UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-39701

INVO Bioscience, Inc.

(Exact Name of Registrant as Specified in its Charter)

Nevada

20-4036208

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

5582 Broadcast Court
Sarasota, FL		34240
(Address of principal executive offices)		(Zip Code)

(978)878-9505

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~August 14, ~~2022,~~2023, the Registrant had ~~12,165,964~~2,449,662 shares of common stock outstanding.

INVO BIOSCIENCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~September~~June 30, ~~2022~~2023

TABLE OF CONTENTS

Item		Page Number		Page Number
PART I. FINANCIAL INFORMATION	PART I. FINANCIAL INFORMATION		PART I. FINANCIAL INFORMATION

1.	Financial Statements (Unaudited):	4	Financial Statements (Unaudited):	4
	Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	4	Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)	5	Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2022 and 2021 (Unaudited)	6	Consolidated Statements of Stockholders’ Equity (Deficit) for the six months ended June 30, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)	7	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	7
	Notes to the Consolidated Financial Statements	8	Notes to the Consolidated Financial Statements	8
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
3.	Quantitative and Qualitative Disclosures about Market Risks	34	Quantitative and Qualitative Disclosures about Market Risks	36
4.	Controls and Procedures	34	Controls and Procedures	36

PART II. OTHER INFORMATION	PART II. OTHER INFORMATION		PART II. OTHER INFORMATION

1.	Legal Proceedings	35	Legal Proceedings	37
1A.	Risk Factors	35	Risk Factors	37
2.	Unregistered Sales of Equity Securities and Use of Proceeds	35	Unregistered Sales of Equity Securities and Use of Proceeds	37
3.	Defaults Upon Senior Securities	35	Defaults Upon Senior Securities	37
4.	Mine Safety Disclosure	35	Mine Safety Disclosure	37
5.	Other Information	35	Other Information	37
6.	Exhibits	35	Exhibits	37
	Signatures	36	Signatures	38

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

●	our business strategies;

●	the timing of regulatory submissions;

●	our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain;

●	risks relating to the timing and costs of clinical trials and the timing and costs of other expenses;

●	risks related to market acceptance of products;

●	the ultimate impact of the ongoing Coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole;

●	intellectual property risks;

●	risks associated with our reliance on third-party organizations;

●	our competitive position;

●	our industry environment;

●	our anticipated financial and operating results, including anticipated sources of revenues;

●	assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches;

●	management’s expectation with respect to future acquisitions;

●	statements regarding our goals, intentions, plans and expectations, including the introduction of new products and markets; and

●	our cash needs and financing plans.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

~~Reverse Stock Splits~~

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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INVO BIOSCIENCE, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	2022			2021
	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
					(audited)						(audited)
ASSETS
Current assets
Cash	$	285,697		$	5,684,871		$	112,485		$	90,135
Accounts receivable		71,311			50,470			74,908			77,149
Inventory		280,131			287,773			280,018			263,602
Prepaid expenses and other current assets		305,151			282,751			374,714			190,201
Total current assets		942,290			6,305,865			842,125			621,087
Property and equipment, net		456,352			501,436			659,442			436,729
Intangible assets, net		132,679			132,093
Lease right of use		1,865,648			2,037,052			4,004,962			1,808,034
Investment in joint ventures		1,281,306			1,489,934			1,132,365			1,237,865
Total assets	$	4,678,275		$	10,466,380		$	6,638,894		$	4,103,715
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	689,558		$	443,422		$	1,844,629		$	1,349,038
Accrued compensation		643,608			581,689			1,202,420			946,262
Deferred revenue, current portion		98,659			5,900
Notes payable, net								263,888			100,000
Notes payable – related parties, net								770,000			662,644
Notes payable, net								770,000			662,644
Deferred revenue								161,187			119,876
Lease liability, current portion		229,169			221,993			227,026			231,604
Total current liabilities		1,660,994			1,253,004			4,469,150			3,409,424
Lease liability, net of current portion		1,728,918			1,901,557			3,873,289			1,669,954
Deferred tax liability		1,139			1,139			1,949			1,949
Total liabilities		3,391,051			3,155,700			8,344,388			5,081,327

Stockholders’ equity
Common Stock, $.0001 par value; 125,000,000 shares authorized; 12,165,964 and 11,929,147 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		1,217			1,193
Stockholders’ deficit
Common Stock, $.0001 par value; 6,250,000 shares authorized; 826,886 and 608,611 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively								83			61
Additional paid-in capital		48,302,505			46,200,509			52,869,346			48,805,860
Accumulated deficit		(47,016,498	)		(38,891,022	)		(54,574,923	)		(49,783,533	)
Total stockholders’ equity		1,287,224			7,310,680
Total liabilities and stockholders’ equity	$	4,678,275		$	10,466,380
Total stockholders’ deficit								(1,705,494	)		(977,612	)
Total liabilities and stockholders’ deficit							$	6,638,894		$	4,103,715

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2022			2021			2022			2021
	For the Three Months						For the Nine Months						For the Three Months						For the Six Months
	Ended September 30,						Ended September 30,						Ended June 30,						Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

Revenue:
Clinic revenue													$	254,364		$	112,358		$	551,745		$	218,206
Product revenue	$	58,926			2,790			149,453			538,642			61,538			33,777			112,182			90,527
Clinic revenue		176,395			37,513			394,601			37,513
License revenue		-			178,571			-			535,714
Total revenue		235,321			218,874			544,054			1,111,869			315,902			146,135			663,927			308,733
Cost of goods sold:
Operating expenses
Cost of revenue		97,590			17,987			219,430			90,464			235,714			170,526			466,719			367,207
Depreciation		11,526			2,431			32,899			7,294
Total cost of goods sold		109,116			20,418			252,329			97,758
Gross profit		126,205			198,456			291,725			1,014,111
Operating expenses
Selling, general and administrative expenses		2,476,356			2,416,791			7,729,694			6,581,516			2,042,609			2,444,586			4,373,443			4,991,714
Research and development expenses		175,267			55,391			470,208			152,674			83,850			190,761			157,370			294,941
Depreciation and amortization														19,705			22,083			38,792			37,630
Total operating expenses		2,651,623			2,472,182			8,199,902			6,734,190			2,381,879			2,827,956			5,036,324			5,691,492
Loss from operations		(2,525,418	)		(2,273,726	)		(7,908,177	)		(5,720,079	)		(2,065,977	)		(2,681,821	)		(4,372,397	)		(5,382,759	)
Other income (expense):
Loss from equity method joint ventures		(21,470	)		(113,492	)		(210,565	)		(113,492	)
Other income		-			-			-			159,126
Income (loss) from equity method joint ventures														3,788			(117,978	)		(23,947	)		(189,095	)
Interest income		34			(843	)		307			3,595			-			48			-			273
Interest expense		(1,761	)		(92,544	)		(3,319	)		(1,078,895	)		(175,192	)		(102	)		(391,781	)		(1,558	)
Foreign currency exchange loss		(1,008	)		(721	)		(2,922	)		(2,213	)		(265	)		(888	)		(400	)		(1,914	)
Total other income (expense)		(24,205	)		(207,600	)		(216,499	)		(1,031,879	)		(171,669	)		(118,920	)		(416,128	)		(192,294	)
Loss before income taxes	$	(2,549,623	)		(2,481,326	)		(8,124,676	)		(6,751,958	)
Net loss before income taxes														(2,237,646	)		(2,800,741	)		(4,788,525	)		(5,575,053	)
Income taxes		-			-			800			-			2,865			800			2,865			800
Net loss		(2,549,623	)		(2,481,326	)		(8,125,476	)		(6,751,958	)	$	(2,240,511	)	$	(2,801,541	)	$	(4,791,390	)	$	(5,575,853	)
Net loss attributable to noncontrolling interest		-			(238,543	)		-			(238,543	)
Net loss attributable to INVO Bioscience, Inc.		(2,549,623	)		(2,242,783	)		(8,125,476	)		(6,513,415	)

Net loss per common share:
Basic	$	(0.21	)		(0.24	)		(0.67	)		(0.66	)	$	(3.06	)	$	(4.62	)	$	(7.07	)	$	(9.23	)
Diluted	$	(0.21	)		(0.24	)		(0.67	)		(0.66	)	$	(3.06	)	$	(4.62	)	$	(7.07	)	$	(9.23	)
Weighted average number of common shares outstanding:
Basic		12,155,655			10,463,981			12,107,124			10,267,495			732,255			605,760			677,684			604,123
Diluted		12,155,655			10,463,981			12,107,124			10,267,495			732,255			605,760			677,684			604,123

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

Shares Amount Capital Deficit Interest Total
Common Stock Additional
Paid-in Accumulated Noncontrolling
Shares Amount Capital Deficit Interest 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 44,806 4 274,694 - - 274,698
Common stock issued for services 96,500 10 324,840 - - 324,850
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 - - 1,151,800 - - 1,151,800
Net loss attributable to noncontrolling interest - - - - (238,543 ) (238,543 )
Net loss attributable to INVO Bioscience, Inc. - - - (6,513,415 ) - (6,513,415 )
Balances, September 30, 2021 10,464,035 $ 1,046 $ 41,343,118 $ (38,749,497 ) (238,543 ) $ 2,356,124 )

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 87,194 9 408,018 - - 408,027
Common stock issued for services 55,000 6 116,760 - - 116,766
Proceeds from the sale of common stock, net of fees and expenses 94,623 9 289,791 - - 289,800
Stock options issued to directors and employees as compensation - - 1,287,427 - - 1,287,427
Net loss - - - (8,125,476 ) - (8,125,476 )
Balances, September 30, 2022 12,165,964 1,217 48,302,505 (47,016,498 ) - 1,287,224

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

Balances, December 31, 2021 596,457 $ 60 $ 46,200,509 $ (38,891,022 ) $ 7,310,680
Common stock issued to directors and employees 2,576 - 328,548 - 328,548
Common stock issued for services 2,750 - 116,766 - 116,766
Proceeds from sale of common stock, net of fees and expenses 4,731 - 315,000 - 315,000
Stock options issued to directors and employees as compensation - - 861,284 - 861,284
Net loss - - - (5,575,853 ) (5,575,853 )
Balances, June 30, 2022 606,514 $ 60 $ 47,823,860 $ (44,466,875 ) $ 3,356,425

Balances, December 31, 2022 608,611 $ 61 $ 48,805,860 $ (49,783,533 ) $ (977,612 )
Balances, value 608,611 $ 61 $ 48,805,860 $ (49,783,533 ) $ (977,612 )
Common stock issued to directors and employees 3,994 - 51,565 - 51,565
Common stock issued for services 25,817 3 244,173 - 244,176
Proceeds from the sale of common stock, net of fees and expenses 184,000 18 2,728,920 - 2,728,938
Common stock issued with notes payable 4,167 1 56,313 - 56,314
Options exercised for cash 297 - 2,375 - 2,375
Stock options issued to directors and employees as compensation - - 652,750 - 652,750
Warrants issued with notes payable - - 327,390 - 327,390
Net loss - - - (4,791,390 ) (4,791,390 )
Balances, June 30, 2023 826,886 $ 83 $ 52,869,346 $ (54,574,923 ) $ (1,705,494 )
Balances, value 826,886 $ 83 $ 52,869,346 $ (54,574,923 ) $ (1,705,494 )

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

6

INVO BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

2022 2021
For the Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net loss $ (8,125,476 ) $ (6,751,958 )
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services 116,766 282,633
Non-cash stock compensation issued to directors and employees 408,027 274,698
Fair value of stock options issued to employees 1,287,427 1,151,800
Non-cash compensation for services 75,000 -
Amortization of discount on notes payable - 1,014,959
Amortization of leasehold right of use asset 171,404 63,047
Extinguishment of debt - (159,126 )
Loss from equity method investment 210,565 113,492
Depreciation and amortization 57,361 23,680
Changes in assets and liabilities:
Accounts receivable (20,841 ) (28,960 )
Interest receivable - (579 )
Inventory 7,642 (25,018 )
Prepaid expenses and other current assets (22,400 ) (75,661 )
Accounts payable and accrued expenses 246,136 186,656
Accrued compensation 61,919 (65,415 )
Deferred revenue 92,759 (535,714 )
Leasehold liability (165,463 ) (21,091 )
Accrued interest - 34,811
Income taxes payable - (1,062 )
Net cash used in operating activities (5,599,174 ) (4,518,808 )
Cash from investing activities:
Payments to acquire property, plant, and equipment (10,920 ) (744,247 )
Payments to acquire intangibles (1,943 ) (38,542 )
Investment in joint ventures (76,937 ) (252,884 )
Payment for notes receivable - (200,000 )
Net cash used in investing activities (89,800 ) (1,235,673 )
Cash from financing activities:
Proceeds from the sale of common stock, net of offering costs 289,800 -
Proceeds from warrant exercise - 123,562
Proceeds from unit purchase option exercise - 246,278
Net cash provided by financing activities 289,800 369,840
Increase (decrease) in cash and cash equivalents (5,399,174 ) (5,384,641 )
Cash and cash equivalents at beginning of period 5,684,871 10,097,760
Cash and cash equivalents at end of period $ 285,697 $ 4,713,119

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ - $ 29,125
Taxes $ 800 $ 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
Initial ROU asset and lease liability $ - $ 1,374,956

For the Six Months Ended
June 30,
2023 2022
Cash flows from operating activities:
Net loss $ (4,791,390 ) $ (5,575,853 )
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services 244,176 116,766
Non-cash stock compensation issued to directors and employees 51,565 328,548
Fair value of stock options issued to employees 652,750 861,284
Non-cash compensation for services 90,000 30,000
Amortization of discount on notes payable 301,098 -
Loss from equity method investment 23,947 189,095
Depreciation and amortization 38,792 37,629
Changes in assets and liabilities:
Accounts receivable 2,241 (6,015 )
Inventory (16,416 ) 5,777
Prepaid expenses and other current assets (184,513 ) 35,069
Accounts payable and accrued expenses 432,654 23,553
Accrued compensation 256,158 (72,885 )
Deferred revenue 41,311 71,457
Leasehold liability
1,829 4,655
Accrued Interest 62,938 -
Net cash used in operating activities (2,792,860 ) (3,950,920 )
Cash from investing activities:
Payments to acquire property, plant, and equipment (261,505 ) (8,338 )
Payments to acquire intangible assets - (1,517 )
Investment in joint ventures (8,447 ) (76,937 )
Net cash used in investing activities (269,952 ) (86,792 )
Cash from financing activities:
Proceeds from the sale of notes payable 714,000 -
Proceeds from the sale of common stock, net of offering costs 2,728,938 315,000
Proceeds from option exercise 2,375 -
Principal payments on note payable (360,151 ) -
Net cash provided by financing activities 3,085,162 315,000
Increase (decrease) in cash and cash equivalents 22,350 (3,722,712 )
Cash and cash equivalents at beginning of period 90,135 5,684,871
Cash and cash equivalents at end of period $ 112,485 $ 1,962,159

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,720 $ -
Taxes $ - $ 2,847
Noncash activities:
Fair value of warrants issued with debt $ 327,390 $ -
Initial ROU asset and lease liability $
2,312,892
$ -

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

7

INVO BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~September~~June 30, ~~2022~~2023
(UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

Description of Business

INVO Bioscience, Inc. (“INVO” or the “Company”) is a ~~commercial-stage~~healthcare services 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~~commercialization strategy is ~~to implement new medical technologies aimed at increasing~~focused on the ~~availability~~opening of ~~affordable, high-quality, patient-centered~~dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational), the acquisition of US-based, profitable in vitro fertilization (“IVF”) clinics and the sale and distribution of our technology solution into existing fertility ~~care.~~clinics. The Company’s ~~flagship product~~proprietary technology, INVOcell, 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), the acquisition of existing fertility clinics, as well as the distribution and sale of its technology solution into existing fertility clinics.

