INVO Bioscience, Inc. (Form: 10-Q, Received: 05/16/2022 16:16:38)

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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 March 31, 2022

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

EXCHANGE ACT OF 1934

INVO Bioscience, Inc.

(Exact name of registrant as specified in its charter)

Nevada

001-39701

20-4036208

(State or other jurisdiction

of incorporation or organization)

(Commission

File No.)

(I.R.S. Employer

Identification No.)

5582 Broadcast Court Sarasota, Florida, 34240

(Address of principal executive offices, including zip code)

(978) 878-9505

(Registrant’s telephone number, including area code)

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 ☒

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

As of May 16, 2022, the registrant had 12,096,798 shares of common stock outstanding.

INVO BIOSCIENCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED March 31, 2022

TABLE OF CONTENTS

Item		Page Number
Part I

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

Part II

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

Forward Looking Statements

The statements contained in this Quarterly Report on Form 10-Q which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding results of operations, the commercialization of our technology, regulatory approvals, our development of new technologies, the adequacy of our ability to develop current financing sources to fund our operations, our growth initiatives, and the strength of our intellectual property portfolio. These forward-looking statements may be identified by the use of words such as “plans”, “intends,” “may,” “could,” “expect,” “estimate,” “anticipate,” “continue” or similar terms, though not all forward-looking statements contain such words. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements due to a number of important factors. These factors that could cause actual results to differ from those anticipated or predicted include, without limitation, our ability to develop and commercialize our products, including obtaining regulatory approvals, the size and growth of the potential markets for our products and our ability to serve those markets, the rate and degree of market acceptance of any of our products, general economic conditions, costs and availability of raw materials and management information systems, our ability to obtain and maintain intellectual property protection for our products, competition, the loss of key management and technical personnel, our ability to obtain timely payment of our invoices from customers, litigation, the effect of governmental regulatory developments, the availability of financing sources, our ability to comply with our debt obligations, our ability to deleverage our balance sheet, and seasonality, as well as the uncertainties set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022 (the “10-K”), including the risk factors contained in Item 1A, and from time to time in our other filings with the SEC We disclaim any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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)


	March 31,			December 31,
	2022			2021
				(audited)
ASSETS
Current assets
Cash	$	3,839,862		$	5,684,871
Accounts receivable		58,720			50,470
Inventory		294,631			287,773
Prepaid expenses and other current assets		228,178			282,751
Total current assets		4,421,391			6,305,865
Property and equipment, net		491,995			501,436
Intangible Assets, net		132,551			132,093
Lease right of use		1,980,153			2,037,052
Investment in joint ventures		1,494,143			1,489,934
Total assets	$	8,520,233		$	10,466,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	462,211		$	443,422
Accrued compensation		391,877			581,689
Deferred revenue, current portion		5,793			5,900
Lease liability, current portion		224,361			221,993
Total current liabilities		1,084,242			1,253,004
Lease liability, net of current portion		1,844,784			1,901,557
Deferred tax liability		1,139			1,139
Total liabilities		2,930,165			3,155,700

Stockholders’ equity
Common Stock, $.0001 par value; 125,000,000 shares authorized; 12,096,798 and 11,929,147 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,210			1,193
Additional paid-in capital		47,254,192			46,200,509
Accumulated deficit		(41,665,334	)		(38,891,022	)
Total stockholders’ equity		5,590,068			7,310,680
Total liabilities and stockholders’ equity	$	8,520,233		$	10,466,380

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the Three Months Ended
	March 31,
	2022			2021
Revenue:
Product revenue	$	56,750		$	505,952
Clinic revenue		105,848			-
License revenue		-			178,571
Total revenue		162,598			684,523
Cost of goods sold:
Production costs		57,533			60,314
Depreciation		7,428			2,431
Total cost of goods sold		64,961			62,745
Gross profit		97,637			621,778
Operating expenses
Selling, general and administrative expenses		2,694,395			2,115,303
Research and development expenses		104,180			66,267
Total operating expenses		2,798,575			2,181,570
Loss from operations		(2,700,938	)		(1,559,792	)
Other income (expense):
Loss from equity method joint ventures		(71,117	)		-
Interest income		225			2,013
Interest expense		(1,456	)		(895,226	)
Foreign currency exchange loss		(1,026	)		(464	)
Total other expenses		(73,374	)		(893,677	)
Net loss		(2,774,312	)		(2,453,469	)
Net loss per common share:
Basic	$	(0.23	)	$	(0.25	)
Diluted	$	(0.23	)	$	(0.25	)
Weighted average number of common shares outstanding:
Basic		12,050,696			9,888,025
Diluted		12,050,696			9,888,025

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


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

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

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

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

INVO BIOSCIENCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


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

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

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

INVO BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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 March 31, 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 three months ended March 31, 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 March 31, 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 March 31, 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 March 31, 2022, and 2021, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.


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

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

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 three months ended March 31, 2022 and 2021, the Company incurred a net loss of approximately $2.8 million and $2.5 million, respectively, and has an accumulated deficit of approximately $41.7 million as of March 31, 2022. Approximately $0.9 million of the net loss was related to non-cash expenses for the three months ended March 31, 2022, compared to $1.4 million for the three months ended March 31, 2021.

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

Although the Company’s audited financial statements for the year ended December 31, 2021 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s 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 March 31, 2022, INVO CTR had made capital contributions greater than the net loss of the Georgia JV. As such, the entire net loss was allocated to INVO CTR, and no loss was allocated to the noncontrolling interest of Bloom.

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

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

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 March 31, 2022, the Company invested $1.7 million in the Alabama JV in the form of a note. For the three months ended March 31, 2022, the Alabama JV recorded a net loss of $0.1 million of which the Company recognized a loss from equity method investment of $0.05 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 March 31,2022, the Company invested $0.2 million in the Mexico JV. For the three months ended March 31, 2022, the Mexico JV recorded a net loss of $0.05 million of which the Company recognized a loss from equity method investment of $0.02 million.

The following table summarizes our investments in unconsolidated VIEs:

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

Earnings from investments in unconsolidated VIEs were as follows:


	Three Months Ended March 31,
	2022			2021
HRCFG INVO, LLC	$	(54,920	)		-
Positib Fertility, S.A. de C.V.		(16,197	)		-
Total earnings from unconsolidated VIEs	$	(71,117	)		-

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


	Three Months Ended March 31,
	2022			2021
Statements of operations:
Operating revenue	$	169,835			-
Operating expenses		(328,756	)		-
Net loss	$	(158,921	)		-

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

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 March 31,
	2022		2021
Bloom Invo, LLC
INVOcell revenue	$	-		-
Unconsolidated VIEs
INVOcell revenue	$	7,500		-

The Company had balances with VIEs as follows:

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

Note 5 – Inventory

Components of inventory are:

Schedule of Inventory

	March 31, 2022		December 31, 2021
Raw materials	$	77,909	$	67,605
Finished goods		216,722		220,168
Total inventory	$	294,631	$	287,773

Note 6 – Property and Equipment

The estimated useful lives and accumulated depreciation for equipment are as follows as of March 31, 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

