~~[X]~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

~~[ ]~~☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark 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 ~~[X]~~ ☒ 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.

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 ~~[X]~~ ☒

~~Indicate~~As of May 16, 2022, the ~~number of~~registrant had 12,096,798 shares ~~outstanding of each of the issuer’s classes~~ of common stock ~~as of the latest practicable date.~~outstanding.

~~Shares of common stock, par value $.0001 per share: 10,449,035 shares outstanding as of May 17, 2021.~~

Item Page Number
Part I

1. Financial Statements (Unaudited): 3
Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 3
Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 4
Consolidated Statements of Stockholders’ Equity (Deficiency) for the three months ended March 31, 2021 and 2020 5
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 6
Notes to the Condensed Consolidated Financial Statements 7
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
3. Quantitative and Qualitative Disclosures about Market Risks 32
4. Controls and Procedures 32
Evaluation of Disclosure Controls and Procedures 32
Changes in Internal Controls Over Financial Reporting 32

Part II

1. Legal Proceedings 33
1A. Risk Factors 33
2. Unregistered Issuance of Equity Securities and Use of Proceeds 33
3. Defaults Upon Senior Securities 33
4. Mine Safety Disclosure 33
5. Other Information 33
6. Exhibits 33
Signatures 34

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~~ our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March ~~30, 2020,~~31, 2022 (the “10-K”), including the risk factors contained in Item 1A, and from time to time in our other filings with the SEC We disclaim any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

On May 26, 2020, the Company effected a 1-for-20 reverse stock split of its common stock. All shares, options and warrants throughout these consolidated financial statements have been retroactively restated to reflect the reverse split.

On November 9, 2020, the Company effected a 5-for-8 reverse stock split of its common stock. All shares, options and warrants throughout these consolidated financial statements have been retroactively restated to reflect the reverse split.

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

Common Stock Additional Paid-in Accumulated
Shares Amount Capital Deficit Total

Balances, December 31, 2019 4,884,879 $ 489 $ 20,174,682 $ (23,888,766 ) $ (3,713,595 )
Common stock issued to directors and employees 40,569 4 303,459 - 303,463
Common stock issued to service providers 5,000 - 38,000 - 38,000
Stock options issued to employees - - 381,475 - 381,475
Net loss - - - (1,444,392 ) (1,444,392 )
Balances, March 31, 2020 4,930,448 $ 493 $ 20,897,616 $ (25,333,158 ) $ (4,435,049 )

Balances, December 31, 2020 9,639,268 $ 964 $ 37,978,224 $ (32,236,082 ) $ 5,743,106
Common stock issued to directors and employees 30,000 3 97,450 - 97,453
Common stock issued for services 71,500 7 221,243 - 221,250
Conversion of notes payable and accrued interest 388,684 39 1,243,749 - 1,243,788
Proceeds from warrant exercise 39,095 4 123,558 - 123,562
Proceeds from unit purchase option exercise 77,444 8 246,270 - 246,278
Cashless warrant exercise 91,709 9 (9 ) - -
Cashless unit purchase option exercise 86,529 8 (8 ) - -
Stock options issued to directors and employees as compensation - - 376,523 - 376,523
Net loss - - - (2,453,469 ) (2,453,469 )
Balances, March 31, 2021 10,424,229 $ 1,042 $ 40,287,000 $ (34,689,551 ) $ 5,598,491

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

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

INVO Bioscience (“INVO” or the “Company”) is a medical device company focused on the Assisted Reproductive Technology (“ART”) marketplace. The primary focus is the manufacture and sale of the INVOcell device and the INVO technology to provide an alternative infertility treatment for couples. The Company’s patented device, the INVOcell, is the first Intravaginal Culture (“IVC”) system in the world used for the natural in vivo incubation of eggs and sperm during fertilization and early embryo development (the “INVO Procedure”). INVOcell was granted clearance in the United States by the U.S. Food & Drug Administration (“FDA”) in November 2015, received the CE mark in October 2019, and is now positioned to help provide millions of infertile couples across the globe access to a new infertility treatment option. The Company believes this novel device and procedure provides a more natural, safe, effective, efficient and economical fertility treatment compared to current infertility treatments, including in-vitro fertilization (“IVF”) and intrauterine insemination (“IUI”). 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 vaginal cavity 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 and live birth rates as the traditional assisted reproductive technique, IVF. Additionally, the Company believes there are emotional benefits of the mother’s participation in the fertilization and early embryo development by vaginal incubation compared to that of conventional IVF treatment. INVOcell also offers to patients a more personalized way to achieve pregnancy.

INVO Bioscience, Inc. (“INVO” or the “Company”) is a commercial-stage fertility company dedicated to expanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and inclusive to people around the world. The Company’s primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. The Company’s flagship product is INVOcell, a revolutionary medical device that allows fertilization and early embryo development to take place in vivo within the woman’s body. This treatment solution is the world’s first intravaginal culture technique for the incubation of oocytes and sperm during fertilization and early embryo development. This technique, designated as “IVC,” provides patients a more connected and intimate experience in comparison to other ART treatments. We believe the IVC procedure can deliver comparable results at a lower cost than traditional in vitro fertilization (“IVF”) and is a significantly more effective treatment than intrauterine insemination (“IUI”). The Company’s commercialization strategy involves the opening of dedicated “INVO Centers” focused on offering the INVOcell and IVC procedure (with three centers in North America now operational), as well as continuing to distribute and sell its technology solution into existing fertility clinics.

The accompanying consolidated balance sheets as of March 31, 2021 and December 31, 2020, the consolidated statements of operations and stockholders’ equity (deficiency) for the three months ended March 31, 2021 and 2020, and consolidated statement of cash flows for the three months ended March 31, 2021 and 2020 of the Company, and the related information contained in these notes have been prepared by management and are unaudited. 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 (“GAAP”) for the periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year.

The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned ~~subsidiaries.~~subsidiaries and controlled affiliates. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets and the amount of consolidated net income (loss) that is attributable to the Company and to the noncontrolling interest in its consolidated statement of operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company uses the equity method of accounting when it owns an interest in an entity whereby it can exert significant influence over but cannot control the entity’s operations.

The preparation of the Company’s ~~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 consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 previously filed by the Company with the Securities and Exchange Commission (“SEC”) on March 30, 2021.

The Company considers events or transactions that have occurred after the ~~unaudited~~ consolidated balance sheet date of March 31, ~~2021,~~2022, but prior to the filing of the ~~unaudited~~ consolidated financial statements with the SEC onin 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~~10-Q.

The Company operates in 1 segment and therefore segment information is not presented.

The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities (“VIE”), where the Company is the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC 810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the ~~SEC.~~primary beneficiary has both: (i) the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The Company reconsiders whether an entity is still a VIE only upon certain triggering events and continually assesses its consolidated VIEs to determine if it continues to be the primary beneficiary. See “Note 3 – Variable Interest Entities” for additional information on the Company’s VIEs.

Investments in unconsolidated affiliates in which the Company exerts significant influence but does not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in loss from equity method joint venture in the accompanying consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.

In preparing financial statements in conformity with generally accepted accounting principles, management is required 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 financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.

Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value, using the first-in, first-out ~~(FIFO)~~ method as a cost flow method.

The Company records property and equipment at cost. Property and equipment is depreciated using the straight-line method over the estimated economic lives of the assets, which are from 3 to 10 years. The Company capitalizes the expenditures for major renewals and improvements that extend the useful lives of property and equipment. Expenditures for maintenance and repairs are charged to expense as incurred. The Company reviews the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by a comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

~~The Company accounts~~Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for ~~stock-based compensation under~~impairment whenever circumstances and situations change such that there is an indication that the ~~provisions~~carrying amounts may not be recoverable. If the non-discounted future cash flows of ~~Accounting Standards Codification (“ASC”) subtopic 718-10, Compensation (“ASC 718-10”). This statement requires~~ the ~~Company~~asset are less than their carrying amount, their carrying amounts are reduced to ~~measure~~ the ~~cost of employee services received in exchange for an award of equity instruments based on the grant-date~~ fair value ~~of the award. That cost is recognized over the period in which the employee is required to provide service or based on performance goals in exchange for the award, which is usually the vesting period.~~

~~Basic~~and an impairment loss per share calculations are computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share forrecognized. There was 0 impairment recorded during the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021.

ASC 825-10-50, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.

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

The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the ~~Company generating a loss.~~

allocation of expenses in multiple state jurisdictions. The Company ~~has excluded~~uses the ~~following dilutive securities~~asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the ~~calculation~~extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.

Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (“FDIC”) limits. As of March 31, 2022, the ~~result would have been anti-dilutive:~~Company had cash balances in excess of FDIC limits.

~~The Company operates in one segment and therefore segment information is not presented.~~

The Company recognizes revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 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 ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:

~~Revenues for products, including: INVOcell®, INVO TM Retention System, and INVO Microscope Holding Block are~~

Revenue generated from the sale of INVOcell is 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.

Revenue generated from clinical and lab services related at the Company’s affiliated INVO Centers is typically recognized at the time the service is performed.

On November 12, 2018, the Company entered into a U.S. Distribution Agreement (the ~~“Distribution~~“Ferring Agreement”) with Ferring International Center S.A. (“Ferring”), pursuant to which it granted Ferring an exclusive license in the United States market only, with rights to sublicense under patents related to our proprietary intravaginal culture device ~~(INVOcell™)~~(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~~fertility treatment) in humans.

On November 2, 2021, Ferring notified the Company of its intention to terminate the Ferring Agreement, which required 90-days prior written notice. Accordingly, the Ferring Agreement officially terminated on January 31, 2022.

The Ferring license was deemed to be a functional license that ~~provide customers~~provides a customer with a “right to access” to the Company’s intellectual property during the subscription period and accordingly, under ASC 606-10-55-60 revenue is recognized over a period of time, which is generally the subscription period. The initial upfront payment of ~~$5,000,000~~$5,000,000 which was received upon the signing of the agreement iswas being recognized as income over the ~~7-year~~7-year term.

~~Long-lived assets and certain identifiable assets~~As of March 31, 2022, the Company had no deferred revenue related to ~~those assets~~the Ferring Agreement as it was recognized in the fourth quarter of fiscal year 2021 in relation to the contract termination. Per ASC 606-10-55-48 the likelihood of Ferring exercising its rights became remote at the time notice of termination was received so INVO recognized the full remaining amount of the deferred revenue.

The Company accounts for stock-based compensation under the provisions of Accounting Standards Codification (“ASC”) subtopic 718-10, Compensation (“ASC 718-10”). This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or based on performance goals in exchange for the award, which is usually the vesting period.

Basic loss per share calculations are ~~periodically reviewed for impairment whenever circumstances and situations change such that there is an indication~~computed by dividing net loss attributable to the Company’s common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the ~~carrying amounts may not be recoverable. If~~denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the ~~non-discounted future cash flows of~~same as the ~~asset are less than their carrying amount, their carrying amounts are reduced to the fair value and an impairment~~basic loss ~~recognized. There was no impairment recorded during~~per share for the three months ended March 31, 2022, and 2021, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

The Company has excluded the following dilutive securities from the calculation of fully diluted shares outstanding because the result would have been anti-dilutive:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The ~~following table sets forth~~Company has reviewed all recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a ~~list~~material impact on its financial condition or the results of its operations.

Historically, the Company has funded its cash and liquidity needs through operating cash flow, equity financings, and convertible notes. For the three months ended March 31, 2022 and 2021, the Company incurred a net loss of approximately $2.8 million and $2.5 million, respectively, and has an accumulated deficit of approximately $41.7 million as of March 31, 2022. Approximately $0.9million of the net loss was related to non-cash expenses for the three months ended March 31, 2022, compared to $1.4 million for the three months ended March 31, 2021.

The Company has been dependent on raising capital from debt and equity financings to meet its needs for cash flow used in operating and investing activities. During the first three months of 2021, the Company received approximately $0.4 million of proceeds from unit purchase option and warrant exercises. During the first three months of 2022, the Company received proceeds of approximately $0.3 million for the sale of common stock. The Company’s current plan includes opening additional INVO Centers over the next 12 months. Until the Company can generate a sufficient amount of cash from operations and to the extent additional funds are necessary to meet the Company’s longer-term liquidity needs and to execute the Company’s business strategy, it may need to raise additional funding, as it has done in the past, by way of debt and/or equity financings. Such additional funding may not be available on reasonable terms, if at all.

Although the Company’s audited financial statements for the year ended December 31, 2021 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s ~~current joint venture arrangements:~~

~~On March 10, 2021,~~independent registered public accounting firm that accompanies the Company’s ~~wholly owned subsidiary,~~financial statements for the year ended December 31, 2021 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, the Company has incurred significant operating losses and the Company expects to continue to incur significant expenses and operating losses as it continues to ramp up the commercialization of INVOcell and develop new INVO ~~Centers,~~Centers. These prior losses and expected future losses have had, and will continue to have, an adverse effect on the Company’s financial condition. If the Company cannot continue as a going concern, its stockholders would likely lose most or all of their investment in the Company.

On June 28, 2021, INVO ~~Centers”),~~CTR entered into a limited liability company agreement (the ~~“JV~~“Bloom Agreement”) with Bloom Fertility, LLC ~~Agreement”~~(“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center (the “Atlanta Clinic”) in the Atlanta, Georgia metropolitan area.

