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EX-31.1 - INVO Bioscience, Inc.ex31-01.htm
EX-32 - INVO Bioscience, Inc.ex32-00.htm
EX-31.2 - INVO Bioscience, Inc.ex31-02.htm
EX-21.01 - INVO Bioscience, Inc.ex21-01.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 


FORM 10-K
 


ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2009
 
or
 
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                               to                                                      
         
INVO BIOSCIENCE, INC.
(Exact name of registrant as specified in Charter)
 
Nevada
333-147330
20-4036208
(State or other jurisdiction of incorporation or organization)
(Commission File No.)
(IRS Employee Identification No.)
 
100 Cummings Center, Suite 421E, Beverly, MA 01915
 (Address of Principal Executive Offices)

Registrant’s telephone number, including area code:   (978) 878-9505

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.0001 par value per share

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES  ¨    NO  x

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.    YES   x     NO   ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated filer    ¨
 
Accelerated filer    ¨
 
Non-accelerated filer   ¨
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).    YES  ¨    NO  x

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed using the closing price as reported on the Over the Counter Bulletin Board for the Registrant’s Common Stock as of June 30, 2009, was $5,921,117

The number of shares outstanding of the Registrant’s Common Stock, $.0001 par value, as of April 5, 2010 was 60,870,822.

 
 FORM 10-K

INVO BIOSCIENCE, INC.

 
   
Page
Part I
 
     
Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Part II
 
     
Item 5.
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Item 6.
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Item 7.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Part III
 
     
Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Part IV
 
     
Item 15.
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  38
     
  39
   
 
EX- (CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
 
   
   
   




Part I
Item 1.Business

In this Annual Report on Form 10-K, INVO Bioscience, Inc. (INVO Bioscience, Inc., together with its subsidiaries, is referred to in this document as “we”, “us”, “INVO Bioscience”, INVO, or the “Company”), incorporates by reference certain information from parts of other documents filed with the Securities and Exchange Commission.  The Securities and Exchange Commission allows us to disclose important information by referring to it in that manner.  Please refer to all such information when reading this Annual Report on Form 10-K.  All information is as of December 31, 2009 unless otherwise indicated.  For a description of the risk factors affecting or applicable to our business, see “Risk Factors,” below.

The Company
 
INVO Bioscience was formed in January 2007 under the laws of the Commonwealth of Massachusetts under the name “Bio X Cell, Inc.,” which was the business successor to Medelle Corporation (“Medelle”).  Dr. Claude Ranoux was the founder and vice president of Medelle and Kathleen Karloff was a vice president of Medelle.  Between 2001 and 2006, Medelle raised $8 million in venture capital, which was used to develop and validate a device called the “INVOcell.”  Medelle conducted pre-clinical safety testing and performed a human efficacy clinical study.  Due to a delay in obtaining U.S. Food and Drug Administration (“FDA”) clearance for the INVOcell, venture capital investments ceased and, by the end of 2006, Medelle ceased operations.  Medelle assigned all of its assets to a trustee who liquidated those assets and distributed the proceeds to creditors.  In that process, Dr. Ranoux purchased all of the assets of Medelle for $20,000 and contributed those assets to Bio X Cell, Inc. including four patents related to the INVOcell technology, upon its formation in January 2007.
 
On December 5, 2008, Bio X Cell, Inc., doing business as INVO Bioscience, and each of the shareholders of INVO Bioscience (the “INVO Bioscience Shareholders”) entered into a share exchange agreement (the “Share Exchange Agreement”) and consummated a share exchange (the “Share Exchange”) with Emy’s Salsa Aji Distribution Company, Inc. (“Emy’s”). Upon the closing of the Share Exchange on December 5, 2008 (the “Closing”), the INVO Bioscience Shareholders transferred all of their shares of Common Stock in INVO Bioscience to Emy’s.  In exchange, Emy’s issued to the INVO Bioscience Shareholders an aggregate of 38,307,500 shares of Emy’s common stock, representing 71.9% of the shares issued and outstanding immediately after the Closing.  As a result of the Share Exchange, INVO Bioscience became a wholly-owned subsidiary of Emy’s.  
 
At Closing, Emy’s officers and directors resigned from their positions.  Kathleen Karloff was appointed as Chief Executive Officer, Secretary and Director and Dr. Claude Ranoux was appointed as President, Treasurer and Director.
 
Immediately following the Closing, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with GRQ Consulting, LLC and Whalehaven Capital Fund Limited.  Pursuant to the Securities Purchase Agreement, the investors invested $375,000 in exchange for 375,000 shares of our Common Stock at a price of $1.00 per share, subject to anti-dilution protection.  After the Closing, the Company had 53,245,000 shares of Common Stock outstanding.
 
We are a development stage company that has recently begun to commercialize our proven and patented technology that we believe will revolutionize the treatment of infertility.  Our device, the INVOcell, and the INVO procedure are designed to provide an alternative infertility treatment for the patient and the clinician; it is less expensive and simpler to perform than current infertility treatments.  The simplicity of the INVO procedure relates to the ability to potentially perform the infertility procedure in a physician’s practice rather than in a specialized facility at a much lower cost overall than current infertility treatments, including in-vitro fertilization (“IVF”).  Therefore, we believe that the INVO procedure will be available in many more locations than conventional IVF especially outside the United States.  INVO also allows conception and embryo development to take place inside the woman's body; an attractive feature for most couples.
 
 
 
 
In May 2008, we 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, we possess the regulatory authority to distribute product in the European Economic Area, provided we comply with local registration requirements as discussed herein (i.e., the European Union, Canada, Australia, New Zealand, Africa and most parts of the Middle East and South America).  
 
As with most start-up situations, one of the biggest challenges that INVO Bioscience is facing is raising the appropriate capital to implement its business plan while opening markets across the globe.  To help with this situation, on October 20, 2009, the Company entered into a Reserve Equity Financing Agreement (“REF”) with AGS Capital Group, LLC pursuant to which AGS committed to purchase, from time to time over a period of two years, shares of our Common Stock for cash consideration of up to $10 million, subject to certain conditions and limitations.  In connection with the REF, we also entered into a registration rights agreement with AGS.  The shares of Common Stock that may be issued to AGS under the REF will be issued pursuant to an exemption from registration under the Securities Act.  Pursuant to the registration rights agreement, we filed a registration statement on Form S-1 that became effective on December 30, 2009 by the Securities and Exchange Commission (the “Registration Statement”).  The Registration Statement covers the possible resale of a portion of our shares of Common Stock to the public by AGS that we may issue to AGS under the REF.  As of April 5, 2010, we have sold 914,500 shares to AGS under the REF.
 
The REF does not prohibit us from raising additional debt or equity financings, other than financings similar to the REF.  We intend to continue to explore other funding opportunities, as they arise, to provide the funds we need to execute our business plans.
 
This discussion is qualified in its entirety by the more detailed discussion of our operations in the “Management’s Discussion and Analysis” section below.
 
The INVOcell Technology
 
Our product, the INVOcell medical device, is designed to treat infertility at a far lower cost than other treatments available in today’s marketplace, including IVF.  The INVOcell technology is a fertility treatment where either mild ovarian stimulation or no ovarian stimulation is used.  Using a mild stimulation protocol, 1-10 follicles are retrieved in a physician’s office with the patient under light sedation with or without local anesthesia.  The follicle retrieval is performed using a vaginal probe under ultrasound guidance.  Eggs are identified immediately after retrieval in the follicular fluid.  During the INVO procedure, fertilization and embryo development occurs inside the woman’s vaginal cavity in a disposable single use device -- the INVOcell -- that holds the eggs, sperm and culture medium.
 
Sperm collection and preparation generally occur before egg retrieval.  Nutrient medium (~1ml) is placed in the inner vessel of the INVOcell.  Eggs and a fraction of motile sperm are placed into the medium and the inner vessel is closed and secured in the protective outer vessel.  The INVOcell is placed in the patient’s vaginal cavity for an incubation period of 2-3 days.  A retention system can be used to maintain the INVOcell system in the vagina during the incubation period.  The retention system consists of a diaphragm with holes in the membrane to allow natural elimination of vaginal secretions.  The INVOcell is designed so that no vaginal fluids penetrate the outer vessel thus ensuring that the inner vessel is not contaminated.  Obtaining eggs, sperm and media then inserting them into the INVOcell and then placing it in the vagina takes approximately 90 minutes.
 
 
 
After 2-3 days, the patient returns to the physician’s office where the retention system and the INVOcell are removed.  The protective outer vessel is discarded and the inner vessel is placed in INVO Bioscience’s patented holding block in a vertical position for 15 minutes.  Embryos are collected in the micro chamber located at the bottom of the inner vessel.  The embryos can be directly viewed in the micro chamber in the holding block by using a microscope.  Embryos can be loaded directly from the device in a transfer catheter from the INVOcell device.  A trained clinician can readily identify the best embryos for transfer.  The embryos to be transferred are aspirated into a standard catheter for transfer into the patient’s uterus.  This second visit should take approximately 45 minutes.  All INVO related medical procedures can be performed in a physician’s office thereby avoiding the requirement of an IVF facility and the associated costs to build and maintain such a facility.
 
Operations Strategy
 
INVO Bioscience operates by outsourcing many key operational functions in the development and manufacturing of the INVOcell device to keep fixed costs to a minimum.  Our most critical management and leadership functions are carried out by our core team.  We have contracted out manufacturing, packaging/labeling and sterilization of the device to a certified manufacturer; to a medical manufacturing company to assemble packages and label the product; and to a sterilization specialist to perform the gamma sterilization process.  Our operations model expedites production and eliminates the need for in-house capital equipment expenditures.
 
To date, we have achieved a series of important steps in the development and manufacturing of the INVOcell including, in part:
 
·
Manufacturing:  Our parts and manufacturing processes have been validated.  Manufacturing of inventory is ongoing.  To date, we have 300 INVOcell devices ready for sale.  We have an additional 9,000 devices molded and ready for assembly, sterilization and packaging.
 ·
CE Mark:  INVO Bioscience has obtained a CE Mark that permits the sale of devices in Europe, Canada and other countries that recognize the CE Mark, subject to local registration requirements.
 ·
Clinical Trials:  Safety and efficacy of the INVOcell device has been demonstrated and accepted by the European Union which has granted a CE Mark and ISO registration.
 ·
Support of Practitioners:  Clinicians and laboratory directors have used the INVO method and the feedback has been positive; practitioners appreciate the fact that it is a patient-friendly procedure, easy to perform and effective.
 ·
Finalize FDA Clearance: INVO Bioscience has completed all developmental testing and pre-trial testing for the 510(k) submission.  We intend to complete what we believe to be the final clinical study required under the investigational device exemption (IDE) by the FDA, subject to receipt of additional funding, in 2011.
 ·
Marketing Trials/Studies: A fertility clinic recently completed a clinical study   in Colombia, South America, showing a 35% efficacy rate. Other studies are in the works in the Middle East currently and soon to commence in India by doctors using the INVOcell device.  These trials will yield “local” data on patient efficacy and experience for marketing collateral and advertising. 
 
Current Market Opportunity
 
According to the European Society for Human Reproduction (“ESHRE”) in 2007, there are more than 100 million infertile couples in the world.  While there have been large increases in the use of IVF, only about one million IVF cycles were performed in 2006, which amounts to a treatment of less than 1% of the infertile couples worldwide.  Knowing that an average of 2-3 cycles of IVF is performed per infertile couple, there are only 300,000-500,000 couples treated by IVF.  A survey by “Resolve: The National Infertility Association,” the number one reason couples do not use IVF is cost and geographical availability.  We can provide a locally available treatment option at less than half of the cost of IVF that will help millions of infertile couples throughout the world where IVF is not currently available.
 
 
IVF is an effective treatment option for many infertile couples.  Our patented and proven INVO technology is a low cost, unique fertility treatment option that is much simpler to perform than IVF.  The procedure can be provided without an IVF center and therefore can be available in many more locations than IVF.  We believe we are well positioned to capture a significant share of this unmet market.  With our INVOcell device and technique, fertilization and early embryo development is done within the vaginal cavity rather than an incubator.  Oocytes and sperm are fertilized and developed into embryos within the INVO device while contained by the woman’s vaginal cavity.
 
Currently, according to ESHRE (2007) less than 1% of infertile couples who receive infertility treatment, including IVF, intra uterine insemination (“IUI”) and other fertility treatment, represents a $6 billion worldwide market annually.  This leaves 99% of the infertile couples untreated with an estimated unmet market opportunity of $594 billion, a portion of which, we believe will be met by the INVO device.  Much of the unmet market is located in developing countries where many patients cannot afford, and have limited access to, IVF.  We believe that developing countries offer a large and ready market for the INVOcell.
 
In May 2008, we received notice that the INVOcell device meets all of the essential requirements of the relevant European Directive, and received CE marking.   The CE marking certifies that a product has met European health, safety and environmental requirements, which ensure consumer safety.  Manufacturers in Europe and abroad must meet CE marking requirements where applicable in order to market their products in Europe.  With CE marking, we now have the necessary regulatory authority to distribute our INVOcell device in the European Union, subject to local registration regulations.  
 
