UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 2)
| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For
the fiscal year ended |
or
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the transition period from to |
(Exact name of registrant as specified in Charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File No.) |
(IRS Employee Identification No.) |
(Address of Principal Executive Offices)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ ☒
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 ☐ ☒
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. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO
The
aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the registrant as of the last business
day of the registrant’s most recently completed second fiscal quarter ended June 30, 2023 was $
The number of shares outstanding of the registrant’s common stock, $0.0001 par value, as of April 16, 2024 was .
DOCUMENTS INCORPORATED BY REFERENCE
| Audit Firm Id | Auditor Name: | Auditor Location: | ||
Explanatory Note
In addition, Item 15 of Part IV is being amended solely to include currently dated certifications in accordance with Rule 13a-13(a) promulgated by the SEC under the Securities Exchange Act of 1934, as amended, with paragraphs 3, 4, and 5 omitted, since no financial statements are contained within this Amendment. Because no financial statements are contained within this Amendment, the Company is not including certifications pursuant to Section 906 of the Sarbanes-Oxley Act 0f 2002 or any disclosures with respect to Items 307 or 308 of Regulation S-K.
Except as described above, no other changes have been made to the Original Filing or the First Amendment. The Original Filing and the First Amendment continue to speak as of the date of the Original Filing and the First Amendment, respectively, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing or the First Amendment, respectively. Accordingly, this Amendment should be read in conjunction with our Original Filing, the First Amendment, and our other filings made with the SEC subsequent to the filing of the Form 10-K.
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Part III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information with respect to each of our directors and executive officers including their positions and age as of the date of this Annual Report.
| NAME | AGE | POSITION | ||
| Mr. Steven Shum | 53 | Director, Chief Executive Officer | ||
| Mr. Andrea Goren | 56 | Chief Financial Officer | ||
| Mr. Michael Campbell | 64 | Chief Operating Officer and Vice President of Business Development | ||
| Mr. Matthew Szot | 49 | Director | ||
| Mr. Trent Davis | 55 | Director | ||
| Ms. Barbara Ryan | 63 | Director | ||
| Ms. Rebecca Messina | 51 | Director |
Steven M. Shum. Mr. Shum is our Chief Executive Officer, a position he has held since October 10, 2019, and is also a director, a position he has held since October 11, 2017. Previously, Mr. Shum was Interim Chief Executive Officer (from May 2019 to October 7, 2019) and Chief Financial Officer of Eastside Distilling (Nasdaq: EAST) (from October 2015 to August 2019). Prior to joining Eastside, Mr. Shum served as an Officer and Director of XZERES Corp, a publicly traded global renewable energy company, from October 2008 until April 2015 in various officer roles, including Chief Operating Officer from September 2014 until April 2015, Chief Financial Officer, Principal Accounting Officer and Secretary from April 2010 until September 2014 (under former name, Cascade Wind Corp) and Chief Executive Officer and President from October 2008 to August 2010. Mr. Shum also serves as the managing principal of Core Fund Management, LP and the Fund Manager of Core Fund, LP. He was a founder of Revere Data LLC (now part of Factset Research Systems, Inc.) and served as its Executive Vice President for four years, heading up the product development efforts and contributing to operations, business development, and sales. He spent six years as an investment research analyst and portfolio manager of D.N.B. Capital Management, Inc. His previous employers include Red Chip Review and Laughlin Group of Companies. He earned a B.S. in Finance and a B.S. in General Management from Portland State University in 1992.
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Andrea Goren. Mr. Goren is our Chief Financial Officer, a position he has held since June 14, 2021, and, before that, was advisor to the CEO of the Company from July 2020. Mr. Goren has over 30 years’ experience in private equity, investment banking, and corporate finance working with management teams in growing and restructuring businesses. Mr. Goren currently serves as director and corporate secretary of iSign Solutions Inc. (ticker: ISGN), an electronic signature software company, and also held the position of CFO from December 2010 to June 2021. Mr. Goren also serves as director and vice chairman of Americans for Ben Gurion University, a U.S. non-profit organization focused primarily on securing funds from U.S. donors to benefit one of Israel’s leading universities. Previously, Mr. Goren served as managing director and CFO of Phoenix Group, a private equity firm, and in that role served as director of Xplore Technologies Corp., a leader in rugged PCs sold to Zebra Technologies (ticker: ZBRA), and director of The Fairchild Corporation, a holding company with aerospace and retail assets, among others. Prior to Phoenix, Mr. Goren served as vice president of Shamrock International, Ltd, an arm of Roy Disney’s holding company focused on private equity and venture capital investments in Europe and Israel. Mr. Goren earned a BA from Connecticut College in 1989 and an MBA from Columbia University’s Graduate School of Business in 1994.
Michael J. Campbell. Mr. Campbell is our Chief Operating Officer and Vice President of Business Development, positions he has held since February 2019, and was a director from October 2017 to November 2020. Mr. Campbell was previously the Vice President of IVF Americas Business Unit for Cooper Surgical, Inc., a wholly owned subsidiary of The Cooper Companies (NYSE: COO). Mr. Campbell has substantial medical device sales, marketing, and business development leadership experience within Global Fortune 500 and startup company environments. During his over 11-year career at Cooper Surgical, Mr. Campbell has been responsible for IVF product portfolio sales globally including the U.S., Canada, Latin America, Europe, Middle East, Africa, and Asia Pacific regions. In addition to Mr. Campbell’s position as Vice President of IVF Americas Business Unit, he served in various leadership roles including Vice President of International Business Unit from 2013-2014 and as Vice President of IVF Business Unit from 2006 to 2012. Prior to joining Cooper Surgical, Mike was Vice President of Sales, Marketing and Business Development at Retroactive Bioscience from 1997 to 2006 and Vice President of Sales and Marketing for Gabriel Medical from 1994 to 1997. Mr. Campbell also served in various senior management positions across marketing, sales and product management at Boston Scientific Corporation beginning in 1984 through 1994.