In consideration for INVO’s commitment to contribute up to $800,000 within the 24-month period following the execution of the Bloom Agreement to support the start-up operations of the Georgia JV, the Georgia JV issued 800 of its units to INVO CTR and in consideration for Bloom’s commitment to contribute physician services having an anticipated value of up to $1,200,000 over the course of a 24-month vesting period, the Georgia JV issued 1,200 of its units to Bloom.

The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR also performs all required, industry specific compliance and accreditation functions, and product documentation for product registration.

The Bloom Agreement provides Bloom with a “profits interest” in the Georgia JV and, in connection with such profits interest, states that profits and losses be allocated to its members based on a hypothetical liquidation of the Georgia JV. In such a scenario, liquidation proceeds would be distributed in the following order: (a) to INVO CTR until the difference between its capital contributions and distributions equals $0; (b) to Bloom until its distributions equal 150% of the liquidation amounts distributed to INVO CTR (a “catch-up” to rebalance the distributions between members); and (c) thereafter on a pro rata basis. The Georgia JV had no assets or liabilities at the time the units were issued, and, as of March 31, 2022, INVO CTR had made capital contributions greater than the net loss of the Georgia JV. As such, the entire net loss was allocated to INVO CTR, and no loss was allocated to the noncontrolling interest of Bloom.

The Georgia JV opened to patients on September 7, 2021, and commenced initial treatment cycles in November 2021.

The Company determined the Georgia JV is a VIE, and that the Company is its primary beneficiary because the Company has an obligation to absorb losses that are potentially significant and the Company controls the majority of the activities that impact the Georgia JV’s economic performance, specifically control of the INVOcell and lab services quality management. As a result, the Company consolidated the Georgia JV’s results with its own. As of March 31, 2022, the Company invested $0.7 million in the Georgia JV in the form of capital contributions as well as $0.5 million in the form of a note. For the three months ended March 31, 2022, the Georgia JV recorded a net loss of $0.2 million. Noncontrolling interest in the Georgia JV was $0.

On March 10, 2021, INVO CTR entered into a limited liability company agreement with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of ~~commercializing INVOcell and the~~establishing an INVO ~~Procedure at a dedicated fertility clinic~~Center in Birmingham, Alabama. The name of the joint venture ~~LLC~~entity is HRCFG INVO, LLC (the “Alabama JV”). The responsibilities of HRCFG’s principals include providing clinical practice expertise, performing recruitment functions, providing all necessary training, and providing day-to-day management of the clinic. The responsibilities of INVO Centers will be to provide access to and be the exclusive provider to the Alabama JV of the INVOcell and the INVO Procedure. INVO Centers willCompany also ~~perform all required in vitro fertilization, industry specific compliance and accreditation functions, and product documentation for product registration. The Company will also provide~~provides certain funding to the Alabama JV. ~~In connection with the formation~~Each party owns 50% of the Alabama JV.

The Alabama JV opened to patients on August 9, 2021, and initial treatment cycles commenced in September 2021.

The Company determined the Alabama JV is a VIE, and that there is no primary beneficiary. As a result, the Company ~~provided an initial $30,000~~will use the equity method to account for its interest in funding, in exchange for a note issued by HRCFG, which will be repaid from the operating profit of the Alabama JV. On March 19, 2021, the Company provided an additional $250,000 to HRCFG pursuant the note. Interest on the note accrues at a rate of 1.5% per annum. In addition, the Company has agreed to issue 25,000 shares of its common stock to HRCFG (i) upon opening the Birmingham clinic for business, and (ii) upon each additional INVOcell clinic opened for business by the Alabama JV. As of March 31, ~~2021,~~2022, the Company ~~had expended $64,932~~invested $1.7 million in ~~startup costs related to this joint venture.~~the Alabama JV in the form of a note. For the three months ended March 31, 2022, the Alabama JV recorded a net loss of $0.1 million of which the Company recognized a loss from equity method investment of $0.05 million.

~~Effective~~On September 24, 2020, INVO ~~Centers, LLC~~CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) under which the Shareholders will commercialize the ~~INVO Procedure~~IVC procedure and offer related medical treatments in Mexico. Each party owns one-third of the Mexican incorporated company, Positib Fertility, S.A. de C.V. (the “Mexico JV”).

The Mexico JV ~~will acquire the INVOcell product at cost plus any incurred shipping, customs~~opened to patients on November 1, 2021, and ~~related fees.~~commenced initial treatment cycles beginning in January 2022.

The Mexico JV will operate in Monterrey Nuevo Leon, Mexico and any other cities and places in Mexico as approved by the Mexico JV’s board of directors and Shareholders. In addition, the Shareholders agreed thatCompany determined the Mexico JV is a VIE, and that there is no primary beneficiary. As a result, the Company will beuse the ~~Company’s exclusive distributor~~equity method to account for its interest in ~~Mexico. The Shareholders also agreed not to compete directly or indirectly with~~the Mexico JV. As of March 31,2022, the Company invested $0.2 million in the Mexico JV. For the three months ended March 31, 2022, the Mexico JV ~~in Mexico. As~~recorded a net loss of ~~March 31, 2021,~~$0.05 million of which the Company ~~had expended $51,670~~recognized a loss from equity method investment of $0.02 million.

The following table summarizes our investments in ~~startup costs related to this joint venture.~~unconsolidated VIEs:

~~Malaysia JV Agreement~~The following tables summarize the combined unaudited financial information of our investments in unconsolidated VIEs:

Schedule of Financial Information of Investments in Unconsolidated Variable Interest Entities

~~On November 23, 2020, the~~Note 4 – Agreements and Transactions with VIE’s

The Company entered into a joint venture agreement with SNS Murni SDN BHD (“SNS Murni”), a company incorporated in Malaysia, to establish an exclusive joint venture in Malaysia to (i) introduce, promote and market its technologies related tosells the INVOcell to its consolidated and ~~INVO Procedure in dedicated government-owned fertility clinics in Malaysia,~~unconsolidated VIEs and (ii) establish INVO Clinics in Malaysia. The joint venture is co-managed and owned 50% by each of INVO Bioscience and SNS Murni. As of March 31, 2021, the Company has expended $7,885 in startup costs relatedanticipates continuing to ~~this joint venture.~~

~~On November 23, 2020, the Company entered into a joint venture agreement with Ginekaliks Dooel (“Ginekaliks”), a limited liability company incorporated~~do so in the ~~Republic~~ordinary course of North Macedonia, to establish an exclusive joint venture to (i) commercialize, introduce, promote and market technologies related to the INVOcell and INVO Procedure in North Macedonia, (ii) establish a private healthcare institution to offer the INVO Procedure. The joint venture will be co-managed and owned 50% by each of INVO Bioscience and Ginekaliks. As of March 31, 2021, the Company had expended $2,597 in startup costs related to this joint venture.

~~On January 13, 2020, the Company entered into a joint venture agreement (the “Agreement”)~~business. All intercompany transactions with Medesole Healthcare and Trading Private Limited, India (“Medesole”), an Indian corporation that promotes and distributes healthcare technologies, medical equipment and allied services to hospitals, clinics and primary health care centers in India and the Middle East.

Pursuant to the Agreement, the Company and Medesole have formed a joint venture entity incorporated and registered in India, which will operate under the name Medesole INVO Bioscience India Private Limited (the “India JV”). After formation, the Company will grant to the India JV all required licenses for promoting, marketing and selling the Company’s INVOcell® technology in India. The Company and Medesole intend that the India JV will open and operate dedicated INVOcell® clinics only in India.

The India JV will be co-managed and owned 50% by each of INVO and Medesole, who will share equally in the expenditures, revenues and profits of the India JV. The Agreement has a term of three years and may be terminated by either party on 180 days’ prior written notice.

~~The Company’s~~ consolidated ~~financial statements include the accounts of the Company, its wholly owned subsidiaries and variable interest~~ entities ~~(“VIE’), where the Company is the primary beneficiary under the provisions of the ASC 810, Consolidation (“ASC 810”).~~

~~Management makes judgments regarding the Company’s level of influence or control over an entity and whether or not the Company is the primary beneficiary of a VIE. Various factors~~ are considered in this analysis, including but not limited to the Company’s ability to direct the activities that most significantly impact the entity’s governing body, the size and seniority of the Company’s investment, the Company’s ability and the rights of other investors to participate in policy making decisions, the Company’s ability to replace the manager and/or liquidate the entity, and the Company’s obligation to absorb losses and right to receive benefits that are significant. Management’s ability to correctly assess its influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entitieseliminated in the Company’s consolidated financial statements. ~~If it is determined~~Per ASC 323-10-35-8 the Company eliminates any sales to an unconsolidated VIE for INVOcell inventory that the ~~Company is~~VIE still has remaining on the ~~primary beneficiary of a VIE,~~books at period end.

The following table summarizes the Company’s ~~financial statements would consolidate the VIE.~~ transactions with VIEs:

The Company ~~performs a qualitative assessment~~had balances with VIEs as follows:

Summary of ~~its joint ventures on an ongoing basis to determine if it continues to be a primary beneficiary.~~Balances with Variable Interest Entities

The Company concluded it has a variable interest in the Alabama JV and the Mexico JV (the “JVs”) on the basis of its capital contributions to the JVs and the terms and conditions contained in the agreements that control the JVs. First, the Company determined that the JVs are VIEs, since the JVs’ equity at risk, as defined by GAAP, is considered to be insufficient to finance JV activities without additional support. Second, the Company determined that it has a controlling financial interest in, and thus is a primary beneficiary of the JVs. Such control stems from the Company’s power to direct activities that most significantly impact the JVs operations, and the Company’s obligation to absorb losses and its right to receive benefits from the JVs that would be significant to the JVs. Such power stems from the Company’s ability, among other things, to control the sale or transfer of the JVs capital units and/or common stock. As a result of its analysis, the Company concluded that it is a primary beneficiary of the JVs and therefore consolidates the balance sheets, results of operations and cash flows of the JVs into its own.

~~As of March 31, 2021, there was no financial activity in the JV’s and therefore no impact on the Company’s financial statements.~~

The estimated useful lives and accumulated depreciation for ~~furniture,~~ equipment ~~and software~~ are as follows as of March 31, ~~2021~~2022, and December 31, ~~2020:~~2021:

During the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021, the Company recorded depreciation expense of ~~$2,527~~$15,095 and ~~$2,528,~~$2,527, respectively.

The Company capitalizes the initial expense related to establishing patents by country and then amortizes the expense over the life of the patent, typically 20 years. It then expenses annual filing fees to maintain the patents. The Company regularly reviews the value of its patents in the marketplace in proportion to the expense it must spend to maintain the patent.

During the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021, the Company recorded ~~$452 and $452, respectively, of~~ amortization expenses related to ~~patents.~~patents of $452 and $452, respectively.

~~The increase in the trademark assets of $11,349 was the result of additional legal fees.~~

The trademarks have an indefinite life and therefore are not amortized. Trademarks are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. The trademark assets were created in 2019, and no material adverse changes have occurred since their creation.

On March 10, 2021, the Company entered into a promissory note with HRCFG, LLC, an unrelated party. The note was entered into in conjunction with the Alabama JV with HRCFG, LLC, accrues interest at 1.5% per annum and repayment of principal and interest shall be paid from 30% of HRCFG INVO LLC’s operating profit. The balance as of March 31, 2021 consists of $280,000 principle and $160 of accrued interest.

The Company has anvarious operating lease agreements in place for its office which has a remaining term of 5 years with an option to renew for three additional years. The lease does not have an early termination clause. The Company’s operating lease agreement does not contain any material restrictive covenants.and joint ventures. Per FASB’s ASU 2016-02, Leases Topic 842 (“ASU 2016-02”), effective January 1, 2019, the Company is required to report a right-of-use asset and corresponding liability to report the present value of the total ~~least~~lease payments, with appropriate interest calculation. Per the terms of ASU ~~201-02,~~2016-02, the Company can use its implicit interest rate, if known, or applicable federal rate otherwise. Since the Company’s implicit interest rate was not readily determinable, the Company utilized the applicable federal rate, ~~which was 3.0%~~ as of ~~April 2019.~~the commencement of the lease. Lease renewal options included in any lease are considered in the lease term if it is reasonably certain the Company will exercise the option to renew. The Company’s operating lease agreements do not contain any material restrictive covenants.

As of March 31, ~~2021,~~2022, the Company’s lease components included in the consolidated balance sheet were as follows:

Future minimum lease payments ~~under non-cancellable leases~~as of March 31, 2022 were as follows:

From May 15, 2020, through July 1, 2020, the Company entered into ~~definitive securities purchase~~ agreements ~~(“Purchase Agreements”)~~ with accredited investors for their purchase of ~~(i)~~ secured convertible notes issued by usthe Company in the aggregate original principal amount of ~~$3,494,840~~$3,494,840 (the ~~“Notes”~~“2020 Convertible Notes”)~~, and (ii)~~. See Note 14 – Unit Purchase Options ~~(“Purchase Options”) to purchase 303,623 units (each, a “Unit”), at an exercise price of $3.20 per Unit (subject to adjustments), with each Unit exercisable~~and Warrants for ~~(A) one share of~~additional information on related securities.

