is the surviving entity. In connection with the share exchange, Emy’s shareholders retained 14,937,500 shares. Effective with the Agreement, all previously outstanding shares of Common Stock owned by the Company’s shareholders were exchanged for an aggregate of 38,307,500 shares of Emy’s common stock. Effective with the Agreement, Emy’s changed its name to INVO Bioscience, Inc.
All references to “Common Stock,” “share” and “per share” amounts have been retroactively restated to reflect the exchange ratio of 357.0197 shares of INVO Bioscience Common Stock for one share of Emy’s common stock outstanding immediately prior to the merger as if the exchange had taken place as of the beginning of the earliest period presented.
The accompanying consolidated financial statements present the historical financial condition, results of operations and cash flows of the Company prior to the merger with Emys. The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
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.
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. The Company had the following amounts of cash and cash equivalents on its balance sheets:
Inventories consist of work in process (WIP) and finished products and are stated at the lower of cost or market; using the first-in, first-out (FIFO) method as a cost flow convention.
The Company records property and equipment at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets, which are from 3 to 7 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.
The Company accounts for stock-based compensation under the provisions of Accounting Standards Codification 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 in exchange for the award, which is usually the vesting period.
Basic loss per share calculations are computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include securities or other contracts to issue common stock that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The Company has excluded the following dilutive securities from the calculation of fully-diluted shares outstanding because the result would have been anti-dilutive:
|
|
Twelve Months Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Effect of dilutive common stock equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
-
|
|
|
|
1,750,000
|
|
|
|
7,316,667
|
|
|
|
7,516,667
|
|
|
|
7,033,334
|
|
Convertible notes and interest
|
|
|
3,239,180
|
|
|
|
7,751,663
|
|
|
|
7,142,996
|
|
|
|
6,534,330
|
|
|
|
10,009,111
|
|
Total
|
|
|
3,239,180
|
|
|
|
9,501,663
|
|
|
|
14,459,663
|
|
|
|
14,050,997
|
|
|
|
17,042,445
|
|
(
I) Fair Value of Financial Instruments
ASC 825-10-50, “Disclosures about Fair Value of Financial Instruments,” (formerly SFAS No. 107) 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” (SFAS 157), 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.
(J) Income Taxes
The Company accounts for income taxes under the ASC 740-10-05, “Accounting for Income Taxes” (SFAS 109). Under ASC 740-10, deferred 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 ASC 740-10, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In July 2006, the FASB issued ASC 740-10, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (FIN 48). ASC 740-10 clarifies the recognition threshold and measurement of a tax position taken on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. ASC 740-10 also requires expanded disclosure with respect to the uncertainty in income taxes.
(K) Business Segments
The Company operates in one segment and therefore segment information is not presented.
(L) Concentration of Credit Risk
Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. The Company had cash balances in excess of FDIC limits in the following amounts:
December 31,
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
$
|
292,004
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(M) Revenue Recognition
The Company will recognize revenue on arrangements in accordance with ASC 605-10 formerly 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 when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
(N) 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 enterprise are less than their carrying amount, their carrying amounts are reduced to the fair value and an impairment loss recognized. There was no impairment recorded from January 5, 2007 (inception) to December 31, 2015.
(O) Research and Development
The Company accounts for research and development costs in accordance with the ASC 730-10 “Accounting for Research and Development Costs” (SFAS 2). 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. The Company did not have any expenditures for research and product development in the year of 2010 through 2015.
(P) Reclassifications
Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.
(Q) Recent Accounting Pronouncements
In May 2016, FASB issued accounting standards update ASU-2016-12, Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same time Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). The Company is currently evaluating the impact of the adoption of ASU 2016-12 on the Company’s financial statements.
In March 2016, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments in this update simplify several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. We are currently evaluating the effect that the adoption of this standard will have on our financial statements.
In February 2016, the FASB issued FASB ASU 2016-02, “Leases (Topic 842)”. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee would be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the effect that the adoption of this ASU will have on our financial statements.
In August 2014, the FASB issued Accounting Standards Update ASU 2014-15 “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments contained in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. We are currently assessing the impact of the adoption of ASU 2014-15, and we have not yet determined the effect of the standard on our ongoing financial reporting.
There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The Company commenced operations in December 2008. In During the year ended December 31, 2015, the Company had a net loss of $4,959,247 and cash used in operations $151,622. At December 31, 2015, the Company had a working capital deficiency of $3,778,018 and a stockholder deficiency of $3,757,002. This raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.
The Company had inventory in the following amounts:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Work in Process
|
|
$
|
31,997
|
|
|
$
|
31,997
|
|
|
$
|
31,997
|
|
|
$
|
46,266
|
|
|
$
|
41,480
|
|
Finished Goods
|
|
|
33,423
|
|
|
|
30,458
|
|
|
|
33,574
|
|
|
|
7,608
|
|
|
|
18,039
|
|
Total Inventory
|
|
$
|
65,420
|
|
|
$
|
62,455
|
|
|
$
|
65,571
|
|
|
$
|
53,874
|
|
|
$
|
59,519
|
|
NOTE 4
|
PROPERTY AND EQUIPMENT
|
The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows:
|
Estimated Useful Life
|
Molds
|
3 to 7 years
|
Computers and Software
|
3 to 5 years
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Manufacturing Equipment - Molds
|
|
$
|
35,263
|
|
|
$
|
35,263
|
|
|
$
|
35,263
|
|
|
$
|
35,263
|
|
|
$
|
35,263
|
|
Less: Accumulated Depreciation
|
|
|
(35,263
|
)
|
|
|
(35,263
|
)
|
|
|
(30,365
|
)
|
|
|
(24,488
|
)
|
|
|
(18,611
|
)
|
Network / IT Equipment
|
|
|
7,595
|
|
|
|
7,595
|
|
|
|
7,595
|
|
|
|
7,595
|
|
|
|
7,595
|
|
Less: Accumulated Depreciation
|
|
|
(7,595
|
)
|
|
|
(7,595
|
)
|
|
|
(7,595
|
)
|
|
|
(7,595
|
)
|
|
|
(7,595
|
)
|
Total Property and Equipment, net
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,898
|
|
|
$
|
10,775
|
|
|
$
|
16,652
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The Company recorded depreciation expense as follows:
Twelve Months Ended December 31,
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
$
|
-
|
|
|
$
|
4,898
|
|
|
$
|
5,877
|
|
|
$
|
5,877
|
|
|
$
|
7,775
|
|
The company capitalizes the initial expense related to establishing the patent 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 the patent in the market place in proportion to the expense it must spend to maintain the patent.
The Company has recorded the following patent costs:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Patent Costs
|
|
$
|
77,743
|
|
|
$
|
77,743
|
|
|
$
|
77,743
|
|
|
$
|
77,743
|
|
|
$
|
77,743
|
|
Less: Accumulated Depreciation
|
|
|
(56,727
|
)
|
|
|
(51,094
|
)
|
|
|
(45,461
|
)
|
|
|
(39,828
|
)
|
|
|
(34,195
|
)
|
Patent Costs, net
|
|
$
|
21,016
|
|
|
$
|
26,649
|
|
|
$
|
32,282
|
|
|
$
|
37,915
|
|
|
$
|
43,548
|
|
The Company recorded amortization expense as follows:
Twelve Months Ended December 31,
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
$
|
5,633
|
|
|
$
|
5,633
|
|
|
$
|
5,633
|
|
|
$
|
5,633
|
|
|
$
|
13,578
|
|
In 2011, the decision was made to not to pay the renewal fees and expedite the amortization of the original patent which expired in 2012. It was also decided to not spend its limited funds in defending the INVO Block patent as it only has value to the Company. The Company continues to pay the annual renewal fees on its active patents.
Estimated amortization expense as of December 31, 2015 is as follows:
Years ended December 31,
|
|
|
|
2016
|
|
$
|
4,536
|
|
2017
|
|
|
4,536
|
|
2018
|
|
|
4,536
|
|
2019
|
|
|
4,536
|
|
2020 and thereafter
|
|
|
2,872
|
|
Total
|
|
$
|
21,016
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
Bridge Notes
During 2009, the Company issued senior secured convertible notes (“Bridge Notes”) payable to investors in the aggregate amount of $545,000. The Bridge Notes carry interest rates ranging between 10-12% and were due in full one year from the date of issuance and are past due. Both the Bridge Notes and the accrued interest thereon are convertible into Restricted Common Stock of the Company at a conversion price of $0.10 per share (the “Original Conversion Price”). If the Company were to issue any new shares of common stock within 24 months of the date of the Bridge Notes at a price below the Original Conversion Price, then the conversion price of the Bridge Notes would be adjusted to reflect the new lower price; see note 8. In addition to the Bridge Notes, the Company issued warrants to purchase 5,750,000 shares of the Company’s Common Stock at a price of $0.20 per share as of the date of this filing. All the warrants have expired. The Company valued the conversion feature of the Bridge Notes and the warrants issued via the Black-Scholes valuation method. The total fair value calculated for the conversion feature was $1,473,710; $151,826 was allocated to discount on the Bridge Notes, and $1,341,884 was charged to operations. The total fair value calculated for the warrants was $1,719,666; $393,174 was allocated to discount on the Bridge Notes, and $1,326,492 was charged to operations. The aggregate discount on the Bridge Notes for the conversion feature and the warrants was $545,000, and the aggregate amount charged to operations was $2,668,371 which was recorded as a derivative liability on the Company’s consolidated balance sheet.
