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 June 30, 2022

☐ 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 Nasdaq Stock 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 August 15, 2022, the Registrant had 12,169,714 shares of common stock outstanding.

INVO BIOSCIENCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED June 30, 2022

TABLE OF CONTENTS

Item		Page Number
PART I. FINANCIAL INFORMATION

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

PART II. OTHER INFORMATION

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

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)

	June 30,			December 31,
	2022			2021
				(audited)
ASSETS
Current assets
Cash	$	1,962,159		$	5,684,871
Accounts receivable		56,485			50,470
Inventory		281,996			287,773
Prepaid expenses and other current assets		247,682			282,751
Total current assets		2,548,322			6,305,865
Property and equipment, net		473,049			501,436
Intangible Assets, net		132,706			132,093
Lease right of use		1,923,020			2,037,052
Investment in joint ventures		1,347,776			1,489,934
Total assets	$	6,424,873		$	10,466,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	466,975		$	443,422
Accrued compensation		508,804			581,689
Deferred revenue, current portion		77,357			5,900
Lease liability, current portion		226,749			221,993
Total current liabilities		1,279,885			1,253,004
Lease liability, net of current portion		1,787,424			1,901,557
Deferred tax liability		1,139			1,139
Total liabilities		3,068,448			3,155,700

Stockholders’ equity
Common Stock, $.0001 par value; 125,000,000 shares authorized; 12,130,298 and 11,929,147 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		1,213			1,193
Additional paid-in capital		47,822,087			46,200,509
Accumulated deficit		(44,466,875	)		(38,891,022	)
Total stockholders’ equity		3,356,425			7,310,680
Total liabilities and stockholders’ equity	$	6,424,873		$	10,466,380

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 Six Months
	Ended June 30,						Ended June 30,
	2022			2021			2022			2021

Revenue:
Product revenue	$	33,777		$	29,900		$	90,527			535,852
Clinic revenue		112,358			-			218,206			-
License revenue		-			178,572			-			357,143
Total revenue		146,135			208,472			308,733			892,995
Cost of goods sold:
Production costs		64,307			12,163			121,840			72,477
Depreciation		13,945			2,432			21,373			4,863
Total cost of goods sold		78,252			14,595			143,213			77,340
Gross profit		67,883			193,877			165,520			815,655
Operating expenses
Selling, general and administrative expenses		2,558,943			2,049,422			5,253,338			4,164,725
Research and development expenses		190,761			31,016			294,941			97,283
Total operating expenses		2,749,704			2,080,438			5,548,279			4,262,008
Loss from operations		(2,681,821	)		(1,886,561	)		(5,382,759	)		(3,446,353	)
Other income (expense):
Loss from equity method joint ventures		(117,978	)		-			(189,095	)		-
Other income		-			159,126			-			159,126
Interest income		48			2,425			273			4,438
Interest expense		(102	)		(91,125	)		(1,558	)		(986,351	)
Foreign currency exchange loss		(888	)		(1,028	)		(1,914	)		(1,492	)
Total other income (expense)		(118,920	)		69,398			(192,294	)		(824,279	)
Loss before income taxes		(2,800,741	)		(1,817,163	)		(5,575,053	)		(4,270,632	)
Income taxes		800			-			800			-
Net loss	$	(2,801,541	)	$	(1,817,163	)		(5,575,853	)		(4,270,632	)

Net loss per common share:
Basic	$	(0.23	)	$	(0.17	)		(0.46	)		(0.42	)
Diluted	$	(0.23	)	$	(0.17	)		(0.46	)		(0.42	)
Weighted average number of common shares outstanding:
Basic		12,115,205			10,444,150			12,082,457			10,167,624
Diluted		12,115,205			10,444,150			12,082,457			10,167,624

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

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

Balances, December 31, 2020		9,639,268	$	964	$	37,978,224		$	(32,236,082	)	$	5,743,106
Common stock issued to directors and employees		39,806		4		186,781			-			186,785
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		-		-		760,606			-			760,606
Net loss		-		-		-			(4,270,632	)		(4,270,632	)
Balances, June 30, 2021		10,459,035	$	1,046	$	40,864,011		$	(36,506,714	)	$	4,358,343

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

Common stock issued to directors and employees		51,528		5		328,543			-			328,548
Common stock issued for services providers		55,000		6		116,760			-			116,766
Proceeds from the sale of common stock, net of fees and expenses		94,623		9		314,991			-			315,000
Stock options issued to directors and employees		-		-		861,284			-			861,284
Net loss		-		-		-			(5,575,853	)		(5,575,853	)
Balances, June 30, 2022		12,130,298		1,213		47,822,087			(44,466,875	)		3,356,425

