UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


 
FORM 10-Q
 


  x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2009
 
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                             to                                        
        
Commission file number 333-147330
 
INVO Bioscience, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
20-4036208
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
100 Cummings Center Suite 421E, Beverly, MA 01915
(Address of principal executive offices, including zip code)

  (978) 878-9505
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x Yes   r No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x  Yes   r No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
   Large accelerated filer  r
Accelerated filer   r
   Non-accelerated filer  r (Do not check if a smaller reporting company)
Smaller reporting company     x
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   r Yes   x   No
 
 Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 Shares of common stock, par value $.0001 per share:  53,703,333 shares outstanding as of May 9, 2009.


 
INVO Bioscience, Inc.
FORM 10-Q
FOR THE QUARTER ENDED March 31, 2009
 
TABLE OF CONTENTS
 
Item
 
Page Number
Part I
     
1.
3
1a.
3
1b.
4
1c.
5
1d.
6
2.
13
3.
16
4.
16
4a.
16
4b.
16
     
Part II
     
1.
17
1A.
17
2.
17
3.
17
4.
17
5.
17
6.
17
 
18

 

 
PART I.  FINANCIAL INFORMATION

ITEM I.  Financial Statements
 
  INVO BIOSCIENCE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
March 31,
2009 (unaudited)
   
December 31,
2008
 
  Assets
           
Current Assets:
           
  Cash
 
$
9,751
   
$
15,716
 
  Accounts receivable
   
52,266
     
34,195
 
  Other receivable
   
7,500
     
7,500
 
  Inventory
   
74,749
     
70,722
 
  Prepaid expenses
   
52,940
     
73,785
 
   Total current assets
   
197,206
     
201,918
 
                 
  Property and equipment, net
   
39,143
     
41,245
 
                 
Other Assets:
               
  Capitalized patents, net
   
66,984
     
68,392
 
   Total other assets
   
66,984
     
68,392
 
                 
  Total assets
 
$
303,333
   
$
311,555
 
                 
Liabilities and Stockholders' Deficiency
 
                 
Current Liabilities:
               
  Accounts payable
 
$
556,804
   
$
226,861
 
  Accrued expenses
   
615,188
     
614,799
 
  Note payable- related party
   
75,000
     
-
 
  Line of credit
   
50,000
     
50,000
 
   Total current liabilities
   
1,296,992
     
891,660
 
                 
Long Term Liabilities:
               
  Note payable- related party
   
96,462
     
96,462
 
   Total long term liabilities
   
96,462
     
96,462
 
                 
  Total liabilities
   
1,393,454
     
988,122
 
                 
Commitments and Contingencies
               
Stockholders' Deficiency:
               
Preferred Stock, $.0001 par value; 100,000,000 shares authorized;
No shares issued and outstanding as of March 31, 2009 and December 31, 2008 
   
-
     
-
 
  Common Stock, $.0001 par value; 200,000,000 shares authorized; 53,703,333 and 53,620,000issued and outstanding as of March 31, 2009 and December 31, 2008, respectively.
   
5,370
     
5,362
 
Additional paid-in capital
   
1,893,057
     
1,855,565
 
Stock subscription receivable
   
(250,000)
     
(450,000)
 
  Accumulated deficit during the development stage
   
(2,738,548
)
   
(2,087,494
)
   Total stockholders' deficiency
   
(1,090,121
)
   
(676,567
)
                 
  Total liabilities and stockholders' deficiency
 
$
303,333
   
$
311,555
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
 
 
INVO BIOSCIENCE, INC.
(A DEVELOPMENT STAGE COMPANY)
  CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
 
   
For the three months
ended
March 31, 2009
   
  For the three months ended
March 31,  2008
   
From January 5, 2007
(Inception) to
March 31, 2009
 
Revenue:
                 
Product Revenue
 
$
36,815
   
$
-
   
$
74,810
 
Cost of Goods Sold:
                       
Product Costs
   
20,669
     
     
30,757
 
                         
Gross Margin:
   
16,146
     
     
44,053
 
                         
Operating Expenses:
                       
  Research and development
   
4,950
             
90,061
 
  Selling, general and administrative
   
656,900
     
39,233
     
2,671,676
 
   Total Operating Expenses
   
661,850
     
39,233
     
2,761,737
 
                         
Loss from operations
   
(645,704
)
   
(39,233
)
   
(2,717,684
)
                         
Other Expenses:
                       
  Interest expense
   
5,350
     
2,079
     
20,864
 
   Total other expenses
   
5,350
     
2,079
     
20,864
 
                         
Loss before income taxes
   
(651,054
)
   
(41,312
)
   
(2,738,548
)
                         
Provisions for income taxes
   
-
     
-
     
-
 
                         
Net Loss
 
$
(651,054
)
 
$
(41,312
)
 
$
(2,738,548
)
                         
Basic and diluted net loss per weighted average shares of common stock
 
$
(0.012
)
 
$
(0.001
)
 
$
-  
Basic and diluted Weighted average number of shares of common stock    
53,656,111
     
30,355,600
       
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 

 
INVO BIOSCIENCE, INC
 
(A DEVELOPMENT STAGE COMPANY)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited)
 
 
   
For the three months ended
March 31, 2009
   
For the three months ended
March 31 , 2008
   
From
January 5, 2007
(Inception) to
March 31, 2009
 
Net Loss
 
$
(651,054
)
 
$
(41,312
)
 
$
(2,738,548
)
Adjustments to reconcile net loss to net cash used in operating activities:
                       
  Non-cash stock compensation issued for services
   
37,500
     
12,000
     
89,085
 
  In kind contribution to employees
           
8,571
     
251,686
 
  In kind interest on loan payable- related party
           
1,241
     
5,988
 
  Depreciation and amortization
   
3,510
     
864
     
17,171
 
Changes in operating assets and liabilities:
                       
  Receivables
   
(18,071
)
   
-
     
(59,766
)
  Inventories
   
(4,027
)
   
-
     
(74,748
)
  Prepaid expenses and other current assets
   
20,845
     
3,349
     
(64,790
)
  Accounts payable
   
329,943
     
5,395
     
  556,534
 
  Other accrued expenses
   
389
     
2,666
     
553,753
 
Net cash used in operating activities
   
(280,965
)
   
(7,226
)
   
(1,463,636
)
                         
Cash flows from investing activities:
                       
Purchase of equipment
                   
(42,858
)
Deferred Financing Costs
   
-
     
2,120
     
-
 
Purchase of intangible assets
   
-
     
(4,238
)
   
(77,742
)
Net cash used in investing activities
   
-
     
(2,118
)
   
(120,600
)
                         
Cash flows from financing activities:
                       
Proceeds from demand note payable
           
779
     
50,000
 
Proceeds from loan payable- insurance
                   
70,587
 
Proceeds from loan payable- related party
   
75,000
     
8,565
     
177,889
 
Repayment of loan payable- related party
                   
(6,247
)
Proceeds from Equity Subscription Receivable
   
200,000
             
1,301,938
 
Net cash provided by financing activities
   
275,000
     
9,344
   
 $
1,594,167
 
                         
Net increase in cash and cash equivalents
 
 $
(5,965
 )
 
 $
-
   
 $
9,751
 
                         
Cash and cash equivalents at beginning of period
 
 $
15,716
   
 $
-
   
 $
-
 
                         
Cash and cash equivalents at end of period
 
 $
9,751
   
 $
-
   
 $
9,751
 
                         
Supplemental disclosure of non-cash financing activity:
                       
  Cash paid for interest
 
 $
5,350
   
 $
2,079
     
14,848
 
  Cash paid for taxes
 
 $
456
   
 $
       
456
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 
INVO BIOSCIENCE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2009

 
NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A)            Description of Business

INVO Bioscience, Inc. (“the Company”) intends to commercialize its proven and patented technology that will revolutionize the treatment of infertility.  The Company’s device, the INVOcell and the INVO procedure are designed to simplify the in vitro fertilization (IVF) treatment for the patient and the clinician, it is less expensive and simpler to perform than conventional in vitro fertilization.  The simplicity of the INVO procedure relates to the ability to potentially perform the infertility procedure in a physician’s practice rather than in a specialized facility at a much lower cost than traditional IVF.  Therefore, the Company believes that the INVO procedure will be available in many more locations than conventional IVF especially outside the US.  INVO also allows conception and embryo development to take place inside the woman's body; an attractive feature for most women.