Schedule of Property and Equipment

	March 31, 2022			December 31, 2021
Manufacturing equipment	$	132,513		$	132,513
Medical equipment		282,811			275,423
Office equipment		75,589			74,891
Leasehold improvements		96,817			96,817
Less: accumulated depreciation		(95,735	)		(78,208	)
Total equipment, net	$	491,995		$	501,436

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

Note 7 – Intangible Assets

Components of intangible assets are as follows:

	March 31, 2022			December 31, 2021
Trademarks	$	111,752		$	110,842
Patents		95,355			95,355
Accumulated amortization		(74,556	)		(74,104	)
Total patent costs, net	$	132,551		$	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 March 31, 2022, and 2021, the Company recorded amortization expenses related to patents of $452 and $452, 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 March 31, 2022, the Company’s lease components included in the consolidated balance sheet were as follows:

Schedule of Lease Components

Lease component	Balance sheet classification	March 31, 2022
Assets
ROU assets – operating lease	Other assets	$	1,980,153
Total ROU assets		$	1,980,153

Liabilities
Current operating lease liability	Current liabilities	$	224,361
Long-term operating lease liability	Other liabilities		1,844,784
Total lease liabilities		$	2,069,145

Future minimum lease payments as of March 31, 2022 were as follows:


2022	$	194,542
2023		264,108
2024		251,671
2025		247,960
2026 and beyond		1,316,245
Total future minimum lease payments	$	2,274,526
Less: Interest		(205,381	)
Total operating lease liabilities	$	2,069,145

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 March 31, 2022, all 2020 Convertible Notes had either converted or been repaid by the Company.

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

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

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

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

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

Three Months Ended March 31, 2022

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

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

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

During the first three months of 2022, the Company granted 86,333 restricted stock units to employees that will vest 50% at six months from grant date and 50% at twelve months from grant date. The Company recognized stock based compensation expense of $40,474 for during the three months ended March 31, 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 Options 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		418,711		3.78		-
Exercised		-		-		-
Canceled		-		-		-
Balance as of March 31, 2022		1,474,605	$	4.90		-
Exercisable as of March 31, 2022		740,495		5.78		-

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:

	Three Months ended March 31,
	2022			2021
Risk-free interest rate range	1.6% to 1.9		%	0.22% to 0.31		%
Expected life of option-years	5.25 to 5.75			5.3 to 6.5
Expected stock price volatility		110.4 to 113.2	%		107.4	%
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
Three months ended March 31, 2022	$	-	$	428,488

For the three months ended March 31, 2021, the weighted average grant date fair value of options granted was $3.08 per share. The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through March 31, 2022, the weighted average remaining service period is 1.3 years.

Restricted Stock and Restricted Stock Units

In the three months ended March 31, 2022, the Company granted 156,361 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 three months ended March 31, 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		159,361			3.40		532,167
Vested		(76,841	)		3.52		(265,847	)
Forfeitures		-			-		-
Balance as of March 31, 2022		92,250		$	3.39	$	302,468

Note 13 – Unit Purchase Options and Warrants

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

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

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

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

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

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

The following table sets forth the activity of unit purchase options:

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

The following table sets forth the activity of warrants:

Schedule of Warrants Activity

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

Note 14 – Income Taxes

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

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

Note 15 – Commitments and Contingencies

Insurance

The Company’s insurance coverage is carried with third-party insurers and includes: (i) general liability insurance covering third-party exposures; (ii) statutory workers’ compensation insurance; (iv) excess liability insurance above the established primary limits for general liability and automobile liability insurance; (v) property insurance, which covers the replacement value of real and personal property and includes business interruption; and (vi) insurance covering our directors and officers for acts related to our business activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are common for companies with similar types of operations.

Legal Matters

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

Note 16 – Subsequent Events

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

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

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

Certain statements made in this Quarterly Report on Form 10-Q, including without limitation this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than statements of historical information, are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may sometimes be identified by such words as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words. We believe that it is important to communicate our future expectations to investors. However, these forward-looking statements involve many risks and uncertainties including those referred to herein and in our Annual Report on Form 10-K for the year ended December 31, 2021. Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are 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. Our primary mission is to implement new medical technologies aimed at increasing the availability of affordable, high-quality, patient-centered fertility care. Our flagship product is INVOcell, a revolutionary medical device that allows fertilization and early embryo development to 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”). Our commercialization strategy is focused on the opening of dedicated “INVO Centers” offering the INVOcell and IVC procedure (with three centers in North America now operational), in addition to continuing to distribute and sell our technology solution into existing fertility clinics.

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

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

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

Operations

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

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

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

Market Opportunity

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

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

Competitive Advantages

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

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

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

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

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

Sales and Marketing

Our product commercialization efforts are focused on identifying distributors and partners within targeted geographic regions that we believe can best promote, market and sell the INVOcell and support our efforts to expand access to advanced fertility treatment for the large number of underserved infertile people hoping to have a baby. We believe that the IVC procedure is an effective and affordable treatment option that greatly reduces the need for more expensive IVF lab facilities and allows providers to pass on related savings to patients without compromising efficacy. We have been cleared to sell the INVOcell in the United States since November 2015 after receiving de novo class II clearance from the FDA. Our primary focus has been on establishing INVO Centers to promote the INVOcell and the IVC procedure, selling the INVOcell directly to U.S. fertility clinics, and developing key international market partnerships around the world.

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

We anticipate that we will experience quarterly fluctuations in our revenue as we expand the sales of the INVOcell to new markets in the U.S. and globally. We continue to seek partners that will contractually commit to meeting agreeable performance objectives that are consistent with our goals and objectives.

Ferring

On November 12, 2018, we entered into a U.S. Distribution Agreement (the “Ferring Agreement”) with Ferring International Center S.A. (“Ferring”), which closed on January 14, 2019. Pursuant to the Ferring Agreement, among other things, we granted Ferring an exclusive license in the United States to market, promote, distribute, and sell the INVOcell. Ferring was responsible, at its own cost, for all commercialization activities in the United States. We retained a limited exception to the exclusive license granted to Ferring allowing us, subject to certain restrictions, to establish up to five INVO Centers in the United States, which as of March 2, 2021, was amended to seven centers. We retained all commercialization rights for the INVOcell outside of the United States.

On November 2, 2021, Ferring notified us of its intention to terminate the Ferring Agreement, which required 90-days prior written notice. Accordingly, the Ferring Agreement officially terminated on January 31, 2022. Pursuant to the terms of the Ferring Agreement, upon notice of termination, Ferring was required to use commercially reasonable efforts to transition any customers to us and otherwise facilitate the orderly transition of the distribution from Ferring to us. By its terms, our Supply Agreement with Ferring also terminated on January 31, 2022.