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Six Months Ended
	June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(5,575,853	)	$	(4,270,632	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation issued for services		116,766			240,422
Non-cash stock compensation issued to directors and employees		328,548			186,785
Fair value of stock options issued to employees		861,284			760,606
Non-cash compensation for services		30,000			-
Amortization of discount on notes payable		-			937,135
Amortization of leasehold right of use asset		114,032			34,350
Extinguishment of debt		-			(157,620	)
Loss from equity method investment		189,095			-
Depreciation and amortization		37,629			5,959
Changes in assets and liabilities:
Accounts receivable		(6,015	)		(26,170	)
Interest receivable		-			(1,827	)
Inventory		5,777			14,588
Prepaid expenses and other current assets		35,069			(90,658	)
Accounts payable and accrued expenses		23,553			(22,675	)
Accrued compensation		(72,885	)		(177,668	)
Deferred revenue		71,457			(357,143	)
Leasehold liability		(109,377	)		(4,053	)
Accrued interest		-			20,526
Income taxes payable		-			(1,062	)
Net cash used in operating activities		(3,950,920	)		(2,909,137	)
Cash from investing activities:
Payments to acquire property, plant, and equipment		(8,338	)		-
Payments to acquire intangibles		(1,517	)		(35,383	)
Investment in joint ventures		(76,937	)		(880,000	)
Net cash used in investing activities		(86,792	)		(915,383	)
Cash from financing activities:
Proceeds from the sale of common stock, net of offering costs		315,000			-
Proceeds from warrant exercise		-			123,562
Proceeds from unit purchase option exercise		-			246,278
Net cash provided by financing activities		315,000			369,840
Increase (decrease) in cash and cash equivalents		(3,722,712	)		(3,454,680	)
Cash and cash equivalents at beginning of period		5,684,871			10,097,760
Cash and cash equivalents at end of period	$	1,962,159		$	6,643,080

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	-		$	27,184
Taxes	$	2,847		$	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

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

INVO BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

Description of Business

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

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 June 30, 2022, 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.

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.

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 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.

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 six months ended June 30, 2022, and 2021.

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 June 30, 2022, the Company had 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.

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 June 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 months ended June 30, 2022, and 2021, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

	2022			2021			2022			2021
	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net loss attributable to common shareholders (numerator)	$	(2,801,541	)	$	(1,817,163	)	$	(5,575,853	)	$	(4,270,632	)
Basic and diluted weighted-average number of common shares outstanding (denominator)		12,115,205			10,444,150			12,082,457			10,167,624
Basic and diluted net loss per common share		(0.23	)		(0.17	)		(0.46	)		(0.42	)

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

	2022		2021
	As of June 30,
	2022		2021
Options		1,489,605		1,118,911
Convertible notes and interest		-		156,597
Unit purchase options and warrants		260,165		216,193
Total		1,749,770		1,491,701

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 through operating cash flow, equity financings, and convertible notes. For the six months ended June 30, 2022 and 2021, the Company incurred a net loss of approximately $5.6 million and $4.3 million, respectively, and has an accumulated deficit of approximately $44.5 million as of June 30, 2022. Approximately $1.7 million of the net loss was related to non-cash expenses for the six months ended June 30, 2022, compared to $2.0 million for the six months ended June 30, 2021.

The Company has been dependent on raising capital from debt and equity financings to meet its needs for cash flow used in operating and investing activities. During the first six months of 2021, the Company converted approximately $1.2 million of outstanding debt to equity and received approximately $370,000 of proceeds from unit purchase option and warrant exercises. During the first six months of 2022, the Company received proceeds of approximately $0.3 million for the sale of common stock. The Company’s current plan includes opening additional INVO Centers over the next 12 months. Until the Company can generate a sufficient amount of cash from operations and to the extent additional funds are necessary to meet the Company’s longer-term liquidity needs and to execute the Company’s business strategy, it may need to raise additional funding, as it has done in the past, by way of debt and/or equity financings. Such additional funding may not be available on reasonable terms, if at all.

Although the Company’s audited financial statements for the year ended December 31, 2021 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s independent registered public accounting firm that accompanies the Company’s financial statements for the year ended December 31, 2021 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, the Company has incurred significant operating losses and the Company expects to continue to incur significant expenses and operating losses as it continues to ramp up the commercialization of INVOcell and develop new INVO Centers. 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.

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 June 30, 2022, INVO CTR had made capital contributions greater than the net loss of the Georgia JV. As such, the entire net loss was allocated to INVO CTR, and no loss was allocated to the noncontrolling interest of Bloom.