Basis of Presentation

The accompanying consolidated financial statements present on a consolidated basis the accounts of the Company and its wholly owned 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 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

The Company considers events or transactions that have occurred after the consolidated balance sheet date of ~~September~~June 30, ~~2022,~~2023, but prior to the filing of the consolidated financial statements with the SEC in 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.
Reclassifications
Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.

Business Segments

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

Variable Interest Entities

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 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.

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Equity Method Investments

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.

Use of Estimates

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.

Cash and Cash Equivalents

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.

Inventory

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 method as a cost flow method.

Property and Equipment

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~~The 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.

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Long- Lived Assets

Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the non-discounted future cash flows of the asset are less than their carrying amount, their carrying amounts are reduced to ~~the~~ fair value and an impairment loss recognized. There was no impairment recorded during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021.~~2022.

Fair Value of Financial Instruments

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 exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.

Income Taxes

The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. 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 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 extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.

Concentration of Credit Risk

Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Corporation (“FDIC”) limits. As of ~~September~~June 30, ~~2022,~~2023, the Company did not have cash balances in excess of FDIC limits.

Revenue Recognition

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:

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.

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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 “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), 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 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 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~~ ~~which was received upon the signing of the agreement was being recognized as income over the~~ 7~~-year term.~~
As of September 30, 2022, the Company had no deferred revenue related to 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.

Stock Based Compensation

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.

Loss Per Share

Basic loss per share calculations are 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 denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Schedule of Earnings Per Share Basic and Diluted

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,
Six Months Ended
June 30,
2022 2021 2022 2021 2023 2022 2023 2022
Net loss attributable to common shareholders (numerator) $ (2,549,623 ) (2,242,783 ) (8,125,476 ) (6,513,415 )
Net loss (numerator) $ (2,240,511 ) (2,801,541 ) (4,791,390 ) (5,575,853 )
Basic and diluted weighted-average number of common shares outstanding (denominator) 12,155,655 10,463,981 12,107,124 10,267,495 732,255 605,760 677,684 604,123
Basic weighted-average number of common shares outstanding (denominator) 732,255 605,760 677,684 604,123
Basic and diluted net loss per common share (0.21 ) (0.24 ) (0.67 ) (0.66 ) (3.06 ) (4.62 ) (7.07 ) (9.23 )
Basic net loss per common share (3.06 ) (4.62 ) (7.07 ) (9.23 )

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

As of September 30, As of June 30,
2022 2021 2023 2022
Options 1,479,605 1,118,911 121,255 74,480
Convertible notes and interest - 160,591 55,120 -
Unit purchase options and warrants 260,165 216,193 348,151 13,008
Total 1,739,770 1,495,695 524,526 87,488

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Recently Adopted Accounting Pronouncements

The 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 material impact on its financial condition or the results of its operations.

Note 2 – Liquidity

Historically, the Company has funded its cash and liquidity needs primarily through ~~operating cash flow,~~revenue collection, equity financings, and convertible notes. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, the Company incurred a net loss of approximately $~~8.1~~4.8 million and $~~6.5~~5.6 million, respectively, and has an accumulated deficit of approximately $4754.6 million as of ~~September~~June 30, ~~2022.~~2023. Approximately $~~2.3~~1.4 million of the net loss was related to non-cash expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to $~~2.8~~1.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

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 ~~nine~~six months of ~~2021,~~2023, the Company ~~converted~~received net proceeds of approximately $~~1.2~~2.7 million for the sale of ~~outstanding debt to equity and received~~its common stock par value $0.0001 per share (“Common Stock”) as well as approximately $~~370,000~~0.7 million from the sale of ~~proceeds from unit purchase option and warrant exercises~~.convertible notes. During the first ~~nine~~six months of 2022, the Company received proceeds of approximately $0.3 million for the sale of ~~common stock. The~~Common Stock. Over the next 12 months, the Company’s ~~current~~ plan includes opening additional INVO Centers, ~~over~~completing the ~~next 12 months.~~acquisition of Wisconsin Fertility Institute and pursuing additional IVF clinic acquisitions. Until the Company can generate ~~a sufficient amount of~~positive 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 will need to raise additional funding ~~as it has done~~to meet its liquidity needs and to execute its business strategy. As in the past, ~~by way of~~the Company will seek debt and/or equity ~~financings. Such additional funding~~financing, which may not be available on reasonable terms, if at all.

Although the Company’s audited financial statements for the year ended December 31, ~~2021~~2022 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s independent registered public accounting firm that accompanies the Company’s financial statements for the year ended December 31, ~~2021~~2022 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. 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.

Note 3 – Variable Interest Entities

Consolidated VIEs

Bloom INVO, LLC

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 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.

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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 ~~September~~June 30, ~~2022,~~2023, 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 ~~September~~June 30, ~~2022,~~2023, the Company invested $0.9 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 and nine~~six months ended ~~September~~June 30, 2023 and 2022, the Georgia JV recorded net losses of $~~0.5~~0.1 million and $~~0.2~~0.3 million respectively. Noncontrolling interest in the Georgia JV was $0.

Unconsolidated VIEs

HRCFG INVO, LLC

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 establishing an INVO Center in Birmingham, Alabama. The name of the joint venture entity is HRCFG INVO, LLC (the “Alabama JV”). The Company also provides certain funding to the Alabama JV. 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 will use the equity method to account for its interest in the Alabama JV. As of ~~September~~June 30, ~~2022,~~2023, the Company invested $1.6 million in the Alabama JV in the form of a note. For the ~~nine~~six months ended ~~September~~June 30, 2023, the Alabama JV recorded net income of $2 thousand, of which the Company recognized a gain from equity method investments of $805. For the six months ended June 30, 2022, the Alabama JV recorded a net loss of $0.3 million, of which the Company recognized a loss from equity method ~~investment~~investments of $0.2 million.

Positib Fertility, S.A. de C.V.

On 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 opened to patients on November 1, ~~2021 and commenced initial treatment cycles beginning in January 2022.~~2021.

The Company determined the Mexico JV is a VIE, and that there is no primary beneficiary. As a result, the Company will use the equity method to account for its interest in the Mexico JV. As of ~~September 30,2022,~~June 30, 2023, the Company invested $~~0.2~~0.1 million in the Mexico JV. For the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, the Mexico JV recorded a net ~~loss~~losses of $~~0.1~~74 ~~million~~thousand and $90 thousand, respectively, of which the Company recognized a loss from equity method ~~investment~~investments of $~~0.05~~24 ~~million.~~thousand and $30 thousand, respectively.

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The following table summarizes our investments in unconsolidated VIEs:

Schedule of Investments in Unconsolidated Variable Interest Entities
Carrying Value as of Carrying Value as of
Location Percentage Ownership
September 30,
2022

December 31,
2021
Location Percentage Ownership
June 30,
2023

December 31,
2022

HRCFG INVO, LLC Alabama, United States       50 % $ 1,148,582 1,387,495 Alabama, United States 50 % $ 1,023,346 1,106,905
Positib Fertility, S.A. de C.V. Mexico 33 % 132,724 102,439 Mexico 33 % 109,019 130,960
Total investment in unconsolidated VIEs Total investment in unconsolidated VIEs $ 1,281,306 1,489,934 Total investment in unconsolidated VIEs $ 1,132,365 1,237,865

Earnings from investments in unconsolidated VIEs were as follows:
Schedule of Earnings from Investments in Unconsolidated Variable Interest Entities

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,
Six Months Ended
June 30,
2022 2021 2022 2021 2023 2022 2023 2022
HRCFG INVO, LLC $ (4,737 ) $ (113,492 ) $ (163,912 ) $ (113,492 ) $ 19,474 $ (104,255 ) $ 805 $ (159,175 )
Positib Fertility, S.A. de C.V. (16,733 ) - (46,653 ) - (15,686 ) (13,723 ) (24,752 ) (29,920 )
Total earnings from unconsolidated VIEs (21,470 ) (113,492 ) (210,565 ) (113,492 ) 3,788 (117,978 ) (23,947 ) (189,095 )

The following tables summarize the combined unaudited financial information of our unconsolidated VIEs:

Schedule of Financial Information of Investments in Unconsolidated Variable Interest Entities

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,
Six Months Ended
June 30,
2022 2021 2022 2021 2023 2022 2023 2022
Statements of operations:
Operating revenue $ 273,737 $ - $ 610,049 $ - $ 458,069 $ 166,477 $ 807,396 $ 336,312
Operating expenses (333,414 ) (283,731 ) (1,077,835 ) (283,731 ) (466,184 ) (415,665 ) (880,050 ) (744,421 )
Net loss (59,677 ) (283,731 ) (467,786 ) (283,731 ) (8,115 ) (249,188 ) (72,654 ) (408,109 )

September 30,
2022

December 31,
2021

June 30,
2023

December 31,
2022

Balance sheets:
Current assets $ 283,946 456,967 $ 416,948 261,477
Long-term assets 1,112,555 1,302,067 1,057,010 1,094,490
Current liabilities (479,212 ) (404,155 ) (513,709 ) (396,619 )
Long-term liabilities (144,267 ) (142,321 ) (121,773 ) (107,374 )
Net assets $ 773,022 1,212,558 $ 838,476 851,974

Note 4 – Agreements and Transactions with VIE’s

The Company sells the INVOcell to its consolidated and unconsolidated VIEs and anticipates continuing to do so in the ordinary course of business. All intercompany transactions with consolidated entities are eliminated in the Company’s consolidated financial statements. Per ASC 323-10-35-8 the Company eliminates any sales to an unconsolidated VIE for INVOcell inventory that the VIE still has remaining on the books at period end.

The following table summarizes the Company’s transactions with VIEs:

Summary of Transaction with Variable Interest Entities

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,
Six Months Ended
June 30,
2022 2021 2022 2021 2023 2022 2023 2022
Bloom Invo, LLC
INVOcell revenue $ 6,000 $ - $ 6000 $ - $ 6,000 $ - $ 10,500 $ -
Unconsolidated VIEs
INVOcell revenue $ 6,000 $ 16,800 $ 22,500 $ 16,800 $ 6,750 $ 9,000 $ 9,750 $ 16,500

The Company had balances with VIEs as follows:

Summary of Balances with Variable Interest Entities

September 30,
2022

December 31,
2021

June 30,
2023

December 31,
2022

Bloom Invo, LLC
Accounts receivable $ 27,600 21,600 $ 12,000 13,500
Notes payable 464,344 453,406 472,839 468,031
Unconsolidated VIEs
Accounts receivable $ 38,810 16,310 $ 34,935 46,310

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Note 5 – Inventory

Components of inventory are:

Schedule of Inventory

September 30,
2022

December 31,
2021

June 30,
2023

December 31,
2022

Raw materials $ 68,630 $ 67,605 $ 62,745 $ 68,723
Finished goods 211,501 220,168 217,273 194,879
Total inventory $ 280,131 $ 287,773 $ 280,018 $ 263,602

Note 6 – Property and Equipment

The estimated useful lives and accumulated depreciation for equipment are as follows as of ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021:~~2022:

Schedule of Estimated Useful Lives of Property and Equipment
Estimated Useful Life
Manufacturing equipment 6 to 10 years
Medical equipment 7 to 10 years
Office equipment 3 to 7 years
Schedule of Property and Equipment

September 30,
2022

December 31,
2021

June 30,
2023

December 31,
2022

Manufacturing equipment $ 132,513 $ 132,513 $ 132,513 $ 132,513
Medical equipment 283,633 275,423 283,065 283,065
Office equipment 77,601 74,891 77,601 77,601
Leasehold improvements 96,817 96,817 358,322 96,817
Less: accumulated depreciation (134,212 ) (78,208 ) (192,059 ) (153,267 )
Total equipment, net $ 456,352 $ 501,436 $ 659,442 $ 436,729

During the three months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded depreciation expense of $~~19,279~~19,705 and $~~17,268~~21,630, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded depreciation expense of $~~56,004~~38,792 and $~~22,323~~36,725., respectively.

Note 7 – Intangible Assets
~~Components of intangible assets are as follows:~~
~~Schedule of Finite-Lived Intangible Assets~~

September 30,
2022

December 31,
2021

Trademarks $ 112,785 $ 110,842
Patents 95,355 95,355
Accumulated amortization (75,461 ) (74,104 )
Total patent costs, net $ 132,679 $ 132,093

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. The Company fully impaired its patents as of December 31, 2022.

During the three months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded amortization expenses related to patents of $~~453~~nil and $~~453~~452, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded amortization expenses related to patents of $~~1,357~~nil and $~~1,357~~904, respectively.

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.~~Company fully impaired its trademarks as of December 31, 2022.

