0001185185-18-002046.txt : 20181114 0001185185-18-002046.hdr.sgml : 20181114 20181114160848 ACCESSION NUMBER: 0001185185-18-002046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181114 DATE AS OF CHANGE: 20181114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVO Bioscience, Inc. CENTRAL INDEX KEY: 0001417926 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 204036208 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-147330 FILM NUMBER: 181183739 BUSINESS ADDRESS: STREET 1: 407R MYSTIC AVENUE STREET 2: SUITE 34C CITY: MEDFORD STATE: MA ZIP: 02155 BUSINESS PHONE: (978) 878-9505 MAIL ADDRESS: STREET 1: 407R MYSTIC AVENUE STREET 2: SUITE 34C CITY: MEDFORD STATE: MA ZIP: 02155 FORMER COMPANY: FORMER CONFORMED NAME: EMY'S SALSA AJI DISTRIBUTION COMPANY, INC. DATE OF NAME CHANGE: 20071108 10-Q 1 invobio20180930_10q.htm FORM 10-Q invobio20180930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549   

 


 

FORM 10-Q 

 


 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE

 

Commission file number 333-147330

 

INVO Bioscience, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-4036208

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

407 Rear Mystic Avenue, Suite 34C, Medford, MA 02155

(Address of principal executive offices, including zip code)

 

 (978) 878-9505

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☐  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).  Yes ☐  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 ☐

 

Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Shares of common stock, par value $.0001 per share:  153,449,336 shares outstanding as of November 10, 2018.

 

 

 

 

INVO BIOSCIENCE, INC.

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2018

 

TABLE OF CONTENTS

 

Item

 

Page Number

Part I

 

 

 

1.

Financial Statements (Unaudited):

3

 

Condensed Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017

3

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (Unaudited)

 4

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (Unaudited)

5

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

6

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

3.

Quantitative and Qualitative Disclosures about Market Risks

23

4.

Controls and Procedures

23

 

Evaluation of Disclosure Controls and Procedures

23

 

Changes in Internal Controls Over Financial Reporting

24

 

 

 

Part II

 

 

 

1.

Legal Proceedings

25

1A.

Risk Factors

26

2.

Unregistered Issuance of Equity Securities and Use of Proceeds

26

3.

Defaults Upon Senior Securities

26

4.

Reserved

26

5.

Other Information

26

6.

Exhibits

26

 

Signatures

27

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.       Financial Statements (unaudited)

 

INVO BIOSCIENCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

September 30,

   

December 31,

 
   

2018

   

2017

 

ASSETS

 

(unaudited)

         

Current assets

               

    Cash

  $ 547,966     $ 25,759  

    Accounts receivable net

    187,141       86,697  

    Inventory

    44,602       58,879  

    Deposits

    6,000       -  

    Prepaid expense

    105,917       63,050  

      Total current assets

    891,626       234,385  
                 

Property and equipment, net

    15,439       15,700  
                 

Other Assets:

               

Capitalized patents, net

    12,926       16,328  

Total other assets

    12,926       16,328  
                 

Total assets

  $ 919,991     $ 266,413  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

               

Current liabilities

               

     Accounts payable and accrued liabilities, including related parties

  $ 795,878     $ 960,725  

     Accrued compensation

    4,156,790       3,955,190  

     Note payable - related party

    127,743       210,888  

     Note payable

    131,722       -  

     Convertible notes, net of discount of $724,401

    130,599       -  

     Convertible notes, related party - net of discount of $34,382

    5,618       -  

          Total current liabilities

    5,348,350       5,126,803  
                 

     Note payable - long term

    -       131,722  
                 

Total liabilities

    5,348,350       5,258,525  
                 

Commitments and contingencies (Note 12)

    -       -  
                 

Stockholder's deficiency

               

Preferred Stock, $.0001 par value; 100,000,000 shares authorized;
No shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively

    -       -  

Common Stock, $.0001 par value; 200,000,000 shares authorized; 147,454,700 and 142,132,374 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively

    14,745       14,213  

   Additional paid-in capital

    16,506,738       13,638,806  

   Accumulated deficit

    (20,949,842

)

    (18,645,131

)

      Total stockholder's deficiency

    (4,428,359

)

    (4,992,112

)

                 

Total liabilities and stockholders' deficiency

  $ 919,991     $ 266,413  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

INVO BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   

For the Three

   

For the Three

   

For the Nine

   

For the Nine

 
   

Months Ended

   

Months Ended

   

Months Ended

   

Months Ended

 
   

September 30,

   

September 30,

   

September 30,

   

September 30,

 
   

2018

   

2017

   

2018

   

2017

 
                                 

Revenue:

                               

Product Revenue

  $ 125,035     $ 68,220     $ 339,385     $ 200,790  

Cost of Goods Sold

    15,369       12,827       46,503       40,866  
                                 

Gross Margin

    109,666       55,393       292,882       159,924  
                                 

Selling, general and administrative expenses

    299,548       199,691       2,413,493       603,336  

      Total operating expenses

    299,548       199,691       2,413,493       603,336  
                                 

Loss from operations

    (189,882

)

    (144,298

)

    (2,120,611

)

    (443,412

)

                                 

Loss on settlement of debt

    -       -       -       40,869  

Interest expense

    104,978       4,550       184,100       16,414  

 Total other ( income) expenses

    104,978       4,550       184,100       57,283  
                                 

Loss before income taxes

    (294,860

)

    (148,848

)

    (2,304,711

)

    (500,695

)

                                 

Provisions for income taxes

    -       -       -       -  
                                 

Net Loss

  $ (294,860

)

  $ (148,848

)

  $ (2,304,711

)

  $ (500,695

)

                                 

Basic net loss per weighted average shares of common stock

  $ (0.00

)

  $ (0.00

)

  $ (0.02

)

  $ (0.00

)

                                 

Diluted net loss per weighted average shares of common stock

  $ (0.00

)

  $ (0.00

)

  $ (0.02

)

  $ (0.00

)

                                 

Basic weighted average number of shares of common stock

    147,454,700       141,375,304       146,052,444       141,103,908  
                                 

Diluted weighted average number of shares of common stock

    147,454,700       141,375,304       146,052,444       141,103,908  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

INVO BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   

For the Nine

   

For the Nine

 
   

Months Ended

   

Months Ended

 
   

September 30,

   

September 30,

 
   

2018

   

2017

 
                 

Cash flows from operating activities:

               

Net loss

  $ (2,304,711

)

  $ (500,695

)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Non-cash stock compensation issued for services

    1,743,464       135,930  

Loss on settlement of debt

    -       40,869  

Amortization of discount on notes payable

    136,217       -  

Depreciation and amortization

    3,663       1,428  

Changes in assets and liabilities:

               

Accounts receivable

    (100,444

)

    (57,388

)

Inventories

    8,277       21,771  

Prepaid expenses and other current assets

    110,133       2,835  

Accounts payable and accrued expenses

    (164,847

)

    (98,124

)

Accrued interest - related party

    -       -  

Accrued compensation

    201,600       291,600  

Net cash provided used in activities

    (366,648

)

    (161,774

)

                 

Cash flows from financing activities:

               

Proceeds from the sale of common stock

    47,000       44,626  

Proceeds from the sale of common stock - related parties

    30,000       -  

Proceeds from convertible notes payable

    855,000       -  

Proceeds from convertible notes payable - related parties

    40,000       -  

Principal payments on note payable - related parties

    (83,145

)

    -  

Net cash provided by financing activities

    888,855       44,626  
                 

Increase (decrease) in cash and cash equivalents

    522,207       (117,148

)

                 

Cash and cash equivalents at beginning of period

    25,759       152,404  
                 

Cash and cash equivalents at end of period

  $ 547,966     $ 35,256  
                 

Supplemental disclosure of cash flow information:

               
                 

Cash paid during the period for:

               

Interest

  $ 6,071     $ -  
                 

Taxes

  $ 3,648     $ -  
                 

Common stock issued upon note payable and accrued interest conversion

  $ -     $ 57,940  
                 

Common stock issued for prepaid services

  $ 153,000     $ -  
                 

Beneficial conversion feature on convertible notes

  $ 895,000     $ -  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Note 1 – Basis of Presentation

 

The accompanying consolidated balance sheet as of September 30, 2018, the consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, and cash flows for the nine months ended September 30, 2018 and 2017 of INVO Bioscience, Inc. (the “Company”), and the related information contained in these notes have been prepared by management and are unaudited. Certain prior year balances have been reclassified to conform to the current year presentation. These reclassifications did not affect previously reported net loss or stockholders’ deficiency. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.

 

The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2017 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission (SEC).

 

The Company considers events or transactions that have occurred after the unaudited consolidated balance sheet date of September 30, 2018, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Quarterly Report on Form 10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form 10-Q with the SEC.

 

Note 2 – Recent Accounting Pronouncements

 

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

 

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

 

Recently Adopted Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein.

 

ASU 2014-09 supersedes existing guidance on revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing, and uncertainty of revenue and the related cash flows. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). The Company adopted the new standard effective January 1, 2018 using the modified retrospective method applied to those contracts that were not completed or substantially completed as of January 1, 2018. The timing and measurement of revenue recognition under the new standard is not materially different than under the old standard. The adoption of the new standard did not have an impact on the Company’s consolidated financial statements.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”). The updated standard addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted.  The Company adopted ASU 2016-15 as of January 1, 2018. The adoption of ASU 2016-15 did not have an impact on the Company’s consolidated financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) (“ASU 2016-18”). The updated standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company adopted ASU 2016-18 as of January 1, 2018. The adoption of ASU 2016-18 did not have a material effect on the Company’s consolidated financial statements.

 

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718) (“ASU 2017-09”). The updated standard clarifies when an entity must apply modification accounting to changes in the terms or conditions of a share-based payment award. ASU 2017-09 is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted.  The Company adopted ASU 2017-09 as of January 1, 2018. The adoption of ASU 2017-09 did not have a material effect on the Company’s consolidated financial statements.

 

In February 2016, FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.  The Company is currently evaluating the impact of its pending adoption of ASU 2016-02 on its consolidated financial statements.

 

In July 2017, FASB issued ASU 2017-11 (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). The new standard simplifies the accounting for certain financial instruments with down round features. Part I of ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments, such as warrants and embedded conversion features, such that a down round feature is disregarded when assessing whether the instrument is indexed to an entity’s own stock under Subtopic 815-40, Contracts in Entity’s Own Equity.  As a result, a down round feature, by itself, no longer requires an instrument to be remeasured at fair value through earnings each period, although all other aspects of the indexation guidance under Subtopic 815-40 continue to apply.  Part II of ASU 2017-11 recharacterizes the indefinite deferral of certain provisions of Topic 480, Distinguishing Liabilities from Equity, (currently presented as pending content in the Codification) as a scope exception.  No change in practice is expected as a result of these amendments.  The new standard is effective for fiscal years beginning after December 15, 2018, early adoption is permitted. The amendments in Part II have no accounting impact and therefore do not have an associated effective date. The Company decided to early adopt this ASU 2017-11 and applied it to the convertible notes it issued during the quarter which are reflected in this Form 10Q.

 

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Note 3 – Going Concern

 

As reflected in the accompanying unaudited consolidated financial statements for the quarter ended September 30, 2018, the Company has started commercialization of its product in the past 2 years within the US with minimal revenues, had a net loss for the nine months of $2,304,711, and a cumulative net loss of $20,949,842, a working capital deficiency of $4,456,724, a stockholder deficiency of $4,428,359, and cash used in operations of $366,648 for the nine months ended September 30, 2018.  This raises substantial doubt about its ability to continue as a going concern.  The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.

 

Note 4 – Inventory

 

As of September 30, 2018 and December 31, 2017, the Company recorded the following inventory balances:

 

   

September 30,

2018

   

December 31,

2017

 

Work in Process

  $ 24,357     $ 24,357  

Finished Goods

    20,245       34,522  

Total Inventory

  $ 44,602     $ 58,879  

 

Note 5 – Property and Equipment

 

The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows as of September 30, 2018 and December 31, 2017:

 

 

Estimated Useful Life

Molds

3 to 7 years

 

   

September 30,

2018

   

December 31,

2017

 

Manufacturing Equipment- Molds

  $ 50,963     $ 50,963  

Accumulated Depreciation

    (35,524

)

    (35,263

)

Total

  $ 15,439     $ 15,700  

 

During the nine months ended September 30, 2018 and 2017 the Company recorded depreciation expense of $261 and $0, respectively. The Company began shipping its new retention device in August which triggered the start of depreciating our retention device mold during the current quarter.

 

Note 6 – Patents

 

As of September 30, 2018 and December 31, 2017, the Company recorded the following patent balances:

 

   

September 30,

2018

   

December 31,

2017

 

Total Patents

  $ 77,743     $ 77,743  

Accumulated Amortization

    (64,817

)

    (61,415

)

Patent costs, net

  $ 12,926     $ 16,328  

 

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

During the three and nine months ended September 30, 2018, the Company recorded $1,134 and $3,402 in amortization expenses respectively. No amortization expenses were recorded during the three and nine months ended September 30, 2017, the Company recorded $1,428 in amortization expense.

 

Estimated amortization expense as of September 30, 2018 is as follows:

 

Years ended December 31,

       

2018

  $ 1,134  

2019

    4,536  

2020

    1,809  

2021

    1,809  

2022 and thereafter

    3,638  

Total

  $ 12,926  

 

Note 7 – Convertible Notes and Notes Payable

 

Convertible Notes - Bridge Notes

 

During 2009, the Company issued senior secured convertible notes (“Bridge Notes”) payable to investors in the aggregate amount of $545,000.  The Bridge Notes carried interest rates ranging between 10-12% and were due in full one year from the date of issuance and are past due.  Both the Bridge Notes and the accrued interest thereon are convertible into Common stock of the Company at a conversion price of $0.10 per share (the “Original Conversion Price”).  If the Company were to issue any new shares of common stock within 24 months of the date of the Bridge Notes at a price below the Original Conversion Price, then the conversion price of the Bridge Notes would be adjusted to reflect the new lower price.  In addition to the Bridge Notes, the Company issued warrants to purchase 5,750,000 shares of the Company’s Common Stock at a price of $0.20 per share as of the date of this filing. All the warrants have expired.  The Company valued the conversion feature of the Bridge Notes and the warrants issued via the Black-Scholes valuation method.  The total fair value calculated for the conversion feature was $1,473,710; $151,826 was allocated to discount on the Bridge Notes, and $1,341,884 was charged to operations.   The total fair value calculated for the warrants was $1,719,666; $393,174 was allocated to discount on the Bridge Notes, and $1,326,492 was charged to operations. The aggregate discount on the Bridge Notes for the conversion feature and the warrants was $545,000, and the aggregate amount charged to operations was $2,668,371 which was recorded as a derivative liability on the Company’s consolidated balance sheet.

