Business Context and Reporting Period
Company: INVO Bioscience, Inc. (Note: Metadata lists "INVO Fertility, Inc.", but the filing identifies the registrant as INVO Bioscience, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: October 28, 2009
Event: Entry into a Material Definitive Agreement (Reserve Equity Financing Agreement).
Key Financial Metrics and Transaction Terms
This filing details a financing arrangement rather than operational financial results. Key terms include:
- Financing Facility: Reserve Equity Financing Agreement (REF) with AGS Capital Group, LLC.
- Total Commitment: Up to $10,000,000 available for purchase of common stock over 24 months.
- Share Issuance Limit: The Company intends to limit the facility to approximately 8,100,000 shares, representing roughly $3,726,000 based on current market prices, despite the $10M commitment.
- Pricing Mechanism: Shares sold at 92% of the Volume Weighted Average Price (VWAP) over a five-day pricing period.
- Placement Agent Fees: Gilford Securities, Inc. receives a 6% cash commission on proceeds plus 600,000 shares (potentially 1,000,000 total if proceeds exceed $6M) for a nominal cost of $1.00.
- Due Diligence Fee: $10,000 paid to AGS.
Material Changes and Conditions
The filing does not report changes in revenue, profit, or cash flow. The material change is the establishment of the equity line of credit. Key conditions and limitations include:
- Registration Requirement: The Company must file a Registration Statement with the SEC for the resale of shares before any funds can be drawn.
- Ownership Cap: AGS cannot acquire more than 4.99% of the Company's outstanding common stock.
- Advance Limits: Maximum advance per transaction is 100% of the average daily trading volume for the five days preceding the notice.
- Price Floor: If the VWAP drops below 85% of the prior five-day VWAP during the pricing period, the advance amount is automatically reduced by 50%.
- Exclusivity: The Company cannot enter into other equity line of credit agreements without AGS's consent.
Outlook, Risks, and Management Commentary
Management Commentary: The Company intends to file the necessary Registration Statement within 30-45 days. There is no guarantee that conditions will be met to draw down funds.
Risks and Contingencies:
- Dilution Risk: There is no contractual limit on the number of shares issuable; if the stock price declines, more shares must be issued to raise the same amount, potentially causing downward pressure on the stock price.
- Market Conditions: The facility is contingent on the stock trading on a principal market and not being suspended.
- Termination: The Company may terminate the agreement with 15 trading days' notice if no advances are outstanding. AGS's obligation terminates if the Registration Statement is suspended for 50 trading days or if the Company materially breaches covenants.
Investor Verification Checklist
- Verify the effectiveness of the Registration Statement filed by the Company to enable share resales.
- Monitor the Company's stock price and trading volume to assess the actual drawdown capacity under the 100% volume limit and 4.99% ownership cap.
- Review the impact of the 600,000 to 1,000,000 shares issued to the placement agent on shareholder dilution.
- Confirm whether the Company has filed any post-effective amendments to the Registration Statement as required by the agreement.
- Check for any subsequent filings regarding the actual utilization of the $10,000,000 facility.