We are a development stage company, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7.  The Company’s activities during the development stage include developing the business plan, seeking regulatory clearance in the European Union and the United States and raising capital.

Through March 31, 2009, we have generated minimal sales 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 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 European Economic Area (EEA).  The CE marking (an acronym for the French “Conformité Européenne”) certifies that a product has met EU health, safety and environmental requirements, which ensure consumer safety.

With CE Marking, the Company now has the ability and necessary regulatory authority to distribute its product in the European Economic Area ( i.e., the European Union, Canada, Australia, New Zealand, and most parts of the Middle East).  The Company has sold 785 units of the INVOcell to date since we commenced sales in the late fall 2008.

(B)            Basis of Presentation

On December 5, 2008, the Company completed a merger transaction with Emy’s Salsa Aji Distribution Company, Inc. (“Emy’s”) an inactive 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 reverse merger, INVO Bioscience became Emy’s wholly-owned subsidiary and the INVO Bioscience Shareholders acquired control of Emy’s.  

For accounting purposes, the Company accounted for the transaction as a recapitalization and the Company is the surviving entity.  In connection with the reverse merger, 14,937,500 shares were retained by Emy’s shareholders.  Effective with the Agreement, all previously outstanding shares of common 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, Emys 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 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.

 
(C)               Significant Accounting Policies

The financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report filed on Form 10K for the year ended December 31, 2008.  The condensed consolidated balance sheet as of December 31, 2008 was derived from the audited financial statements for the year then ended.

In the opinion of the Company, all adjustments necessary to present fairly our financial position and the results of our operations and cash flows have been included in the accompanying financial statements.  The results of operations for interim periods are not necessarily indicative of the expected results for the full year.

 Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.  As of March 31, 2009, and December 31, 2008, the Company had $9,751 and $15,716 in cash equivalents respectively.
 
(D)              Recent Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). SFAS 160 requires that non-controlling (or minority) interests in subsidiaries be reported in the equity section of the company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. SFAS 160 also changes the manner in which the net income of the subsidiary is reported and disclosed in the controlling company’s income statement. SFAS 160 also establishes guidelines for accounting or changes in ownership percentages and for deconsolidation. SFAS 160 is effective for financial statements for fiscal years beginning on or after December 15, 2008 and interim periods within those years. The adoption of SFAS 160 did not have a material impact on our financial position, results of operations or cash flows.
 
 In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS No. 115-2”). FSP FAS No. 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company plans to adopt the provisions of this Staff Position during the second quarter of 2009, but does not believe this guidance will have a significant impact on its consolidated financial statements.
 
In April 2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS No. 157-4”). FSP FAS No. 157-4 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in SFAS No. 157, “Fair Value Measurements.” FSP FAS No. 157-4 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company will apply the provisions of this statement prospectively beginning with the second quarter 2009, and does not expect its adoption to have a material effect on its consolidated financial statements.
 
In April 2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS No. 107-1 and APB 28-1”). This FSP amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. APB 28-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. This standard is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company plans to adopt FSP FAS No. 107-1 and APB 28-1 and provide the additional disclosure requirements beginning in second quarter 2009.
 
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.
 
      
NOTE 2  GOING CONCERN
 
As reflected in the accompanying consolidated financial statements, the Company is in the development stage and has just commenced operations in December 2008, has a net loss for the quarter of $651,000 and a cumulative net loss of $2,739,000 a working capital deficiency of $1,100,000, a stockholder deficiency of $1,090,000 and cash used in operations of $281,000 for the three months ended March 31, 2009.  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.
 
NOTE 3  INVENTORY

As of March 31, 2009 and December 31, 2008, the Company recorded the following inventory balances:

   
March 31,
2009
   
December 31,
2008
 
Raw Materials
  $ -     $ -  
Work in Process
    49,507       55,466  
Finished Goods
    25,242       15,257  
Total Inventory
  $ 74,749     $ 70,722  
 
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

   
March 31,
2009
   
December 31,
2008
 
Manufacturing Equipment- Molds
  $ 35,263     $ 35,263  
  Less: Accumulated Depreciation
    2,449       980  
Network/IT Equipment
    7,595       7,595  
  Less: Accumulated Depreciation
    1,267       633  
    $ 39,143     $ 41,245  
 
During the quarters ended March 31, 2009, and 2008, the Company recorded $2,102 and $0 in depreciation expense, respectively.

 
NOTE 5.  PATENTS

As of March 31, 2009 and December 31, 2008, the Company recorded the following patent balances:

   
March 31,
2009
   
December 31,
20 08
 
Total Patents
 
 $
77,743
   
 $
77,743
 
                 
ACCUMULATED AMORTIZATION
   
(10,759
)
   
(9,351
)
                 
Patent costs, net
 
$
66,984
   
$
68,392
 

During the quarters ended March 31, 2009 and 2008, the Company recorded $ 1,408 and $864, respectively in amortization expenses.
 
NOTE 6  WORKING LINE OF CREDIT

At March 31, 2009, the Company had a $50,000 working capital line of credit with Century Bank with interest payable monthly at 0.24% above the bank’s prime lending rate.  On April 30, 2009 the rate was 3.74%, maturing May 31, 2010.  At March 31, 2009 and December 31, 2008, the balance outstanding on the line of credit was $50,000.
 
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 is the President, Director and Chief Scientific Officer of the Company.  Dr. Ranoux had loaned funds to the Company to sustain its operations since January 5, 2007 (inception).  Dr. Ranoux’s total cumulative investment at March 31, 2009 is $96,462 (“the Principal Amount”) in INVO Bioscience.  On March 26, 2009, the Company and Dr Ranoux agreed to amend the agreement to a non-convertible note payable bearing interest at 5% per annum and extended the repayment date to March 31, 2010.  The Company and Dr. Ranoux can jointly decide to repay the loan earlier without prepayment penalties. 

For the quarters ended March 31, 2009 and 2008, the Company recorded $1,206 in interest expense both years, 2008 was charged as an in-kind contribution.

On March 5, 2009, the Company entered into a related party transaction with Kathleen Karloff the CEO and a Director of the Company.  Ms. Karloff provided a short-term loan in the amount of $75,000 to the Company to fund operations.  Ms. Karloff’s total cumulative investment at March 31, 2009 is $75,000 (“the Principal Amount”) in INVO Bioscience.  
 
NOTE  8  STOCKHOLDERS’ EQUITY

For the period from January 5, 2007 (inception) through December 31, 2007, BioXcell (INVO Bioscience) issued 70,000 shares of common stock for $20,000, at $.2857/share.  This was retroactively restated to 24,991,379 shares due to the stock split on November 12, 2008 and the subsequent reverse merger on December 29, 2008.
 
On December 29, 2008, the Company filed an amended and restated articles of incorporation with the Secretary of State of Nevada.  The Company’s authorized capital stock was changed from 75,000,000 shares, all of which were shares of Common Stock, par value $.0001 per share, to authorized Common Stock of 200,000,000 shares, par value $.0001, and 100,000,000 newly created shares of undesignated preferred stock, par value $.0001.
 
On November 7, 2008, Emy’s Board of Directors approved a 5-1 forward stock split (the “Forward Split”) of our Common Stock with a record date of November 10, 2008 for the Company’s issued and outstanding shares and not its authorized shares.  The Forward Split was payable on November 12, 2008.  Emys had 12,387,500 shares outstanding prior to the Forward Split and 61,937,500 shares outstanding thereafter.

 
The Company had 61,937,500 shares issued and outstanding immediately prior to the Share Exchange.  Pursuant to the Share Exchange Agreement, certain shareholders of Emy’s agreed to cancel 47,000,000 shares of Emy’s Common Stock and Emys agreed to issue 38,307,500 newly-issued shares of Common Stock to INVO Bioscience shareholders.  As of December 5, 2008 and immediately after Closing, an aggregate of 53,245,000 shares of Common Stock were outstanding, including shares issued pursuant to the Closing.

After the consummation of the transaction contemplated by the Share Exchange Agreement, on the day of the Closing, we entered into the Securities Purchase Agreement with investors pursuant to which, the investors contributed $375,000 in exchange for 375,000 shares of our Common Stock at a price of $1.00 per share.  The investors have piggyback registration rights that permit them to register their Common Stock on any registration statement filed by the Company, as well as anti-dilution protection.