 

From November 2009 through May 2015 $535,000 of the principal of the Bridge Notes were converted into shares of Common stock.

 

In March 2017, the Company converted the last Bridge Note in the amount of $10,000 and accrued interest into shares of common stock. The Company negotiated this conversion at a price lower than the conversion price stated in the original Bridge Note documents because the Bridge Note was past due.  This conversion was treated as a restructure of debt.  $10,000 of the Bridge Notes and accrued interest were converted into 341,000 shares of common stock resulting in a loss on debt settlement in the amount of $40,869.

 

The principal balances of the Convertible Notes was $0 as of September 30, 2018 and 2017.  The related interest for the three months ended September 30, 2018 and 2017 was $0. The related interest for the nine months ended September30, 2018 and 2017 was $0.

 

Notes Payable

 

In August 2016, INVO Bioscience converted a long time vendor’s outstanding accounts payable balance of $131,722 into a Promissory Note with a three year term that accrues interest at 5% per annum. The note provides for interest only payments on the first and second anniversaries of the note. The note is payable in full along with any outstanding accrued interest on August _9, 2019. The Company has the right to prepay the note at any time without a premium or penalty.  The interest on this note for the three and nine months ended September 30, 2018 and 2017 were the same at $1,647 and $4,940, respectively.

 

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

2018 Convertible Notes Payable

 

In April and May 2018, the Company issued convertible notes (the “2018 Convertible Notes”) payable to investors in the aggregate principal amount of $895,000. The 2018 Convertible Notes accrue interest at the rate of 9% per annum which is paid in stock. 2018 Convertible Notes with an aggregate principal amount of $550,000 are due on January 30, 2021, and 2018 Convertible Notes with an aggregate principal amount of $345,000 are due on March 31, 2021. The notes are convertible into shares of common stock at a price of $0.20 per share, provided, that if the Company completes a subsequent equity financing, the holders of the 2018 Convertible Notes can elect to convert the notes in shares of our common stock at a price equal to 75% of the price paid per share in such subsequent equity financing.

 

The Company calculated a beneficial conversion feature of the 2018 Convertible Notes based on ASU 17-11 in the form of a discount of $895,000; $79,771 and $136,217 of this amount was amortized to interest expense during the three and nine months ended September 30, 2018, respectively, based on the three year term of the notes. In addition $20,302 and $34,645 of interest was expensed in the three and nine months ended September 30, 2018, respectively.

 

Note 8 – Notes Payable and Other Related Party Transactions

 

On September 18, 2008, the Company entered into a related party transaction with Dr. Claude Ranoux.  Dr. Ranoux was then the President, Director and Chief Scientific Officer of the Company.  Dr. Ranoux had loaned funds to the Company to sustain its operations since January 5, 2007 (inception).  Dr. Ranoux’s loan outstanding as of September 30, 2018 and 2017 was $21,888 (“the Principal Amount”).  The loan accrues interest at 5% per annum, the term of the note has been extended a several times, and the current repayment date is October 31, 2018.  The Company and Dr. Ranoux can jointly decide to repay the loan earlier without prepayment penalties.  During the nine months ended September 30, 2018 and 2017, $21,888 of principal and $6,071 of interest, respectively, were paid on this loan. The interest on this note for the nine months ended September 30, 2018 and 2017 was $821. At September 30, 2018, this loan has been paid in full.

 

On March 5, 2009, the Company entered into a related party transaction with Kathleen Karloff, the Chief Executive Officer and a Director of the Company.  Ms. Karloff provided a short-term loan in the amount of $75,000 bearing interest at 5% per annum to the Company to fund operations.  In May 2009, Ms. Karloff loaned to the Company an additional $13,000, making her total cumulative loan $88,000 as of December 31, 2011.  This note was due on September 15, 2009, which has since been extended a few times to its current date of October 31, 2018.   During the twelve months ended December 31, 2014, Ms. Karloff loaned the Company an additional $66,000 at an interest rate of 0% by entering into a note payable agreement in satisfaction of expenses incurred by her for amounts previously advanced to the Company. This note currently has the same expiration date as the others which is October 31, 2018. Payments totaling $61,257 were made against this note during the nine months ended September 30, 2018. The interest on these notes for the nine months ended September 30, 2018 and 2017 was $4,120.

 

On December 28, 2009 James Bowdring, the brother of Director & Acting Chief Financial Officer Robert Bowdring invested $100,000 acquiring 666,667 shares of common stock.  In April 2011, the Company issued a short term convertible note (“Q211 Note”) payable to James Bowdring in the amount of $50,000.  The Q211 Note carries a 10% interest rate and was due in full, two months from the date of issuance.  The note was extended and is partially still open, as of this date the balance is $25,000. The Q211 Note is convertible into Common Stock of the Company at a conversion price of $0.03 per share, subject to adjustments.  In addition to the Q211 Note, the Company issued warrants to purchase 1,666,667 shares of the Company’s Common Stock at a price of $0.03 per share, as of this date the warrants have expired.  The Company valued the Q211 Note’s warrants issued as consideration for the notes payable via the Black-Scholes valuation method.  The total fair value calculated for the conversion was approximately $39,500, and for the warrants was approximately $45,500 both of which were recorded as a derivative liability on the Company’s balance sheet.  In September 2011, the Company made a principal payment on the Q211 Note in the amount of $25,000.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

In November 2011, the Company issued another convertible note (“Q411 Note”) payable to James Bowdring in the amount of $10,000.  The Q411 Note carries a 10% interest rate and was due in full, two months from the date of issuance.  The Q411 Note is convertible into Common Stock of the Company at a conversion price of $0.01 per share, subject to adjustments.  In addition to the Q411 Note, the Company issued warrants to purchase 500,000 shares of the Company’s Common Stock at a price of $0.02 per share, as of this date the warrants have expired.  The Company valued the Bridge Note’s warrants issued as consideration for the notes payable via the Black-Scholes valuation method.  The total fair value calculated for the conversion option was $2,345, and for the warrants was $4,076 both of which were recorded as a derivative liability on the Company’s balance sheet. 

 

The Company has been renting our corporate office from Forty Four Realty Trust which is owned by James Bowdring, the brother of Director & Acting Chief Financial Officer, Robert Bowdring since November 2012. It is a month to month rental arrangement for what the Company believes is less than the fair market real estate rental rate for comparable leases. We have been paying $4,800 annually since 2012. In September 2018, however, the rent increased to $600 per month, or $7,200 annually. In addition the Company purchases stationary supplies and marketing items at discounted rates from Superior Printing & Promotions which is also owned by James Bowdring and is in the same building as our corporate office. INVO Bioscience spent $1,471 and $669 with Superior during the first nine months of 2018 and 2017, respectively.

 

Principal balances of the Related Party loans were as follows:

 

   

September 30,

2018

   

December 31,

2017

 

Claude Ranoux Note

  $ -     $ 21,888  
                 

James Bowdring Family - 2011 Notes

    35,000       35,000  
                 

James Bowdring Family – 2018 Convertible Notes

    40,000       -  
                 

Kathleen Karloff Note

    92,743       154,000  

 Less discount

    (34,382 )     -  

Total, net of discount

  $ 133,361     $ 210,888  

 

Interest expense on the Related Party loans was $8,765 and $8,729 for the nine months ended September 30, 2018 and 2017, respectively.

 

Accounts payable and accrued liabilities balances include expenses reports for Ms. Karloff, Dr. Ranoux and Mr. Bowdring for expenses they paid for personally related to travel or normal business expenses and are represented in the following table:

 

   

September 30,

   

December 31,

 
   

2018

   

2017

 

Accounts payable and accrued liabilities

  $ 96,000     $ 127,000  

 

During the nine months ended September 30, 2018, the Company sold 150,000 shares of common stock at a price of $0.20 per share for proceeds of $30,000 to Charles Mulrey and family, the brother-in-law of Robert J. Bowdring, Director & Acting Chief Financial Officer as part of the recent financing.

 

During the second quarter of 2018, INVO Bioscience settled a commitment it had with one of its Directors, Dr. Kevin Doody for the services he and his team performed prior to and following INVOcell’s FDA clearance related to clinical guidance and support. Dr. Doody and his team performed clinical studies and provided papers, lectures and discussions with regulatory bodies and key opinion leaders in the industry. The Company believes without Dr. Doody’s services and support during his tenure the Company would not be where it is today. The Company issued Dr. Doody 3 million shares of our common stock with a fair value of $1,530,000.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Note 9 – Stockholders’ Equity

 

Nine Months Ended September 30, 2018

 

In January and March 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company sold 260,000 shares of common stock to accredited investors in a private placement for cash of $47,000.

 

In January 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 1,200,000 shares of common stock with a fair value of $138,000 to management and board members.

 

In January and March 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 352,326 shares of common stock with a fair value of $43,664 to service providers.

 

In April and May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 340,000 shares of common stock with a fair value of $174,800 to service providers.

 

In May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company sold 150,000 shares of common stock to accredited investors who are family members of Robert J Bowdring, a Board Member in a private placement for cash of $30,000.

 

In May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 3,020,000 shares of common stock with a fair value of $1,540,000 to a board member, Dr. Kevin Doody for services previously provided to the Company.

 

 Nine Months Ended September 30, 2017

 

In March 2017, pursuant to Section 4(a)(2) of the Securities Act, the company issued 196,000 shares of common stock with a fair value of $59,242 to service providers.

 

In March 2017, pursuant to Section 4(a)(2) of the Securities Act, the Company negotiated the conversion of $10,000 of past due Bridge Notes and accrued interest into 341,000 shares of common stock resulting in a loss on debt settlement in the amount of $40,869.

 

In April 2017, pursuant to Section 4(2) of the Securities Act, the company issued 51,750 shares of common stock with a fair value of $17,201 to service providers.

 

In June 2017, pursuant to Section 4(2) of the Securities Act, the company issued 99,412 shares of common stock with a fair value of $30,898 to service providers.

 

In September 2017, pursuant to Section 4(2) of the Securities Act, the company issued 133,960 shares of restricted common stock with a fair value of $28,576 to service providers.

 

In September 2017, pursuant to Section 4(2) of the Securities Act, the company issued 262,500 shares of restricted common stock for cash proceeds of $44,626.

 

Note 10 – Stock Options and Warrants

 

As of September 30, 2018 and December 31, 2017, the Company does not have any outstanding or committed and unissued stock options or warrants.  

  

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Note 11 – Income Taxes

 

The Company has adopted ASC 740-10, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

The Company’s total deferred tax liabilities, deferred tax assets and deferred tax asset valuation allowances at September 30, 2018 and December 31, 2017 are as follows: 

 

   

September 30,

2018

   

December 31,

2017

 

Total deferred tax assets

  $ 4,260,000     $ 3,730,000  

Less valuation allowance

    (4,260,000

)

    (3,730,000

)

Total deferred tax liabilities

    -       -  

Net deferred tax asset (liability)

  $ -     $ -  

 

Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which is uncertain.  Those amounts are therefore presented on the Company’s balance sheets as a non-current asset.  Utilization of the net operating loss carry forwards may be subject to substantial annual limitations, which may result in the expiration of net operating loss carry forwards before utilization.

 

Note 12 – Commitments and Contingencies

 

A)

Operating Leases

 

In November 2012, INVO Bioscience entered into a month-to-month rental agreement with Forty Four Realty Trust with for the space it requires.  Forty Four Realty Trust is owned by investor James Bowdring, the brother of Director & Acting Chief Financial Officer Robert Bowdring. The annual rent under the agreements was increased from $4,800 annually to $7,200 annually in September 2018.

 

B)

Litigation

 

There has been no change in the status of the litigation INVO Bioscience, Inc., and two of its directors have been involved in since 2010, defending litigation brought by investors in an alleged predecessor of INVO Bioscience.  On March 24, 2010, INVO Bioscience, Inc. and its corporate affiliate, Bio X Cell, Inc., Claude Ranoux, and Kathleen Karloff were served an Amended Complaint, the original of which was filed on December 31, 2009 at the Suffolk Superior Court Business Litigation Session by two terminated employees of Medelle Corporation (also named as a co-defendant but no longer active), who are also attorneys, and a former investor in and creditor of Medelle.  These plaintiffs allege various claims of wrongdoing relating to the sale of assets of Medelle to Dr. Ranoux.  Plaintiffs claim that Dr. Ranoux, Ms. Karloff, and Medelle (and therefore INVO Bioscience as an alleged successor corporation) violated alleged duties owed to plaintiffs in connection with the sale.  Separate claims were also alleged against INVO Bioscience.

 

Dr. Ranoux, Ms. Karloff, and INVO Bioscience have challenged these allegations, which they believe are baseless.  The transfer of the assets of Medelle was professionally handled by an independent third party, after approval by the Medelle Board of Directors, representing a majority of its shareholders.  Medelle’s Board voted to proceed with an assignment for the benefit of creditors (AFBC) and gave complete authority to the President & CEO at that time (neither Dr. Ranoux nor Ms. Karloff) to work with the third-party assignee and to get the best possible price for those assets.  The third party was responsible for notifying all the appropriate parties and for filing notices in various professional publications and newspapers of Medelle’s intention to sell its assets.  The third party also contacted numerous large medical device and bio-pharma companies to learn if they would be interested in acquiring the assets.  After a private sale was deemed unlikely, the assignee of the assets elected to proceed with a sealed-bid auction of the assets.  On the day of the auction, Dr. Ranoux submitted the only bid and was awarded the assets, upon full payment. 

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

During 2010, Dr. Ranoux, Ms. Karloff, and INVO Bioscience filed Motions to Dismiss as to all claims, pursuant to M.R.Civ. P. 12(b)(6).  In a written Decision rendered on November 12, 2010, the judge dismissed all claims against INVO, Bio X Cell, and Ms. Karloff, and also dismissed the claims against Dr. Ranoux alleging civil conspiracy and breach of M.G.L. c. 93A.  The judge denied Dr. Ranoux’s motion to dismiss the remaining breach of fiduciary duty and fraud claims.  The plaintiffs allege in their Amended Complaint that Dr. Ranoux committed fraud by failing to inform them of the details of the Medelle auction. 

 

The claims against Dr. Ranoux that survived the November 2010 dismissal order were submitted to binding arbitration.  On February 15, 2013, the mutually-agreed arbitrator ruled in favor of Dr. Ranoux. The award held that Dr. Ranoux did not withhold information about the auction of Medelle’s assets and expressed doubt that the plaintiffs would have invested the resources necessary to make a beneficial use of the assets.  The arbitrator’s award then was confirmed by the Superior Court on August 21, 2013.  The Superior Court’s confirmation of the award was affirmed on appeal on October 20, 2013 by the Massachusetts Appeals Court.  The Massachusetts Supreme Judicial Court then denied further appellate review.  

