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, 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 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 14, 2023, the Registrant had 2,449,662 shares of common stock outstanding.

INVO BIOSCIENCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED June 30, 2023

TABLE OF CONTENTS

Item		Page Number
PART I. FINANCIAL INFORMATION

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

PART II. OTHER INFORMATION

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INVO BIOSCIENCE, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,			December 31,
	2023			2022
					(audited)
ASSETS
Current assets
Cash	$	112,485		$	90,135
Accounts receivable		74,908			77,149
Inventory		280,018			263,602
Prepaid expenses and other current assets		374,714			190,201
Total current assets		842,125			621,087
Property and equipment, net		659,442			436,729
Lease right of use		4,004,962			1,808,034
Investment in joint ventures		1,132,365			1,237,865
Total assets	$	6,638,894		$	4,103,715
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	1,844,629		$	1,349,038
Accrued compensation		1,202,420			946,262
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		227,026			231,604
Total current liabilities		4,469,150			3,409,424
Lease liability, net of current portion		3,873,289			1,669,954
Deferred tax liability		1,949			1,949
Total liabilities		8,344,388			5,081,327

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		52,869,346			48,805,860
Accumulated deficit		(54,574,923	)		(49,783,533	)
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)


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2023			2022			2023			2022

Revenue:
Clinic revenue	$	254,364		$	112,358		$	551,745		$	218,206
Product revenue		61,538			33,777			112,182			90,527
Total revenue		315,902			146,135			663,927			308,733
Operating expenses
Cost of revenue		235,714			170,526			466,719			367,207
Selling, general and administrative expenses		2,042,609			2,444,586			4,373,443			4,991,714
Research and development expenses		83,850			190,761			157,370			294,941
Depreciation and amortization		19,705			22,083			38,792			37,630
Total operating expenses		2,381,879			2,827,956			5,036,324			5,691,492
Loss from operations		(2,065,977	)		(2,681,821	)		(4,372,397	)		(5,382,759	)
Other income (expense):
Income (loss) from equity method joint ventures		3,788			(117,978	)		(23,947	)		(189,095	)
Interest income		-			48			-			273
Interest expense		(175,192	)		(102	)		(391,781	)		(1,558	)
Foreign currency exchange loss		(265	)		(888	)		(400	)		(1,914	)
Total other income (expense)		(171,669	)		(118,920	)		(416,128	)		(192,294	)
Net loss before income taxes		(2,237,646	)		(2,800,741	)		(4,788,525	)		(5,575,053	)
Income taxes		2,865			800			2,865			800
Net loss	$	(2,240,511	)	$	(2,801,541	)	$	(4,791,390	)	$	(5,575,853	)

Net loss per common share:
Basic	$	(3.06	)	$	(4.62	)	$	(7.07	)	$	(9.23	)
Diluted	$	(3.06	)	$	(4.62	)	$	(7.07	)	$	(9.23	)
Weighted average number of common shares outstanding:
Basic		732,255			605,760			677,684			604,123
Diluted		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)


	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.

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	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.

INVO BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

Description of Business

INVO Bioscience, Inc. (“INVO” or the “Company”) is a 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 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 US-based, profitable in vitro fertilization (“IVF”) clinics and the sale and distribution of our technology solution into existing fertility clinics. The Company’s proprietary technology, INVOcell, is 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.

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, 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.

Equity Method Investments

Investments in unconsolidated affiliates, 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. 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.

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 fair value and an impairment loss recognized. There was no impairment recorded during the six months ended June 30, 2023, and 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 June 30, 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.

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.

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 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 six months ended June 30, 2023, and 2022, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
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)		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		(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:


	As of June 30,
	2023		2022
Options		121,255		74,480
Convertible notes and interest		55,120		-
Unit purchase options and warrants		348,151		13,008
Total		524,526		87,488

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 revenue collection, equity financings, and convertible notes. For the six months ended June 30, 2023, and 2022, the Company incurred a net loss of approximately $4.8 million and $5.6 million, respectively, and has an accumulated deficit of approximately $54.6 million as of June 30, 2023. Approximately $1.4 million of the net loss was related to non-cash expenses for the six months ended June 30, 2023, compared to $1.6 million for the six months ended June 30, 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 six months of 2023, the Company received net proceeds of approximately $2.7 million for the sale of its common stock par value $0.0001 per share (“Common Stock”) as well as approximately $0.7 million from the sale of convertible notes. During the first six months of 2022, the Company received proceeds of approximately $0.3 million for the sale of Common Stock. Over the next 12 months, the Company’s plan includes opening additional INVO Centers, completing the acquisition of Wisconsin Fertility Institute and pursuing additional IVF clinic acquisitions. Until the Company can generate positive cash from operations, it will need to raise additional funding to meet its liquidity needs and to execute its business strategy. As in the past, the Company will seek debt and/or equity 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, 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, 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.

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, 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.

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, 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 six months ended June 30, 2023 and 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.

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, 2023, the Company invested $1.6 million in the Alabama JV in the form of a note. For the six months ended 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 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.

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, 2023, the Company invested $0.1 million in the Mexico JV. For the six months ended June 30, 2023 and 2022, the Mexico JV recorded net losses of $74 thousand and $90 thousand, respectively, of which the Company recognized a loss from equity method investments of $24 thousand and $30 thousand, respectively.

The following table summarizes our investments in unconsolidated VIEs:

					Carrying Value as of
	Location	Percentage Ownership			June 30, 2023		December 31, 2022
HRCFG INVO, LLC	Alabama, United States		50	%	$	1,023,346		1,106,905
Positib Fertility, S.A. de C.V.	Mexico		33	%		109,019		130,960
Total investment in unconsolidated VIEs					$	1,132,365		1,237,865

Earnings from investments in unconsolidated VIEs were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
HRCFG INVO, LLC	$	19,474		$	(104,255	)	$	805		$	(159,175	)
Positib Fertility, S.A. de C.V.		(15,686	)		(13,723	)		(24,752	)		(29,920	)
Total earnings from unconsolidated VIEs		3,788			(117,978	)		(23,947	)		(189,095	)

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Statements of operations:
Operating revenue	$	458,069		$	166,477		$	807,396		$	336,312
Operating expenses		(466,184	)		(415,665	)		(880,050	)		(744,421	)
Net loss		(8,115	)		(249,188	)		(72,654	)		(408,109	)


	June 30, 2023			December 31, 2022
Balance sheets:
Current assets	$	416,948			261,477
Long-term assets		1,057,010			1,094,490
Current liabilities		(513,709	)		(396,619	)
Long-term liabilities		(121,773	)		(107,374	)
Net assets	$	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:


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

The Company had balances with VIEs as follows:


	June 30, 2023		December 31, 2022
Bloom Invo, LLC
Accounts receivable	$	12,000		13,500
Notes payable		472,839		468,031
Unconsolidated VIEs
Accounts receivable	$	34,935		46,310

Note 5 – Inventory

Components of inventory are:

Schedule of Inventory

	June 30, 2023		December 31, 2022
Raw materials	$	62,745	$	68,723
Finished goods		217,273		194,879
Total inventory	$	280,018	$	263,602

SEC Form 10-Q filed by INVO BioScience Inc.