Currently, we are continuing to establish agreements with distributors and train physicians outside of the U.S. including in Canada, South America, Latin America, Europe, the Middle East, India and Africa.  While we penetrate the infertility markets in Europe and Latin America, along with the other countries, we anticipate also 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) by filing a Premarket Notification with the FDA (i.e., an FDA 510(k) submission).  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 believe that we are presently halfway completed with our clinical trial and anticipate its completion by the end of 2011, subject to funding through the AGS REF or other sources.  However, there can be no assurance that we will be able to fund our clinical trial to completion, that our trial will be successful and that we will receive FDA clearance thereafter.
 
Competition
 
The infertility industry is highly competitive and characterized by technological improvements.  New artificial reproductive technology (“ART”) services, devices and techniques may be developed that may render the INVOcell obsolete.  Competition in the areas of infertility and ART services is largely based on pregnancy rates and other patient outcomes.  Accordingly, the ability of our business to compete is largely dependent on our ability to achieve adequate pregnancy rates and patient satisfaction levels.  The INVO procedure will offer an alternative treatment to couples who currently do not have access to treatments because of cost or location.  Infertility clinics can expand their businesses by offering INVO in satellite centers that can be opened at a substantially lower cost than an IVF center.  We are not aware of any direct competitors to INVO Bioscience or the INVO process using the INVOcell device.  However, there are existing infertility treatment regimes that the INVOcell will compete with when the infertile couple, in conjunction with their physician, is choosing the treatment method for their infertility.  We believe that the menu of currently available clinical infertility treatment methods generally is limited to IUI and IVF.
 
 
Competing Treatments
 
Intra Uterine Insemination (IUI):   In IUI treatments, ovarian stimulation protocols with induction of ovulation are frequently used to recruit several follicles and improve clinical pregnancy rates.  When monitoring ovulation indicates that the female patient is ready to ovulate, the male patient will produce a sperm sample in the fertility doctor’s office.  The sperm is then prepared and delivered to the uterus through a catheter.  IUI can only treat approximately 40% of the causes of infertility.  For example, IUI does not address infertility causes such as tubal disease and other conditions that are treatable by IVF and the INVOcell device and process.  In addition, IUI does not produce the diagnostic information such as fertilization that an IVF or INVO cycle produces.  Approximately 600,000 IUI cycles are performed annually by a subset of 5,000 of the 40,000 fertility doctors in the U.S. as well as by IVF providers.  In Europe, at least 550,000 IUI cycles are performed annually.  The cost of a single IUI treatment can range from $500 to $4,000 per cycle in the U.S. and $500 to $2,000 in Europe.  The intra-country differences in cost depend on the stimulation protocol and the ovulation monitoring used by the physician.
 
In Vitro Fertilization (IVF):   IVF addresses tubal factor, ovulatory dysfunction, diminished ovarian reserve, endometriosis, uterine factor, male factor, unexplained infertility and other causes.  IVF bypasses the function of the fallopian tube by achieving fertilization within a laboratory environment.  Ovarian hyper-stimulation is common with IVF treatments to recruit numerous follicles and increase the chances for success.  Follicles are retrieved trans-vaginally using a vaginal probe and ultrasound guidance.  General anesthesia is frequently used due to the number of follicles retrieved and the resulting discomfort experienced by the patient.  The eggs are identified in the follicular fluid and combined with sperm and culture medium in culture dishes, which are placed in an incubator with a temperature and gas environment designed to mimic the condition of the fallopian tubes.  Once the embryos develop, they are transferred to the uterine cavity.  The transfer of several embryos allows an average success rate for IVF of 27%, but it is also responsible for a high multiple birth rate of approximately 40% of IVF pregnancies.  Multiple births bring risks to mother and babies and significant expenses for third party payers.  In addition, due to the high number of embryos produced in IVF, cryo-preservation of excess embryos occurs in more than 30% of the cycles.  In the U.S., there are approximately 1,000 reproductive endocrinologists who collectively perform more than 125,000 IVF cycles per year at 430 specialized facilities.  In Europe, nearly 300,000 IVF cycles are reportedly performed at more than 1,000 facilities.
 
The cost to the patient for a single IVF cycle (including drugs) averages $12,400 in the U.S. and can go as high as $20,000 depending on the IVF center.  The cost of drugs for an IVF cycle ranges from $2,500 to $3,500.  The average cost per live birth using IVF can exceed $50,000 since the successful patient generally requires more than one cycle depending on the age of the patient.  Many patients who would be good candidates for IVF are unable to access it because of the high cost and lack of insurance reimbursement.  Additional obstacles to IVF often include significant distances to IVF clinics; travel costs; and time off from work.  In addition, some couples experience concerns regarding IVF such as the possibility of laboratory errors resulting in receiving another person’s embryo.
 
Competitors
 
We operate in a highly competitive industry, which is subject to competitive pricing and rapid technological change.  The market for fertility treatment and devices are highly competitive in terms of pricing, functionality and service quality, the timing of development and introduction of new products and services and terms of financing.  We face competition from all ART practitioners and device manufacturers.  Our competitors may implement new technologies before we do, allowing them to offer more attractively priced or enhanced products, services or solutions.  Our competitors may have greater resources in certain business segments or geographic markets than we have.  We may also encounter increased competition from new market entrants or alternative ART technologies.  Our ability to compete in this market successfully will require us to adapt to economic or regulatory changes, to introduce new products to the market and to enhance the functionality while reducing the cost of new and existing products.
 
 
Our principal ART medical-device competitor is Anecova, a Swiss start-up life sciences company with an intrauterine device under development for infertility treatment.  This device is a very small silicone tube with 360 micro perforations.  Oocytes are fertilized outside the device and then placed in the tube, which is placed inside the woman’s uterus for early embryo development.  After 1-5 days, the device is removed and the best embryo(s) are transferred back into the woman’s uterus.  We believe that the device is much more difficult to use than the INVOcell due to its size and the requirement to place the device in the uterus, a sterile environment.  The precision manufacturing of the Anecova device will drive its cost close to $1,500, which is higher than our price.  The Anecova device would only be available in hospitals and IVF Centers at a significantly higher cost than the INVOcell.  
 
Competitive Advantages
 
We believe that the INVOcell has the following competitive advantages:
 
Lower cost than IVF with similar efficacy:  The INVOcell is substantially less expensive than IVF due to a lower cost of supplies, labor, capital equipment and overhead.  An IVF center requires at least $500,000 of laboratory capital equipment and highly trained personnel.  In contrast, the cost of laboratory capital equipment to set-up an INVOcell procedure is approximately $30,000 and does not require highly trained specialists beyond the traditional obstetrician and gynecological practice.  The global success rate for IVF varies dramatically from 13.6% to 40.5% with an average of 27% per cycle (ESHRE, ICMART Committee, June 21, 2006).  We foresee that the INVO device will be offered at approximately $5,000 per cycle with a pregnancy rate comparable to traditional IVF.  In Europe, IUI currently averages $1,000 per cycle.  In Europe, the average cost per pregnancy for IVF is $21,354.  INVO in Europe will be offered at approximately $2,500 per cycle.  
 
Similar cost than IUI with greater efficacy:  In the U.S. currently, IUI averages $1,500 per cycle with <10% pregnancy rate while IVF averages $12,400 per cycle with an average of 27% pregnancy rate.  With INVO, we believe that the Ob/Gyn or reproductive endocrinologist practitioners will benefit by providing a superior product than IUI with good financial margins, efficacy rates more than double IUI while treating the full range of infertility indications.  In Europe, the average cost per pregnancy using IUI is $12,000.  The average cost per pregnancy for IVF is $21,354 while for INVO it is only $13,888: a savings of more than $7,000 per pregnancy.  Using INVO could reduce annual infertility costs in Europe by more than $650 million.
 
Greater geographic availability:   In Europe, there are more than 1,000 IVF centers, and there are approximately 430 IVF centers in the U.S.  In addition, by having INVO geographically available in Ob/Gyn offices, couples will avoid the travel costs and absence from work associated with long-distance IVF treatments.  The medical staff at these centers could easily learn the INVO technique and offer it as a lower cost treatment option for their patients through satellite centers.  There are also 5,000 Ob/Gyn physicians in the U.S. who offer infertility services such as the IUI treatment but lack the facilities to offer the IVF treatment.  Since INVO does not require a specialized lab facility, large costly equipment or highly specialized staff, the INVO treatment may be offered in a doctors’ office.  Therefore, in the U.S. alone, INVO could be 10 times more available than conventional IVF.  Ob/Gyn offices worldwide could offer INVO as an alternative or follow up treatment to IUI and generate a significant new revenue stream.
 
Greater patient involvement: With INVO, the patient uses her own body as the incubation environment.  This creates a greater sense of involvement, comfort and participation for patients who know that the fertilization is happening within their own bodies.  In some cases, this frees the couples from ethical or religious concerns, or fears of laboratory mix-ups that could result in a patient receiving another couple’s embryo(s).
 
 
SALES AND MARKETING
 
Product Pricing
 
We anticipate employing the following pricing system for the INVOcell technology.  These prices were determined through discussions with our advisory board of physicians and potential strategic partners and reflect the innovative features of the device, the savings in physician’s laboratory fixed costs and the amount that a physician will receive from patients to perform INVO.  Our goal is to have the INVO procedure offered to infertile couples as a lower cost alternative with comparable success rates to IVF.
 
INVOcell device:    We expect to sell the INVOcell device and its retention system for between $75 and $400 per unit.  IVF centers or Ob/Gyn groups purchasing a large number of devices and promoting the INVO process will receive discounted prices and a limited amount of free advertising of their facility on our website.  It is expected that the INVOcell will sell for $400 in the U.S., which grants a single-use license under our patents.  In Central and South America and Europe, the price of the device will be reduced to between $100-$300 to reflect a generally lower cost of infertility procedures in most of these countries and to make INVOcell available to populations with lower incomes.
 
Holding/Warming Blocks:  The holding blocks will be sold as a tool for viewing and retrieving the embryos from the inner chamber.  Each physician will need a minimum of two blocks depending on the number of cycles he/she performs.  The blocks cost $100 per block and will sell for $200 each.  These blocks may provide an additional revenue stream.
 
Fixed Laboratory Equipment:  The equipment used in the INVO procedure (microscope with video system, bench centrifuge, incubator without CO2, bench warmer and laminar flow hood) is readily available in the market.  We have had initial discussions with an international equipment supplier that has a mobile bench and hood with all the required equipment.  We intend to establish an agreement with this company to provide our customers with a discount and financing to facilitate new customer entry into the INVO market in the future, however, there can be no assurance that we will be successful in this effort.  The complete set up for the INVO procedure is approximately $18,000 in Europe and $30,000 in the U.S.
 
Our Sales Team
 
As of December 31, 2009, we employ two sales and marketing individuals who are charged with all of our sales efforts.  We anticipate growing our sales team to six in 2010, subject to raising additional capital.  Our sales efforts follow two approaches:
 
             Direct Physician Sales through Distributors -- In foreign countries, we intend to establish local distributors to access the countries’ markets.  With the distributor-to-physician model, the distributors will be selling to IVF centers, medical practices and physicians directly.  We will support the distributors’ efforts with training, both to the distributors’ trainers as well as to the physicians directly.  We currently maintain written distribution agreements in the following countries: Canada, Colombia, Venezuela, Ecuador, Panama, Argentina, Peru, Pakistan, Turkey, Bulgaria, South Africa and Taiwan.  Additionally we are in discussions with potential distributors for Spain, Greece, Cyprus, Poland, Russia, Egypt and India.
 
              Direct Sales to Physicians -- We are also following a parallel path directly to leading infertility doctors in regions where there is demand but either distributors do not exist such as in Western Africa or we have not yet signed distribution agreements.  
 
 
Target Markets
 
Currently and through 2010, we anticipate that we will continue to launch the sale of the INVOcell device in Europe, Canada, South America and the Middle East.  During 2011, or at such time that we receive FDA approval, we anticipate launching the INVOcell in the U.S.  In 2010, we also anticipate the launch of the INVOcell device in South Africa, India and Russia.  In 2011, we anticipate the launch of the INVOcell device in China and other countries that are currently under the registration process and where alternative treatment is needed.  With the cost of the INVO procedure being less than half the cost of IVF, we expect to penetrate 5% of the currently untreated infertility market, although no assurances can be made in this regard or that will achieve our goals in our target markets on schedule, or at all.
 
            Worldwide -- According to ESHRE, there are more than 100 million infertile couples in the world as of 2007.  About one million IVF cycles were performed in 2006, which is less than 1% of the infertile couples worldwide.  More than 99 million infertile couples remain untreated due to cost, availability, awareness and other factors.
 
            U.S. -- According to the Centers for Disease Control, 7.3 million people in the U.S. have difficulty conceiving.  With only 350,000 couples receiving fertility treatment, more than six million couples receive no treatment.  According to Integramed, Inc., a U.S. based network of fertility centers, 97% of the untreated infertile couples do not receive treatment due to cost.  Working with our advisory board, we estimate that an INVO procedure in the U.S. will cost approximately $5,000 dollars.  
 