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Note 8 – Leases

The Company has various operating lease agreements in place for its office 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 lease payments, with appropriate interest calculation. Per the terms of ASU 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, as of 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 ~~September~~June 30, ~~2022,~~2023, the Company’s lease components included in the consolidated balance sheet were as follows:

Schedule of Lease Components

Lease component Balance sheet classification
September 30,
2022
Balance sheet classification June 30, 2023
Assets
ROU assets – operating lease Other assets $ 1,865,648 Other assets $ 4,004,962
Total ROU assets $ 1,865,648 $ 4,004,962

Liabilities
Current operating lease liability Current liabilities $ 229,169 Current liabilities $ 227,026
Long-term operating lease liability Other liabilities 1,728,918 Other liabilities 3,873,289
Total lease liabilities $ 1,958,087 $ 4,100,315

Future minimum lease payments as of ~~September~~June 30, ~~2022~~2023 were as follows:
Schedule of Future Minimum Lease Payments

2022 $ 65,272
2023 264,108
2024 251,671
2025 247,960
2026 and beyond 1,316,245
Total future minimum lease payments $ 2,145,256
Less: Interest (187,169 )
Total operating lease liabilities $ 1,958,087

2023 156,465
2024 392,869
2025 392,688
2026 401,581
2027 and beyond 4,197,510
Total future minimum lease payments $ 5,541,113
Less: Interest (1,440,798 )
Total operating lease liabilities $ 4,100,315

Note 9 – Notes Payable

Notes payables consisted of the following:
~~2020 Convertible~~Schedule of Notes Payable

June 30,
2023

December 31,
2022

Less debt discount (285,961 ) (107,356 )
Related party demand notes with a 10% financing fee. 10% annual interest starting January 31, 2023. Notes are callable starting September 30, 2023 $ 770,000 $ 770,000
Convertible notes. 10% annual interest. Conversion price of $10.00-$12.00 410,000 100,000
Convertible debentures. 8% interest. Conversion price of $10.40 139,849 -
Less debt discount (285,961 ) (107,356 )
Total, net of discount $ 1,033,888 $ 762,644
Related Party Demand Notes

~~From May 15, 2020, through July 1, 2020,~~In the fourth quarter of 2022, the Company ~~entered into agreements~~received $500,000 through the issuance of five demand notes (the “JAG Notes”) from a related party, JAG Multi Investments LLC (“JAG”). The Company’s CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with ~~accredited investors~~respect to the Company. The JAG Notes accrue 10% annual interest from the date of issuance. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest.
16
In consideration for ~~their~~subscribing to the JAG Note for $100,000 dated December 29, 2022, and for agreeing to extend the date on which the other JAG Notes are callable to March 31, 2023, the Company issued JAG a warrant to purchase 17,500 shares of ~~secured~~Common Stock. The warrant may be exercised for a period of five (5) years from issuance at a price of $10.00 per share. The financing fees for said JAG Note and the fair value of the warrant issued were capped at the total proceeds. The relative fair value of the warrant was recorded as a debt discount and as of June 30, 2023 the Company had fully amortized the discount. On July 10, 2023 JAG agreed to extend the date on which the JAG Notes are callable to September 30, 2023.
In the fourth quarter of 2022, the Company received $200,000 through the issuance of demand promissory notes of which (1) $100,000 was received from our chief executive officer, Steven Shum ($60,000 on November 29, 2022, $15,000 on December 2, 2022, and $25,000 on December 13, 2022) and (2) $100,000 was received from an entity controlled by our chief financial officer, Andrea Goren ($75,000 on November 29, 2022 and $25,000 on December 13, 2022). These notes accrue 10% annual interest accrues from the date of issuance. These notes are callable with 10 days prior written notice. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest.
The financing fees for all demand notes were recorded as a debt discount and as of June 30, 2023 the Company had fully amortized the discount.
For the six months ended June 30, 2023, the Company incurred $42,758 in interest related to these demand notes.
Jan and March 2023 Convertible Notes
In January and March 2023, the Company issued $410,000 of convertible notes, for $310,000 in cash and the conversion of $100,000 of demand notes from the fourth quarter of 2022. These convertible notes were issued bywith fixed conversion prices of $10.00 (for the $275,000 issued in January 2023) and $12.00 (for the $135,000 issued in March 2023) and (ii) 5-year warrants to purchase 19,375 shares of the Common Stock at an exercise price of $20.00.
The cumulative fair value of the warrants at issuance was $132,183. This was recognized as a debt discount and will be amortized on a straight-line basis over the life of the respective notes. For the six months ending June 30, 2023 the Company inamortized $59,238 of the ~~aggregate original principal amount~~debt discount and as of June 30, 2023 had a remaining debt discount balance of $~~3,494,840~~72,945 ~~(the “2020 Convertible Notes”)~~. ~~See Note 14 – Unit Purchase Options and Warrants for additional information on related securities.~~

Interest on ~~the 2020 Convertible Notes accrued~~these notes accrues at a rate of ten percent (10%) per annum and ~~was~~is payable at the holder’s option either in cash or in shares of the Common Stock at the conversion price set forth in the notes on December 31, 2023, unless converted earlier. For the ~~maturity dates of November 15, 2021, December 22, 2021, and December~~six months ended June 30, ~~2021.~~2023 the Company incurred $17,456 in interest related to these convertible notes.

All amounts ~~of principal and interest~~ due under ~~the 2020 Convertible Notes were~~these notes are 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~~Common Stock at a fixed conversion price ~~of $3.20, subject to adjustments.~~for the notes as described above.

~~As of September 30, 2022, all 2020~~February 2023 Convertible ~~Notes had either converted or been repaid by the Company.~~Debentures

On February 3, and February 17, 2023, the Company entered into securities purchase agreements (the “February Purchase Agreements”) with accredited investors (the “February Investors”) for the purchase of (i) convertible debentures of the Company in the aggregate original principal amount of $500,000 (the “February Debentures”) for a purchase price of $450,000, (ii) warrants (the “February Warrants”) to purchase 12,500 shares (the “February Warrant Shares”) of Common Stock at an exercise price of $15.00 per share, and (iii) 4,167 shares of Common Stock issued as an inducement for issuing the February Debentures. The proceeds, net of placement agent and legal fees, were used for working capital and general corporate purposes.
The cumulative fair value of the warrants at issuance was $291,207. This was recognized as a debt discount and will be amortized on a straight-line basis over the life of the respective notes. For the six months ending June 30, 2023 the Company amortized $86,642 of the debt discount and as of June 30, 2023 had a remaining debt discount balance of $213,016.
Pursuant to the February Debentures, interest on the February Debentures accrues at a rate of eight percent (8%) per annum and is payable at maturity, one year from the date of the February Debentures. For the six months ended June 30, 2023 the Company incurred $8,444 in interest on the February Debentures.
All amounts due under the February Debentures are convertible at any time after the issuance date, in whole or in part, at the option of the February Investors into Common Stock at an initial price of $10.40 per share. This conversion price is subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments and is subject to a floor price.
1617

~~Interest expense on~~The Company may prepay the ~~2020 Convertible Notes was $~~February Debentures at any time in whole or in part by paying a sum of money equal to 0105% of the principal amount to be redeemed, together with accrued and $~~12,779~~ ~~for the three months ended September 30, 2022, and 2021, respectively.~~unpaid interest.

~~Interest expense on~~While any portion of each February Debenture remains outstanding, if the ~~2020 Convertible Notes was~~Company receives cash proceeds of more than $02,000,000 ~~and~~(the “Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the February Investors shall have the right in their sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company above the Minimum Threshold to repay the outstanding amounts owed under the February Debentures. The Company used $~~60,628~~360,151 ~~for~~in proceeds from the ~~nine months ended September~~RD Offering (as described in Note 11 below) to repay a portion of the February Debentures, leaving $139,849 of the February Debentures outstanding as of June 30, ~~2022, and 2021, respectively.~~2023. On August 8, 2023, the Company repaid the remaining balance of $139,849 with proceeds from the August Public Offering (as described in Note 16 below).

~~Amortization~~The February Warrants include anti-dilution protection whereby a subsequent offering priced below the February Warrants’ strike price then in effect would entitle the February Investors to a reduction of ~~options discount on~~such strike price to the ~~2020 Convertible Notes was $~~0price of such subsequent offering and $~~3,734~~ ~~for the three months September 30, 2022, and 2021, respectively.~~
~~Amortization of options discount on the 2020 Convertible Notes was $~~0 ~~and $168,767~~ ~~for the nine months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of warrant discount on the 2020 Convertible Notes was $~~0 ~~and $3,955~~ ~~for the three months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of warrant discount on the 2020 Convertible Notes was $~~0 ~~and $171,449~~ ~~for the nine months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of beneficial conversion feature on the 2020 Convertible Notes was $~~0 ~~and $49,541~~ ~~for the three months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of beneficial conversion feature on the 2020 Convertible Notes was $~~0 ~~and $559,665~~ ~~for the nine months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of issuance costs on the 2020 Convertible Notes was $~~0 ~~and $20,594~~ ~~for the three months ended September 30, 2022, and 2021, respectively.~~
~~Amortization of issuance costs on the 2020 Convertible Notes was $~~0 ~~and $81,764~~ ~~for the nine months ended September 30, 2022, and 2021, respectively.~~
~~Paycheck Protection Program~~
~~On July 1, 2020, the Company received a loan~~an increase in the ~~principal~~February Warrant Shares determined by dividing the dollar amount for which the February Warrants are exercisable by such lower strike price. As a result of the $2.85 strike of the August Public Offering (as described in Note 16 below), the February Warrants now entitle the February Investors to purchase a total 65,790 at a price of $~~157,620~~2.85 ~~pursuant to the U.S. Small Business Administration’s Paycheck Protection Program.~~ ~~The loan matured 18 months from the date of funding, was payable over 18 equal monthly installments, and had an interest of 1%~~ per ~~annum.Up to 100% of the principal balance of the loan was forgivable based upon satisfaction of certain criteria under the Paycheck Protection 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 recognized a gain of $159,126~~ ~~on extinguishment of debt during the year ended December 31, 2021.~~February Warrant Share.

Note 10 – Related Party Transactions

In ~~October 2021, Paulson Investment~~the fourth quarter of 2022, the Company ~~(“Paulson”) served~~received $700,000 through the issuance of demand notes from related parties, as follows: (a) $500,000 from JAG; (b) $100,000 from our chief executive officer, Steve Shum; and (c) $100,000 from our chief financial officer, Andrea Goren. The Company’s CFO is a ~~placement agent for~~beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the ~~Company’s registered direct offering and received fees and commissions for such role in the amount of $323,584. Trent Davis, one~~Company. See Note 9 of the ~~Company’s directors, is President~~Notes to Consolidated Financial Statements for additional information.
As of ~~Paulson. Additionally, Paulson received fees of~~June 30, 2023 the Company owed accounts payable to related parties totaling $~~25,200~~142,176 ~~associated with shares sold in January 2022. Mr. Davis did not receive any compensation~~, primarily related to ~~the fees~~unpaid employee expense reimbursements 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~~.unpaid board fees.

Note 11 – Stockholders’ Equity
Reverse Stock ~~Splits~~Split
On ~~December 16, 2019, the Company’s stockholders approved a reverse stock split at a ratio of between~~ ~~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,~~June 28, 2023, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20 and also approved a proportionate decrease in its authorized common stock to ~~1-for-20~~6,250,000 shares from 125,000,000. On ~~May 21, 2020,~~July 26, 2023, the Company filed a certificate of change (with an effective date of ~~May 26, 2020)~~July 28, 2023) 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~~. 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,~~July 27, 2023, the Company received notice from ~~FINRA/OTC Corporate Actions~~Nasdaq that the reverse split would take effect at the open of business on ~~November 9, 2020,~~July 28, 2023, and the reverse stock split took effect on that date. All share information included in this Form 10-Q has been reflected as if the reverse stock split occurred as of the earliest period presented.

~~The consolidated financial statements presented reflect the reverse splits.~~
17
~~Public offerings~~February 2023 Equity Purchase Agreement

On ~~November 12, 2020,~~February 3, 2023, the Company entered into an ~~underwriting~~equity purchase agreement (the ~~“Underwriting Agreement”~~“ELOC”) and registration rights agreement (the “ELOC RRA”) with ~~Roth Capital Partners, LLC, as representative~~an accredited investor (the “Feb 3 Investor”) pursuant to which the Company has the right, but not the obligation, to direct the Feb 3 Investor to purchase up to $10.0 million (the “Maximum Commitment Amount”) of shares of Common Stock, in multiple tranches. Further, under the ELOC and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit notices to the Feb 3 Investor to purchase shares of Common Stock (i) in a minimum amount of not less than $25,000 and (ii) in a maximum amount of up to the lesser of (a) $750,000 or (b) 200% of the ~~several underwriters (the “Underwriters”), in connection with~~Company’s average daily trading value of the ~~Company’s public offering (the “Offering”) of~~ Common Stock.
~~3,625,000~~
Also on February 3, 2023, the Company issued to the Feb 3 Investor 7,500 shares of ~~common stock, at a public offering price of $~~Common Stock for its commitment to enter into the ELOC.
~~3.20~~ ~~per share.~~
The ~~initial closing~~obligation of the ~~Offering for~~ ~~3,625,000~~Feb 3 Investor to purchase shares of ~~common stock took place on November 17, 2020. On November 18, 2020, the Underwriters exercised their option~~Common Stock pursuant to the ~~Underwriting Agreement~~ELOC ends on the earlier of (i) the date on which the purchases under the ELOC equal the Maximum Commitment Amount, (ii) 24 months after the date of the ELOC (February 3, 2025), (iii) written notice of termination by the Company, (iv) the date that the ELOC RRA is no longer effective after its initial effective date, or (v) the date that the Company commences a voluntary case or any person or entity commences a proceeding against the Company pursuant to ~~purchase an additional~~ ~~528,750~~ ~~shares~~or within the meaning of ~~common stock (the “Option Shares”). The closing~~federal or state bankruptcy law, a custodian is appointed for the ~~Option Shares took place on November 20, 2020,~~Company or for ~~which~~all or substantially all of its property, or the Company ~~received approximately $1.5~~ ~~million in net proceeds after deducting underwriting discounts and commissions. With~~makes a general assignment for the ~~exercise~~benefit of its creditors (the “Commitment Period”).
During the ~~option~~Commitment Period, the price that Feb 3 Investor will pay to purchase the ~~Option Shares, the total amount of~~ shares of ~~common stock sold in~~Common Stock that it is obligated to purchase under the ~~Offering was~~ ~~4,153,750~~ ~~shares~~ELOC shall be 97% of the “market price,” which is defined as the lesser of (i) the lowest closing price of our Common Stock during the 7 trading day-period following the clearance date associated with ~~aggregate net proceeds received by~~the applicable put notice from the Company or (ii) the lowest closing bid price of ~~approximately $~~the Common Stock on the principal trading market for the Common Stock (currently, the Nasdaq Capital Market) on the trading day immediately preceding a put date.
~~11.8~~ ~~million after deducting underwriting discounts and commissions and offering expenses.~~
March 2023 Registered Direct Offering

On ~~October 1, 2021, the Company and certain institutional and accredited investors and members of the Company’s management team (the “Investors”)~~March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which the Company agreed to issue and sell to ~~the Investors~~ ~~1,240,737~~ ~~shares of its common stock,~~such investor (i) in a registered direct offering (the ~~“Direct~~“RD 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 $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 $323,584~~, ~~as well as warrants to purchase~~ ~~37,222~~69,000 shares of ~~the Company’s common stock~~Common Stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $~~3.912~~0.20 per share, and (ii) in a concurrent private placement (the “March Warrant Placement”), a common stock purchase warrant (the “March Warrant”), exercisable for an aggregate of up to 276,000 shares of Common Stock, at an exercise price of $12.60 per share. The securities to be issued in the RD Offering (priced at the marked under Nasdaq rules) were offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-255096), initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. All Pre-Funded Warrants were exercised by the investor in June 2023.
The March Warrant (and the shares of Common Stock issuable upon the exercise of the March Warrant) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On March 27, 2023, the Company closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by the Company. In the event the March Warrant is fully exercised for cash, the Company would receive additional gross proceeds of approximately $3.5 million. Under the March Purchase Agreement, the Company may use a portion of the net proceeds of the offering to (a) repay February Debentures, and (b) to pay the down payment for Wisconsin Fertility acquisition. The remainder of the net proceeds will be used for working capital, capital expenditures, and other general corporate purposes. The Company used $383,879 in proceeds to repay a portion of the February Debentures and related fees and interest and the remainder of the proceeds are being used for working capital and general corporate purposes.
18
Under the March Purchase Agreement, the Company is required within 30 days of the closing date of the March Warrant Placement to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrant. The Company is required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full review by the SEC), and to keep the Resale Registration Statement effective at all times until no shares of Common Stock remain exercisable under the March Warrant.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from the date of the RD Offering and March Warrant Placement, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company issued ~~51,528~~3,994 shares of ~~common stock~~Common Stock to employees and directors and ~~40,000~~12,202 shares of ~~common stock~~Common Stock to consultants with a fair value of $~~218,196~~51,565 and $~~89,406~~106,176, respectively. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).
During the ~~nine~~six months ended ~~September~~June 30, ~~2022, the Company granted~~ ~~96,333~~ ~~restricted stock units to employees that vest~~ 50~~% at six months from grant date and~~ 50~~% at twelve months from grant date. The shares were granted under the 2019 Plan. As of September 30, 2022 the Company had issued~~ ~~35,666~~ ~~vested shares and recognized stock based compensation expense of $189,831~~ ~~during the nine months ended September 30, 2022 associated with the equity grants.~~
~~During the nine months ended September 30, 2022,~~2023, the Company issued ~~15,000~~297 shares of ~~its common stock~~Common Stock upon the exercise of options. The Company received proceeds of $2,375.
In February 2023, the Company issued 4,167 shares of Common Stock with a fair value of $56,313 as inducement for issuing the February Debentures. The fair value of the shares was recognized as a discount to the February Debentures and will be amortized over the life of the notes.
In February 2023, the Company 7,500 shares of Common Stock in connection with the ELOC with a fair value of $93,000 that was expensed in the period.
In March 2023, the Company issued 69,000 shares of Common Stock in the RD Offering and March Warrant Placement. The Company received net proceeds of approximately $2.7 million.
In May 2023, the Company issued 6,115 shares of Common Stock to consultants in consideration of services rendered with a fair value of $~~27,360~~45,000. 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 net proceeds of $289,800~~.