 

On October 18, 2016, following motions and argument, the Superior Court issued a memorandum of decision and order denying plaintiffs’ motion for entry of default judgment and assessment of damages against Medelle and allowed the motion of INVO Bioscience, Bio X Cell, and Ms. Karloff for entry of final judgment of dismissal.  The foregoing order was converted to a final judgment dismissing all claims against all defendants and entered on the docket on October 27, 2016.

 

On November 28, 2016, plaintiffs filed an amended notice of appeal from the Superior Court’s decision of October 17, 2016 and the subsequent judgment entered on October 27, 2016.  The appeal further challenges the order of dismissal from November, 2010.  Plaintiffs did not appeal from the dismissal of the claims against Ms. Karloff, so the judgment in her favor is now final, leaving claims against INVO Bioscience, Bio X Cell, Medelle, and Dr. Ranoux.

 

INVO Bioscience and Bio X Cell intend a vigorous opposition to the current appeal, consistent with their previous positions that no breach of duty occurred in the sale of Medelle’s assets. It is assumed that Dr. Ranoux will oppose the appeal as well.

 

Outside of the above-mentioned litigation, neither INVO Bioscience nor Bio X Cell, our wholly-owned subsidiary, either directly or indirectly, 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 operation, financial position, or cash flows.

 

C)

Employee Agreements

 

The Company had employment agreements for officers, executives and employees of the Company in place. The agreements have since expired and have not been renewed as the Company has not had the proper funds to meet its commitment but has continued to accrue amounts annually for the work that has been performed.  The employees have received shares of stock as compensation for not being paid. The employees and directors are continuing to work based on good faith and belief in the Company and the INVOcell product.  

 

D)

Consulting Agreements

 

The Company has a verbal agreement beginning in March, 2013 with its former CFO, Robert Bowdring, who is currently a Director & Acting Chief Financial Officer, to assist where necessary in the financial and administrative areas of the Company for compensation to be equivalent to the others working in the organization.

 

Note 13 – Contracts with Customers

 

We have adopted ASC 606, Revenue from Contracts with Customers effective January 1, 2018 using the modified retrospective method applied to those contracts which were not substantially completed as of January 1, 2018. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues for 2018 are reported under ASC 606, while prior period amounts are not adjusted and continue to be reported under ASC 605, Revenue Recognition.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

We routinely enter into agreements with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms and in most cases prices for the products that we offer. However, these agreements do not obligate us to provide goods to the customer and there is no consideration promised to us at the onset of these arrangements. For customers without separate agreements, we have a standard list price established by geography and by currency for all products and our invoices contain standard terms and conditions that are applicable to those customers where a separate agreement is not controlling. Our performance obligations are established when a customer submits a purchase order or e-mail notification (in writing, electronically or verbally) for goods, and we accept the order. We identify performance obligations as the delivery of the requested product(s) in appropriate quantities and to the location specified in the customer’s e-mail/or purchase order. We generally recognize revenue upon the satisfaction of these criteria when control of the product has been transferred to the customer at which time we have an unconditional right to receive payment. Our prices are fixed and are not affected by contingent events that could impact the transaction price. We do not offer price concessions and do not accept payment that is less than the price stated when we accept the purchase order, except in rare credit related circumstances. We do not have any material performance obligations where we are acting as an agent for another entity.

 

Revenues for products, including: INVOcell®, INVO TM Retention System, and INVO Microscope Holding Block are typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenues from consignment are recognized when the medical device is shipped from the Consignor to the customer.

 

Sources of Revenue

 

We have identified the following revenues disaggregated by revenue source:

 

 

1.

Domestic Physicians  – direct sales of products.

 

 

 

 

2.

International Distributors  – direct sales of products.

 

For the nine months ended September 30, 2018 and 2017 the source of revenue was only from Domestic Physicians.

 

Contract Balances

 

We incur agreement obligations on general customer purchase orders and e-mails that have been accepted but unfulfilled. Due to the short duration of time between order acceptance and delivery of the related product, we have determined that the balance related to these obligations is generally immaterial at any point in time. We monitor the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate.

 

Warranty

 

Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations.

 

Significant Judgments in the Application of the Guidance in ASC 606

 

There are no significant judgments associated with the satisfaction of our performance obligations. We generally satisfy performance obligations upon delivery of the product to the customer. This is consistent with the time in which the customer obtains control of the products. Therefore the value of unsatisfied performance obligations at the end of any reporting period is generally immaterial. We consider variable consideration in establishing the transaction price. Forms of variable consideration applicable to our arrangements include sales returns, rebates, volume based bonuses, and prompt pay discounts. We use historical information along with an analysis of the expected value to properly calculate and to consider the need to constrain estimates of variable consideration. Such amounts are included as a reduction to revenue from the sale of products in the periods in which the related revenue is recognized and adjusted in future periods as necessary.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Commissions and Contract Costs

 

We do not use or offer sales commissions of any type at this time. We generally do not incur incremental charges associated with securing agreements with customers which would require capitalization and recovery over the life of the agreement.

 

Practical Expedients

 

Our payment terms for sales direct to customers and distributors are substantially less than the one year collection period that falls within the practical expedient in determination of whether a significant financing component exists.

 

Shipping and Handling Charges

 

Fees charged to customers for shipping and handling of products are included as an offset to the costs for shipping and handling of products included as a component of cost of products.

 

Taxes Collected from Customers

 

As our products are used in another service and are exempt, to this point we have not collected taxes. If we were to collect taxes they would be on the value of transaction revenue and would be excluded from product revenues and cost of sales and would be accrued in current liabilities until remitted to governmental authorities.

 

Effective Date and Transition Disclosures

 

Adoption of the new standards related to revenue recognition did not have a material impact on our consolidated financial statements, and is not expected to have a material impact in future periods.

 

Note 14 – Subsequent Events

 

In October 2018, the Company issued the following shares of common stock for payment of services and to settle a portion of the outstanding accrued compensation and convertible notes payable to improve the balance sheet:

 

-

380,000 shares of common stock with a fair value of $153,800 were issued to service providers for services performed;

-

1,233,719 shares of common stock with a fair value of $481,150 were issued to employees reducing accrued compensation;

-

2,056,107 shares of common stock with a fair value of $801,882 were issued to officers for previously accrued compensation;

-

625,250 shares of common stock with a fair value of $244,000 were issued to directors as bonuses;

-

600,000 shares of common stock with a fair value of $234,000 were issued to directors as compensation for 2019;

-

1,099,560 shares of common stock with a fair value of $219,912 were issued in connection with the conversion of notes payable.

 

On November 12, 2018, INVO Bioscience, Inc (the “Company”) entered into a Distribution Agreement with Ferring International Center S.A. (“Ferring”), pursuant to which, among other things, the Company granted to Ferring an exclusive license in the United States (the “Territory”) with rights to sublicense under patents related to the Company’s proprietary intravaginal culture device known as INVOcell™, together with the retention device and any other applicable accessories (collectively, the “Licensed Product”) to market, promote, distribute and sell the Licensed Product with respect to all therapeutic, prophylactic and diagnostic uses of medical devices or pharmaceutical products involving reproductive technology (including infertility treatment) in humans (the “Field”). Ferring is responsible, at its own cost, for all commercialization activities for the Licensed Product in the Field in the Territory. The Company does retain a limited exception to the exclusive license granted to Ferring allowing the Company, subject to certain restrictions, to establish up to five clinics that will commercialize INVO cycles in the Territory. The Company retains all commercialization rights for the Licensed Product outside of the United States.

 

 

INVO BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(unaudited)

 

Under the terms of the Distribution Agreement, Ferring is obligated to make an initial payment to the Company of $5,000,000 upon satisfaction of certain closing conditions, including an agreement from all current manufacturers of the Licensed Product that upon a material supply default by the Company, Ferring can assume a direct purchase relationship with such manufacturers. The Closing under the Distribution Agreement will not occur prior to January 14, 2019 without consent of the Company and Ferring. Ferring is obligated to make a second payment to the Company of $3,000,000 provided that the Company is successful in obtaining a five (5) day label enhancement from the FDA for the current incubation period for the Licensed Product at least three (3) years prior to the expiration of the term of the license for the Licensed Product and provided further that Ferring has not previously exercised its right to terminate the Distribution Agreement for convenience. In addition, under the terms of a separate Supply Agreement, attached as an exhibit to the Distribution Agreement, Ferring is obligated to pay the Company a specified supply price for each Licensed Product purchased by Ferring for distribution.

 

The Distribution Agreement has an initial term expiring on December 31, 2025 and at the end of the initial term it may be terminated by the Company if Ferring fails to generate specified minimum revenues to the Company from the sale of the Licensed Product during the final two years of the initial term. Provided that no such termination occurs at the end of the initial term, thereafter the term of the Distribution Agreement shall automatically be renewed for successive three (3) years terms unless terminated by mutual consent. The Distribution Agreement is subject to termination upon a material breach by either party, or by Ferring for convenience. In addition, if the closing under the Distribution Agreement does not occur within seventy five (75) days, a non-breaching party may elect to terminate the Distribution Agreement.

 

The foregoing summary of the terms of the Distribution Agreement does not purport to be complete and is qualified in its entirety by reference to the Distribution Agreement, copies of which will be filed with the Securities and Exchange Commission by the Company with its Annual Report on Form 10-K for the fiscal year ending December 31, 2018, requesting confidential treatment for certain portions.

 

The Company has evaluated subsequent events through the date the financial statements were released and there were no others.

 

 

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Statements made in this Quarterly Report on Form 10-Q, including without limitation this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than statements of historical information, are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements may sometimes be identified by such words as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words.  We believe that it is important to communicate our future expectations to investors.  However, these forward-looking statements involve many risks and uncertainties including those referred to herein and in our Annual Report on Form 10-K for the year ended December 31, 2017.  Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors.  We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results.

 

Overview

 

INVO Bioscience’s mission is to increase access to care and expand fertility treatment and patient care across the globe. We have developed the INVOcell device and procedure, the first Intravaginal Culture (IVC) system granted FDA clearance in the United States, in hope of providing millions of infertile couples across the country access to this new infertility treatment. This novel device and procedure provides a more natural, safe, effective and economical fertility treatment compared to current infertility treatments, including in-vitro fertilization (“IVF”) and intrauterine insemination (“IUI”). The patented INVOcell device is used for the incubation of eggs and sperm during fertilization and early embryo development. Unlike conventional infertility treatments such as IVF where the eggs and sperm develop into embryos in a laboratory incubator, the INVOcell utilizes the women’s vagina as an incubator to support a more natural fertilization and embryo development environment. This novel device promotes in vivo conception and early embryo development.

 

In both current utilization of the INVOcell and in clinical studies, the INVO Procedure has proven to have equivalent pregnancy success rates as the traditional assisted reproductive technique IVF. Additionally, the psychological benefits of the potential mother’s participation in fertilization and early embryo development by vaginal incubation are incomparable to traditional IVF treatment. This new technique offers to patients a more natural and personalized way to achieve pregnancy and is simple enough to be performed in an appropriately trained physician’s office or in a satellite facility of an IVF center.

 

For many couples struggling with infertility, access to treatment is often not available. Financial challenges, limited availability of specialized medical care, religious, social and cultural roadblocks can prevent these hopeful couples from realizing their dream to have a baby. There are many benefits to the INVO Procedure, including:

 

• Reduces the risk of errors of a wrong embryo transfers since the embryos are never far from the woman.

• Reduces the worry of leaving embryos in an incubator where mix-ups have been known to occur.

• Promotes greater involvement by couples in the treatment and conception.

• Creates a more natural and environmentally stable incubation than traditional IVF incubation in a laboratory.

• Reduces the worry of leaving embryos in an incubator where mix-ups have been known to occur.

• Requires fewer office visits for the couples.

 

Since November 2, 2015 when INVO Bioscience was notified by the United States Food & Drug Administration that the INVOcell and INVO procedure were cleared for use, the Company has begun to market and sell the INVOcell in several locations across the U.S. and plans on continuing to penetrate the market through 2018 and beyond. See “Recent Developments” below for a discussion regarding our recent Distribution Agreement with Ferring International Center S.A. (“Ferring”), The Company currently has 75 appropriately trained physician offices or satellite facilities of an IVF center across the U.S. where patients can receive the INVO Procedure for infertility.

 

As with most start-up situations, one of the largest challenges that INVO Bioscience has faced is raising the appropriate capital to implement its business plan while opening the US market  as well as move on other opportunities  across the globe.

 

We anticipate that we will experience significant quarterly fluctuations in our sales and revenues as a result of the Company’s efforts to expand the sales of the INVO technology across the United States and into new markets.  Operating results will depend upon the timing of the training of the physicians and their staffs’ on the INVO procedure as well as the time it takes the doctor’s to determine where it will fit with their other service offerings.  In addition, assuming we close on the Distribution Agreement with Ferring discussed below, our operating results will be heavily dependent on Ferring’s ability to penetrate the U.S. markets.

 

 

For the three months ended September 30, 2018 INVO Bioscience continued for a third consecutive quarter with revenue over $100,000. The Company continues to establish a market in the United States for its patented INVO procedure & INVOcell device with it now being offered by clinics in 19 states and as far west as Hawaii. 

 

INVO Bioscience increased its training capacity within the first nine months of 2018 now offering training by two new teams in addition to Dr. Kevin Doody and his team at CARE Fertility in Bedford, TX. The new training teams are led by Drs. Anthony Anderson of EMBRYO Director.com  and Francisco Arredondo of RMA of Texas in San Antonio as division of Aspire Fertility, and Dr. John Nichols of Piedmont Reproductive Endocrinology Group (PREG) in Greenville, South Carolina.   We are continuing with the one day session format where it is a collaborative effort of the doctor and their embryology staff providing an overview of the treatment and then hands on training regarding the specific techniques required of the INVO procedure. 

 

We continue to see the newly trained doctors and embryologists leave the session very excited and enthusiastic to go back to their practices to determine how INVO will fit into their current offering of services. This process usually takes a few months. We continue to see our first re-orders come in from the clinics. We are also starting to hear about more INVO babies being born as some our clinics are reaching their first year anniversary.