            Europe -- Europe has approximately 10 million infertile couples, of which 137,000 are estimated to have received IVF treatment and 183,000 received IUI (ESHRE) leaving 9.5 million infertile couples untreated.
 
Preliminary Sales Strategy
 
The CE Mark allows us to sell our INVO device in Europe, Canada and certain countries in South America, the Middle East and Africa along with Russia, and India, subject to local registration requirements.  Our strategy is to launch the product in the developing world first because of the high demand and relatively low availability of IVF procedures. 
 
Launching INVO in the U.S. market requires 510(k) clearance, which we anticipate receiving in early 2011 upon completion of our clinical trials estimated for 2010-2011, provided that we receive additional funding.   We have completed the required human confirmatory study.  The births of normal babies have been confirmed in this study using the INVOcell.  It will take one year and approximately $1,000,000 of funding to complete the clinical study including data collection on all required subjects, analysis of the data, have an independent audit and submit the full 510(k) report to the FDA.  The FDA has 90 days to review the submission from INVO Bioscience.  All preclinical data and testing has been completed and reviewed by FDA.  We expect to receive approval to sell the INVOcell after completion of the clinical study and 510(k) submission.  However, there is no assurance that will be the case.  We intend to launch INVOcell through key IVF centers in the U.S. once FDA clearance is achieved, if at all.  
 
Insurance Reimbursement for Infertility Treatment
 
Most European countries have some level of coverage for infertility treatment, but the level of coverage varies from country to country and even within countries.  For example, the National Health Service in the UK covers 20% of most costs for infertility treatment.  However, that standard is not applied universally throughout the country and some counties provide almost no coverage.  In the U.S., fifteen states mandate some form of insurance reimbursement for infertility treatment.  Three states mandate reimbursement for IVF, while other states cover some form of infertility treatment, but they may also specifically exclude IVF due to cost.  In addition, fifteen other states are considering mandating some form of coverage for infertility treatment.  
 
 
We believe that the INVOcell process will be treated favorably by insurance companies because it lowers cost and has a high efficacy rate.  In Europe, the average cost per pregnancy using IUI is $12,000 and IUI is appropriate for only 40% of the infertile population.  However, the INVO device, which is marginally more expensive at $13,888 per pregnancy, is a more effective treatment for a majority of infertile couples.  The average cost per pregnancy for IVF is $21,354.  Therefore, there is a savings of more than $7,000 (more than 33% of the cost) per pregnancy by using INVO versus IVF.  
 
Currently, many third-party payers require that an infertile patient have at least three cycles of IUI before going on to IVF.  The aggregate success rate of three IUI’s is 25%.  Therefore, up to 75% of those patients are often referred to IVF.  In the future, third-party insurance payers could save more than $7,000 per pregnancy by requiring the patient to try INVOcell first.
 
Branding and Promotion
 
We have a new logo associated with the INVO device that is refined for the infertility market.  We have trademarked the logo, device and technology.  At the same time, we are developing a website that includes special pages for clinicians and patients.  Subject to available capital, the next generation website will include materials that medical professionals and patients can print, including status reports and news items.  It will include training videos for potential customers both physician and patients who want to learn exactly how the INVOcell works.
 
REGULATION
 
Domestic Regulations
 
The manufacture and sale of our products are subject to extensive regulation by numerous governmental authorities, principally by the FDA in the U.S. and corresponding foreign agencies.  The FDA administers the Federal Food, Drug and Cosmetic Act and the regulations promulgated there under.  We are subject to the standards and procedures with respect to the manufacture of medical devices and are subject to inspection by the FDA for compliance with such standards and procedures.  The FDA classifies medical devices into one of three classes depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.  The INVOcell device and process must secure a 510(k) pre-market notification clearance before it can be introduced into the U.S. market.  The process of obtaining 510(k) clearance typically takes several months and may involve the submission of limited clinical data to support our assertions that the product is substantially equivalent to an already approved device or to a device that was on the market before the enactment of the Medical Device Amendments of 1976.
 
Every company that manufactures or assembles medical devices is required to register with the FDA and adhere to certain “good manufacturing practices” in accordance with the FDA’s Quality System Regulation, which regulates the manufacture of medical devices, prescribes record-keeping procedures and provides for the routine inspection of facilities for compliance with such regulations.  The FDA also has broad regulatory powers in the areas of clinical testing, marketing and advertising of medical devices.
 
Medical device manufacturers are routinely subject to periodic inspections by the FDA.  If the FDA believes that a company may not be operating in compliance with applicable laws and regulations, it can:
 
 ·
place the company under observation and re-inspect the facilities;
 ·
issue a warning letter apprising of violating conduct;
 ·
detain or seize products;
 ·
mandate a recall;
 ·
enjoin future violations; and
 ·
assess civil and criminal penalties against the company, its officers or its employees.
 
 
 
At present, we believe are more than halfway completed with the clinical trials requested by the FDA based on the work previously completed by Medelle.  Subject to available capital, we anticipate completing those clinical trials by the end of 2010.  Thus, we believe that we will receive FDA clearance by 2011, though there can be no assurance that we will be successful in doing so on a timely basis, if at all.
 
International Regulations
 
We are also subject to regulation in each of the foreign countries where our products are sold.  Many of the regulations applicable to our products in such countries are similar to those of the FDA.  The national health or social security organizations of certain countries require that our products be qualified before they can be marketed in those countries.  Many of the countries we are targeting do not have a formal approval process of their own but rely on either FDA clearance or the European approval, the CE mark.  Some countries require a registration process of listing the INVOcell with the governing body in addition to the CE mark.
 
Our activities during our development stage have included developing our business plan, seeking regulatory clearance in Europe and the United States and raising capital.  In May 2008, we received the CE mark.  
 
With CE marking, we have the necessary regulatory authority to distribute our product after registration in the European Economic Area (i.e., Europe, Canada, Australia, New Zealand, along with most parts of the Middle East and South America).  Every country is different; we have completed registrations in some, are in process with others.  Upon funding from the REF, which is subject to certain limitations as discussed in the “Managements Discussion and Analysis” section, we will be submitting additional registrations.  Certain other countries require that we first receive FDA clearance.  We are registering the product based on the size of the market and our ability to service it given our resources.
 
Intellectual Property
 
More than 800 cases of an INVO-type procedure have been documented in peer-reviewed journals since the 1980s, using an incubation device not specifically designed for the process but functionally capable of demonstrating success rates equivalent to IVF at that time.  The INVOcell device was specially developed to optimize the ease of use and effectiveness of the procedure at an affordable price.  This product development process has resulted in five active patents worldwide covering both the INVOcell device and the INVO process.  
 
Employees
 
As of December 31, 2009, we have five full-time employees.  We consider our relationship with our employees to be good.
 
Available Information

We maintain an Internet website at www.invobioscience.com.  We make available, free of charge through our website, our annual report on Form 10-K, current reports on Form 8-K, quarterly reports on Form 10-Q and each amendment to these reports.  Each such report is posted on our website as soon as reasonably practicable after such report is filed with the SEC via the EDGAR system.

The information on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report.  Our website address is included in this Annual Report as an inactive textual reference only.
 
 
Item 1A.Risk Factors

Investing in our Common Stock involves a high degree of risk.  Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this Annual Report on Form 10-K, before purchasing our Common Stock.  There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals.  The risks described below are not the only ones we will face.  If any of these risks actually occurs, our business, financial condition or results of operation may be materially adversely affected.  In such case, the trading price of our Common Stock could decline and investors could lose all or part of their investment.  The risks and uncertainties described below are not exclusive and are intended to reflect the material risks that are specific to us , material risks related to our industry and material risks related to companies that undertake a public offering or seek to maintain a class of securities that is registered or quoted on an over-the-counter market.

Except for historical matters, matters discussed in this Annual Report on Form 10-K contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition or Plans of Operations.”  All statements other than statements of historical fact contained in this Annual Report on Form 10-K, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements.  We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology.  Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.  
 
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined here under “Risk Factors” or elsewhere in this Form 10-K, which may cause our, or our industry’s, actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to differ.  Moreover, we operate in a very competitive and rapidly changing environment.  New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations, and financial needs.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-K, and in particular, the risks discussed below and under the heading “Risk Factors” and those discussed in other documents we file with the SEC that are incorporated into this Form 10-K by reference.  

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto.  We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.  In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement.

Our business has posted net operating losses, has limited operating history and needs capital to grow and finance its operations.  

From the inception of our operating subsidiary, BioXcell Inc., until December 31, 2009, INVO Bioscience had a net loss of $6,749,000.  INVO Bioscience has a limited operating history and is essentially an early-stage operation.  We will continue to be dependent on having access to working capital that will allow us to finance operations during all growth period.  Continued net operating losses together with limited working capital make investing in our Common Stock a high-risk proposal.  The adverse effects of a limited operating history include reduced management visibility into forward sales, marketing costs, customer acquisition and retention, which could lead to missing targets for achievement of profitability.
 
 
We require substantial additional capital to continue as a going concern which if not obtained could result in a need to curtail or cease operations.

As reflected in the accompanying financial statements, the Company is in the development stage with minimal revenues, had a net loss of $4,661,000, a working capital deficiency of $3,333,000, a stockholder deficiency of $3,237,000, and cash used in operations of $927,000 for the year ended December 31, 2009.  These amounts raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

We require substantial additional funding to meet our future operating and capital expenditure requirements.  To execute on our business plan successfully, we will need to raise additional money in the future.  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 successful that we will be able to raise capital when needed or at all, or that such capital, if available, will be on terms acceptable to us.  If we are not able to raise additional capital, our business will likely suffer.
 
Our business is subject to significant competition.

The infertility industry is highly competitive and characterized by technological improvements.  New artificial reproductive technology (“ART”) services, devices and techniques may be developed that may render the INVOcell obsolete.  Competition in the areas of infertility and ART services is largely based on pregnancy rates and other patient outcomes.  Accordingly, the ability of our business to compete is largely dependent on our ability to achieve adequate pregnancy rates and patient satisfaction levels.  Our business operates in highly competitive areas that are subject to continual change.  New health care providers and medical technology companies entering the market may reduce our market share, patient volume and growth rates.  Additionally, increased competitive pressures may require us to commit more resources to our marketing efforts, thereby increasing our cost structure and affecting our profitability.  There can be no assurance that we will not be able to compete effectively nor can there be assurance that additional competitors will not enter the market, or that such competition will not make it more difficult for us to enter into additional contracts with fertility clinics or open profitable INVOcell clinics.

We need to manage growth in operations to maximize our potential growth.

In order to maximize potential growth in our current and potential markets, we believe that we must expand the scope of our services in the bioscience industry.  This expansion will place a significant strain on our management and our operational and sales systems.  We expect that we will need to continue to improve our INVO technology, operating procedures and management information systems.  We will also need to effectively train, motivate and manage our employees.  Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

Our internal growth strategy may not be successful which may negatively impact our growth, financial condition, results of operations and cash flow.

One of our strategies is to grow internally through increasing the customers we target.  However, many obstacles to this expansion exist, including, but not limited to, increased competition from similar businesses, unexpected costs, costs associated with marketing efforts and maintaining a strong client base.  Therefore, we cannot assure you that we will be able to overcome such obstacles successfully and establish our services in any additional markets.  Our inability to implement this internal growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

 
We may be unable to implement our strategies in achieving our business objectives.

Our business plan is based on circumstances currently prevailing and the bases and assumptions that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involved in various stages of development.  However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives.  If we are not able to implement our strategies successfully, our business operations and financial performance may be adversely affected.

Our products incorporate intellectual property rights developed by us that may be difficult to protect or may be found to infringe on the rights of others.

While we currently own four patents, there can be no assurance that any of these patents will not be challenged, invalidated or circumvented, or that any rights granted under these patents will in fact provide competitive advantages to us.  The U.S. or Europe could place restrictions on the patentability of medical devices.  Any limitations on the patentability of medical devices may materially affect our business.  We utilize a combination of trade secrets, confidentiality policies, non-disclosure and other contractual arrangements in addition to relying on patent, copyright and trademark laws to protect our intellectual property rights.  However, these measures may not be adequate to prevent or deter infringement or other misappropriation.  Moreover, we may not be able to detect unauthorized use or take appropriate and timely steps to establish and enforce our proprietary rights.  In fact, existing laws of some countries in which we conduct business offer only limited protection of our intellectual property rights, if at all.  As the number of market entrants as well as the complexity of the technology increases, the possibility of functional overlap and inadvertent infringement of intellectual property rights also increases.
  
We must defend our intellectual property rights from infringement through extensive legal action.

Third parties may assert in the future, claims against us alleging that we infringe their intellectual property rights.  Defending such claims may be expensive, time consuming and divert the efforts of our management and/or technical personnel.  Because of litigation, we could be required to pay damages and other compensation, develop non-infringing products or enter into royalty or licensing agreements.  However, we cannot be certain that any such licenses, if available at all, will be available to us on commercially reasonable terms.