In November and December 2009, principal in the aggregate amount of $235,000 of the Bridge Notes was converted into shares of Common Stock and the fair value of the derivative liability was recalculated and reduced to $108,000 with adjustments to revaluation expense of $486,000. The remaining discount of $545,000 was amortized to interest expense over the original one-year term of the Bridge Notes using the effective interest method; as of September 30, 2010 the full amount has been amortized.
In July 2010, INVO Bioscience reached an agreement with one of the investors who had converted his bridge notes into shares to cancel those related 1,750,000 shares and the corresponding 1,750,000 warrants and apply the proceeds to the open subscription receivable balance he carried with the company.
In May 2015, the Company negotiated the conversion of certain of the Bridge Notes and accrued interest into shares of common stock. The Company negotiated these conversions at a price lower than the conversion price stated in the original Bridge Note documents because the Bridge Notes were past due. These conversions were treated as a restructure of debt on the Company’s financial statements for the twelve months ended December 31, 2015. $300,000 of the Bridge Notes and accrued interest were converted into 12,470,900 shares of restricted common stock resulting in a loss on debt settlement in the amount of $6,632,279.
Q2 Notes
In April and May, 2010, the Company issued convertible notes (“Q2 Notes”) payable to investors in the aggregate amount of $90,000. The Q2 Notes carried an 8% interest rate and are due in full nine months from the date of issuance. The Q2 Notes were convertible into Common Stock of the Company starting 90 days after the issuance date until maturity or when paid whichever is later. The conversion price is variable, based on a fifty percent discount per share on the average of the three lowest trading prices for the ten trading days ending one trading day prior to the date the conversion notice is sent to the Company, subject to adjustments. The Company valued the conversion feature of the Q2 Notes via the Black-Scholes valuation method. The total fair value calculated for the conversion was $55,900, which was recorded as a derivative liability on the Company’s balance sheet. Of this amount, $25,900 was allocated to the discount on the Q2 Notes and $30,000 was charged to operations.
During the twelve months ended December 31, 2010, Q2 Note principal in the amount of $55,500 was converted to 2,370,147 shares of common stock.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
During the twelve months ended December 31, 2011, Q2 Notes principal and accrued interest were converted to common stock as follows:
- On January 3, 2011, Q2 Note principal in the amount of $4,500 and accrued interest in the amount of $2,400 were converted at a price of $0.016 per share into 431,250 shares of common stock, resulting in a loss on debt settlement in the amount of $4,161;
- On January 18, 2011, Q2 Note principal in the amount of $10,000 was converted at a price of $0.0197 into 507,614 shares of common stock, resulting in a gain on debt settlement in the amount of $1,883;
- On February 15, 2011, Q2 Note principal in the amount of $12,000 was converted at a price of $0.0198 into 606,061 shares of common stock, resulting in a gain on debt settlement in the amount of $2,256;
- On February 23, 2011, Q2 Note principal in the amount of $8,000 and accrued interest in the amount of $1,200 were converted at a price of $0.0165 per share into 557,576 shares of common stock, resulting in a loss on debt settlement in the amount of $38.
During the year ended December 31, 2011, the total aggregate Q2 Note conversion of $34,500 of principal and $3,600 of accrued interest at a weighted-average price of $0.0181 per share into 2,102,501 shares of common stock. The net loss on settlement of debt for the year was $60. At December 31, 2011, principal balance of the Q2 Notes was $0.
Q111 Note
In March 2011, the Company issued a new convertible note (“Q111 Note”) payable to Asher Enterprises in the amount of $37,500. The Q111 Note carries an 8% interest rate and is due in full nine months from the date of issuance. The Q111 Note is convertible into Common Stock of the Company starting 180 days after the issuance date until maturity or when paid whichever is later. The conversion price is variable, based on a fifty percent discount per share on the average of the three lowest trading prices for the ten trading days ending one trading day prior to the date the conversion notice is sent to the Company, subject to adjustments. The Company valued the conversion feature derivative liability of this note via the Black-Scholes valuation method. The total fair value calculated for the conversion was approximately $25,400, which was recorded as a derivative liability and was allocated as a discount to the note on the Company’s balance sheet. During the twelve months ended December 31, 2011, Q111 Note principal and accrued interest were converted to common stock as follows:
- On September 16, 2011, Q111 Note principal in the amount of $8,000 was converted at a price of $0.0119 per share into 672,269 shares of common stock, resulting in a gain on debt settlement in the amount of $1,797;
- On September 26, 2011, Q111 Note principal in the amount of $10,000 was converted at a price of $0.0097 per share into 1,030,928 shares of common stock, resulting in a gain on debt settlement in the amount of $1,630;
- On October 10, 2011, Q111 Note principal in the amount of $9,500 and was converted at a price of $0.0084 per share into 1,130,952 shares of common stock, resulting in a gain on debt settlement in the amount of $321;
- On October 20, 2011, Q111 Note principal in the amount of $10,000 and accrued interest in the amount of $1,500 was converted at a price of $0.0074 per share into 1,554,054 shares of common stock, resulting in a loss on debt settlement in the amount of $1,803.
During the year ended December 31, 2011, the total aggregate Q111 Note conversion of $37,500 of principal and $1,500 of accrued interest at a weighted-average price of $0.0089 per share into 4,388,203 shares of common stock. The net gain on settlement of debt for the Q111 Note conversions was $1,946. At December 31, 2011, principal balance of the Q111 Notes was $0.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
Q311 Note
In July 2011, the Company issued a new convertible note (“Q311 Note”) payable to Asher Enterprises in the amount of $30,000. The Q311 Note carries an 8% interest rate and is due in full nine months from the date of issuance. The Q 111 Note is convertible into Common Stock of the Company starting 180 days after the issuance date until maturity or when paid whichever is later. The conversion price is variable, based on a fifty percent discount per share on the average of the three lowest trading prices for the ten trading days ending one trading day prior to the date the conversion notice is sent to the Company, subject to adjustments. The Company valued the conversion feature derivative liability of this note via the Black-Scholes valuation method. The total fair value calculated for the conversion was $18,685, which was recorded as a derivative liability and was allocated as a discount to the note on the Company’s balance sheet.
During the twelve months ended December 31, 2012, the Q311 Note and accrued interest were converted to common stock as follows:
- On January 30, 2012, Q311 Note principal in the amount of $12,000 was converted at a price of $0.0065 per share into 1,846,154 shares of common stock, resulting in a gain on debt settlement in the amount of $427;
- On February 2, 2012, Q311 Note principal in the amount of $10,000 was converted at a price of $0.0117 per share into 854,701 shares of common stock, resulting in a gain on debt settlement in the amount of $4,211;
- On February 8, 2012, Q311 Note principal in the amount of $8,000 and accrued interest in the amount of $1,200 were converted at a price of $0.0092 per share into 1,000,000 shares of common stock, resulting in a loss on debt settlement in the amount of $1,394.
During the year ended December 31, 2012, the total Q311 Note conversions transactions resulted in the conversion of $30,000 of principal and $1,200 of accrued interest at a weighted-average price of $0.0084 per share into 3,700,855 shares of common stock, resulting in a net gain on settlement of debt for the year in the amount of $3,244.
Principal balances of the Convertible Notes were as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Bridge Notes
|
|
$
|
10,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q111 Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q311 Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
340,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
10,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
322,406
|
|
Interest expense on the Convertible Notes was charged to operations as represented in the following table:
|
|
Twelve Months Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Accrued Interest
|
|
$
|
14,286
|
|
|
$
|
34,200
|
|
|
$
|
34,200
|
|
|
$
|
34,513
|
|
|
$
|
37,234
|
|
Amortization of Discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,594
|
|
|
|
44,901
|
|
Total interest expense - Convertible Notes Payable
|
|
$
|
14,286
|
|
|
$
|
34,200
|
|
|
$
|
34,200
|
|
|
$
|
52,107
|
|
|
$
|
82,135
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
NOTE 7
|
NOTE PAYABLE AND OTHER RELATED PARTY TRANSACTIONS
|
On September 18, 2008, the Company entered into a related party transaction with Dr. Claude Ranoux. Dr. Ranoux was then the President, Director and Chief Scientific Officer of the Company; as of the date of this filing he is a Director. Dr. Ranoux had loaned funds to the Company to sustain its operations since January 5, 2007 (inception). Dr. Ranoux’s total original cumulative investment as of December 31, 2008 was $96,462, as of December 31, 2015 it is $21,888 (“the Principal Amount”) in INVO Bioscience. 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, the term of the note had been extended, and has been extended a couple of additional times, the current repayment date is October 31, 2018. The Company and Dr. Ranoux can jointly decide to repay the loan earlier without prepayment penalties. During the twelve months ended December 31, 2015, $20,000 was repaid on the principal of the loan.