 

Continuing on the subject of training, INVO successfully completed its inaugural introduction of the INVOcell and Procedure to the Masters students in the Reproductive Clinical Science program at the renowned Jones Institute at the Eastern Virginia Medical School. This two-year program is designed for clinical embryologists, andrologists, physicians and others involved in the practice of assisted reproductive technology. The program goal is to provide multidisciplinary graduate-level education and training in current technology to meet the ever-changing demands in clinical and research aspects of assisted reproductive medicine embryology and andrology.  This is a very exciting step for us as we are now teaching new and practicing reproductive practitioners looking to grow and learn about the latest technology in the field. These students are attending the institution where reproductive medicine began in the Unites States and have dreams of continuing to expand it across the US.  

 

We now have eight universities offering the INVO procedure at their facilities; University of California San Francisco, University of North Carolina, University of Texas San Antonio, University of Pennsylvania, University of Illinois, Northwestern University, the University of Rochester and most recently added Stanford University. We believe this represents an opportunity for medical students to be introduced to the INVO Procedure and the INVOcell device prior to moving into the field.   

 

In January 2018 we announced we were conducting a financing round of up to $1.5 million which included convertible notes and a private placement of shares of our common stock. In this financing round, we raised approximately $972,000 of which $895,000 were in convertible notes and $77,000 were in shares of common stock

 

We continue to control spending and currently require approximately $350,000 per quarter to fund our operations.  Assuming the Company’s Distribution Agreement with Ferring is consummated and the Company receives the initial $5,000,000 payment under the Distribution Agreement, spending will increase as we expand  our new product development, expandour FDA clearances, international registrations, patent expansion, marketing, sales, distribution and training efforts. During the year we were able to start a number of initiatives that we were unable to do over the past 5 years, including moving our stock from the OTC Bulletin Board to the OTCQB Venture Market, starting social media and investor relations campaigns, and initiating new product and patent designs with lawyers, doctors and engineers.

 

Recent Developments

 

On November 13, 2018 we announced a U.S. license and distribution agreement and as a result took a significant step to strengthen the Company that we believe will allow us to implement our overall business plan. We believe that this strategic partnership with a strong reproductive organization such as Ferring Pharmaceuticals will provide us with the necessary sales and marketing resources within the United States to expand the market and help reach all of those couples not receiving reproductive treatments today.  The agreement calls for the issuance of an initial upfront payment of $5 million and then subsequent licensing fee payment of $3,000,000 that will provide us with a source of non-dilutive financing to execute our plan. Under the terms of the agreement we can pursue developing international markets and as well as partnering and opening INVO-only reproductive centers within the U.S. market. We believe this major milestone and agreement is a critical step that allows the Company to implement its mission of expanding access to care in the fertility marketplace.   

 

 

Our registered independent certified public accountants have stated in their report dated March 29, 2018, filed with the Company’s Annual Report on Form 10-K that the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts. We have continued and expect to continue to generate negative cash outflows from operating activities for 2018.  Assuming the closing of the Ferring International Center S.A. agreement in early 2019 we anticipate we will have sufficient capital for at least the subsequent 18 months and be able to grow the overall business more rapidly, moving it toward the goal of generating positive cash flow from operations, although we make no assurances in this regard.  In addition, as a part of the process to improve its equity position, the Company took steps in October by working with current and former employees to exchange shares of stock for a reduction of 33% of their accrued compensation. Additional steps will be taken after the closing to reduce the company’s liabilities, including paying 60% of the accrued compensation balance.  If the Ferring agreement does not close as expected the previously mentioned factors among others may raise substantial doubt about our ability to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the United States of America.  The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Our estimates include those related to revenue recognition, the valuation of inventory, and valuation of deferred tax assets and liabilities, useful lives of intangible assets, warranty obligations and accruals.  We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  For a complete description of accounting policies, see Note 1 to our financial statements included in our Form 10K for the year ended December 31, 2017.  There were no significant changes in critical accounting estimates.

 

Results of Operations

 

Three months ended September 30, 2018, compared to the three months ended September 30, 2017

 

Net Sales and Revenues

 

Revenue for the three months ended September 30, 2018, was $125,035 compared to $68,220 for the same three month period in 2017, an increase of $58,815 or 83%.  The increase was the result doctors increasing their use of INVO alongside their other reproductive services and have established a recurring ordering pattern along with new practices taking their initial orders.  We shipped out 374 INVOcells in the third quarter of 2018 which included samples, demonstration & training devices, along with discounted and full priced revenue items, compared to 285 INVOcells in the same period in 2017. 

 

Gross Margin

 

The gross margin reported for the third quarter ended September 30, 2018 was 88% or $109,666 compared to 81% or $55,393 for the three months ended September 30, 2017. The increase in gross margin was related primarily to the 2018 price increase on reorders compared to our 2017 introductory sales promotion.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended September 30, 2018 were $299,548 as compared to $199,691 for the three months ended September 30, 2017, an increase of $99,857 or 50%.  The increase in SG&A during the third quarter of 2018 compared to the third quarter of 2017 was the result of additional insurances, stock market up listing, market research, the fees associated with the addition of three independent board of directors and increased investor awareness expenses.

 

Interest Expense and Financing Fees

 

During the three month period ended September 30, 2018 we incurred $104,978 in interest expense, an increase of $100,428 compared to $4,550 in the three-month period ended September 30, 2017. The primary reason for the increase in 2018 was the amortization of discount on the 2018 Convertible Notes Payable in the amount of $79,771 along with $20,302 of interest for the same notes.

 

 

Net Income (loss)

 

For the reasons above, the Company had a net loss of $294,860 for the three months ended September 30, 2018, an increase of $146,012 compared to a net loss of $148,848 for the three months ended September 30, 2017.

 

Nine months ended September 30, 2018, compared to the nine months ended September 30, 2017

 

Net Sales and Revenues

 

Revenue for the nine months ended September 30, 2018 was $339,385, an increase of $138,595 or 69% compared to $200,790 for the same nine month period in 2017.  The increase was the result of the continuation and expansion by the doctors who came on board in 2017 offering the INVO Procedure with their other reproductive services and have established a recurring ordering pattern.  We shipped out approximately 1,000 INVOcells in the first nine months of 2018 which included samples, demonstration & training devices, along with discounted and full priced revenue items compared to 880 INVOcells in the same period in 2017. 

 

Gross Margin

 

The gross margin reported for the nine months ended September 30, 2018 was 86% or $292,882 compared to 80% or $159,924 for the nine months ended September 30, 2017. The increase in gross margin was related primarily to the 2018 price increase on reorders compared to our 2017 introductory sales promotion.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the nine months ended September 30, 2018 were $2,413,493, an increase of $1,810,157 or 300% compared to $603,336 for the nine months ended September 30, 2017.  During the current year, we had a one-time event and issued 3,000,000 shares of common stock with a fair value of $1,530,000 for key services provided by one of our board members. Our limited cash resources have continued to force us to keep a tight reign over spending in 2018. The 12% increase in SG&A during the first nine months of 2018 compared to the first nine months of 2017 was primary the result of the increases in investor relations, marketing and legal fees.

 

Interest Expense and Financing Fees

 

During the nine month period ended September 30, 2018 we incurred $184,100 in interest expense, an increase of $167,686 compared to $16,414 in the nine month period ended September 30, 2017. The primary reason for the increase in 2018 was the amortization of discount on the 2018 Convertible Notes Payable in the amount of $136,217 along with $34,645 of interest for the same notes.

 

Net Income (loss)

 

For the reasons above, the Company had a net loss of $2,304,711 for the nine months ended September 30, 2018, an increase of $1,804,016 compared to a net loss of $500,695 for the nine months ended September 30, 2017.

   

Liquidity and Capital Resources

 

As of September 30, 2018, we had $547,966 in cash and no cash equivalents.  

 

Net cash used by operating activities was $366,648 for the nine months ended September 30, 2018, compared to net cash used by operating activities of $161,774 for the nine months ended September 30, 2017.  The increase in net cash used was due to an increase in accounts receivable due to the higher revenue, increased spending on strategic initiatives such as new product research, up listing to the OTCQB Venture Market for our stock trading, increased investor awareness activities, legal fees for contract creation and negotiations and a decrease of accounts payable and accrued expenses using cash to pay vendors.

 

No cash was used during the first nine months of 2018 or 2017 in investing activities.

 

Cash proceeds from financing activities were $888,855 during the nine months ended September 30, 2018. This amount consisted of cash from the sale of convertible notes payable in the amount of $895,000 (including $40,000 to related parties); and cash received of $77,000 from the sale of common stock (including $30,000 to related parties). The Company also made principle payments of $83,145 on related party loans during the period.

 

 

Our registered independent certified public accountants have stated in their report dated March 29, 2018, filed with the Company’s Annual Report on Form 10-K that the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, and is dependent on securing additional equity and debt financing to support its business efforts.  These factors among others may raise substantial doubt about our ability to continue as a going concern.

 

Our existing cash resources, and cash flow from operations will provide adequate resources to fully support our reduced operations during fiscal 2018. Assuming we consummate the Ferring Distribution Agreement in early 2019, we believe we will have the strategic funding necessary to execute our business plan over the next 12 to 24 months, although there can be no assurance that this source of funding will materialize in early 2019. If we do not close on the Ferring Distribution Agreement in early 2019, we may have to further curtail our spending and possibly downsize operations.

 

Critical Accounting Policies and Estimates

 

There have been no material changes in our critical accounting policies or critical accounting estimates since December 31, 2017. For further discussion of our accounting policies see the “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as well as the notes to the financial statements contained in this Quarterly Report on Form 10-Q.

 

The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASU 2014-09, when a customer obtains control of promised goods and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods and collectability of the resulting receivable is reasonably assured.

 

Intangible Assets

 

The Company’s intangible assets consist of its INVOcell and INVO process patents The Company amortizes its intangible assets with definitive lives over their useful lives, which range up to 20 years, based on the time period the Company expects to receive the economic benefit from these assets. No impairment charge was recorded during the nine months period ended September 30, 2018 or 2017.

 

The Company continually assesses whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of its intangible and indefinite-lived assets or whether the remaining balances of those assets should be evaluated for possible impairment. There were no changes in the carrying value of intangible and indefinite-lived assets during the nine months ended September 30, 2018.

 

Impairment of Long-Lived Assets

 

The Company’s long-lived assets are its patents which are subject to amortization. The Company evaluates long-lived assets for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use of the asset and eventual disposition. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized.

 

The Company continually assesses whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of its intangible and indefinite-lived assets or whether the remaining balances of those assets should be evaluated for possible impairment. There were no changes in the carrying value of intangible and indefinite-lived assets during the nine months ended September 30, 2018.

 

Allowance for Doubtful Accounts Receivable

 

The Company performs ongoing credit evaluations of our customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been minimal, within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results.

 

 

Income Taxes

 

As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax provision (benefit) in each of the jurisdictions in which we operate. This process involves estimating our current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which temporary differences reverse.

 

Recent Accounting Pronouncements

 

For information regarding recent accounting pronouncements and their effect on the Company, see “Recent Accounting Pronouncements” in Note 2 of the Unaudited Notes to Unaudited Condensed Consolidated Financial Statements contained herein

 

Forward Looking Statements

 

The statements contained in this Quarterly Report on Form 10-Q which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding results of operations, the commercialization of our technology, regulatory approvals, our development of new technologies, the adequacy of our ability to develop current financing sources to fund our operations, our growth initiatives, and the strength of our intellectual property portfolio. These forward-looking statements may be identified by the use of words such as “plans”, “intends,” “may,” “could,” “expect,” “estimate,” “anticipate,” “continue” or similar terms, though not all forward-looking statements contain such words. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements due to a number of important factors. These factors that could cause actual results to differ from those anticipated or predicted include, without limitation, our ability to develop and commercialize our products, including obtaining regulatory approvals, the size and growth of the potential markets for our products and our ability to serve those markets, the rate and degree of market acceptance of any of our products, general economic conditions, costs and availability of raw materials and management information systems, our ability to obtain and maintain intellectual property protection for our products, competition, the loss of key management and technical personnel, our ability to obtain timely payment of our invoices from customers, litigation, the effect of governmental regulatory developments, the availability of financing sources, our ability to comply with our debt obligations, our ability to deleverage our balance sheet, and seasonality, as well as the uncertainties set forth in the Company’s Annual Report on Form 10-K, filed on March 29, 2018, including the risk factors contained in Item 1A, and from time to time in the Company’s other filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 3.       Quantitative and Qualitative Disclosures about Market Risks

 

Not Applicable

 

Item 4.       Controls and Procedures

 

Item 4a.     Evaluation of Disclosure Controls and Procedures

 

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Acting 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 September 30 2018, the end of the fiscal period covered by this Form 10Q.  We maintain disclosure controls and procedures that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.   Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as of December 31, 2017 (described below) which has not been remediated as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Acting Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this Quarterly Report.
 

 

Because of the Company’s limited resources and limited number of employees, management concluded that, as of September 30, 2018, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. The Company is taking steps to create effective procedures and controls throughout the organization.  The Company is in the process of establishing procedures and segregating duties where it can.  It has implemented a new accounting system, has outsourced its accounts payable function, implemented an approval processes, created a number of policies, reporting processes, a standard customer contract and has introduced an employee manual.  We will continue to monitor our disclosure controls and procedures and will address areas of potential concern.  As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

 

If the Ferring deal closes we will be taking steps to enhance our internal and disclosure controls.

 

Our management, including our Chief Executive Officer and Acting 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.

 

Item 4b.     Changes in Internal Control over Financial Reporting

 

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PART II. OTHER INFORMATION

 

Item 1.      Legal Proceedings

 

As outlined in the Annual Report on Form 10K filed on March 29, 2018, there has been no change in the status in the suit INVO Bioscience, Inc., and two of its directors have been involved in since 2010, defending litigation brought by investors in an alleged predecessor of INVO Bioscience.  On March 24, 2010, INVO Bioscience, Inc. and its corporate affiliate, Bio X Cell, Inc., Claude Ranoux, and Kathleen Karloff were served an Amended Complaint, the original of which was filed on December 31, 2009 at the Suffolk Superior Court Business Litigation Session by two terminated employees of Medelle Corporation (also named as a co-defendant but no longer active), who are also attorneys, and a former investor in and creditor of Medelle.  These plaintiffs allege various claims of wrongdoing relating to the sale of assets of Medelle to Dr. Ranoux.  Plaintiffs claim that Dr. Ranoux, Ms. Karloff, and Medelle (and therefore INVO Bioscience as an alleged successor corporation) violated alleged duties owed to plaintiffs in connection with the sale.  Separate claims were also alleged against INVO Bioscience.