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

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

International Distribution Agreements

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

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

				INVOcell Registration
Market	Distribution Partner	Date	Initial Term	Status in Country

Canada	Invaron Pharmaceuticals Inc.	July 2020	1-Year	Completed
Mexico (a)	Positib Fertility, S.A. de C.V.	Sept 2020	TBD**	Completed
Malaysia	iDS Medical Systems	Nov 2020	3-year	Completed
Jordan	Biovate	Sept 2019	1-year	Completed
Pakistan	Galaxy Pharma	Dec 2020	1-year	In process
Thailand	IVF Envimed Co., Ltd.	April 2021	1-year	Complete
Sudan	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	In process
Ethiopia	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	In process
Uganda	Quality Medicines, Cosmetics & Medical Equipment Import	Sept 2020	1-year	Not required
Nigeria	G-Systems Limited	Sept 2020	5-year	Completed
Togolese Republic	INVOSOLUX TOGO	Nov 2019	1-year	In process
Iran	Tasnim Behboud	Dec 2020	1-year	Complete
Sri Lanka	Alsonic Limited	July 2021	1-year	In process

(a)

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

Investment in Joint Ventures and Partnerships

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

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

Affiliate Name	Country	Percent (%) Ownership

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

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

Partner		Country		Partnership Split
Lyfe Medical		United States			40	%

Alabama JV Agreement

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

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

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

Georgia JV Agreement

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

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

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

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

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

Mexico JV Agreement

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

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

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

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

Malaysia JV Agreement

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

North Macedonia JV Agreement

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

Lyfe Medical Center I, LLC Partnership Agreement

On April 9, 2021, we entered into a partnership agreement (the “Lyfe Agreement”) with Lyfe Medical Center I, LLC (“Lyfe”) in connection with Lyfe’s intention to establish an INVO Center in the Bay Area of California (the “Bay Area Clinic”). Pursuant to the Lyfe Agreement, we will provide embryology laboratory services in connection with the IVC procedure and other fertility-related treatments (the “Lab Services”) to be provided by Lyfe to its patients at the Bay Area Clinic. Under the terms of the Lyfe Agreement, we will receive 40% of the net income received by the Bay Area Clinic for the performance of the Lab Services. As of March 31, 2022, the Bay Area Clinic was not yet operational.

Results of Operations

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

With respect to our distribution efforts, we re-assumed control of the U.S. market upon the termination of the Ferring Agreement in the first quarter. We are now selling directly ourselves (rather than through a distributor) to the existing, established fertility clinics in the U.S. market. During the quarter, we received several orders from existing IVF clinics that had previously trained on implementing the IVC procedure within their practices. To support these efforts, we added sales resources during the first quarter and believe we will experience growing revenue from these activities going forward. This revenue is also anticipated to be more consistent from quarter to quarter, as opposed to the sporadic orders placed by Ferring over the past several years.

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

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

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

Revenue

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

Gross Profit

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

Selling, General and Administrative Expenses

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

Research and Development Expenses

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

Loss from equity investment

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

Interest Expense and Financing Fees

Interest expense and financing fees were approximately $0.1 thousand for the three months ended March 31, 2022, compared to approximately $0.9 million for the three months ended March 31, 2021.

Liquidity and Capital Resources

For the three months ended March 31, 2022, and 2021, we had net losses of approximately $2.8 million and $2.5 million, respectively, and an accumulated deficit of approximately $41.7 million as of March 31, 2022. Approximately $0.9 million of the net loss was related to non-cash expenses for the three months ended March 31, 2022, compared to $1.4 million for the three months ended March 31, 2021. We had net working capital of approximately $3.3 million as of March 31, 2022, compared to approximately $5.1 million as of December 31, 2021. As of March 31, 2022, our stockholder’s equity was approximately $5.6 million compared to approximately $7.3 million as of December 31, 2021.

We have been dependent on raising capital from debt and equity financings to meet our needs for cash to fund our operating expenses and investing activities. During the first three months of 2021, we received approximately $0.4 million of proceeds from unit purchase option and warrant exercises. During the first three months of 2022, we received proceeds of approximately $0.3 million for the sale of our common stock. Our current plan includes opening additional INVO Centers over the next 12 months. Until we can generate a sufficient amount of cash from operations and to the extent additional funds are necessary to meet our longer-term liquidity needs and to execute our business strategy, we will need to raise additional funding, as 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 our audited financial statements for the year ended December 31, 2021, were prepared under the assumption that we would continue operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2021, contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, we have incurred significant operating losses and we expect to continue to incur significant expenses and operating losses as we continue to ramp up the commercialization of INVOcell and develop new INVO Centers. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.

Cash Flows

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

	2022			2021
Cash (used in) provided by:
Operating activities		(2,078,119	)		(1,735,384	)
Investing activities		(81,890	)		(308,980	)
Financing activities		315,000			369,840

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

During the three months ended March 31, 2022, cash used in investing activities of $0.1 million was primarily related to a loss on equity method for the JVs, payments to acquire property, plants, and equipment, as well as additional trademarks. During the three months ended March 31, 2021, cash used in investing activities of approximately $0.3 million was related to notes receivable as well as new molds and trademarks.

During the three months ended March 31, 2022, cash provided by financing activities of approximately $0.3 million was primarily related to the sale of common stock, net of offering costs. During the three months ended March 31, 2021, cash provided by financing activities of approximately $0.4 million related to the exercising of warrants and unit purchase stock options.

Critical Accounting Policies and Estimates

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

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

Stock Based Compensation

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

Revenue Recognition

We recognize revenue on arrangements in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services ASC 606 requires companies to assess their contracts to determine the timing and amount of revenue to recognize under the new revenue standard. The model has a five-step approach:

1.	Identify the contract with the customer.

2.	Identify the performance obligations in the contract.

3.	Determine the total transaction price.

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

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

Variable Interest Entities

The Company’s 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.

Equity Method Investments

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

Item 3. Quantitative and Qualitative Disclosures about Market Risks

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

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

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2022, the end of the fiscal period covered by this Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2022.

(b) Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please see Note 14 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021, for a description of pending litigation.

Item 1A. Risk Factors

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on March 31, 2022. Except as set forth below, there have been no material changes from the factors disclosed in our 2020 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

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

	1.	During the first three months of 2022, we issued 3,500 shares of our common stock to consultants in consideration of services rendered with a fair value of $9,480. These shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. We did not receive any cash proceeds from this issuance.
	2.	See out Current Report dated January 31, 2022 and filed with the Securities and Exchange Commission on February 2, 2022.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

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

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

The foregoing summary of the terms of the Distribution Agreement does not purport to be complete and is qualified in its entirety by reference to the Distribution Agreement, filed as an exhibit to this Quarterly Report on Form 10-Q.

Item 6. Exhibits

10.1*#	Exclusive Distribution Agreement
31.1*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (the cover page of the Registrant’s Quartley Report on Form 10-Q for the quarter ended March 31, 2022 is embedded within the Inline XBRL document)

	* Filed herewith.
	** Furnished herewith.
	# Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful if publicly disclosed.

SIGNATURES

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

	INVO Bioscience, Inc.