On March 5, 2009, the Company entered into a related party transaction with Kathleen Karloff, the Chief Executive Officer and a Director of the Company. Ms. Karloff provided a short-term loan in the amount of $75,000 bearing interest at 5% per annum to the Company to fund operations. In May 2009, Ms. Karloff loaned to the Company an additional $13,000, making her total cumulative loan $88,000 as of December 31, 2011. This note was due on September 15, 2009, which has since been extended a few times to its current date of October 31, 2018. During the twelve months ended December 31, 2014, Ms. Karloff loaned the Company an additional $66,000 at an interest rate of 0% by entering into a note payable agreement in satisfaction of expenses incurred by her for amounts previously advanced to the Company. This note currently has the same expiration date as the others which is October 31, 2018.
On December 28, 2009 James Bowdring, the brother of Director Robert Bowdring invested $100,000 acquiring 666,667 shares of restricted common stock. In April 2011, the Company issued a new short term convertible note (“Q211 Note”) payable to James Bowdring in the amount of $50,000. The Q211 Note carries a 10% interest rate and is due in full, two months from the date of issuance. The note was past due and is partially still open, as of this date the balance is $25,000. The Q211 Note is convertible into Common Stock of the Company at a conversion price of $0.03 per share, subject to adjustments. In addition to the Q211 Note, the Company issued warrants to purchase 1,666,667 shares of the Company’s Common Stock at a price of $0.03 per share, as of this date the warrants have expired. The Company valued the Q211 Note’s warrants issued as consideration for the notes payable via the Black-Scholes valuation method. The total fair value calculated for the conversion was approximately $39,500, and for the warrants was approximately $45,500 both of which were recorded as a derivative liability on the Company’s balance sheet. In September 2011, the Company made a principal payment on the Q211 Note in the amount of $25,000.
In November 2011, the Company issued a new convertible note (“Q411 Note”) payable to James Bowdring in the amount of $10,000. The Q411 Note carries a 10% interest rate and is due in full, two months from the date of issuance. The Q411 Note is convertible into Common Stock of the Company at a conversion price of $0.01 per share, subject to adjustments. In addition to the Q411 Note, the Company issued warrants to purchase 500,000 shares of the Company’s Common Stock at a price of $0.02 per share, as of this date the warrants have expired. The Company valued the Bridge Note’s warrants issued as consideration for the notes payable via the Black-Scholes valuation method. The total fair value calculated for the conversion option was $2,345, and for the warrants was $4,076 both of which were recorded as a derivative liability on the Company’s balance sheet.
In Other Related Party Transactions, we have been renting our corporate office from Forty Four Realty Trust which is owned by James Bowdring, the brother of Director, Robert Bowdring since November 2012. It is a month to month rental arrangement for less than the going fair market real estate rental rate. We have been paying $4,800 annually since 2012. In addition the Company purchases stationary supplies and marketing items at discounted rates from Superior Printing & Promotions which is also owned by James Bowdring and is in the same building as our corporate office. INVO Bioscience spent $5,000 with Superior during 2015.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
Principal balances of the Related Party loans were as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Claude Ranoux Note
|
|
$
|
21,888
|
|
|
$
|
41,888
|
|
|
$
|
41,888
|
|
|
$
|
41,888
|
|
|
$
|
41,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Bowdring – Q211 Note
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Bowdring- Q411 Note
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Karloff Note
|
|
|
154,000
|
|
|
|
154,000
|
|
|
|
88,000
|
|
|
|
88,000
|
|
|
|
88,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
210,888
|
|
|
$
|
230,888
|
|
|
$
|
164,888
|
|
|
$
|
164,888
|
|
|
$
|
164,888
|
|
Interest expense on the Related Party loans was charged to operations as represented in the following table:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest - Related Party Notes
|
|
$
|
20,195
|
|
|
$
|
20,195
|
|
|
$
|
20,195
|
|
|
$
|
20,210
|
|
|
$
|
17,270
|
|
Amortization of discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,941
|
|
Total interest expense – related parties
|
|
$
|
20,195
|
|
|
$
|
20,195
|
|
|
$
|
20,195
|
|
|
$
|
20,210
|
|
|
$
|
74,211
|
|
Accounts payable and accrued liabilities balances include expenses reports for Ms. Karloff, Dr. Ranoux and Mr. Bowdring for expenses they paid for personally related to travel or normal business expenses and are represented in the following table:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
68,002
|
|
|
$
|
114,376
|
|
|
$
|
109,138
|
|
|
$
|
100,742
|
|
|
$
|
96,598
|
|
NOTE 8
|
DERIVATIVE LIABILITY
|
In June 2008, the FASB issued new accounting guidance, which requires entities to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock by assessing the instrument’s contingent exercise provisions and settlement provisions. Instruments not indexed to their own stock fail to meet the scope exception of ASC 815 “Derivative and Hedging” and should be classified as a liability and marked-to-market. The statement is effective for fiscal years beginning after December 15, 2008 and is to be applied to outstanding instruments upon adoption with the cumulative effect of the change in accounting principle recognized as an adjustment to the opening balance of retained earnings.
ASC 815-40 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. As disclosed in Note 7, during 2009, the Company entered into short term convertible loans with attached warrants, which contain a strike price adjustment feature. The anti-dilution provisions in the convertible notes and warrants trigger liability treatment. At the end of each quarter since their issuance in 2009, the liability has been adjusted for the change in fair value of the warrants.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The following table represents the amount of derivative liability on the Company’s balance sheets:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Value of derivative liability attributed to warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
31,447
|
|
|
$
|
32,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of derivative liability attributed to conversion options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,796
|
|
|
|
47,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value of derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
39,243
|
|
|
$
|
80,484
|
|
The Company valued the anti-dilution provisions of the convertible notes and warrants using the Black-Scholes valuation model using the following assumptions:
|
|
For the twelve months ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Expected volatility
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
|
231.09 to 303.04
|
%
|
|
155.37 to 260.26
|
%
|
|
142.59 to 170.58
|
%
|
Expected life (years)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
0.41 to 2.46
|
|
|
0.19 to 3.07
|
|
|
0.08 to 4.00
|
|
Risk free interest rate
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
|
0.04 to 0.11
|
%
|
|
0.05 to 0.41
|
%
|
|
0.06 to 0.17
|
%
|
Forfeiture rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dividend rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NOTE 9
|
STOCKHOLDERS’ EQUITY
|
Twelve Months Ended December 31, 2011
In January 2011, we issued 400,000 shares to AGS Capital Group LLC for shares they purchased under our Reserve Equity Financing Agreement with them for a value of $6,680, these funds were used to pay patent annuities.
In January 2011, Asher Enterprises requested the conversion of $14,500 of its convertible notes (Q2 Notes) and $2,400 of accrued interest with the Company and 938,864 shares of Common Stock were issued. These shares were exempt from registration pursuant to Section (4)(2) of the Securities Act. The Company recorded a loss on settlement of debt in the amount of $2,278 with regard to this transaction.
In February 2011, Asher Enterprises requested the conversion of $20,000 of its convertible notes (Q2 Notes) and $1,200 of accrued interest with the Company and 1,163,637 shares of Common Stock were issued. These shares were exempt from registration pursuant to Section (4)(2) of the Securities Act. . The Company recorded a gain on settlement of debt in the amount of $2,218 with regard to this transaction.
In March 2011, the Company issued an aggregate of 128,333 shares of Common Stock for consulting and investor relation services having a value of $3,850.
In April 2011, the Company issued an aggregate of 458,000 shares of Common Stock for FDA consultative and investor relation consulting services having a value of $15,240.
In June 2011, the Company issued an aggregate of 310,413 shares of Common Stock for FDA consulting services and for payment of outstanding legal expenses having a value of $9,312.
In September 2011, the Company issued an aggregate of 410,000 shares of Common Stock for marketing consulting services, accounting and filing services and for payment of outstanding legal expenses having a value of $8,200.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
In September 2011, Asher Enterprises requested the conversion of $18,000 of its convertible note (Q111 Note) with the Company and 1,703,197 shares of Common Stock were issued. These shares were exempt from registration pursuant to Section (4)(2) of the Securities Act. The Company recorded a gain on settlement of debt in the amount of $3,427 with regard to this transaction.
In October 2011, the Company issued an aggregate of 142,406 shares of Common Stock to a current investor for cash in the amount of $3,551.
In October 2011, Asher Enterprises requested the conversion of the balance of its convertible note (Q111 Note) with the Company in the amount of $19,500 plus accrued interest in the amount of $1,500, and 2,685,006 shares of Common Stock were issued. These shares were exempt from registration pursuant to Section (4)(2) of the Securities Act. The Company recorded a loss on settlement of debt in the amount of $1,482 with regard to this transaction.
In October 2011, the Company issued an aggregate of 200,000 shares of Common Stock for accounting and filing services and for payment of outstanding expenses having a value of $4,000.