Note 12 – Equity-Based Compensation

Equity Incentive Plans

In October 2019, the Company adopted the 2019 Plan. Under the 2019 Plan, the Company’s board of directors is authorized to grant stock options to purchase ~~common stock,~~Common Stock, restricted stock units, and restricted shares of ~~common stock~~Common Stock to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of ~~500,000~~25,000 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~~Common Stock outstanding on December 31 of the preceding calendar ~~year.~~year. In January ~~2022,~~2023, the number of available shares increased by ~~715,749~~ ~~shares and on October 12, 2022 shareholders approved an amendment to the plan to add an additional~~ ~~412,802~~36,498 shares bringing the total shares available under the 2019 Plan to ~~2,500,000~~125,000.

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~~Common Stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a ~~three~~three-year~~-year~~ period.
18

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

Schedule of Stock Options Activity

Number of
Shares

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number of
Shares

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Outstanding as of December 31, 2021 1,055,894 $ 5.09 $ 133,022
Outstanding as of December 31, 2022 64,850 $ 68.00 $ -
Granted 433,711 3.70 - 59,048 7.74 -
Exercised - - - (297 ) 8.00 -
Canceled 10,000 3.89 - (2,346 ) 72.38 -
Balance as of September 30, 2022 1,479,605 4.50 -
Exercisable as of September 30, 2022 896,139 5.21 -
Balance as of June 30, 2023 121,255 $ 2.10 $ -
Exercisable as of June 30, 2023 71,251 $ 62.42 $ -

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:

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

Nine months ended
September 30,

2022 2021
Risk-free interest rate range 1.6 to 1.9 % 0.22 to 0.73 %
Expected life of option-years 5.25 to 5.75 5.3 to 6.5
Expected stock price volatility 110 to 113 % 107 to 125 %
Expected dividend yield - % - %
Six months ended June 30,
2023 2022
Risk-free interest rate range 3.6-3.69 % 1.6 to 1.9 %
Expected life of option-years 5-5.63 5.25 to 5.75
Expected stock price volatility 106.6-114.9 % 110.4 to 113.2 %
Expected dividend yield - % - %
19

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~~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,~~Common Stock, nor does it expect to do so in the foreseeable future.

Schedule of Share Based Payments Arrangements Options Exercised and Options Vested

Total
Intrinsic
Value of
Options
Exercised

Total Fair
Value of Options
Vested

Year ended December 31, 2021 $      - $ 1,543,912
Nine months ended September 30, 2022 $ - $ 861,284

Total
Intrinsic
Value of
Options
Exercised

Total Fair
Value of Options
Vested

Year ended December 31, 2022 $ - $ 1,616,401
Six months ended June 30, 2023 $ - $ 654,925

For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the weighted average grant date fair value of options granted was $~~2.97~~6.38 per share. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through ~~September~~June 30, ~~2022,~~2023, the weighted average remaining service period is ~~1.2~~1 ~~years.~~year.

Restricted Stock and Restricted Stock Units

In the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company granted ~~187,861~~13,272 in restricted stock units and shares of restricted stock to certain employees, directors, and consultants under the 2019 Plan. Restricted stock issued to employees, directors, and consultants generally vest either at grant or vest over a period of one year from the date of grant.

The following table summarizes the Company’s restricted stock awards activity under the 2019 Plan during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Schedule of Aggregate Restricted Stock Awards and Restricted Stock Unit Activity

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 187,861 3.08 579,086
Vested (136,507 ) 3.09 (385,035 )
Forfeitures - - -
Balance as of September 30, 2022 61,084 $ 3.03 $ 230,199
19

Number of
Unvested
Shares

Weighted
Average
Grant Date
Fair Value

Aggregate
Value
of Shares

Balance as of December 31, 2022 3,533 $ 8.40 $ 29,949
Granted 13,272 8.88 97,172
Vested (16,505 ) 18.82 286,597
Forfeitures - - -
Balance as of June 30, 2023 300 18.42 5,525
Note 13 – Unit Purchase Options and Warrants
~~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~~ ~~per unit, with each unit consisting of~~ ~~one~~ ~~share of common stock and a warrant to purchase one share of common stock at an exercise price of $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 downward 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 unit purchase options and warrants issued in this period were determined to require equity 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~~ ~~warrants to purchase~~ ~~6,750~~ ~~shares of the Company’s common stock at an exercise price of $3.20~~.
~~A Monte Carlo model was used because the investor unit purchase options and 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:~~
~~Schedule of Fair Value Measurement Inputs and Valuation Techniques~~
~~Risk-free interest rate range~~ ~~0.33% -~~ ~~0.39~~ %
~~Stock price~~ $ ~~3.00~~ ~~- $3.95~~
~~Expected life of warrants and unit purchase options (years)~~ ~~5.00~~
~~Expected stock price volatility~~ ~~108.2% -~~ ~~112.5~~ %
~~Expected dividend yield~~ 0 %
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 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 following table sets forth the activity of unit purchase options:

Schedule of Unit Purchase Stock Options Activity

Number of
Unit Purchase
Options

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number of
Unit Purchase
Options

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Outstanding as of December 31, 2021 $ 92,893 $ 3.20 $ 5,647
Outstanding as of December 31, 2022 $ 4,649 $ 64.00 $ -
Granted - - - - - -
Exercised - - - - - -
Canceled - - - - - -
Balance as of September 30, 2022 $ 92,893 $ 3.20 $ -
Balance as of June 30, 2023 $ 4,649 $ 64.00 $ -

The following table sets forth the activity of warrants:

Schedule of Warrants Activity

Number of
Warrants

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number of
Warrants

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Outstanding as of December 31, 2021 167,272 $ 3.62 $ 16,029
Outstanding as of December 31, 2022 25,864 $ 30.20 $ -
Granted - - - 432,618 12.60 -
Exercised - - - (115,000 ) 0.20 -
Canceled - - - - - -
Balance as of September 30, 2022 167,272 $ 3.62 $ -
Balance as of June 30, 2023 378,849 $ 20.41 $ -

20

Note 14 – Income Taxes

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 $800~~ ~~for the three and nine months ended September 30, 2022, compared to $~~02,865 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~compared to $800 for the three and six months ended June 30, 2022. The annual forecasted effective income tax rate for ~~2022~~2023 is 0%, with a year-to-date effective income tax rate for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, of 0%.

Note 15 – Commitments and Contingencies

Insurance

The Company’s insurance coverage is carried with third-party insurers and includes: (i) general liability insurance covering third-party exposures; (ii) statutory workers’ compensation insurance; (iv) excess liability insurance above the 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 our business activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are common for companies with similar types of operations.

Legal Matters

The Company is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.

Note 16 – Subsequent Events

~~In October and November 2022,~~On July 11, 2023, the Company ~~received $~~issued ~~0.35~~16,250 ~~million through~~shares of Common Stock in consideration of a settlement with an unrelated third party. 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.
On August 8, 2023, the Company issued 26,391 shares of Common Stock upon exercise of an existing warrant on a net-exercise basis. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) and/or 3(a)(9) of the Securities Act of 1933, as amended.
Reverse Stock Split
On July 28, 2023 the Company effected a 1-for-20 reverse stock split of its outstanding common stock, please see Note 11 for more details. The Company issued an additional 135 shares of Common Stock for fractional shares.
Amendment to Armistice SPA
On July 7, 2023, the Company entered into an Amendment to Securities Purchase Agreement (the “Armistice Amendment”) with Armistice Capital Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities Purchase Agreement (the “Armistice SPA”) with Armistice pursuant to which the Company agreed that from March 23, 2023 until 45 days after the effective date of the Resale Registration Statement (as defined below) the Company would not (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of ~~demand notes~~any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, other than the prospectus supplement filed in connection with that offering and the Resale Registration Statement (the “Subsequent Equity Financing Provision”). In consideration of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent Equity Financing Provision from the Armistice SPA, the Company agreed to pay Armistice a ~~related party,~~fee a $1,000,000 (the “Armistice Amendment Fee”) within two days of the closing of this Offering. Additionally, the Company agreed to include a proposal in its proxy statement for its 2023 Annual Meeting of Stockholders for the purpose of obtaining the approval of the holders of a majority of our outstanding voting common stock, to effectuate the reduction of the exercise price set forth in Section 2(b) of the Common Stock Purchase Warrants issued to Armistice on March 27, 2023 (the “Existing Warrants”) to the per unit public offering price of this Offering, in accordance with Nasdaq Rule 5635(d) (the “Shareholder Approval”) with the recommendation of the Company’s board of directors that such proposal be approved. The Company also agreed to solicit proxies from its shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and that all management-appointed proxyholders shall vote their proxies in favor of such proposal. Further, if the Company does not obtain Shareholder Approval at the first meeting, the Company will call a meeting every six (6) months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is obtained or the Existing Warrants are no longer outstanding. Until such approval is obtained, the exercise price of the Existing Warrants will remain unchanged. The Armistice Amendment Fee was paid concurrent with closing of the August 2023 Public Offering on August 8, 2023.
21
JAG Demand Note
On July 10, 2023, the Company entered into a letter agreement (the “Agreement”) with JAG Multi Investments LLC (“JAG”)~~. Our~~, a related party to Andrea Goren, the Company’s CFO, who is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. ~~If paid prior to December 31, 2022,~~ In the Agreement, the Company and JAG agreed that (1) JAG would loan the Company $100,000 under a demand ~~notes are interest free until December 31, 2022. For any amount that remains outstanding past December 31, 2022, 10% annual interest would accrue from~~promissory note, (2) the date on which JAG can demand payment of ~~issuance. At maturity,~~principal, fees and any interest under those certain demand promissory previously issued to JAG by the Company for a total of $500,000, of which JAG may demand payment of $500,000 as of the date hereof, be extended to September 30, 2023.
July 2023 Standard Merchant Cash Advance Agreement
On July 19, 2023, the Company entered into a Standard Merchant Cash Advance Agreement with Cedar Advance LLC (“Cedar”) under which Cedar purchased $543,750 of our receivables for a gross purchase price of $375,000. The Company received net proceeds of $356,250. Until the purchase price has been repaid, the Company agreed to pay ~~outstanding principal,~~Cedar $19,419.64 per week. If the Company repays the purchase price within 30-days then the amount payable shall be reduced to $465,000. In addition, the Company granted Cedar a ~~10% financing fee~~security interest in its accounts, including deposit accounts and ~~accrued interest~~accounts receivable. The Company intends to use the proceeds for working capital and general corporate purposes.
Notices from Nasdaq of Failure to Satisfy Continued Listing Rules.
On July 11, 2023, the Company received a notice from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that, based upon the Company’s non-compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Rule”), ~~if any.~~ as of July 10, 2023, the Nasdaq Hearing Panel (the “Panel”) will consider such non-compliance in its decision regarding the Company’s continued listing on Nasdaq.
The ~~demand notes are callable with 10 days prior written notice, which may be delivered~~Company plans to timely submit to the Panel confirmation of its plan to regain compliance under the Rule, providing similar information to that presented to the Panel at the Company’s hearing on July 6, 2023.
As previously disclosed, the Company ~~starting 30 days~~was granted a 180-day grace period to regain compliance with the Rule through July 10, 2023. The Company was unable to do so by that date, which resulted in the issuance of the Staff’s notice.
On July 27, 2023, the Company received a letter from ~~issuance.~~ the Panel under which they granted its request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule as well as Nasdaq Listing Rule 5550(a)(2) (to maintain a minimum bid price of $1; the “Price Rule”) on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises the Company that it is a requirement during the exception period that the Company provide prompt notification of any significant events that occur during this time that may affect its compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question its ability to meet the terms of the exception granted.
August 2023 Public Offering
On August 4, 2023, the Company, entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional and other investors, pursuant to which the Company agreed to issue and sell to such investors in a public offering (the “Offering”), 1,580,000 units (the “Units”) with each Unit consisting of (i) one share (the “Shares”) of Common Stock of the Company, and (ii) two common stock purchase warrants (the “Warrants”), each exercisable for one share of Common Stock at an exercise price of $2.85 per share, for an aggregate of 1,580,000 Shares and Warrants to purchase 3,160,000 shares of Common Stock being sold in the Offering, at a price of $2.85 per Unit. The securities to be issued in the Offering were offered pursuant to the Company’s registration statement on Form S-1 (File 333-273174) (the “Registration Statement”), initially filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), on July 7, 2023 and declared effective on August 3, 2023.
The Company closed the Offering on August 8, 2023, raising gross proceeds of approximately $4.5 million before deducting placement agent fees and other offering expenses payable by the Company. The Company used (i) $2,150,000 of the net proceeds to fund the initial installment of the purchase price required to consummate the acquisition of the Wisconsin Fertility Institute (net of a $350,000 holdback) on August 10, 2023; (ii) $1,000,000 of the net proceeds of this offering to pay Armistice the Armistice Amendment Fee for agreeing to remove the Subsequent Equity Financing Provision from the Armistice SPA; (iii) $100,000 to repay that certain 8% Debenture with a maturity date of February 3, 2024issued to Peak One Opportunity Fund LP plus accrued interest and fees of approximately $7,784; and (iv) $39,849 to repay that certain 8% Debenture with a maturity date of February 17, 2024issued to First Fire Global Opportunities Fund, LLC, plus accrued interest and fees of approximately $3,127. The Company intends to use the remaining net proceeds from this offering for working capital and general corporate purposes.
Also in connection with the offering, on August 4, 2023, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which (i) the Placement Agent agreed to act as placement agent on a “best efforts” basis in connection with the Offering and (ii) the Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds (and 5% for certain investors) raised in the offering and warrants to purchase up to 110,600 shares of Common Stock at an exercise price of $3.14 (the “Placement Agent Warrants”). The Placement Agent Warrants (and the shares of Common Stock issuable upon the exercise of the Placement Agent Warrants) were not registered under the Securities Act and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
Wisconsin Fertility Institute Acquisition
On August 10, 2023, the Company, through Wood Violet Fertility LLC, a Delaware limited liability company (“Buyer”) and wholly owned subsidiary of INVO Centers LLC, a Delaware company wholly-owned by INVO, consummated its acquisition of the Wisconsin Fertility Institute (the “Clinic”) for a combined purchase price of $10 million, of which $2.5 million was paid on the closing date (net $2,150,000 after a $350,000 holdback) plus assumption of the inter-company loan owed by WFRSA in the amount of $528,756 and the remaining three installments of $2.5 million each will be paid on the subsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock valued at $125.00, $181.80, and $285.80, for the second, third, and final installments, respectively.
The Clinic is comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owns, operates and manages the Clinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services.
INVO is purchasing the non-medical assets of WFRSA and one hundred percent of FLOW’s membership interests. As reflected in the WFRSA purchase agreement, the Buyer and WFRSA will enter into a management services agreement pursuant to which WFRSA will outsource all its non-medical activities to the Buyer.