Interest on the Company’s common stock and (B) a 5-year warrant (the “Warrants”) to purchase one share of our common stock at an exercise price of $3.20 (subject to adjustments) (the “Private Placement”). Each purchaser of a Note was issued a 5-year Purchase Option to purchase 0.086875 Units (as adjusted for subsequent reverse splits for each dollar of2020 Convertible Notes purchased. The Company received gross proceeds of approximately $3.5 million (of which $3,351,200 was received in cash and $143,640 resulted from cancellation of indebtedness). Tribal Capital Markets, LLC acted as placement agent (the “Placement Agent”) in the Private Placement. The Company paid the Placement Agent and certain selling agents a cash fee of 8% on a portion of the proceeds for an aggregate amount of $236,000. The Company also agreed to issue the Placement Agent and the selling agent 5-year warrants to purchase 6,750 shares of our common stock at an exercise price of $3.20 per share. These warrants have the same terms and conditions as the Warrants issued in the Private Placement, except for the different exercise price. The Company received approximately $2,998,905 in net proceeds from the Private Placement, after deducting fees payable to the Placement Agent, selling agent, and investor counsel. The Company used approximately $413,456, in proceeds to repay outstanding 9% promissory notes and the Company intends to use the remaining proceeds for working capital and general corporate purposes.

~~Pursuant to that certain Form of Secured Convertible Note entered into in connection with the Purchase Agreement, interest on such Notes accrues~~accrued at a rate of ~~ten percent (10%)~~10% per annum and iswas payable either in cash or in shares of the Company’s common stock at a conversion price of $3.20 (following and subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments) on ~~each of the six- and twelve-month anniversary of the issuance date and on~~ the maturity dates of November 15, 2021, December 22, 2021, and December 30, ~~2021.~~2021.

All amounts of principal and interest due under the 2020 Convertible Notes ~~are~~were convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders, into the Company’s common stock at a fixed conversion price of ~~$3.20, which is~~$3.20, subject to ~~adjustment as described above.~~adjustments.

Upon any issuance by the Company of any of its equity securities, including common stock, for cash consideration, indebtedness or a combination thereof after the date hereof (a “Subsequent Equity Financing”), each holder of a Note will have the option to convert the outstanding principal and accrued but unpaid interest of its Note into the number of fully paid and non-assessable shares of common stock issued in the Subsequent Equity Financing (“Conversion Securities”) equal to the product of unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder multiplied by 1.1, divided by the price per share paid by the investors for the Conversion Securities.

A Note may not be converted, and shares of common stock may not be issued under the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding ordinary shares.

The Company may prepay the Notes at any time in whole or in part by paying an amount equal to 100% of the principal amount to be redeemed, together with accrued and unpaid interest plus a prepayment fee equal to one percent (1%) of the principal amount to be repaid.

The Notes contain customary events of default including but not limited to: (i) failure to make payments when due; and (ii) bankruptcy or insolvency of the Company. If an event of default occurs, each holder may require the Company to redeem all or any portion of the Notes (including all accrued and unpaid interest thereon), in cash.

~~Pursuant to the terms of a Security Agreement entered into between the Company and the noteholders under the Purchase Agreements, the~~ Notes are secured by the proceeds from the $3,000,000 milestone payment pursuant to Section 7.2(b) of the Distribution Agreement dated November 12, 2018 between the Company and Ferring to the extent such proceeds are actually received by the Company from Ferring.

Of the $3,494,840 in net proceeds received in the offering, $1,048,904 million was allocated to the unit purchase options issued to investors based on their relative fair value and $2,062,586 of beneficial conversion feature based on their relative fair value. This amount represented a discount on the debt and additional paid-in-capital at the date of issuance.

In November 2020, noteholders holding notes with a principal value of $1,319,840 elected to convert in connection with the public underwritten offering. In November and December 2020, the Company redeemed an additional $475,000 in principal note value. In March 2021, an additional $1,200,000 converted into equity. As of March 31, ~~2021, there is $500,000 in principal note value that remains outstanding.~~

~~Principal balances of the~~2022, all 2020 Convertible Notes ~~were as follows:~~had either converted or been repaid by the Company.

March 31,
2021

December 31,
2020

2020 Convertible Notes 500,000 1,700,000
Accrued interest 13,613 24,373
Less beneficial conversion feature discount (143,777 ) (604,897 )
Less options discount (62,712 ) (224,051 )
Less warrants discount (66,374 ) (229,954 )
Less issuance cost (55,292 ) (129,408 )
Total, net of discount $ 185,458 $ 536,063

Interest expense on the 2020 Convertible Notes was ~~$35,070~~$0 and $0$35,070 for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively.

Amortization of options discount on the 2020 Convertible Notes was ~~$161,339~~$0 and $0$161,339 for the three months ~~ended~~ March 31, 2022, and 2021, ~~and 2020,~~ respectively.

Amortization of warrant discount on the 2020 Convertible Notes was ~~$163,580~~$0 and $0$163,580 for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively.

Amortization of beneficial conversion feature on the 2020 Convertible Notes was ~~$461,120~~$0 and $0$461,120 for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively.

Amortization of issuance costs on the 2020 Convertible Notes was ~~$74,116~~$0 and $0$74,116 for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively.

On July 1, 2020, the Company received a loan in the principal amount of ~~$157,620~~$157,620 pursuant to the U.S. Small Business Administration’s Paycheck Protection Program. The loan ~~will mature~~matured 18 months from the date of funding, iswas payable over 18 equal monthly installments, and ~~bears~~had an interest ~~at a rate~~ of 1% per ~~annum.~~ annum. Up to 100% of the principal balance of the loan iswas forgivable based upon satisfaction of certain criteria under the Paycheck Protection ~~Program.~~Program. On June 16, 2021, the principal of the loan as well as $1,506 of accrued interest was forgiven and the note was extinguished. The Company ~~has applied for full forgiveness~~recognized a gain of $159,126 on extinguishment of debt during the ~~loan.~~year ended December 31, 2021.

In ~~November 2020,~~October 2021, Paulson Investment Company served as a ~~co-managing underwriter~~placement agent for the Company’s ~~underwritten public~~registered direct offering and received ~~fee~~fees and commissions for such role in the amount of ~~$271,440.~~$323,584. Trent Davis, one of ~~our~~the Company’s directors, is President of Paulson Investment Company. Mr. Davis did not receive any compensation related to the fees and commissions received by Paulson. Steve Shum and Andrea Goren, the CEO and CFO of the Company, respectively, each purchased 30,674 shares in the registered direct offering for gross proceeds of $199,994.

On December 16, 2019, the Company’s stockholders approved a reverse stock split at a ratio of between ~~1-for 5~~1-for-5 and 1-for-25, with discretion for the exact ratio to be approved by the Company’s board of directors. On February 19, 2020, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of ~~1-for-20.~~1-for-20. On May 21, 2020, the Company filed a certificate of change (with an effective date of May 26, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. The reverse split took effect at the open of business on May 26, 2020.

On October 22, 2020, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 5-for-8 and also approved a proportionate decrease in the Company’s authorized common stock to 125,000,000 shares from ~~200,000,000.~~200,000,000. On November 5, 2020, the Company filed a certificate of change (with an effective date of November 9, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 5-for-8 reverse stock split of its outstanding common stock. As a result of the reverse stock split, 133 shares were issued in lieu of fractional shares. On November 6, 2020, the Company received notice from FINRA/OTC Corporate Actions that the reverse split would take effect at the open of business on November 9, 2020, and the reverse stock split took effect on that date.

On November 12, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC, as representative of the several underwriters (the “Underwriters”), in connection with the Company’s public offering (the “Offering”) of 3,625,000 shares of common stock, at a public offering price of ~~$3.20~~$3.20 per share. The initial closing of the Offering for 3,625,000 shares of common stock took place on November 17, 2020. On November 18, 2020, the Underwriters exercised their option pursuant to the Underwriting Agreement to purchase an additional 528,750 shares of common stock (the “Option Shares”). The closing for the Option Shares took place on November 20, 2020, for which the Company received approximately ~~$1.5~~$1.5 million in net proceeds after deducting underwriting discounts and commissions. With the exercise of the option to purchase the Option Shares, the total amount of shares of common stock sold in the Offering was 4,153,750 shares with aggregate net proceeds received by the Company of approximately ~~$11.8~~$11.8 million after deducting underwriting discounts and commissions and offering expenses.

~~During the year ended December 31, 2020~~On October 1, 2021, the Company ~~incurred~~and certain institutional and accredited investors and members of the Company’s management team (the “Investors”) entered into a securities purchase agreement pursuant to which the Company agreed to issue and sell to the Investors 1,240,737 shares of its common stock, in a registered direct offering (the “Direct Offering”) for aggregate gross proceeds of $4,044,803. The purchase price for each share in the Direct Offering was $3.26. The net proceeds to the Company from the Direct Offering, after deducting placement agent fees and the Company’s estimated offering expenses, were approximately ~~$1.8 million~~$3.65 million. Paulson Investment Company served as a placement agent for the Direct Offering and received a fee for its role in the amount of ~~offering costs related~~$323,584, as well as warrants to ~~issuance~~purchase 37,222 shares of the Company’s common ~~stock.~~stock at an exercise price of $3.912 per share.

~~In January 2021,~~During the first three months of 2022, the Company issued ~~30,000~~51,528 shares of common stock to employees ~~under its 2019 Stock Incentive Plan~~and directors and 18,500 shares of common stock to consultants with a fair value of ~~$97,453.~~$186,000 and $57,370, respectively. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).

During the first three months of 2022, the Company issued 3,000 shares of its common stock to consultants in consideration of services rendered with a fair value of $9,480. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from this issuance.

In January 2022, the Company issued 94,623 shares of its common stock for proceeds of $315,000.

During the first three ~~month~~months of ~~2021,~~2022, the Company ~~issued 71,500 shares~~granted 86,333 restricted stock units to employees that will vest 50% at six months from grant date and 50% at twelve months from grant date. The Company recognized stock based compensation expense of ~~common stock to consultants under its 2019 Stock Incentive Plan with a fair value of $221,250.~~

~~In March 2021,~~$40,474 for during the Company issued 388,684 shares of common stock with fair value of $1,243,788 as a result of the conversion of notes payables and accrued interest. No gain or loss was recorded on conversion, as the issuance of common stock was pursuant to the terms of a prior agreement.

~~In March 2021, the Company issued 77,444 shares of common stock for proceeds of $246,278 as a result of the exercise of unit purchase options.~~

~~In March 2021, the Company issued 39,095 shares of common stock for proceeds of $123,562 as a result of the exercise of warrants.~~

~~In March 2021, the Company issued 91,709 shares of common stock as a result of a cashless exercise of warrants.~~

~~In March 2021, the Company issued 86,529 shares of common stock as a result of a cashless exercise of unit purchase options.~~

In October 2019, the Company adopted ~~its~~the 2019 ~~Stock Incentive Plan (the “2019 Plan”).~~Plan. Under the 2019 Plan, the Company’s ~~Board~~board of ~~Directors~~directors is authorized to grant ~~both incentive and non-statutory~~ stock options to purchase common stock, restricted stock units, and restricted shares of common 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,~~2022, 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~~ 715,749 shares to a total of ~~1,371,449 shares.~~2,087,198.

Options granted under the 2019 Plan 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~~board of ~~Directors.~~

directors. Vesting for employees typically occurs over a three-year ~~period or based on performance objectives.~~ period.

The following table sets forth the activity of the options to purchase common stock under the 2019 Plan. ~~The prices represent the closing price~~

Schedule of ~~our common stock on the Nasdaq Capital Market on the respective dates.~~Stock Options Activity

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:

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.

Schedule of Share Based Payments Arrangements Options Exercised and Options Vested

For the three months ended March 31, 2021, the weighted average grant date fair value of options granted was ~~$2.33~~$3.08 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 March 31, ~~2021,~~2022, the weighted average remaining service period is ~~4.5~~1.3 years.

~~The Company recognized $376,524 and $381,475~~ in stock-based compensation expense for stock options, which is recorded in selling, general and administrative expenses on the consolidated statement of operations for the three months ended March 31, 2021 and 2020, respectively. Unamortized stock option expense at March 31, 2021, that will be amortized over the weighted-average remaining service period totaled $2,642,796.

In the three months ended March 31, ~~2021,~~2022, the Company ~~issued 30,000~~granted 156,361 in restricted stock units and shares of restricted stock to certain ~~employees.~~employees, directors, and consultants under the 2019 Plan. Restricted stock ~~and restricted stock units~~ issued to employees, directors, and ~~directors~~consultants generally vest either at grant or vest over a period of one yearfrom the date of grant.

The following table summarizes the Company’s ~~aggregate~~ restricted stock awards ~~and restricted stock unit~~ activity under the 2019 Plan during the three months ended March 31, ~~2021:~~2022:

Schedule of Aggregate Restricted Stock Awards and Restricted Stock Unit Activity

Number of Unvested
Shares

Weighted
Average
Grant Date Fair Value

Aggregate
Value
of Unvested Shares

Balance at December 31, 2020 16,698 $ 4.67 $ 77,927
Granted 71,757 $ 3.04 $ 218,228
Vested (24,445 ) $ 3.66 $ (89,473 )
Forfeitures - $ - $ -
Balance at March 31, 2021 64,010 $ 3.23 $ 206,682

The Company recognized $89,473 and $265,963 in stock-based compensation expense for restricted stock and restricted stock units for the three months ended March 31, 2021 and March 31, 2020 respectively. Stock-based compensation expense is recorded in selling, general and administrative expenses on the consolidated statement of operations

In connection with the issuance of the 2020 Convertible Notes, the Company also issued unit purchase options to purchase 303,623 units at an exercise price of ~~$3.20~~$3.20 per unit, with each unit consisting of ~~one~~1 share of common stock and a warrant to purchase one share of common stock at an exercise price of ~~$3.20~~$3.20 per share. The units and warrants vested immediately, are exercisable for a period of five years from the date of issuance and are subject to a downward ~~provision~~adjustment if the Company issues securities at a lower price. Warrant holders have a right to require the Company to pay cash in the event of a fundamental transaction. In accordance with ASC 815, the ~~warrants~~unit purchase options and ~~options~~warrants issued in this period were determined to require equity ~~treatment and $247,821 related to the options and $125,104 related to warrants was recorded in stockholders’ equity in the three months ended March 31, 2021.~~treatment.