In December 2011, the Company received an additional credit in the amount of $98,894 from a service provider for common stock previously issue for services.
Twelve Months Ended December 31, 2012
In January 2012, Asher Enterprises requested the conversion of principal of its convertible note (Q311 Note) with the Company in the amount of $12,000, and 1,846,154 shares of Common Stock were issued. The Company recorded a gain on settlement of debt in the amount of $427 with regard to this transaction.
In February 2012, Asher Enterprises requested the conversion of principal of its convertible note (Q311 Note) with the Company in the amount of $10,000, and 854,701 shares of Common Stock were issued. .The Company recorded a gain on settlement of debt in the amount of $4,211 with regard to this transaction.
In February 2012, Asher Enterprises requested the conversion of principal of its convertible note (Q311 Note) with the Company in the amount of $8,000 and accrued interest in the amount of $1,200, and 1,000,000 shares of Common Stock were issued. The Company recorded a loss on settlement of debt in the amount of $1,394 with regard to this transaction.
In June 2012, the Company sold 750,000 shares of common stock and warrants to purchase an additional 750,000 shares of common stock at a price of $0.08 per share for cash in the amount of $30,000.
In June 2012, the Company issued 3,592,308 shares of common stock with a fair value of $35,923 to service providers.
In September 2012, the Company sold 250,000 shares of common stock and warrants to purchase an additional 1,000,000 shares of common stock at a price of $0.20per share for cash in the amount of $15,000.
In December 2012, the Company issued 1,629,107 shares of common stock with a fair value of $16,291 to service providers.
In December 2012, the Company sold 500,000 shares of common stock for cash of $5,000.
Twelve Months Ended December 31, 2013
In February 2013, the Company sold 250,000 shares of common stock for cash of $15,000.
In February 2013, the Company issued 12,000,000 shares of common stock with a fair value of $60,000 to employees for services.
In March 2013, the Company sold 42,858 shares of common stock for cash of $750.
In April 2013, the Company sold 375,000 shares of common stock for cash of $15,000.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
In April 2013, the Company issued 1,036,000 shares of common stock with a fair value of $23,038 to service providers.
In April 2013, the Company issued 1,200,000 shares of common stock with a fair value of $12,000 to service providers.
In July 2013, the Company sold 750,000 shares of common stock for cash of $15,000.
In July 2013, the Company issued 1,000,000 shares of common stock with a fair value of $10,000 to service providers.
In July 2013, the Company sold 1,250,000 shares of common stock for cash of $25,000.
Twelve Months Ended December 31, 2014
In November 2014, the Company sold 400,000 shares of common stock for cash of $20,000.
In November 2014, the Company issued 930,000 shares of common stock with a fair value of $118,300 to service providers.
In November 2014, the Company issued 7,000,000 shares of common stock with a fair value of $1,050,000 to employees for services.
Twelve Months Ended December 31, 2015
In February 2015, the Company sold 125,000 shares of common stock for cash of $25,000.
In May 2015, investors requested the conversion of principal of convertible notes (Bridge Notes) with the Company in the amount of $300,000 and accrued interest and 12,470,900 shares of Common Stock were issued. The Company recorded a loss on settlement of debt in the amount of $6,632,279 with regard to this transaction.
In June 2015, the Company issued 750,000 shares of common stock for cash proceeds of $60,000 pursuant to the exercise of warrants by an investor.
In September 2015, the Company issued 1,000,000 shares of common stock for cash proceeds of $60,000 pursuant to the exercise of warrants by an investor.
In October 2015, the Company issued 119,000 shares of common stock with a fair value of $53,548 to service providers.
In October 2015, the Company sold 1,000,000 shares of common stock for cash of $500,000.
In December 2015, the Company issued 1,888,476 shares of common stock with a fair value of $37,770 to service providers.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
NOTE 10
|
STOCK OPTIONS AND WARRANTS
|
Stock Options
As of December 31, 2015, 2014, 2013, 2012, and 2011, the Company does not have any committed and unissued stock options.
Warrants
The following tables summarize the significant terms of warrants outstanding at the periods indicated. These warrants were granted in lieu of cash compensation for services performed or financing expenses in connection with placement of convertible debentures and sale of Common Stock shares. As of the date of this filing the Company does not have any warrants outstanding.
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)
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
2.86
|
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
2.86
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
2.27
|
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
2.27
|
|
$
|
0.08
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.08
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
2.69
|
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
2.69
|
|
$
|
0.20
|
|
|
|
3,900,000
|
|
|
|
2.26
|
|
|
$
|
0.20
|
|
|
|
3,900,000
|
|
|
|
2.26
|
|
$
|
0.30
|
|
|
|
666,667
|
|
|
|
0.98
|
|
|
$
|
0.30
|
|
|
|
666,667
|
|
|
|
0.98
|
|
Total 12/31/2011
|
|
|
|
7,033,334
|
|
|
|
2.20
|
|
|
$
|
0.15
|
|
|
|
7,033,334
|
|
|
|
2.20
|
|
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)
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
1.85
|
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
1.85
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
1.27
|
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
1.27
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
2.45
|
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
2.45
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
1.69
|
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
1.69
|
|
$
|
0.20
|
|
|
|
4,300,000
|
|
|
|
1.81
|
|
|
$
|
0.20
|
|
|
|
4,300,000
|
|
|
|
1.81
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
Total 12/31/2012
|
|
|
|
7,516,667
|
|
|
|
1.75
|
|
|
$
|
0.13
|
|
|
|
7,516,667
|
|
|
|
1.75
|
|
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)
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
0.85
|
|
|
$
|
0.02
|
|
|
|
500,000
|
|
|
|
0.85
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
0.27
|
|
|
$
|
0.03
|
|
|
|
1,666,667
|
|
|
|
0.27
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
1.45
|
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
1.45
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
0.69
|
|
|
$
|
0.10
|
|
|
|
300,000
|
|
|
|
0.69
|
|
$
|
0.20
|
|
|
|
4,100,000
|
|
|
|
0.88
|
|
|
$
|
0.20
|
|
|
|
4,100,000
|
|
|
|
0.88
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
Total 12/31/2013
|
|
|
|
7,316,667
|
|
|
|
0.79
|
|
|
$
|
0.13
|
|
|
|
7,316,667
|
|
|
|
0.79
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
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)
|
|
$
|
0.02
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.02
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.03
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.03
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
0.45
|
|
|
$
|
0.08
|
|
|
|
750,000
|
|
|
|
0.45
|
|
$
|
0.10
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.10
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.20
|
|
|
|
1,000,000
|
|
|
|
0.71
|
|
|
$
|
0.20
|
|
|
|
1,000,000
|
|
|
|
0.71
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
Total 12/31/2014
|
|
|
|
1,750,000
|
|
|
|
0.60
|
|
|
$
|
0.15
|
|
|
|
1,750,000
|
|
|
|
0.60
|
|
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)
|
|
$
|
0.02
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.03
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.08
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.10
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.20
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.30
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total 12/21/2015
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Transactions involving warrants are summarized as follows:
|
|
|
|
|
Weighted-
|
|
|
|
Number of
|
|
|
Average Price
|
|
|
|
Shares
|
|
|
per Share
|
|
Outstanding at December 31, 2010
|
|
|
4,866,667
|
|
|
$
|
0.21
|
|
Granted
|
|
|
2,166,667
|
|
|
|
0.028
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2011
|
|
|
7,033,334
|
|
|
$
|
0.15
|
|
Granted
|
|
|
1,750,000
|
|
|
|
0.0149
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or Expired
|
|
|
(1,266,667
|
)
|
|
|
-
|
|
Outstanding at December 31, 2012
|
|
|
7,516,667
|
|
|
$
|
0.013
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or Expired
|
|
|
(200,000
|
)
|
|
|
0.20
|
|
Outstanding at December 31, 2013
|
|
|
7,316,667
|
|
|
$
|
0.13
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or Expired
|
|
|
(5,566,667
|
)
|
|
|
0.14
|
|
Outstanding at December 31, 2014
|
|
|
1,750,000
|
|
|
$
|
0.15
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(1,750,000
|
)
|
|
|
0
|
|
Cancelled or Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
In April 2011, the Company issued warrants to purchase 1,666,667 shares of common stock at a price of $0.03 per share to investors pursuant to the Q211 Note transaction (see Note 7). In November 2011, the Company issued warrants to purchase 500,000 shares of common stock at a price of $0.02 per share to investors pursuant to the Q411 Note transaction (see Note 7).
In June 2012, the Company issued warrants to purchase 750,000 shares of common stock at a price of $0.08 per share to investors pursuant to a sale of common stock (see Note 9). In September 2012, the Company issued warrants to purchase 1,000,000 shares of common stock at a price of $0.20 per share to investors pursuant to a sale of common stock (see Note 9).