 

Dr. Ranoux, Ms. Karloff, and INVO Bioscience have challenged these allegations, which they believe are baseless.  The transfer of the assets of Medelle was professionally handled by an independent third party, after approval by the Medelle Board of Directors, representing a majority of its shareholders.  Medelle’s Board voted to proceed with an assignment for the benefit of creditors (AFBC) and gave complete authority to the President & CEO at that time (neither Dr. Ranoux nor Ms. Karloff) to work with the third-party assignee and to get the best possible price for those assets.  The third party was responsible for notifying all the appropriate parties and for filing notices in various professional publications and newspapers of Medelle’s intention to sell its assets.  The third party also contacted numerous large medical device and bio-pharma companies to learn if they would be interested in acquiring the assets.  After a private sale was deemed unlikely, the assignee of the assets elected to proceed with a sealed-bid auction of the assets.  On the day of the auction, Dr. Ranoux submitted the only bid and was awarded the assets, upon full payment. 

 

During 2010, Dr. Ranoux, Ms. Karloff, and INVO Bioscience filed Motions to Dismiss as to all claims, pursuant to M.R.Civ. P. 12(b)(6).  In a written Decision rendered on November 12, 2010, the judge dismissed all claims against INVO, Bio X Cell, and Ms. Karloff, and also dismissed the claims against Dr. Ranoux alleging civil conspiracy and breach of M.G.L. c. 93A.  The judge denied Dr. Ranoux’s motion to dismiss the remaining breach of fiduciary duty and fraud claims.  The plaintiffs allege in their Amended Complaint that Dr. Ranoux committed fraud by failing to inform them of the details of the Medelle auction. 

 

The claims against Dr. Ranoux that survived the November 2010 dismissal order were submitted to binding arbitration.  On February 15, 2013, the mutually-agreed arbitrator ruled in favor of Dr. Ranoux. The award held that Dr. Ranoux did not withhold information about the auction of Medelle’s assets and expressed doubt that the plaintiffs would have invested the resources necessary to make a beneficial use of the assets.  The arbitrator’s award then was confirmed by the Superior Court on August 21, 2013.  The Superior Court’s confirmation of the award was affirmed on appeal on October 20, 2013 by the Massachusetts Appeals Court.  The Massachusetts Supreme Judicial Court then denied further appellate review.  

 

On October 18, 2016, following motions and argument, the Superior Court issued a memorandum of decision and order denying plaintiffs’ motion for entry of default judgment and assessment of damages against Medelle and allowed the motion of INVO Bioscience, Bio X Cell, and Ms. Karloff for entry of final judgment of dismissal.  The foregoing order was converted to a final judgment dismissing all claims against all defendants and entered on the docket on October 27, 2016.

 

On November 28, 2016, plaintiffs filed an amended notice of appeal from the Superior Court’s decision of October 17, 2016 and the subsequent judgment entered on October 27, 2016.  The appeal further challenges the order of dismissal from November, 2010.  Plaintiffs did not appeal from the dismissal of the claims against Ms. Karloff, so the judgment in her favor is now final, leaving claims against INVO Bioscience, Bio X Cell, Medelle, and Dr. Ranoux.

 

INVO Bioscience and Bio X Cell intend a vigorous opposition to the current appeal, consistent with their previous positions that no breach of duty occurred in the sale of Medelle’s assets. It is assumed that Dr. Ranoux will oppose the appeal as well.

 

Outside of the above-mentioned litigation, neither INVO Bioscience nor Bio X Cell, our wholly-owned subsidiary, either directly or indirectly, 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 operation, financial position, or cash flows.

 

 

Item 1A.   Risk Factors

 

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed on March 29, 2018 with the SEC.  Other than the Company’s continued limited resources as its single largest risk, there have been no material changes from the factors disclosed in our 2017 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.

 

Item 2.      Unregistered Issuance of Equity Securities and Use of Proceeds

 

During the period covered by this Report, we issued 410,000 shares of common stock for cash, 4,220,000 shares of common stock to officers and directors for services, and 692,326 shares of common stock to service providers for services. We claimed the exemption from registration set forth in Section 4(a)(2) of the Securities Act and the rules there under, as private transactions not involving a public distribution.  The facts we relied upon to claim the exemption include: (i) all represented that they acquired the shares from the Company for investment and not with a view to distribution to the public; (ii) each certificate issued for unregistered securities contains a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities; (iii) most represented that they are accredited investors and all are familiar with our business activities; and (iv) all given full and complete access to any corporate information they requested.

 

Item 3.      Defaults Upon Senior Securities

 

None.

 

Item 4.      Reserved

 

Item 5.      Other Information

 

None.

 

Item 6.      Exhibits

 

31.1

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017, and (iv) Notes to Consolidated Financial Statements.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 14, 2018.

 

 

INVO Bioscience, Inc.

 

 

 

 

 

Date:  November 14 , 2018

By:

/s/Kathleen Karloff                     

 

 

 

Kathleen Karloff, Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

 

Date:  November 14, 2018

By:

/s/ Robert J. Bowdring           

 

 

 

Robert J. Bowdring, Treasurer and

 

 

 

Acting Chief Financial Officer

(Acting Principal Financial and Accounting Officer)

 

 

 

 

 

EXHIBIT INDEX

 

31.1

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017, and (iv) Notes to Consolidated Financial Statements.

 

 

 

 

 

 

28

 

 

EX-31.1 2 ex_128854.htm EXHIBIT 31.1 ex_128854.htm

 

 

EXHIBIT 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 

I, Kathleen Karloff, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of INVO Bioscience Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the unaudited condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

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

 

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

 

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

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

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

 

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

 

  

INVO BIOSCIENCE

 

 

 

 

 

Date: November 14, 2018

By:

/s/ Kathleen Karloff                                 

 

 

 

Kathleen Karloff

 

 

 

Chief Executive Officer

 

 

 

 

 

EX-31.2 3 ex_128855.htm EXHIBIT 31.2 ex_128855.htm

 

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Robert J. Bowdring, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of INVO Bioscience Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the unaudited condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

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

 

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

 

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

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

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

 

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

 

 

INVO BIOSCIENCE

 

 

 

 

 

Date: November 14, 2018

By:

/s/ Robert J. Bowdring                           

 

 

 

Robert J. Bowdring

 

 

 

Acting Chief Financial Officer

 

 

 

 

 

 

EX-32 4 ex_128856.htm EXHIBIT 32 ex_128856.htm

 

 

EXHIBIT 32

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of INVO Bioscience, Inc. (the “Company”) for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kathleen Karloff, Chief and Principal Executive Officer of the Company, and Robert J. Bowdring, Acting Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

 

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

 

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

 

 

INVO BIOSCIENCE

 

 

 

 

 

Date: November 14, 2018

By:

/s/ Kathleen Karloff 

 

 

 

Kathleen Karloff

 

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

INVO BIOSCIENCE

 

 

 

 

 

Date: November 14, 2018

By:

/s/ Robert J. Bowdring

 

 

 

Robert J. Bowdring

 

 

 

Acting Chief Financial Officer

 

 

 

 

 

 

 

 

 