2122

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” “INVO,” or “INVO Bioscience, Inc.” refer to INVO Bioscience, Inc.

Overview

We are a ~~commercial-stage~~healthcare services fertility company dedicated to expanding the assisted reproductive technology (“ART”) marketplace by making fertility care accessible and inclusive to people around the world. Our ~~primary mission~~commercialization strategy is ~~to implement new medical technologies aimed at increasing~~focused on the ~~availability~~opening of ~~affordable, high-quality, patient-centered~~dedicated “INVO Centers” offering the INVOcell® and IVC procedure (with three centers in North America now operational), the acquisition of US-based, profitable in vitro fertilization (“IVF”) clinics and the sale and distribution of our technology solution into existing fertility ~~care.~~clinics. Our ~~flagship product~~proprietary technology, INVOcell®, 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 with a more ~~connected~~natural, intimate, and ~~intimate~~more affordable experience in comparison to other ART treatments. We believe the IVC procedure can deliver comparable results at a ~~lower~~fraction of the cost ~~than~~of traditional ~~in vitro~~ ~~fertilization (“IVF”)~~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), the acquisition of existing fertility clinics, as well as the distribution and sale of our technology solution into existing fertility clinics.

Unlike ~~conventional infertility treatments such as~~ IVF where the oocytes and sperm develop into embryos in an expensive laboratory incubator, the INVOcell allows fertilization and early embryo development to take place in the woman’s body. This allows for many benefits in the IVC procedure, including:

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

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

While the INVOcell remains important to our efforts, our commercialization and corporate development strategy has expanded to focus primarily on providing ART services to the significantly underserved patient population seeking access to affordable fertility treatment. The Company is now largely focused on the opening of dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational) and the acquisition of existing IVF clinics, in addition to continuing to distribute and sell our technology solution to existing fertility clinics.
On August 10, 2023 we closed our first acquisition, Wisconsin Fertility Institute (“WFI”). The acquisition of WFI is expected to provide significant scale to our operations and complement our INVO Center strategy. The Madison-based fertility center primarily offers conventional IVF procedures and generated more than $5 million in revenue and approximately $1.7 million of net income based on fiscal 2022 audited results.
2223

Operations

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~~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 INVOcell 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:

● Manufacturing: Wewe are ISO 13485:2016 certified and manage all aspects of production and manufacturing with qualified suppliers. Our key suppliers have been steadfast partners since our company first began and can provide us with virtually an unlimited capability to support our growth objectives, with all manufacturing performed in the New England region of the U.S..
● Raw Materials: ~~All~~all raw materials utilized for the INVOcell are medical grade and commonly used in medical devices (e.g., medical grade silicone, medical grade plastic). Our principal molded component suppliers are well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are supplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified, and U.S. Food & Drug Administration (“FDA”) registered.
● CE Mark: INVO Bioscience received the CE Mark in October 2019. The CE Mark permits the sale of devices in Europe, Australia and other countries that recognize the CE Mark, subject to local registration requirements.
● US Marketing Clearance: the safety and efficacy of the INVOcell ~~was~~has been demonstrated and cleared for marketing and use by the FDA in November 2015.
● Clinical: ~~We are actively seeking~~In June 2023 we received FDA 510(k) clearance to expand the labeling on ~~our~~the INVOcell device ~~the~~and its indication for use to ~~cover~~provide for a ~~day 5~~5-day incubation ~~period, in addition to~~period. The data supporting the currently approved use of day 3 incubation. This may be accomplished with a prospective clinical study, which we previously designed and had the Institutional Review Board (“IRB”) approve to evaluate the modified INVOcell system for effectiveness of achieving fertilization, implantation, embryo development, clinical pregnancy, and live birth after day 5 continuous vaginalexpanded 5-day incubation (clinicaltrials.gov identifier: NCT04246268). The objective of this study would be to assess the efficacy, safety, comfort and retention of the INVOcell with the retention device and demonstrate superior efficacy following day 5 vaginal incubation as compared to the current day 3 vaginal incubation indication. As a result of the COVID-19 pandemic, we elected to place the trial on hold, but expect to move it forward with someclearance demonstrated improved design parameters. In the meantime, and as a result of available retrospective, real-market usage (day 5) data, we initiated an effort to pursue a 510(k) filing utilizing retrospective data as a separate effort to achieve our label enhancement. This retrospective effort remains ongoing and active in 2022.patient outcomes.
23

Market Opportunity

The global ART marketplace is a large, multi-billion industry growing at a strong pace in ~~most~~many parts of the world as increased infertility rates, increased patient awareness, acceptance of treatment options, and improving financial incentives such as insurance and ~~government~~governmental 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~~though IVF. 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).
24

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.
As part of the expanded corporate expansion efforts the Company has incorporated an acquisition strategy to the business. The Company estimates that there are approximately 80 to 100 established owner-operated IVF clinics that may represent suitable acquisitions as part of this additional effort.

Competitive Advantages

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

Lower cost than IVF with equivalent ~~efficacy~~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.~~IVF.

The IVC procedure is currently being offered at ~~practicing~~several IVF clinics at a price 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 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~~three-pronged strategy (IVF clinics, INVO Centers and OB/GYN practices), in addition to lowering costs, we believe INVOcell and the 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.

24
Greater patient involvement. With the IVC procedure, the patient uses their own body for fertilization, incubation, and early embryo development which creates a greater sense of involvement, comfort, and participation. In some cases, this may also free people from barriers related to due to ethical or religious concerns, or fears of laboratory mix-ups.

25
INVOcell Sales and Marketing

Our ~~product commercialization efforts are~~approach to market is focused on identifying ~~distributors and~~ partners within targeted geographic regions that we believe can best promote ~~market and sell the INVOcell and~~ support our efforts to expand access to advanced fertility treatment for the large number of underserved infertile people hoping to have a baby. We believe that the INVOcell-based IVC procedure is an effective and affordable treatment option that greatly reduces the need for more expensive IVF lab facilities and allows providers to pass on related savings to patients without compromising efficacy. We have been cleared to sell the INVOcell in the United States since November 2015 after receiving de novo class II clearance from the FDA. Our primary focus over the past two years has been on establishing INVO Centers in the U.S. and abroad to promote the INVOcell and the IVC procedure and acquiring existing U.S.-based IVF clinics where we can integrate the INVOcell. While we continue selling the INVOcell directly to ~~U.S. fertility~~IVF clinics and ~~developing key international market partnerships~~via distributors and other partners around the ~~world. More recently,~~world, we ~~announced our intention~~have transitioned INVO from being a medical device company to ~~pursue acquisitions of established fertility clinics in the U.S.~~
~~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~~one that is mostly focused on opening and acquiring additional clinics in the US to expand access to INVOcell and the IVC procedure. We announced new INVO Centers in the San Francisco Bay Area, Tampa, Florida and Kansas City, Kansas, as well as the execution of a non-binding letter of intent to acquire an existingproviding fertility ~~clinic.~~
~~We continue to seek partners that will contractually commit to meeting agreeable performance objectives that are consistent with our goals and objectives.~~
~~Ferring~~
On November 12, 2018, we entered into a U.S. Distribution Agreement (the “Ferring Agreement”) with Ferring International Center S.A. (“Ferring”), which closed on January 14, 2019. Pursuant to the Ferring Agreement, among other things, we granted Ferring an exclusive license in the United States to market, promote, distribute, and sell the INVOcell. Ferring was responsible, at its own cost, for all commercialization activities 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 five INVO Centers in the United States, which as of March 2, 2021, was amended to seven centers. We retained all commercialization rights for the INVOcell outside of the United States.
On November 2, 2021, Ferring notified us 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. 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 Ferring 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 was recognized over a period of time, which is generally the subscription period. During the years ended December 31, 2021, and 2020, we recognized $3.6 million and $0.7 million of revenue related to the Ferring license agreement, respectively.
~~As of December 31, 2021, we had no deferred revenue related to the Ferring Agreement as it was recognized in the fourth quarter of fiscal year 2021 in relation to the contract termination.~~services.

International Distribution Agreements

We have 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. 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.

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

INVOcell

Registration
Market Distribution Partner Date Initial Term Status in Country

~~Canada~~ ~~Invaron Pharmaceuticals Inc.~~ ~~July 2020~~ ~~1-Year~~ ~~Completed~~
Mexico (a) Positib Fertility, S.A. de C.V. Sept 2020 ~~n/a~~TBD** Completed
Malaysia ~~SNS Murni SDN BHD~~iDS Medical Systems ~~Sept 2022~~Nov 2020 3-year Completed
Pakistan Galaxy Pharma Dec 2020 1-year In process
Thailand IVF Envimed Co., Ltd. April 2021 1-year Completed
Sudan Quality Medicines, Cosmetics & Medical Equipment Import Sept 2020 1-year In process
Ethiopia Quality Medicines, Cosmetics & Medical Equipment Import Sept 2020 1-year In process
Uganda Quality Medicines, Cosmetics & Medical Equipment Import Sept 2020 1-year Not required
Nigeria G-Systems Limited Sept 2020 5-year Completed
Iran Tasnim Behboud Dec 2020 1-year Completed
Sri Lanka Alsonic Limited July 2021 1-year In process
China Onesky Holdings Limited May 2022 5-year In process

(a) Our Mexico JV. Please note that the registration is temporarily in the name of Proveedora de Equipos y Productos, S.A. de C.V. and will be transferred to Positib Fertility as soon as practicable.

Investment in Joint Ventures and Partnerships

As part of our commercialization strategy, we entered into a number of joint ventures and partnerships designed to establish new INVO Centers.

The following table sets forth a list of our current joint venture arrangements:

Affiliate Name Country
Percent (%)

Ownership
HRCFG INVO, LLC United States 50 %
Bloom Invo, LLC United States 40 %
Positib Fertility, S.A. de C.V. Mexico 33 %
~~Ginekalix INVO Bioscience LLC Skopje~~ ~~Republic of North Macedonia~~ 50 %
~~The following table sets forth a list of our current partnership arrangements:~~
~~Partner~~ ~~Country~~ ~~Partnership Split~~
~~Lyfe Medical~~ ~~United States~~ 40 %

Alabama JV Agreement

On March 10, 2021, our wholly owned subsidiary, INVO Centers, LLC (“INVO CTR”), entered into a limited liability company agreement with HRCFG, LLC (“HRCFG”) to form a joint venture for the purpose of establishing an INVO 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 CTR include providing certain funding to the Alabama JV and providing access to and being the exclusive provider of the INVOcell to the Alabama JV. INVO CTR will also perform all required, industry specific compliance and accreditation functions, and product documentation for product registration.

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 ~~September~~June 30, ~~2022~~2023 we invested $1.6 million in the Alabama JV in the form of a note. For the ~~nine~~six months ended ~~September~~June 30, 2023, the Alabama JV recorded net income of $2 thousand, of which we recognized a gain from equity method investments of $805. For the six months ended June 30, 2022, the Alabama JV recorded a net loss of $0.3 million, of which we recognized a loss from equity method ~~investment~~investments of $0.2 million.

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Georgia JV Agreement

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, 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 ~~September~~June 30, ~~2022,~~2023, INVO invested $0.9 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 ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, the Georgia JV recorded a net ~~loss~~losses of ~~$0.5 million.~~$0.1 million and $0.2 million respectively. Noncontrolling interest in the Georgia JV was $0. See Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on the Georgia JV.
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Mexico JV Agreement

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.~~2021.

The Mexico JV is accounted for using the equity method in our financial statements. As of ~~September~~June 30, ~~2022,~~2023, INVO invested ~~$0.2~~$0.1 million in the Mexico JV. For the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, the Mexico JV recorded a net ~~loss~~losses of ~~$0.1 million~~$74 thousand and $90 thousand, respectively, of which we recognized a loss from equity method ~~investment~~investments of ~~$0.05 million.~~$24 thousand and $30 thousand, respectively.