During the period from January 1, 2008 through November 30, 2008, the Company issued an aggregate of 4,561,641 shares of Common Stock for cash totaling $706,938 for share prices ranging from $0.15 to $1.50.

In March 2008, the Company issued an aggregate of 8,488,857 shares of Common Stock (net of forfeitures) for services rendered totaling $11,259.  In November 2008, the Company issued an aggregate of 265,623 shares of Common Stock for services rendered totaling $40,056.

In March 2009, the Company issued an aggregate of 83,333 shares of Common Stock for services rendered totaling $37,500.

During the three months ended March 31, 2009, the Company received $200,000 against the outstanding stock subscription receivable.  As of March 31, 2009, $250,000 remains outstanding.

Since January 1, 2008, the Company has signed agreements in place for certain of its officers, executives and service providers of the Company.  As of December 31, 2008, a total of 303,500 shares of Common Stock and options to purchase an additional 636,000 (including 461,000 of employee incentive stock options) of the Company’s Common Stock were agreed to be issued.  As of March 31, 2009, the Company has not issued the committed shares but has recorded an accrued liability of $313,500.  As of March 31, 2009, the Company has not deemed the 636,000 options as granted until the plan is approved. 

During the three months ended March 31, 2009 and March 31, 2008, the stock based compensation was$37,500 and $13,041, respectively.
 
Non-Statutory Options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s Common Stock issued.  These options were agreed to be issued in lieu of cash compensation for services performed.

     
Options Outstanding
 
Options Exercisable
 
Exercise Prices
   
Number
Outstanding
   
Weighted Average
Remaining Contractual
Life (Years)
 
Number
Exercisable
 
Weighted
Average
Exercise Price
 
$
1.00
     
70,000
     
2.9
   
 $
-
   
$
-
 
 
 
 
Transactions involving warrants are summarized as follows:
   
Number of
Shares
   
Weighted
Average Price
Per Share
 
Outstanding at January 5, 2007
    -     $ -  
Granted
    -       -  
Exercised
    -       -  
Canceled or expired
    -       -  
Outstanding at December 31, 2007
    -     $ -  
Granted
    140,000       1.00  
Exercised
    -       -  
Canceled or expired
    -       -  
Outstanding at December 31, 2008
    140,000     $ 1.00  
Granted
    -       -  
Exercised
    -       -  
Canceled or expired
    70,000       -  
Outstanding at March 31, 2009
    70,000     $ 1.00  
  
Aggregate intrinsic value of options outstanding and exercisable at March 31, 2009 was $70,000.  Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.70 as of March 31, 2009, and the exercise price multiplied by the number of options outstanding.  As of March 31, 2009, total unrecognized stock-based compensation expense related to stock options was $218,750.  During the quarters ended March 31, 2009 and 2008, the Company did not charge to operations the related expense to recognized stock-based compensation for the above stock options.
 
NOTE  9  INCOME TAXES
The Company has adopted Financial Accounting Standard number 109, 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 statement 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.  Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
 
For income tax reporting purposes, the Company's aggregate unused net operating losses approximate $2,400,000, expire at various times through 2029, subject to limitations of Section 382 of the Internal Revenue Code, as amended.  The deferred tax asset related to the carry forward is approximately $540,000.  The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.
 
NOTE 10  COMMITMENTS

 
A)
Operating Leases

On January 1, 2007, the Company entered into an operating lease (the “lease”) with Cummings Properties, LLC, to lease 3,294 square feet of general office space.  The lease commenced on January 1, 2007 and was automatically extended in October 2008 until December 31, 2010.  The Company agreed to pay a security deposit of $3,000 on January 1, 2007, which was repaid to the

Company in equal $500 installments over the first six months of the lease.  The Company received no rent incentives or improvement allowances under this agreement.  The lease requires the Company to pay minimum lease payments of $2,000 per month for the duration of the lease.  The lease is subject to a cost of living increase equal to the Boston, MA Consumer Price Index at the beginning of each calendar year.  As of January 1, 2009, the Company’s lease payments under this agreement increased 3.53% to $2,070.60.

Fiscal Year                                     Minimum Future Lease Payments
    2009                                                                $24,847
    2010                                                                $24,847
 

 
B)
Consulting agreements

On December 5, 2008 in conjunction with the closing of the reverse merger, the Company signed a letter agreement with Lionshare Ventures LLC (“LSV”).  The terms of the letter agreement were such that LSV agreed to invest the balance of its original commitment to the Company dated May 19, 2008 for $450,000.  Thereafter, 2,000,000 shares of Common Stock were escrowed until the money was funded to the Company.  As of today, LSV has delivered $245,000 and the Company released 1,000,000 of the 2,000,000 common shares it held in escrow.

On March 10, 2009, the Company entered into an agreement with Wakabayashi Fund, LLC of Tokyo, Japan for investor relation services focused on the Asian financial markets.

On April 17, 2009 the Company entered into an agreement with Red Chip Securities, Inc. of Alpharetta, Georgia to act as the Company’s investment banker and placement agent in assisting the Company in securing a private placement equity financing.

 
C)
Anti-Dilution and Piggyback Registration Rights

On December 5, 2008, we entered into the Securities Purchase Agreement with the certain investors who have piggyback registration rights that permit them to register their Common Stock on certain registration statements filed by the Company.  In addition, pursuant to certain anti-dilution rights granted under the Securities Purchase Agreement to the investors, the Company may be obligated to issue additional shares of its Common Stock to the investors in the event it issues Common Stock to future investors at a per share purchase price less than $1.00.  The number of additional shares to be issued in such event is equal to that number of shares that the investors would have acquired at such price had that price been offered at the time of their original investment, minus the number of shares acquired in their original investment.  Further, pursuant to the letter agreement, LSV and its managing member, Christopher Esposito, have agreed to forfeit to us, one share of our Common Stock for every two shares we would be required to issue up to the maximum of 562,500 shares, which number of shares are being held in escrow by us until December 5, 2010.

 
D)
Employee Agreements

Since January 1, 2008, the Company has signed nine employee agreements for officers, executives and employees of the Company.  Three of these agreements were with the founders of the Company.  The remaining six of the agreements were executed with executives and staff of the Company.  The Company agreed to issue options and shares of common stock of the Company.  Under the terms of these agreements, the shares and options are only issued the completion of the reverse merger and the implementation of the Company’s employee stock plan.  The reverse merger closed on December 5, 2008, however, the Company has yet to implement an employee stock plan.  The Company intends to implement an employee stock plan in the second quarter of 2009.  As of today, a total of 303,500 shares of Common Stock and options to purchase an additional 635,000 shares of the Company’s Common Stock have been promised but not issued.  
 
 
ITEM 2.   Management s Discussion and Analysis of Financial Condition and Results of Operations
 
Statements made in this Quarterly Report on Form 10-Q, including without limitation this Management's Discussion and Analysis of Financial Condition and Results of Operations, other than statements of historical information, are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements may sometimes be identified by such words as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue" or similar words.  We believe that it is important to communicate our future expectations to investors.  However, these forward-looking statements involve many risks and uncertainties including those referred to herein and in our Annual Report on Form 10-K for the year ended December 31, 2008.  Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors.  We are under no duty to update any of the forward-looking statements after the date of this Report on Quarterly Form 10-Q to conform these statements to actual results.
 
Overview

Our primary focus is the manufacture and sale of the INVO technology to assist infertile couples in having a baby.  In-vitro fertilization (IVF) is an effective treatment option for most infertile couples.  Our patented and proven INVOcell technology is a low cost alternative to IVF that is much simpler to perform.  It may be provided in a physician’s office and, therefore, can be offered by physicians around the U.S. and around the world who do not have access to an IVF laboratory.  INVO uses a device, the INVOcell, which we currently price between $75-$225 to distributors in the developing countries around the world and $125-$300 in Europe and the U.S.  We can manufacture, assemble, package, sterilize and ship an INVOcell for less than $50.