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

The Company determined the Georgia JV is a VIE, and that the Company is its primary beneficiary because the Company has an obligation to absorb losses that are potentially significant and the Company controls the majority of the activities that impact the Georgia JV’s economic performance, specifically control of the INVOcell and lab services quality management. As a result, the Company consolidated the Georgia JV’s results with its own. As of June 30, 2022, the Company invested $0.8 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 six months ended June 30, 2022, the Georgia JV recorded net losses of $0.1 million and $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 June 30, 2022, the Company invested $1.7 million in the Alabama JV in the form of a note. 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 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.

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 June 30,2022, the Company invested $0.2 million in the Mexico JV. For the six months ended June 30, 2022, the Mexico JV recorded a net loss of $0.1 million of which the Company recognized a loss from equity method investment of $0.03 million.

The following table summarizes our investments in unconsolidated VIEs:

					Carrying Value as of
	Location	Percentage Ownership			June 30, 2022		December 31, 2021
HRCFG INVO, LLC	Alabama, United States		50	%	$	1,198,320		1,387,495
Positib Fertility, S.A. de C.V.	Mexico		33	%		149,456		102,439
Total investment in unconsolidated VIEs					$	1,347,776		1,489,934

Earnings from investments in unconsolidated VIEs were as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021
HRCFG INVO, LLC	$	(104,255	)	$	-	$	(159,175	)	$	-
Positib Fertility, S.A. de C.V.		(13,723	)		-		(29,920	)		-
Total earnings from unconsolidated VIEs		(117,978	)		-		(189,095	)		-

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

	2022			2021		2022			2021
	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021
Statements of operations:
Operating revenue	$	166,477		$	-	$	336,312		$	-
Operating expenses		(415,665	)		-		(744,421	)		-
Net loss		(249,188	)		-		(408,109	)		-

	June 30, 2022			December 31, 2021
Balance sheets:
Current assets	$	494,588			456,967
Long-term assets		1,071,433			1,302,067
Current liabilities		(544,305	)		(404,155	)
Long-term liabilities		(146,585	)		(142,321	)
Net assets	$	875,131			1,212,558

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:

	2022		2021		2022		2021
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Bloom Invo, LLC
INVOcell revenue	$	-	$	-	$	-	$	-
Unconsolidated VIEs
INVOcell revenue	$	9,000	$	-	$	16,500	$	-

The Company had balances with VIEs as follows:

	June 30, 2022		December 31, 2021
Bloom Invo, LLC
Accounts receivable	$	21,600		21,600
Notes payable		460,658		453,406
Unconsolidated VIEs
Accounts receivable	$	32,810		16,310

Note 5 – Inventory

Components of inventory are:

Schedule of Inventory

	June 30, 2022		December 31, 2021
Raw materials	$	71,417	$	67,605
Finished goods		210,579		220,168
Total inventory	$	281,996	$	287,773

Note 6 – Property and Equipment

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

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

	June 30, 2022			December 31, 2021
Manufacturing equipment	$	132,513		$	132,513
Medical equipment		283,063			275,423
Office equipment		75,589			74,891
Leasehold improvements		96,817			96,817
Less: accumulated depreciation		(114,933	)		(78,208	)
Total equipment, net	$	473,049		$	501,436

During the three months ended June 30, 2022, and 2021, the Company recorded depreciation expense of $21,630 and $2,528, respectively.

During the six months ended June 30, 2022, and 2021, the Company recorded depreciation expense of $36,725 and $5,055.

Note 7 – Intangible Assets

Components of intangible assets are as follows:

	June 30, 2022			December 31, 2021
Trademarks	$	112,359		$	110,842
Patents		95,355			95,355
Accumulated amortization		(75,008	)		(74,104	)
Total patent costs, net	$	132,706		$	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.

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

During the six months ended June 30, 2022, and 2021, the Company recorded amortization expenses related to patents of $904 and $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.

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 June 30, 2022, the Company’s lease components included in the consolidated balance sheet were as follows:

Schedule of Lease Components

Lease component	Balance sheet classification	June 30, 2022
Assets
ROU assets – operating lease	Other assets	$	1,923,020
Total ROU assets		$	1,923,020

Liabilities
Current operating lease liability	Current liabilities	$	226,749
Long-term operating lease liability	Other liabilities		1,787,424
Total lease liabilities		$	2,014,173

Future minimum lease payments as of June 30, 2022 were as follows:


2022	$	130,345
2023		264,108
2024		251,671
2025		247,960
2026 and beyond		1,316,245
Total future minimum lease payments	$	2,210,329
Less: Interest		(196,156	)
Total operating lease liabilities	$	2,014,173

Note 9 – Notes Payable

2020 Convertible Notes Payable

From May 15, 2020, through July 1, 2020, the Company entered into agreements with accredited investors for their purchase of secured convertible notes issued by the Company in the aggregate original principal amount of $3,494,840 (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 at a rate of 10% per annum and was payable on the maturity dates of November 15, 2021, December 22, 2021, and December 30, 2021.