We regard our trade secrets, patents and similar intellectual property as critical to our success.  We rely on patent and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights.  No assurance can be given that our patents will not be challenged, invalidated, infringed or circumvented, or that our intellectual property rights will provide competitive advantages to us.  In addition, we intend to defend our intellectual property rights from infringement through legal action if needed, which could be very costly which would adversely affect our profitability.  Our limited capital resources could put us at a disadvantage if we are required to take legal action to enforce our intellectual property rights.

We face potential liability as a provider of a medical device.  These risks may be heightened in the area of artificial reproduction.

The provision of medical devices entails the substantial risk of potential claims of tort injury claims.  The Company does not engage in the practice of medicine or assume responsibility for compliance with regulatory requirements directly applicable to physicians.  Although we currently maintain product liability insurance that we believe is adequate as to risk and amount, successful claims could exceed the limits of our insurance and could have a material adverse effect on our business, financial condition or operating results.  Moreover, there can be no assurance that we will be able to obtain such insurance on commercially reasonable terms in the future or that any such insurance will provide adequate coverage against potential claims.  Further, a claim asserted against us could be costly to defend, could consume management resources and could adversely affect our reputation and business, regardless of the merit or eventual outcome of such claim.
 
There are inherent risks specific to the provision of infertility and ART services.  For example, the long-term effects on women of the administration of fertility medication, integral to most infertility and ART services,  are of concern to certain physicians and others who fear the medication may prove to be carcinogenic or cause other medical problems.  Currently, fertility medication is critical to most infertility and ART services and a ban by the FDA or foreign regulatory or other limitation on its use would have a material adverse effect on our business.
 

If we fail to maintain adequate quality standards for our products, our business may be adversely affected and our reputation harmed.

Our customers are expecting that our products will perform as we claim.  Our manufacturing companies and packaging processes will be relied up on heavily.  A failure to sustain the specified quality requirements could result in the loss of demand for our products.  Delays or quality lapses in our production lines could result in substantial economic losses to us.  Although we believe that our continued focus on quality throughout the Company adequately addresses these risks, there can be no assurance that we will not experience occasional or systemic quality lapses in our manufacturing and service operations.  We have limited manufacturing capabilities, and maybe  insufficient to produce an adequate supply of products at appropriate quality levels, our growth could be limited and our business could be harmed.  If we experience significant or prolonged quality problems, our business and reputation may be harmed, which may result in the loss of customers, our inability to participate in future customer product opportunities and reduced revenue and earnings.

We heavily rely on third party package delivery services, and a significant disruption in these services or significant increases in prices may disrupt our ability to import or export materials, increase our costs and lower our profitability.

We ship a significant portion of our products to our customers through independent package delivery companies.  If any of our key third party package delivery providers experience a significant disruption such that any of our products, components or raw materials cannot be delivered in a timely fashion or such that we incur additional shipping costs that we could not pass on to our customers, our costs may increase and our relationships with certain of our customers may be adversely affected.  In particular, if our third party package delivery providers increase prices and we are not able to find comparable alternatives or adjust our delivery network, our profitability could be adversely affected.

We depend on our key management personnel and the loss of their services could adversely affect our business.

We place substantial reliance upon the efforts and abilities of our executive officers, Kathleen Karloff and Dr. Claude Ranoux.  The loss of the services of our executive officers could have a material adverse effect on our business, operations, revenues or prospects.  We do not maintain key man life insurance on the lives of these individuals.

We will need additional, qualified personnel in order to expand our business.  Without additional personnel, we will not be able to expand our business.
 
Expanding our business entails increasing the number of persons engaged in activities for the sale and marketing of our products as well as clinical training personnel for the proper training of the INVO procedures.  Upon receiving funding, we are planning to hire employees in both of these areas.  However, we cannot be sure that we will able to find, attract and retain potential employees with the proper background and training matching the skills required for the positions.
 
Our revenues and operating results could fluctuate significantly from quarter to quarter, which may cause our stock price to decline.
 
Since our inception, we have recognized minimal revenue.  Our results from year-to-year and from quarter-to-quarter are expected to vary significantly based on ordering cycles of distributors and physicians who we plan to pursue for sales, and the payment cycle of such organizations.  As a result of these and other factors, we believe that period-to-period comparisons of our operating results will not be meaningful and that you should not rely upon our performance in a particular historical period as an indication of our performance in any future period.
 
 
Currency exchange fluctuations may affect the results of our operations.

We intend to distribute our INVOcell product throughout the world.  We intend to transact our international sales in U.S. dollars, and European, Latin American and Asian currencies.  Our results of operations thus will be affected by fluctuations in currency exchange rates.  Although we may enter into foreign currency exchange forward contracts from time to time to reduce our risk related to currency exchange fluctuation, our results of operations might still be negatively affected by foreign currency exchange rates.  Because we do not anticipate that we will hedge against all of our foreign currency exposure, our business will continue to be susceptible to adverse foreign currency fluctuations.

We are subject to risks in connection with changes in international, national and local economic and market conditions because of global developments.

Our business is subject to risks in connection with changes in international, national and local economic and market conditions because of global developments.  Beyond the risks of doing business internationally, there is also the potential impact of changes in the international, national and local economic and market conditions as a result of global developments, including the effects of global financial crisis, effects of terrorist acts and war on terrorism, U.S. and Canadian presence in Iraq and Afghanistan, potential conflict or crisis in North Korea or Middle East and current global credit crisis, negatively affecting infertile couples’ ability to pay for fertility treatment around the world.

International sales will account for a significant part of our revenue especially in this period as we pursue FDA clearance.  We will experience additional risks associated with these sales, which include:
 
 
political and economic instability;
 
export controls;
 
changes in legal and regulatory requirements;
 
United States and foreign government policy changes affecting the markets for our products; and
 
changes in tax laws and tariffs.
 
Any of these factors could have a material adverse effect on our business, results of operations and financial condition.  We sell our products in certain international markets mainly through independent distributors.  If a distributor fails to meet annual sales goals, it may be difficult and costly to locate an acceptable substitute distributor.  If a change in our distributors becomes necessary, we may experience increased costs, as well as a substantial disruption in operations and a resulting loss of revenue.

We have only two directors, which limits our ability to establish effective independent corporate governance procedures and increases the control of our president.
 
We have only two directors, one of which is also our President and Treasurer and the other is our Chief Executive Officer (CEO).  Accordingly, we have not established board committees comprised of independent members to oversee functions like compensation or audit issues.
  
Until we have a larger board of directors, which would include some independent members, there will be limited oversight of our President and CEO ’s decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.
 
 
We are subject to significant regulation by the government and other regulatory authorities.
 
Our business is heavily regulated in the United States and internationally.  In addition to the FDA, various other federal, state and local regulations also apply.  If we fail to comply with FDA or other regulatory requirements, we could be subjected to civil and criminal penalties, or even required to suspend or cease operations.  Any such actions could severely curtail our sales.  In addition, more restrictive laws, regulations or interpretations could be adopted, which could make compliance more difficult or expensive or otherwise adversely affect our business.  We devote substantial resources to complying with laws and regulations; however, the possibility cannot be eliminated that interpretations of existing laws and regulations will result in findings that we have not complied with significant existing regulations.  Such a finding could materially harm the business.  Moreover, healthcare reform is continually under consideration by regulators, and the Company does not know how laws and regulations will change in the future.
  
We are conducting clinical trials related to newer technologies that may prove unsuccessful and have a negative impact on future sales.
 
We are conducting clinical trials related to the INVOcell.  While we are confident in the future outcomes of these trials, an unsuccessful trial could adversely affect the marketability of this product and the receipt of FDA clearance in particular.

Changes in the healthcare industry may require us to decrease the selling price for our products or could result in a reduction in the size of the market for our products, each of which could have a negative impact on our financial performance.
 
Trends toward managed care, healthcare cost containment and other changes in government and private sector initiatives in the U.S. and other countries in which we do business could place increased emphasis on the delivery of more cost-effective medical therapies, which could work in our favor unless more cost-effective devices become available, which could adversely affect the sale and/or the prices of our products.  There are proposed and existing laws and regulations in domestic and international markets regulating pricing and profitability of companies in the healthcare industry.  There have been initiatives by third-party payers to challenge the prices charged for medical products, which could affect our ability to sell products on a competitive basis in the future.  There has been a consolidation among healthcare facilities and purchasers of medical devices in the U.S. who prefer to limit the number of suppliers from whom they purchase medical products, and these entities may decide to stop purchasing our products or demand discounts on our prices.  Both the pressure to reduce prices for our products in response to these trends and the decrease in the size of the market because of these trends could adversely affect our levels of revenues and profitability of sales, which could have a material adverse effect on our business.
 
Recent economic trends could adversely affect our financial performance.
 
Economic downturns and declines in consumption in our markets may affect the levels of both our sales and profitability.  As widely reported, the domestic and global financial markets have been experiencing extreme disruption in recent months, including severely diminished liquidity and credit availability.  Concurrently, economic weakness has begun to accelerate.  If these conditions exist for a sustained period, or if there is further deterioration in financial markets and major economies, our financial performance could be adversely affected.  The current tightening of credit in financial markets may adversely affect the ability of our customers and suppliers to obtain financing, which could result in a decrease in, or deferrals or cancellations of, the sale of our products and services.  In addition, weakening economic conditions and outlook may result in a decline in spending for ART and fertility assistance that could adversely affect our results of operations and liquidity.  We are unable to predict the likely duration and severity of the current disruption in the domestic and global financial markets and the related adverse economic conditions.

Risks Relating to the Share Exchange

Our Chief Executive Officer, Kathleen Karloff, beneficially owns 9.8% and our President , Dr. Claude Ranoux, owns 41.9% of our outstanding Common Stock, which gives them control over certain major decisions on which our stockholders may vote.
 
 
As a result of the Share Exchange, two of our officers and directors beneficially own 51.7% of our outstanding shares.  The interests of these two individuals may differ from the interests of other stockholders.  As a result, these officers and directors will have the right and ability to control virtually all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:
 
 
Electing  or defeating the election of directors;
 
Amending or preventing amendment of our Articles of Incorporation or bylaws;
 
Effecting or preventing a merger, sale of assets or other corporate transaction; and
 
Controlling the outcome of any other matter submitted to the stockholders for vote.

The Company’s stock ownership profile may discourage a potential acquirer from seeking to acquire shares of our Common Stock or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

As a publicly traded company, INVO Bioscience is subject to the reporting requirements of U.S. federal securities laws, which can be expensive.

INVO Bioscience is a public reporting company and, accordingly, is subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act.  Preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is costly.  In addition, the Company may face time consuming and costly effects to develop and implement internal controls and reporting procedures required by the Sarbanes-Oxley Act.  We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.  If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications required by the Sarbanes-Oxley Act.
  
Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies.  As a public entity, we expect these rules and regulations to increase compliance costs and to make certain activities more time consuming and costly.  As a public entity, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.  As a result, it may be more difficult for us to attract and retain qualified persons to serve as directors or as executive officers.

Risks Related to Our Common Stock

Our Articles of Incorporation provide for indemnification of officers and directors at our expense and limit their liability, which may result in major costs to us.  

Our Articles of Incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf.  We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's written promise to repay us if it is ultimately determined that any such person shall not have been entitled to indemnification.  This indemnification policy could result in substantial expenditures by us, which we will be unable to recoup.
 
 
We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933, as amended (the “Securities Act”) and is, therefore, unenforceable.  In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develop.

Our shares of Common Stock are very thinly traded, and the price may not reflect our value; there can be no assurance that there will be an active market for our shares now or in the future.

We have a trading symbol for our Common Stock (“IVOB”), which permits our shares to be quoted on the Over-the-Counter Bulletin Board (“OTCBB”), which is a quotation medium for subscribing members, not an issuer listing service.  However, our shares of Common Stock are very thinly traded, and the price, if traded, may not reflect our value.  There can be no assurance that there will be an active market for our shares of Common Stock either now or in the future.  The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors.  There can be no assurance given that there will be any awareness generated.  

Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business.  If a more active market should develop, the price may be highly volatile.  Because there may be a low price for our shares of Common Stock, many brokerage firms may not be willing to effect transactions in the securities.  Even if an investor finds a broker willing to effect a transaction in the shares of our Common Stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price.  Further, many lending institutions will not permit the use of such shares of Common Stock as collateral for any loans.

Shareholders may be diluted significantly through our efforts to obtain financing and from issuance of additional shares of our Common Stock for services.
 
Apart from the REF entered into with AGS Capital Group, LLC on October 28, 2009, we have no committed source of financing.  We cannot draw against the REF until we update our Form S-1, as filed with the SEC.  Even after we update our Form S-1, we will have some limitations on our ability to draw against the REF.  In addition, we may issue shares or incur debt, which may be convertible into shares of our Common Stock to satisfy our financial obligations.  If a trading market develops for our Common Stock, we may attempt to raise capital by selling shares of our Common Stock, possibly with warrants, which may be issued or exercised at a discount to the market price for our Common Stock.  These actions will result in dilution of the ownership interests of existing shareholders, and may further dilute the Common Stock book value, and that dilution may be material.  Such issuances may also serve to enhance existing management’s ability to control INVO because the shares may be issued to our officers, directors, new employees, or related parties and may be on a non-arms length basis.
 
