Equity-Based Compensation

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Equity-Based Compensation

Note 12 – Equity-Based Compensation

Equity Incentive Plans

In October 2019, the Company adopted its 2019 Stock Incentive Plan (the “2019 Plan”). Under the 2019 Plan, the Company’s Board of Directors is authorized to grant both incentive and non-statutory stock options to purchase common stock and restricted stock awards to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of 500,000 shares. A provision in the 2019 Plan provides for an automatic annual increase equal to 6% of the total number of shares of Company common stock outstanding on December 31 of the preceding calendar year. In January 2020, the number of available shares was increased to 793,093. In January 2021, the number of available shares issuable increased by an additional 578,356 shares to a total of 1,371,449 shares.

Options generally have a life of 3 to 10 years and exercise prices equal to or greater than the fair market value of the common stock as determined by the Company’s Board of Directors. Vesting for employees typically occurs over a three-year period.

The following table sets forth the activity of the options to purchase common stock under the 2019 Plan.

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2020		939,114	$	5.73	$	17,250
Granted		179,797		3.14		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of September, 2021		1,118,911	$	5.32	$	333,368
Exercisable as of September, 2021		582,858	$	2.63	$	17,325

The fair value of each option granted is estimated as of the grant date using the Black-Scholes option pricing model with the following assumptions:

	Nine months ended September 30,
	2021		2020
Risk-free interest rate range	0.22 to 0.73	%	0.48 to 1.65	%
Expected life of option-years	5.3 to 6.5		5.20 to 5.77
Expected stock price volatility	107 to 125	%	110.8 to 128.	%
Expected dividend yield	-	%	-	%

INVO BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(UNAUDITED)

The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. Expected volatility is based upon the average historical volatility of the Company’s common stock over the period commensurate with the expected term of the related instrument. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups, executives and non-executives, within the Company. The Company does not currently pay dividends on its common stock, nor does it expect to do so in the foreseeable future.

	Total Intrinsic Value of Options Exercised		Total Fair Value of Options Vested
Year ended December 31, 2020	$	-	$	1,495,744
Nine months ended September 30, 2021	$	-	$	1,137,129

For the nine months ended September 30, 2021, the weighted average grant date fair value of options granted was $2.37 per share. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through September 30, 2021, the weighted average remaining service period is 4.0 years.

The Company recognized $391,194 and $259,547 in stock-based compensation expense for stock options for the three months ended September 30, 2021, and 2020, respectively. The Company recognized $1,151,800 and $852,187 in stock-based compensation expense related to stock options for the nine months ended September 30, 2021, and 2020, respectively. Unamortized stock option expense as of September 30, 2021, to be amortized over the weighted-average remaining service period totaled $1,937,560.

Restricted Stock and Restricted Stock Units

In the nine months ended September 30, 2021, the Company issued 44,806 shares of restricted stock to certain employees and directors under the Company’s 2019 Plan. Restricted stock and restricted stock units issued to employees and directors generally vest either at grant or vest over a period of one year from grant.

The following table summarizes the Company’s aggregate restricted stock awards and restricted stock unit activity under the Company’s 2019 Plan during the nine months ended September 30, 2021:

	Number of Shares			Weighted Average Grant Date Fair Value		Aggregate Value of Shares
Balance as of December 31, 2020		16,698		$	4.67	$	77,927
Granted		86,563			3.62		285,094
Vested		(74,669	)		3.51		(262,356	)
Forfeitures		-			-		-
Balance as of September 30, 2021		28,592		$	3.34	$	100,665

INVO BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(UNAUDITED)

The Company recognized $87,912 and $67,202 in stock-based compensation expense related to restricted stock and restricted stock units for the three months ended September 30, 2021, and 2020, respectively. The Company recognized $266,718 and $388,173 in stock-based compensation expense for restricted stock and restricted stock units for the nine months ended September 30, 2021, and 2020, respectively.