~~Malaysia JV Agreement~~
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 September 30, 2022, no joint venture entity had been formed.
~~North Macedonia JV Agreement~~
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 September 30, 2022, no joint venture entity had been formed.
~~Lyfe Medical Center I, LLC Partnership Agreement~~
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 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 Lyfe Agreement, we will receive 40% of the net income received by the Bay Area Clinic for the performance of the Lab Services. As of September 30, 2022, the Bay Area Clinic was not yet operational.
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Terminated JV Agreements
As of May 15, 2023, our JV agreements to establish INVO Centers in the Republic of North Macedonia and in the Bay Area of California were terminated due to lack of progress.
Recent Developments
Wisconsin Fertility Institute Acquisition
On August 10, 2023, INVO, through Wood Violet Fertility LLC, a Delaware limited liability company (“Buyer”) and wholly owned subsidiary of INVO Centers LLC, a Delaware company wholly-owned by INVO, consummated its acquisition of the Wisconsin Fertility Institute (the “Clinic”) for a combined purchase price of $10 million, of which $2.5 million was paid on the closing date (net $2,150,000 after a $350,000 holdback) plus assumption of the inter-company loan owed by WFRSA in the amount of $528,756 and the remaining three installments of $2.5 million each will be paid on the subsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock valued at $125.00, $181.80, and $285.80, for the second, third, and final installments, respectively.
The Clinic is comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owns, operates and manages the Clinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services.
INVO is purchasing the non-medical assets of WFRSA and one hundred percent of FLOW’s membership interests. As reflected in the WFRSA purchase agreement, the Buyer and WFRSA will enter into a management services agreement pursuant to which WFRSA will outsource all its non-medical activities to the Buyer.
August 2023 Public Offering
On August 4, 2023, we, entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional and other investors, pursuant to which we agreed to issue and sell to such investors in a public offering (the “Offering”), 1,580,000 units (the “Units”) with each Unit consisting of (i) one share (the “Shares”) of our Common Stock, and (ii) two common stock purchase warrants (the “Warrants”), each exercisable for one share of Common Stock at an exercise price of $2.85 per share, for an aggregate of 1,580,000 Shares and Warrants to purchase 3,160,000 shares of Common Stock being sold in the Offering, at a price of $2.85 per Unit. The securities to be issued in the Offering were offered pursuant to our registration statement on Form S-1 (File 333-273174) (the “Registration Statement”), initially filed by us with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), on July 7, 2023 and declared effective on August 3, 2023.
We closed the Offering on August 8, 2023, raising gross proceeds of approximately $4 million before deducting placement agent fees and other offering expenses payable by us. We used (i) $2,150,000 of the net proceeds to fund the initial installment of the purchase price required to consummate our acquisition of the Wisconsin Fertility Institute (net of a $350,000 holdback) on August 10, 2023; (ii) $1,000,000 of the net proceeds of this offering to pay Armistice the Armistice Amendment Fee for agreeing to remove the Subsequent Equity Financing Provision from the Armistice SPA; (iii) $100,000 to repay that certain 8% Debenture with a maturity date of February 3, 2024 issued to Peak One Opportunity Fund LP plus accrued interest and fees of approximately $7,784; and (iv) $39,849 to repay that certain 8% Debenture with a maturity date of February 17, 2024 issued to First Fire Global Opportunities Fund, LLC, plus accrued interest and fees of approximately $3,127. We intend to use the remaining net proceeds from this offering for working capital and general corporate purposes.
Also in connection with the offering, on August 4, 2023, we entered into a placement agency agreement (the “Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which (i) the Placement Agent agreed to act as placement agent on a “best efforts” basis in connection with the Offering and (ii) we agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the offering and warrants to purchase up to 110,600 shares of Common Stock at an exercise price of $3.14 (the “Placement Agent Warrants”). The Placement Agent Warrants (and the shares of Common Stock issuable upon the exercise of the Placement Agent Warrants) were not registered under the Securities Act and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
July 2023 Standard Merchant Cash Advance Agreement
On July 19, 2023, we entered into a Standard Merchant Cash Advance Agreement with Cedar Advance LLC (“Cedar”) under which Cedar purchased $543,750 of our receivables for a gross purchase price of $375,000. We received net proceeds of $356,250. Until the purchase price has been repaid, we agreed to pay Cedar $19,419.64 per week. If we repay the purchase price within 30 days, then the amount payable shall be reduced to $465,000. In addition, we granted Cedar a security interest in our accounts, including deposit accounts and accounts receivable. We intend to use the proceeds for working capital and general corporate purposes.
Amendment to Armistice SPA
On July 7, 2023, we entered into an Amendment to Securities Purchase Agreement (the “Armistice Amendment”) with Armistice Capital Markets Ltd. to delete Section 4.12(a) of our March 23, 2023 Securities Purchase Agreement (the “Armistice SPA”) with Armistice pursuant to which we agreed that from March 23, 2023 until 45 days after the effective date of the Resale Registration Statement (as defined below) we would not (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, other than the prospectus supplement filed in connection with that offering and the Resale Registration Statement (the “Subsequent Equity Financing Provision”). In consideration of Armistice’s agreement to enter into the Armistice Amendment and delete the Subsequent Equity Financing Provision from the Armistice SPA, we agreed to pay Armistice a fee a $1,000,000 (the “Armistice Amendment Fee”) within two days of the closing of this Offering. Additionally, we agreed to include a proposal in our proxy statement for our 2023 Annual Meeting of Stockholders for the purpose of obtaining the approval of the holders of a majority of our outstanding voting common stock, to effectuate the reduction of the exercise price set forth in Section 2(b) of the Common Stock Purchase Warrants issued to Armistice on March 27, 2023 (the “Existing Warrants”) to the per unit public offering price of this Offering, in accordance with Nasdaq Rule 5635(d) (the “Shareholder Approval”) with the recommendation of our board of directors that such proposal be approved. We also agreed to solicit proxies from our shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and that all management-appointed proxyholders shall vote their proxies in favor of such proposal. Further, if we do not obtain Shareholder Approval at the first meeting, we will call a meeting every six (6) months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is obtained or the Existing Warrants are no longer outstanding. Until such approval is obtained, the exercise price of the Existing Warrants will remain unchanged.
Reverse Stock Split
On June 28, 2023, our board of directors approved a reverse stock split of our common stock at a ratio of 1-for-20 and also approved a proportionate decrease in our authorized common stock to 6,250,000 shares from 125,000,000. Pursuant to Nevada Revised Statutes, a company may effect a reverse split without stockholder approval if both the number of authorized shares of common stock and the number of outstanding shares of common stock are proportionally reduced as a result of the reverse split, the reverse split does not adversely affect any other class of stock of the company, and the company does not pay money or issue scrip to stockholders who would otherwise be entitled to receive a fractional share as a result of the reverse split. On July 26, 2023, we filed a certificate of change with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to (i) decrease the number of authorized shares of common stock from 125,000,000 to 6,250,000 shares and (ii) effectuate a 1-for-20 reverse stock split of the outstanding common stock. On July 27, 2023, we received notice from Nasdaq that the reverse split would take effect at the open of business on July 28, 2023 and the reverse stock split took effect on that date.
510(k) FDA Clearance
On June 22, 2023, we received U.S. Food and Drug Administration (FDA) 510(k) clearance to expand the labeling on the INVOcell device and its indication for use to provide for a 5-day incubation period. The data supporting the expanded 5-day incubation clearance demonstrated improved patient outcomes.
March 2023 Registered Direct Offering
On March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional investor, pursuant to which we agreed to issue and sell to such investor (i) in a registered direct offering (the “RD Offering”), 69,000 shares of Common Stock, and a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 115,000 shares of Common Stock, at an exercise price of $0.20 per share, and (ii) in a concurrent private placement (the “March Warrant Placement”), a common stock purchase warrant (the “March Warrant”), exercisable for an aggregate of up to 276,000 shares of Common Stock, at an exercise price of $12.60 per share. The securities to be issued in the RD Offering (priced at the marked under Nasdaq rules) were offered pursuant to our shelf registration statement on Form S-3 (File 333-255096), initially filed by us with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and declared effective on April 16, 2021. The Pre-Funded Warrant is exercisable upon issuance and will remain exercisable until all of the shares underlying the Pre-Funded Warrant are exercised in full. All Pre-Funded Warrants were exercised by the investor in June 2023.
The March Warrant (and the shares of Common Stock issuable upon the exercise of the Private Warrants) was not registered under the Securities Act and was offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The March Warrant is immediately exercisable upon issuance, will expire eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.
On March 27, 2023, we closed the RD Offering and March Warrant Placement, raising gross proceeds of approximately $3 million before deducting placement agent fees and other offering expenses payable by us. In the event the March Warrant is fully exercised for cash, we would receive additional gross proceeds of approximately $3.5 million. We used $383,879 in proceeds to repay a portion of the convertible debenture issued in February 2023 and the remainder of the proceeds are being used for working capital and general corporate purposes.
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Under the March Purchase Agreement, We are required within 30 days of the closing date of the March Warrant Placement to file a registration statement on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the exercise of the March Warrant. We are required to use commercially reasonable efforts to cause such registration to become effective within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full review by the SEC), and to keep the Resale Registration Statement effective at all times until no shares of Common Stock remain exercisable under the March Warrant.
In addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from the date of the RD Offering and March Warrant Placement, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
Notices from Nasdaq of Failure to Satisfy Continued Listing Rules
Notice Regarding Non-Compliance with Minimum Stockholders’ Equity
On November 23, 2022, we received notice from The Nasdaq Stock Market LLC (“Nasdaq”) advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000 (the “Stockholders’ Equity Requirement”). In our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, we reported stockholders’ equity of $1,287,224, which is below the Stockholders’ Equity Requirement for continued listing. Additionally, as of the date of the notice, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years.
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The notice had no immediate effect on the listing of our common stock and our common stock continues to trade on The Nasdaq Capital Market under the symbol “INVO” subject to our compliance with the other continued listing requirements.
Pursuant to the notice, Nasdaq gave us 45 calendar days, or until January 7, 2023, to submit to Nasdaq a plan to regain compliance. We submitted our plan within the prescribed time and, on January 18, 2023, we received a letter from Nasdaq stating that based on our submission that Nasdaq had determined to grant us an extension of time to regain compliance with the Equity Rule until May 22, 2023.
On May 23, 2023, we were notified by the Listing Qualifications department (the “Staff”) of Nasdaq that, based upon our non-compliance with the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Global Market, as set forth in the Equity Rule, as of May 22, 2023, our common stock was subject to delisting from Nasdaq unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).
We requested a hearing before the Panel, which stayed any further action by Nasdaq at least until the hearing process was concluded and any extension that may be granted by the Panel has expired.
On July 6, 2023, we had our hearing before the Panel at which time we provided the Panel our plan to regain compliance under the Equity Rule.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule as well as Nasdaq Listing Rule 5550(a)(2) (to maintain a minimum bid price of $1; the “Price Rule”) on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
Notice Regarding Failure to Maintain Minimum Bid Price
On January 11, 2023, we received a letter from the staff indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing under the Price Rule.
The notice had no immediate effect on the listing of our common stock, and our common stock continues to trade on The Nasdaq Capital Market under the symbol “INVO.”
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until July 10, 2023, to regain compliance with the minimum bid price requirement. If at any time before July 10, 2023, the closing bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq would provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. If we did not regain compliance prior to July 10, 2023, then Nasdaq may grant us a second 180 calendar day period to regain compliance, provided we (i) meet the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency within such second 180 calendar day period, by effecting a reverse stock split, if necessary.
We were unable to regain compliance by July 10, 2023 and accordingly on July 11, 2023, we received a notice from Staff of Nasdaq that, based upon our non-compliance with the minimum bid price requirement set forth in the Price Rule. We presented our plan to regain compliance with the minimum bid price requirement at our hearing with the Panel on July 6, 2023.
On July 27, 2023, we received a letter from the Panel under which they granted our request for continued listing of Nasdaq subject to us demonstrating compliance with the Equity Rule and the Price Rule on or before September 29. 2023. The Panel reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of our securities on Nasdaq inadvisable or unwarranted. In that regard, the Panel advises us that it is a requirement during the exception period we provide prompt notification of any significant events that occur during this time that may affect our compliance with Nasdaq requirements. This includes, but is not limited to, prompt advance notice of any event that may call into question our ability to meet the terms of the exception granted.
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Results of Operations

During the first ~~nine months~~half of ~~2022,~~2023, we made further progress toward our ~~fully~~key objectives. Our three existing operational INVO Centers ~~in Birmingham, Alabama, Atlanta, Georgia,~~experienced growing revenues and ~~Monterrey, Mexico continued to make progress toward building local market awareness and treating patients. We~~improved operating results. Progress also continued toward opening our planned new Tampa INVO Center, which we expect to ~~expand~~open in the second half of this year. At the end of the second quarter, we received FDA clearance on our ~~similar marketing efforts~~510k submission, which represented a very significant milestone resulting from our multi-year effort to ~~build awareness for~~advance the INVOcell technology and ~~IVC procedure~~further demonstrate its success and quality of outcomes.
Subsequent to ~~support~~ the ~~efforts~~second quarter end, we completed a major step forward on our previously announced acquisition strategy. On August 10, 2023 we closed our first acquisition, Wisconsin Fertility Institute (“WFI”). The acquisition of ~~the~~WFI is expected to provide significant scale to our operations and complement our INVO ~~Centers,~~Center strategy. The Madison-based fertility center primarily offers conventional IVF procedures and generated more than $5 million in revenue and approximately $1.7 million of net income based on fiscal 2022 audited results.
Looking ahead, we will continue to seek out and pursue accretive acquisition opportunities along with our ~~distribution partners around the world and fertility clinic customers offering IVC. During the quarter, we also announced~~ plans to open ~~INVO Centers in the Tampa, Florida and Kansas City, Kansas areas, and are working towards opening~~ additional INVO Centers in key domestic ~~and international~~ markets. WeWith respect to INVO Centers, we have ~~identified more than 20~~selected an initial list of markets in the U.S. ~~alone as~~that we believe are excellent potential locations, for an INVO Center. As part of our efforts to expand our clinic activities, we have more recently identified opportunities to acquire existing profitable fertility practices. Although these established practices provide conventional IVF,and we believe ~~they represent an opportunity to integrate~~ the ~~INVOcell technology and thereby enhance the available treatment options~~universe of suitable acquisition targets for patients and further expand the overall business level. As such, we intend to selectively pursue potential acquisitions as part of our strategy, which we believe compliments our efforts to build new practices and allows us to scale up our overall operations more quickly. To this end, we signed a non-binding letter of intent to acquire one such clinic.
With respect to our distribution efforts, we re-assumed control of the U.S. market upon the termination of the Ferring Agreement in the first quarter of 2022. We have since sold INVOcell directly to the existing, established fertilityINVO exceeds 80 clinics in the U.S. ~~market, rather than naming a new distributor. During~~We also continue to work on the ~~quarter ended September 30, 2022, we received several orders from~~expansion of INVOcell distribution into existing IVF clinics that had previously trained on implementing the IVC procedure within their practices. To support these efforts, we added sales resources during the first quarter of 2022 and believe we will experience growing revenue from these activities going forward. This revenue is also anticipated to be more consistent from quarter to quarter, as opposed to the sporadic orders placed by Ferring over the past several years.fertility clinics.

From a market strategy perspective, our commercialization efforts will continue to focus on the substantial, underserved patient population and on expanding access to advanced fertility treatments. We believe our solutions can help address the key challenges of affordability and capacity to provide care to the vast number of patients that go untreated every year. This represents the major opportunity for INVOcell and the IVC procedure it enables. Despite the COVID pandemic, the fertility industry continues to expand, and we believe our growing volume of partners (both distributors and JVjoint venture INVO Centers) affords us strong forward-looking opportunities. We believe our INVO Center approach ~~adds~~and our plans to implement IVC procedures in acquired clinics can help to add much needed capacity and affordability and aligns with our key mission to open access to care to the underserved ~~and that our acquisition strategy will allow us to accelerate our growth plans and help expand the use of INVOcell.~~patient population.

The 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.

Comparison of the Three Months Ended ~~September~~June 30, ~~2022,~~2023, and ~~2021~~2022

Revenue

Revenue for the three months ended ~~September~~June 30, ~~2022,~~2023, was approximately ~~$235~~$316 thousand compared to approximately ~~$219~~$146 thousand for the three months ended ~~September~~June 30, ~~2021.~~2022. Of the ~~$235~~$316 thousand in revenue for the ~~first three months~~second quarter of ~~2022,~~2023, approximately ~~$176~~$254 thousand was related to clinic revenue from the consolidated Georgia JV. The increase of approximately ~~$16~~$170 thousand, or approximately 8%116%, was primarily related to increased revenue from the Georgia ~~JV and increased product sales to U.S. IVF clinics which was partially offset by the change in license revenue.~~JV.

~~Gross Profit~~Cost of Revenue

~~Gross profit~~
Cost of revenue for the three months ended ~~September~~June 30, ~~2022,~~2023, was approximately ~~$126~~$235 thousand compared to approximately ~~$198~~$171 thousand for the three months ended ~~September~~June 30, 2021. Gross margins were approximately 54% and 91% for the three months ended September 30, 2022, and 2021, respectively. The decrease in gross margin reflects both the lack of Ferring license revenue in the second quarter of 2022 compared to the same period in 2021, as well as consolidated INVO Center cost of goods sold expenses due to increased cycle volume.2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended ~~September~~June 30, ~~2022,~~2023, were approximately ~~$2.5~~$2.0 million compared to approximately $2.4 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease of approximately ~~$0.1~~$0.4 million, or approximately 2%16%, was primarily the result of ~~increased~~approximately $0.2 million in decreased personnel expenses and approximately $0.2 million in decreased marketing expenses. Non-cash, stock-based compensation expense, which was $0.4 million in the period, ~~was $0.5 million,~~ compared to ~~$0.5~~$0.7 million for the same period in the prior year.