We may be subject to the penny stock rules, which will make the shares of our Common Stock more difficult to sell.

We may be subject now and in the future to the SEC’s “penny stock” rules if our shares of Common Stock sell below $5.00 per share.  Penny stocks generally are equity securities with a price of less than $5.00.  The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer's account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation.

In addition, the penny stock rules require that prior to a transaction the broker dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our Common Stock.  As long as our shares of Common Stock are subject to the penny stock rules, the holders of such shares of Common Stock may find it more difficult to sell their securities.
 

Sales of our currently issued and outstanding Common Stock may become freely tradable pursuant to rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares.

A substantial majority of our outstanding shares of Common Stock are “restricted securities” within the meaning of Rule 144 under the Securities Act.  As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws.  A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of Common Stock (which we filed pursuant to the REF and which we tend to pursue), may have a depressive effect upon the price of our shares of Common Stock in any active market that may develop.

The market for penny stocks has experienced numerous frauds and abuses, which could adversely affect investors in our stock.

We believe that the market for penny stocks has suffered from patterns of fraud and abuse.  Such patterns include:
 
 
·
Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
 
·
Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
 
·
“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
 
·
Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
 
·
Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

We believe that many of these abuses have occurred with respect to the promotion of low price stock companies that lacked experienced management, adequate financial resources, an adequate business plan and/or marketable and successful business or product.
 
We may never pay any dividends to shareholders.

We have never paid any dividends and have not declared any dividends to date in 2009.  Our board of directors does not intend to distribute dividends in the near future.  The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant.  There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
  
We may have difficulty raising necessary capital to fund operations because of market price volatility for our shares of Common Stock.

In recent years, and indeed in recent months in particular, the securities markets in the U.S. and around the world have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies.  For these reasons, our shares of Common Stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control.  If our business development plans are successful, we may require additional financing to continue to develop and exploit existing and new products and services related to our industries and to expand into new markets.  The exploitation of our services may be dependent therefore upon our ability to obtain financing through debt and equity or other means.
 
 
Failure to comply with internal control attestation requirements could lead to loss of public confidence in our financial statements and negatively impact our stock price.
 
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in this annual report, management’s assessment of the effectiveness of our internal control over financial reporting.  Furthermore, beginning with the fiscal year ending on December 31, 2010, our independent registered public accounting firm will be required to attest to whether management’s assessment of the effectiveness of internal controls over financial reporting is fairly stated in all material respects and separately report on whether it believes we maintained, in all material respects, effective internal control over financial reporting.  If we fail to timely complete the development of our internal controls and management is unable to make this assessment, or, once required, if the independent registered public accounting firm cannot timely attest to this assessment, we could be subject to regulatory sanctions and a loss of public confidence in our internal control and the reliability of our financial statements, which ultimately could negatively impact our stock price.
 
Any future acquisitions and other material changes in our operations likely will require us to expand and possibly revise our disclosure controls and procedures, internal controls and related corporate governance policies.  In addition, the new and changed laws and regulations are subject to varying interpretations in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.  If our efforts to comply with new or changed laws and regulations differ from the conduct intended by regulatory or governing bodies due to ambiguities or varying interpretations of the law, we could be subject to regulatory sanctions, our reputation may be harmed and our stock price may be adversely affected.

Item 2. Properties

We currently do not own any property.  Our principal executive office is located at 100 Cummings Center, Suite 421E, Beverly, Massachusetts 01915, pursuant to a lease entered into by INVO Bioscience in January 2007 (the “lease”) for 3,294 square feet of general office space.  The lessor is Cummings Properties, LLC and the lease commenced in January 2007 and has been renewed to December 31, 2010.  The Company paid a security deposit of $3,000, 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, Massachusetts Consumer Price Index at the beginning of each calendar year.  As of January 1, 2010, the Company’s lease payments increased over the base year by 5.42% to $2,108.39.
 
Item 3. Legal Proceedings
 
On March 24, 2010, we were served a complaint on an action that was filed on December 31, 2009 with the Suffolk Superior Court Business Litigation Session by two former employees and a former creditor of Medelle Corporation.  The former employees allege various claims relating to the sale and transfer of the assets from Medelle to Dr. Ranoux was wrongful at least in their eyes.  In various counts, the former Medelle employees claim that Dr. Ranoux and Kathleen Karloff and therefore INVO Bioscience violated alleged duties owed to them in connection with the transfer.
 
We intend to challenge these allegations, as they are all false.  The sale and transfer of the assets of Medelle was professionally handled by an independent third party after approval by the Board of Directors representing a majority its shareholders.  Medelle’ s  shareholders through its Board  voted to have an assignment to the benefit of creditors and gave complete authority to the President & CEO at that time (neither Dr. Ranoux or Ms. Karloff)  to work with the third party and get the best possible price through a sealed bid auction.  The third party notified all of the appropriate parties as required by law as well as filed notices in various professional publications and newspapers of its intention to sell the assets of Medelle.  Additionally the third party also contacted numerous large medical device and bio-Pharma companies to see if they would be interested in acquiring the assets.  On the day of the auction Dr. Ranoux submitted the winning bid and was awarded the assets upon full payment.  We believe this complaint is base-less and will be dismissed once the facts are brought to light and will not have a material effect upon our results of operations.
 
Outside of the above mentioned item neither we, nor BioXcell Inc, our wholly owned subsidiary, either directly or indirectly, including INVO Bioscience are involved in any lawsuit outside the ordinary course of business, the disposition of which would have a material effect upon either our results of operations, financial position or cash flows.
 
 
Item 4. Submission of Matters to a Vote of Security Holders

In 2009, the shareholders were not asked to vote on any matters.  During the fourth quarter of the fiscal year ended December 31, 2008, the shareholders of INVO Bioscience were requested to vote on the Share Exchange between Emy’s Salsa Aji Distribution Company, Inc. and BioXcell, Inc.  The shareholders of both companies approved the transaction.

Part II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our Common Stock is quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol “IVOB.”  Before February 17, 2009, our symbol on the OTCBB was “EMYS.”  The table below sets forth the high and low sales prices for the periods shown.

   
2009
   
2008
 
   
Fiscal Year
   
Fiscal Year
 
   
High
   
Low
   
High
   
Low
 
First Quarter
  $ 5.50     $ 0.40     $ 0.00     $ 0.00  
Second Quarter
  $ 1.01     $ 0.05     $ 0.00     $ 0.00  
Third Quarter
  $ 0.46     $ 0.08     $ 0.00     $ 0.00  
Fourth Quarter
  $ 0.60     $ 0.17     $ 5.50     $ 0.40  

During 2009, the high and low closing price per share of our Common Stock was $5.50 and $0.05 respectively.
 
Our Common Stock originally traded under our predecessor company’s name and symbol, EMYS, which was first quoted on November 11, 2008 at a price of $0.40 per share for 10,000 common stock shares.  On December 5, 2008, the day of the closing of the Share Exchange, 1,000 shares of Common Stock were traded at $1.50 share.  

Stockholders

On April 5, 2010, there were approximately 95 stockholders of record.

Dividend Policy

We have never declared or paid a dividend on our Common Stock.  We intend to retain future earnings to fund development and growth of our business.

Compensation Plan

We do not have any equity compensation plans in place at this time.  We intend to implement an equity compensation plan in 2010.  Options have been promised to employees as consideration for services but have not been granted or approved by the Board of Directors.  These shares will be granted upon the approval and implementation of the equity compensation plan.
 
 
Item 6.  Selected Financial Data

We are not required to provide the information as to selected financial data as we are considered a smaller reporting company.

Item 7.  Management s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This discussion includes certain forward-looking statements about our business and our expectations, including statements relating to revenues, international revenues, revenue growth rates, gross margin, operating expenses, amortization expense, earnings per share, available cash and operating cash flow.  Any such statements are subject to risk that could cause the actual results to vary materially from expectations.  For a further discussion of the various risks that may affect our business and expectations, see the section titled “Risk Factors” contained in Item 1A of Part I of this Annual Report on Form 10-K.  The risks and uncertainties discussed therein do not reflect the potential future impact of any mergers, acquisitions or dispositions.  In addition, any forward-looking statements represent our estimates only as of the day this Annual Report was filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date.  While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.
 
Background

The previous management of Emy’s (our predecessor) determined that it was in the best interests of Emy’s shareholders to agree to the Share Exchange and acquire Bio X Cell, Inc., a Commonwealth of Massachusetts company (d/b/a/ “INVO Bioscience”) that has developed its patented technology, the INVOcell and the INVO procedure, which are designed to be less expensive and an alternative to conventional IVF.  As part of the Share Exchange, Emys ceased the salsa distribution business and INVO Bioscience became a wholly-owned subsidiary of Emy’s.
 
The Share Exchange was accounted for as a “reverse merger” because the INVO Bioscience Shareholders now own a majority of the outstanding shares of Common Stock immediately following the Share Exchange.  INVO Bioscience is deemed the acquirer in the reverse merger.  Consequently, the assets and liabilities and the historical operations that are reflected in the financial statements prior to the Share Exchange are those of INVO Bioscience and are recorded at the historical cost basis of INVO Bioscience and the consolidated financial statements after completion of the Share Exchange include the assets and liabilities of INVO Bioscience, historical operations of INVO Bioscience.  The financial results summarized below are based on INVO Bioscience’s audited balance sheet as of December 31, 2009 and 2008 and related audited statements of operations and stockholders’ deficiency and statements of cash flows for the periods ended December 31, 2009 and 2008, respectively.  

Overview
 
We are a development stage company that has recently begun to commercialize our proven and patented technology that we believe will revolutionize the treatment of infertility.  Our device, the INVOcell, and the INVO procedure are designed to provide an alternative infertility treatment for the patient and the clinician; it is less expensive and simpler to perform than current infertility treatments.  The simplicity of the INVO procedure relates to the ability to potentially perform the infertility procedure in a physician’s practice rather than in a specialized facility at a much lower cost overall than current infertility treatments, including in vitro fertilization (“IVF”).  Therefore, we believe that the INVO procedure will be available in many more locations than conventional IVF especially outside the United States.  INVO also allows conception and embryo development to take place inside the woman's body; an attractive feature for most couples.
 
 
Our primary focus is the sale of the INVOcell device and the INVO technology to assist infertile couples in having a baby.  We believe that our patented and proven INVOcell technology is an effective low cost alternative to current treatments.  Along with being offered as an option in traditional IVF clinics, the INVO technique may be provided in a physician’s office or a small lab.  Therefore, the INVO device and technique may be offered by physicians around the world to couples who do not have access to IVF facilities.  INVO uses a device, the INVOcell, which we currently sell to distributors around the world (outside of the U.S.) at prices ranging from $75 to $400.  Currently, we are only authorized to sell the INVOcell device in certain international markets.  We do not expect to be able to sell the device in the United States until at least the third quarter of 2011, assuming we receive the necessary capital to complete our clinical trial and receive FDA clearance by such date.  We are establishing agreements with distributors and beginning to train physicians around the world in places such as South America, Europe, Africa and the Middle East.  While we penetrate the infertility markets in Europe and South America along with other countries, we anticipate pursuing the completion of the FDA “510(k)” process.  We have completed the first step for medical device companies who manufacture Class 2 devices and the filing of a Premarket Notification with the FDA (i.e., an FDA 510(k) submission).  Technically, the FDA does not “approve” Class 1 and 2 medical devices for sale in the U.S. they give “clearance” for them to be sold.  We are hoping to receive clearance to market in the U.S. by the end of 2011 upon completion of our clinical trial, which we will commence upon achieving appropriate funding.  However, there can be no assurance that we will receive such clearance by that date or ever.
 
We operate by outsourcing many key operational functions in the development and manufacturing of the INVOcell device to keep fixed costs to a minimum.  Our most critical management and leadership functions are carried out by our core team.  We have contracted out the following functions: manufacturing, packaging/labeling and sterilization of the device to a certified manufacturer to mold the parts; to a medical manufacturing company to assemble packages and label the product and to a sterilization specialist to perform the gamma sterilization process.  This expedites production and eliminates the need for in-house capital equipment expenditures.
 
We anticipate that we will experience significant quarterly fluctuations in our sales and revenues as a result of our 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 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.  Subject to having available financial resources, we are committed in our ongoing sales, marketing and development activities to sustain and grow our sales and revenues from our products and services.  However, there can be no assurance that we will be successful in doing so.  
 