Matthew Szot. Mr. Szot is one of our directors, a position he has held since September 13, 2020, and serves as Chairman of the Audit Committee and Compensation Committee, positions he has held since September 14, 2020. Mr. Szot is currently the Chief Financial Officer of Cadrenal Therapeutics, Inc. (Nasdaq: CVKD), a late-stage biopharmaceutical company where he has served since May 2022. From March 2010 to November 2021, Mr. Szot served as the Executive Vice President and Chief Financial Officer of S&W Seed Company (Nasdaq: SANW), an agricultural biotechnology company. Mr. Szot is also currently a director and serves as Chairman of both the Audit and Nominating and Governance Committees of SenesTech (Nasdaq: SNES), a publicly traded life science company with next generation technologies for managing animal pest populations through fertility control. From June 2018 to August 2019, Mr. Szot served on the board of directors and as Chairman of the Audit Committee of Eastside Distilling, Inc. (Nasdaq; EAST), a publicly traded company in the craft spirits industry. From February 2007 until October 2011, Mr. Szot served as the Chief Financial Officer for Cardiff Partners, LLC, a strategic consulting company that provided executive financial services to various publicly traded and privately held companies. Prior thereto, from 2003 to December 2006, Mr. Szot served as Chief Financial Officer and Secretary of Rip Curl, Inc., a market leader in wetsuit and action sports apparel products. From 1996 to 2003, Mr. Szot was a Certified Public Accountant with KPMG in the San Diego and Chicago offices and served as an Audit Manager for various publicly traded companies. Mr. Szot graduated with High Honors from the University of Illinois, Champaign-Urbana with a Bachelor of Science degree in Agricultural Economics/Accountancy. Mr. Szot is a Certified Public Accountant in the State of California. We believe that Mr. Szot is qualified to serve as a member of our board of directors because of his experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial, and accounting matters gained as a past and present chief financial officer and director of other public and private companies.
Trent Davis. Mr. Davis is one of our directors since his appointment in December 2019. Mr. Davis also serves as the Chairman of our Nominating and Corporate Governance Committee, a position he has held since November 2020. In addition, Mr. Davis is currently CEO of Paulson Investment Company, LLC, a boutique investment firm that specializes in private equity offerings of small and mid-cap companies. From December 2014 to December 2018, Mr. Davis was President and Chief Operating Officer of Whitestone Investment Network, Inc., which provides executive advisory services and also restructures, recapitalizes and makes strategic investments in small to midsize companies. Since March 2018, Mr. Davis served as a director of Senmiao Technology Limited (Nasdaq: AIHS), an online lending platform in China. From August 2016 to August 2019, Mr. Davis served as director of Eastside Distilling, Inc. (Nasdaq: EAST), and from July 2015 to April 2017, he served as director of Dataram Corporation (Nasdaq: DRAM). Mr. Davis helped to successfully complete the reverse merger between Dataram and U.S. Gold Corp (Nasdaq: USAU), a gold exploration and development company. From December 2014 to July 2015, Mr. Davis served as Chairman of the Board of Majesco Entertainment Company (Nasdaq: COOL). Mr. Davis also served as director and President of Paulson Capital Corp. (Nasdaq: PLCC) from November 2013 to July 2014, when Paulson Capital Corp. completed a reverse merger with VBI Vaccine (Nasdaq: VBIV). Mr. Davis continued to serve on the board and the audit committee of VBI until May 2016. Prior to serving on the board of Paulson Capital Corp., Mr. Davis served as the Chief Executive Officer of its subsidiary, Paulson Investment Company, LLC, where he oversaw he syndication of approximately $600 million of investment in over 50 client companies in both public and private transactions. In 2003, Mr. Davis served as Chairman of the Board of the National Investment Banking Association. Mr. Davis holds a B.S. in Business and Economics from Linfield College and an M.B.A. from the University of Portland. Mr. Davis is qualified to serve on the Board because of his deep knowledge of finance and public company issues, capital market, advisory and entrepreneurial experiences, and extensive expertise in operational and executive management.
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Barbara Ryan. Ms. Ryan is one of our directors, a position she has held since September 2020. Ms. Ryan founded Barbara Ryan Advisors, a capital markets and communications firm, in 2012 following a more than 30-year career on Wall Street as a sell-side research analyst covering the US large cap pharmaceutical industry. Ms. Ryan has deep experience in equity and debt financings, M&A, valuation, SEC reporting, financial analysis, and corporate strategy across a broad range of life sciences companies. Barbara worked on several of the industry’s largest M&A transactions: Shire’s defense versus a hostile takeover attempt by Abbvie, Shire’s takeover of Baxalta, Allergan’s defense against Valeant and Perrigo’s defense versus Mylan. Barbara served as an executive team member and on the disclosure committee for Radius Health from January 2014 to December 2017 and played a critical role in the Company’s IPO and subsequent follow on offerings which raised over $1 billion. Previously, Ms. Ryan was a Managing Director at Deutsche Bank/Alex Brown and Head of the company’s Pharmaceutical Research Team for 19 years and began her research career covering the pharmaceutical industry at Bear Stearns in 1982. Ms. Ryan also covered the drug wholesalers and PBMs and was the lead analyst on many high-profile IPO’s including Express Scripts, PSSI, and Henry Schein. Ms. Ryan currently serves as a senior advisor to EY and is a director on the boards of Indivior, PLC, MiNK Therapeutics where she Chairs the Audit Committee, Safecor Heatlh, Azitra, and The Red Door Community (formerly Gilda’s Club NYC), a non-profit organization. Barbara is the Founder of Fabulous Pharma Females, a non-profit whose mission is to advance women in the biopharma industry, is a member of the Editorial Advisory Board of Pharmaceutical Executive Magazine, a member of the Biopharma Executive Council, a faculty member of the GLG Institute, and a member of the Prix Galien Executive Advisory Board.
Rebecca Messina. Ms. Messina is one of our directors, a position she has held since April 2021. Ms. Messina also serves as the Chairman of our Marketing Committee, a position she has held since May 2021. Ms. Messina is currently a senior advisor at McKinsey & Company, a position she has held since 2019. From 2018-2019, Ms. Messina served as Global Chief Marketing Officer for Uber and from 2016-2018, Ms. Messina served as Senior Vice President, Global Chief Marketing Officer for Beam Suntory. Prior to that, Ms. Messina spent 22 years with The Coca-Cola Company in various roles of increasing responsibility, serving as Senior Vice President, Marketing & Innovation, Ventures & emerging Brands from 2014-2016. Ms. Messina is currently a director for each of Nick’s Ice Cream, Zico Rising, Make-a-Wish Foundation, Bartesian, and Mobile Marketing Association, all private companies. Ms. Messina received her Bachelor of Arts from Miami University of Ohio in 1994.
Independence of the Board of Directors
The listing rules of Nasdaq require us to maintain a Board comprised of a majority of independent directors, as determined affirmatively by our Board. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of our Audit, Compensation, and Nominating and Corporate Governance Committees must be independent. Audit Committee members and Compensation Committee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under the Exchange Act. Under Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of our Board, the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities.
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Our Board has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities, and determined that Trent Davis, Matthew Szot, Barbara Ryan, and Rebecca Messina representing four of our five directors, are independent under Nasdaq listing rules. Mr. Shum is not considered independent due to his position as our Chief Executive Officer.
In making these determinations, our Board considered the relationships that each nonemployee director has with us and all other facts and circumstances our Board deemed relevant in determining their independence, including consulting relationships, family relationships, and the beneficial ownership of our capital stock by each non-employee director.
Code of Ethics
We have adopted a Code of Conduct that applies to all employees including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The text of our Code of Conduct is posted in the “Investor Information—Corporate Governance” section of our website, www.invobio.com.