In connection with the issuance of the 2020 Convertible Notes, the Company agreed to issue the placement agent and the selling agent ~~five-year~~five-year warrants to purchase 6,750 shares of the Company’s common stock at an exercise price of ~~$3.20.~~$3.20.

A Monte Carlo model was used because the investor ~~warrants~~unit purchase options and ~~options~~warrants contain fundamental transaction payouts and reset events that cannot be modeled with a Black Scholes model.

The fair value of the unit purchase options and warrants issued to the convertible debt holders is estimated as of the issue date using a Monte Carlo model with the following assumptions:

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~~unit purchase options and warrants. Expected volatility is based upon the historical volatility of the Company’s common stock over the period commensurate with the expected term of the related instrument. The unit purchase options and warrants are valued assuming projected reset events adjusting the exercise price and a forced exercise upon a projected fundamental transaction by management. The unit purchase options and warrants early exercise are modeled assuming registration after 180 days. The Company does not currently pay dividends on its common stock, nor does it expect to in the foreseeable future.

The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company decides as to whether the carryforward will be utilized in the future. Currently, a valuation allowance is established for all deferred tax assets and carryforwards as their recoverability is deemed to be uncertain. If the Company’s expectations for future operating results at the federal or at the state jurisdiction level vary from actual results due to changes in healthcare regulations, general economic conditions, or other factors, it may need to adjust the valuation allowance, for all or a portion of the Company’s deferred tax assets. The Company’s income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in the Company’s valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on the Company’s future earnings.

Income tax expense was ~~$0 and $0~~$0 for each of the three months ended March 31, ~~2021~~2022, and ~~2020.~~2021. The annual forecasted effective income tax rate for ~~2021~~2022 is 0%0%, with a year-to-date effective income tax rate for the three months ended March 31, ~~2021 respectively~~2022, of 0%0%.

On August 7, 2019, the Company sent James Bowdring, the brother of the Company’s then Chief Financial Officer, a check in the amount of $65,197 as full and final payment under those certain promissory notes dated April 8, 2011 and November 9, 2011. On August 8, 2019, Mr. Bowdring’s legal counsel returned the check. The basis for returning the check was a claim that the interest due under the Notes called for compounded interest and not per annum interest, this amount is recorded in Accounts Payable and Accrued Liabilities on the Consolidated Balance Sheet. In addition, the letter rejecting the tender of the payment in full check alleged Mr. Bowdring was considering a future intention to convert his Promissory Notes into shares of the Company’s common stock. Mr. Bowdring, through his counsel, indicated that such future intention to convert the Notes to common stock were contingent upon Mr. Bowdring addressing certain personal issues which were not disclosed by his counsel in the correspondence returning the checks. The Company does not believe that Mr. Bowdring has the right to seek conversion of the Notes once payment for the Notes has been tendered. In order to resolve the issue of the Company’s tender of payment in full versus Mr. Bowdring’s assertion that he can reject tender and seek conversion, the Company has filed an action in the Suffolk Superior Court in Boston on September 3, 2019 seeking Declaratory Judgment and Judgment for Breach of Contract. On September 30, 2019, Mr. Bowdring filed an answer and counterclaim under which he alleged breach of contract, fraud, promissory estoppel, unfair and deceptive practices and constructive trust. Mr. Bowdring is seeking receipt of all shares due under the adjusted conversion price.

The 10% Senior Secured Convertible Promissory Notes were issued on April 8, 2011 and November 9, 2011, with maturity dates thirty days subsequent to the dates of issuance. Interest was calculated at 10% per annum, compounded based on a 360-day year. Investors had the option to convert any unpaid principal and accrued interest into shares of Company’s common stock original conversion prices of $0.96 and $0.32, respectively, subject to adjustments upon the Company’s issuances of stock at prices less than the original conversion prices during the 24-months after issuance of each note (i.e., currently $0.2100).

~~The Company does not currently expect the above matter to have a material adverse effect upon either the Company’s results of operations, financial position, or cash flows.~~

~~The Company adopted ASC 606,~~ ~~Revenue from Contracts with Customers~~ ~~(ASC 606) effective January 1, 2018 using~~third-party insurers and includes: (i) general liability insurance covering third-party exposures; (ii) statutory workers’ compensation insurance; (iv) excess liability insurance above the ~~modified retrospective method applied~~established primary limits for general liability and automobile liability insurance; (v) property insurance, which covers the replacement value of real and personal property and includes business interruption; and (vi) insurance covering our directors and officers for acts related 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~~our business activities. All coverage is subject to ~~determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict~~certain limits and deductibles, 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 2020 are reported under ASC 606.

~~The Company routinely enters into agreements with customers that include general commercial~~ terms and conditions ~~notification requirements~~of which are common for price increases, shipping terms and in most cases prices for the products that it offers. However, these agreements do not obligate the Company to provide goods to the customer and there is no consideration promised to us at the onsetcompanies with similar types of these arrangements. For customers without separate agreements, the Company has 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. The Company��s performance obligations are established when a customer submits a purchase order or notification (in writing, electronically or verbally) for goods, and it accept the order. The Company identifies 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. The Company generally recognizes revenue upon the satisfaction of these criteria when control of the product has been transferred to the customer at which time it has an unconditional right to receive payment. The Company’s prices are fixed and are not affected by contingent events that could impact the transaction price. The Company does not offer price concessions and does not accept payment that is less than the price stated when it accepted the purchase order, except in rare credit related circumstances. The Company does not have any material performance obligations where it is acting as an agent for another entity.operations.

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.Legal Matters

In January 2019, the Company announced a U.S. license and distribution agreement with Ferring. The agreement calls for the issuance of an initial upfront payment of $5,000,000 which the Company received upon the signing of the agreement, ongoing product revenue, and then subsequent licensing fee payment of $3,000,000 that will provide the Company with a source of non-dilutive financing to execute its plan. Under the terms of the agreement the Company can pursue developing international markets and as well as partnering and opening INVO-only reproductive centers within the U.S. market. The initial upfront payment of $5,000,000 which the Company received upon the signing of the agreement is being recognized as income over the 7-year term.

Under the terms of the Distribution Agreement, Ferring completed its obligation to make an initial payment to the Company of $5,000,000 upon completion of the required closing conditions, including executed agreements 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. 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, the Company entered into a separate Distribution Agreement. 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.

On March 2, 2021, the Company entered into Amendment No. 1 to the Distribution Agreement (the “Amendment”) with Ferring. Pursuant to the Amendment, Ferring agreed to purchase a 2,004 count of product for $501,000 in March 2021, at which point the minimum annual target for 2020 set forth in Section 2.4 of the Distribution Agreement was deemed to be satisfied in full as a result of such purchase. The Amendment provides for added flexibility by increasing the number of INVO company-owned clinics initially allowable under the agreement and removing certain geographical requirements.

The Ferring license was deemed to be a functional license that provide customers with a “right to access” to the Company’s intellectual property during the subscription period and, accordingly, revenue is recognized over a period of time, which is generally the subscription period. During the three months ended March 31, 2021, the Company recognized $178,571 related to the Ferring license agreement.

~~As of March 31, 2021, and March 31, 2020, the Company had deferred revenues of $3,392,857and $4,107,143, respectively.~~

The Company has entered into exclusive distribution agreements for a number of international markets. These agreements usually have an initial term with renewal options and require the distributors to meet minimum annual purchases, which vary depending on the market. The Company is ~~also required~~not currently subject to ~~register~~any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ~~product~~ordinary course of its business, or legal proceedings it considered immaterial may in ~~each market before~~ the ~~distributor can begin importing, a process and timeline that can vary widely depending on the market.~~

The Company incurs 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 deliveryfuture become material. Regardless of the ~~related product, the Company has determined that the balance related~~outcome, litigation can, among other things, be time consuming and expensive to these obligations is generally immaterial at any point in time. The Company monitors the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate.resolve, and can divert management resources.

The Company’s 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.

There are no significant judgments associated with the satisfaction of our performance obligations. The Company generally satisfies 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. The Company considers 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. The Company uses 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.

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

~~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.~~

On ~~April 9, 2021,~~May 13, 2022, the Company entered into ~~a partnership agreement (“Partnership~~an Exclusive Distribution Agreement (the “Onesky Agreement”) with ~~Lyfe~~Onesky Holdings Limited (“Onesky”), pursuant to which, among other things, the Company granted to Onesky an exclusive right to distribute INVOcell in the People’s Republic of China, excluding Hong Kong, Macau and Taiwan (the “Territory”).

The Onesky Agreement became effective on May 13, 2022, and will remain in effect for a period of five years after the date of National Medical ~~Center I, LLC (“Medical Center”)~~Products Administration approval and automatically renews for successive two year period unless written notice is given by either party 90 days’ prior to the expiry of any term. If either party defaults in the performance of any of its obligations under ~~which Medical Center will establish a clinic~~the Onesky Agreement, including Onesky’s minimum purchase obligations, the other party may give written notice of default and the other party has 30 days to cure. If such default is not cured, then the Onesky Agreement may be terminated immediately thereafter. The Onesky Agreement contains other customary termination provisions. The Company granted Onesky an exclusive, revocable and royalty free license to use INVO trademarks in ~~Santa Cruz, California (the “Cruz Clinic”) to offer~~ the ~~INVO Procedure to its patients and where we will provide embryology laboratory services~~Territory in connection with the ~~INVO Procedure~~promotion, distribution, and ~~other fertility treatments (the “Lab Services”) to patients at the Cruz Clinic. Under the terms~~sale of ~~the Partnership Agreement, the Company will receive 40% of the net income received by the Cruz Clinic for the performance of the Lab Services under the Partnership Agreement.~~INVOcell.

On April 21, 2021, the Board appointed Rebecca Messina as a director to fill the vacancy created by the expansion of the Board to seven members in November 2020. Ms. Messina will serve as a director until her successor is duly elected and qualified. After Ms. Messina’s appointment, the Board currently has seven members.

~~In May 2021, the Company issued 24,806 shares of common stock to employees and consultants under its 2019 Stock Incentive Plan.~~

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

Certain 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, ~~2020.~~2021. Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

We are a ~~medical device~~commercial-stage fertility company ~~focused in~~dedicated to expanding the ~~Assisted Reproductive Technology~~assisted reproductive technology (“ART”) ~~marketplace.~~marketplace by making fertility care accessible and inclusive to people around the world. Our primary mission is to ~~increase access~~implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. Our flagship product is INVOcell, a revolutionary medical device that allows fertilization and early embryo development to ~~care and expand fertility~~take place in vivo within the woman’s body. This treatment ~~and patient care across the globe. Our patented device, the INVOcell,~~solution is the world’s first ~~Intravaginal Culture (“IVC”) system in the world used~~intravaginal culture technique for the ~~natural in vivo~~ incubation of ~~eggs~~oocytes and sperm during fertilization and early embryo development. ~~INVOcell was granted clearance~~This technique, designated as “IVC”, provides patients a more connected and intimate experience in ~~the United States by the U.S. Food & Drug Administration (“FDA”) in November 2015, received the CE mark in October 2019, and is now positioned~~comparison to ~~help provide millions of infertile couples across the globe access to a new infertility treatment option.~~other ART treatments. We believe ~~this novel device and~~the IVC procedure ~~provides~~can deliver comparable results at a ~~more natural, safe, effective, efficient and economical fertility treatment compared to current infertility treatments, including in-vitro~~lower cost than traditional in vitro fertilization (“IVF”) and is a significantly more effective treatment than intrauterine insemination (“IUI”). Our commercialization strategy is focused on the opening of dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational), in addition to continuing to distribute and sell our technology solution into existing fertility clinics.

Unlike conventional infertility treatments such as IVF where the ~~eggs~~oocytes and sperm develop into embryos in aan expensive laboratory incubator, the INVOcell ~~utilizes the women’s vaginal cavity as an incubator to support a more natural~~allows fertilization ~~and embryo development environment. As such, this novel device promotes in vivo conception~~ and early embryo ~~development.~~development to take place in the woman’s body. This allows for many benefits in the IVC procedure, including:

In both ~~commercial~~current utilization of the INVOcell, and in clinical studies, the ~~INVO Procedure~~IVC procedure has ~~proven to have~~demonstrated equivalent pregnancy success and live birth rates to those of IVF.

We operate with a core internal team and outsource certain operational functions in order to help advance our efforts as well as reduce fixed internal overhead needs and costs, as well as in-house capital equipment requirements. Our most critical management and leadership functions are carried out by our core management team. We have contracted out the manufacturing, assembly, packaging, labeling, and sterilization of the device to a medical manufacturing company and a sterilization specialist to perform the gamma sterilization process.