Currently, we are establishing agreements with distributors and beginning to train physicians around the world in places such as Latin America, Europe, Africa and the Middle East.  While we penetrate the infertility markets in Europe and Canada along with certain developing countries, additionally we anticipate pursuing the completion of the FDA's “510(k)” process.  We have completed the first step for medical device companies who manufacture Class 2 devices (and a small number of Class 1 and 3 devices) and the filing of a Premarket Notification with the FDA ( i.e., an FDA 510(k) submission).  Technically, the FDA does not “approve” Class 1 and 2 medical devices for sale in the U.S. they give “clearance” for them to be sold.  We are hoping to receive clearance to market in the U.S. by 2010 upon completion of our clinical trial.  However, there can be no assurance that we will receive such clearance by that date or ever.

We anticipate that we will experience significant quarterly fluctuations in our sales and revenues as a result of the Company’s efforts to expand the sales of the INVO technology to new markets.  Operating results will depend upon and upon the timing of signing of new distributor contracts and the training of the physicians and their staffs in the INVO procedure.  International sales will continue to be our only source of revenue for the coming year.  We are aware of many significant international opportunities and we expect international revenues to continue to grow.  International sales are, however, difficult to forecast.  We are committed in our ongoing sales, marketing and development activities to sustain and grow our sales and revenues from our products and services.  We expect our sales and marketing, research and development and general and administrative expenses to increase in 2009 as compared to 2008.
 
As of March 31, 2009, we require approximately $200,000 per month to fund our operations.  This amount may increase as we expand our sales and marketing efforts and develop new products and services; however, if we do not raise additional capital in the near future we will have to curtail our spending and downsize our operations.  Our cash needs are primarily attributable to funding sales and marketing efforts, strengthening our training capabilities, satisfying existing obligations and building administrative infrastructure, including costs and professional fees associated with being a public company. 
 
 
 We are currently seeking up to $5 million in capital through a private placement of our common stock.  The exact amount of funds raised, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.  No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to us.  If we are unable to raise additional capital in the current private offering, we could be required to substantially reduce operations, terminate certain products or services or pursue exit strategies.
 
Our registered independent certified public accountants have stated in their report dated April 15, 2009, filed with the Company’s Annual report on form 10K that the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts.  These factors among others may raise substantial doubt about our ability to continue as a going concern.

 
Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon the condensed financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the United States of America.  The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Our estimates include those related to revenue recognition, the valuation of inventory, and valuation of deferred tax assets and liabilities, useful lives of intangible assets, warranty obligations and accruals.  We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  For a complete description of accounting policies, see Note 1 to our financial statements included in our Form 10K for the year ended December 31, 2008.  There were no significant changes in critical accounting estimates.

Results of Operations

Three months ended March 31, 2009, compared to the three months ended March 31, 2008

Net Sales and Revenues

Net sales and revenues for the first quarter of 2009 increased 100% to $36,800 compared to no revenues in the same period in 2007.  The increase was due to starting international shipments of small orders to our newly signed distributors as well as direct shipments to physicians who want to use the INVOcell. The Company has received positive feedback and acceptance of the INVO procedure and INVOCell device almost instantaneously following the completion of  the initial procedure.  The Company expects this trend to continue as we introduce the technology into our targeted countries over the next few months ( i.e., Spain, Italy and Peru).  The Company expects revenues to grow slowly as we move into these new countries adding to our current customer base in Turkey, Pakistan and Colombia.

Cost of Sales and Revenues

Cost of sales as a percentage of revenues was 56% for three months ended March 31, 2009  This is significantly higher than we expect in the future as we are producing small lot quantities and have higher shipping costs per unit as a result of the small volume shipments.  Additionally, as we open new markets we are finding the need to provide samples of the INVOcell for demonstration and training, as markets mature this practice will not be necessary.  There were no sales or costs in the first three months of 2008 with which to compare our first quarter results.  As the Company’s products become an accepted method of assisting couples with infertility, we will be manufacturing larger quantities of our devices that will reduce our costs of sales.  Further, shipping larger quantities to distributors via common carriers will reduce our shipping costs.  Collectively, the Company anticipates that these volume discounts would reduce our cost of sales by 50% of the amount this quarter.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2009 were $657,000 as compared to $39,000 for the  three months ended March 31, 2008.  Our higher general and administrative expenses in 2009 were due starting to market our products and technology outside of the United States.  During the first three months of 2008, the Company had three employees, two of which   did not take a salary.  In 2009 the Company had grown to six employees all earning a salary as well as all the associated expenses that relate to them, including benefits and travel.  Salaries and benefits for the period were $248,000 compared to $10,000 for the same period last year.  The Company incurred considerable travel costs as its employees continued to go across the globe to introduce the INVOcell and the INVO process to physicians and distributors in Europe, the Middle East, Asia and South America, travel related expenses totaled $70,000.  The Company continued to protect its patent rights around the world with legal and filing fees totaling $18,600 for the three months ended March 31, 2009 compared to the $10,600 for the three months ended March 31, 2008.  Some of  the new expenses incurred by the Company during  the first three months of 2009 as compared to the first three months of 2008 relate to being a public entity, including investor relations, insurance, accounting and legal costs,  which together were $159,000.  Additionally during the three months ended March 31, 2009, the Company created a Scientific Advisory Board with some of the most reputable fertility doctors and specialists in the United States to assist INVO Bioscience with strategic planning, regulatory guidance and protocol development.  The advisory board members are provided a small stipend and an option grant as consideration for preparing for and attending Company meetings in addition to a reimbursement of travel expenses.  Additionally we have a few consultants conducting research and gathering scientific and market data contributing to the project.  The 2009 costs associated with these items were approximately $85,000.

 
Research and Development Expenses

Research and development expenses increased to $5,000 for the three months ended March 31, 2009, as compared to $0 for the three months ended March 31, 2008.  The increase in research and development expense was due to the Company looking at improving the design of one of its products.

Interest Income and Expense, Net

We had net interest expense of $5,400 for the three months ended March 31, 2009, as compared to $2,100 for the three months ended March 31, 2008 as a result of having higher loans in 2009 versus 2008.

Income Taxes

The Company's aggregate unused net operating losses approximate $1,800,000, which expire at various times through 2029, subject to limitations of Section 382 of the Internal Revenue Code of 1986, as amended.  The deferred tax asset related to the carry forward is approximately $540,000.  The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.

Liquidity and Capital Resources

As of March 31, 2009, we had $9,700 in cash and no cash equivalents.  

Net cash used by operating activities was $281,000 for the three months ended March 31, 2009, compared to net cash used by operating activities was $7,200 for the three months ended March 31, 2008.  The increase in net cash used was due to the significant costs of staffing, compliance and introducing our products into new markets in 2009 as well as the establishment of an Advisory Board in preparation of our FDA submission.  In addition, all of the current employees have assisted INVO Bioscience in its funding requirements for the three months ended March 31, 2009 by deferring their salaries for the month of March 2009.

No cash was used during the first three months of 2009 in investing activities, compared to $2,100 cash used by investing activities for the same three months ended March 31, 2008.  The increase in cash used during 2008 resulted from the purchase of patents to protect our proprietary products.

Net cash provided by financing activities was $275,000 for the three months ended March 31, 2009, $75,000 was provided by a short term loan by Kathleen Karloff, the Company’s CEO.  The remaining $200,000 was from Lionshare Ventures LLC per their subscription receivable agreement date December 5, 2008 for the previous sale of Common Stock.  As of May 9, 2009, $205,000 is still due to the Company from Lionshare.

The Company maintains a $50,000 working capital line of credit with Century Bank.  Interest is payable monthly at the rate of 0.24% above the bank’s prime lending rate.  As of April 30, 2009, the rate was 3.74%.  This line of credit matures May 31, 2010.  At March 31, 2009 and December 31, 2008 the balance outstanding on the line of credit was $50,000.

Our registered independent certified public accountants have stated in their report dated April 15, 2009, filed with the Company’s Annual report on form 10K that the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts.  These factors among others may raise substantial doubt about our ability to continue as a going concern.
 
Management believes that its existing cash resources, cash flow from operations and short-term borrowings on the existing credit line will not provide adequate resources for supporting operations during fiscal 2009.  The Company is actively seeking the funding it needs to continue to execute its business plan,  Although there can be no assurance that we will find additional sources of funding, management believes that it will be able to find sources of funds on commercially acceptable terms.  However, if we do not raise additional capital in the near future we will have to curtail our spending and downsize our operations.
 