Date: May 16, 2022	By:	/s/ Steven Shum
		Steven Shum, Chief Executive Officer
		(Principal Executive Officer)

Date: May 16, 2022	By:	/s/ Andrea Goren
		Andrea Goren, Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 10.1

CERTAIN INFORMATION IDENTIFIED BY BRACKETED ASTERISKS ([***]) HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.

EXCLUSIVE DISTRIBUTION AGREEMENT

THIS EXCLUSIVE DISTRIBUTION AGREEMENT (this “Agreement”) is made on May 13, 2022, (the “Commencement Date”) between INVO Bioscience Inc., a Nevada Corporation with a registered office at 5582 Broadcast Court, Sarasota, FL 34240 (“INVO”), Onesky Holdings Limited (“Onesky”), a Hong Kong company with its address of Room 2214, 22^nd Floor, Mira Place Tower A, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong, and Guangzhou Kang Cheng Medical Devices Co., Limited (Chinese name: 广州康珵医疗器械有限公司) (“KangCheng”), an incorporation of the People’s Republic of China (“China”) with its registered office at Room 2701A R&F To-Win Building, 30 Hua Xia Road, Tianhe District, Guangzhou City, China 510623 (Onesky and KangCheng collectively as “DISTRIBUTOR”). INVO and DISTRIBUTOR may be referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, DISTRIBUTOR are distribution companies with the resources and expertise necessary to distribute medical devices such as the products manufactured by INVO, and KangCheng is the wholly-owned subsidiary of Onesky;

WHEREAS, INVO is the global manufacturer of the patented medical device (the “INVOcell”) and of affiliated medical devices and accessories that together enable a unique in vivo method of vaginal incubation (the “INVO Procedure”);

WHEREAS, DISTRIBUTOR desires to obtain from INVO and INVO desires to grant to DISTRIBUTOR, on the terms and conditions set forth below, the exclusive right to distribute the Products to Customers (including but not limiting qualified physicians and fertility clinics) within the Territory (“Products”, “Territory” and “Customers” are defined below); and

WHEREAS, INVO is entering into this Agreement based on assurances that DISTRIBUTOR will devote its best efforts to market and distribute certain Products in the Territory and will otherwise adhere to all the terms and conditions of this Agreement.

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NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which are now and forever acknowledged and confessed, the Parties hereto agree as follows:

1. GRANT OF DISTRIBUTION RIGHTS

1.1.

Subject to all of the terms and conditions of this Agreement (including the attached Exhibits), INVO hereby grants the DISTRIBUTOR the exclusive right to distribute the INVO products (the “Products”) set forth on Exhibit A in the territory described in Exhibit B (the “Territory”) to customers in the Territory (the “Customers”). INVO further acknowledges that DISTRIBUTOR shall authorize KangCheng as the sole sub-distributor to propagate, sell and distribute the Product in the Territory, and to become listed as agent of the Products on NMPA (as defined in Section 4.3) approval. KangCheng shall have the right to establish second-tier sub-distributors (the “Sub-distributors”) to support distribution of the Products in the Territory. The appointment by DISTRIBUTOR of any Sub-distributors shall not relieve DITRIBUTOR from any of its undertakings herein. DISTRIBUTOR shall be responsible for ensuring that its Sub-distributors (including but not limiting KangCheng being the sole Sub-distributor of Onesky) fulfill all of the same obligations hereunder as DISTRIBUTOR, including without limitation all regulatory requirements, and DISTRIBUTOR will remain liable for any breach of the provisions hereof by any of its Sub-distributors. For the purpose of this Agreement, “Customers” refers to medical doctors, medical institutions, hospitals and/or clinics (including but not limiting INVO Centers operated directly or indirectly by INVO as provided in Section 4.7), person(s) or entity(s) that is domiciled inside the Territory, and person(s) or entity(s) outside the Territories who DISTRIBUTOR know or have reason to know intends to use or resell the Products inside the Territories.

1.2.

DISTRIBUTOR will not, and DISTRIBUTOR shall ensure that each of KangCheng and the Sub-distributors will not, utilize, re-sell or deliver any Products to any Parties located outside the Territory. DISTRIBUTOR will not, and DISTRIBUTOR shall ensure that each of KangCheng and the Sub-distributors will not, distribute or re-sell Products in the Territory to any person or entity, which DISTRIBUTOR knows or should know, will use, utilize, distribute, sell or deliver Products outside the Territory. DISTRIBUTOR will promptly notify INVO in writing of all sales requests received from potential customers inside or outside the Territory for Products, which are to be utilized, sold or delivered outside the Territory. INVO reserves the right to distribute, whether directly or indirectly, any and all Products worldwide without restriction outside of the DISTRIBUTOR’s defined Territory.

1.3.

INVO is entitled to apply for any license or set up one or more fertility clinics focused on the INVO Procedure (each, an “INVO Center”) inside or outside the Territory and enter into any partnership or joint venture agreement or license agreement directly or indirectly with other China partners for such purpose.

1.4.

INVO will promptly notify DISTRIBUTOR in writing of all requests received from potential customers inside the Territory looking to utilize the Products inside the Territory.

1.5.

Any other products to be purchased by DISTRIBUTOR from INVO during the term hereof and not included in Exhibit A, may be added to this Agreement by written amendment signed by the Parties.

Page 2 of 34

2. TERM OF AGREEMENT AND EARLY TERMINATION

2.1.

This Agreement shall become effective on the Commencement Date and will remain in full force and effect for a period of five (5) years after the date of NMPA approval (the “Initial Term”), unless otherwise terminated in writing in accordance with the provisions of this Agreement. This Agreement shall automatically renew for successive two (2) year periods (the “Renewed Term”) unless written notice is given by either Party ninety (90) days prior to the expiry of the Initial Term or each Renewed Term (the Initial Term and Renewal Term collectively are referred to herein as the “Term”).

2.2.

Early Termination. Notwithstanding anything to the contrary contained herein, this Agreement may be terminated before its normal expiration date under the following circumstances:

2.2.1.

If either Party defaults in the performance of any of its obligations under this Agreement (including but not limiting the DISTRIBUTOR’s obligation to purchase minimum quantities as set forth in Exhibit D hereto), the other Party may give written notice to the defaulting Party specifying the nature and the extent of the default and demanding a cure to the default. The defaulting Party will then have thirty (30) days to cure each default. If the default is not cured within thirty (30) days of the date of notice, then the aggrieved Party may by written notice terminate this Agreement effective immediately upon the defaulting Party’s receipt of the notice.

2.2.2.

If either Party becomes bankrupt or insolvent or makes an assignment for the benefit of its creditors, or has a receiver appointed for it or for any of its properties, the other Party will have the right to terminate this Agreement effective immediately upon the date of written notice to the other Party. All outstanding debts will be required to be paid to the other Party within thirty (30) days of such notice.

2.2.3.

Immediately upon written notice to the other Party in the event that any other agreement existing between INVO (or its affiliates) and DISTRIBUTOR (or its affiliates) terminates for cause during the term of this Agreement.

2.2.4.