The estimated value of the compensatory warrants granted to non-employees in exchange for financing expenses was determined using the Black-Scholes pricing model and the following assumptions:
|
|
For the twelve months ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Expected volatility
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
|
231.09 to 303.04
|
%
|
|
214.73 to 260.26
|
%
|
|
142.59 to 170.58
|
%
|
Expected life (years)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.50
|
|
|
0.19 to 0.50
|
|
|
0.08 to 1.00
|
|
Risk free interest rate
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
|
0.04 to 0.11
|
%
|
|
0.05 to 0.16
|
%
|
|
0.06 to 0.17
|
%
|
Forfeiture rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dividend rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NOTE 11
|
FAIR VALUE MEASUREMENTS
|
Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of long term convertible notes is based on management estimates and reasonably approximates their book value after comparison to obligations with similar interest rates and maturities. The fair value of the Company’s derivative instruments is determined using option pricing models.
As a result of the adoption of ASC 815-40, the Company is required to disclose the fair value measurements required by ASC 820, “Fair Value Measurements and Disclosures.” The other liabilities recorded at fair value in the balance sheet as of December 31, 2015, 2014, 2013, 2012, and 2011 are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC 820 are directly related to the amount of subjectivity associated with the inputs to fair valuations of these liabilities are as follows:
Level 1 —
|
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
|
|
|
Level 2 —
|
Inputs other than Level 1 inputs that are either directly or indirectly observable; and
|
|
|
Level 3 —
|
Unobservable inputs, for which little or no market data exist, therefore requiring an entity to develop its own assumptions.
|
The following table summarizes the financial liabilities measured at fair value on a recurring basis as of the dates indicated, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
at fair value
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
$
|
80,484
|
|
|
$
|
80,484
|
|
December 31, 2012:
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
at fair value
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
$
|
39,243
|
|
|
$
|
39,243
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
at fair value
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
at fair value
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
at fair value
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Warrant and conversion option derivative liability
— these instruments consist of certain of our warrants with anti-dilution provisions, and conversion options embedded in convertible notes payable. These instruments were valued using pricing models, which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.
The following is a summary of changes in fair value of the derivative and warrant liability for which Level 3 inputs were used in determining fair value:
|
|
Warrants
|
|
|
Conv Op
|
|
|
Total
|
|
Balance at January 1, 2011
|
|
$
|
130,824
|
|
|
$
|
37,731
|
|
|
$
|
168,555
|
|
Issued
|
|
|
49,536
|
|
|
|
86,015
|
|
|
|
135,551
|
|
Revalued
|
|
|
(147,823
|
)
|
|
|
53,368
|
|
|
|
(94,455
|
)
|
Note paid
|
|
|
-
|
|
|
|
(11,012
|
)
|
|
|
(11,012
|
)
|
Note converted
|
|
|
-
|
|
|
|
(118,155
|
)
|
|
|
(118,155
|
)
|
Balance at December 31, 2011
|
|
$
|
32,537
|
|
|
$
|
47,947
|
|
|
$
|
80,484
|
|
Issued
|
|
|
23,126
|
|
|
|
-
|
|
|
|
23,126
|
|
Revalued
|
|
|
(24,216
|
)
|
|
|
48,705
|
|
|
|
24,489
|
|
Note paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note converted
|
|
|
-
|
|
|
|
(88,856
|
)
|
|
|
(88,856
|
)
|
Balance at December 31, 2012
|
|
$
|
31,447
|
|
|
$
|
7,796
|
|
|
$
|
39,243
|
|
Issued
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Revalued
|
|
|
59,649
|
|
|
|
43,901
|
|
|
|
103,550
|
|
Note paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note converted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Charged to APIC
|
|
|
(91,096
|
)
|
|
|
(51,697
|
)
|
|
|
(142,793
|
)
|
Balance at December 31, 2013
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Revalued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note converted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2014
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Revalued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note converted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has adopted ASC 740-10, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The Company’s total deferred tax liabilities, deferred tax assets, and deferred tax asset valuation allowances are as of December 31 are as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Total deferred tax assets
|
|
$
|
6,327,000
|
|
|
$
|
4,343,000
|
|
|
$
|
3,651,000
|
|
|
$
|
3,346,000
|
|
|
$
|
3,080,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(6,327,000
|
)
|
|
|
(4,343,000
|
)
|
|
|
(3,651,000
|
)
|
|
|
(3,346,000
|
)
|
|
|
(3,080,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Those amounts have been presented in the company’s financial statements as of December 31, as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Noncurrent deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The company has a loss carry forward of $ 15,819,000 that may be offset against future taxable income. Substantially all of the carry forwards expire in 2030.
Income tax provision (benefit) consists of the following components:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Noncurrent deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which is uncertain. Those amounts are therefore presented on the Company’s balance sheets as a non-current asset. Utilization of the net operating loss carry forwards may be subject to substantial annual limitations, which may result in the expiration of net operating loss carry forwards before utilization.
NOTE 13
|
COMMITMENTS AND CONTINGENCIES
|
In January 2011, the Company entered into a month to month rental agreement with Highland- March Executive Suites within its current location at the Cummings Center for the space and services it requires.
In November 2012, INVO Bioscience entered into a below market, month to month rental agreement with Forty Four Realty Trust with for the space it requires. Forty Four Realty Trust is owned by investor James Bowdring, the brother of Director Robert Bowdring.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
INVO Bioscience, Inc., and two of its directors have been, since 2010, defending litigation brought by investors in an alleged predecessor of INVO Bioscience, Inc. On March 24, 2010, INVO Bioscience, Inc. (meaning also its corporate affiliate Bio-X-Cell, Inc.), Claude Ranoux, and Kathleen Karloff were served an Amended Complaint, the original of which was filed on December 31, 2009 at the Suffolk Superior Court Business Litigation Session by two terminated employees of Medelle Corporation, who are also attorneys, and a former investor in and creditor of Medelle Corporation. These plaintiffs allege various claims of wrongdoing relating to the sale of assets of Medelle to Dr. Ranoux. Plaintiffs claim that Dr. Ranoux, Ms. Karloff, and Medelle Corporation (and therefore INVO Bioscience as an alleged successor corporation) violated alleged duties owed to plaintiffs in connection with the sale.
Dr. Ranoux, Ms. Karloff, and INVO Bioscience have challenged these allegations, which they believe are baseless. The transfer of the assets of Medelle was professionally handled by an independent third party, after approval by the Medelle Board of Directors, representing a majority of its shareholders. Medelle’s Board voted to proceed with an assignment for the benefit of creditors (AFBC) and gave complete authority to the President & CEO at that time (neither Dr. Ranoux nor Ms. Karloff) to work with the third-party assignee and to get the best possible price for those assets. The third party was responsible for notifying all the appropriate parties and for filing notices in various professional publications and newspapers of Medelle’s intention to sell its assets. The third party also contacted numerous large medical device and bio-pharma companies to learn if they would be interested in acquiring the assets. After a private sale was deemed unlikely, the assignee of the assets elected to proceed with a sealed-bid auction of the assets. On the day of the auction, Dr. Ranoux submitted the only bid and was awarded the assets, upon full payment.
During 2010, Dr. Ranoux, Ms. Karloff, and INVO Bioscience filed Motions to Dismiss as to all claims, pursuant to M.R.Civ. P. 12(b)(6). In a written Decision rendered on November 12, 2010, the judge dismissed all claims against INVO, Bio X Cell, and Ms. Karloff, and also dismissed the claims against Dr. Ranoux alleging civil conspiracy and breach of M.G.L. c. 93A. The judge denied Dr. Ranoux’s motion to dismiss the remaining breach of fiduciary duty and fraud claims. The plaintiffs allege in their Amended Complaint that Dr. Ranoux committed fraud by failing to inform them of the details of the Medelle auction.
The claims against Dr. Ranoux that survived the November 2010 dismissal order were submitted to binding arbitration. On February 15, 2013, the mutually-agreed arbitrator ruled in favor of Dr. Ranoux in a 122-paragraph award. The award held that Dr. Ranoux did not withhold information about the auction of Medelle’s assets and expressed doubt that the plaintiffs would have invested the resources necessary to make a beneficial use of the assets. The arbitrator’s award then was confirmed by the Superior Court on August 21, 2013. The Superior Court’s confirmation of the award was affirmed on appeal on October 20, 2013 by the Massachusetts Appeals Court. The Massachusetts Supreme Judicial Court then denied further appellate review.
On October 27, 2016, the Suffolk County Superior Court converted the November 2010 order of dismissal into a final judgment dismissing all claims against all defendants.
Plaintiffs have filed a second appeal on November 28, 2016, challenging the order of dismissal from November, 2010. Plaintiffs have not challenged the dismissal of Ms. Karloff, leaving claims against Medelle (and INVO, as Medelle’s alleged successor) and Dr. Ranoux.
INVO Bioscience, Inc. and Dr. Ranoux intend a vigorous opposition to the current appeal, consistent with their previous positions that no breach of duty occurred in the sale of Medelle’s assets.
From time to time, the Company may be involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
The Company had employment agreements for officers, executives and employees of the Company in place. The agreements have since expired and have not been renewed as the Company has not had the proper funds to meet its commitment but has continued to accrue amounts annually for the work that has been performed. The employees and directors are continuing to work based on good faith and belief in the Company and the INVOcell product.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
The Company has a verbal agreement beginning in March, 2013 with its former CFO, Robert Bowdring, who is currently a Director, to assist where necessary in the financial and administrative areas of the Company for compensation to be equivalent to the others working in the organization.