During the last year, we continued to market our products in strategic markets utilizing our limited resources in the most economical fashion possible.  We focused our efforts on South America and parts of Europe as we see these as our best opportunities to introduce the INVO procedure to many willing physicians quickly.  During this period, we reduced our travel and planned trips further in advance to benefit from travel discounts, which reduced our travel expenses considerably.  We had a presence at a few Gynecology and Obstetrics Conferences held in the Netherlands, Togo, San Salvador, Egypt and Peru during 2009, as we continued to introduce the INVOcell across new regions of the globe.  These were the largest infertility conferences of physicians in the particular areas of the world and we felt participation in them to be essential components in gaining name recognition and traction.
 
The INVOcell is cleared for use within countries that require a CE mark.  We must undergo a registration process in certain countries in addition to having the CE mark, because it is a Class II medical device.  In some countries, the process is relatively quick - approximately three to six weeks - while we have discovered in other countries it may take months.  While we are continuing to tend to the needs of the regional health organizations for registering the INVOcell, INVO Bioscience has continued to train physicians actively and teach distributors in the INVOcell technology.  Physicians have demonstrated that their patients would like to see current success rates within their own geographic and cultural areas and therefore we are assisting them in sponsoring clinical marketing trials.  As of December 31, 2009, we have the necessary approvals to sell the INVOcell device in the following countries: Colombia, Guatemala, Belgium, Greece, Bulgaria, Turkey, Poland, Spain, Switzerland, Cyprus, Pakistan, Cameroon, Nigeria, South Africa and IndiaWe have started the registration process in the following countries as well: Peru, Argentina, Venezuela, Egypt, Russia and Taiwan.
 
 
Because of the registration process and delays to wait for “local results” in certain geographic and cultural areas, along with limited resources to assist in moving things forward in some countries, revenues were significantly less than anticipated for the year.  However, we are continuing to receive registration notifications as well as receiving favorable initial local results that will be used for regional marketing campaigns.  In addition to these developments, we are continuing to plan sales and training trips actively.  We believe that we will begin increasing revenues in the future; however, our growth is limited by both the registration processes that we must undertake as well as our limited capital resources, and therefore we anticipate that revenues will continue to be lower than originally anticipated for the next few quarters.  The registration process differs from a clinical approval, which the INVOcell has in the form of the CE mark; instead, the process is more akin to a governmental tracking to monitor what products are sold and used within its borders.
 
Our most significant challenge in growing our business has been our limited resources.  As of December 31, 2009, we generally require approximately $175,000 per month to fund our planned 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 our clinical trial, sales and marketing efforts, strengthening our training capabilities, satisfying existing obligations and building an administrative infrastructure, including costs and professional fees associated with being a public company. 
 
We believe we are taking the necessary steps to provide the capital resources we need to execute our business plan and grow the business as expected, including through the REF with AGS Capital Group, LLC, although no assurances can be made that we will be able to draw down on the REF.  At present, we are unable to draw-down on the REF equity line until we update our Form S-1 filed with the SEC with the update financials contained in this Form 10-K.  Even with an update Form S-1 in place, our ability to draw against this equity line is subject to conditions and limitations.  We also seek other sources of capital through private placements of our securities.  The exact amount of funds raised, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake, such as initiating the final required FDA clinical trial.  No assurance can be given that we will be able to raise additional capital when needed.  If we are unable to raise additional capital, we will be required to substantially curtail or cease operations.
 
Selling, general and administrative expenses were $1,857,000 and $1,838,000 for the years ended December 31, 2009 and 2008, respectively.  In 2008, we started to hire resources in the following areas, clinical training, sales and accounting.
 
We currently are incurring a net loss as we continue to market our product and proprietary process as we endeavor to increase our revenue base.  It is expected that we will continue to generate net losses through 2010.

We cannot predict what our level of activity will be over the next 12 months.  However, INVO Bioscience anticipates that it will continue to launch the sale of the INVOcell device in Canada, Europe, Latin America, India and the Middle East through established distributors, IVF centers and physicians.  With the cost of the INVO procedure being less than half the cost of IVF, we believe we can penetrate 5% of the currently untreated infertility market, though there can be no assurance that we will be successful in doing so.

To achieve this plan, we require additional financing.  As we expand our distribution base, our costs and expenses will exceed the cash flow being generated and therefore we will require additional capital. 
 
Due to our early stage of growth, each of the items from our Statement of Operations may not be indicative of future levels of activity.  As such, we expect our costs and losses to increase in future periods as we seek to ramp up sales and incur infrastructure costs.  As we move forward, the Company expects to expand its sales force and clinical trainers and continuing to travel to support our distributors and physicians.  

The amounts and timing of our actual expenditures may vary significantly from our expectations depending upon numerous factors, including our results of operation, financial condition and capital requirements.  Accordingly, we will retain the discretion to allocate the available funds among the identified uses described above, and we reserve the right to change the allocation available funds among the uses described above.

We had a net loss of $4,661,000, a working capital deficiency of $3,333,000, a stockholder deficiency of $3,237,000, and cash used in operations of $927,000 for the year ended December 31, 2009.  This raises substantial doubt about our ability to continue as a going concern.  Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan.  Our financial statements attached do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
 
Critical Accounting Policies and Estimates

The discussion and analysis of INVO Bioscience’s financial condition presented in this section are based upon the audited consolidated financial statements of INVO Bioscience, which have been prepared in accordance with the generally accepted accounting principles in the United States.  During the preparation of the financial statements, INVO Bioscience is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an ongoing basis, INVO Bioscience evaluates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  A summary of significant accounting policies are included below.  Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
 
Stock Based Compensation

The Company accounts for stock-based compensation under the provisions of, ASC 718-10 Share-Based Payment (formerly SFAS 123R).  This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.  That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period.

Revenue Recognition

The Company will recognize revenue on arrangements in accordance with Accounting Standards Codification  605-10  formerly Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition.”  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Fair Value of Financial Instruments

ASC 825-10-50, “Disclosures about Fair Value of Financial Instruments” (SFAS No. 107) requires disclosure of the fair value of certain financial instruments.  The carrying value of cash and cash equivalents, accounts payable and borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.

Effective January 1, 2008, the Company adopted ASC 820-10, “Fair Value Measurements” (SFAS 157), which provides a framework for measuring fair value under GAAP.   ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements and their effect on the Company, see “Recent Accounting Pronouncements” in Note 1 of the Notes to Consolidated Financial Statements contained herein.
 
 
Results of Operations
 
Fiscal 2009 Compared to Fiscal 2008

Net Sales and Revenues

Net sales and revenues for 2009 increased 66% to $63,200 compared to $38,000 in 2008.  The increase was due to the launch of international shipments of small orders to our newly signed distributors as well as direct shipments to physicians internationally.  We expect this trend to continue as we introduce the INVO technology into our targeted countries over the next few months while continuing to assist our current customer base in the Middle East and South America.
 
Cost of Sales and Revenues

Cost of sales as a percentage of revenues were 65% or $41,300 in 2009 compared to 27% or $10,100 in 2008.  Our 2009 product cost of sales is significantly higher compared to 2008, which is a trend we expect to continue in the future for a few reasons.  In 2009, we reduced our average selling price in a number of markets to gain initial entry and to allow for marketing trials.  Additionally, we are producing small lot quantities and have higher shipping costs per unit as a result of the small volume shipments.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses grew by 1% to $1,856,900 in 2009, as compared to $1,837,600.  Our slightly higher general and administrative expenses in 2009 were due to focusing our limited resources in a couple of areas.  First, we continued to expand training related to the use of our products and technology outside of the United States and, second, we established a scientific advisory board.  The advisory board members assisted us in reviewing our product registrations and clinical protocols for international marketing trials and eventually our FDA clinical trial.  During the initial six months of 2008, we had three senior employees who did not take a salary.  In the second half of 2008, we grew to seven employees, all earning a salary as well as all the associated expenses that relate to them, including benefits and taxes.  Salaries and benefits in 2009 were $836,400 compared to $989,100 during 2008.  We were able to maintain the travel costs of our employees as they continued to travel internationally to introduce and train physicians and distributors on the INVO technology in Europe, Mid-East, Africa and South America by carefully planning all travel.  Travel related expenses for the comparable years ending December 31, 2009 and 2008 were $149,700 and $152,000 respectively.  We continued to protect our patent rights around the world with legal and filing fees totaling $59,100 for 2009 compared to $53,700 during 2008.  Some of the new expenses incurred by us during 2009 relate to being a public entity, including investor relations, shareholder services, filing fees, accounting and legal costs, which together were $380,200 versus $375,300 in 2008 for similar expenses related to the share exchange. 
 
Research and Development Expenses
 
Research and development expenses decreased to $7,700 in 2009 from $51,800 in 2008.  Minimal resources were spent on R&D in 2009 as we felt the products were ready for the market as they were.  We do not anticipate much spending in R&D in the next 6-12 months as we focus our resources on launching and training doctors on our current products.
 
Interest Income and Expense and Financing Fees
 
In 2009, we incurred significant non-cash financing liability expense related to the convertible loans with detachable warrants that we issued to raise capital during the summer of 2009.  We incurred $2,925,500 in non-cash expense primarily from the common stock market price appreciation compared to the conversion feature of $0.10 per share and warrant price per share of $0.20.  Additionally we incurred broker’s fees for both the convertible loan as well as the REF we executed, effective as of October 28, 2009, these fees totaled $361,000 in 2009 compared to $0 in 2008.  We had net interest expense of $39,700 in 2009, as compared to $11,900 for 2008 as a result of having higher loans including the convertible loans in 2009 versus 2008.
 
 
Income Taxes
 
Our aggregate unused net operating losses approximate $6,700,000, 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 $2,715,000.  We have provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon our earnings history, it is more likely than not that we will not realize the net operating loss benefits.
 
Liquidity and Capital Resources
 
Our lack of financial resources continues to be our major challenge.  As of December 31, 2009, we had $79,000 in cash and no cash equivalents.  Net cash used by operating activities in 2009 was $927,000, compared to net cash used by operating activities of $1,067,000 for 2008.  The major reason for the decrease in net cash used was due to the current employees assisting INVO Bioscience in its funding requirements by deferring their salaries ($508,000) for the last ten months of 2009.
 
No cash was used in 2009 in investing activities, compared to $74,000 cash used by investing activities for the same period of 2008.  The cash used during 2008 was for the expansion of our patents to protect our proprietary products.  During 2009, we maintained our current patents across the globe and currently do not believe it is necessary to expand any of them at this time.  Also during 2008, we purchased manufacturing molds for our products, laptop computers for our employees and a telephone system.
 
Net cash provided by financing activities was $990,000 during 2009.  Of that amount, $88,000 was provided by a short term 5% loan by Kathleen Karloff, our CEO.  In addition, on September 15, 2009, we completed a 10% convertible notes bridge offering (the “Notes”) with a principal amount of $545,000 .  Each Note bears interest, payable in shares of our Common Stock, at a rate equal to 10-12% per annum from the date of issuance of the Note until paid in full on the Maturity Date (defined below).  The initial investor’s Notes bear interest at 12% per annum.  All outstanding principal and accrued interest under each Note is payable on the first to occur of (i) one year following the original issue date (as defined below), or (ii) a follow-on financing of at least $2,500,000 (the “Maturity Date”).  We can prepay the Notes at any time without penalty or premium.  The Notes are secured by all of our assets and carry detachable Common Stock purchase warrants.  The Notes rank junior to our SBA $50,000 Century Bank Line of Credit Loan and rank senior in all respects to all other existing and future indebtedness.  The Notes are convertible into our Common Stock at a conversion price of $0.10 per share.  The investors have the option to convert all or any portion of the principal amount of the Notes outstanding at any time, together with any accrued and unpaid interest hereunder into shares of Common Stock at the conversion price.  In addition, as additional consideration for the investment in the Notes, we issued a warrant to purchase the number of shares of Common Stock equal to 100% of the quotient of the principal amount of the Note issued to such investor divided by the Conversion Price, as set forth in such Note, the Conversion Price equals $0.10 per share and the exercise price of the Warrants equals $0.20 per share.  The purchase agreement for the Notes also includes certain negative covenants of the Company, including, without limitation, limitations on:  incurring additional indebtedness and liens, transactions with affiliates and payment of dividends.  Additionally $100,000 from financing activities came from a single investor who purchased 66,667 shares of our Common Stock for $0.15 per share, along with the investment they were also granted a warrant to purchase another 66,667 shares at $0.30, similar to the convertible note arrangement mentioned above.
 
The remaining $295,000 of net cash provided by financing activities was from Lionshare Ventures (LSV), per a subscription receivable agreement dated December 5, 2008, and revised on June 10, 2009, for the previous sale of Common Stock to LSV.  As of December 31, 2009, LSV defaulted on their agreement for a second time leaving $155,000 still due to us from LSV.
 
We maintain 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 December 31, 2009, the rate was 3.74%.  This line of credit matures on May 31, 2010.  At December 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 6, 2010, that we have generated negative cash outflows from operating activities, experienced recurring net operating losses, and are dependent on securing additional equity and debt financing to support our business efforts.  These factors among others may raise substantial doubt about our ability to continue as a going concern.
 
