INVO Bioscience, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated June 30, 2020, details the final closing of a private placement of secured convertible notes and unit purchase options by INVO Bioscience, Inc. (trading symbol: INVO). The company is incorporated in Nevada and operates in the fertility and bioscience sector.
Key Financial Metrics and Transaction Details
- Third Closing Proceeds: The company entered into agreements for secured convertible notes with an aggregate original principal amount of $401,200.
- Total Private Placement Proceeds: Across the Initial Closing (May 15, 2020), Second Closing (June 22, 2020), and Third Closing, the company received approximately $3.08 million in net proceeds after deducting fees.
- Gross Proceeds by Closing:
- Initial Closing: $2,105,000 (comprising $1,961,360 cash and $143,640 from cancellation of indebtedness).
- Second Closing: $988,640 (noted as "million" in source text, context implies dollars).
- Third Closing: $401,200 (principal amount of notes).
- Transaction Costs: Aggregate placement and selling agent fees totaled $236,000 (8% of a portion of proceeds). Additionally, 5-year warrants to purchase 10,800 shares were issued to agents at an exercise price of $3.60.
- Debt Repayment: $413,456 of proceeds were used to repay prior outstanding indebtedness ($335,000 principal and $78,456 accrued interest) carrying a 9% interest rate.
- Remaining Liquidity: Remaining proceeds are designated for working capital and general corporate purposes.
Material Changes and Instrument Terms
The filing reports the issuance of new debt and equity instruments with the following material terms:
- Secured Convertible Notes:
- Interest Rate: 10% per annum, payable in cash or shares.
- Maturity Date: December 30, 2021.
- Conversion Price: Initial fixed price of $3.60 per share, subject to anti-dilution adjustments.
- Prepayment: Company may prepay at 100% principal plus accrued interest and a 1% prepayment fee.
- Security: Notes are secured by proceeds from a $3,000,000 milestone payment under a distribution agreement with Ferring International Center S.A.
- Unit Purchase Options: Investors received options to purchase 55,797 units at $5.00 per unit. Each unit consists of one share of common stock and a 5-year warrant to purchase one share at $6.00.
- Ownership Limitation: Conversion is restricted if the holder would beneficially own more than 9.99% of outstanding shares.
Outlook, Risks, and Contingencies
The filing does not provide specific forward-looking financial guidance or revenue projections. Key risks and contingencies identified include:
- Collateral Dependency: The security for the notes relies on the receipt of a milestone payment from Ferring International Center S.A.
- Dilution Risk: The transaction involves significant potential dilution through the conversion of notes, exercise of purchase options, and issuance of warrants.
- Default Triggers: Notes contain customary triggering events for redemption, including failure to make payments or bankruptcy/insolvency.
- Registration Rights: The company agreed to file a registration statement (Form S-3 or S-1) within 30 days of closing to cover the resale of registrable securities.
Investor Verification Checklist
- Verify the actual receipt of the $3,000,000 milestone payment from Ferring International Center S.A., which secures the new notes.
- Confirm the total number of shares outstanding post-closing to assess the 9.99% beneficial ownership limitation on conversions.
- Review the attached Security Agreement (Exhibit 10.2) to understand the specific lien priority on the Ferring milestone proceeds.
- Monitor the filing of the required Registration Statement (Form S-3 or S-1) within the 30-day window to ensure liquidity for noteholders.
- Clarify the exact gross proceeds figure for the Second Closing, as the source text contains a potential typo stating "$988,640 million."