 
Recent Accounting Pronouncements
 
For information regarding recent accounting pronouncements and their effect on the Company, see “Recent Accounting Pronouncements” in Note 1 of the Unaudited Notes to Condensed Consolidated Financial Statements contained herein.
 
Item 3.  Quantitative and Qualitative Disclosures about Market Risks
 
Not Applicable

Item 4.  Controls and Procedures
 
4a .   Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2009, the end of the fiscal period covered by this Form 10Q.  We maintain disclosure controls and procedures that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.   Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as of December 31, 2008 (described below) which has not been remediated as of of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this Quarterly Report.
 
Because of the Company’s limited resources and limited number of employees, management concluded that, as of December 31, 2008, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
 
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. The Company is taking steps to create effective procedures and controls throughout the organization.  The Company is in the process of establishing procedures and segregating duties where it can.  Over the past six months, it has implemented a new accounting system and has outsourced its accounts payable function.  It has implemented an approval processes, created a number of policies, reporting processes, a standard customer contract and has introduced an employee manual.  We will continue to monitor our disclosure controls and procedures and will address areas of potential concern.  As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
 
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
4b.   Changes in Internal Control over Financial Reporting
 
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II.  OTHER INFORMATION
 
ITEM 1.       Legal Proceedings
 
 From time to time we may be a party to various legal proceedings arising in the ordinary course of our business.  We are not currently subject to any material legal proceedings.
 
ITEM 1A.     Risk Factors
 
You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.  There have been no material changes from the factors disclosed in our 2008 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.
 
ITEM 2.        Unregistered Issuance of Equity Securities and Use of Proceeds
 
During the period covered by this Report, the Company issued 83,333 shares of restricted Common Stock for investor relation services in Asia to Wakabayashi Fund, LLC.  We claimed the exemption from registration set forth in Section 4(2) of the Securities Act and the rules there under, as private transactions not involving a public distribution.  The facts we relied upon to claim the exemption include: (i) Wakabayashi Fund, LLC represented that it acquired the shares from the Company for investment and not with a view to distribution to the public; (ii) each certificate issued for unregistered securities contains a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities; (iii) Wakabayashi Fund, LLC represented that it is an accredited investor and familiar with our business activities; and (iv) Wakabayashi Fund, LLC was given full and complete access to any corporate information it requested.

During the period covered by this Report, the Company entered into an agreement for the future issuance of common stock with Red Chip Securities, Inc.  During the second quarter 2009, the Company intends to issue 75,000 restricted common shares to Red Chip Securities, Inc. as compensation for investment banking and placement agent assistance.

Additionally, the Company entered into an agreement for the future issuance of common stock with Investor Awareness, Inc. for investor relation services in the United States.  This Agreement is between Lionshare Ventures LLC and Investor Awareness as part of Lionshare’s $1,000,000 commitment and letter agreement with the Company dated December 5, 2008 to fund investor relations services for 24 months.  INVO Bioscience has final signoff on all promotional material and decided to support the agreement by intending to issue 50,000 restricted shares of common stock.
 
ITEM 3.       Defaults Upon Senior Securities
 
None.
 
ITEM 4.       Submission of Matters to a Vote of Security Holders
 
None.
 
ITEM 5.       Other Information
 
None.
 
ITEM 6.      Exhibits
 
10.1
10.2
10.3
10.4
10.5
31.1
31.2
32.0




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 15, 2009.
 
 
INVO Bioscience, Inc.
 
       
Date:  May 15, 2009
By:
/s/ Kathleen Karloff                              
 
   
Kathleen Karloff
 
   
Chief Executive Officer
  (Principal Executive Officer)
 
 
 
Date: May 15, 2009
By:
/s/ Robert J. Bowdring                            
 
   
Robert J. Bowdring
 
   
Chief Financial Officer
(Principal Financial and Accounting Officer)
 

 

EXHIBIT INDEX
 
 
10.1
10.2
10.3
10.4
10.5
31.1
31.2
32.0



EXHIBIT 10.01
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
 
BIOXCELL, INC.
 
CONVERTIBLE TERM NOTE
 
$96,462.00     Beverly, Massachusetts
 
September 18, 2008
 
FOR VALUE RECEIVED, the undersigned, BioXcell, Inc. (“Maker”) a Massachusetts corporation with its principal place of business in Beverly, Massachusetts promises to pay to Claude Ranoux (“Holder”), at 8 Chestnut Street, Winchester, MA 01890 or at such other place as Holder shall have designated to Maker in writing, a principal amount equal to Ninety Six Thousand Four Hundred Sixty Two Dollars ($96,462.00) (the “Principal Amount”) together with interest thereon as set forth below.
 
1)  
Repayment .  Maker promises to pay the entire Principal Amount plus accrued and unpaid interest thereon, and all other sums and charges due Holder hereunder on March 31, 2009 (the “Maturity Date”).  The Maturity Date is subject to acceleration as set forth below.

2)  
Interest .  This Note shall bear interest at the rate of five percent (5%) per annum from the date hereof.  All interest shall accrue and be paid with the Principal Amount on the Maturity Date.

3)  
Conversion .  The Principal Amount plus all accrued interest may be converted by Holder into shares of common stock of Maker (“Shares”) at any time prior to payment upon ten (10) days advance written notice by Holder to Maker.  The conversion price shall be the fair market value of a Share.  For purposes of this Note, fair market value shall mean:
 
a.  
The average of the closing bid and asked prices of the Shares quoted in the Over-The Counter Market Summary (if not on the NASDAQ system) or the closing price quoted o the Nasdaq Stock Market or any exchange on which the Shares are listed, whichever is applicable, as published in the Wall Street Journal for the ten (10) trading days prior to the date of determination of fair market value, or
 
b.  
If the Shares are not traded over-the-counter or on an exchange, the fair market value of a Share shall be as determined by an independent appraiser appointed in good faith by the Maker’s Board of Directors.  The Principal Amount and all accrued interest must be converted at one time.
 
4)  
Application of Payments .  All payments shall be made in legal tender of the United States of America and shall be applied first to the payment of any sums or charges other than principal or interest due Holder; second, to the payment of accrued and unpaid interest on the unpaid Principal Amount; and third, the balance on account of the Principal Amount.

5)  
Payment of Charges and Expenses .  Maker agrees to pay the debt evidenced hereby, and, after default, to pay all reasonable costs, expenses and attorneys’ fees incurred by the Holder in connection with any proceeding for collection of the debt evidenced hereby, or in any litigation or controversy arising from or connected with this Note.  The Maker’s obligation to pay such costs, expenses and attorneys’ fees of Holder after default in connection with the protecting, enforcing or realizing of the rights and remedies above described or otherwise set forth herein, shall exist whether or not proceedings are instituted or legal appearances made in any court of competent jurisdiction on behalf of the Holder.

6)  
Event of Default .  Upon the occurrence of any one or more of the following events Maker shall be in default hereunder and the entire indebtedness with accrued interest due thereon under this Note shall, at the option of Holder, accelerate and become immediately due and payable without demand or notice of any kind:
 
a.  
Failure by Maker to pay (i) the outstanding Principal Amount of this Note, together with interest accrued thereon, at final maturity of this Note; or (ii) any other sums required to be paid by Maker hereunder; or
 
 
b.  
If (i) a petition is filed against Maker under any bankruptcy, reorganization, arrangement, composition, readjustment, liquidation, dissolution, or insolvency law, and is not dismissed within ninety (90) days after such filing; or (ii) Maker (x) files a petition in voluntary bankruptcy or seeks relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any petition against it under any such law, or (y) makes any general assignment for the benefit of creditors or admits in writing its inability to pay, or fails to pay, its debts generally as they become due, or consents to or otherwise suffers the appointment of a receiver, custodian, liquidator or trustee for itself, or of all or any part of its property.

 
 
 

 
 
7)  
Waiver of Rights .  Maker hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assents to extensions of the time of payment of forbearance or other indulgence without notice.