We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K
Marketing Committee
Our Marketing Committee currently consists of Ms. Messina (Chair) and Ms. Ryan.
In May 2021, the board elected to form a special Marketing Committee in order to support the addition of our internal marketing resources and overall plan to expand our marketing efforts to support our INVO Centers and distribution activities. The Marketing Committee helps to review, support, oversee, and provide input on our marketing activities in support of our marketing team.
Compensation Committee
Our Compensation Committee currently consists of Ms. Ryan(Chair), Mr. Davis and Mr. Szot.
The Compensation Committee oversees our compensation policies, plans and programs, and to review and determine the compensation to be paid to our executive officers and directors. In addition, the Compensation Committee has the authority to act on behalf of the Board in fulfilling the Board’s responsibilities with respect to compensation-based and related disclosures in filings as required by the Securities and Exchange Commission.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Mr. Davis (Chair), Ms. Ryan and Mr. Szot.
The Nominating and Corporate Governance Committee (i) oversees our corporate governance functions on behalf of the Board; (ii) makes recommendations to the Board regarding corporate governance issues; (iii) identify and evaluate candidates to serve as our directors consistent with the criteria approved by the Board and reviews and evaluates the performance of the Board; (iv) serves as a focal point for communication between director candidates, non-committee directors and management; (v) selects or recommends to the Board for selection candidates to the Board, or, to the extent required below, to serve as nominees for director for the annual meeting of shareholders; and (vi) makes other recommendations to the Board regarding affairs relating to our directors.
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Audit Committee Related Function
Our Audit Committee members currently consist of Mr. Szot (Chair), Ms. Messina and Ms. Ryan. Each of the members of our Audit Committee is an independent director under the Nasdaq listing rules, satisfies the additional independence criteria for Audit Committee members, and satisfies the requirements for financial literacy under the Nasdaq listing rules and Rule 10A-3 of the Securities Exchange Act of 1934, as applicable.
Our board has also determined that Mr. Szot qualifies as an Audit Committee financial expert within the meaning of the applicable rules and regulations of the SEC and satisfies the financial sophistication requirements of the Nasdaq listing rules.
Our Audit Committee oversees our corporate accounting and financial reporting process and assists our Board in monitoring our financial systems and our legal and regulatory compliance. Our Audit Committee also:
| ● | oversees the work of our independent auditors; | |
| ● | approves the hiring, discharging and compensation of our independent auditors; | |
| ● | approves engagements of the independent auditors to render any audit or permissible non-audit services; | |
| ● | reviews the qualifications, independence and performance of the independent auditors; | |
| ● | reviews our financial statements and our critical accounting policies and estimates; | |
| ● | reviews the adequacy and effectiveness of our internal controls; | |
| ● | reviews our policies with respect to risk assessment and risk management; | |
| ● | reviews and monitors our policies and procedures relating to related person transactions; and | |
| ● | reviews and discusses with management and the independent auditors the results of our annual audit, our quarterly financial statements and our publicly filed reports. |
Our Audit Committee operates under a written charter approved by our Board and that satisfies the applicable rules and regulations of the SEC and the listing requirements of Nasdaq. The charter is available on the corporate governance section of our website, which is located at www.invobio.com.
BOARD DIVERSITY MATRIX
The following matrix discloses the gender and demographic backgrounds of our Board as self-identified by its members in accordance with the newly enacted Nasdaq Listing Rule 5606.
| Board Diversity Matrix (As of April 29, 2024) | ||||
| Total Number of Directors | 5 | |||
| Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender | ||||||||||||
| Directors | 2 | 3 | - | - | ||||||||||||
| Part II: Demographic Background | ||||||||||||||||
| African American or Black | - | - | - | - | ||||||||||||
| Alaskan Native or Native American | - | - | - | - | ||||||||||||
| Asian | - | - | - | - | ||||||||||||
| Hispanic or Latinx | - | - | - | - | ||||||||||||
| Native Hawaiian or Pacific Islander | - | - | - | - | ||||||||||||
| White | 2 | 3 | - | - | ||||||||||||
| Two or More Races or Ethnicities | - | - | - | - | ||||||||||||
| LGBTQ+ | - | - | - | - | ||||||||||||
| Did Not Disclose Demographic Background | - | - | - | |||||||||||||
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Item 11. Executive and Director 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 “named executive officers” for SEC reporting purposes.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||||
| Steven Shum | 2023 | 201,875 | (2) | - | - | 30,800 | (3) | - | 232,675 | |||||||||||||||||||
| Chief Executive Officer (1) | 2022 | 260,000 | (4) | - | 72,601 | (5) | 169,400 | (6) | - | 502,001 | ||||||||||||||||||
| Andrea Goren | 2023 | 173,750 | (7) | - | - | 24,948 | (8) | - | 198,698 | |||||||||||||||||||
| Chief Financial Officer | 2022 | 215,000 | (9) | - | 19,353 | (10) | 361,468 | (11) | - | 595,821 | ||||||||||||||||||
| Michael Campbell | 2023 | 220,000 | (12) | - | - | 55,002 | (13) | - | 275,002 | |||||||||||||||||||
| Chief Operating Officer | 2022 | 220,000 | (14) | - | 55,002 | (15) | 55,002 | (16) | - | 330,004 | ||||||||||||||||||
| Vice President, Business Development | ||||||||||||||||||||||||||||
| (1) | Mr. Shum did not receive any additional compensation for being a member of the board. |
| (2) | As of December 31, 2023, Mr. Shum deferred $75,106 of his salary, which the Company expects to pay before the end of 2024. |
| (3) | Amounts reflect the aggregate grant date fair value of the 5,000 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Shum. The options issued to Mr. Shum provide for equal quarterly vesting over a 3-year period based on continued employment during that time. |
| (4) | As of December 31, 2022, Mr. Shum deferred $49,771 of his salary, which the Company paid during 2023. |
| (5) | Amounts reflect the aggregate grant date fair value of the 1,006 shares of common stock. This amount does not reflect the actual economic value realized by Mr. Shum. The restricted stock grant issued to Mr. Shum provides for 50% vesting at 6 months and 50% vesting at 12 months based on continued employment during that time. |
| (6) | Amounts reflect the aggregate grant date fair value of the 2,851 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Shum. The options issued to Mr. Shum provide for equal monthly vesting over a 3-year period based on continued employment during that time. |
| (7) | As of December 31, 2023, Mr. Goren deferred $56,969 of his salary, which the Company expects to pay before the end of 2024. |
| (8) | Amounts reflect the aggregate grant date fair value of the 4,050 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Goren. The options issued to Mr. Goren provide for equal quarterly vesting over a 3-year period based on continued employment during that time. |
| (9) | As of December 31, 2022, Mr. Goren deferred $40,502 of his salary, which the Company paid during 2023. |
| (10) | Amounts reflect the aggregate grant date fair value of the 269 shares of common stock. This amount does not reflect the actual economic value realized by Mr. Goren. The restricted stock grant issued to Mr. Goren provides for 50% vesting at 6 months and 50% vesting at 12 months based on continued employment during that time. |
| (11) | Amounts reflect the aggregate grant date fair value of the 4,385 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Goren. The options issued to Mr. Goren provide for equal monthly vesting over a 3-year period based on continued employment during that time. |
| (12) | As of December 31, 2023, Mr. Campbell deferred $93,565 of his salary, which the Company expects to pay before the end of 2024. |
| (13) | Amounts reflect the aggregate grant date fair value of the 4,150 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Campbell. The options issued to Mr. Campbell provide for equal quarterly vesting over a 3-year period based on continued employment during that time. |
| (14) | As of December 31, 2022, Mr. Campbell deferred $15,369 of his salary, which the Company paid during 2023. |
| (15) | Amounts reflect the aggregate grant date fair value of the 762 shares of common stock. The restricted stock grant issued to Mr. Campbell provide for 50% vesting at 6 months and 50% vesting at 12 months based on continued employment during that time. |
| (16) | Amounts reflect the aggregate grant date fair value of the 926 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Campbell. The options issued to Mr. Campbell provide for equal monthly vesting over a 3-year period based on continued employment during that time. |
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Narrative Disclosure to Summary Compensation Table
Except as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from the Company with respect to any named executive officer, that would result in payments to such person because of his resignation, retirement, or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
OUTSTANDING EQUITY AWARDS AT END OF 2023
The following table provides information about outstanding stock options issued by the Company held by each of our NEOs as of December 31, 2023. None of our NEOs held any other equity awards from the Company as of December 31, 2023.