In the event there shall be a change in applicable country statutes, local statutes, case law, administrative interpretations, regulations or general instructions, the adoption of new federal or local legislation, or a change in any third-party reimbursement system, any of which are reasonably likely to materially and adversely affect the manner in which either Party may perform or be compensated under this Agreement or which shall make this Agreement or any related agreements unlawful or unenforceable, or which would be reasonably likely to subject either Party to this Agreement, or any member, manager, officer, director, employee, agent or affiliated organization to any civil or criminal penalties or administrative sanctions, the Parties shall as soon as practicable use their best efforts to enter into a new distribution arrangement or basis for compensation for the distributorship furnished pursuant to this Agreement that complies with the applicable new laws, regulations, or policies, or which eliminates the possibility of any penalties, sanctions or unenforceability, and that approximates as closely as possible the economic position of the Parties prior to the change.

Page 3 of 34

2.2.5.

Immediately without notice, in the event any Products sold to DISTRIBUTOR are subsequently and intentionally sold, or distributed, delivered to any group, person or persons domiciled outside the Territory.

2.2.6.

INVO is entitled to terminate this Agreement with immediate effect upon receipt of any written notice (with reasonable evidence) of non-compliance of any law, administrative interpretations or regulations of the Territory and other Applicable Law (as defined below) by DISTRIBUTOR relating to the use, sales and distribution of the Products, PROVIDED HOWEVER THAT, INVO is obliged to conduct investigation against DISTRIBUTOR before delivering termination notice by disclosing to DISTRIBUTOR in writing such evidence of non-compliance, and DISTRIBUTOR shall be entitled to defense against such allegation, or otherwise cured such non-compliance within reasonable period of time..

2.3.

Obligations Upon Termination or Expiration.

2.3.1.

Immediately upon the termination or expiration of this Agreement, DISTRIBUTOR’s distributorship will terminate and all of DISTRIBUTOR’s rights under this Agreement will terminate, excluding the right to any overdue payments or fees. Following any expiration or termination of this Agreement, DISTRIBUTOR will, within thirty (30) days of such date of expiration or early termination, return to INVO all unused Products in its inventory (“Current Stock”). DISTRIBUTOR shall also provide a list of the Current Stock within fifteen (15) days of such date of expiration or early termination. INVO will refund DISTRIBUTOR within thirty (30) days of receipt of such returned Current Stock the purchase price paid by DISTRIBUTOR for any Current Stock that are unpacked regardless of remaining Shelf Life. INVO shall refund an amount that is in excess of any and all amounts due to INVO under this Agreement or otherwise. Such refund commitment shall be subject to DISTRIBUTOR returning the Current Stock in the same condition as shipped by INVO to DISTRIBUTOR. For the purpose of clarity, DISTRIBUTOR shall be also responsible for the export tax and all reasonable freight costs associated with shipping such Current Stock back to INVO. For the purpose of this Agreement, “Shelf Life” refers to expiry date of the Product, which is 6 years.

2.3.2.

Promptly upon termination or expiration of this Agreement, DISTRIBUTOR will provide INVO with a complete and detailed customer list, including contact information, to whom DISTRIBUTOR sold Products to.

Page 4 of 34

2.3.3.

The termination or expiration of this Agreement will operate as a cancellation, as of the date of the termination or expiration, of all orders which have not been shipped by INVO to DISTRIBUTOR and, thereafter, INVO will not be obligated to fill such orders. DISTRIBUTOR will not be obligated to take any orders that have not been shipped by INVO, and orders that have not arrived at Port Of Destination (defined below in Section 3.7) upon termination date. Within thirty (30) days after the date of termination or expiration of this Agreement, DISTRIBUTOR will pay all outstanding invoices deducting such invoiced amount relating to orders that have not arrived at Port Of Destination upon termination date, and deliver to INVO any and all other sums due to INVO from DISTRIBUTOR under this Agreement, and will return to INVO all trade secret and Confidential Information belonging to INVO, along with any and all sales aids which INVO may have supplied to DISTRIBUTOR under this Agreement.

2.3.4.

In the event of the termination of this Agreement by INVO pursuant to Sections 2.2.1 or 2.2.3, INVO will have the right to withhold payment of any amounts owed by INVO under this Agreement as a set-off against any damages, including fines and attorneys’ fees, which INVO incurs as a result of DISTRIBUTOR’s default.

2.4.

Upon the expiration or effective date of termination of this Agreement, DISTRIBUTOR will immediately remove from its premises, website and elsewhere all signs, promotion and advertising relating to being the exclusive distributor of INVO and the Products, and will stop all use of any trademark, trade name, branding and logos used by INVO in promoting its products and services or associated with the Products, including, but not limited to, those listed in Exhibit F hereto (the “INVO Trademarks”). DISTRIBUTOR will also ensure that any and all use by any affiliate (including KangCheng) or subsidiary of DISTRIBUTOR or others claiming rights from DISTRIBUTOR (the “Affiliates”) will immediately cease. Without INVO’s written consent, any name, title or expression in connection with any business in which DISTRIBUTOR or any Affiliate is engaged in, which, in the judgment of INVO, resembles any trademark or trade name, or part thereof, owned by INVO, including the INVO Trademarks, and likely to lead to confusion or uncertainty on the part of the public, will no longer be used by DISTRIBUTOR and any Affiliate.

2.4.1.

Upon the expiration or effective date of termination of this Agreement, INVO will immediately remove from its premises, website and elsewhere all signs and advertising relating to DISTRIBUTOR and its affiliated businesses.

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2.4.2.

It is understood by the Parties hereto that in the event of termination or expiration of this Agreement, INVO shall have no obligation whatsoever to reimburse or otherwise compensate DISTRIBUTOR, in whole or in part, for the capital or labor investment undertaken in connection with the storage or utilization of the Products, including without limitation its investment in personal or real property or any improvements thereto, any personnel employed by DISTRIBUTOR engaged in the use, handling, storage or utilization of the Products, for advertising, promotion or marketing efforts undertaken in connection with the Products, or to compensate or indemnify DISTRIBUTOR in any other way whatsoever, including without limitation on account of the loss of prospective profits on sales or commitments in connection with the business or goodwill of DISTRIBUTOR. DISTRIBUTOR acknowledges that (i) DISTRIBUTOR has no expectation and has received no assurances that its business relationship with INVO will continue beyond the stated term of this Agreement or it’s termination in accordance with the terms of this Agreement, or that any investment by DISTRIBUTOR in the promotion of Products will be recovered or recouped by virtue of this Agreement, and (ii) DISTRIBUTOR will not have or acquire any vested, proprietary or other right in the promotion of the Products or in any goodwill created by its efforts under this Agreement. THE PARTIES ACKNOWLEDGE THAT THIS SECTION HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR INVO TO ENTER INTO THIS AGREEMENT AND THAT INVO WOULD NOT HAVE ENTERED INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY OUTLINED IN THIS SECTION.

2.4.3.

The expiration or termination of this Agreement will not affect any existing obligation of either Party with respect to any already incurred and due payments or fees or to Confidential Information (as defined below).

3. TERMS AND CONDITIONS OF SALE TO DISTRIBUTOR

3.1.