8)  
Holder’s Rights .  Holder’s rights hereunder shall be cumulative and not exclusive and may be exercised at the sole discretion of Holder until this Note and all accrued and unpaid interest and other sums and charges due hereunder shall have been paid in full.  Further, no failure on the part of Holder to exercise any right or remedy hereunder, whether before or after the occurrence of any event of default hereunder, shall constitute a waiver hereof, and no waiver of any past default shall constitute waiver of any future default or of any other default.  No failure to accelerate the indebtedness evidenced hereby by reason of default hereunder, or waiver granted from time to time shall be construed to be a waiver of the right to insist upon prompt payment thereafter or a waiver of any right of acceleration or any other right, or be construed so as to preclude the exercise of any right which Holder may have, whether by the laws of the Commonwealth of Massachusetts, by agreement or otherwise; and Maker hereby expressly waives the benefit of any statute or rule of law or equity which would produce a result contrary to or in conflict with the foregoing.

9)  
Prepayment .  Maker shall not have the right to prepay this Note.

10)  
Binding Effect .  This Note shall bind the successors and assigns of Maker and shall inure to the benefit of Holder, his heirs, administrators, representatives, trustees, successors and assigns.

11)  
Captions and Section Headings .  The captions and section headings used in this Note are for convenience only and shall not be used to interpret, modify or affect in any way the covenants and agreements herein contained.

12)  
Severability .  In the event that any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or in the event that any one or more of the provisions of this Note shall operate or would prospectively operate, to invalidate this Note, then the remaining provisions of this Note shall remain operative and in full force and effect, shall be valid, legal and enforceable and shall in no way be affected, prejudiced or disturbed thereby.

13)  
Governing Law .  This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to its conflict of laws provisions.
 
.
 MAKER:      BIOXCELL, INC  
       
 
By:
/s/  Philip H. Warren                               
    Philip H. Warren  
    Its President  
       
 
 
 
 

 
 
 
 
 
 
 
 

 










EXHIBIT 10.02
 
 
March 25, 2009
Dr. Claude Ranoux
8 Chestnut Street
Winchester MA  01890
 
Re: Amendment
 
Dear Claude:
 
This letter will evidence the agreement between you and BioXcell, Inc. (the “Company”) regarding the amendment of the Convertible Term Note dated September 18, 2008, issued to you by the Company (the “Note”).
 
The amendments to the Note are as follows:
 
1.  
The Maturity Date (as defined in the Note) is March 31, 2010.
2.  
Section 3, Conversion , is eliminated and all remaining sections of the Note are appropriately renumbered.
 
All other terms of the Note remain in full force and effect.
 
Please indicate your agreement to the foregoing by signing and returning a copy of this letter to the Company.
 
 ACCEPTED and AGREED: Very Truly Yours,
   
 
BIO X CELL, INC. BIO X CELL, INC.
/s/ Claude Ranoux                                    
/s/ Robert Bowdring                           
Dr. Claude Ranoux         
Robert J BowdringIts
 
Chief Financial Officer
                                                                          
                                                     
  100 Cummings Center Suite 421E Beverly, MA 01915
(978) 878-9505 voice & fax     
www.bioxcell.com
 
 
 
 

EXHIBIT 10.03

 
Wakabayashi Fund LLC.  
 
This Agreement made this February 28, 2009May 12, 2009, by and between Wakabayashi Fund, LLC., a Japanese Limited Liability Company, whose address is 4-13-20 Mita, Minato-Ku, Tokyo Japan 108-0073, hereinafter referred to as “WAKABAYASHI FUND” or “Consultant” and  INVO BIOSCIENCE , a Nevada corporation, its agents, successors or assigns, hereinafter referred to as “INVO BIOSCIENCE ” OR “Client”, whose address is 100 Cummings Center, Suite 421E Beverly, MA 01915 USA Telephone No 978.878.9505; Fax No --- Symbol: IVOB.OB
 
Whereas Consultant is in the business of providing Institutional Investor relations Services and whereas INVO BIOSCIENCE desires to retain Consultant for the following purposes:  For and in consideration of mutual benefits, detriments, promises, and the cross consideration hereinafter set forth,  the parties hereto, WAKABAYASHI FUND and INVO BIOSCIENCE, collectively “THE PARTIES”, hereby covenant and agree as follows:
 
1.  
Services
 
WAKABAYASHI FUND is hereby engaged to provide Public Relations services (non-exclusive) including serving as an investment banking liaison, obtaining write ups about the company and acting as an institutional public relations consultant for a six month period from the date hereof (the “term”).
 
2.  
Compensation
 
INVO BIOSCIENCE hereby agrees to pay WAKABAYASHI FUND for the services set forth in Paragraph 1, the following non-refundable retainer items:
 
 
a.   The issuance of 83,333 shares of common stock upfront. The said shares shall be issued within five days after the date hereof.  Such stock cannot be issued pursuant to an S-8 Registration    statement.  The shares are not in contravention of Section 5 of the Securities Act of 1933 and specifically with sections 5a and 5c there under.
 
b.   WAKABAYASHI FUND will also incorporate a free look clause whereby INVO BIOSCIENCE may request to verify our long position in INVO BIOSCIENCE's stock as well as incorporate a proprietary restrictive clause which precludes any liquidation of our vested stock until the termination of our contract.
 
c.   INVO BIOSCIENCE shall pay consultant out-of-pocket expenses related to the services set forth in Paragraph 1 above, subject to prior written budget approval by INVO BIOSCIENCE

3.  
Termination of Agreement
 
This Consulting Agreement may not be terminated by either party prior to the expiration of the term provided herein above, except as follows:
 
a.   Both parties, INVO BIOSCIENCE and WAKABAYASHI FUND, LLC. have the implicit right to cancel with 30 day written notice
b.   Upon the bankruptcy or liquidation of the other party, whether voluntary or involuntary;
c.   Upon the other party taking the benefit of any insolvency law;
d.   Upon the other party having or applying for a receiver appointed for either party; and/or
e.   Mutual consent of the parties.
 
   4.  
Notices
 
All notices hereunder shall be in writing and addressed to the party at the address herein set forth, or at such other address which notice pursuant to this section may be given, and shall be given upon the earlier of actual receipt or three (3) business days after being mailed or delivered to such courier service.  Any notices to be given hereunder shall be effective if executed by and/or sent by the attorneys for THE PARTIES giving such notice and, in connection therewith, THE PARTIES and their respective counsel agree in giving such notice such counsel may communicate directly in writing with such party to the extent necessary to give such notice.
 
5.  
Attorney Fees
 
In the event either party is in default of the terms or conditions of this Consulting Agreement and legal action is initiated as a result of such default, the prevailing party shall be entitled to recover all costs incurred as a result of such default including reasonable attorney fees, expenses and court costs through trial, appeal and to final dispositions.
 
6.  
Time is of the Essence
 
Time is hereby expressly made of the essence of this Consulting Agreement with respect to the performance by THE PARTIES of their respective obligations hereunder.
 
 
 

 
 
7.  
Inurement
 
This Consulting Agreement shall inure to the benefit of and be binding upon THE PARTIES hereto and their respective heirs, executors, administrators, personal representatives, successors, and consultant shall not assign this agreement.
 
8.  
Entire Agreement
 
This Consulting Agreement contains the entire agreement of THE PARTIES.  It is declared by THE PARTIES that there are no other oral or written agreements or understanding between them affecting this Agreement.  This Agreement supersedes all previous agreements.
 
9.  
Amendments
 
This Agreement may be modified or amended provided such modifications or amendments are mutually agreed upon and between THE PARTIES hereto and that said modifications or amendments are made only by an instrument in writing signed by THE PARTIES.
 
10.  
Waivers
 
No waiver of any provision or condition of this Agreement shall be valid unless executed in writing and signed by the party to be bound thereby, and then only to the extent specified in such waiver.  No waiver of any provision or condition of this Agreement and no present waiver of any provision or condition of this Agreement shall be construed as a future waiver of such provision or condition.
 
11.  
Non-Waiver
 
The failure of either party, at any time, to require any such performance by any other party shall not be construed as a waiver of such right to require such performance, and shall in no way affect such party’s right to require such performance and shall in no way affect such party’s right subsequently to require a full performance hereunder.
 
  12.  
Construction of Agreement
 
 
Each party has participated fully in the review and revision of this Agreement.  Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement.
 
  13. 
Non-Circumvention Agreement
 
INVO BIOSCIENCE  agrees, represents and warrants hereby that it shall not circumvent WAKABAYASHI FUND with respect to any banking or lending institution, investment bank, trust, corporation, individual or investor specifically introduced by WAKABAYASHI FUND to INVO BIOSCIENCE  nor with respect to any transaction or other business opportunity proposed by, assisted with or otherwise promoted by WAKABAYASHI FUND for the benefit of INVO BIOSCIENCE  pursuant to the terms with WAKABAYASHI FUND for the purpose of, without limitation, this Agreement and for a period of twelve (12) months from the date of execution by THE PARTIES of this Agreement or the introduction to a specific financing source.
 