To date, we have completed a series of important steps in the successful development and manufacturing of the INVOcell:

The global ART marketplace is a large, multi-billion industry growing at a strong pace in most parts of the world as increased infertility rates, increased patient awareness, acceptance of treatment options, and improving financial incentives such as insurance and government assistance continue to drive demand. According to the European Society for Human Reproduction 2020 ART Fact Sheet, one in six couples worldwide experience infertility problems. Additionally, the worldwide market remains vastly underserved as a high percentage of patients in need of care continue to go untreated each year for many reasons, but key among them are capacity constraints and cost barriers. While there have been large increases in the use of IVF, there are still only approximately 2.6 million ART cycles, including IVF, IUI and other fertility treatments, performed globally each year, producing around 500,000 babies. This amounts to less than 3% of the infertile couples worldwide being treated and only 1% having a child through IVF. ~~Additionally,~~The industry remains capacity constrained which creates challenges in providing access to care to the volume of patients in need. A survey by “Resolve: The National Infertility Association,” indicates the two main reasons couples do not use IVF is cost and geographical availability (and/or capacity).

In the United States, infertility, according to the American Society of Reproductive Medicine (2017), affects an estimated 10%-15% of the couples of childbearing-age. According to the Centers for Disease Control (“CDC”), there are approximately 6.7 million women with impaired fertility. Based on preliminary 2020 data from CDC’s National ART Surveillance System, approximately 326,000 IVF cycles were performed at 449 IVF centers, leaving the U.S. with a large, underserved patient population, which is similar to most markets around the world.

We believe that the INVOcell, and the IVC procedure it enables, have the following key advantages:

Lower cost than IVF with equivalent efficacy. The IVC procedure can be offered for less than IVF due to lower cost of supplies, labor, capital equipment and general overhead. The laboratory equipment needed to perform an IVF cycle is expensive and requires ongoing costs as compared to what is required for an IVC cycle. As a result, we also believe INVOcell and the IVC procedure enable a clinic and its laboratory to be more efficient as compared to conventional IVF, and, ultimately, to allow the treatment of more patients with fewer resources.

The IVC procedure is currently being offered at practicing clinics at a range of $5,000 - $11,000 per cycle and from $4,500 to $7,000 at the existing INVO Centers, thereby making it more affordable than conventional IVF (which tends to average $12,000 to $17,000 per cycle or higher).

Improved efficiency providing for greater capacity and improved access to care and geographic availability. In many parts of the world, including the U.S., IVF clinics tend to be concentrated in higher population centers and are often capacity constrained in terms of how many patients a center can treat, since volume is limited by the number of capital-intensive incubators available in IVF clinic labs. With the significant number of untreated patients along with the growing interest and demand for services, the industry remains challenged to provide sufficient access to care and to do so at an economical price. We believe INVOcell and the IVC procedure it enables can play a significant role in helping to address these challenges. According to the 2020 CDC Report, there are approximately 449 IVF centers in the U.S. We estimate that by adopting the INVOcell, IVF clinics can increase fertility cycle volume by up to 30% without adding to personnel, space and/or equipment costs. Our own INVO Centers also address capacity constraints by adding to the overall ART cycle capacity and doing so with comparable efficacy to IVF outcomes as well as at a lower per cycle price. Moreover, we believe that we are uniquely positioned to drive more significant growth in fertility treatment capacity in the future by partnering with existing OB/GYN practices. In the U.S., there are ~~emotional benefits~~an estimated 5,000 OB/GYN offices, many of which offer fertility services (usually limited to consultation and IUI, but not IVF). Since the IVC procedure requires a much smaller lab facility, less equipment and fewer lab personnel (in comparison to conventional IVF), it could potentially be offered as an extended service in an OB/GYN office. With proper training and a lighter lab infrastructure, the INVOcell could expand the business for these physicians and allow them to treat patients that are unable to afford IVF and provide patients with a more readily accessible, convenient, and cost-effective solution. With our multi-pronged strategy (IVF clinics, INVO Centers and OB/GYN practices), in addition to lowering costs, we believe INVOcell and the ~~mother’s participation~~IVC procedure can address our industry’s key challenges, capacity and cost, by their ability to expand and decentralize treatment and increase the number of points of care for patients in need. This powerful combination of lower cost and added capacity has the potential to open up access to care for underserved patients around the world.

Greater patient involvement. With the IVC procedure, the patient uses their own body for fertilization, incubation, and early embryo development ~~by vaginal incubation compared~~which creates a greater sense of involvement, comfort, and participation. In some cases, this may also free people from barriers related to ~~that~~due to ethical or religious concerns, or fears of ~~conventional IVF treatment by offering patients a more connected and personalized method to achieve pregnancy.~~laboratory mix-ups.

For many couples struggling with infertility, access to treatment is often not available. Financial challenges (cost of treatment) and limited availability (or capacity) of fertility medical care are two of the main challenges in the ART marketplace that contribute to the large percentage of untreated patients. Religious, social and cultural roadblocks can also prevent hopeful couples from realizing their dream to have a baby with conventional IVF. We believe INVOcell can address many of the key challenges in the ART market, particularly patient cost and infrastructure capacity constraints. The many benefits to the INVO solution include:

~~In the second quarter of 2016, the first U.S. baby from the INVOcell and INVO Procedure following FDA clearance was born in Texas.~~

Our product commercialization efforts are focused on identifying distributors and partners within targeted geographic regions that we believe can best promote, market and ~~sale~~sell the INVOcell ~~device~~ and ~~process~~support our efforts to ~~assist~~expand access to advanced fertility treatment for the large number of underserved infertile ~~couples in having~~people hoping to have a baby. We believe that ~~our proven INVOcell~~the IVC procedure is an effective ~~low-cost~~and affordable treatment option ~~which can also be offered without~~that greatly reduces the need for a more expensive IVF lab ~~facility.~~facilities and allows providers to pass on related savings to patients without compromising efficacy. We have been ~~authorized~~cleared to sell the INVOcell ~~device~~ in the United States since November 2015 after receiving de novo class II clearance from the ~~US Food & Drug Administration (“FDA”). As a result of our January 2019 exclusive sales, marketing and distribution agreement with Ferring for the U.S., our~~FDA. Our primary focus ~~will be~~has been on ~~supporting Ferring~~establishing INVO Centers to promote the INVOcell and ~~establishing INVO-clinics within~~ the IVC procedure, selling the INVOcell directly to U.S. ~~as well as~~fertility clinics, and developing key international ~~markets~~market partnerships around the world.

In late 2021, we made substantial progress with our INVO Center strategy by opening three locations – Birmingham, Alabama, Atlanta, Georgia, and Monterrey, Mexico – and remain focused on opening additional locations in the US and abroad to expand access to INVOcell and the IVC procedure.

We anticipate that we will experience quarterly fluctuations in our ~~revenues~~revenue as ~~a result of our efforts to~~we expand the sales of the ~~INVO technology~~INVOcell to new ~~markets.~~markets in the U.S. and globally. We ~~expect international sales will increase moving forward as we~~ continue to ~~expand our efforts to expand INVOcell globally. We will continue to~~ seek ~~out~~ partners that will contractually commit to meeting agreeable performance objectives that are consistent with our goals and objectives.

On November 12, 2018, we entered into a U.S. Distribution Agreement (the ~~“Distribution~~“Ferring Agreement”) with Ferring International Center S.A. (“Ferring”), which closed on January 14, 2019. Pursuant to the ~~Distribution~~Ferring Agreement, among other things, we granted Ferring an exclusive license in the United States (the “Territory”) with rights to sublicense under patents related to our proprietary INVOcell™ intravaginal culture device 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”).INVOcell. Ferring iswas responsible, at its own cost, for all commercialization activities ~~for the Licensed Product~~ in the United States. We retained a limited exception to the exclusive license granted to Ferring allowing us, subject to certain restrictions, to establish up to ~~establish up to~~ five ~~clinics that will commercialize~~ INVO ~~cycles~~Centers in the ~~U.S. This agreement was amended on~~United States, which as of March 2, 2021, was amended to ~~provide for added flexibility by increasing the number of INVO company-owned clinics initially allowable under the agreement and removing certain geographical requirements.~~seven centers. We retained all commercialization rights for the ~~Licensed Product~~INVOcell outside of the United States. ~~We believe~~

On November 2, 2021, Ferring notified us of its intention to terminate the ~~strategic partnership~~Ferring Agreement, which required 90-days prior written notice. Accordingly, the Ferring Agreement officially terminated on January 31, 2022. Pursuant to the terms of the Ferring Agreement, upon notice of termination, Ferring was required to use commercially reasonable efforts to transition any customers to us and otherwise facilitate the orderly transition of the distribution from Ferring to us. By its terms, our Supply Agreement with ~~a strong reproductive organization such as~~ Ferring ~~has provided us with the necessary sales and marketing resources and overall market credibility to help execute our goal to expand the INVOcell device around the world.~~also terminated on January 31, 2022.

The Ferring license was deemed to be a functional license that provides the counterparty with a “right to access” to our intellectual property during the subscription period and accordingly, revenue is recognized over a period of time, which is generally the subscription period. During the ~~three months~~years ended ~~March~~December 31, 2021, and 2020, we recognized ~~$178,571~~$3.6 million and $0.7 million of revenue related to the Ferring license ~~agreement.~~agreement, respectively.

As of ~~March~~December 31, 2021, we had no deferred ~~revenues of $3,392,857 relating~~revenue related to the Ferring Agreement as it was recognized in the fourth quarter of fiscal year 2021 in relation to the contract termination. The likelihood of Ferring exercising its rights became remote at the time notice of termination was received therefore INVO recognized the full remaining amount of the deferred revenue.

We have entered into exclusive distribution agreements for a number of international markets. These agreements usually have an initial term with ~~Ferring.~~renewal options and require the distributors to meet minimum annual purchases, which vary depending on the market. We are also required to register the product in each market before the distributor can begin importing, a process and timeline that can vary widely depending on the market.

The following table sets forth a list of our current international distribution agreements:

As part of our commercialization strategy, we entered into ~~Amendment No. 1 to the Distribution Agreement (the “Amendment”) with Ferring. Pursuant to the Amendment, Ferring agreed to purchase~~ a 2,004 count of product for $501,000 pursuant to the Distribution Agreement in March 2021, at which point the minimum annual target for 2020 set forth in Section 2.4 of the Distribution Agreement will be deemed to be satisfied in full as a result of such purchase. The Amendment provides for added flexibility by increasing the number of ~~INVO company-owned clinics initially allowable under the agreement and removing certain geographical requirements.~~

We operate with a core internal team and outsource certain operational functions in order to help accelerate our efforts as well as reduce fixed internal overhead needs and in-house capital equipment requirements. Our most critical management and leadership functions are carried out by our core management team. We have contracted out the manufacturing, assembly, packaging, labeling and sterilization of the device to a medical manufacturing company and to a sterilization specialist to perform the gamma sterilization process.

Our cash needs are primarily attributable to funding our sales and marketing efforts, strengthening our training capabilities, satisfying existing obligations, funding our clinical activities for additional indications for use, building an administrative infrastructure, and costs and professional fees associated with being a public company. We currently expect our existing distribution and partnership agreements, such as that with Ferring and the other more recent agreements with non-U.S. companies to provide increased revenue in the future, which we expect will help offset the higher level of spending.

Throughout 2020, we incurred annual net losses as we continued to market our product and proprietary process and endeavored to increase our revenue base. We expect to continue incurring losses during 2021 as we continue to invest in INVO clinics in the U.S. and the global expansion of our business and the INVOcell technology.

We cannot accurately predict the level of success our key partners will experience over the next 12-24 months. However, we anticipate that we will continue to launch the INVOcell device and INVO Procedure within the U.S. through our agreement with Ferring and our clinic joint ventures and ~~in other parts~~partnerships designed to establish new INVO Centers.

The following table sets forth a list of ~~the world with new distributor partnerships and~~our current joint venture ~~agreements.~~arrangements:

On March 10, 2021, our wholly owned subsidiary, INVO Centers, LLC (“INVO ~~Centers”~~CTR”), entered into a limited liability company agreement ~~(the “JV LLC Agreement”)~~ with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of ~~commercializing INVOcell and the~~establishing an INVO ~~Procedure at a dedicated fertility clinic~~Center in Birmingham, Alabama. The name of the joint venture LLC is HRCFG INVO, LLC (the “Alabama JV”). The responsibilities of HRCFG’s principals include providing clinical practice expertise, performing recruitment functions, providing all necessary training, and providing day-to-day management of the clinic. The responsibilities of INVO ~~Centers will provide access to and will be the exclusive provider~~CTR include providing certain funding to the Alabama JV and providing access to and being the exclusive provider of the INVOcell ~~and~~to the Alabama JV. INVO ~~Procedure. INVO Centers~~CTR will also perform all required, ~~in vitro fertilization,~~ industry specific compliance and accreditation functions, and product documentation for product registration. ~~We will also provide~~

The Alabama JV opened to patients on August 9, 2021, and initial treatment cycles commenced in September 2021.

The Alabama JV is accounted for using the equity method in our financial statements. As of March 31, 2022 we invested $1.7 million in the Alabama JV in the form of a note. For the three months ended March 31, 2022, the Alabama JV recorded a net loss of $0.1 million of which we recognized a loss from equity method investment of $0.05 million.

On June 28, 2021, INVO CTR entered into a limited liability company agreement (the “Bloom Agreement”) with Bloom Fertility, LLC (“Bloom”) to establish a joint venture entity, formed as “Bloom INVO LLC” (the “Georgia JV”), for the purposes of commercializing INVOcell, and the related IVC procedure, through the establishment of an INVO Center, (the “Atlanta Clinic”) in the Atlanta, Georgia metropolitan area.