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(the &#x201c;Company&#x201d;), and the related information contained in these notes have been prepared by management and are unaudited. Certain prior year balances have been reclassified to conform to the current year presentation. These reclassifications did not affect previously reported net loss or stockholders&#x2019; deficiency. In the opinion of management, all adjustments (which include normal recurring and nonrecurring items) necessary to present fairly the Company&#x2019;s financial position, results of operations and cash flows in conformity with generally accepted accounting principles for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain information and note disclosures normally included in the Company&#x2019;s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company&#x2019;s December 31, 2017 Annual Report on Form 10-K previously filed by the Company with the Securities and Exchange Commission (SEC).</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company considers events or transactions that have occurred after the unaudited consolidated balance sheet date of September 30, 2018, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Quarterly Report on Form&#xa0;10-Q, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure, as applicable. Subsequent events have been evaluated through the date of the filing of this Quarterly Report on Form&#xa0;10-Q with the SEC.</p><br/></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 2 &#x2013; Recent Accounting Pronouncements</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Changes to GAAP are established by the Financial Accounting Standards Board (&#x201c;FASB&#x201d;) in the form of accounting standards updates (&#x201c;ASUs&#x201d;) to the FASB&#x2019;s Accounting Standards Codification.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company&#x2019;s consolidated financial position and results of operations.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Recently Adopted Accounting Pronouncements</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (&#x201c;ASU 2014-09&#x201d;). The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">ASU 2014-09 supersedes existing guidance on revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing, and uncertainty of revenue and the related cash flows. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method).&#xa0;The Company adopted the new standard effective January 1, 2018 using the modified retrospective method applied to those contracts that were not completed or substantially completed as of January 1, 2018. The timing and measurement of revenue recognition under the new standard is not materially different than under the old standard. The adoption of the new standard did not have an impact on the Company&#x2019;s consolidated financial statements.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) (&#x201c;ASU 2016-15&#x201d;). The updated standard addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual&#xa0;reporting periods. Early adoption is permitted.&#xa0; The Company&#xa0;adopted&#xa0;ASU 2016-15 as of January 1, 2018. The adoption of ASU 2016-15 did not have an impact on the Company&#x2019;s consolidated financial statements.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) (&#x201c;ASU 2016-18&#x201d;). The updated standard&#xa0;requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.&#xa0;ASU 2016-18 is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company&#xa0;adopted&#xa0;ASU 2016-18 as of January 1, 2018. The adoption of ASU 2016-18 did not have a material effect on the Company&#x2019;s consolidated financial statements.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In May 2017, the FASB issued ASU 2017-09, Compensation &#x2013; Stock Compensation (Topic 718) (&#x201c;ASU 2017-09&#x201d;). 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Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.&#xa0; The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.&#xa0; The Company is currently evaluating the impact of its pending adoption of ASU 2016-02 on its consolidated financial statements.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In July 2017, FASB issued ASU 2017-11 (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (&#x201c;ASU 2017-11&#x201d;). The new standard simplifies the accounting for certain financial instruments with down round features. Part I of ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments, such as warrants and embedded conversion features, such that a down round feature is disregarded when assessing whether the instrument is indexed to an entity&#x2019;s own stock under Subtopic 815-40, Contracts in Entity&#x2019;s Own Equity.&#xa0;&#xa0;As a result, a down round feature, by itself, no longer requires an instrument to be remeasured at fair value through earnings each period, although all other aspects of the indexation guidance under Subtopic 815-40 continue to apply.&#xa0;&#xa0;Part II of ASU 2017-11 recharacterizes the indefinite deferral of certain provisions of Topic 480, Distinguishing Liabilities from Equity, (currently presented as pending content in the Codification) as a scope exception.&#xa0;&#xa0;No change in practice is expected as a result of these amendments.&#xa0;&#xa0;The new standard is effective for fiscal years beginning after December 15, 2018, early adoption is permitted. The amendments in Part II have no accounting impact and therefore do not have an associated effective date. The Company decided to early adopt this ASU 2017-11 and applied it to the convertible notes it issued during the quarter which are reflected in this Form 10Q.</p><br/></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 3&#xa0;&#x2013; Going Concern</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">As reflected in the accompanying unaudited consolidated financial statements for the quarter ended September 30, 2018, the Company has started commercialization of its product in the past 2 years within the US with minimal revenues, had a net loss for the nine months of $2,304,711, and a cumulative net loss of $20,949,842, a working capital deficiency of $4,456,724, a stockholder deficiency of $4,428,359, and cash used in operations of $366,648 for the nine months ended September 30, 2018.&#xa0;&#xa0;This raises substantial doubt about its ability to continue as a going concern.&#xa0;&#xa0;The unaudited consolidated&#xa0;financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.&#xa0;&#xa0;The ability of the Company to continue as a going concern is dependent on the Company&#x2019;s ability to raise additional capital and implement its business plan.</p><br/></div> -4456724 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 4&#xa0;&#x2013; Inventory</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">As of September 30, 2018 and December 31, 2017, the Company recorded the following inventory balances:</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1219" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1220" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1221" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1222" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1223" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1224" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Work in Process</p> </td> <td id="new_id-1225" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1226" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1227" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">24,357</td> <td id="new_id-1228" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1229" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1230" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1231" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">24,357</td> <td id="new_id-1232" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Finished Goods</p> </td> <td id="new_id-1233" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1234" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1235" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">20,245</td> <td id="new_id-1236" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1237" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1238" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1239" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">34,522</td> <td id="new_id-1240" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Total Inventory</b></p> </td> <td id="new_id-1241" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1242" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1243" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">44,602</td> <td id="new_id-1244" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1245" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1246" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1247" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">58,879</td> <td id="new_id-1248" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/></div> <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> As of September 30, 2018 and December 31, 2017, the Company recorded the following inventory balances:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1219" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1220" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1221" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1222" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1223" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1224" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Work in Process</p> </td> <td id="new_id-1225" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1226" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1227" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">24,357</td> <td id="new_id-1228" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1229" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1230" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1231" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">24,357</td> <td id="new_id-1232" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Finished Goods</p> </td> <td id="new_id-1233" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1234" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1235" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">20,245</td> <td id="new_id-1236" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1237" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1238" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1239" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">34,522</td> <td id="new_id-1240" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Total Inventory</b></p> </td> <td id="new_id-1241" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1242" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1243" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">44,602</td> <td id="new_id-1244" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1245" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1246" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1247" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">58,879</td> <td id="new_id-1248" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 24357 24357 20245 34522 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 5&#xa0;&#x2013; Property and Equipment</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows as of September 30, 2018 and December 31, 2017:</p><br/><table border="0px" cellpadding="0pt" cellspacing="0pt" style="margin: 0pt 25%; width: 50%; text-indent: 0px; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <tr style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <td style="vertical-align: bottom; width: 62.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align: bottom; border-bottom: 1px solid rgb(0, 0, 0); width: 37.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b>Estimated Useful&#xa0;Life</b></p> </td> </tr> <tr style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; background-color: rgb(204, 238, 255);"> <td style="vertical-align: bottom; width: 62.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Molds</p> </td> <td style="vertical-align: bottom; width: 37.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;">3&#xa0;to&#xa0;7&#xa0;years</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1249" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1250" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1251" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1252" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1253" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1254" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Manufacturing Equipment- Molds</p> </td> <td id="new_id-1255" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1256" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1257" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">50,963</td> <td id="new_id-1258" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1259" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1260" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1261" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">50,963</td> <td id="new_id-1262" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accumulated Depreciation</p> </td> <td id="new_id-1263" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1264" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1265" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(35,524</td> <td id="new_id-1266" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1267" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1268" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1269" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(35,263</td> <td id="new_id-1270" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total</p> </td> <td id="new_id-1271" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1272" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1273" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>15,439</b></td> <td id="new_id-1274" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1275" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1276" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1277" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>15,700</b></td> <td id="new_id-1278" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During the nine months ended September 30, 2018 and 2017 the Company recorded depreciation expense of $261 and $0, respectively. The Company began shipping its new retention device in August which triggered the start of depreciating our retention device mold during the current quarter.</p><br/></div> 261 0 <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows as of September 30, 2018 and December 31, 2017:<br /><br /><table border="0px" cellpadding="0pt" cellspacing="0pt" style="margin: 0pt 25%; width: 50%; text-indent: 0px; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <tr style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <td style="vertical-align: bottom; width: 62.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align: bottom; border-bottom: 1px solid rgb(0, 0, 0); width: 37.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b>Estimated Useful&#xa0;Life</b></p> </td> </tr> <tr style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; background-color: rgb(204, 238, 255);"> <td style="vertical-align: bottom; width: 62.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Molds</p> </td> <td style="vertical-align: bottom; width: 37.5%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;">3&#xa0;to&#xa0;7&#xa0;years</p> </td> </tr> </table></div> P3Y P7Y <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> <table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1249" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1250" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1251" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1252" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1253" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1254" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Manufacturing Equipment- Molds</p> </td> <td id="new_id-1255" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1256" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1257" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">50,963</td> <td id="new_id-1258" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1259" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1260" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1261" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">50,963</td> <td id="new_id-1262" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accumulated Depreciation</p> </td> <td id="new_id-1263" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1264" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1265" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(35,524</td> <td id="new_id-1266" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1267" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1268" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1269" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(35,263</td> <td id="new_id-1270" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total</p> </td> <td id="new_id-1271" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1272" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1273" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>15,439</b></td> <td id="new_id-1274" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1275" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1276" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1277" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>15,700</b></td> <td id="new_id-1278" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 50963 50963 35524 35263 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 6&#xa0;&#x2013; Patents</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">As of September 30, 2018 and December 31, 2017, the Company recorded the following patent balances:</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1279" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1280" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1281" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1282" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1283" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1284" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Total Patents</b></p> </td> <td id="new_id-1285" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1286" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1287" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">77,743</td> <td id="new_id-1288" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1289" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1290" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1291" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">77,743</td> <td id="new_id-1292" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accumulated Amortization</p> </td> <td id="new_id-1293" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1294" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1295" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(64,817</td> <td id="new_id-1296" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1297" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1298" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1299" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(61,415</td> <td id="new_id-1300" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Patent costs, net</b></p> </td> <td id="new_id-1301" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1302" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1303" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>12,926</b></td> <td id="new_id-1304" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1305" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1306" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1307" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>16,328</b></td> <td id="new_id-1308" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During the three and nine months ended September 30, 2018, the Company recorded $1,134 and $3,402 in amortization expenses respectively. No amortization expenses were recorded during the three and nine months ended September 30, 2017, the Company recorded $1,428 in amortization expense.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Estimated amortization expense as of September 30, 2018 is as follows:</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 81%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Years ended December 31,</p> </td> <td id="new_id-1309" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1310" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1311" style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1312" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2018</p> </td> <td id="new_id-1313" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1314" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1315" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,134</td> <td id="new_id-1316" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2019</p> </td> <td id="new_id-1317" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1318" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1319" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">4,536</td> <td id="new_id-1320" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2020</p> </td> <td id="new_id-1321" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1322" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1323" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,809</td> <td id="new_id-1324" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2021</p> </td> <td id="new_id-1325" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1326" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1327" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,809</td> <td id="new_id-1328" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2022 and thereafter</p> </td> <td id="new_id-1329" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1330" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1331" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">3,638</td> <td id="new_id-1332" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total</p> </td> <td id="new_id-1333" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1334" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1335" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">12,926</td> <td id="new_id-1336" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/></div> 1134 3402 1428 1428 <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> As of September 30, 2018 and December 31, 2017, the Company recorded the following patent balances:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1279" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1280" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1281" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1282" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1283" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1284" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Total Patents</b></p> </td> <td id="new_id-1285" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1286" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1287" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">77,743</td> <td id="new_id-1288" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1289" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1290" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1291" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">77,743</td> <td id="new_id-1292" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accumulated Amortization</p> </td> <td id="new_id-1293" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1294" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1295" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(64,817</td> <td id="new_id-1296" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1297" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1298" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1299" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(61,415</td> <td id="new_id-1300" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><b>Patent costs, net</b></p> </td> <td id="new_id-1301" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1302" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1303" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>12,926</b></td> <td id="new_id-1304" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1305" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1306" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>$</b></td> <td id="new_id-1307" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><b>16,328</b></td> <td id="new_id-1308" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 77743 77743 64817 61415 <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> Estimated amortization expense as of September 30, 2018 is as follows:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 81%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Years ended December 31,</p> </td> <td id="new_id-1309" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1310" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1311" style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1312" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2018</p> </td> <td id="new_id-1313" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1314" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1315" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,134</td> <td id="new_id-1316" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2019</p> </td> <td id="new_id-1317" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1318" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1319" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">4,536</td> <td id="new_id-1320" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2020</p> </td> <td id="new_id-1321" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1322" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1323" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,809</td> <td id="new_id-1324" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2021</p> </td> <td id="new_id-1325" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1326" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1327" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">1,809</td> <td id="new_id-1328" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2022 and thereafter</p> </td> <td id="new_id-1329" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1330" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1331" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">3,638</td> <td id="new_id-1332" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total</p> </td> <td id="new_id-1333" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1334" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1335" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">12,926</td> <td id="new_id-1336" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 1134 4536 1809 1809 3638 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 7 &#x2013;&#xa0;Convertible Notes and Notes Payable</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><font style="text-decoration:underline">Convertible Notes - Bridge Notes</font></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During 2009, the Company issued senior secured convertible notes (&#x201c;Bridge Notes&#x201d;) payable to investors in the aggregate amount of $545,000.&#xa0;&#xa0;The Bridge Notes carried interest rates ranging between 10-12% and were due in full one year from the date of issuance and are past due.&#xa0; Both the Bridge Notes and the accrued interest thereon are convertible into Common stock of the Company at a conversion price of $0.10 per share (the &#x201c;Original Conversion Price&#x201d;).&#xa0; If the Company were to issue any new shares of common stock within 24 months of the date of the Bridge Notes at a price below the Original Conversion Price, then the conversion price of the Bridge Notes would be adjusted to reflect the new lower price.&#xa0;&#xa0;In addition to the Bridge Notes, the Company issued warrants to purchase 5,750,000 shares of the Company&#x2019;s Common Stock at a price of $0.20 per share as of the date of this filing. All the warrants have expired.