| Option Awards | Stock Awards | |||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Has Not Yet Vested | Market Value of Stock that has not Yet Vested | ||||||||||||||||
| Steve Shum | 12,643 | 4,363 | 7.36-163.20 | 12/05/30-05/17/33 | - | - | ||||||||||||||||
| Andrea Goren | 12,493 | 4,067 | 7.36-115.20 | 08/10/30-05/17/33 | - | - | ||||||||||||||||
| Michael Campbell | 16,630 | 3,101 | 7.36-161.39 | 01/17/30-05/17/33 | - | - | ||||||||||||||||
Employment Agreements
Steven Shum
On October 16, 2019, the Company entered into an employment agreement with Steven Shum (the “Shum Employment Agreement”), pursuant to which Mr. Shum serves as chief executive officer on an at-will basis at an annual base salary of $260,000. The Shum Employment Agreement provided for a performance bonus of $75,000 upon a successful up-listing to the Nasdaq Stock Market, with all other bonuses to be determined by the Board in its sole discretion. In addition to his base salary and performance bonus, Mr. Shum was granted: (i) 625 shares of our common stock and (ii) a three-year option to purchase 10,130 shares of our common stock at an exercise price of $163.20 per share. This option vested monthly over its 3-year term. Pursuant to the Shum Employment Agreement, Mr. Shum is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Shum Employment Agreement provides that if Mr. Shum is terminated without cause (as defined in the Shum Employment Agreement) or he resigns his employment due to a constructive termination (as defined in the Shum Employment Agreement) then he will be entitled to receive, as severance, (a) 12 month’s base salary continuation, (b) 6 months reimbursement of payments for continuing health coverage, pursuant to COBRA, and (c) continued vesting of his shares for a period of 6 months following such employment termination.
On August 10, 2023, Mr. Shum, voluntarily agreed to temporarily reduce the annual base salary under his employment agreement from $260,000 to $105,000 until further notice, which reduction took effect on August 16, 2023. As of January 1, 2024, the salary for Mr. Shum reverted to the amount reflected in the Shum Employment Agreement.
Andrea Goren
On June 14, 2021, the Company entered into an employment agreement with Andrea Goren (the “Goren Employment Agreement”), pursuant to which Mr. Goren was hired as the Company’s chief financial officer. The Goren Employment Agreement provides for an annual base salary of $215,000 and a target annual incentive bonus of up to 50% of base salary if the Company achieves goals and objectives determined by the Board. In connection with the Goren Employment Agreement, on June 14, 2021 the Company granted Mr. Goren a stock option under the 2019 Plan to purchase 3,625 shares of the Company common stock (the “Goren Option”). The Goren Option vests in equal monthly installments over a 3-year period, has a term of 10 years and can be exercised at a price of $104.10 per share. Also, in connection with the Goren Employment Agreement, as of July 1, 2021, Mr. Goren was granted a restricted stock award for 250 share of Company common stock (the “Goren RSA”). The Goren RSA vested in equal monthly installments over a 12-month period. Mr. Goren is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Goren Employment Agreement provides that if Mr. Goren terminates the Goren Employment Agreement for “cause” (as defined in the Goren Employment Agreement) or the Company terminates the Goren Employment Agreement without “cause,” then he will continue to receive his base salary for three months after termination and certain insurance benefits for twelve months after termination. The Company may terminate the Goren Employment Agreement without “cause” on 30 days’ notice.
On August 10, 2023, Mr. Goren, voluntarily agreed to temporarily reduce the annual base salary under his employment agreement from $215,000 to $105,000 until further notice, which reduction took effect on August 16, 2023. As of January 1, 2024, the salary for Mr. Goren reverted to the amount reflected in the Goren Employment Agreement.
| -9- |
Michael Campbell
On January 15, 2020, the Company entered into an employment agreement (the “Campbell Employment Agreement”) with Michael Campbell to serve as the Company’s chief operating officer and vice president of business development. The Campbell Employment Agreement provides for an annual base salary of $220,000, and a target annual incentive bonus of up to 50% of base salary if the Company achieves goals and objectives determined by the Board. In connection with the Campbell Employment Agreement, on January 17, 2020, the Company granted Mr. Campbell 1,563 shares of Company common stock, and an option to purchase 6,250 shares of Company common stock (the “Campbell Option”) at an exercise price of $136.8192 per share. One quarter of the Campbell Option vested upon grant, and the remainder vested in monthly increments over a period of two years from the date of grant. Mr. Campbell is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Campbell Employment Agreement provides that if Mr. Campbell terminates the Campbell Employment Agreement for “cause” (as defined in the Campbell Employment Agreement) or the Company terminates the Campbell Employment Agreement without “cause,” then he will continue to receive his base salary and certain insurance benefits for three months after termination. The Company may terminate the Campbell Employment Agreement without “cause” on 60 days’ notice.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
If Mr. Shum is involuntarily terminated without cause or constructively terminated (in each case, as defined in the Shum Employment Agreement), then he is entitled to 12 months’ severance and continued vesting of his shares for a period of 6-months following termination.