14. 
Applicable Law
 
THIS AGREEMENT IS EXECUTED PURSUANT TO AND SHALL BE INTERPRETED AND GOVERNED FOR ALL PURPOSES BY THE LAWS OF THE STATE OF NEW YORK FOR WHICH THE COURTS IN NEW YORK CITY, NEW YORK SHALL HAVE JURISDICTION WITHOUT GIVING EFFECT TO THE CHOICE OR LAWS OR CONFLICT OF LAWS RULES THEREOF OR OF ANY STYLE.  The parties agree that mediation shall be used as an initial forum for the good-faith attempt to settle and resolve any issues or disputes that may arise
 
15. 
Counterparts
 
This Agreement may be executed in a number of identical counterparts.  Each such counterpart is deemed an original for all purposes and all such counterparts shall, collectively, constitute one agreement, but, in making proof of this Agreement, it shall not be necessary to produce or account for more than one counterpart.
 
  16.  
Facsimile
 
 
A facsimile copy of this Agreement is acceptable.
 
 
 

 
 
  17.  
  Acceptance of Agreement
 
Unless both parties have signed this Agreement within ten (10) business days of the date listed above, this Agreement shall be deemed automatically withdrawn and terminated
 
IN WITNESS WHEREOF, THE PARTIES have set forth their hands and seal in execution of this Consulting Agreement this 12 May 2009, by and between:                                                                 
                                                 
  INVO BIOSCIENCE  
    A Nevada Corporation  
Date: February 28, 2009
By:
/s/ Kathleen Karloff                                 
    Kathleen Karloff  
    CEO  
       
                

 
WAKABAYASHI FUND, LLC.
 
    A Japanese Limited Liability Company       
Date: February 28, 2009     
By:
/s/  Tadaharu Wakabayashi                          
    Tadaharu Wakabayashi  
    Tadaharu Wakabayashi Fund, Director           
       
 
4-13-20 Mita, Minato-ku   Tokyo, Japan 108-0073
(JP)   T:  81.03.6657.8339       F: 81.03.6657 8340    (US) T: 01.914.613.3002     F: 01.646.514.1601


 
 
 

 
























EXHIBIT 10.04
 
RedChip Securities, Inc.
5755 North Point Parkway, Suite 3
Alpharetta, GA 30022
770-410-1040  Office     678-949-0373 Cell    404-921-9639 Fax
 
 
April 14, 2009
 
 
Kathleen Karloff
CEO of INVO Bioscience, Inc.
100 Cummings Center
Suite 421e
Beverly, Mass 01915
 
Dear Ms. Karloff,
 
RedChip Securities, Inc. (“RedChip”) a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member in good standing of the Financial Industry Regulatory Authority, Inc., would be pleased to serve as investment banker and placement agent for INVO Bioscience, Inc.,(the “Company”), in connection with the current growth plans of the Company and the funding thereof. The initial terms of the engagement shall be for 120 days on a non-exclusive basis from the date of this agreement. The engagement may be extended at the sole discretion of the Company.
 
The Services of RedChip
 
In its role as investment banker, RedChip shall provide the following services:
 
·  
Use our best efforts to secure up to $5,000,000 in private placement of the companies securities on a best efforts basis,
 
·  
Evaluate the Company’s capital requirements for funding current growth,

·  
Assist in the structure of the securities to be used to complete the funding,
 
Compensation
 
In connection with the services to be provided, as outlined above, the Company shall pay to RedChip fees in the following manner: However all fees and commissions are subject to the rights granted within the termination clause.
 
·  
For its role as investment banker RedChip shall receive a fee equal to $8,000 payable in four equal installments of $2,000. The first installment is due upon the execution of this agreement and every thirty days thereafter until the balance is paid.

·  
75,000 shares of restricted shares of INVO Common stock to be issued upon execution of this agreement.

·  
For the placement of common or preferred stock and any convertible/redeemable debt RedChip shall receive 10% of the principal amount raised at each closing.
 
·  
Additionally RedChip shall receive 10% warrant coverage for any equity or sub-debt placed. The warrants shall be for five years and shall be exercisable at 10% above the offering price or conversion price and have piggyback registration rights. All warrants shall be covered in a separate warrant agreement.
 
·  
RedChip shall also be reimbursed for any pre-approved out of pocket expenses.
 
 
 

 
 
The Company agrees that if RedChip directly introduces the Company, during the term of this agreement to any person(s) or entity that within two years from the termination date of this agreement, provides any equity or debt financing to the Company or any affiliate thereof, the Company shall pay the fees as stated in this agreement. Upon the termination of this agreement RedChip shall provide a list of investors that have been approached by RedChip to the Company for approval for payment under this agreement.
 
Termination
 
The Company shall have the right to terminate this agreement upon giving 30 days written notice. Upon termination by either party all expenses, advisory fees and commissions earned shall be paid immediately.
 
Notices
 
Except as otherwise specifically agreed, all notices and other communications made under this agreement shall be in writing and when delivered in person by certified mail-return receipt requested, by recognized commercial carrier or by facsimile transmission, shall be deemed given on the same day if delivered on a business day during normal business hours, or on the first business day following delivery in person or by facsimile outside normal business hours, or on the date indicated on the return receipt requested. All notices sent shall be sent to the representatives of the party to be notified at the addresses indicated respectively below, or at such other addresses as the parties to be notified may from time to time by like notice hereafter specify:
 
If to the Company:                                               Kathleen Karloff
CEO of INVO Bioscience, Inc.
100 Cummings Center
Suite 421e
Beverly, Mass 01915
 
If to RedChip Securities, Inc.:                             Mr. Timothy Moody, President
5755 North Point Parkway
Suite 3
Alpharetta, GA 30022
 
Indemnification
 
The Company and RedChip each agree, to the extent allowed under governing law, to indemnify and hold the other party harmless from any claim, demand, suit, loss, or liability which the indemnified party may sustain as a result of the indemnifying party’s breach of its duties to the indemnifying party’s errors or omissions and from the reasonable expenses of the indemnified party, including attorney’s fees, incurred in connection with such claims and damages (collectively “Damages”). As a condition precedent to asserting a right of indemnity, the party seeking indemnification shall have given the indemnifying party timely written notice of the assertion of the claim to which the right of indemnification is claimed to exist.
 
Representations and Warranties
 
All communication and information provided by the Company to RedChip, whether written or oral, with respect to operations and profitability is true and accurate. RedChip may rely on the accuracy thereof.
 
The financial statements of the Company as presented to RedChip together with the related schedules and notes present fairly the financial position of the Company and the results of its operations and the changes in its financial position at the respective dates and for the respective periods for which they apply; such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied, throughout the periods indicated except as otherwise stated therein.
 
The Company is not in default, in the performance of any obligation, agreement or condition contained in any debenture, note, loan agreement or other evidence of indebtedness of the Company.  Except with respect to such defaults which have been waived in writing or for which consents have been obtained in writing, the execution and delivery of this agreement and the consummation of the transactions herein contemplated, will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the certificate of incorporation, as amended, or bylaws of the Company, any note, indenture, mortgage, deed of trust, or other agreement or instrument to which the Company is a party or by which it or any of its property is bound, or any existing law, order, rule, regulation, writ, injunction, or decree of any government, governmental instrumentality, agency or body, arbitration tribunal or court, domestic or foreign, having jurisdiction over the Company or its property.
 
The Company is duly incorporated and validly existing, is in good standing as a corporation under the laws of Nevada with full corporate power and the authority to own its property and conduct its business, present and proposed, and the Company has full corporate power and authority to enter into this agreement. The Company is duly qualified and in good standing as a domestic corporation in each jurisdiction in which it owns or leases real property or transacts business requiring such qualification, except where the failure to so qualify or to be in good standing would not result in a material adverse effect on the Company.
 