Purchase Orders. DISTRIBUTOR will order Products from INVO, and INVO will sell Products to DISTRIBUTOR pursuant to the terms and conditions in this Agreement. In the event of a conflict between the terms of purchase order and the terms of this Agreement, the terms of this Agreement will control. Each confirmed purchase order will be an agreement between DISTRIBUTOR and INVO for the delivery of Products in accordance with this Agreement. The purchase order shall be deemed to have been accepted by INVO when INVO issues written confirmation to accept the purchase order or, in the absence of written acceptance of the purchase order, on the date that INVO commences delivery of the Products.

3.2.

Price. The price payable by DISTRIBUTOR for Products purchased from INVO will be the distributor prices outlined in Exhibit A to this Agreement (the “Prices”). All Prices are in United States Dollars, and are shipped EX Works (Incoterms 2010) INVO’s facilities. Prices do not include handling, shipping and insurance charges, nor any taxes, such as property, sales, use, or similar taxes. The payment of the full amount of all such fees, charges and/or taxes will be the responsibility of DISTRIBUTOR. If INVO is required to collect or pay any such fees, charges or taxes, the amounts so paid or collected will be billed to and reimbursed by DISTRIBUTOR. DISTRIBUTOR will provide INVO with appropriate sales tax exemption certificate numbers and forms along with other documentation satisfactory to the applicable taxing authorities to substantiate any claim of exemption from any such fees, charges or taxes. Nothing contained herein shall be deemed to limit in any way the right of DISTRIBUTOR to determine the prices at which or the terms on which the Products purchased by DISTRIBUTOR may be resold to its sub-distributor(s) and/or Customer(s) in the Territory.

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3.3.

Payment. Payments to INVO for all orders will be paid by DISTRIBUTOR thirty (30 days) after the invoice date. Terms of payment are outlined in Exhibit A. All payments will be made in United States Dollars. Failure to make any payment when due will be deemed a material breach of this Agreement by DISTRIBUTOR and will entitle INVO to penalty interest on overdue and outstanding payments at the rate of one and one half percent (1.5%) per month until paid, beginning with the due date of the overdue and outstanding payment.

3.4.

INVO Remedies. In addition to any other legal or equitable remedies INVO may have, INVO reserves the right to refuse to accept or to cancel any orders placed by DISTRIBUTOR and accepted by INVO, or to refuse or delay shipment, if DISTRIBUTOR (i) fails to make any payment as provided for in this Agreement or an INVO invoice, (ii) fails to meet reasonable credit or financial requirements established by INVO, including any limitations on allowable credit, and/or (iii) otherwise fails to comply with the terms and conditions of this Agreement.

3.5.

Risk of Loss and Title to Products. Risk of loss or damage and Title to the Products will pass to DISTRIBUTOR when Products are loaded for shipment at the INVO facility, and INVO will have no further responsibility for any damages or losses to the Products, except when a defect is discovered upon opening a Product for immediate use. In such an event, INVO will be responsible to replace any Product in non-conformity, or deemed defective or contaminated; provided, however, that such Product is deemed defective during its recommended shelf life. INVO and DISTRIBUTOR will work together to obtain insurance policy(ies) from an insurance company satisfactory to INVO covering the Products in the amount equal to the order price, as far as such insurance company are commercially available in the Territory. Unaccounted for units, not returned for any reason, will be charged the full order price per this Agreement or any purchase order.

3.6.

Changes to Products. It is understood that the basic specifications of any Product may be modified by INVO. INVO will notify DISTRIBUTOR of significant changes in specifications that will alter the use or handling of the Product upon at least three (3) months prior written notice to DISTRIBUTOR.

3.7.

Shipment. INVO must deliver to DISTRIBUTOR the Products free from any right or claim of a third person, and deliver the Products to Guangzhou Baiyun International Airport, or any other port of destination in the Territory designated by KangCheng in any relevant purchase order (“Port Of Destination”). Each order shall be shipped within one (1) week after order confirmation by INVO in writing, and such written confirmation shall not be unreasonably withheld. All shipment and delivery of the Products shall be EXW, as that term is defined in Incoterms 2010.

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3.8.

NON-CONFORMITY. DISTRIBUTOR shall examine the Products, or cause them to be examined within as short period as is practicable after their arrival at the Port Of Destination. In the event that DISTRIBUTOR discovers any lack of conformity of the Products with the relevant Purchase Order(s) of the DISTRIBUTOR or the specification of the Products, whether with respect to the quantity or quality of the Products delivered, or otherwise, DISTRIBUTOR shall notify INVO in writing, specifying the nature of the lack of conformity, within seven (7) days after DISTRIBUTOR has discovered or ought to have discovered the lack of conformity. Where DISTRIBUTOR has given due written notice of non-conformity to INVO, INVO may at its option, and provided it can do so without unreasonable delay and without causing DISTRIBUTOR unreasonable inconvenience: (i) deliver any missing quantity of Products, without any additional expense to DISTRIBUTOR; or (ii) replace Products with conforming goods, without any additional expense to DISTRIBUTOR; or (iii) reduce the Contract Price according to the degree of inferiority, extent of damage and amount of losses suffered by DISTRIBUTOR.

3.9.

Audit Rights. INVO or its representatives may, not more than twice per calendar year during normal business hours and upon thirty (30) days prior written notice, inspect the books and records of DISTRIBUTOR related to the performance of its obligations under this Agreement. All information received by INVO or its representatives shall be subject to the confidentiality provisions of this Agreement. The cost of the audit or inspection shall be paid by INVO unless such audit reveals that DISTRIBUTOR has made significant violations to the terms and conditions of this Agreement, in which case the cost shall be paid by DISTRIBUTOR.

4. GENERAL CONDITIONS

4.1.

Sales Promotion. DISTRIBUTOR shall use its best efforts to promote, market and sell the Products to the Customers in the Territory, to meet the market demand for the Products for use in the Territory. DISTRIBUTOR shall refrain from misrepresenting the origin of the Products in such a way that would cause one to believe that the Products are manufactured or developed by anyone other than INVO. DISTRIBUTOR shall distribute the Products in the Territory so as to include all warnings and instructions necessary for the proper use of the Products and shall not make any warranty, express or implied, relating to the Products other than the warranty set forth in Section 4.17. DISTRIBUTOR shall only promote and market the Products for the approved indications as stated in the Product labeling.

4.2.

Promotional Materials. DISTRIBUTOR shall ensure that all advertising, promotional literature and packaging for the Products complies with all Applicable Law and regulations. DISTRIBUTOR shall not use any advertising or promotional materials to promote the Products or any packaging that have not been approved in writing by INVO in advance.

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4.3.