If (i) Mr. Goren terminates his employment agreement for cause, (ii) the Company provides notice not to renew his employment agreement on any anniversary date, or (iii) the Company terminates his employment agreement without cause, then he is entitled to three months’ severance and insurance benefits.
If (i) Mr. Campbell terminates his employment agreement for cause, (ii) the Company provides notice not to renew his employment agreement on any anniversary date, or (iii) the Company terminates his employment agreement without cause, then he is entitled to three months’ severance and insurance benefits.
The following table sets forth quantitative information with respect to potential payments to be made to either Mr. Shum, Mr. Goren and Mr. Campbell upon termination in various circumstances. The potential payments are based on the terms of each of the employment agreements discussed above. For a more detailed description of the employment agreements, see the “Employment Agreements” section above.
| Name | Potential Payment Upon Termination | |||||||
| ($) | Option Awards (#) | |||||||
| Steven Shum | $ | 260,000 | (1) | 4,363 | (2) | |||
| Andrea Goren | $ | 53,750 | (3) | 4,067 | (4) | |||
| Michael Campbell | $ | 55,000 | (5) | 3,101 | (6) | |||
| (1) | Mr. Shum is entitled to twelve months’ severance at the then applicable base salary rate. Mr. Shum’s current base salary is $260,000 per annum. |
| (2) | Represents the number of unvested options at December 31, 2023. Mr. Shum’s options vest equally over a 36-month period. At December 31, 2023, there were 12 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Shum’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (3) | Mr. Goren is entitled to three months’ severance at the then applicable base salary rate. Mr. Goren’s current base salary is $215,000 per annum. |
| (4) | Represents the number of unvested options at December 31, 2023. Mr. Goren’s options vest equally over a 36-month period. At December 31, 2023, there were 12 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Goren’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (5) | Mr. Campbell is entitled to three months’ severance at the then applicable base salary rate. Mr. Campbell’s current base salary is $220,000 per annum. |
| (6) | Represents the number of unvested options at December 31, 2023. Mr. Campbell’s options vest equally over a 36-month period. At December 31, 2023, there were 12 to 24 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Campbell’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| -10- |
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance metrics. The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how we or the Compensation Committee view the link between financial performance and the compensation actually received or realized by our named executive officers. All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.
The table below presents information on the compensation of our Chief Executive Officer and other named executive officers in comparison to certain performance metrics for 2023 and 2022. These metrics are not those that the Compensation Committee uses when setting executive compensation. The use of the term Compensation Actually Paid (“CAP”) is required by the rules and regulations of the SEC, and under such rules, CAP was calculated by adjusting the Summary Compensation Table (“SCT”) Total values for the applicable year as described in the footnotes to the table.
| Year | Summary Compensation Table Total for PEO (1)(2) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Non-PEO NEOs (1)(2) | Average Compensation Actually Paid to Non-PEO NEOs (3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return | Net Income | ||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||
| 2023 | 232,675 | 202,076 | 222,131 | 198,460 | 3 | (8,034,612 | ) | |||||||||||||||||
| 2022 | 502,001 | 53,054 | 462,913 | (22,301 | ) | 14 | (10,892,511 | ) | ||||||||||||||||
| 2021 | 297,500 | 381,828 | 307,304 | 414,742 | 110 | (6,654,940 | ) | |||||||||||||||||
| (1) | The Principal Executive Officer (“PEO”) information reflected in columns (a) and (b) relates to our CEO, Steven Shum. The non-Principal Executive Officer (“non-PEO”) NEOs information reflected in columns (c) and (d) above relates to our CFO Andrea Goren and our COO Michael Campbell. |
| (2) | The amounts shown in this column are the amounts of total compensation reported for Steven Shum or the average total compensation reported for the non-PEO NEOs, as applicable, for each corresponding year in the “Total” column of the Summary Compensation. Please refer to “Executive Compensation—Compensation Tables—Summary Compensation Table.” |
| (3) | The amounts shown have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually realized or received by the Company’s PEO and non-PEO NEOs. In accordance with the requirements of Item 402(v) of Regulation S-K, adjustments were made to Mr. Shum’s total compensation, or the average total compensation of the non-PEO NEOs, as applicable, as described in the tables below. |
PEO SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards | Less Option Awards | Fair Value Adjustments to SCT Total | CAP | |||||||||||||||
| 2023 | $ | 232,675 | $ | - | $ | 30,800 | $ | 201 | $ | 202,076 | ||||||||||
| 2022 | 502,001 | 72,601 | 169,400 | (206,946 | ) | 53,054 | ||||||||||||||
| 2021 | 297,500 | - | - | 84,328 | 381,828 | |||||||||||||||
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Average Non-PEO NEOs SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards | Less Option Awards | Fair Value Adjustments to SCT Total | CAP | |||||||||||||||
| 2023 | $ | 222,131 | $ | - | $ | 25,256 | $ | 1,585 | $ | 198,460 | ||||||||||
| 2022 | 462,913 | 37,178 | 208,235 | (239,801 | ) | (22,301 | ) | |||||||||||||
| 2021 | 307,304 | 18,438 | - | 125,876 | 414,742 | |||||||||||||||
PEO Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, | Change in Fair Value of Prior Years’ Awards Unvested at December 31, | Change in Fair Value of Prior Years’ Awards Vested through the Year Ended December 31, | Change in Fair Value of Prior Years’ Awards Failed to Vest through the Year Ended | Equity Value Included in CAP | |||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2023 | $ | 4,448 | $ | (4,214 | ) | $ | 5,574 | $ | (5,607 | ) | $ | 201 | ||||||||
| 2022 | 14,953 | (159,116 | ) | 31,772 | (94,556 | ) | (206,946 | ) | ||||||||||||
| 2021 | - | 42,470 | - | 41,858 | 84,328 | |||||||||||||||
Average Non-PEO NEOs Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, | Change in Fair Value of Prior Years’ Awards Unvested at December 31, | Change in Fair Value of Prior Years’ Awards Vested through the Year Ended December 31, | Change in Fair Value of Prior Years’ Awards Failed to Vest through the Year Ended | Equity Value Included in CAP | |||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2023 | $ | 3,648 | $ | (3,293 | ) | $ | 4,570 | $ | (3,341 | ) | $ | 1,585 | ||||||||
| 2022 | 12,550 | (191,259 | ) | 38,928 | (100,021 | ) | (239,801 | ) | ||||||||||||
| 2021 | 4,856 | 41,360 | 3,802 | 75,858 | 125,876 | |||||||||||||||
| -12- |
Compensation of Directors
DIRECTOR COMPENSATION TABLE
| Name | Year | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | All other compensation ($) | Total ($) | ||||||||||||||||||
| Trent Davis | 2023 | 42,500 | (1) | - | 24,820 | - | 67,320 | |||||||||||||||||
| 2022 | 42,500 | (2) | 32,000 | 31,613 | - | 106,113 | ||||||||||||||||||
| Barbara Ryan | 2023 | 49,375 | (3) | - | 24,820 | - | 74,195 | |||||||||||||||||
| 2022 | 41,250 | (4) | 31,000 | 30,267 | - | 102,877 | ||||||||||||||||||
| Matthew Szot | 2023 | 49,375 | (5) | - | 24,820 | - | 74,195 | |||||||||||||||||