The Company had an agreement beginning in August, 2011 with an Advisory Board Member who assisted the Company in its sales and marketing areas for stock compensation. This members’ agreement was not renewed in September 2016 when it expired.
NOTE 14
|
SUBSEQUENT EVENTS
|
In May 2016, the Company issued 3,511,000 shares of common stock with a fair value of $1,264,000 to employees, consultants and interns for services.
In March 2017, the Company issued 196,000 restricted shares of common stock with a fair value of $60,000 to consultants for services rendered.
In March 2017, an investor converted the principal of his convertible note (Bridge Notes) with the Company in the amount of $10,000 and accrued interest, 341,000 restricted shares of Common Stock were issued.
On October 27, 2016, the Suffolk County Superior Court converted the November 2010 order of dismissal into a final judgment dismissing all claims against all defendants, INVO Bioscience, Inc. (also its subsidiary Bio-X-Cell, Inc.), Claude Ranoux, and Kathleen Karloff. Plaintiffs have filed a second appeal on November 28, 2016, challenging the order of dismissal from November, 2010. Plaintiffs have not challenged the dismissal of Ms. Karloff, leaving claims against Medelle (and INVO, as Medelle’s alleged successor) and Dr. Ranoux.
INVO Bioscience, Inc. and Dr. Ranoux intend a vigorous opposition to the current appeal, consistent with their previous positions that no breach of duty occurred in the sale of Medelle’s assets. For more information see note 13, Litigation.
INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, 2013, 2012, and 2011
NOTE 15
|
QUARTERLY FINANCIAL INFORMATION (Unaudited)
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2015
|
|
|
2015
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
114,561
|
|
|
$
|
79,623
|
|
|
$
|
24,471
|
|
Accounts receivable net
|
|
|
1,346
|
|
|
|
321
|
|
|
|
2,134
|
|
Inventory
|
|
|
60,851
|
|
|
|
61,038
|
|
|
|
61,896
|
|
Prepaid expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total current assets
|
|
|
176,758
|
|
|
|
140,982
|
|
|
|
88,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized patents, net
|
|
|
22,424
|
|
|
|
23,832
|
|
|
|
25,240
|
|
Total other assets
|
|
|
22,424
|
|
|
|
23,832
|
|
|
|
25,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
199,182
|
|
|
$
|
164,814
|
|
|
$
|
113,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities, including related parties
|
|
$
|
1,069,298
|
|
|
$
|
1,068,936
|
|
|
$
|
1,252,690
|
|
Accrued Compensation
|
|
|
2,993,190
|
|
|
|
2,895,990
|
|
|
|
2,798,790
|
|
Note payable - related party
|
|
|
230,888
|
|
|
|
230,888
|
|
|
|
230,888
|
|
Convertible notes
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
310,000
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total current liabilities
|
|
|
4,303,376
|
|
|
|
4,205,814
|
|
|
|
4,592,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,303,376
|
|
|
|
4,205,814
|
|
|
|
4,592,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
134,078,170, 133,078,170, and 119,857,270
issued and outstanding as of September 30, 2015, June 30, 2015,
and March 31, 2015, respectively.
|
|
|
13,408
|
|
|
|
13,308
|
|
|
|
11,986
|
|
Additional paid-in capital
|
|
|
11,456,988
|
|
|
|
11,397,087
|
|
|
|
6,513,514
|
|
Accumulated deficit
|
|
|
(15,574,590
|
)
|
|
|
(15,451,395
|
)
|
|
|
(11,004,127
|
)
|
Total stockholder's deficit
|
|
|
(4,104,194
|
)
|
|
|
(4,041,000
|
)
|
|
|
(4,478,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
199,182
|
|
|
$
|
164,814
|
|
|
$
|
113,741
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2014
|
|
|
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,274
|
|
|
$
|
8,634
|
|
|
$
|
7,256
|
|
Accounts receivable net
|
|
|
3,757
|
|
|
|
1,927
|
|
|
|
9,188
|
|
Inventory
|
|
|
62,996
|
|
|
|
63,799
|
|
|
|
64,078
|
|
Prepaid expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total current assets
|
|
|
73,027
|
|
|
|
74,360
|
|
|
|
80,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
490
|
|
|
|
1,959
|
|
|
|
3,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized patents, net
|
|
|
28,057
|
|
|
|
29,465
|
|
|
|
30,874
|
|
Total other assets
|
|
|
28,057
|
|
|
|
29,465
|
|
|
|
30,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
101,574
|
|
|
$
|
105,784
|
|
|
$
|
114,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities, including related parties
|
|
$
|
1,192,904
|
|
|
$
|
1,176,595
|
|
|
$
|
1,162,063
|
|
Accrued Compensation
|
|
|
2,604,390
|
|
|
|
2,507,190
|
|
|
|
2,409,990
|
|
Note payable - related party
|
|
|
230,888
|
|
|
|
230,888
|
|
|
|
164,888
|
|
Convertible notes
|
|
|
310,000
|
|
|
|
310,000
|
|
|
|
310,000
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total current liabilities
|
|
|
4,338,182
|
|
|
|
4,224,673
|
|
|
|
4,046,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,338,182
|
|
|
|
4,224,673
|
|
|
|
4,046,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
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; 111,402,270
issued and outstanding as of September 30, 2014, June 30, 2014, and March 31, 2014.
|
|
|
11,140
|
|
|
|
11,140
|
|
|
|
11,140
|
|
Additional paid-in capital
|
|
|
5,301,060
|
|
|
|
5,301,060
|
|
|
|
5,301,060
|
|
Accumulated deficit
|
|
|
(9,548,808
|
)
|
|
|
(9,431,089
|
)
|
|
|
(9,244,316
|
)
|
Total stockholder's deficit
|
|
|
(4,236,608
|
)
|
|
|
(4,118,889
|
)
|
|
|
(3,932,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
101,574
|
|
|
$
|
105,784
|
|
|
$
|
114,825
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2013
|
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
7,501
|
|
|
$
|
2,275
|
|
|
$
|
687
|
|
Accounts receivable net
|
|
|
(485
|
)
|
|
|
1,627
|
|
|
|
3,977
|
|
Inventory
|
|
|
67,903
|
|
|
|
52,259
|
|
|
|
52,537
|
|
Prepaid expense
|
|
|
-
|
|
|
|
16,064
|
|
|
|
13,592
|
|
Total current assets
|
|
|
74,919
|
|
|
|
72,225
|
|
|
|
70,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6,367
|
|
|
|
7,836
|
|
|
|
9,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized patents, net
|
|
|
33,690
|
|
|
|
35,098
|
|
|
|
36,507
|
|
Total other assets
|
|
|
33,690
|
|
|
|
35,098
|
|
|
|
36,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
114,976
|
|
|
$
|
115,159
|
|
|
$
|
116,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities, including related parties
|
|
$
|
1,111,692
|
|
|
$
|
1,096,671
|
|
|
$
|
1,082,502
|
|
Accrued Compensation
|
|
|
2,215,590
|
|
|
|
2,118,390
|
|
|
|
2,021,190
|
|
Note payable - related party
|
|
|
164,888
|
|
|
|
164,888
|
|
|
|
164,888
|
|
Convertible notes
|
|
|
310,000
|
|
|
|
310,000
|
|
|
|
310,000
|
|
Derivative liability
|
|
|
156,246
|
|
|
|
79,685
|
|
|
|
137,654
|
|
Total current liabilities
|
|
|
3,958,416
|
|
|
|
3,769,634
|
|
|
|
3,716,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,958,416
|
|
|
|
3,769,634
|
|
|
|
3,716,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
110,152,270, 108,402,270, and 105,791,270
issued and outstanding as of September 30, 2014, June 30, 2014,
and March 31, 2014, respectively.