&#xa0;&#xa0;The Company valued the conversion feature of the Bridge Notes and&#xa0;the warrants issued&#xa0;via the Black-Scholes valuation method.&#xa0;&#xa0;The total fair value calculated for the conversion feature was $1,473,710;&#xa0;$151,826 was allocated to discount on the Bridge Notes, and $1,341,884 was charged to operations.&#xa0;&#xa0; The total fair value calculated for the warrants was $1,719,666;&#xa0;$393,174 was allocated to discount on the Bridge Notes, and $1,326,492 was charged to operations. The aggregate discount on the Bridge Notes for the conversion feature and the warrants was $545,000, and the aggregate amount charged to operations was $2,668,371 which was recorded as a derivative liability on the Company&#x2019;s consolidated balance sheet.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">From November 2009 through May 2015 $535,000 of the principal of the Bridge Notes were converted into shares of Common stock.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In March 2017, the Company converted the last Bridge Note in the amount of $10,000 and accrued interest into shares of common stock. The Company negotiated this conversion at a price lower than the conversion price stated in the original Bridge Note documents because the Bridge Note was past due.&#xa0; This conversion was treated as a restructure of debt.&#xa0; $10,000 of the Bridge Notes and accrued interest were converted into 341,000 shares of common stock resulting in a loss on debt settlement in the amount of $40,869.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The principal balances of the Convertible Notes was $0 as of September 30, 2018 and 2017.&#xa0; The related interest for the three months ended September 30, 2018 and 2017 was $0. The related interest for the nine months ended September30, 2018 and 2017 was $0.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><font style="text-decoration:underline">Notes Payable</font></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In August 2016, INVO Bioscience converted a long time vendor&#x2019;s outstanding accounts payable balance of $131,722 into a Promissory Note with a three year term that accrues interest at 5% per annum. The note provides for interest only payments on the first and second anniversaries of the note. The note is payable in full along with any outstanding accrued interest on August _9, 2019. The Company has the right to prepay the note at any time without a premium or penalty.&#xa0; The interest on this note for the three and nine months ended September 30, 2018 and 2017 were the same at&#xa0;$1,647 and $4,940, respectively.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><font style="text-decoration:underline">2018 Convertible Notes Payable</font></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In April and May 2018, the Company issued convertible notes (the &#x201c;2018 Convertible Notes&#x201d;) payable to investors in the aggregate principal amount of $895,000. The 2018 Convertible Notes accrue interest at the rate of 9% per annum which is paid in stock. 2018 Convertible Notes with an aggregate principal amount of $550,000 are due on January 30, 2021, and 2018 Convertible Notes with an aggregate principal amount of $345,000 are due on March 31, 2021. The notes are convertible into shares of common stock at a price of $0.20 per share, provided, that if the Company completes a subsequent equity financing, the holders of the 2018 Convertible Notes can elect to convert the notes in shares of our common stock at a price equal to 75% of the price paid per share in such subsequent equity financing.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company calculated a beneficial conversion feature of the 2018 Convertible Notes based on ASU 17-11 in the form of a discount of $895,000; $79,771 and $136,217 of this amount was amortized to interest expense during the three and nine months ended September 30, 2018, respectively, based on the three year term of the notes. In addition $20,302 and $34,645 of interest was expensed in the three and nine months ended September 30, 2018, respectively.</p><br/></div> 545000 0.10 0.12 P1Y 0.10 If the Company were to issue any new shares of common stock within 24 months of the date of the Bridge Notes at a price below the Original Conversion Price, then the conversion price of the Bridge Notes would be adjusted to reflect the new lower price. 5750000 0.20 1473710 151826 1341884 1719666 393174 1326492 545000 545000 2668371 535000 10000 341000 -40869 0 0 0 0 0 131722 P3Y 0.05 1647 4940 895000 0.09 550000 345000 shares of common stock at a price of $0.20 per share, provided, that if the Company completes a subsequent equity financing, the holders of the 2018 Convertible Notes can elect to convert the notes in shares of our common stock at a price equal to 75% of the price paid per share in such subsequent equity financing 0.20 895000 79771 136217 20302 34645 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 8 &#x2013;&#xa0;Notes Payable and Other Related Party Transactions</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On September 18, 2008, the Company entered into a related party transaction with Dr. Claude Ranoux.&#xa0;&#xa0;Dr. Ranoux was then the President, Director and Chief Scientific Officer of the Company.&#xa0;&#xa0;Dr. Ranoux had loaned funds to the Company to sustain its operations since January 5, 2007 (inception).&#xa0;&#xa0;Dr. Ranoux&#x2019;s&#xa0;loan outstanding as of&#xa0;September 30, 2018 and 2017&#xa0;was&#xa0;$21,888 (&#x201c;the Principal Amount&#x201d;).&#xa0; The loan accrues interest at 5% per annum, the term of the note&#xa0;has been extended a several times, and the current repayment date is October 31, 2018.&#xa0; The Company and Dr. Ranoux can jointly decide to repay the loan earlier without prepayment penalties.&#xa0; During the nine months ended&#xa0;September 30, 2018 and 2017, $21,888 of principal and $6,071 of interest, respectively, were paid on this loan. The interest on this note for the nine months ended September 30, 2018 and 2017 was $821. At September 30, 2018, this loan has been paid in full.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On March 5, 2009, the Company entered into a related party transaction with Kathleen Karloff, the Chief Executive Officer and a Director of the Company.&#xa0;&#xa0;Ms. Karloff provided a short-term loan in the amount of $75,000 bearing interest at 5% per annum to the Company to fund operations.&#xa0; In May 2009, Ms. Karloff&#xa0;loaned to the Company an additional $13,000, making her total cumulative loan $88,000 as of December 31, 2011.&#xa0;&#xa0;This note was due on September 15, 2009, which has since been extended a few times to its current date of October 31, 2018.&#xa0;&#xa0; During the twelve months ended December 31, 2014, Ms. Karloff loaned the Company an additional $66,000 at an interest rate of 0% by entering into a note payable agreement in satisfaction of expenses incurred by her for amounts previously advanced to the Company. This note currently has the same expiration date as the others which is October 31, 2018. Payments totaling $61,257 were made against this note during the nine months ended September 30, 2018.<b>&#xa0;</b>The interest on these notes for the nine months ended September 30, 2018 and 2017 was $4,120.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On December 28, 2009 James Bowdring, the brother of Director &amp; Acting Chief Financial Officer Robert Bowdring invested $100,000 acquiring 666,667 shares of common stock.&#xa0; In April 2011, the Company issued a short term convertible note (&#x201c;Q211 Note&#x201d;) payable to James Bowdring in the amount of $50,000.&#xa0;&#xa0;The Q211 Note carries a 10% interest rate and was due in full, two months from the date of issuance.&#xa0; The note was extended and is partially still open, as of this date the balance is $25,000. The Q211 Note is convertible into Common Stock of the Company at a conversion price of $0.03 per share, subject to adjustments.&#xa0; In addition to the Q211 Note, the Company issued warrants to purchase 1,666,667 shares of the Company&#x2019;s Common Stock at a price of $0.03 per share, as of this date the warrants have expired.&#xa0;&#xa0;The Company valued the Q211 Note&#x2019;s warrants issued as consideration for the notes payable via the Black-Scholes valuation method.&#xa0;&#xa0;The total fair value calculated for the conversion was approximately $39,500, and for the warrants&#xa0;was approximately $45,500 both of which were recorded as a derivative liability on the Company&#x2019;s balance sheet.&#xa0; In September 2011, the Company made a principal payment on the Q211 Note in the amount of $25,000.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In November 2011, the Company issued another convertible note (&#x201c;Q411 Note&#x201d;) payable to James Bowdring in the amount of $10,000.&#xa0;&#xa0;The Q411 Note carries a 10% interest rate and was due in full, two months from the date of issuance.&#xa0; The Q411 Note is convertible into Common Stock of the Company at a conversion price of $0.01&#xa0;per share, subject to adjustments.&#xa0;&#xa0;In addition to the Q411 Note, the Company issued warrants to purchase 500,000 shares of the Company&#x2019;s Common Stock at a price of $0.02&#xa0;per share, as of this date the warrants have expired.&#xa0;&#xa0;The Company valued the Bridge Note&#x2019;s warrants issued as consideration for the notes payable via the Black-Scholes valuation method.&#xa0;&#xa0;The total fair value calculated for the conversion option was $2,345, and for the warrants&#xa0;was $4,076 both of which were recorded as a derivative liability on the Company&#x2019;s balance sheet.<b>&#xa0;</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company has been renting our corporate office from Forty Four Realty Trust which is owned by James Bowdring, the brother of Director &amp; Acting Chief Financial Officer, Robert Bowdring since November 2012. It is a month to month rental arrangement for what the Company believes is less than the fair market real estate rental rate for comparable leases. We have been paying $4,800 annually since 2012. In September 2018, however, the rent increased to $600 per month, or $7,200 annually. In addition the Company purchases stationary supplies and marketing items at discounted rates from Superior Printing &amp; Promotions which is also owned by James Bowdring and is in the same building as our corporate office. INVO Bioscience&#xa0;spent&#xa0;$1,471 and $669 with Superior during the first nine months of 2018 and 2017, respectively.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Principal balances of the Related Party loans were as follows:</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1337" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1338" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30, </b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1339" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1340" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1341" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31, </b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1342" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Claude Ranoux Note</p> </td> <td id="new_id-1343" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1344" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1345" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">-</td> <td id="new_id-1346" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1347" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1348" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1349" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">21,888</td> <td id="new_id-1350" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1351">&#xa0;</td> <td id="new_id-1352">&#xa0;</td> <td id="new_id-1353">&#xa0;</td> <td id="new_id-1354">&#xa0;</td> <td id="new_id-1355">&#xa0;</td> <td id="new_id-1356">&#xa0;</td> <td id="new_id-1357">&#xa0;</td> <td id="new_id-1358">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">James Bowdring Family&#xa0;- 2011 Notes</p> </td> <td id="new_id-1359" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1360" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1361" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">35,000</td> <td id="new_id-1362" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1363" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1364" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1365" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">35,000</td> <td id="new_id-1366" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1367">&#xa0;</td> <td id="new_id-1368">&#xa0;</td> <td id="new_id-1369">&#xa0;</td> <td id="new_id-1370">&#xa0;</td> <td id="new_id-1371">&#xa0;</td> <td id="new_id-1372">&#xa0;</td> <td id="new_id-1373">&#xa0;</td> <td id="new_id-1374">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">James Bowdring Family &#x2013; 2018 Convertible Notes</p> </td> <td id="new_id-1375" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1376" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1377" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">40,000</td> <td id="new_id-1378" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1379" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1380" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1381" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">-</td> <td id="new_id-1382" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1383">&#xa0;</td> <td id="new_id-1384">&#xa0;</td> <td id="new_id-1385">&#xa0;</td> <td id="new_id-1386">&#xa0;</td> <td id="new_id-1387">&#xa0;</td> <td id="new_id-1388">&#xa0;</td> <td id="new_id-1389">&#xa0;</td> <td id="new_id-1390">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Kathleen Karloff Note</p> </td> <td id="new_id-1391" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1392" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1393" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">92,743</td> <td id="new_id-1394" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1395" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1396" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1397" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">154,000</td> <td id="new_id-1398" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;Less discount</p> </td> <td id="new_id-1399" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1400" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1401" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(34,382</td> <td id="new_id-1402" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;">)</td> <td id="new_id-1403" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1404" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1405" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">-</td> <td id="new_id-1406" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total, net of discount</p> </td> <td id="new_id-1407" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1408" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1409" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">133,361</td> <td id="new_id-1410" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1411" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1412" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1413" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">210,888</td> <td id="new_id-1414" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Interest expense on the Related Party loans was $8,765 and $8,729 for the nine months ended September 30, 2018 and 2017, respectively.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Accounts payable and accrued liabilities balances include expenses reports for Ms. Karloff, Dr. Ranoux and Mr. Bowdring for expenses they paid for personally related to travel or normal business expenses and are represented in the following table:</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1415" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1416" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> </td> <td id="new_id-1417" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1418" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1419" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> </td> <td id="new_id-1420" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1421" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1422" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1423" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1424" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1425" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1426" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accounts payable and accrued liabilities</p> </td> <td id="new_id-1427" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1428" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1429" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">96,000</td> <td id="new_id-1430" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1431" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1432" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1433" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">127,000</td> <td id="new_id-1434" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During the nine months ended September 30, 2018, the Company sold 150,000 shares of common stock at a price of $0.20 per share for proceeds of $30,000 to Charles Mulrey and family, the brother-in-law of Robert J. Bowdring, Director &amp; Acting Chief Financial Officer as part of the recent financing.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During the second quarter of 2018, INVO Bioscience settled a commitment it had with one of its Directors, Dr. Kevin Doody for the services he and his team performed prior to and following INVOcell&#x2019;s FDA clearance related to clinical guidance and support. Dr. Doody and his team performed clinical studies and provided papers, lectures and discussions with regulatory bodies and key opinion leaders in the industry. The Company believes without Dr. Doody&#x2019;s services and support during his tenure the Company would not be where it is today. The Company issued Dr. Doody 3 million shares of our common stock with a fair value of $1,530,000.</p><br/></div> 21888 21888 0.05 2018-10-31 21888 6071 821 75000 0.05 13000 88000 2018-10-31 66000 0.00 61257 4120 100000 666667 50000 0.10 P2M 25000 0.03 1666667 0.03 39500 45500 25000 10000 0.10 P2M 0.01 500000 0.02 2345 4076 4800 600 7200 1471 669 8765 8729 150000 0.20 30000 3000000 1530000 <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> Principal balances of the Related Party loans were as follows:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1337" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1338" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30, </b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1339" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1340" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1341" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31, </b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1342" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Claude Ranoux Note</p> </td> <td id="new_id-1343" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1344" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1345" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">-</td> <td id="new_id-1346" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1347" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1348" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1349" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">21,888</td> <td id="new_id-1350" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1351">&#xa0;</td> <td id="new_id-1352">&#xa0;</td> <td id="new_id-1353">&#xa0;</td> <td id="new_id-1354">&#xa0;</td> <td id="new_id-1355">&#xa0;</td> <td id="new_id-1356">&#xa0;</td> <td id="new_id-1357">&#xa0;</td> <td id="new_id-1358">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">James Bowdring Family&#xa0;- 2011 Notes</p> </td> <td id="new_id-1359" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1360" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1361" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">35,000</td> <td id="new_id-1362" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1363" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1364" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1365" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">35,000</td> <td id="new_id-1366" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1367">&#xa0;</td> <td id="new_id-1368">&#xa0;</td> <td id="new_id-1369">&#xa0;</td> <td id="new_id-1370">&#xa0;</td> <td id="new_id-1371">&#xa0;</td> <td id="new_id-1372">&#xa0;</td> <td id="new_id-1373">&#xa0;</td> <td id="new_id-1374">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">James Bowdring Family &#x2013; 2018 Convertible Notes</p> </td> <td id="new_id-1375" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1376" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1377" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">40,000</td> <td id="new_id-1378" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1379" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1380" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1381" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">-</td> <td id="new_id-1382" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td>&#xa0;</td> <td id="new_id-1383">&#xa0;</td> <td id="new_id-1384">&#xa0;</td> <td id="new_id-1385">&#xa0;</td> <td id="new_id-1386">&#xa0;</td> <td id="new_id-1387">&#xa0;</td> <td id="new_id-1388">&#xa0;</td> <td id="new_id-1389">&#xa0;</td> <td id="new_id-1390">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Kathleen Karloff Note</p> </td> <td id="new_id-1391" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1392" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1393" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">92,743</td> <td id="new_id-1394" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1395" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1396" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1397" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">154,000</td> <td id="new_id-1398" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;Less discount</p> </td> <td id="new_id-1399" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1400" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1401" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">(34,382</td> <td id="new_id-1402" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;">)</td> <td id="new_id-1403" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1404" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 1px solid rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1405" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);">-</td> <td id="new_id-1406" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 1px; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Total, net of discount</p> </td> <td id="new_id-1407" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1408" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1409" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">133,361</td> <td id="new_id-1410" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1411" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1412" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1413" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">210,888</td> <td id="new_id-1414" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 0 21888 35000 35000 40000 0 92743 154000 34382 0 133361 210888 <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> Accounts payable and accrued liabilities balances include expenses reports for Ms. Karloff, Dr. Ranoux and Mr. Bowdring for expenses they paid for personally related to travel or normal business expenses and are represented in the following table:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1415" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1416" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> </td> <td id="new_id-1417" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1418" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1419" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> </td> <td id="new_id-1420" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1421" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1422" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1423" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1424" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1425" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1426" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: left; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Accounts payable and accrued liabilities</p> </td> <td id="new_id-1427" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1428" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1429" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">96,000</td> <td id="new_id-1430" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1431" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1432" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1433" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">127,000</td> <td id="new_id-1434" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 96000 127000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note&#xa0;9 &#x2013; Stockholders&#x2019; Equity</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><font style="text-decoration:underline">Nine Months Ended September 30, 2018</font></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In January and March 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company sold 260,000 shares of common stock to accredited investors in a private placement for cash of $47,000.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In January 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 1,200,000 shares of common stock with a fair value of $138,000 to management and board members.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In January and March 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 352,326 shares of common stock with a fair value of $43,664 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In April and May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 340,000 shares of common stock with a fair value of $174,800 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company sold 150,000 shares of common stock to accredited investors who are family members of Robert J Bowdring, a Board Member in a private placement for cash of $30,000.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In May 2018, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 3,020,000 shares of common stock with a fair value of $1,540,000 to a board member, Dr. Kevin Doody for services previously provided to the Company.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><font style="text-decoration:underline">&#xa0;Nine Months Ended September 30, 2017</font></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In March 2017, pursuant to Section 4(a)(2) of the Securities Act, the company issued 196,000 shares of common stock with a fair value of $59,242 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In March 2017, pursuant to Section 4(a)(2) of the Securities Act, the Company negotiated the conversion of $10,000 of past due Bridge Notes and accrued interest into 341,000 shares of common stock resulting in a loss on debt settlement in the amount of $40,869.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In April 2017, pursuant to Section 4(2) of the Securities Act, the company issued 51,750 shares of common stock with a fair value of $17,201 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In June 2017, pursuant to Section 4(2) of the Securities Act, the company issued 99,412 shares of common stock with a fair value of $30,898 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In September 2017, pursuant to Section 4(2) of the Securities Act, the company issued 133,960 shares of restricted common stock with a fair value of $28,576 to service providers.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In September 2017, pursuant to Section 4(2) of the Securities Act, the company issued 262,500 shares of restricted common stock for cash proceeds of $44,626.