| 2022 | 55,000 | (6) | 37,000 | 36,552 | - | 128,552 | ||||||||||||||||||
| Rebecca Messina | 2023 | 41,250 | (7) | - | 24,820 | - | 66,070 | |||||||||||||||||
| 2022 | 41,250 | (8) | 30,000 | 29,638 | - | 100,888 | ||||||||||||||||||
| Jeffrey Segal | 2023 | 8,750 | - | - | - | 8,750 | ||||||||||||||||||
| Former Director | 2022 | 37,500 | (9) | 29,000 | 28,651 | - | 95,151 | |||||||||||||||||
| Kevin Doody | 2023 | - | - | - | - | - | ||||||||||||||||||
| Former Director | 2022 | 25,978 | 27,000 | 26,673 | - | 79,651 | ||||||||||||||||||
| (1) | As of December 31, 2023, Mr. Davis deferred $42,500 of fees earned, which the Company expects to pay before the end of 2024. |
| (2) | As of December 31, 2022, Mr. Davis deferred $10,625 of fees earned, which the Company expects to pay before the end of 2024. |
| (3) | As of December 31, 2023, Ms. Ryan deferred $52,500 of fees earned, which the Company expects to pay before the end of 2024. |
| (4) | As of December 31, 2022, Ms. Ryan deferred $11,250 of fees earned, which the Company expects to pay before the end of 2024. |
| (5) | As of December 31, 2023, Mr. Szot deferred $47,500 of fees earned, which the Company expects to pay before the end of 2024. |
| (6) | As of December 31, 2022, Mr. Szot deferred $13,750 of fees earned, which the Company expects to pay before the end of 2024. |
| (7) | As of December 31, 2023, Ms. Messina deferred $42,500 of fees earned, which the Company expects to pay before the end of 2024. |
| (8) | As of December 31, 2022, Ms. Messina deferred $9,375 of fees earned, which the Company expects to pay before the end of 2024. |
| (9) | As of December 31, 2022, Mr. Segal deferred $8,750 of fees earned, which the Company paid during 2023. |
| -13- |
Director Compensation Program
Our current director compensation program is designed to align our director compensation program with the long-term interests of our stockholders by implementing a program comprised of cash and equity compensation.
In setting director compensation, we consider the amount of time that directors expend in fulfilling their duties to the Company as well as the skill level and experience required by our board of directors. We also consider board compensation practices at similarly situated companies, while keeping in mind the compensation philosophy of us and the stockholders’ interests. The directors also receive reimbursement for expenses, including reasonable travel expenses to attend board and committee meetings, reasonable outside seminar expenses, and other special board related expenses.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table shows information regarding our equity compensation plans as of December 31, 2023.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (c) | |||||||||
| Equity compensation plans approved by security holders (1) | 106,753 | (2) | $ | 41.90 | 5,725 | |||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 106,753 | $ | 41.90 | 5,725 | ||||||||
(1) 2019 Stock Incentive Plan. On October 3, 2019, our Board adopted the 2019 Stock Incentive Plan (as amended, the “Plan”). The purpose of our Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan, including 20,640 shares approved at our shareholders meeting on October 12, 2022, is 161,498 shares, subject to annual increases of six percent (6%) of the total number of shares of outstanding Common Stock on December 31st of the preceding calendar year.
(2) We granted 23,547 shares subject to restricted stock grants under the Plan in the year ended December 31, 2023.
Our Board administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our Board arising out of or in connection with the interpretation and administration of the plan is final and conclusive.
The Board, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the Board or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our Board or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.
In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.
Our Board may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our Board may deem appropriate and in our best interest.
| -14- |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table and notes set forth the beneficial ownership of the common stock of the Company as of April 29, 2024, by each person who was known by the Company to beneficially own more than 5% of the common stock, by each director and named executive officer, and by all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or dispositive power with respect to the securities. Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and dispositive power with respect to their shares of our common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise noted, the address of all of the individuals and entities named below is care of INVO Bioscience, Inc., 5582 Broadcast Court Sarasota, Florida, 34240.
The following table sets forth the beneficial ownership of our common shares as of April 29, 2024 for:
| ● | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common shares; | |
| ● | each of our named executive officers; | |
| ● | each of our directors; and | |
| ● | all of our current executive officers and directors as a group. |
The percentage ownership information is based upon 3,797,097 common shares outstanding as of April 29, 2024. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. The address for persons listed in the table is c/o INVO Bioscience, Inc., 5582 Broadcast Court, Sarasota, FL 34240.
| Name and Address of Beneficial Owner (1) | Number of Shares | Percentage of Common Stock | ||||||
| 5% Stockholders: | ||||||||
| None | - | - | ||||||
| Officers and Directors: | ||||||||
| Andrea Goren | 21,055 | (2) | 0.55 | % | ||||
| Michael Campbell | 20,919 | (3) | 0.55 | % | ||||
| Steve Shum | 19,957 | (4) | 0.52 | % | ||||
| Matthew Szot | 7,761 | (5) | 0.20 | % | ||||
| Trent Davis | 7,327 | (6) | 0.19 | % | ||||
| Barbara Ryan | 7,147 | (7) | 0.19 | % | ||||
| Rebecca Messina | 6,217 | (8) | 0.16 | % | ||||
| All directors and executive officers as a group (7 persons) | 90,384 | 2.37 | % | |||||
| (1) | Unless otherwise indicated, the business address of each current director or executive officer is INVO Bioscience, Inc. 5582 Broadcast Court Sarasota, Florida 34240. |
| (2) | Includes: 13,251 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (3) | Includes: 17,079 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (4) | Includes: 13,376 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (5) | Includes: 5,801 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (6) | Includes: 5,645 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (7) | Includes: 5,567 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| (8) | Includes: 5,067 shares of common stock under options (either presently exercisable or within 60 days of April 29, 2024). |
| -15- |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors to file with the SEC reports of ownership on Form 3 and changes in ownership on Form 4 and Form 5. Officers and directors are required by Commission regulations to furnish to us copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, to our knowledge all Section 16(a) filing requirements applicable to our officers and directors were timely filed during the fiscal year ended December 31, 2023.
Insider Adoption or Termination of Trading Arrangements
During the fiscal quarter ended December 31, 2023, none of our directors or officers informed us of the adoption, modification, or termination of a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408 of Regulation S-K.
Insider Trading Policy
We have adopted an Insider Trading Policy that governs the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees. The Insider Trading Policy is designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us.