|
|
|
11,015
|
|
|
|
10,840
|
|
|
|
10,579
|
|
Additional paid-in capital
|
|
|
5,133,392
|
|
|
|
5,108,567
|
|
|
|
5,058,790
|
|
Accumulated deficit
|
|
|
(8,987,847
|
)
|
|
|
(8,773,882
|
)
|
|
|
(8,668,997
|
)
|
Total stockholder's deficit
|
|
|
(3,843,440
|
)
|
|
|
(3,654,475
|
)
|
|
|
(3,599,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
114,976
|
|
|
$
|
115,159
|
|
|
$
|
116,606
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
27,690
|
|
|
$
|
31,459
|
|
|
$
|
887
|
|
Accounts receivable net
|
|
|
4,628
|
|
|
|
6,898
|
|
|
|
10,681
|
|
Inventory
|
|
|
56,407
|
|
|
|
56,929
|
|
|
|
58,145
|
|
Prepaid expense
|
|
|
-
|
|
|
|
541
|
|
|
|
1,082
|
|
Total current assets
|
|
|
88,725
|
|
|
|
95,827
|
|
|
|
70,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
12,244
|
|
|
|
13,714
|
|
|
|
15,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized patents, net
|
|
|
39,323
|
|
|
|
40,731
|
|
|
|
42,140
|
|
Total other assets
|
|
|
39,323
|
|
|
|
40,731
|
|
|
|
42,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
140,292
|
|
|
$
|
150,272
|
|
|
$
|
128,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities, including related parties
|
|
$
|
1,024,084
|
|
|
$
|
995,983
|
|
|
$
|
964,051
|
|
Accrued Compensation
|
|
|
1,826,790
|
|
|
|
1,729,590
|
|
|
|
1,632,390
|
|
Note payable - related party
|
|
|
164,888
|
|
|
|
164,888
|
|
|
|
164,888
|
|
Convertible notes
|
|
|
310,000
|
|
|
|
310,000
|
|
|
|
310,000
|
|
Derivative liability
|
|
|
165,455
|
|
|
|
75,387
|
|
|
|
108,987
|
|
Total current liabilities
|
|
|
3,491,217
|
|
|
|
3,275,848
|
|
|
|
3,180,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,491,217
|
|
|
|
3,275,848
|
|
|
|
3,180,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
91,369,305, 91,119,305, and 86,776,997 shares
issued and outstanding as of September 30, 2012, June 30, 2012,
and March 31, 2012, respectively.
|
|
|
9,137
|
|
|
|
9,112
|
|
|
|
8,678
|
|
Additional paid-in capital
|
|
|
4,963,191
|
|
|
|
4,948,216
|
|
|
|
4,882,727
|
|
Accumulated deficit
|
|
|
(8,323,253
|
)
|
|
|
(8,082,904
|
)
|
|
|
(7,943,603
|
)
|
Total stockholder's deficit
|
|
|
(3,350,925
|
)
|
|
|
(3,125,576
|
)
|
|
|
(3,052,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
140,292
|
|
|
$
|
150,272
|
|
|
$
|
128,118
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three
|
|
|
For the Nine
|
|
|
For the Three
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2015
|
|
|
2015
|
|
|
2015
|
|
|
2015
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,513
|
|
|
$
|
11,689
|
|
|
$
|
5,551
|
|
|
$
|
9,176
|
|
|
$
|
3,625
|
|
Cost of goods sold:
|
|
|
4,412
|
|
|
|
6,154
|
|
|
|
(466
|
)
|
|
|
1,742
|
|
|
|
2,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
(1,899
|
)
|
|
|
5,535
|
|
|
|
6,017
|
|
|
|
7,434
|
|
|
|
1,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
116,865
|
|
|
|
363,582
|
|
|
|
113,457
|
|
|
|
246,717
|
|
|
|
133,260
|
|
Total operating expenses
|
|
|
116,865
|
|
|
|
363,582
|
|
|
|
113,457
|
|
|
|
246,717
|
|
|
|
133,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(118,764
|
)
|
|
|
(358,047
|
)
|
|
|
(107,440
|
)
|
|
|
(239,283
|
)
|
|
|
(131,843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
4,332,155
|
|
|
|
4,332,155
|
|
|
|
4,332,155
|
|
|
|
-
|
|
(Gain) Loss in fair value of derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Value of derivative liability in excess of principal of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
4,431
|
|
|
|
24,919
|
|
|
|
7,673
|
|
|
|
20,488
|
|
|
|
12,815
|
|
Total other ( income) expenses
|
|
|
4,431
|
|
|
|
4,357,074
|
|
|
|
4,339,828
|
|
|
|
4,352,643
|
|
|
|
12,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(123,195
|
)
|
|
|
(4,715,121
|
)
|
|
|
(4,447,268
|
)
|
|
|
(4,591,926
|
)
|
|
|
(144,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(123,195
|
)
|
|
$
|
(4,715,121
|
)
|
|
$
|
(4,447,268
|
)
|
|
$
|
(4,591,926
|
)
|
|
$
|
(144,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(004
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of common stock
|
|
|
133,241,213
|
|
|
|
126,253,467
|
|
|
|
125,580,775
|
|
|
|
122,701,684
|
|
|
|
119,790,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of common stock
|
|
|
133,241,213
|
|
|
|
126,253,467
|
|
|
|
125,580,775
|
|
|
|
122,701,684
|
|
|
|
119,790,603
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three
|
|
|
For the Nine
|
|
|
For the Three
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2014
|
|
|
2014
|
|
|
2014
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,753
|
|
|
$
|
16,588
|
|
|
$
|
2,162
|
|
|
$
|
11,835
|
|
|
$
|
9,673
|
|
Cost of goods sold:
|
|
|
1,899
|
|
|
|
6,274
|
|
|
|
1,749
|
|
|
|
4,375
|
|
|
|
2,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
2,854
|
|
|
|
10,314
|
|
|
|
413
|
|
|
|
7,460
|
|
|
|
7,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
107,522
|
|
|
|
393,280
|
|
|
|
174,237
|
|
|
|
285,758
|
|
|
|
111,521
|
|
Total operating expenses
|
|
|
107,522
|
|
|
|
393,280
|
|
|
|
174,237
|
|
|
|
285,758
|
|
|
|
111,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(104,668
|
)
|
|
|
(382,966
|
)
|
|
|
(173,824
|
)
|
|
|
(278,298
|
)
|
|
|
(104,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(Gain) Loss in fair value of derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Value of derivative liability in excess of principal of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
13,051
|
|
|
|
38,845
|
|
|
|
12,949
|
|
|
|
25,794
|
|
|
|
12,845
|
|
Total other ( income) expenses
|
|
|
13,051
|
|
|
|
38,845
|
|
|
|
12,949
|
|
|
|
25,794
|
|
|
|
12,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(117,719
|
)
|
|
|
(421,811
|
)
|
|
|
(186,773
|
)
|
|
|
(304,092
|
)
|
|
|
(117,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(117,719
|
)
|
|
$
|
(421,811
|
)
|
|
$
|
(186,773
|
)
|
|
$
|
(304,092
|
)
|
|
$
|
(117,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of common stock
|
|
|
111,402,970
|
|
|
|
111,402,970
|
|
|
|
111,402,270
|
|
|
|
111,402,270
|
|
|
|
111,402,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of common stock
|
|
|
111,402,970
|
|
|
|
111,402,970
|
|
|
|
111,402,270
|
|
|
|
111,402,270
|
|
|
|
111,402,270
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three
|
|
|
For the Nine
|
|
|
For the Three
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2013
|
|
|
2013
|
|
|
2013
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
297
|
|
|
$
|
12,198
|
|
|
$
|
3,625
|
|
|
$
|
11,901
|
|
|
$
|
8,276
|
|
Cost of goods sold:
|
|
|
1,074
|
|
|
|
5,193
|
|
|
|
1,674
|
|
|
|
4,119
|
|
|
|
2,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
(777
|
)
|
|
|
7,005
|
|
|
|
1,951
|
|
|
|
7,782
|
|
|
|
5,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
123,576
|
|
|
|
472,686
|
|
|
|
151,856
|
|
|
|
349,110
|
|
|
|
197,254
|
|
Total operating expenses
|
|
|
123,576
|
|
|
|
472,686
|
|
|
|
151,856
|
|
|
|
349,110
|
|
|
|
197,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(124,353
|
)
|
|
|
(465,681
|
)
|
|
|
(149,905
|
)
|
|
|
(341,328
|
)
|
|
|
(191,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(Gain) Loss in fair value of derivative liability
|
|
|
76,561
|
|
|
|
117,003
|
|
|
|
(57,969
|
)
|
|
|
40,442
|
|
|
|
98,411
|
|
Value of derivative liability in excess of principal of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
13,051
|
|
|
|
38,845
|
|
|
|
12,949
|
|
|
|
25,794
|
|
|
|
12,845
|
|
Total other ( income) expenses
|
|
|
89,612
|
|
|
|
155,848
|
|
|
|
(45,020
|
)
|
|
|
66,236
|
|
|
|
111,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(213,965
|
)
|
|
|
(621,529
|
)
|
|
|
(104,885
|
)
|
|
|
(407,564
|
)
|
|
|
(302,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(213,965
|
)
|
|
$
|
(621,529
|
)
|
|
$
|
(104,885
|
)
|
|
$
|
(407,564
|
)
|
|
$
|
(302,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of common stock
|
|
|
109,581,618
|
|
|
|
105,910,613
|
|
|
|
107,239,512
|
|
|
|
104,044,687
|
|
|
|
104,044,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of common stock
|
|
|
109,581,618
|
|
|
|
105,910,613
|
|
|
|
107,239,512
|
|
|
|
104,044,687
|
|
|
|
104,044,687
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three
|
|
|
For the Nine
|
|
|
For the Three
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
3,624
|
|
|
$
|
27,575
|
|
|
$
|
12,669
|
|
|
$
|
23,951
|
|
|
$
|
11,282
|
|
Cost of goods sold:
|
|
|
1,990
|
|
|
|
7,867
|
|
|
|
5,011
|
|
|
|
5,877
|
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
1,634
|
|
|
|
19,708
|
|
|
|
7,658
|
|
|
|
18,074
|
|
|
|
10,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
161,960
|
|
|
|
456,471
|
|
|
|
167,610
|
|
|
|
294,481
|
|
|
|
126,871
|
|
Total operating expenses
|
|
|
161,960
|
|
|
|
456,471
|
|
|
|
167,610
|
|
|
|
294,481
|
|
|
|
126,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(160,326
|
)
|
|
|
(436,763
|
)
|
|
|
(159,952
|
)
|
|
|
(276,407
|
)
|
|
|
(116,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
(3,244
|
)
|
|
|
-
|
|
|
|
(3,244
|
)
|
|
|
(3,244
|
)
|
(Gain) Loss in fair value of derivative liability
|
|
|
66,972
|
|
|
|
150,701
|
|
|
|
(33,600
|
)
|
|
|
78,655
|
|
|
|
117,359
|
|