Our existing cash resources, cash flow from operations and short-term borrowings on the existing credit line or from management will not provide adequate resources for supporting operations during fiscal 2010.  We intend to achieve additional funding through additional sales of our securities, including in connection with the $10 million REF from AGS Capital Group, LLC described elsewhere in this Annual Report on Form 10-K subject to certain conditions and limitations.  Additionally we continue to seek alternative funding to compliment the REF to execute our business plan.  Although there can be no assurance that an additional source of funding will materialize, we currently believe that we will be able to obtain the funding we need to continue to grow our business.  However, if we do not raise additional capital in the near future we will have to further curtail our spending and downsize or cease our operations.
 
Off Balance Sheet Arrangements

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.  An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:
 
 
-
Any obligation under certain guarantee contracts;
 
-
Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;
 
-
Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholder’s equity in our statement of financial position; and
 
-
Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.
 
We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations.  In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations.  These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.
 
Inflation

We believe that inflation has not had a material effect on our operations to date.
 
Item 8.  Financial Statements and Supplementary Data
 
The financial statements and supplementary data are included herein under Item 6 and in the Consolidated Financial Statements and related notes thereto.  See Item 15 of this Form 10-K.

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.
 
 
Item 9A.  Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) 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 SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

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 December 31, 2009.  Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as described below under “Management’s Report on Internal Control over Financial Reporting,” the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.
 
Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company.  Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2009 based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2009, 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 because of the Company’s limited resources and limited number of employees.

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.  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.

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this annual report.
 
Limitations on Effectiveness of Controls and Procedures

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.
 
 
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.
 
Item 9B.  Other Information
 
None.
 
Part III

  Item 10.  Directors and Executive Officers of the Registrant
 
The Company’s Directors are elected annually by our stockholders at the annual meeting.  Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.  INVO Bioscience's executive officers are elected annually by our Board of Directors.  Each executive officer holds his office until they resign, is removed by the Board, or their successor is elected and qualified.  Information regarding our executive officers is presented below.

NAME
 
AGE
 
POSITION
Ms. Kathleen Karloff
 
54
 
Director and Chief Executive Officer, Secretary
         
Dr. Claude Ranoux, MD
 
58
 
Director, President and  Treasurer
         
Mr. Robert Bowdring
 
52
 
Chief Financial Officer
         
 
Kathleen Karloff, Chief Executive Officer, Secretary and Director

Ms. Karloff co-founded INVO Bioscience in January 2007.  Since this time, Kathleen has obtained ISO certification and the CE mark for the INVOcell device and has implemented manufacturing and distribution systems.  From 2004 until September 2006, Kathleen was the Vice President of Operations for Medelle Corporation.  From 2000 through 2003, Kathleen was the Vice President of Operations for a start-up company Control Delivery Systems developing an intra-ocular drug therapy for Uveitis and Diabetic Macular Edema.  The Company was acquired by Psivida LTD.  Prior to that, she has held various positions at Boston Scientific during 13 years of dynamic growth from 1983 to 1997 her last position being the Director of Manufacturing.  Since leaving Boston Scientific, she has been Vice President of Operations on start-up teams of three device/pharmaceutical companies.  Ms. Karloff earned her B.S. in microbiology from Montana State University and attended Northeastern University for MBA coursework.

 
 
Claude Ranoux, M.D., M.S., President, Treasurer and Director

Dr. Ranoux co-founded INVO Bioscience in January 2007.  He has more than 30 years of experience in the research and treatment of infertility; he is the inventor and developer of the INVO™ procedure and INVOcell device.  From 2000 through 2005, Dr. Ranoux was president of Medelle Corporation and worked on development of the INVOcell.  Dr. Ranoux has built and run 12 IVF centers worldwide and has established 12 reproductive centers worldwide.  Before founding INVO Bioscience and recruiting the highly experience management team, Dr. Ranoux had 6 years of experience in creating  and finding financing for a start-up company.  He has been scientific consultant for a new instrument (Immuno1) from Bayer Corporation.  During this collaboration, the North West area became the first area for the sales of the instrument two years in a row.  Dr. Ranoux was the founder of several non-profit organizations and foreign trade advisor in the New England area.  Dr. Ranoux earned his M.D. and his M.S. in Reproductive Biology from the Medical University of Paris (V & XI) where he was an Associate Professor.  Dr. Ranoux has served as a scientific consultant for eight other centers and is the author of numerous scientific publications as first author.  He has given numerous invited lectures, conferences and workshops and is the author of five medical and scientific theses and mentor for several others.  He is co-author of six scientific and medical films.  He received a prize for the one of the best scientific presentation at the Fifth World Congress in IVF, in Norfolk, VA, and is the recipient of several other awards.  Dr. Ranoux is the main inventor in six international patents.

Robert J. Bowdring, Chief Financial Officer
 
Mr. Bowdring joined the Company as its Corporate Controller in October 2008.  In January 2009, the Company appointed Mr. Bowdring as its Chief Financial Officer.  From April 2003 to August 2008, Mr. Bowdring served as Vice President of Finance and Administration for Cyphermint, Inc., a software development firm.  For the fourteen prior years, he was the Controller and Vice President of Lifeline Systems Inc., a public manufacturing and service company (NASDAQ: LIFE) in the personal emergency response market.  Mr. Bowdring has a strong history in senior financial management with more than 25 years experience serving in capacities such as chief financial officer, vice president of finance and controller.  Rob has been in both public and private manufacturing and service companies during his career.  Mr. Bowdring has a Bachelors degree in Accounting from the University of Massachusetts in Amherst.
 
Code of Ethics

We currently have a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and senior executives, it may be found on the Company’s website.
  
Cumulative voting is not provided for in our Articles of Incorporation or any amendments thereto, which means that the majority of the shares voted can elect all of the directors then standing for election.  The Common Stock is not entitled to preemptive rights and is not subject to conversion or redemption.  Upon the occurrence of a liquidation, dissolution or winding-up, the holders of shares of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and satisfaction of preferential rights of any outstanding preferred stock.  There are no sinking fund provisions applicable to the Common Stock.  
 
 
 
Item 11.  Executive Compensation
 
Summary Compensation Table

The following Summary Compensation Table sets forth, for the years indicated, all cash compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by the Company’s chief executive officer and president who received or was entitled to receive remuneration in excess of $100,000 during the stated periods.  As reflected below, none of our officers received cash compensation during fiscal 2007.
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
Year
 
Paid
Salary ($)
   
Accrued Salary ($)
   
Stock Award
($) (5)
   
Option Award ($)
   
Non-Equity Incentive Plan Compensation Earnings ($)
   
Non-Qualified Deferred Compensation Earnings ($)
   
All other Compensation ($)
   
Total ($)
 
                                                   
Kathleen Karloff, CEO/Director  
2009
   
29,167
     
145,833
     
0
     
0
     
0
     
0
     
0
     
175,000
 
(1,5 & 6)
2008
   
93,074
     
0
     
0
     
0
     
0
     
0
     
0
     
93,074
 
 
2007
   
0
     
0
     
  4,498
     
0
     
0
     
0
     
0
     
4,498
 
                                                                   
Claude Ranoux
President/Director
2009
   
29,167
     
145,833
     
0
     
0
     
0
     
0
     
0
     
175,00
 
(2, 5 & 6)
2008
   
91,974
     
0
     
0
     
0
     
0
     
0
     
0
     
91,974
 
 
2007
   
0
     
0
     
19,731
     
0
     
0
     
0
     
0
     
19,731
 
                                                                   
Robert Bowdring
2009
   
22,500
     
123,750
     
0
     
0
     
0
     
0
     
0
     
146,250
 
CFO (4 & 6)
2008
   
25,312
     
0
     
0
     
0
     
0
     
0
     
0
     
25,312
 
                                                                   
Philip Warren    (3 & 5)
2009
   
0
     
0
     
0
     
0
     
0
     
0
     
0
     
0
 
Former CEO
2008
   
43,980
     
0
     
0
     
0
     
0
     
0
     
0
     
43,980
 
 
2007
   
0
     
0
     
2,761
     
0
     
0
     
0
     
0
     
2,761
 
 
(1)
Kathleen Karloff was elected as the Chief Executive Officer, Secretary and member of the Board of Directors of the Company effective upon the resignation of Andrew Uribe in connection with the acquisition of INVO Bioscience on December 5, 2008.  During 2007, Ms. Karloff received shares of Common Stock valued at $0.2857 per share for services rendered in 2007 and awarded in 2008.
(2)
Claude Ranoux was elected as the President, Treasurer and member of the Board of Directors effective upon the resignation of Andrew Uribe, in connection with the acquisition of INVO Bioscience on December 5, 2008.  During 2007, Dr. Ranoux received shares of Common Stock valued at $0.2857 per share for services rendered in 2007 and awarded in 2008.
(3)
Philip Warren served as the Chief Executive Officer of INVO Bioscience from May 2007 to September 2008.  During 2007, Mr. Warren received shares of Common Stock valued at $0.2857 per share for services rendered in 2007 and awarded in 2008.
(4)
Robert Bowdring was elected as the Chief Financial Officer on January 2, 2009 after joining the Company in October 2008 as Controller.
(5)
The dollar value reported in 1, 2, & 3 was based upon a per share price of $0.2857.  The per share price was determined in accordance with the relevant facts of BioXcell in February 2008.  BioXcell was a start-up company, in a pre-revenue stage and without any third-party investment.
(6)
During 2009, the named Officers received only 17% of their 2009 salaries in order to assist the Company’s cash flow during the year.

Compensation of Directors

None.
 
 
Stock Option Grants

Since January 1, 2008, the Company has signed agreements for officers, executives and service providers of the Company.  As of December 31, 2008, a total of 303,500 shares of Common Stock and three-year vesting options to purchase an additional 500,000 of the Company’s Common Stock were agreed to be issued, the price will be determined on date of grant.  As of December 31, 2009, the Company has issued the committed shares against the 2008 recorded accrued liability of $313,500.  As of December 31, 2008, the Company has not obtained shareholder approval for the equity compensation plan and has not deemed the 500,000 options as granted until the plan is approved.
 
Employment Contracts

Kathleen Karloff, chief executive officer, secretary and member of the Board of Directors, has executed an employment agreement with INVO Bioscience effective as of February 1, 2008.  The agreement provides for an annual salary of $175,000 and health and life insurance and retirement plan along with the reimbursement of expenses.  In the event that Ms. Karloff’s employment is terminated other than for good cause (as defined in the employment agreement), she will receive her salary and full medical benefits for twelve (12) months thereafter.  Kathleen Karloff voluntarily agreed to a salary reduction from February 1, 2008 through September 1, 2008 to $101,061 per year, however, that reduction is no longer in effect.
 
Dr. Claude Ranoux, president, Treasurer and member of the Board of Directors, has executed an employment agreement with INVO Bioscience effective as of February 1, 2008.  The agreement provides for an annual salary of $175,000 and health and life insurance and retirement plan along with the reimbursement of expenses.  In the event that Dr. Ranoux’s employment is terminated other than for good cause (as defined in the employment agreement), he will receive his salary and full medical benefits for twelve (12) months thereafter.  Claude Ranoux voluntarily agreed to a salary reduction from February 1, 2008 through September 1, 2008 to $86,478 per year, however, that reduction is no longer in effect.

Robert Bowdring, chief financial officer, has executed an employment agreement with INVO Bioscience effective as of October 27, 2008.  His current agreement provides for an annual salary of $150,000 and health and life insurance and retirement plan along with the reimbursement of expenses.  In the event that Mr. Bowdring’s employment is terminated other than for cause (as defined in the employment agreement), he will receive a severance package of  12 months of salary and full medical benefits.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The following table sets forth the names and beneficial ownership of the 60,870,822 shares of our Common Stock as of  March 23, 2010, by each of our directors, all of our directors and executives as a group, and to the best of our knowledge, all holders of 5% or more of the issued and outstanding shares of the Company’s voting stock.  Unless otherwise noted, the address of all of the individuals and entities named below is care of INVO Bioscience, Inc., 100 Cummings Center, Suite 421E, Beverly, Massachusetts 01915:

Name and Address of Beneficial Owner (1)
 
Nature of
Security
 
Number of
Shares
   
Percentage of Common
Stock
 
                 
Directors and Officers:
               
                 
Kathleen Karloff
 
Common Stock
   
 5,947,159
     
9.77
%
                     
Claude Ranoux
 
Common Stock
   
25,490,473
     
41.87
%
                     
All directors and executive officers as a group (2 persons)
       
31,437,632
     
51.64
%
                     
Other 5% or more Shareholders:
                   
                     
Phillip Warren
 
Common Stock
   
3,450,778
     
5.66
%
                     
Christopher Esposito (2)
 
Common Stock
   
3,222,363
     
5.29
%
                     
 
                 (1)
Beneficial ownership is determined in accordance with Rule 13d-3(a) of the Securities Exchange Act of 1934 and generally includes voting or investment power with respect to securities.  Except as indicated by footnotes and subject to community property laws, where applicable, the person named above has sole voting and investment power with respect to all shares of the Common Stock shown as beneficially owned by him or her.
 