Registrations. DISTRIBUTOR will notify INVO promptly upon becoming aware of any governmental approval requirements with respect to the Products in the Territory. If governmental registrations, licenses, permits or approvals (collectively, the “Registrations”) are required in the Territory, then DISTRIBUTOR shall, at its own expense, obtain the Registrations that are necessary to allow for the purchase, distribution and resale by DISTRIBUTOR or any of its sub-distributor of the Products in the Territory. DISTRIBUTOR shall cover all the cost, fees and/or charges relating to the Registration with the National Medical Products Administration (“NMPA”), including but not limited to clinical evaluation and/or clinical trial (if necessary). INVO shall supply, free of charge, Product samples and/or free loans of any required hardware, solely for the purpose of product testing at NPMA approved laboratories; and provide, at its own expenses, all technical documentation (including notarization and apostille of such documentation) to the satisfaction of NMPA and/or its approved laboratories. INVO shall reasonably cooperate with the DISTRIBUTOR in connection with obtaining the Registrations. All Registrations shall be owned by and made in the name of INVO to the fullest extent permitted by Applicable Laws and regulations of the Territory. DISTRIBUTOR shall provide INVO with all tangible documents, records, and other property relating to the Registrations. DISTRIBUTOR shall have the right to maintain copies of all Registrations, as necessary for DISTRIBUTOR’s activities authorized hereunder subject to the confidentiality obligations hereof. Unless otherwise stated in this Section 4.3, DISTRIBUTOR shall, at no cost to INVO, execute such documents and instruments and take such further actions as necessary or appropriate to evidence INVO’s ownership of the Registrations.

4.4.

Conduct of Business. DISTRIBUTOR shall conduct, and shall ensure that each of KangCheng and the Sub-distributors conduct, its business in a manner that reflects favorably at all times on the Products and the good name, goodwill and reputation of INVO. Without limiting the generality of the foregoing, DISTRIBUTOR shall (a) avoid deceptive, misleading or unethical practices that are or might be detrimental to INVO or the public, including but not limited to disparagement of INVO or the Products, (b) not publish or employ, or cooperate in the publication or employment of any misleading or deceptive advertising material, (c) make no representations, warranties or guarantees to third parties with respect to the specifications, features or capabilities of the Products that are inconsistent with any representations, warranties or guaranties regarding the Products that are expressly authorized by INVO, (d) use marketing and advertising efforts of high quality and good taste, and preserve the professional image and reputation of INVO and the Products, and (e) use professional and properly trained, as per INVO’s requirements, sales force to promote, market and sell the Products.

4.5.

Inventory. DISTRIBUTOR will maintain an adequate inventory of Products (and accessories) at all times. An “adequate inventory” is defined as an inventory that will allow DISTRIBUTOR to promptly and efficiently meet the demand for INVOcell in the Territory. DISTRIBUTOR shall ensure that, while Products are under its sub-distributor’s responsibility, storage and/or transport conditions shall comply with the conditions set by INVO.

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4.6.

Other Regulations. DISTRIBUTOR will keep INVO currently informed, in writing, of all governmental and/or technical regulations that may apply to the Products in the Territory. INVO will determine whether any of the Products will be modified in order to conform to any such regulations, but INVO will not be required to modify any of the Products.

4.7.

INVO Centers. INVO shall be entitled, in its sole discretion and at its sole cost, to establish INVO Centers, whether as new or within existing medical practices, that will promote use of the Products in the Territory through a contractual relationship with or an ownership interest by INVO. INVO shall provide written notice to DISTRIBUTOR not less than ninety (90) days prior to the expected opening of each INVO Center. Distributor will allow INVO to purchase product for these entities for a $[***] premium per unit above the current transfer price provided in Exhibit A.

4.8.

Regulatory Approvals; Compliance with Law.

4.8.1.

INVO represents and warrants that (a) the INVOcell can be marketed having been approved by several regulatory agencies, including clearance from the United States Food and Drug Administration (the “FDA”) (as a class II medical device), the European Union (CE Mark) in compliance with Medical Device Regulation requirements and various other countries in Asia and the Americas, and (b) INVO is ISO 13485 registered. INVO agrees to maintain ongoing quality assurance and testing procedures sufficient to satisfy applicable regulatory requirements of the NMPA.

4.8.2.

DISTRIBUTOR represents and warrants that, at its own expense, it shall have in effect at all times during the Term all licenses, permits, certifications and authorizations from all federal, state, and local authorities necessary to the performance of its obligations under this Agreement, and DISTRIBUTOR is responsible for complying with Applicable Law regarding the sales, distribution and use of the Products within the Territory.

4.8.3.

DISTRIBUTOR shall comply with all governmental laws, regulations, and orders in the Territory that may be applicable to DISTRIBUTOR by reason of its execution of this Agreement, including, without limitation, any requirement to be registered as INVO’s independent distributor with any governmental authority, and including any and all laws, regulations, or orders that govern or affect the ordering, export, shipment, import, sale (including government procurement), delivery, or redelivery of the Products in the Territory as well as data privacy. DISTRIBUTOR shall not engage in any course of conduct that, in INVO’s reasonable belief, would cause INVO to be in violation of the laws of any jurisdiction.

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4.8.4.

DISTRIBUTOR represents and warrants that in the performance of its obligations under this Agreement, DISTRIBUTOR shall not act in any fashion or take any action which will render INVO liable for a violation of the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits the offering, giving or promising to offer or give, directly or indirectly, money or anything of value to any official of a government, political party or instrumentality thereof in order to assist DISTRIBUTOR or INVO in obtaining or retaining business. INVO shall have the right to terminate this Agreement immediately if DISTRIBUTOR takes any action in violation of the FCPA. DISTRIBUTOR shall indemnify and hold INVO harmless from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) relating to DISTRIBUTOR’s breach of this Section 4.8.4 and the FCPA.

4.8.5.

DISTRIBUTOR shall, at its sole cost and expense, be responsible for the translation of all required labeling and instructions for use (“IFUs”) for the Product(s) into simplified Chinese characters in accordance with then prevailing laws, rules and regulations in force in the Territory. It is expressly understood and agreed that INVO shall have the right to review and approve the labeling of the Products and IFUs for the Products. No changes are allowed to approved labeling and IFUs except accredited translations that have been reviewed and approved by INVO. Furthermore, INVO hereby represents and warrants that it shall be responsible for printing such labeling and IFUs, and insert them into the packing of Product before it is shipped to DISTRIBUTOR.

4.9.

Accurate Records; Reports of Operation. DISTRIBUTOR agrees to maintain accurate and complete books, records and accounts of transactions under this Agreement. DISTRIBUTOR will provide INVO with its actual and forecast usage, market trends for the utilization of Products, and such other information as INVO reasonably requests. DISTRIBUTOR agrees to follow the medical device reporting procedures listed in Exhibit G, as well as any related procedures required under Applicable Law, NMPA rules or other regulatory authorities.

4.9.1.

The INVOcell is classified as a class II medical device by the FDA and as such proper record keeping and traceability information must be maintained by DISTRIBUTOR. DISTRIBUTOR will keep detailed traceable records maintained by lot number of every Product it receives for distribution to Customers in the Territory. Discarded Products must also be kept tracked of and logged with their disposition.

4.9.2.

DISTRIBUTOR is required to report in writing knowledge of any complaints, adverse effect or event that occurs with the use of any Product as soon as practicable to INVO. INVO will have sole responsibility for reporting any adverse event associated with any Product to the applicable governmental authority.