In consideration for INVO’s commitment to contribute up to $800,000 within the 24-month period following execution of the Bloom Agreement to support the start-up operations of the Georgia JV, the Georgia JV issued 800 of its units to INVO CTR and in consideration for Bloom’s commitment to contribute physician services having an anticipated value of up to $1,200,000 over the course of a 24-month vesting period, the Georgia JV issued 1,200 of its units to Bloom.

The responsibilities of Bloom include providing all medical services required for the operation of the Atlanta Clinic. The responsibilities of INVO CTR include providing certain funding to the Georgia JV, ~~Company.~~lab services quality management, and providing access to and being the exclusive provider of the INVOcell to the Georgia JV. INVO CTR will also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration.

The Georgia JV opened to patients on September 7, 2021, and commenced initial treatment cycles in November 2021.

The results of the Georgia JV are consolidated in our financial statements. As of March 31, 2022, INVO invested $0.7 million in the Georgia JV in the form of capital contributions as well as $0.5 million in the form of a note. For the months ended March 31, 2022, the Georgia JV recorded a net loss of $0.2 million. Noncontrolling interest in the Georgia JV was $0. See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information on the Georgia JV.

Effective September 24, 2020, INVO CTR entered into a Pre-Incorporation and Shareholders Agreement with Francisco Arredondo, MD PLLC (“Arredondo”) and Security Health LLC, a Texas limited liability company (“Ramirez”, and together with INVO CTR and Arredondo, the “Shareholders”) under which the Shareholders will commercialize the IVC procedure and offer related medical treatments in Mexico. Each party owns one-third of the Mexican incorporated company, Positib Fertility, S.A. de C.V. (the “Mexico JV”).

The Mexico JV will operate in Monterrey, Nuevo Leon, Mexico and any other cities and places in Mexico as approved by the Mexico JV’s board of directors and Shareholders. In addition, the Shareholders agreed that the Mexico JV will be our exclusive distributor in Mexico. The Shareholders also agreed not to compete directly or indirectly with the Mexico JV in Mexico.

The Mexico JV opened to patients on November 1, 2021, and commenced initial treatment cycles beginning in January 2022.

The Mexico JV is accounted for using the equity method in our financial statements. As of March 31, 2022, INVO invested $0.2 million in the Mexico JV. For the three months ended March 31, 2022, the Mexico JV recorded a net loss of $0.05 million of which we recognized a loss from equity method investment of $0.02 million.

On November 23, 2020, we entered into a joint venture agreement with SNS Murni SDN BHD (“SNS Murni”), a company incorporated in Malaysia, to establish an exclusive joint venture in Malaysia to (i) introduce, promote and market technologies related to the INVOcell and IVC Procedure in dedicated government-owned fertility clinics in Malaysia, and (ii) establish INVO Centers in Malaysia. The joint venture is co-managed and owned 50% by each of INVO Bioscience and SNS Murni. As of March 31, 2022, no joint venture entity had been formed.

On November 23, 2020, we entered into a joint venture agreement with Ginekaliks Dooel (“Ginekaliks”), a limited liability company incorporated in the Republic of North Macedonia, to establish an exclusive joint venture to (i) commercialize, introduce, promote and market technologies related to the INVOcell and IVC procedure in the Republic of North Macedonia, and (ii) establish an INVO Center. The joint venture will be co-managed and owned 50% by each of INVO and Ginekaliks. As of March 31, 2022, no joint venture entity had been formed.

On April 9, 2021, we entered into a partnership agreement (the “Lyfe Agreement”) with Lyfe Medical Center I, LLC (“Lyfe”) in connection with Lyfe’s intention to establish an INVO Center in the Bay Area of California (the “Bay Area Clinic”). Pursuant to the Lyfe Agreement, we will provide embryology laboratory services in connection with the ~~formation~~IVC procedure and other fertility-related treatments (the “Lab Services”) to be provided by Lyfe to its patients at the Bay Area Clinic. Under the terms of the ~~Alabama JV,~~Lyfe Agreement, we ~~provided an initial $30,000 in funding, in exchange for a note issued by HRCFG, which~~ will ~~be repaid from the operating profit~~receive 40% of the ~~Alabama JV. On March 19, 2021 we provided an additional $250,000~~net income received by the Bay Area Clinic for the ~~note. Interest on the note accrues at a rate of 1.5% per annum. In addition, we agreed to issue 25,000 shares of our common stock to HRCFG (i) upon opening~~performance of the ~~Birmingham clinic for business, and (ii) upon each additional INVOcell clinic opened for business by~~Lab Services. As of March 31, 2022, the ~~Alabama JV.~~Bay Area Clinic was not yet operational.

~~Ferring Amendment~~During the first quarter of 2022, our fully operational INVO Centers in Birmingham, Alabama, Atlanta, Georgia, and Monterrey, Mexico continued to make progress toward building local market awareness and treating patients. We also continued to expand on our similar marketing efforts to build awareness for the INVOcell and IVC procedure and to support the efforts of both the INVO Centers and our distribution partners around the world. During the quarter, we also announced plans to open INVO Centers in the Tampa, Florida and Kansas City, Missouri areas, and are working towards opening additional INVO Centers in key domestic and international markets. We believe we have initially identified more than 20 markets in the U.S. alone as excellent potential locations for an INVO Center.

~~On March 2, 2021,~~With respect to our distribution efforts, we re-assumed control of the ~~Company entered into Amendment No. 1~~U.S. market upon the termination of the Ferring Agreement in the first quarter. We are now selling directly ourselves (rather than through a distributor) to the ~~Distribution Agreement (the “Amendment”) with Ferring. Pursuant to~~existing, established fertility clinics in the ~~Amendment, Ferring agreed to purchase a 2,004 count of product for $501,000 in March 2021, at which point~~U.S. market. During the ~~minimum annual target for 2020 set forth in Section 2.4 of~~quarter, we received several orders from existing IVF clinics that had previously trained on implementing the ~~Distribution Agreement will be deemed to be satisfied in full as a result of such purchase. The Amendment provides for~~IVC procedure within their practices. To support these efforts, we added ~~flexibility by increasing the number of INVO company-owned clinics initially allowable under the agreement and removing certain geographical requirements.~~

~~Although the COVID-19 global pandemic continued to impact the global economy, we believe we made progress toward our commercialization goals~~sales resources during the first quarter ~~of 2021. We added new distribution partners in several markets, established new joint venture partnership agreements~~and believe we will experience growing revenue from these activities going forward. This revenue is also anticipated to ~~develop dedicated INVO-clinics and we are now rapidly moving closer~~be more consistent from quarter to quarter, as opposed to the ~~actual opening of those initial INVO-clinics, which we believe will commence in~~sporadic orders placed by Ferring over the second half of 2021. We have recently added marketing resources to our team to support both the INVO-clinics as well as our new distribution partners around the world and we will look to aggressively drive awareness this year of the INVOcell technology to help accelerate adoption and expand fertility care through the utilization of our technology.past several years.

~~The~~From a market strategy perspective, our commercialization efforts will continue to focus on the substantial, underserved patient ~~market is significant,~~population and weon expanding access to advanced fertility treatments. We believe our ~~technology~~solutions can help address the key challenges of affordability and capacity to provide care to the ~~many~~vast number of patients that go ~~untreated.~~untreated every year. This represents athe major opportunity for ~~INVOcell. While~~INVOcell and the ~~ongoing~~IVC procedure it enables. Despite the COVID pandemic, ~~may continue to impact 2021 and impede certain progress in some markets,~~ the fertility industry ~~has and~~ continues to ~~work toward a return to normal levels~~expand, and we believe our ~~expanded number~~growing volume of partners (both distributors and ~~active markets~~JV INVO Centers) affords us a strong forward-looking outlook. We believe our INVO Center approach adds much needed capacity and affordability and aligns with our key mission to open access to care to the underserved.

The ~~Assisted Reproductive Technology~~ART market also continues to benefit from a number of industry tailwinds, including 1) the large under-served potential patient population, 2) increasing infertility rates around the world 3) growing awareness and education of fertility treatment options, 4) a growing acceptance of fertility treatment, 5) improvements in procedure techniques and hence improvements in pregnancy success rates and 6) generally improving insurance (private and public) reimbursement ~~trends; all of which should help contribute to strong industry growth and patient demand for treatment.~~trends.

Three months ended March 31, ~~2021~~2022, compared to the three months ended March 31, ~~2020~~2021

Revenue for the three months ended March 31, ~~2021,~~2022, was approximately ~~$0.7~~$0.2 million compared to approximately ~~$0.3~~$0.7 million for the three months ended March 31, ~~2020. The increase of approximately $0.4~~2021. Of the $0.2 million ~~or approximately 165% was the result of an increase~~ in ~~product sales to Ferring. The sales to Ferring in~~revenue for the first quarter of ~~2021 were~~2022, $0.1 was related to ~~satisfying~~clinic revenue from the consolidated Atlanta JV. The decrease of approximately $0.5 million, or approximately 76%, was related to a decrease in product sales versus a one-time bulk order from Ferring in the previous year that was made to meet calendar year 2020 minimum purchase ~~requirements for 2020 as described above~~commitments in ~~Recent Developments.~~the Ferring Agreement.

Gross profit for the three months ended March 31, ~~2021~~2022, was approximately ~~$0.6~~$0.1 million compared to approximately ~~$0.2~~$0.6 million for the three months ended March 31, ~~2020.~~2021. Gross margins were approximately ~~91%~~60% and ~~approximately 88%~~91% for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively. The decrease in gross margin reflects the lack of Ferring license revenue in the first quarter of 2022 compared to the same period in 2021, as well as the inclusion of consolidated INVO Center cost of goods sold expenses.

Selling, general and administrative expenses for the three months ended March 31, ~~2021~~2022, were approximately ~~$2.1~~$2.6 million compared to approximately ~~$1.6~~$2.1 million for the three months ended March 31, ~~2020.~~2021. The increase of approximately $0.5 million, or approximately ~~33%~~27%, was primarily the result of approximately $0.2 million in ~~startup costs~~increased expenses related to ~~clinic joint ventures as well as~~the operations of the consolidated Atlanta JV, approximately $0.2 million in increased personnel expenses, and ~~consulting expenses.~~$0.1 million in marketing activities. We also incurred approximately ~~$0.6~~$0.7 million of non-cash, stock-based compensation expense in the ~~period.~~period, compared to $0.6 million for the same period in the prior year.

We began to fund additional research and development (“R&D”) efforts in 2020 as part of our 5-day label expansion ~~efforts, and also submitted additional trademark and patent filings.~~efforts. R&D expenses were ~~$66,267~~approximately $0.1 million and $0.07 million for the three months ended March 31, 2022, and March 31, 2021, ~~compared to $30,050~~respectively.

Loss from equity investments for the three months ended March 31, ~~2020.~~2022, was approximately $0.07 million compared to $0 for the three months ended March 31, 2021. The increase in loss is due to the investment in Alabama and Mexico JVs becoming operational in the second half of 2021.

Interest expense and financing fees were approximately $0.1 thousand for the three months ended March 31, 2022, compared to approximately $0.9 million for the three months ended March 31, 2021, compared to approximately $0.05 million for the three months ended March 31, 2020. The increase of approximately $0.85 million was primarily non-cash and due to an increase in amortization of debt discount, debt issuance cost and interest on the 2020 Convertible Notes.2021.

For the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021, we had net losses of approximately $2.8 million and $2.5 million, respectively, and an accumulated deficit of approximately ~~$1.4~~$41.7 million ~~respectively. The increase in net loss was due to increased operating expenses and interest expense, partially offset by an increase in product revenue.~~as of March 31, 2022. Approximately ~~$1.5~~$0.9 million of the net loss was related to non-cash ~~expenses. The Company~~expenses for the three months ended March 31, 2022, compared to $1.4 million for the three months ended March 31, 2021. We had net working capital of approximately ~~$7.7~~$3.3 million as of March 31, ~~2021,~~2022, compared to approximately ~~$8.3~~$5.1 million as of December 31, ~~2020.~~2021. As of March 31, ~~2021, the Company’s~~2022, our stockholder’s equity was approximately $5.6 million compared to approximately ~~$5.7~~$7.3 million as of December 31, ~~2020. Cash used in operation~~2021.

We have been dependent on raising capital from debt and equity financings to meet our needs for cash to fund our operating expenses and investing activities. During the first three months of 2021, ~~was~~we received approximately ~~$1.7~~$0.4 million ~~compared to approximately $0.9 million for~~of proceeds from unit purchase option and warrant exercises. During the first three months of ~~2020.~~

~~During 2020,~~2022, we ~~raised~~received proceeds of approximately ~~$13.8~~$0.3 million ~~in debt and equity financings. During~~for the ~~first quarter 2021, we converted approximately $1.2 million~~sale of ~~outstanding debt to equity and received approximately $370,000 of proceeds from option and warrant exercises. Based on~~ our common stock. Our current plan ~~we believe we have sufficient liquidity for at least~~includes opening additional INVO Centers over the next 12 months. ToUntil we can generate a sufficient amount of cash from operations and to the extent additional funds are necessary to meet our longer-term liquidity needs and to execute our business strategy, we ~~may~~will need to raise additional funding, as in the past, by way of debt and/or equity ~~financings or a combination of these potential sources of funds, although we can provide no assurance that these sources of~~financings. Such additional funding ~~will be available on reasonable terms.~~

Historically, our primary sources of liquidity have been from equity or debt offerings and up-front distribution licensing fees. Until we can generate a sufficient amount of cash from operations, we may need to finance future cash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If

Although our audited financial statements for the year ended December 31, 2021, were prepared under the assumption that we ~~are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly scale back our~~would continue operations ~~or delay, scale back or discontinue~~as a going concern, the ~~continuing development~~report of our ~~products. If we raise additional funds through~~independent registered public accounting firm that accompanies our financial statements for the ~~issuance of additional debt or equity securities, it could result~~year ended December 31, 2021, contains a going concern qualification in dilution to our existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations,which such ~~as limitations on~~firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, we have incurred significant operating losses and we expect to continue to incur ~~additional debt, limitations~~significant expenses and operating losses as we continue to ramp up the commercialization of INVOcell and develop new INVO Centers. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our ~~ability to acquire, sell~~financial condition. If we cannot continue as a going concern, our stockholders would likely lose most or ~~license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any~~all of ~~these events could significantly harm our business, financial condition and prospects.~~their investment in us.