                 (2)
Christopher Esposito has sole or shared decision-making power over the following: Christopher Esposito’s 2,447,363 shares of which 1,786,563 shares were recently issued for his personal participation in the Company’s Convertible “Bridge” loans in the fall of 2009 and through Lionshare Venture Holdings LLC for 775,000 currently held in escrow until his original investment commitment is fulfilled. Mr. Esposito has informed the Company that, at this time, he does not intend to fulfill his investment commitment.  The Company still deems Mr. Esposito to have beneficial ownership over such shares; the percentage change of his ownership of our Common Stock reflects a reduction of approximately 5 million shares over the last 15 months.
 
 
Changes in Control

There are no present arrangements or pledges of the Company’s securities, which may result in a change in control of the Company.

Item 13.  Certain Relationships and Related Transactions, and Director Independence
 
Conflicts of Interest

Certain potential conflicts of interest are inherent in the relationships between our officers and directors, and us.  From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate.  These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with ours with respect to operations, including financing and marketing, management time and services and potential customers.  These activities may give rise to conflicts between or among the interests of us and other businesses with which our affiliates are associated.  Our affiliates are in no way prohibited from undertaking such activities, and neither our shareholders nor we will have any right to require participation in such other activities.
 
Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons or entities.  We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.

With respect to transactions involving real or apparent conflicts of interest, we intend to require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.

Directors’ and Officers’ Liability Insurance

We have an insurance policy to insure directors and officers against certain liabilities.

Item 14.  Principal Accountant Fees and Services

Effective March 2, 2009, our independent registered public accounting firm is RBSM LLP.  Our independent registered public accounting firm was Webb & Company, P.A. prior to March 2, 2009.  Set forth below are the fees and expenses invoiced by RBSM LLP and Webb & Company, P.A. for audit services and tax services provided to us in 2009 and 2008.  The following table summarizes the approximate aggregate fees billed to us or expected to be billed to us by our independent registered accounting firms for our 2009 and 2008 fiscal years:

   
Fiscal Year Ended
   
Fiscal Year Ended
 
   
December 31, 2009
   
December 31, 2008
 
Audit Fees
  $ 67,400     $ 25,000-  
Audit Related fees
  $ 13,000     $ -  
Tax Fees
  $ -     $ 1,600--  
All Other Fees
  $ -     $ -  

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors.  Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services.  Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board.  Any such approval by the designated member is disclosed to the entire Board at the next meeting.  The audit and tax fees paid to the auditors with respect to fiscal year 2009 and 2008 were pre-approved by the entire Board of Directors.
 
 
Part IV

Item 15.  Exhibits and Financial Statement Schedules

 
(a)
Financial Statements

The following are filed as a part of this report:

1. Financial Statements
 

2. Financial Statement Schedules

Information required by Schedule II is shown in the Notes to Consolidated Financial Statements.  All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
 
 
(b)
Exhibits

The Exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index following the audit report to this Annual Report on Form 10-K and are incorporated herein by reference.


 
Board of Directors
INVO Bioscience, Inc.
Beverly, MA

We have audited the accompanying consolidated balance sheets of INVO Bioscience, Inc. (“the Company”), a development stage company, as of December 31, 2009 and 2008, and the related consolidated statements of losses, stockholders' deficiency, and cash flows for each of the two years in the period ended December 31, 2009  and the period January 5, 2007 (date of inception) through December 31, 2009.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based upon our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Invo Bioscience, Inc. a development stage company, at December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009  and for the period January 5, 2007 (date of inception) through December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2, the Company has a generated negative cash flows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts.  These factors raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans in regards to this matter are described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
       
/s/ RBSM LLP               
       
New York, New York 
April 6, 2010
     
 
 

 
F-1

 
INVO Bioscience, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheets
 
Assets
 
   
December 31,
   
December 31,
 
   
2009
   
2008
 
             
Current Assets:
           
  Cash
 
$
79,052
   
$
15,716
 
  Accounts receivable, net
   
3,064
     
34,195
 
  Other receivable
   
-
     
7,500
 
  Inventory
   
63,134
     
70,722
 
  Prepaid expenses
   
46,991
     
73,785
 
   Total current assets
   
192,241
     
201,918
 
                 
  Property and equipment, net
   
32,836
     
41,245
 
                 
Other Assets:
               
  Capitalized patents, net
   
62,759
     
68,392
 
   Total other assets
   
62,759
     
68,392
 
                 
  Total assets
 
$
287,836
   
$
311,555
 
                 
Liabilities and Stockholders' Deficiency
 
                 
Current Liabilities:
               
  Accounts payable
 
$
683,816
   
$
226,861
 
  Accrued expenses and salaries
   
727,483
     
614,799
 
  Note payable- related party
   
146,462
     
38,000
 
  Line of credit
   
50,000
     
50,000
 
  Convertible notes, net of debt discount of  $297,897 and $0, respectively
   
12,103
     
-
 
  Derivative liabilities
   
1,905,109
     
-
 
   Total current liabilities
   
3,524,973
     
929,660
 
                 
Long Term Liabilities:
               
  Note payable- related party
   
-
     
58,462
 
   Total long term liabilities
   
-
     
58,462
 
                 
  Total liabilities
   
3,524,973
     
988,122
 
                 
Commitments and Contingencies
               
Stockholders' Deficiency:
               
Preferred Stock, $.0001 par value; 100,000,000 shares authorized;
No shares issued and outstanding as of December 31, 2009 and 2008 
   
-
     
-
 
Common Stock, $.0001 par value; 200,000,000 shares authorized; 58,926,322 and 53,620,000 issued and outstanding as of December 31, 2009 and 2008, respectively.
   
5,893
     
5,362
 
Additional paid-in capital
   
3,660,933
     
1,855,565
 
Stock subscription receivable
   
(155,000
)    
(450,000
)
  Accumulated deficit during the development stage
   
(6,748,963
)
   
(2,087,494
)
   Total stockholders' deficiency
   
(3,237,137
)
   
(676,567
)
                 
  Total liabilities and stockholders' deficiency
 
$
287,836
   
$
311,555
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
INVO Bioscience, Inc.
 
(A DEVELOPMENT STAGE COMPANY)
 
Consolidated Statements of Losses
 
   
                   
   
 
         
From January 5, 2007
 
   
Year Ended
   
Year Ended
   
(Inception) to
 
   
December 31, 2009
   
December 31, 2008
   
December 31, 2009
 
                   
Revenue:
                 
Product Revenue
 
$
63,204
   
$
37,995
   
$
101,199
 
Cost of Goods Sold:
                       
Product Costs
   
41,391
     
10,088
     
51,479
 
                         
Gross Margin:
   
21,813
     
27,907
     
49,720
 
                         
Operating Expenses:
                       

  Research and development
   
7,650
     
51,761
     
92,761
 
  Selling, general and administrative
   
1,856,904
     
1,837,606
     
3,871,680
 
   Total Operating Expenses
   
1,864,554
     
1,889,367
     
3,964,441
 
                         
Loss from operations
   
(1,842,741
)
   
(1,861,460
)
   
(3,914,721
)
                         
Other Expenses:
                       
  Change in fair value of derivative liability
   
(507,424
   
               -
     
  (507,424
)
  Interest & financing fees
   
3,326,152
     
11,945
     
3,341,666
 
   Total other expenses
   
2,818,728
     
11,945
     
2,834,242
 
                         
Loss before income taxes
   
(4,661,469
)
   
(1,873,405
)
   
(6,748,963
)
                         
Provisions for income taxes
   
-
     
-
     
-
 
                         
Net Loss
 
$
(4,661,469
)
 
$
(1,873,405
)
 
$
(6,748,963
)
                         
Basic and diluted net loss per weighted average shares of common stock
 
$
(0.09
)
 
$
(0.05
)
 
$
(0.17
)
Basic and diluted weighted average number of shares of common stock
   
54,736,168
     
36,691,176
     
38,806,248
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
INVO Bioscience, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Stockholders' Deficiency
For the Period January 5, 2007 (Date of Inception) to December 31, 2009
 
   

 
Common Stock
                         
   
Shares
   
Amount
   
Additional Paid in Capital
   
Subscription Receivable
   
Accumulated Deficit during Development Stage
   
Total
 
                                     
Stock issuance to founder in January 2007
    24,991,379     $ 2,499     $ 17,501             -     $ 20,000  
                                               
In Kind contribution of services in December 2007
    -       -       90,865             -       90,865  
                                               
In Kind contribution of interest in December 2007
    -       -       2,298             -       2,298  
                                               
Net Loss for the period January 5, 2007 (Inception)to December 31, 2007
    -       -       -           $ (214,089 )     (214,089 )
                                               
Balance, December 31, 2007
    24,991,379     $ 2,499     $ 110,664           $ (214,089 )   $ (100,926 )
                                               
Common stock issued for services in March 2008
    10,728,442       1,073       11,978             -       13,051  
                                               
Common stock issued for cash in April 2008
    312,392       31       31,969             -       32,000  
                                               
Common stock issued for cash in May 2008
    365,588       37       54,963             -       55,000  
                                               
Common stock issued for cash in June 2008
    431,994       43       64,957             -       65,000  
                                               
Common stock issued for cash in July 2008
    399,148       40       59,960             -       60,000  
                                               
Common stock issued for cash in August 2008
    365,588       37       54,963             -       55,000  
                                               
Common stock issued for cash in September 2008
    1,136,751       114       174,886             -       175,000  
                                               
In Kind Contribution of services in September 2008
    -       -       160,821             -       160,821  
                                               
In Kind Contribution of interest in September 2008
    -       -       3,690             -       3,690  
                                               
Common stock issued for cash in October 2008
    1,118,186       112       199,826             -       199,938  
                                               
Common stock issued for services in November 2008
    265,623       27       40,029             -       40,056  
                                               
Forfeited common stock for services not fully rendered during 2008
    (2,239,585 )     (224 )     (1,568 )           -       (1,792 )
                                               
Common stock issued for cash in November 2008
    431,994       43       64,957             -       65,000  
                                               
Common stock issued to Registrant’s shareholders in December 2008
    14,937,500       1,494       448,506       (450,000 )     -       -  
                                                 
Common stock issued for Cash in December 2008
    375,000       38       374,962               -       375,000  
                                                 
Net Loss, for the year ended December 31, 2008
    -       -       -       -     $ (1,873,405 )     (1,873,405 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
INVO Bioscience, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Stockholders' Deficiency (Continued)
For the Period January 5, 2007 (Date of Inception) to December 31, 2009
 
   

 
Common Stock
                         
   
Shares
   
Amount
   
Additional Paid in Capital
   
Subscription Receivable
   
Accumulated Deficit during Development Stage
   
Total
 
           
                                                 
Balance, December 31, 2008
    53,620,000     $ 5,362     $ 1,855,565     $ (450,000 )   $ (2,087,494 )   $ (676,567 )
                                                 
Cash received for Subscription Receivable in January 2009
                            100,000               100,000  
                                                 
Cash received for Subscription Receivable in February 2009
                            60,000               60,000  
                                                 
Common stock issued for services in March 2009
    83,333       8       37,492                       37,500  
                                                 
Cash received for Subscription Receivable in March 2009
                            40,000               40,000  
                                                 
Cash received for Subscription Receivable in April 2009
                            45,000               45,000  
                                                 
Common stock issued for services in May 2009
    125,000       13       15,487                       15,500  
                                                 
Common stock issued per favored nation agreement dated 12/5/08 in Sept. 09
    1,125,000       113       (113 )                     -  
                                                 
Common stock issued for services in Sept. 2009
    857,000       86       299,864                       299,950  
                                                 
Forfeited common stock per 12/5/08 Purchase Agreement in August 09
    (562,500 )     (56 )     56                       -  
                                                 
Common stock issued for services in November 09
    12,000       1       6,121                       6,122  
                                                 
Common stock issued for Notes Payable (N.P.) Conversion in November 2009
    2,100,000       210       209,790                       210,000  
                                                 
Common stock issued for the interest related to N.P. Conversion in November 2009
    42,930       4       4,289                       4,293  
                                                 
Common stock issued for financing fees for broker services in November 2009
    600,000       60       305,940                       306,000  
                                                 
Cash received for Subscription Receivable in December 2009
                            50,000               50,000  
                                                 
Common stock issued for N.P. Conversion in December 2009
    250,000       25       24,975                       25,000  
                                                 
Common stock issued for the interest related to N.P. Conversion in December 2009
    6,892       1       688                       689  
                                                 
Common stock issued to a related party for cash in December 2009
    666,667       67       99,933                       100,000  
                                                 
Convertible Option Liability Conversion in December 2009
                    800,845                       800,845  
                                                 
Net Loss, for the year ended December 31, 2009
                                  $ (4,661,469 )     (4,661,469 )
                                                 
Balance, December 31, 2009
    58,926,322     $ 5,893     $ 3,660,933     $ (155,000 )   $ (6,748,963 )   $ (3,237,137 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
INVO Bioscience, Inc
 
(A DEVELOPMENT STAGE COMPANY)
 
 
   
   
For the Year