Confidentiality
 
In connection with the engagement, RedChip shall have access to confidential materials of the Company.  RedChip, its shareholders, employees and agents shall keep all such information strictly confidential in whatever form so received, and shall execute a confidentiality agreement if so requested by the Company, and RedChip agrees that the Company shall be entitled to equitable and injunctive relief including damages in the event RedChip breaches any of its confidentiality obligations to the Company.
 
Entire Agreement, Governing Law, and Severability
 
 
 

 
 
This agreement sets forth the entire understanding of the parties relating to the subject matter hereof and supersedes and cancels any prior communications, understanding and agreements.  This agreement cannot be modified or changed, nor can any of its provisions be waived, except by written agreement executed by both parties hereto.
 
This agreement shall be governed by and construed in accordance with the laws of the State of Georgia.  The parties hereto agree to submit to arbitration any action or dispute arising under the agreement or any action to enforce the terms hereof.  Such arbitration shall be determined pursuant to the procedure and rules as prescribed and adopted by the Financial Industry Regulatory Authority, Inc. (“FINRA”). If FINRA agrees, one arbitrator shall settle any arbitration between the two parties.
 
If any term, provision, covenant or restriction contained in the agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restriction contained in the agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
 
Acceptance
 
Please confirm your acceptance of the foregoing terms of the agreement by signing on behalf of the Company, then returning two (2) executed originals of the agreement to RedChip Securities, Inc.
                                       
  Very truly yours,  
     
     
  RedChip Securities, Inc.  
       
 
By:
/s/Tim Moody                                 
    Timothy C. Moody  
    President  
 
 
I have read the foregoing and hereby agree to the terms and conditions contained herein this 14th day of April 2009.
 
 
  INVO Bioscience, Inc.  
       
 
By:
/ s/ Kathleen Karloff                         
    Kathleen Karloff  
    CEO  
       
 
 
 
RedChip Securities, Inc.
5755 North Point Parkway, Suite 3
Alpharetta, GA 30022
770-410-1040  Office     678-949-0373 Cell    404-921-9639 Fax
 
 
 

 
EXHIBIT 10.05

 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
 
INVO BIOSCIENCE, INC.
 
SHORT TERM NOTE
 
$75,000.00   
 Beverly, Massachusetts
                                                                                                               
March 5, 2009
 
FOR VALUE RECEIVED, the undersigned, INVO Bioscience, Inc. (“Maker”) a Nevada corporation with its principal place of business at 100 Cummings Center, Suite 421E, Beverly, Massachusetts promises to pay to Kathleen Karloff (“Holder”), of 109 Beacon Street, Boston, MA 02116 or at such other place as Holder shall have designated to Maker in writing, a principal amount equal to Seventy-Five Thousand Dollars ($75,000.00) (the “Principal Amount”) together with interest thereon as set forth below.
 
1.  
Repayment .  Maker promises to pay the entire Principal Amount plus accrued and unpaid interest thereon, and all other sums and charges due Holder hereunder on May 20, 2009 (the “Maturity Date”).  The Maturity Date is subject to acceleration as set forth below.

2.  
Interest .  This Note shall bear interest at the rate of five percent (5%) per annum from the date hereof.  All interest shall accrue and be paid with the Principal Amount on the Maturity Date.

3.  
Application of Payments .  All payments shall be made in legal tender of the United States of America and shall be applied first to the payment of any sums or charges other than principal or interest due Holder; second, to the payment of accrued and unpaid interest on the unpaid Principal Amount; and third, the balance on account of the Principal Amount.

4.  
Payment of Charges and Expenses .  Maker agrees to pay the debt evidenced hereby, and, after default, to pay all reasonable costs, expenses and attorneys’ fees incurred by the Holder in connection with any proceeding for collection of the debt evidenced hereby, or in any litigation or controversy arising from or connected with this Note.  The Maker’s obligation to pay such costs, expenses and attorneys’ fees of Holder after default in connection with the protecting, enforcing or realizing of the rights and remedies above described or otherwise set forth herein, shall exist whether or not proceedings are instituted or legal appearances made in any court of competent jurisdiction on behalf of the Holder.

5.  
Event of Default .  Upon the occurrence of any one or more of the following events Maker shall be in default hereunder and the entire indebtedness with accrued interest due thereon under this Note shall, at the option of Holder, accelerate and become immediately due and payable without demand or notice of any kind:

a.  
Failure by Maker to pay (i) the outstanding Principal Amount of this Note, together with interest accrued thereon, at final maturity of this Note; or (ii) any other sums required to be paid by Maker hereunder; or

b.  
If (i) a petition is filed against Maker under any bankruptcy, reorganization, arrangement, composition, readjustment, liquidation, dissolution, or insolvency law, and is not dismissed within ninety (90) days after such filing; or (ii) Maker (x) files a petition in voluntary bankruptcy or seeks relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any petition against it under any such law, or (y) makes any general assignment for the benefit of creditors or admits in writing its inability to pay, or fails to pay, its debts generally as they become due, or consents to or otherwise suffers the appointment of a receiver, custodian, liquidator or trustee for itself, or of all or any part of its property.
 
6.  
Waiver of Rights .  Maker hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assents to extensions of the time of payment of forbearance or other indulgence without notice.

7.  
Holder’s Rights .  Holder’s rights hereunder shall be cumulative and not exclusive and may be exercised at the sole discretion of Holder until this Note and all accrued and unpaid interest and other sums and charges due hereunder shall have been paid in full.  Further, no failure on the part of Holder to exercise any right or remedy hereunder, whether before or after the occurrence of any event of default hereunder, shall constitute a waiver hereof, and no waiver of any past default shall constitute waiver of any future default or of any other default.  No failure to accelerate the indebtedness evidenced hereby by reason of default hereunder, or waiver granted from time to time shall be construed to be a waiver of the right to insist upon prompt payment thereafter or a waiver of any right of acceleration or any other right, or be construed so as to preclude the exercise of any right which Holder may have, whether by the laws of the Commonwealth of Massachusetts, by agreement or otherwise; and Maker hereby expressly waives the benefit of any statute or rule of law or equity which would produce a result contrary to or in conflict with the foregoing.

8.  
Prepayment .  Maker shall not have the right to prepay this Note.

9.  
Binding Effect .  This Note shall bind the successors and assigns of Maker and shall inure to the benefit of Holder, his heirs, administrators, representatives, trustees, successors and assigns.
 
 
 

 
 
10.  
Captions and Section Headings .  The captions and section headings used in this Note are for convenience only and shall not be used to interpret, modify or affect in any way the covenants and agreements herein contained.

11.  
Severability .  In the event that any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or in the event that any one or more of the provisions of this Note shall operate or would prospectively operate, to invalidate this Note, then the remaining provisions of this Note shall remain operative and in full force and effect, shall be valid, legal and enforceable and shall in no way be affected, prejudiced or disturbed thereby.

12.  
Governing Law .  This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to its conflict of laws provisions.
 

 
 MAKER:     INVO BIOSCIENCE, INC.  
       
 
By:
/s/ Dr. Claude Ranoux  
    Dr. Claude Ranoux  
    Its President  
       
 
 
 
 
 
 

 
 
 
 
 

EXHIBIT 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Kathleen Karloff, certify that:
 
1.
I have reviewed this annual report on Form 10-Q of INVO Bioscience Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
  INVO BIOSCIENCE  
       
Date: May 15, 2009
By:
/ s/ Kathleen Karloff                                  
    Kathleen Karloff  
    Chief Executive Officer  
       
 
 
 

EXHIBIT 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Robert J. Bowdring, certify that:
 
1.
I have reviewed this annual report on Form 10-Q of INVO Bioscience Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting
 
 

  INVO BIOSCIENCE  
       
Date: May 15, 2009
By:
/ s/ Robert J. Bowdring                       
    Robert J. Bowdring  
    Chief Financial Officer  
       
 

 
 
 

 
EXHIBIT 32.00

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of INVO Bioscience, Inc. (the “Company”) for the  period ended March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kathleen Karloff, Chief and Principal Executive Officer of the Company, and Robert J Bowdring, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 

 
  INVO BIOSCIENCE  
       
Date: May 15, 2009
By:
/s/ Kathleen Karloff                          
    Kathleen Karloff  
    Chief Executive Officer  
       
 
 

 
  INVO BIOSCIENCE  
       
Date: May 15, 2009
By:
/ s/ Robert J. Bowdring                       
    Robert J. Bowdring  
    Chief Financial Officer