The following table shows a summary of our cash flows for the three months ended March 31:

As of March 31, ~~2021,~~2022, we had approximately ~~$8.4~~$3.8 million in cash compared to approximately ~~$10.0~~$8.4 million ~~on December~~as of March 31, ~~2020.~~2021. Net cash used in operating activities for the first three months of ~~2021,~~2022, was approximately ~~$1.7~~$2.1 million, compared to approximately ~~$0.9~~$1.7 million for the same period in ~~2020.~~2021. The increase in net cash used in operations was primarily due to the increase in net loss.

During the three months ended March 31, 2022, cash used in investing activities of $0.1 million was primarily related to a loss ~~accounts receivable~~on equity method for the JVs, payments to acquire property, plants, and ~~a decrease in accrued compensation.~~

equipment, as well as additional trademarks. During the three months ended March 31, 2021, cash used in investing activities of approximately $0.3 million was related to notes receivable as well as ~~additional trademarks~~new molds and ~~patents.~~ trademarks.

During the three months ended March 31, ~~2020,~~2022, cash ~~used in investing~~provided by financing activities of approximately ~~$0.03~~$0.3 million was primarily related to ~~new molds and trademarks.~~

the sale of common stock, net of offering costs. During the three months ended March 31, 2021, cash provided by financing activities of approximately $0.4 million ~~primarily~~ related to the exercising of warrants and unit purchase stock options. ~~No cash was used or provided by financing activities during the three months ended March 31, 2020.~~

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

See Note 1 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for a summary of significant accounting policies and the effect on our financial statements.

We account for stock-based compensation under the provisions of ASC 718-10 Share-Based Payment (formerly SFAS 123R). This statement requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or performance goals in exchange for the award, which is usually immediate but sometimes over a vesting period. Warrants granted to non-employees are recorded as an expense over the requisite service period based on the grant date and the estimated fair value of the grant, which is determined using the Black-Scholes option pricing model.

We recognize revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 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 ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:

The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and variable interest entities (“~~VIE’~~VIE”), where the Company is the primary beneficiary under the provisions of ~~the~~ ASC 810, ~~“Consolidation”~~Consolidation (“ASC 810”).

~~Management makes judgments regarding the Company’s level of influence or control over an entity~~ A VIE must be consolidated by its primary beneficiary when, along with its affiliates and ~~whether or not the Company is~~agents, the primary beneficiary ~~of a VIE. Various factors are considered in this analysis, including but not limited to~~has both: (i) the ~~Company’s ability~~power to direct the activities that most significantly impact the ~~entity’s governing body,~~VIE’s economic performance; and (ii) the size and seniority of the Company’s investment, the Company’s ability and the rights of other investors to participate in policy making decisions, the Company’s ability to replace the manager and/or liquidate the entity, and the Company’s obligation to absorb losses ~~and~~or the right to receive the benefits of the VIE that ~~are significant. Management’s ability~~could potentially be significant to correctly assess its influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in the Company’s consolidated financial statements. If it is determined that the Company is the primary beneficiary of a VIE, the Company’s financial statements would consolidate the VIE. The Company ~~performs~~reconsiders whether an entity is still a ~~qualitative assessment of~~VIE only upon certain triggering events and continually assesses its ~~joint ventures on an ongoing basis~~consolidated VIEs to determine if it continues to be athe primary beneficiary.

Investments in unconsolidated affiliates in which we exert significant influence but do not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. Our share of the profits and losses from these investments is reported in loss from equity method investment in the accompanying consolidated statements of operations. Management monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the ~~SEC,~~Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our Chief Executive Officer and ~~Acting~~ Chief Financial 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 March 31, ~~2021,~~2022, 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.10-Q. Based upon that evaluation, our Chief Executive Officer and ~~Acting~~ Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, ~~2021.~~2022.

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.

Please see Note 1314 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, for a description of pending litigation.

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, ~~2020~~2021, filed on March ~~30, 2020. There~~31, 2022. Except as set forth below, there have been no material changes from the factors disclosed in our 2020 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 SEC.

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

On May 13, 2022, we entered into an Exclusive Distribution Agreement (the “Onesky Agreement”) with Onesky Holdings Limited (“Onesky”), pursuant to which, among other things, we granted to Onesky an exclusive right to distribute INVOcell in the People’s Republic of China, excluding Hong Kong, Macau and Taiwan (the “Territory”).

~~1. See~~The Onesky Agreement became effective on May 13, 2022, and will remain in effective for a period of five years after the date of National Medical Products Administration approval and automatically renews for successive two year period unless written notice is given by either party 90 days’ prior to the expiry of any term. If either party defaults in the performance of any of its obligations under the Onesky Agreement, including Onesky’s minimum purchase obligations, the other party may give written notice of default and the other party has 30 days to cure. If such default is not cured, then the Onesky Agreement may be terminated immediately thereafter. The Onesky Agreement contains other customary termination provisions. We granted Onesky an exclusive, revocable and royalty free license to use our ~~Current~~trademarks in the Territory in connection with the promotion, distribution, and sale of the INVOcell.

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, filed as an exhibit to this Quarterly Report on Form ~~8-K filed on April 26, 2021.~~10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~March 17, 2021.~~May 16, 2022.

Large accelerated filer ~~[ ]~~☐		Accelerated filer ~~[ ]~~☐
Non-accelerated filer ~~[X]~~ ☒		Smaller reporting company ~~[X]~~☒		Emerging growth company ~~[ ]~~☐

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		INVO		The Nasdaq Stock Market LLC


							March 31,			December 31,
	March 31,			December 31,			2022			2021
	2021			2020						(audited)
ASSETS
Current assets
Cash	$	8,423,236		$	10,097,760		$	3,839,862		$	5,684,871
Accounts receivable		527,651			21,699			58,720			50,470
Inventory		268,349			265,372			294,631			287,773
Prepaid expenses and other current assets		363,969			157,700			228,178			282,751
Total current assets		9,583,205			10,542,531			4,421,391			6,305,865

Property and equipment, net		129,679			132,206			491,995			501,436
Capitalized patents, net		22,606			5,427
Intangible Assets, net								132,551			132,093
Lease right of use		73,644			79,319			1,980,153			2,037,052
Trademarks		100,885			89,536
Notes receivable		280,160			-
Other assets		-			240
Investment in joint ventures		-			98,084			1,494,143			1,489,934
Total other assets		477,295			272,606

Total assets	$	10,190,179		$	10,947,343		$	8,520,233		$	10,466,380

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities, including related parties	$	512,044		$	328,927
Accrued compensation – related party		267,390			527,326
Accounts payable and accrued liabilities							$	462,211		$	443,422
Accrued compensation								391,877			581,689
Deferred revenue, current portion		714,286			714,286			5,793			5,900
Lease liability, current portion		23,061			22,707			224,361			221,993
Notes payable – Payroll Protection Program		157,620			157,620
Convertible notes, net		185,458			536,063
Income taxes payable		-			1,062
Total current liabilities		1,859,859			2,287,991			1,084,242			1,253,004

Lease liability, net of current portion		52,789			58,634			1,844,784			1,901,557
Deferred revenue, net of current portion		2,678,571			2,857,143
Deferred tax liability		469			469			1,139			1,139

Total liabilities		4,591,688			5,204,237			2,930,165			3,155,700

Stockholders’ equity
Common Stock, $.0001 par value; 125,000,000 shares authorized; 10,424,229 and 9,639,268 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		1,042			964
Common Stock, $.0001 par value; 125,000,000 shares authorized; 12,096,798 and 11,929,147 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively								1,210			1,193
Additional paid-in capital		40,287,000			37,978,224			47,254,192			46,200,509
Accumulated deficit		(34,689,551	)		(32,236,082	)		(41,665,334	)		(38,891,022	)
Total stockholders’ equity		5,598,491			5,743,106			5,590,068			7,310,680

Total liabilities and stockholders’ equity	$	10,190,179		$	10,947,343		$	8,520,233		$	10,466,380

	For the Three Months
	Ended March 31,									For the Three Months Ended
	2021			2020			March 31,
							2022			2021
Revenue:
Product revenue	$	505,952		$	80,000		$	56,750		$	505,952
Clinic revenue								105,848			-
License revenue		178,571			178,571			-			178,571
Total revenue		684,523			258,571			162,598			684,523

Cost of goods sold:
Production costs		60,314			27,563			57,533			60,314
Depreciation		2,431			2,431			7,428			2,431
Total cost of goods sold		62,745			29,994			64,961			62,745

Gross profit		621,778			228,577			97,637			621,778

Operating expenses
Selling, general and administrative expenses		2,115,303			1,595,046			2,694,395			2,115,303
Research and development expenses		66,267			30,050			104,180			66,267
Total operating expenses		2,181,570			1,625,096			2,798,575			2,181,570

Loss from operations		(1,559,792	)		(1,396,519	)		(2,700,938	)		(1,559,792	)

Other income (expense):
Loss from equity method joint ventures								(71,117	)		-
Interest income		2,013			-			225			2,013
Interest expense		(895,226	)		(47,873	)		(1,456	)		(895,226	)
Foreign currency exchange loss		(464	)		-			(1,026	)		(464	)
Total other expenses		(893,677	)		(47,873	)		(73,374	)		(893,677	)

Loss before income taxes		(2,453,469	)		(1,444,392	)

Provision for income taxes		-			-

Net loss	$	(2,453,469	)	$	(1,444,392	)		(2,774,312	)		(2,453,469	)

Net loss per common share:
Basic	$	(0.25	)	$	(0.29	)	$	(0.23	)	$	(0.25	)
Diluted	$	(0.25	)	$	(0.29	)	$	(0.23	)	$	(0.25	)
Weighted average number of common shares outstanding:
Basic		9,888,025			4,917,997			12,050,696			9,888,025
Diluted		9,888,025			4,917,997			12,050,696			9,888,025


	For the Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(2,774,312	)	$	(2,453,469	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services		66,850			94,611
Non-cash stock compensation issued to directors and employees		243,362			97,453
Fair value of stock options issued to employees		428,488			376,523
Amortization of discount on notes payable		-			860,155
Amortization of leasehold right of use asset		56,899			5,675
Loss from equity method investment		71,117			-
Depreciation and amortization		15,547			2,979
Changes in assets and liabilities:
Accounts receivable		(8,250	)		(505,952	)
Interest receivable		-			(160	)
Inventory		(6,858	)		(2,977	)
Prepaid expenses and other current assets		54,573			18,694
Accounts payable and accrued expenses		18,789			183,117
Accrued compensation		(189,812	)		(259,936	)
Deferred revenue		(107	)		(178,572	)
Leasehold liability		(54,405	)		(5,491	)
Accrued interest		-			33,028
Income taxes payable		-			(1,062	)
Net cash used in operating activities		(2,078,119	)		(1,735,384	)
Cash from investing activities:
Payments to acquire property, plant, and equipment		(5,654	)		-
Payments to acquire patents		-			(17,631	)
Payments to acquire trademarks		(910	)		(11,349	)
Investment in joint ventures		(75,326	)		-
Payment for notes receivable		-			(280,000	)
Net cash used in investing activities		(81,890	)		(308,980	)
Cash from financing activities:
Proceeds from the sale of common stock, net of offering costs		315,000			-
Proceeds from warrant exercise		-			123,562
Proceeds from unit purchase option exercise		-			246,278
Net cash provided by financing activities		315,000			369,840
Increase (decrease) in cash and cash equivalents		(1,845,009	)		(1,674,524	)
Cash and cash equivalents at beginning of period		5,684,871			10,097,760
Cash and cash equivalents at end of period	$	3,839,862		$	8,423,236

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	-		$	2,043
Taxes	$	-		$	912
Noncash activities:
Common stock issued upon note payable and accrued interest conversion	$	-		$	1,243,788
Common stock issued for prepaid services	$	-		$	168,850
Cashless exercise of warrants	$	-		$	9
Cashless exercise of unit purchase options	$	-		$	8

Item		Page Number
Part I

1.	Financial Statements (Unaudited):	4
	Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	4
	Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7
	Notes to the Consolidated Financial Statements	8
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
3.	Quantitative and Qualitative Disclosures about Market Risks	33
4.	Controls and Procedures	33
	Evaluation of Disclosure Controls and Procedures	33
	Changes in Internal Controls Over Financial Reporting	33

Part II

1.	Legal Proceedings	34
1A.	Risk Factors	34
2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
3.	Defaults Upon Senior Securities	34
4.	Mine Safety Disclosure	34
5.	Other Information	34
6.	Exhibits	34
	Signatures	35