Value of derivative liability in excess of principal of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,104
|
|
|
|
-
|
|
Interest expense
|
|
|
13,051
|
|
|
|
39,169
|
|
|
|
12,949
|
|
|
|
26,118
|
|
|
|
13,169
|
|
Total other ( income) expenses
|
|
|
80,023
|
|
|
|
186,626
|
|
|
|
(20,651
|
)
|
|
|
106,633
|
|
|
|
127,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(240,349
|
)
|
|
|
(623,389
|
)
|
|
|
(139,301
|
)
|
|
|
(383,040
|
)
|
|
|
(243,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(240,349
|
)
|
|
$
|
(623,389
|
)
|
|
$
|
(139,301
|
)
|
|
$
|
(383,040
|
)
|
|
$
|
(243,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per weighted average shares of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of common stock
|
|
|
91,160,066
|
|
|
|
88,174,887
|
|
|
|
87,922,221
|
|
|
|
86,665,895
|
|
|
|
85,409,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of common stock
|
|
|
91,160,066
|
|
|
|
88,174,887
|
|
|
|
87,922,221
|
|
|
|
86,665,895
|
|
|
|
85,409,569
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2015
|
|
|
2015
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,715,121
|
)
|
|
$
|
(4,591,926
|
)
|
|
$
|
(144,658
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on settlement of debt
|
|
|
4,332,155
|
|
|
|
4,332,155
|
|
|
|
-
|
|
Excess value of warrant liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash cost of equity financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash compensation issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(Gain) Loss from the revaluation of derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of derivative liability in excess of principal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accretion of convertible debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
4,225
|
|
|
|
2,817
|
|
|
|
1,409
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,025
|
)
|
|
|
-
|
|
|
|
(1,813
|
)
|
Inventory
|
|
|
1,604
|
|
|
|
1,417
|
|
|
|
559
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable and accrued expenses
|
|
|
37,497
|
|
|
|
37,134
|
|
|
|
28,148
|
|
Accrued compensation
|
|
|
291,600
|
|
|
|
194,400
|
|
|
|
97,200
|
|
Net cash used in operating activities
|
|
|
(49,065
|
)
|
|
|
(24,003
|
)
|
|
|
(19,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment from demand note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on loans payable to related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from the sale of common stock
|
|
|
145,000
|
|
|
|
85,000
|
|
|
|
25,000
|
|
Net cash (used in) provided by financing activities
|
|
|
145,000
|
|
|
|
85,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
95,935
|
|
|
|
60,997
|
|
|
|
5,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
18,626
|
|
|
|
18,626
|
|
|
|
18,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
114,561
|
|
|
$
|
79,623
|
|
|
$
|
24,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon note payable and accrued interest conversion
|
|
$
|
4,824,896
|
|
|
$
|
4,824,896
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2014
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(421,811
|
)
|
|
$
|
(304,092
|
)
|
|
$
|
(117,319
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Excess value of warrant liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash cost of equity financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash compensation issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(Gain) Loss from the revaluation of derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of derivative liability in excess of principal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accretion of convertible debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
8,633
|
|
|
|
5,756
|
|
|
|
2,877
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,992
|
)
|
|
|
(162
|
)
|
|
|
(7,423
|
)
|
Inventory
|
|
|
2,575
|
|
|
|
1,772
|
|
|
|
1,493
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable and accrued expenses
|
|
|
109,242
|
|
|
|
92,933
|
|
|
|
12,401
|
|
Accrued compensation
|
|
|
291,600
|
|
|
|
194,400
|
|
|
|
97,200
|
|
Net cash provided by (used in) operating activities
|
|
|
(11,753
|
)
|
|
|
(9,393
|
)
|
|
|
(10,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment from demand note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on loans payable to related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from the sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net cash (used in) provided by financing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(11,753
|
)
|
|
|
(9,393
|
)
|
|
|
(10,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
18,027
|
|
|
|
18,027
|
|
|
|
18,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
6,274
|
|
|
$
|
8,634
|
|
|
$
|
7,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon note payable and accrued interest conversion
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2013
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(621,529
|
)
|
|
$
|
(407,564
|
)
|
|
$
|
(302,679
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Excess value of warrant liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash cost of equity financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash compensation issued for services
|
|
|
105,039
|
|
|
|
95,039
|
|
|
|
60,000
|
|
(Gain) Loss from the revaluation of derivative liability
|
|
|
117,003
|
|
|
|
40,442
|
|
|
|
98,411
|
|
Fair value of derivative liability in excess of principal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accretion of convertible debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
8,633
|
|
|
|
5,756
|
|
|
|
2,877
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
12,945
|
|
|
|
10,833
|
|
|
|
8,483
|
|
Inventory
|
|
|
(14,029
|
)
|
|
|
1,615
|
|
|
|
1,337
|
|
Prepaid expenses and other current assets
|
|
|
3,051
|
|
|
|
(13,013
|
)
|
|
|
(10,541
|
)
|
Accounts payable and accrued expenses
|
|
|
51,845
|
|
|
|
36,824
|
|
|
|
22,655
|
|
Accrued compensation
|
|
|
291,600
|
|
|
|
194,400
|
|
|
|
97,200
|
|
Net cash provided by (used in) operating activities
|
|
|
(45,442
|
)
|
|
|
(35,668
|
)
|
|
|
(22,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment from demand note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on loans payable to related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from the sale of common stock
|
|
|
45,749
|
|
|
|
30,749
|
|
|
|
15,750
|
|
Net cash (used in) provided by financing activities
|
|
|
45,749
|
|
|
|
30,749
|
|
|
|
15,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
307
|
|
|
|
(4,919
|
)
|
|
|
(6,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
7,194
|
|
|
|
7,194
|
|
|
|
7,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
7,501
|
|
|
$
|
2,275
|
|
|
$
|
687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon note payable and accrued interest conversion
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
INVO BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
For the Six
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(623,389
|
)
|
|
$
|
(383,040
|
)
|
|
$
|
(243,739
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on settlement of debt
|
|
|
(3,244
|
)
|
|
|
(3,244
|
)
|
|
|
(3,244
|
)
|
Excess value of warrant liability
|
|
|
23,096
|
|
|
|
5,104
|
|
|
|
-
|
|
Non-cash cost of equity financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash compensation issued for services
|
|
|
35,923
|
|
|
|
35,923
|
|
|
|
-
|
|
(Gain) Loss from the revaluation of derivative liability
|
|
|
150,701
|
|
|
|
78,655
|
|
|
|
117,359
|
|
Fair value of derivative liability in excess of principal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accretion of convertible debt discount
|
|
|
17,594
|
|
|
|
17,594
|
|
|
|
17,594
|
|
Depreciation and amortization
|
|
|
8,633
|
|
|
|
5,755
|
|
|
|
2,877
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
949
|
|
|
|
(1,321
|
)
|
|
|
(5,104
|
)
|
Inventory
|
|
|
3,112
|
|
|
|
2,590
|
|
|
|
1,374
|
|
Prepaid expenses and other current assets
|
|
|
2,179
|
|
|
|
1,638
|
|
|
|
1,097
|
|
Accounts payable and accrued expenses
|
|
|
75,133
|
|
|
|
47,002
|
|
|
|
15,070
|
|
Accrued compensation
|
|
|
291,600
|
|
|
|
194,400
|
|
|
|
97,200
|
|
Net cash provided by (used in) operating activities
|
|
|
(17,713
|
)
|
|
|
1,056
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment from demand note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on loans payable to related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Principal payments on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from the sale of common stock
|
|
|
45,000
|
|
|
|
30,000
|
|
|
|
-
|
|
Net cash (used in) provided by financing activities
|
|
|
45,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
27,287
|
|
|
|
31,056
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
403
|
|
|
|
403
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
27,690
|
|
|
$
|
31,459
|
|
|
$
|
887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon note payable and accrued interest conversion
|
|
$
|
116,812
|
|
|
$
|
116,812
|
|
|
$
|
116,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
35,923
|
|
|
$
|
35,923
|
|
|
$
|
-
|
|