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

As of June 30, 2022, all 2020 Convertible Notes had either converted or been repaid by the Company.

Interest expense on the 2020 Convertible Notes was $0 and $12,640 for the three months ended June 30, 2022, and 2021, respectively.

Interest expense on the 2020 Convertible Notes was $0 and $47,710 for the six months ended June 30, 2022, and 2021, respectively.

Amortization of options discount on the 2020 Convertible Notes was $0 and $3,694 for the three months June 30, 2022, and 2021, respectively.

Amortization of options discount on the 2020 Convertible Notes was $0 and $165,033 for the six months ended June 30, 2022, and 2021, respectively.

Amortization of warrant discount on the 2020 Convertible Notes was $0 and $3,914 for the three months ended June 30, 2022, and 2021, respectively.

Amortization of warrant discount on the 2020 Convertible Notes was $0 and $167,494 for the six months ended June 30, 2022, and 2021, respectively.

Amortization of beneficial conversion feature on the 2020 Convertible Notes was $0 and $49,004 for the three months ended June 30, 2022, and 2021, respectively.

Amortization of beneficial conversion feature on the 2020 Convertible Notes was $0 and $510,124 for the six months ended June 30, 2022, and 2021, respectively.

Amortization of issuance costs on the 2020 Convertible Notes was $0 and $20,368 for the three months ended June 30, 2022, and 2021, respectively.

Amortization of issuance costs on the 2020 Convertible Notes was $0 and $94,484 for the six months ended June 30, 2022, and 2021, respectively.

Paycheck Protection Program

On July 1, 2020, the Company received a loan in the principal amount of $157,620 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.

Note 10 – Related Party Transactions

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

Note 11 – Stockholders’ Equity

Reverse Stock Splits

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, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20. On May 21, 2020, the Company filed a certificate of change (with an effective date of May 26, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. The reverse split took effect at the open of business on May 26, 2020.

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

The consolidated financial statements presented reflect the reverse splits.

Public offerings

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

On October 1, 2021, the Company and certain institutional and accredited investors and members of the Company’s management team (the “Investors”) entered into a securities purchase agreement pursuant to which the Company agreed to issue and sell to the Investors 1,240,737 shares of its common stock, in a registered direct offering (the “Direct Offering”) for aggregate gross proceeds of $4,044,803. The purchase price for each share in the Direct Offering was $3.26. The net proceeds to the Company from the Direct Offering, after deducting placement agent fees and the Company’s estimated offering expenses, were approximately $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 shares of the Company’s common stock at an exercise price of $3.912 per share.

Six Months Ended June 30, 2022

During the first six months of 2022, the Company issued 51,528 shares of common stock to employees and directors and 40,000 shares of common stock to consultants with a fair value of $214,637 and $89,405, respectively. The shares were issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”).

During the first six months of 2022, the Company issued 15,000 shares of its common stock to consultants in consideration of services rendered with a fair value of $27,361. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from this issuance.

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

During the first six months of 2022, the Company granted 96,333 restricted stock units to employees that will vest 50% at six months from grant date and 50% at twelve months from grant date. The Company recognized stock based compensation expense of $113,911 for during the six months ended June 30, 2022 associated with the equity grant.

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, restricted stock units, and restricted shares of common stock to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of 500,000 shares. A provision in the 2019 Plan provides for an automatic annual increase equal to 6% of the total number of shares of Company common stock outstanding on December 31 of the preceding calendar year. In January 2022, the number of available shares increased by 715,749 shares to a total of 2,087,198.

Options granted under the 2019 Plan generally have a life of 3 to 10 years and exercise prices equal to or greater than the fair market value of the common stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a three-year period.

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

Schedule of Stock Option Activity

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2021	$	1,055,894	$	5.09	$	133,022
Granted		433,711		3.65		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of June 30, 2022		1,489,605		4.48		-
Exercisable as of June 30, 2022		786,392		5.32		-

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:

	Six months ended June 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		-	%		-	%

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

Total

Intrinsic

Value of

Options

Exercised

Total Fair

Value of Options

Vested

Year ended December 31, 2021

1,543,912

Six months ended June 30, 2022

861,284

For the six months ended June 30, 2022, the weighted average grant date fair value of options granted was $2.97 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 June 30, 2022, the weighted average remaining service period is 1.3 years.

Restricted Stock and Restricted Stock Units

In the six months ended June 30, 2022, the Company granted 187,861 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 six months ended June 30, 2022:

	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		(100,841	)		3.08		(309,416	)
Forfeitures		-			-		-
Balance as of June 30, 2022		96,750		$	3.16	$	305,818

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

SEC Form 10-Q filed by INVO BioScience Inc.