Grants Made Close in Time to the Release of Material Nonpublic Information
We do not have any policies and practices on the timing of awards of stock options or other equity grants in relation to the disclosure of material nonpublic information. In 2023, we did not award any stock options or other equity grants to any executive officer in the period beginning four business days before the filing of any periodic report on Form 10-Q or 10-K or the filing or furnishing of a current report on Form 8-K that disclosed material non-public information and ending one business day after the filing or furnishing of such report.
Changes in Control
NAYA Biosciences Merger Agreement
On October 22, 2023, the Company, INVO Merger Sub Inc., a wholly owned subsidiary of the Company and a Delaware corporation (“Merger Sub”), and NAYA Biosciences, Inc., a Delaware corporation (“NAYA”), entered into an Agreement and Plan of Merger, as amended on October 25, 2023 (the “Merger Agreement”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge (the “Merger”) with and into NAYA, with NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the effective time and as a result of the Merger, each share of Class A common stock, par value $0.000001 per share, of NAYA (the “NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by NAYA as treasury stock or owned by the Company or Merger Sub, will be converted into the right to receive 7.33333 (subject to adjustment as set forth in the Merger Agreement) shares of a newly designated series of common stock, par value $0.0001 per share, of the Company which shall be entitled to ten (10) votes per each share (“Company Class B common stock”) for a total of approximately 18,150,000 shares of the Company (together with cash proceeds from the sale of fractional shares, the “Merger Consideration”).
Immediately following the effective time of the Merger, Dr. Daniel Teper, NAYA’s current chairman and chief executive officer, will be named chairman and chief executive officer of the Company, and the board of directors will be comprised of at least nine (9) directors, of which (i) one shall be Steven Shum, INVO’s current chief executive officer, and (ii) eight shall be identified by NAYA, of which seven (7) shall be independent directors.
| -16- |
The completion of the Merger is subject to satisfaction or waiver of certain customary mutual closing conditions, including (1) the adoption of the Merger Agreement by the stockholders of the Company and NAYA, (2) the absence of any injunction or other order issued by a court of competent jurisdiction or applicable law or legal prohibition prohibiting or making illegal the consummation of the Merger, (3) the completion of due diligence, (4) the completion of a private sale of the Company’s preferred stock at a price per share of $5.00 per share, in a private offering resulting in an amount equal to at least $2,000,000 of gross proceeds to INVO in the aggregate, plus an additional amount as may be required prior to closing of the Merger to be determined in good faith by the parties to adequately support INVO’s fertility business activities per an agreed forecast of INVO, as well as for a period of twelve (12) months post-Closing including a catch-up on INVO’s past due accrued payables still outstanding (the “Interim PIPE”), (5) the aggregate of the liabilities of the Company, excluding certain specified liabilities, shall not exceed $5,000,000, (6) the receipt of waivers from any and all holders of warrants (and any other similar instruments) to securities of the Company, with respect to any fundamental transaction rights such warrant holders may have under any such warrants, (7) the continued listing of the Company common stock on NASDAQ through the effective time of the Merger and the approval for listing on NASDAQ of the shares of the Company common stock to be issued in connection with the Merger, the interim private offering, and a private offering of shares of Company common stock at a target price of $5.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Company common stock) resulting in sufficient cash available for the Company for one year of operations, as estimated by NAYA, (8) the effectiveness of a registration statement on Form S-4 to be filed by the Company pursuant to which the shares of Company common stock to be issued in connection with the Merger will be registered with the SEC, and the absence of any stop order suspending such effectiveness or proceeding for the purpose of suspending such effectiveness being pending before or threatened by the SEC, and (9) the Company shall have received customary lock-up Agreement from certain Company stockholders. The obligation of each party to consummate the Merger is also conditioned upon (1) the other party having performed in all material respects its obligations under the Merger Agreement and (2) the other party’s representations and warranties in the Merger Agreement being true and correct (subject to certain materiality qualifiers); provided, however, that these conditions, other than with respects to certain representations and warranties, will be deemed waived by the Company upon the closing of the interim private offering.
The Merger Agreement contains termination rights for each of the Company and NAYA, including, among others: (1) if the consummation of the Merger does not occur on or before December 31, 2023 (the “End Date”) (which has since been extended to April 30, 20204), except that any party whose material breach of the Merger Agreement caused or was the primary contributing factor that resulted in the failure of the Merger to be consummated on or before the End Date, (2) if any governmental authority has enacted any law or order making illegal, permanently enjoining, or otherwise permanently prohibiting the consummation of the Merger, and (3) if the required vote of the stockholders of either the Company or NAYA has not been obtained. The Merger Agreement contains additional termination rights for NAYA, including, among others: (1) if the Company materially breaches its non-solicitation obligations or fails to take all action necessary to hold a stockholder meeting to approve the transactions contemplated by the Merger Agreement, (2) if the aggregate of the liabilities of the Company, excluding certain specified liabilities, exceed $5,000,000, (3) if NAYA determines that the due diligence contingency will not be satisfied by October 26, 2023, (4) if NAYA determines that the Company has experienced a material adverse effect, or (5) the Company material breaches any representation, warranty, covenant, or agreement such that the conditions to closing would not be satisfied and such breach is incapable of being cured, unless such breach is caused by NAYA’s failure to perform or comply with any of the covenants, agreements, or conditions hereof to be performed or complied with by it prior to the closing.
If all of NAYA’s conditions to closing are satisfied or waived and NAYA fails to consummate the Merger, NAYA would be required to pay the Company a termination fee of $1,000,000. If all of the Company’s conditions to closing conditions are satisfied or waived and the Company fails to consummate the Merger, the Company would be required to pay NAYA a termination fee of $1,000,000.
On December 27, 2023, the Company entered into second amendment (“Second Amendment”) to the Merger Agreement. Pursuant to the Second Amendment, the parties agreed to extend the End Date to April 30, 2024. The parties further agreed to modify the closing condition for the Interim PIPE from a private offering of shares of Company common stock at a price that is a premium to the market price of the Company common stock in an estimated amount of $5,000,000 or more of gross proceeds to a private offering of the Company’s preferred stock at a price per share of $5.00 per share in an amount equal to at least $2,000,000 to the Company, plus an additional amount as may be required prior to closing of the Merger to be determined in good faith by the parties to adequately support the Company’s fertility business activities per an agreed forecast, as well as for a period of twelve (12) months post-closing including a catch-up on the Company’s past due accrued payables still outstanding. The parties further agreed to the following schedule (the “Minimum Interim Pipe Schedule”) for the initial $2,000,000: (1) $500,000 no later than December 29, 2023, (2) $500,000 no later than January 19, 2024, (3) $500,000 no later than February 2, 2024, and (4) $500,000 no later than February 16, 2024. The parties also further agreed to modify the covenant of the parties regarding the Interim PIPE to require NAYA to consummate the Interim PIPE before the closing of the Merger; provided, however, if the Company does not receive the initial gross proceeds pursuant to the Minimum Interim Pipe Schedule, the Company shall be free to secure funding from third parties to make up for short falls on reasonable terms under SEC and Nasdaq regulations.