Item		Page Number
Part I

1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	4
	Consolidated Statements of Stockholders’ Equity (Deficiency) for the three months ended March 31, 2021 and 2020	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	6
	Notes to the Condensed Consolidated Financial Statements	7
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
3.	Quantitative and Qualitative Disclosures about Market Risks	32
4.	Controls and Procedures	32
	Evaluation of Disclosure Controls and Procedures	32
	Changes in Internal Controls Over Financial Reporting	32

Part II

1.	Legal Proceedings	33
1A.	Risk Factors	33
2.	Unregistered Issuance of Equity Securities and Use of Proceeds	33
3.	Defaults Upon Senior Securities	33
4.	Mine Safety Disclosure	33
5.	Other Information	33
6.	Exhibits	33
	Signatures	34


	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total

Balances, December 31, 2020		9,639,268	$	964	$	37,978,224		$	(32,236,082	)	$	5,743,106
Common stock issued to directors and employees		30,000		3		97,450			-			97,453
Common stock issued to service providers		71,500		7		221,243			-			221,250
Conversion of notes payable and accrued interest		388,684		39		1,243,749			-			1,243,788
Proceeds from warrant exercise		39,095		4		123,558			-			123,562
Proceeds from unit purchase option exercise		77,444		8		246,270			-			246,278
Cashless warrant exercise		91,709		9		(9	)		-			-
Cashless unit purchase option exercise		86,529		8		(8	)		-			-
Stock options issued to directors and employees as compensation		-		-		376,523			-			376,523
Net loss		-		-		-			(2,453,469	)		(2,453,469	)
Balances, March 31, 2021		10,424,229	$	1,042	$	40,287,000		$	(34,689,551	)	$	5,598,491

Balances, December 31, 2021		11,929,147	$	1,193	$	46,200,509		$	(38,891,022	)	$	7,310,680

Common stock issued to directors and employees		51,528		6		243,356			-			243,362
Common stock issued for services providers		21,500		2		66,848			-			66,850
Proceeds from the sale of common stock, net of fees and expenses		94,623		9		314,991			-			315,000
Stock options issued to directors and employees		-		-		428,488			-			428,488
Net loss		-		-		-			(2,774,312	)		(2,774,312	)
Balances, March 31, 2022		12,096,798		1,210		47,254,192			(41,665,334	)		5,590,068

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total

Balances, December 31, 2019		4,884,879	$	489	$	20,174,682		$	(23,888,766	)	$	(3,713,595	)
Common stock issued to directors and employees		40,569		4		303,459			-			303,463
Common stock issued to service providers		5,000		-		38,000			-			38,000
Stock options issued to employees		-		-		381,475			-			381,475
Net loss		-		-		-			(1,444,392	)		(1,444,392	)
Balances, March 31, 2020		4,930,448	$	493	$	20,897,616		$	(25,333,158	)	$	(4,435,049	)

Balances, December 31, 2020		9,639,268	$	964	$	37,978,224		$	(32,236,082	)	$	5,743,106
Common stock issued to directors and employees		30,000		3		97,450			-			97,453
Common stock issued for services		71,500		7		221,243			-			221,250
Conversion of notes payable and accrued interest		388,684		39		1,243,749			-			1,243,788
Proceeds from warrant exercise		39,095		4		123,558			-			123,562
Proceeds from unit purchase option exercise		77,444		8		246,270			-			246,278
Cashless warrant exercise		91,709		9		(9	)		-			-
Cashless unit purchase option exercise		86,529		8		(8	)		-			-
Stock options issued to directors and employees as compensation		-		-		376,523			-			376,523
Net loss		-		-		-			(2,453,469	)		(2,453,469	)
Balances, March 31, 2021		10,424,229	$	1,042	$	40,287,000		$	(34,689,551	)	$	5,598,491

	Three Months Ended March 31,
	2021			2020
Loss to common shareholders (Numerator)	$	(2,453,469	)	$	(1,444,392	)
Basic and diluted weighted-average number of common shares outstanding (Denominator)		9,888,025			4,917,997

1.	Identify the contract with the customer.

2.	Identify the performance obligations in the contract.

3.	Determine the total transaction price.

4.	Allocate the total transaction price to each performance obligation in the contract.

5.	Recognize as revenue when (or as) each performance obligation is satisfied.


	Three Months Ended March 31,
	2022			2021
Net loss (numerator)	$	(2,774,312	)	$	(2,453,469	)
Basic and diluted weighted-average number of common shares outstanding (denominator)		12,050,696			9,888,025
Basic and diluted net loss per common share		(0.23	)		(0.25	)


	As of March 31,
	2022		2021
Options		1,474,605		1,102,672
Convertible notes and interest		-		160,504
Unit purchase options and warrants		260,165		216,193
Total		1,734,770		1,479,369

~~Subsidiary Name~~	~~Country~~	~~Percent (%) Ownership~~

~~HRCFG INVO, LLC~~	~~United States~~		~~50%~~
~~Positib Fertility, S.A. de C.V.~~	~~Mexico~~		33%
~~SNS MURNI INVO Bioscience Malaysia Sendirian Berhad~~	~~Malaysia~~		50%
~~Ginekalix INVO Bioscience LLC Skopje~~	~~North Macedonia~~		50%
~~Medesole INVO Bioscience India~~	~~India~~		50%

					Carrying Value as of
	Location	Percentage Ownership			March 31, 2022		December 31, 2021
HRCFG INVO, LLC	Alabama, United States		50	%	$	1,332,574		1,387,495
Positib Fertility, S.A. de C.V.	Mexico		33	%		161,569		102,439
Total investment in unconsolidated VIEs					$	1,494,143		1,489,934

	March 31, 2022			December 31, 2021
Balance sheets:
Current assets	$	474,379			456,967
Long-term assets		1,133,071			1,302,067
Current liabilities		(407,425	)		(404,155	)
Long-term liabilities		(146,515	)		(142,321	)
Net assets	$	1,053,510			1,212,558

	March 31, 2022		December 31, 2021
Bloom Invo, LLC
Accounts receivable	$	21,600		21,600
Notes payable		457,012		453,406
Unconsolidated VIEs
Accounts receivable	$	23,810		16,310

	March 31, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Raw materials	$	67,936	$	72,022	$	77,909	$	67,605
Work in process		5,005		29,645
Finished goods		195,408		163,705		216,722		220,168
Total inventory	$	268,349	$	265,372	$	294,631	$	287,773

		Estimated Useful Life
Manufacturing equipment		6 to 10 years
Medical equipment		7 to 10 years
Office equipment		3 to 7 years

	March 31, 2021			December 31, 2020
Patents	$	95,353		$	77,722
Accumulated amortization		(72,747	)		(72,295	)
Total patent costs, net	$	22,606		$	5,427

	March 31, 2021		December 31, 2020
Notes receivable – HRCFG, LLC	$	280,160	$	-
Total notes receivable	$	280,160	$	-

Lease component	Balance sheet classification	March 31, 2021		Balance sheet classification	March 31, 2022
Assets
ROU assets - operating lease	Other assets	$	73,644

ROU assets – operating lease				Other assets	$	1,980,153
Total ROU assets		$	73,644		$	1,980,153

Liabilities
Current operating lease liability	Current liabilities	$	23,061	Current liabilities	$	224,361

Long-term operating lease liability	Other liabilities		52,789	Other liabilities		1,844,784

Total lease liabilities		$	75,850		$	2,069,145

	March 31, 2021
2021	$	18,751
2022		25,585		$	194,542
2023		26,352			264,108
2024		8,870			251,671
2025 and beyond		-
2025					247,960
2026 and beyond					1,316,245
Total future minimum lease payments	$	79,558		$	2,274,526
Less: Interest		(3,708	)		(205,381	)
Total operating lease liabilities	$	75,850		$	2,069,145

Current operating lease liability	$	23,061
Long-term operating lease liability		52,789
Total operating lease liabilities	$	75,850

	March 31, 2021			December 31, 2020

2020 Convertible Notes		500,000			1,700,000
Accrued interest		13,613			24,373
Less beneficial conversion feature discount		(143,777	)		(604,897	)
Less options discount		(62,712	)		(224,051	)
Less warrants discount		(66,374	)		(229,954	)
Less issuance cost		(55,292	)		(129,408	)
Total, net of discount	$	185,458		$	536,063

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		1,055,894	$	5.09	$	133,022
Granted		418,711		3.78		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of March 31, 2022		1,474,605	$	4.90		-
Exercisable as of March 31, 2022		740,495		5.78		-

	Options Outstanding								Options Exercisable
	Number of Shares		Price per Share Range		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
Balance at December 31, 2020		594,114	$	3.19-9.25	$	7.28	$	-		265,386	$	5.64	$	-
Forfeited		-	$	-	$	-		-		-		-		-
Vested		-		-		-		-		97,615		3.86		-
Exercised		-	$	-	$	-		-		-		-		-
Granted		508,558	$	2.28-2.55	$	2.33		-		-		-		-
Balance at March 31, 2021		1,102,672	$	2.28-9.25	$	4.33	$	-		374,256	$	3.57	$	-

	Three months ended March 31,						Three Months ended March 31,
	2021			2020			2022			2021
Risk-free interest rate range		0.22 to 0.31	%		0.48 to 1.65	%	1.6% to 1.9		%	0.22% to 0.31		%
Expected life of option-years		5.5 to 6.5			5.20 to 5.77		5.25 to 5.75			5.3 to 6.5
Expected stock price volatility		107.4	%		110.8 to 128.	%		110.4 to 113.2	%		107.4	%
Expected dividend yield		-	%		-	%		-	%		-	%

	Total Intrinsic Value of Options Exercised		Total Fair Value of Options Vested
Year ended December 31, 2021	$	-	$	1,543,912
Three months ended March 31, 2022	$	-	$	428,488

	Number of Unvested Shares			Weighted Average Grant Date Fair Value		Aggregate Value of Shares

Balance as of December 31, 2021		9,730		$	3.72	$	36,148
Granted		159,361			3.40		532,167
Vested		(76,841	)		3.52		(265,847	)
Forfeitures		-			-		-
Balance as of March 31, 2022		92,250		$	3.39	$	302,468

	Number of Unvested Shares			Weighted Average Grant Date Fair Value		Aggregate Value of Unvested Shares

Balance at December 31, 2020		16,698		$	4.67	$	77,927
Granted		71,757		$	3.04	$	218,228
Vested		(24,445	)	$	3.66	$	(89,473	)
Forfeitures		-		$	-	$	-
Balance at March 31, 2021		64,010		$	3.23	$	206,682


Risk-free interest rate range			~~0.33%~~0.33% - 0.39	%
Stock ~~Price~~price	$	3.00 - ~~$3.95~~$3.95
Expected life of warrants and ~~option~~unit purchase options (years)		5.00
Expected stock price volatility		~~108.2%~~108.2% - 112.5	%
Expected dividend yield		0	%

	Number of Unit Purchase Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		92,893	$	3.20	$	5,647
Granted		-		-		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of March 31, 2022		92,893	$	3.20	$	-

	Number of Warrants		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		167,272	$	3.62	$	16,029
Granted		-		-		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of March 31, 2022		167,272	$	3.62	$	-

				~~INVOcell Registration~~
~~Market~~	~~Distribution Partner~~	~~Date~~	~~Initial Term~~	~~Status in Country~~

~~Canada~~	~~Invaron Pharmaceuticals Inc.~~	~~July 2020~~	~~1-Year~~	~~Completed~~
~~Mexico~~	Proveedora de Equipos y Productos S.A.**	~~Sept 2020~~	~~5-year~~	~~Completed~~
~~Malaysia~~	~~iDS Medical Systems~~	~~Nov 2020~~	~~3-year~~	~~Completed~~
~~Turkey~~	~~Orcan Medical~~	~~Oct 2019~~	~~1-year~~	~~Completed~~
~~Jordan~~	~~Biovate~~	~~Sept 2019~~	~~1-year~~	~~Completed~~
~~Pakistan~~	~~Galaxy Pharma~~	~~Dec 2020~~	~~1-year~~	~~In process~~
~~Thailand~~	~~IVF Envimed Co., Ltd.~~	~~April 2021~~	~~1-year~~	~~In process~~
~~Sudan~~	~~Quality Medicines, Cosmetics & Medical Equipment Import~~	~~Sept 2020~~	~~1-year~~	~~In process~~
~~Ethiopia~~	~~Quality Medicines, Cosmetics & Medical Equipment Import~~	~~Sept 2021~~	~~1-year~~	~~In process~~
~~Uganda~~	~~Quality Medicines, Cosmetics & Medical Equipment Import~~	~~Sept 2022~~	~~1-year~~	~~In process~~
~~Nigeria~~	~~G-Sytems Limited~~	~~Sept 2023~~	~~1-year~~	~~In process~~
~~Togolese Republic~~	~~INVOSOLUX TOGO~~	~~Nov 2019~~	~~1-year~~	~~In process~~
~~Iran~~	~~Tasnim Behboud~~	~~Dec 2020~~	~~1-year~~	~~In process~~

			** Also the JV Partner for Mexico

	●	Eliminates expensive and time-consuming lab equipment and corresponding procedures, allowing clinics and doctors to increase patient capacity and reduce costs;
	●	Provides a natural, stable incubation environment;
	●	Offers a more personal, intimate experience for patients; and
	●	Reduces the risk of errors and wrong embryo transfers.