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Research and Development Expenses

We began to fund additional research and development (“R&D”) efforts in 2020 as part of our 5-day label expansion efforts. R&D expenses were approximately ~~$0.2 million~~$84 thousand and ~~$0.06~~$0.2 million for the three months ended ~~September~~June 30, 2023, and March 31, 2022, respectively.
Gain (loss) from equity investment
Gain from equity investments for the three months ended June 30, 2023, was approximately $4 thousand compared to a $0.1 million loss for the three months ended June 30, 2022. The gain is due to an increase in revenue from the equity method JV’s and ~~September~~a decrease in expenses associated with one-time startup costs.
Interest Expense and Financing Fees
Interest expense and financing fees were approximately $175 thousand for the three months ended June 30, ~~2021,~~2023, compared to approximately $102 for the three months ended June 30, 2022. The expense in 2023 was primarily non-cash and due to the debt discount, debt issuance cost and interest from convertible notes.
Comparison of the Six Months Ended June 30, 2023, and 2022
Revenue
Revenue for the six months ended June 30, 2023, was approximately $0.7 million compared to approximately $0.3 million for the six months ended June 30, 2022. Of the $0.7 million in revenue for the six months ended June 30, 2023, $0.6 was related to clinic revenue from the consolidated Georgia JV. The increase of approximately $0.4 million, or approximately 155%, was primarily related to increased revenue from the Georgia JV.
Cost of Revenue
Cost of revenue for the six months ended June 30, 2023, was approximately $0.5 million compared to approximately $0.4 million for the six months ended June 30, 2022.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended June 30, 2023, were approximately $4.4 million compared to approximately $5.0 million for the six months ended June 30, 2022. The decrease of approximately $0.6 million, or approximately 12%, was primarily the result of approximately $0.5 million in decrease expenses related to personnel expenses, approximately $0.4 million in decreased marketing expenses, and was partially offset by a $0.2 million increase in professional fees related to the acquistion of WFI and $0.1 million increase in operational expenses related to the Georgia JV. Non-cash, stock-based compensation expense, which was $0.3 million in the period, compared to $0.5 million for the same period in the prior year.
Research and Development Expenses
R&D expenses were approximately $0.2 million and $0.3 million for the six months ended June 30, 2023, and June 30, 2022, respectively.

Loss from equity investment
Loss from equity investments for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, was approximately ~~$0.02 million~~$24 thousand compared to ~~$0.1~~$0.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2021.~~2022. The decrease in loss is due to an increase in revenue in the equity method JV’s and a decrease in expenses associated with ~~onetime~~one-time startup costs.
~~Other income~~
~~Other income was $0 for the three months ended September 30, 2022, compared to approximately $0 for the three months ended September 30, 2021.~~

Interest Expense and Financing Fees
Interest expense and financing fees were approximately $0.4 million for the six months ended June 30, 2023, compared to approximately $2 thousand for the ~~three~~six months ended ~~September~~June 30, ~~2022, compared to approximately $93 thousand for the three months ended September 30, 2021.~~2022. The expense in ~~2021~~2023 was primarily non-cash and due to the debt discount, debt issuance cost and interest from convertible ~~notes which have now been fully amortized.~~notes.
~~Comparison of the Nine Months Ended September 30, 2022, and 2021~~
~~Revenue~~
Revenue for the nine months ended September 30, 2022, was approximately $0.5 million compared to approximately $1.1 million for the nine months ended September 30, 2021. Of the $0.5 million in revenue for the nine months ended September 30, 2022, $0.4 million was related to clinic revenue from the consolidated Georgia JV. The decrease of approximately $0.6 million, or approximately 51%, 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 commitments in the Ferring Agreement and the loss of Ferring licensing revenue compared to the same period in 2021.
~~Gross Profit~~
Gross profit for the nine months ended September 30, 2022, was approximately $0.3 million compared to approximately $1 million for the nine months ended September 30, 2021. Gross margins were approximately 54% and 91% for the nine months ended September 30, 2022, and 2021, respectively. The decrease in gross margin reflects the lack of Ferring license revenue and one-time bulk order from Ferring in the first quarter of 2021 compared to the same period in 2022, as well as the inclusion of consolidated INVO Center cost of goods sold expenses.
~~Selling, General and Administrative Expenses~~
Selling, general and administrative expenses for the nine months ended September 30, 2022, were approximately $7.7 million compared to approximately $6.6 million for the nine months ended September 30, 2021. The increase of approximately $1.1 million, or approximately 17%, was primarily the result of increased personnel expenses and non-cash, stock-based compensation expense, which increased from $1.3 million last year to $1.8 million for the current quarter.
~~Research and Development Expenses~~
~~R&D expenses were approximately $0.5 million and $0.2 million for the nine months ended September 30, 2022, and September 30, 2021, respectively.~~
~~Loss from equity investment~~
Loss from equity investments for the nine months ended September 30, 2022, was approximately $0.2 million compared to $0.1 for the nine months ended September 30, 2021. The increase in loss was due to the Alabama and Mexico joint venture clinics being operational only for part of 2021.
~~Other income~~
Other income was $0 for the nine months ended September 30, 2022, compared to approximately $159 thousand for the nine months ended September 30, 2021. The decrease was the result of the extinguishment of our Paycheck Protection Program note and related interest being forgiven in 2021.
~~Interest Expense and Financing Fees~~
Interest expense and financing fees were approximately $3 thousand for the nine months ended September 30, 2022, compared to approximately $1.0 million for the nine months ended September 30, 2021. The expense in 2021 was primarily non-cash and due to the debt discount, debt issuance cost and interest from convertible notes which have now been fully amortized.
30

Liquidity and Capital Resources

For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, we had net losses of approximately ~~$8.1~~$4.8 million and ~~$6.5~~$5.6 million, respectively, and an accumulated deficit of approximately ~~$47~~$54.6 million as of ~~September~~June 30, ~~2022.~~2023. Approximately ~~$2.3~~$1.4 million of the net loss was related to non-cash expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$2.8~~$1.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. We had negative working capital of approximately ~~$0.7~~$3.6 million as of ~~September~~June 30, ~~2022,~~2023, compared to ~~positive~~negative working capital of approximately ~~$5.1~~$2.8 million as of December 31, ~~2021.~~2022. As of ~~September~~June 30, ~~2022, our~~2023, we had stockholder’s ~~equity was~~deficit of approximately ~~$1.3~~$1.7 million compared to stockholder’s deficit of approximately ~~$7.3~~$1.0 million as of December 31, ~~2021.~~2022.

We have been dependent on raising capital from debt and equity financings to meet our needs for cash required to fund our operating expenses and investing activities. During the first ~~nine~~six months of ~~2021,~~2023, we ~~converted~~received proceeds of approximately ~~$1.2~~$2.7 million for the sale of ~~outstanding debt to equity~~our Common Stock and ~~received approximately $0.4~~$0.7 million ofin proceeds from ~~unit purchase option and warrant exercises.~~the sale of convertible notes. During the first ~~nine~~six months of 2022, we received ~~proceeds of~~ approximately $0.3 million for the sale of Common Stock. Over the next 12 months, our ~~common stock. Our current~~ plan includes opening additional INVO Centers, ~~over~~completing the ~~next 12 months.~~acquisition of Wisconsin Fertility Institute and pursuing additional IVF clinic acquisitions. Until we can generate ~~a sufficient amount of~~positive cash from operations, ~~and~~we will need to ~~the extent~~raise additional ~~funds are necessary~~funding to meet our ~~longer-term~~ liquidity needs and to execute our business ~~strategy, we will need to raise additional funding, as~~strategy. As in the past, ~~by way of~~we will seek debt and/or equity ~~financings. Such additional funding~~financing, which may not be available on reasonable terms, if at all.

Although our audited financial statements for the year ended December 31, ~~2021~~2022 were prepared under the assumption that we would continue operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, ~~2021~~2022 contains a going concern qualification in which such 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 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 financial condition. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.

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Cash Flows

The following table shows a summary of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

2022 2021 2023 2022
Cash (used in) provided by:
Operating activities (5,599,174 ) (4,518,808 ) (2,792,860 ) (3,950,920 )
Investing activities (89,800 ) (1,235,673 ) (269,952 ) (86,792 )
Financing activities 289,800 369,840 3,085,162 315,000

Cash Flows from Operating Activities

As of ~~September~~June 30, ~~2022,~~2023, we had approximately ~~$0.3~~$0.1 million in cash compared to approximately ~~$4.7~~$2.0 million as of ~~September~~June 30, ~~2021.~~2022. Net cash used in operating activities for the first ~~nine~~six months of ~~2022,~~2023 was approximately ~~$5.6~~$2.8 million, compared to approximately ~~$4.5~~$4.0 million for the same period in ~~2021.~~2022. The ~~increase~~decrease in net cash used in ~~operations~~operating activities was primarily due to the increase in ~~net loss.~~accounts payable and accrued compensation.

Cash Flows from Investing Activities

During the ~~nine~~six months ended ~~September~~June 30, 2023, cash used in investing activities of $0.3 million was primarily related to the buildout infrastructure for our Tampa INVO Center. During the six months ended June 30, 2022, cash used in investing activities of approximately $0.1 million was primarily related to a loss on equity method for the JVs, payments to acquire property, ~~plants,~~plant, and equipment, as well as ~~additional~~investment in trademarks. ~~During the nine months ended September 30, 2021, cash used in investing activities of approximately $1.2 million was related to notes receivable and payments to acquire property, plant, and equipment.~~

Cash Flows from Financing Activities

During the ~~nine~~six months ended ~~September~~June 30, 2023 cash provided by financing activities of approximately $3.0 million was primarily related to the sale of Common Stock and convertible notes. During the six months ended June 30, 2022, cash provided by financing activities of approximately $0.3 million ~~was~~ primarily related to the sale of ~~common stock. During the nine months ended September 30, 2021, cash provided by financing activities~~Common Stock, net of ~~approximately $0.4 million related to the exercise of unit purchase options and warrants.~~offering costs.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition presented in this section is based upon our audited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. During the preparation of the financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, our results, which allows us to form a basis for making judgments on the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates based on variance with our assumptions and 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.

3234

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.

Stock Based Compensation

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.

Revenue Recognition

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:

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.

Variable Interest Entities

~~The Company’s~~Our consolidated financial statements include the accounts of ~~the Company,~~INVO, its wholly owned subsidiaries and variable interest entities (“VIE”), where ~~the Company is~~we are 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 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~~We reconsider 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.

Equity Method Investments

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.

Recently Issued Accounting Standards Not Yet Effective or Adopted

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.

3335

Item 3. Quantitative and Qualitative Disclosures about Market Risks

~~The Company is~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required byunder this ~~Item as it is a “smaller reporting company,” as defined~~item.
We are exposed to risk from changes in ~~Rule 12b-2 of~~foreign currency exchange rates related to our foreign joint venture. Our principal exchange rate exposure relates to the ~~Exchange Act.~~Mexican Peso.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the 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 Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the ~~Company’s~~our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of ~~September~~June 30, ~~2022,~~2023, the end of the fiscal period covered by this Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

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

3436

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (“Annual Report”) as filed with the SEC on ~~March 31, 2022,~~April 17, 2023, as amended. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

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

~~None.~~
On May 18, 2023, the Company issued 6,115 shares of Common Stock to consultants in consideration of services rendered with a fair value of $45,000. 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.
On July 11, 2023, the Company issued 16,250 shares of Common Stock in consideration of a settlement with an unrelated third party. 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 July 2023, the Company issued 135 shares of our common stock as the result of the rounding up of fractional shares resulting from the 1-20 reverse stock split of the Company’s common stock effectuated on July 28, 2023. The Company did not receive any proceeds from the issuance. The issuance was exempt under Section 3(a)(9) of the Securities Act of 1933, as amended.
On August 8, 2023, the Company issued 26,391 shares of Common Stock upon exercise of an existing warrant on a net-exercise basis. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) and/or 3(a)(9) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

~~In October and November 2022, we received $0.35 million through~~Temporary Reduction of Salary under Employment Agreements
On August 10, 2023 the issuance of demand notes from a related party, JAG Multi Investments LLC (“JAG”). Our CFO is a beneficiary of JAG but does not have any control over JAG’s investment decisions with respect to the Company. If paid prior to December 31, 2022, the demand notes are interest free until December 31, 2022. For any amount that remains outstanding past December 31, 2022, 10% annual interest would accrue from the date of issuance. At maturity, weCompany’s CEO, Steven Shum, voluntarily agreed to ~~pay outstanding principal, a 10% financing fee and accrued interest, if any. The demand notes are callable with 10 days prior written~~temporarily reduce the annual base salary under his employment agreement from $260,000 to $105,000 until further notice, which ~~may be delivered~~reduction will take effect on August 16, 2023 (the “Shum Temporary Salary Reduction”).
The foregoing description of the Shum Temporary Salary Reduction is qualified in its entirety by reference to ~~us starting 30 days~~a copy of the Shum Temporary Salary Reduction letter filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
On August 10, 2023 the Company’s CFO, Andrea Goren, voluntarily agreed to temporarily reduce the annual base salary under his employment agreement from ~~issuance.~~$215,000 to $105,000 until further notice, which reduction will take effect on August 16, 2023 (the “Goren Temporary Salary Reduction”).
The foregoing description of the Goren Temporary Salary Reduction is qualified in its entirety by reference to a copy of the Goren Temporary Salary Reduction letter filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Item 6. Exhibits

Exhibit
No. Description

4.1*10.1* ~~Form of Demand Note~~Shum Temporary Salary Reduction letter.
10.2* Goren Temporary Salary Reduction letter.

31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS* Inline XBRL Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

104* Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 is formatted in Inline XBRL

* Filed herewith.
** Furnished herewith.

3537

~~SIGNATURES~~

SIGNATURES
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 ~~November~~August 14, ~~2022.~~2023.
INVO Bioscience, Inc.