</p><br/></div> 260000 47000 1200000 138000 352326 43664 340000 174800 150000 30000 3020000 1540000 196000 59242 -40869 51750 17201 99412 30898 133960 28576 262500 44626 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note&#xa0;10 &#x2013; Stock Options and Warrants</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">As of September 30, 2018 and December 31, 2017,&#xa0;the Company does not have any outstanding or committed and unissued stock options or warrants.&#xa0;&#xa0;</p><br/></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note&#xa0;11 &#x2013; Income Taxes</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company has adopted ASC 740-10, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.&#xa0;&#xa0;Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company&#x2019;s total deferred tax liabilities, deferred tax assets and deferred tax asset valuation allowances at September 30, 2018 and December 31, 2017 are as follows:&#xa0;</p><br/><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1435" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1436" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1437" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1438" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1439" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1440" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Total deferred tax assets</p> </td> <td id="new_id-1441" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1442" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1443" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">4,260,000</td> <td id="new_id-1444" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1445" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1446" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1447" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">3,730,000</td> <td id="new_id-1448" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Less valuation allowance</p> </td> <td id="new_id-1449" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1450" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1451" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">(4,260,000</td> <td id="new_id-1452" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1453" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1454" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1455" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">(3,730,000</td> <td id="new_id-1456" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Total deferred tax liabilities</p> </td> <td id="new_id-1457" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1458" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1459" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1460" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1461" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1462" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1463" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1464" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Net deferred tax asset (liability)</p> </td> <td id="new_id-1465" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1466" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1467" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1468" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1469" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1470" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1471" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1472" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which is uncertain.&#xa0;&#xa0;Those amounts are therefore presented on the Company&#x2019;s balance sheets as a non-current asset.&#xa0;&#xa0;Utilization of the net operating loss carry forwards may be subject to substantial annual limitations, which may result in the expiration of net operating loss carry forwards before utilization.</p><br/></div> <div style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; "> The Company&#x2019;s total deferred tax liabilities, deferred tax assets and deferred tax asset valuation allowances at September 30, 2018 and December 31, 2017 are as follows:<br /><br /><table border="0" cellpadding="0" cellspacing="0" class="finTable" style="margin-right: 10%; margin-left: 10%; width: 80%; font-size: 10pt; font-family: &quot;Times New Roman&quot;, Times, serif; text-indent: 0px;"> <tr style="vertical-align: bottom;"> <td style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1435" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1436" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>September 30,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2018</b></b></p> </td> <td id="new_id-1437" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> <td id="new_id-1438" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td colspan="2" id="new_id-1439" style="text-align: center; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 1px solid rgb(0, 0, 0);"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>December 31,</b></b></p> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><b><b>2017</b></b></p> </td> <td id="new_id-1440" style="font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 1px;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; width: 62%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Total deferred tax assets</p> </td> <td id="new_id-1441" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1442" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1443" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">4,260,000</td> <td id="new_id-1444" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1445" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1446" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td id="new_id-1447" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">3,730,000</td> <td id="new_id-1448" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Less valuation allowance</p> </td> <td id="new_id-1449" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1450" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1451" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">(4,260,000</td> <td id="new_id-1452" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> <td id="new_id-1453" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1454" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1455" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;">(3,730,000</td> <td id="new_id-1456" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; white-space: nowrap;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">)</p> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Total deferred tax liabilities</p> </td> <td id="new_id-1457" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1458" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1459" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1460" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1461" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1462" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);">&#xa0;</td> <td id="new_id-1463" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1464" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="text-align: justify; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Net deferred tax asset (liability)</p> </td> <td id="new_id-1465" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1466" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1467" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1468" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> <td id="new_id-1469" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt;">&#xa0;</td> <td id="new_id-1470" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td id="new_id-1471" style="width: 16%; text-align: right; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">-</td> <td id="new_id-1472" style="width: 1%; font-family: &quot;Times New Roman&quot;, Times, serif; font-size: 10pt; padding-bottom: 3px; margin-left: 0pt; white-space: nowrap;">&#xa0;</td> </tr> </table></div> 4260000 3730000 4260000 3730000 0 0 0 0 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note&#xa0;12 &#x2013; Commitments and Contingencies</b></p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:5.3%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">A)</p> </td> <td style="vertical-align:top;width:94.7%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Operating Leases</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In November 2012, INVO Bioscience entered into a month-to-month rental agreement with Forty Four Realty Trust with for the space it requires.&#xa0; Forty Four Realty Trust is owned by investor James Bowdring, the brother of Director &amp; Acting Chief Financial Officer Robert Bowdring. The annual rent under the agreements was increased from $4,800 annually to $7,200 annually in September 2018.</p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:5.3%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">B)</p> </td> <td style="vertical-align:top;width:94.7%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Litigation</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">There has been no change in the status of the litigation INVO Bioscience, Inc., and two of its directors have been involved in since 2010, defending litigation brought by investors in an alleged predecessor of INVO Bioscience.&#xa0; On March 24, 2010, INVO Bioscience, Inc. and its corporate affiliate, Bio X Cell, Inc., Claude Ranoux, and Kathleen Karloff were served an Amended Complaint, the original of which was filed on December 31, 2009 at the Suffolk Superior Court Business Litigation Session by two terminated employees of Medelle Corporation (also named as a co-defendant but no longer active), who are also attorneys, and a former investor in and creditor&#xa0;of Medelle.&#xa0;&#xa0;These plaintiffs allege various claims of wrongdoing relating to the sale of assets of Medelle to Dr. Ranoux.&#xa0;&#xa0;Plaintiffs claim that Dr. Ranoux, Ms. Karloff, and Medelle (and therefore INVO Bioscience as an alleged successor corporation) violated alleged duties owed to plaintiffs in connection with the sale.&#xa0; Separate claims were also alleged against INVO Bioscience.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Dr. Ranoux, Ms. Karloff, and INVO Bioscience have challenged these allegations, which they believe are baseless.&#xa0;&#xa0;The transfer of the assets of Medelle was professionally handled by an independent third party, after approval by the Medelle Board of Directors, representing a majority of its shareholders.&#xa0;&#xa0;Medelle&#x2019;s Board&#xa0;voted to proceed with an assignment for the benefit of creditors (AFBC) and gave complete authority to the President &amp; CEO at that time (neither Dr. Ranoux nor Ms. Karloff)&#xa0;to work with the third-party assignee and to get the best possible price for those assets.&#xa0;&#xa0;The third party was responsible for notifying all the appropriate parties and for filing notices in various professional publications and newspapers of Medelle&#x2019;s intention to sell its assets.&#xa0;&#xa0;The third party also contacted numerous large medical device and bio-pharma companies to learn if they would be interested in acquiring the assets.&#xa0;&#xa0;After a private sale was deemed unlikely, the assignee of the assets elected to proceed with a sealed-bid auction of the assets.&#xa0; On the day of the auction, Dr. Ranoux submitted the only bid and was awarded the assets, upon full payment.&#xa0;</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">During 2010, Dr. Ranoux, Ms. Karloff, and INVO Bioscience filed Motions to Dismiss as to all claims, pursuant to M.R.Civ. P. 12(b)(6).&#xa0;&#xa0;In a written Decision rendered on November 12, 2010, the judge dismissed all claims against INVO, Bio X Cell, and Ms. Karloff, and also dismissed the claims against Dr. Ranoux alleging civil conspiracy and breach of M.G.L. c. 93A.&#xa0;&#xa0;The judge denied Dr. Ranoux&#x2019;s motion to dismiss the remaining breach of fiduciary duty and fraud claims.&#xa0; The plaintiffs allege in their Amended Complaint that Dr. Ranoux committed fraud by failing to inform them of the details of the Medelle auction.&#xa0;</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The claims against Dr. Ranoux that survived the November 2010 dismissal order were submitted to binding arbitration.&#xa0; On February 15, 2013, the mutually-agreed arbitrator ruled in favor of Dr. Ranoux. The award held that Dr. Ranoux did not withhold information about the auction of Medelle&#x2019;s assets and expressed doubt that the plaintiffs would have invested the resources necessary to make a beneficial use of the assets.&#xa0; The arbitrator&#x2019;s award then was confirmed by the Superior Court on August 21, 2013.&#xa0; The Superior Court&#x2019;s confirmation of the award was affirmed on appeal on October 20, 2013 by the Massachusetts Appeals Court.&#xa0; The Massachusetts Supreme Judicial Court then denied further appellate review.&#xa0;&#xa0;</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On October 18, 2016, following motions and argument, the Superior Court issued a memorandum of decision and order denying plaintiffs&#x2019; motion for entry of default judgment and assessment of damages against Medelle and allowed the motion of INVO Bioscience, Bio X Cell, and Ms. Karloff for entry of final judgment of dismissal.&#xa0; The foregoing order was converted to a final judgment dismissing all claims against all defendants and entered on the docket on October 27, 2016.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On November 28, 2016, plaintiffs filed an amended notice of appeal from the Superior Court&#x2019;s decision of October 17, 2016 and the subsequent judgment entered on October 27, 2016.&#xa0; The appeal further challenges the order of dismissal from November, 2010.&#xa0; Plaintiffs did not appeal from the dismissal of the claims against Ms. Karloff, so the judgment in her favor is now final, leaving claims against INVO Bioscience, Bio X Cell, Medelle, and Dr. Ranoux.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">INVO Bioscience and Bio X Cell intend a vigorous opposition to the current appeal, consistent with their previous positions that no breach of duty occurred in the sale of Medelle&#x2019;s assets. It is assumed that Dr. Ranoux will oppose the appeal as well.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Outside of the above-mentioned litigation, neither INVO Bioscience nor Bio X Cell, our wholly-owned subsidiary, either directly or indirectly, 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 operation, financial position, or cash flows.</p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:5.3%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">C)</p> </td> <td style="vertical-align:top;width:94.7%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Employee Agreements</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company had employment agreements for officers, executives and employees of the Company in place. The agreements have since expired and have not been renewed as the Company has not had the proper funds to meet its commitment but has continued to accrue amounts annually for the work that has been performed.&#xa0; The employees have received shares of stock as compensation for not being paid. The employees and directors are continuing to work based on good faith and belief in the Company and the INVOcell product.&#xa0;&#xa0;</p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:5.3%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">D)</p> </td> <td style="vertical-align:top;width:94.7%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Consulting Agreements</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Company has a verbal agreement beginning in March, 2013 with its former CFO, Robert Bowdring, who is currently a Director &amp; Acting Chief Financial Officer, to assist where necessary in the financial and administrative areas of the Company for compensation to be equivalent to the others working in the organization.</p><br/></div> 4800 7200 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 13&#xa0;&#x2013; Contracts with Customers</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">We have adopted ASC 606,&#xa0;<i>Revenue from Contracts with Customers</i>&#xa0;effective January&#xa0;1, 2018 using the modified retrospective method applied to those contracts which were not substantially completed as of January&#xa0;1, 2018<i>.</i>&#xa0;These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues for 2018 are reported under ASC 606, while prior period amounts are not adjusted and continue to be reported under ASC 605,&#xa0;<i>Revenue Recognition</i>.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">We routinely enter into agreements with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms and in most cases prices for the products that we offer. However, these agreements do not obligate us to provide goods to the customer and there is no consideration promised to us at the onset of these arrangements. For customers without separate agreements, we have a standard list price established by geography and by currency for all products and our invoices contain standard terms and conditions that are applicable to those customers where a separate agreement is not controlling. Our performance obligations are established when a customer submits a purchase order or e-mail notification (in writing, electronically or verbally) for goods, and we accept the order. We identify performance obligations as the delivery of the requested product(s) in appropriate quantities and to the location specified in the customer&#x2019;s e-mail/or purchase order. We generally recognize revenue upon the satisfaction of these criteria when control of the product has been transferred to the customer at which time we have an unconditional right to receive payment. Our prices are fixed and are not affected by contingent events that could impact the transaction price. We do not offer price concessions and do not accept payment that is less than the price stated when we accept the purchase order, except in rare credit related circumstances. We do not have any material performance obligations where we are acting as an agent for another entity.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Revenues for products, including: INVOcell<sup>&#xae;</sup>,&#xa0;INVO<sup>&#xa0;TM</sup>&#xa0;Retention System, and INVO Microscope Holding Block are typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenues from consignment are recognized when the medical device is shipped from the Consignor to the customer.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;"><i><b>Sources of Revenue</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">We have identified the following revenues disaggregated by revenue source:</p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:middle;width:8%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align:top;width:5%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">1.</p> </td> <td style="vertical-align:top;width:87%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">Domestic Physicians&#xa0;&#xa0;&#x2013; direct sales of products.</p> </td> </tr> <tr> <td style="vertical-align:middle;width:8%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align:top;width:5%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align:top;width:87%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> </tr> <tr> <td style="vertical-align:middle;width:8%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">&#xa0;</p> </td> <td style="vertical-align:top;width:5%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">2.</p> </td> <td style="vertical-align:top;width:87%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:left;">International Distributors&#xa0;&#xa0;&#x2013; direct sales of products.</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">For the nine months ended September 30, 2018 and 2017 the source of revenue was only from Domestic Physicians.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Contract Balances</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">We incur agreement obligations on general customer purchase orders and e-mails that have been accepted but unfulfilled. Due to the short duration of time between order acceptance and delivery of the related product, we have determined that the balance related to these obligations is generally immaterial at any point in time. We monitor the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Warranty</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Significant Judgments in the Application of the Guidance in ASC 606</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">There are no significant judgments associated with the satisfaction of our performance obligations. We generally satisfy performance obligations upon delivery of the product to the customer. This is consistent with the time in which the customer obtains control of the products. Therefore the value of unsatisfied performance obligations at the end of any reporting period is generally immaterial. We consider variable consideration in establishing the transaction price. Forms of variable consideration applicable to our arrangements include sales returns, rebates, volume based bonuses, and prompt pay discounts. We use historical information along with an analysis of the expected value to properly calculate and to consider the need to constrain estimates of variable consideration. Such amounts are included as a reduction to revenue from the sale of products in the periods in which the related revenue is recognized and adjusted in future periods as necessary.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Commissions and Contract Costs</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">We do not use or offer sales commissions of any type at this time. We generally do not incur incremental charges associated with securing agreements with customers which would require capitalization and recovery over the life of the agreement.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Practical Expedients</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Our payment terms for sales direct to customers and distributors are substantially less than the one year collection period that falls within the practical expedient in determination of whether a significant financing component exists.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Shipping and Handling Charges</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Fees charged to customers for shipping and handling of products are included as an offset to the costs for shipping and handling of products included as a component of cost of products.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Taxes Collected from Customers</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">As our products are used in another service and are exempt, to this point we have not collected taxes. If we were to collect taxes they would be on the value of transaction revenue and would be excluded from product revenues and cost of sales and would be accrued in current liabilities until remitted to governmental authorities.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><i><b>Effective Date and Transition Disclosures</b></i></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Adoption of the new standards related to revenue recognition did not have a material impact on our consolidated financial statements, and is not expected to have a material impact in future periods.</p><br/></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt; "> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;"><b>Note 14&#xa0;&#x2013; Subsequent Events</b></p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">In October 2018, the Company issued the following shares of common stock for payment of services and to settle a portion of the outstanding accrued compensation and convertible notes payable to improve the balance sheet:</p><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">380,000 shares of common stock with a fair value of $153,800 were issued to service providers for services performed;</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">1,233,719 shares of common stock with a fair value of $481,150 were issued to employees reducing accrued compensation;</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">2,056,107 shares of common stock with a fair value of $801,882 were issued to officers for previously accrued compensation;</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">625,250 shares of common stock with a fair value of $244,000 were issued to directors as bonuses;</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">600,000 shares of common stock with a fair value of $234,000 were issued to directors as compensation for 2019;</p> </td> </tr> </table><br/><table border="0" cellpadding="0" cellspacing="0" style="width:100%;text-indent:0;font-family:'Times New Roman', Times, serif;font-size:10pt;"> <tr> <td style="vertical-align:top;width:3.6%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">-</p> </td> <td style="vertical-align:top;width:96.4%;"> <p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">1,099,560 shares of common stock with a fair value of $219,912 were issued in connection with the conversion of notes payable.</p> </td> </tr> </table><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">On November 12, 2018, INVO Bioscience, Inc (the &#x201c;Company&#x201d;) entered into a Distribution Agreement with Ferring International Center S.A. (&#x201c;Ferring&#x201d;), pursuant to which, among other things, the Company granted to Ferring an exclusive license in the United States (the &#x201c;Territory&#x201d;) with rights to sublicense under patents related to the Company&#x2019;s proprietary intravaginal culture device known as INVOcell&#x2122;, together with the retention device and any other applicable accessories (collectively, the &#x201c;Licensed Product&#x201d;) to market, promote, distribute and sell the Licensed Product with respect to all therapeutic, prophylactic and diagnostic uses of medical devices or pharmaceutical products involving reproductive technology (including infertility treatment) in humans (the &#x201c;Field&#x201d;). Ferring is responsible, at its own cost, for all commercialization activities for the Licensed Product in the Field in the Territory. The Company does retain a limited exception to the exclusive license granted to Ferring allowing the Company, subject to certain restrictions, to establish up to five clinics that will commercialize INVO cycles in the Territory. The Company retains all commercialization rights for the Licensed Product outside of the United States.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">Under the terms of the Distribution Agreement, Ferring is obligated to make an initial payment to the Company of $5,000,000 upon satisfaction of certain closing conditions, including an agreement from all current manufacturers of the Licensed Product that upon a material supply default by the Company, Ferring can assume a direct purchase relationship with such manufacturers. The Closing under the Distribution Agreement will not occur prior to January 14, 2019 without consent of the Company and Ferring. Ferring is obligated to make a second payment to the Company of $3,000,000 provided that the Company is successful in obtaining a five (5) day label enhancement from the FDA for the current incubation period for the Licensed Product at least three (3) years prior to the expiration of the term of the license for the Licensed Product and provided further that Ferring has not previously exercised its right to terminate the Distribution Agreement for convenience. In addition, under the terms of a separate Supply Agreement, attached as an exhibit to the Distribution Agreement, Ferring is obligated to pay the Company a specified supply price for each Licensed Product purchased by Ferring for distribution.</p><br/><p style="font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:justify;">The Distribution Agreement has an initial term expiring on December 31, 2025 and at the end of the initial term it may be terminated by the Company if Ferring fails to generate specified minimum revenues to the Company from the sale of the Licensed Product during the final two years of the initial term. Provided that no such termination occurs at the end of the initial term, thereafter the term of the Distribution Agreement shall automatically be renewed for successive three (3) years terms unless terminated by mutual consent. The Distribution Agreement is subject to termination upon a material breach by either party, or by Ferring for convenience. 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