The foregoing description of the Merger Agreement and the amendments thereto do not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to the Company’s Current Report on Form 8-K filed October 26, 2023 as Exhibit 2.1, the Amendment to Agreement and Plan of Merger, which is attached to the Company’s Current Report on Form 8-K filed October 26, 2023 as Exhibit 2.2, and the Second Amendment, which is attached to the Company’s Current Report on Form 8-K filed January 3, 2024 as Exhibit 2.1, all of which are incorporated herein by reference.
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In connection with the proposed transaction between the Company and NAYA (the “Proposed Transaction”), the Company and NAYA will file relevant materials with the SEC, including a registration statement on Form S-4 filed by the Company that will include a proxy statement of the Company that also constitutes a prospectus of the Company. A definitive proxy statement/prospectus will be mailed to stockholders of the Company and of NAYA. This communication is not a substitute for the registration statement, proxy statement, or prospectus or any other document that the Company or NAYA (as applicable) may file with the SEC in connection with the Proposed Transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND NAYA ARE URGED TO READ THE REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the registration statement and the proxy statement/prospectus (when they become available), as well as other filings containing important information about the Company or NAYA, without charge at the SEC’s Internet website (http://www.sec.gov). Copies of the documents filed with the SEC by the Company will be available free of charge under the tab “SEC Filings” on the “Investors” page of the Company’s internet website at www.invobioscience.com or by contacting the Company’s Investor Relations Contact at INVO@lythampartners.com. The information included on, or accessible through, the Company’s or NAYA’s website is not incorporated by reference into this communication.
The Company, NAYA, their respective directors and certain of their respective executive officers may be deemed to be participants in the solicitation of proxies in respect of the Proposed Transaction. Information about the directors and executive officers of the Company is set forth in its annual report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 16, 2024, its amendment to annual report on Form 10-K, which was filed on April 17, 2024, and this amendment. Information about the directors and executive officers of NAYA will be set forth in the registration statement on Form S-4 and the definitive proxy statement/prospectus included therein. Additional information regarding the participants in the proxy solicitations and a description of their direct or indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials filed with the SEC when they become available.
This communication is for informational purposes and is not intended to, and shall not, constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any offer, solicitation, or sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
Except as set forth above, there are no present arrangements, including pledges of the Company’s securities, known to the Company, the operation of which may result at a subsequent date in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions
Related Party Transactions Policy and Procedures
We have adopted a written policy with respect to the review, approval, and ratification of related party transactions. Under the policy, any transactions where the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any related person has or will have a direct or indirect material interest, other than equity and other compensation, termination, and other arrangements which are described under the headings “Compensation of Directors” and “Executive and Director Compensation,” is defined as a related party transaction. Any such related party transactions are reviewed and must be approved by the Company’s board of directors.
Certain Related Party Transactions
In the fourth quarter of 2022, the Company issued a series demand promissory notes in the aggregate principal amount of $550,000 to a related party JAG Multi Investments LLC (“JAG”), a company in which our Chief Financial Officer is a beneficiary but does not have any control over its investment decisions with respect to the Company. The JAG Notes accrue 10% annual interest from their respective dates of issuance. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest. On July 10, 2023, the Company issued an additional demand promissory note in the principal amount of $110,000 to JAG for a purchase price of $100,000.
In consideration for subscribing to the JAG Note for $100,000 dated December 29, 2022, and for agreeing to extend the date on which the other JAG Notes are callable to March 31, 2023, the Company issued JAG a warrant to purchase 17,500 shares of Common Stock. The warrant may be exercised for a period of five (5) years from issuance at a price of $10.00 per share. On July 10, 2023 JAG agreed to extend the date on which the JAG Notes are callable to September 30, 2023.
In the fourth quarter of 2022, the Company issued demand promissory notes in the aggregate principal amount of $220,000 for an aggregate purchase price of $200,000, of which (1) $100,000 was received from its Chief Executive Officer ($60,000 on November 29, 2022, $15,000 on December 2, 2022, and $25,000 on December 13, 2022) and (2) $100,000 was received from an entity controlled by its Chief Financial Officer ($75,000 on November 29, 2022 and $25,000 on December 13, 2022). These notes accrue 10% annual interest accrues from the date of issuance. These notes are callable with 10 days prior written notice. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest.
For the year ended December 31, 2023, the Company incurred $75,889 in interest related to these demand notes.
As of December 31, 2023 the Company owed accounts payable to related parties totaling $228,907, primarily related to unpaid employee expense reimbursements and unpaid board fees.
Item 14. Principal Accountant Fees and Services
The following table summarizes the approximate aggregate fees billed to the Company or expected to be billed to the Company by its independent registered accounting firm:
| Fiscal Year Ended December 31, 2023 | Fiscal Year Ended December 31, 2022 | |||||||
| Audit Fees (a) | $ | 71,350 | $ | 61,740 | ||||
| Audit Related fees (b) | $ | 99,600 | $ | 53,250 | ||||
| (a) | Audit Fees includes fees billed for the fiscal year shown for professional services for the audit of the Company’s consolidated financial statements included in its annual report on Form 10-K and review of financial statements included in its quarterly reports on Form 10-Q. | |
| (b) | Audit-Related Fees include assurance and related services performed to comply with generally accepted auditing standards and including audit of target acquisition companies and comfort and consent letters in connection with SEC filings and financing transactions. |
The Company’s Board of Directors has adopted a procedure for pre-approval of all fees charged by the Company’s independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of the Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit fees paid to the auditors with respect to fiscal year 2023 and 2022 were pre-approved by the entire Board of Directors.
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Part IV
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this report: |
3. Exhibits:
The exhibits listed in the Original Filing and the exhibits listed below in this Amendment are filed with, or incorporated by reference in, this report.
Item 16. Form 10-K Summary
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized on April 29, 2024.
| INVO Bioscience, Inc. | ||
| Date: April 29, 2024 | By: | /s/ Steven Shum |
| Steven Shum | ||
Chief Executive Officer (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 29, 2024.
| Signature | Title | |
| /s/ Steven Shum | Chief Executive Officer and director | |
| Steven Shum | (Principal Executive Officer) | |
| /s/ Andrea Goren | Chief Financial Officer | |
| Andrea Goren | (Principal Financial and Accounting Officer) | |
| /s/ Matthew Szot | ||
| Matthew Szot | Director | |
| /s/ Trent Davis | ||
| Trent Davis | Director | |
| /s/ Barbara Ryan | ||
| Barbara Ryan | Director | |
| /s/ Rebecca Messina | ||
| Rebecca Messina | Director |
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