Date: ~~November~~August 14, ~~2022~~2023 By: /s/ Steven Shum
Steven Shum, Chief Executive Officer
(Principal Executive Officer)

Date: ~~November~~August 14, ~~2022~~2023 By: /s/ Andrea Goren
Andrea Goren, Chief Financial Officer
(Principal Financial and Accounting Officer)

3638

	Shares		Amount		Capital			Deficit			Interest			Total
	Common Stock				Additional Paid-in			Accumulated			Noncontrolling
	Shares		Amount		Capital			Deficit			Interest			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		44,806		4		274,694			-			-			274,698
Common stock issued for services		96,500		10		324,840			-			-			324,850
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		-		-		1,151,800			-			-			1,151,800
Net loss attributable to noncontrolling interest		-		-		-			-			(238,543	)		(238,543	)
Net loss attributable to INVO Bioscience, Inc.		-		-		-			(6,513,415	)		-			(6,513,415	)
Balances, September 30, 2021		10,464,035	$	1,046	$	41,343,118		$	(38,749,497	)		(238,543	)	$	2,356,124	)

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		87,194		9		408,018			-			-			408,027
Common stock issued for services		55,000		6		116,760			-			-			116,766
Proceeds from the sale of common stock, net of fees and expenses		94,623		9		289,791			-			-			289,800
Stock options issued to directors and employees as compensation		-		-		1,287,427			-			-			1,287,427
Net loss		-		-		-			(8,125,476	)		-			(8,125,476	)
Balances, September 30, 2022		12,165,964		1,217		48,302,505			(47,016,498	)		-			1,287,224

	2022			2021
	For the Nine Months Ended
	September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(8,125,476	)	$	(6,751,958	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services		116,766			282,633
Non-cash stock compensation issued to directors and employees		408,027			274,698
Fair value of stock options issued to employees		1,287,427			1,151,800
Non-cash compensation for services		75,000			-
Amortization of discount on notes payable		-			1,014,959
Amortization of leasehold right of use asset		171,404			63,047
Extinguishment of debt		-			(159,126	)
Loss from equity method investment		210,565			113,492
Depreciation and amortization		57,361			23,680
Changes in assets and liabilities:
Accounts receivable		(20,841	)		(28,960	)
Interest receivable		-			(579	)
Inventory		7,642			(25,018	)
Prepaid expenses and other current assets		(22,400	)		(75,661	)
Accounts payable and accrued expenses		246,136			186,656
Accrued compensation		61,919			(65,415	)
Deferred revenue		92,759			(535,714	)
Leasehold liability		(165,463	)		(21,091	)
Accrued interest		-			34,811
Income taxes payable		-			(1,062	)
Net cash used in operating activities		(5,599,174	)		(4,518,808	)
Cash from investing activities:
Payments to acquire property, plant, and equipment		(10,920	)		(744,247	)
Payments to acquire intangibles		(1,943	)		(38,542	)
Investment in joint ventures		(76,937	)		(252,884	)
Payment for notes receivable		-			(200,000	)
Net cash used in investing activities		(89,800	)		(1,235,673	)
Cash from financing activities:
Proceeds from the sale of common stock, net of offering costs		289,800			-
Proceeds from warrant exercise		-			123,562
Proceeds from unit purchase option exercise		-			246,278
Net cash provided by financing activities		289,800			369,840
Increase (decrease) in cash and cash equivalents		(5,399,174	)		(5,384,641	)
Cash and cash equivalents at beginning of period		5,684,871			10,097,760
Cash and cash equivalents at end of period	$	285,697		$	4,713,119

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	-		$	29,125
Taxes	$	800		$	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
Initial ROU asset and lease liability	$	-		$	1,374,956


	For the Six Months Ended
	June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(4,791,390	)	$	(5,575,853	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services		244,176			116,766
Non-cash stock compensation issued to directors and employees		51,565			328,548
Fair value of stock options issued to employees		652,750			861,284
Non-cash compensation for services		90,000			30,000
Amortization of discount on notes payable		301,098			-
Loss from equity method investment		23,947			189,095
Depreciation and amortization		38,792			37,629
Changes in assets and liabilities:
Accounts receivable		2,241			(6,015	)
Inventory		(16,416	)		5,777
Prepaid expenses and other current assets		(184,513	)		35,069
Accounts payable and accrued expenses		432,654			23,553
Accrued compensation		256,158			(72,885	)
Deferred revenue		41,311			71,457
Leasehold liability		1,829			4,655
Accrued Interest		62,938			-
Net cash used in operating activities		(2,792,860	)		(3,950,920	)
Cash from investing activities:
Payments to acquire property, plant, and equipment		(261,505	)		(8,338	)
Payments to acquire intangible assets		-			(1,517	)
Investment in joint ventures		(8,447	)		(76,937	)
Net cash used in investing activities		(269,952	)		(86,792	)
Cash from financing activities:
Proceeds from the sale of notes payable		714,000			-
Proceeds from the sale of common stock, net of offering costs		2,728,938			315,000
Proceeds from option exercise		2,375			-
Principal payments on note payable		(360,151	)		-
Net cash provided by financing activities		3,085,162			315,000
Increase (decrease) in cash and cash equivalents		22,350			(3,722,712	)
Cash and cash equivalents at beginning of period		90,135			5,684,871
Cash and cash equivalents at end of period	$	112,485		$	1,962,159

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	5,720		$	-
Taxes	$	-		$	2,847
Noncash activities:
Fair value of warrants issued with debt	$	327,390		$	-
Initial ROU asset and lease liability	$	2,312,892		$	-

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 September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Net loss attributable to common shareholders (numerator)	$	(2,549,623	)		(2,242,783	)		(8,125,476	)		(6,513,415	)
Net loss (numerator)													$	(2,240,511	)		(2,801,541	)		(4,791,390	)		(5,575,853	)
Basic and diluted weighted-average number of common shares outstanding (denominator)		12,155,655			10,463,981			12,107,124			10,267,495			732,255			605,760			677,684			604,123
Basic weighted-average number of common shares outstanding (denominator)														732,255			605,760			677,684			604,123
Basic and diluted net loss per common share		(0.21	)		(0.24	)		(0.67	)		(0.66	)		(3.06	)		(4.62	)		(7.07	)		(9.23	)
Basic net loss per common share														(3.06	)		(4.62	)		(7.07	)		(9.23	)


	As of September 30,				As of June 30,
	2022		2021		2023		2022
Options		1,479,605		1,118,911		121,255		74,480
Convertible notes and interest		-		160,591		55,120		-
Unit purchase options and warrants		260,165		216,193		348,151		13,008
Total		1,739,770		1,495,695		524,526		87,488

						Carrying Value as of									Carrying Value as of
		Location	Percentage Ownership			September 30, 2022		December 31, 2021			Location	Percentage Ownership			June 30, 2023		December 31, 2022
HRCFG INVO, LLC		Alabama, United States		50	%	$	1,148,582		1,387,495		Alabama, United States		50	%	$	1,023,346		1,106,905
Positib Fertility, S.A. de C.V.		Mexico		33	%		132,724		102,439		Mexico		33	%		109,019		130,960
Total investment in unconsolidated VIEs	Total investment in unconsolidated VIEs					$	1,281,306		1,489,934	Total investment in unconsolidated VIEs					$	1,132,365		1,237,865


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Bloom Invo, LLC
INVOcell revenue	$	6,000	$	-	$	6000	$	-	$	6,000	$	-	$	10,500	$	-
Unconsolidated VIEs
INVOcell revenue	$	6,000	$	16,800	$	22,500	$	16,800	$	6,750	$	9,000	$	9,750	$	16,500

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


	September 30, 2022			December 31, 2021
Trademarks	$	112,785		$	110,842
Patents		95,355			95,355
Accumulated amortization		(75,461	)		(74,104	)
Total patent costs, net	$	132,679		$	132,093


Lease component	Balance sheet classification	September 30, 2022		Balance sheet classification	June 30, 2023
Assets
ROU assets – operating lease	Other assets	$	1,865,648	Other assets	$	4,004,962
Total ROU assets		$	1,865,648		$	4,004,962

Liabilities
Current operating lease liability	Current liabilities	$	229,169	Current liabilities	$	227,026
Long-term operating lease liability	Other liabilities		1,728,918	Other liabilities		3,873,289
Total lease liabilities		$	1,958,087		$	4,100,315


2022	$	65,272
2023		264,108
2024		251,671
2025		247,960
2026 and beyond		1,316,245
Total future minimum lease payments	$	2,145,256
Less: Interest		(187,169	)
Total operating lease liabilities	$	1,958,087


2023		156,465
2024		392,869
2025		392,688
2026		401,581
2027 and beyond		4,197,510
Total future minimum lease payments	$	5,541,113
Less: Interest		(1,440,798	)
Total operating lease liabilities	$	4,100,315


	June 30, 2023			December 31, 2022
Less debt discount		(285,961	)		(107,356	)
Related party demand notes with a 10% financing fee. 10% annual interest starting January 31, 2023. Notes are callable starting September 30, 2023	$	770,000		$	770,000
Convertible notes. 10% annual interest. Conversion price of $10.00-$12.00		410,000			100,000
Convertible debentures. 8% interest. Conversion price of $10.40		139,849			-
Less debt discount		(285,961	)		(107,356	)
Total, net of discount	$	1,033,888		$	762,644

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		1,055,894	$	5.09	$	133,022
Outstanding as of December 31, 2022								64,850		$	68.00	$	-
Granted		433,711		3.70		-		59,048			7.74		-
Exercised		-		-		-		(297	)		8.00		-
Canceled		10,000		3.89		-		(2,346	)		72.38		-
Balance as of September 30, 2022		1,479,605		4.50		-
Exercisable as of September 30, 2022		896,139		5.21		-
Balance as of June 30, 2023								121,255		$	2.10	$	-
Exercisable as of June 30, 2023								71,251		$	62.42	$	-

	Nine months ended September 30,
	2022			2021
Risk-free interest rate range		1.6 to 1.9	%		0.22 to 0.73	%
Expected life of option-years		5.25 to 5.75			5.3 to 6.5
Expected stock price volatility		110 to 113	%		107 to 125	%
Expected dividend yield		-	%		-	%

	Six months ended June 30,
	2023		2022
Risk-free interest rate range	3.6-3.69 %		1.6 to 1.9 %
Expected life of option-years	5-5.63		5.25 to 5.75
Expected stock price volatility	106.6-114.9 %		110.4 to 113.2 %
Expected dividend yield	-	%	-	%

	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		187,861			3.08		579,086
Vested		(136,507	)		3.09		(385,035	)
Forfeitures		-			-		-
Balance as of September 30, 2022		61,084		$	3.03	$	230,199

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

	Number of Unit Purchase Options		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Unit Purchase Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021	$	92,893	$	3.20	$	5,647
Outstanding as of December 31, 2022							$	4,649	$	64.00	$	-
Granted		-		-		-		-		-		-
Exercised		-		-		-		-		-		-
Canceled		-		-		-		-		-		-
Balance as of September 30, 2022	$	92,893	$	3.20	$	-
Balance as of June 30, 2023							$	4,649	$	64.00	$	-

	Number of Warrants		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Warrants			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		167,272	$	3.62	$	16,029
Outstanding as of December 31, 2022								25,864		$	30.20	$	-
Granted		-		-		-		432,618			12.60		-
Exercised		-		-		-		(115,000	)		0.20		-
Canceled		-		-		-		-			-		-
Balance as of September 30, 2022		167,272	$	3.62	$	-
Balance as of June 30, 2023								378,849		$	20.41	$	-

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

●	Manufacturing: Wewe are ISO 13485:2016 certified and manage all aspects of production and manufacturing with qualified suppliers. Our key suppliers have been steadfast partners since our company first began and can provide us with virtually an unlimited capability to support our growth objectives, with all manufacturing performed in the New England region of the U.S..
●	Raw Materials: ~~All~~all raw materials utilized for the INVOcell are medical grade and commonly used in medical devices (e.g., medical grade silicone, medical grade plastic). Our principal molded component suppliers are well-established companies in the molding industry and are either ISO 13485 or ISO 9001 certified. The molded components are supplied to our contract manufacturer for assembly and packaging of the INVOcell system. The contract manufacturer is ISO 13485 certified, and U.S. Food & Drug Administration (“FDA”) registered.
●	CE Mark: INVO Bioscience received the CE Mark in October 2019. The CE Mark permits the sale of devices in Europe, Australia and other countries that recognize the CE Mark, subject to local registration requirements.
●	US Marketing Clearance: the safety and efficacy of the INVOcell ~~was~~has been demonstrated and cleared for marketing and use by the FDA in November 2015.
●	Clinical: ~~We are actively seeking~~In June 2023 we received FDA 510(k) clearance to expand the labeling on ~~our~~the INVOcell device ~~the~~and its indication for use to ~~cover~~provide for a ~~day 5~~5-day incubation ~~period, in addition to~~period. The data supporting the currently approved use of day 3 incubation. This may be accomplished with a prospective clinical study, which we previously designed and had the Institutional Review Board (“IRB”) approve to evaluate the modified INVOcell system for effectiveness of achieving fertilization, implantation, embryo development, clinical pregnancy, and live birth after day 5 continuous vaginalexpanded 5-day incubation (clinicaltrials.gov identifier: NCT04246268). The objective of this study would be to assess the efficacy, safety, comfort and retention of the INVOcell with the retention device and demonstrate superior efficacy following day 5 vaginal incubation as compared to the current day 3 vaginal incubation indication. As a result of the COVID-19 pandemic, we elected to place the trial on hold, but expect to move it forward with someclearance demonstrated improved design parameters. In the meantime, and as a result of available retrospective, real-market usage (day 5) data, we initiated an effort to pursue a 510(k) filing utilizing retrospective data as a separate effort to achieve our label enhancement. This retrospective effort remains ongoing and active in 2022.patient outcomes.

				INVOcell Registration
Market	Distribution Partner	Date	Initial Term	Status in Country

~~Canada~~	~~Invaron Pharmaceuticals Inc.~~	~~July 2020~~	~~1-Year~~	~~Completed~~
Mexico (a)	Positib Fertility, S.A. de C.V.	Sept 2020	~~n/a~~TBD**	Completed
Malaysia	~~SNS Murni SDN BHD~~iDS Medical Systems	~~Sept 2022~~Nov 2020	3-year	Completed
Pakistan	Galaxy Pharma	Dec 2020	1-year	In process
Thailand	IVF Envimed Co., Ltd.	April 2021	1-year	Completed
Sudan	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	In process
Ethiopia	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	In process
Uganda	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	Not required
Nigeria	G-Systems Limited	Sept 2020	5-year	Completed
Iran	Tasnim Behboud	Dec 2020	1-year	Completed
Sri Lanka	Alsonic Limited	July 2021	1-year	In process
China	Onesky Holdings Limited	May 2022	5-year	In process

Affiliate Name	Country	Percent (%) Ownership

HRCFG INVO, LLC	United States		50	%
Bloom Invo, LLC	United States		40	%
Positib Fertility, S.A. de C.V.	Mexico		33	%
~~Ginekalix INVO Bioscience LLC Skopje~~	~~Republic of North Macedonia~~		50	%

~~Partner~~		~~Country~~		~~Partnership Split~~
~~Lyfe Medical~~		~~United States~~			40	%

	2022			2021			2023			2022
Cash (used in) provided by:
Operating activities		(5,599,174	)		(4,518,808	)		(2,792,860	)		(3,950,920	)
Investing activities		(89,800	)		(1,235,673	)		(269,952	)		(86,792	)
Financing activities		289,800			369,840			3,085,162			315,000

Exhibit No.		Description

4.110.1		~~Form of Demand Note~~Shum Temporary Salary Reduction letter.

10.2*		Goren Temporary Salary Reduction letter.

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 is formatted in Inline XBRL

	INVO Bioscience, Inc.

Date: ~~November~~August 14, ~~2022~~2023	By:	/s/ Steven Shum
		Steven Shum, Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November~~August 14, ~~2022~~2023	By:	/s/ Andrea Goren
		Andrea Goren, Chief Financial Officer
		(Principal Financial and Accounting Officer)