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4.10.

No Repackaging or Relabeling. All shipments of the products purchased by DISTRIBUTOR will be used by DISTRIBUTOR in their original configuration including the original labels provided by INVO.

4.11.

Advertising.

4.11.1.

Subject to Sections 4.9.2 and 10, all advertising by DISTRIBUTOR, its agents and employees, and Affiliates will follow general advertising statements and specific instruction as to the use of INVO Trademarks provided by INVO (see Exhibit F).

4.11.2.

The INVO name and branding, and the INVO Trademarks will be featured in advertising and promotion material used by DISTRIBUTOR and targeted to the Territory with respect to the Products, unless otherwise previously agreed upon in writing by INVO. DISTRIBUTOR is required to submit all INVO branded marketing materials of any type to INVO for approval. INVO may request DISTRIBUTOR to alter its advertising, and DISTRIBUTOR will comply with all such requests at its sole expense. INVO will provide approved copies of recommended materials bearing the INVO brand for use by the DISTRIBUTOR while this Agreement is in effect.

4.11.3.

All marketing, promotional materials and advertising will be in compliance with local market regulations of the Territory and approved by INVO.

4.11.4.

DISTRIBUTOR agrees, upon request, to promptly discontinue any promotional activities, advertising or practice which INVO reasonably determines might mislead or deceive the public or which might be detrimental to the good name, trademarks, trade names, goodwill or reputation of INVO or the Products. DISTRIBUTOR may not advertise the Products outside the Territory. Any Product which DISTRIBUTOR advertises or otherwise represents to customers as being made by or obtained from INVO must in fact be so made or obtained.

4.11.5.

Social Media Advertising: DISTRIBUTOR will ensure that any social media accounts used to promote the Products shall contain only promotional information and product labeling that is in compliance with local market regulations in the Territory.

4.12.

Trademark License.

4.12.1.

License. INVO hereby grants to DISTRIBUTOR an exclusive, revocable and royalty-free license to use the INVO Trademarks in the Territory in connection with the promotion, distribution, and sale of the Products during the Term as contemplated by this Agreement. DISTRIBUTOR will conduct its business under its own trade name, but may refer to itself as an authorized distributor of INVO and the Products in the Territory.

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4.12.2.

Quality Control. In order to protect the goodwill associated with the INVO Trademarks, DISTRIBUTOR shall use the INVO Trademarks only in connection with the Products sold by DISTRIBUTOR in the Territory in accordance with such written (including via email) guidance and directions furnished by INVO from time to time to ensure that the quality of the goods shall always be satisfactory to INVO. INVO shall be the sole judge of whether or not DISTRIBUTOR has met or is meeting the standards of quality so established. DISTRIBUTOR will permit duly authorized representatives of INVO to inspect the premises of and all forms of use of the INVO Trademarks by DISTRIBUTOR at all reasonable times, for the purpose of ascertaining or determining compliance with these quality control measures.

4.12.3.

No Grant of License. Except for the limited rights granted to DISTRIBUTOR in Section 4.12.1 above, nothing contained in this Agreement shall give DISTRIBUTOR or any other person or entity any rights or interest in any INVO Trademark, and DISTRIBUTOR agrees that it will not at any time during or after termination of this Agreement assert or claim any interest in, or do anything which may adversely affect the validity or enforceability of any INVO Trademark or the rights of INVO therein.

4.12.4.

Ownership. DISTRIBUTOR acknowledges and agrees that, as between INVO and DISTRIBUTOR, INVO owns and shall continue to own all right, title and interest in and to the INVO Trademarks throughout the world, and to any registrations that have issued or may issue thereon. The Parties acknowledge that any and all goodwill arising from DISTRIBUTOR’s use of the INVO Trademarks shall inure to the benefit of INVO. DISTRIBUTOR agrees to cooperate and assist INVO in preserving INVO’s interest in the INVO Trademarks. DISTRIBUTOR agrees not to challenge INVO’s ownership or validity of the INVO Trademarks or any derivation thereof worldwide. Upon termination or expiration of this Agreement, DISTRIBUTOR shall cease all display, advertising and use of the INVO Trademarks and shall not thereafter use, advertise or display any trade name, trademark, logo or other trade designation which is, or any part of which is, the same as or confusingly similar to the INVO Trademarks or any such trade name, trademark or other designation associated with INVO or the Products. DISTRIBUTOR shall not at any time use or register the INVO Trademarks or any other trademark or trade name used by INVO, whether alone or in combination with other words or symbols, or any mark, name or logo which is, or any part of which is, confusingly similar to any designation associated with INVO or the Products. The provisions of this Section shall survive termination of this Agreement.

4.12.5.

Enforcement. If DISTRIBUTOR believes that a third party has violated or infringed, or threatens to violate or infringe the INVO Trademarks, DISTRIBUTOR shall promptly notify INVO thereof and confer with INVO as to appropriate steps necessary to police such infringement.

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4.13.

Commercial Practices. DISTRIBUTOR will at all times respect the laws and rules of commerce and fair competition in the Territory. DISTRIBUTOR attests that it will not enter into exclusive agreements with Customers to enforce the sale and use of only DISTRIBUTOR owned INVO Products in the Territory.

4.14.

Inspection. In the event of a breach and upon request with fourteen (14) days reasonable notice and subject to the prior consent of the DISTRIBUTOR, INVO and its representatives will have reasonable access, during normal working hours, to DISTRIBUTOR’s place(s) of business to review DISTRIBUTOR’s compliance with this Agreement.

4.15.

Cooperation with Recall. If INVO, or one of INVO’s suppliers, institutes a recall or other field action including but not limiting notification campaign, or similar program, with respect to any and all of the Products, DISTRIBUTOR will implement such recall or other field actions (including location and retrieval of the recalled Products) with respect to DISTRIBUTOR’s customers in accordance with the written instruction of INVO to comply with the terms and goals of such campaign or program. INVO agrees to refund within a reasonable period of time the EXW price, freight charges and insurance on shipment, import tax and VAT paid by DISTRIBUTOR for such recalled Products and any reasonable out of pocket administrative costs and freight charges and insurance on shipment incurred by the DISTRIBUTOR relating to such recall.

4.16.

Limited Warranty. INVO’s Warranty is for the entire Shelf Life of the product until it’s expiration date on the product label. INVO WILL HAVE NO LIABILITY TO DISTRIBUTOR, CUSTOMERS OR OTHER THIRD PARTIES FOR CLAIMS OR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, OTHER THAN AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. No employee, agent or representative of INVO has the authority to bind INVO to any oral representation or warranty concerning any Product. Any oral representation or warranty made prior to the purchase of any Product and not set forth in writing and signed by a duly authorized officer of INVO shall not be enforceable by DISTRIBUTOR. INVO makes no warranty and shall have no obligation with respect to expendable or consumable parts and supplies or with respect to damage caused by or resulting from accident, misuse, neglect or unauthorized installation, alterations or repairs to the Products.

If used as authorized in accordance with INVO specifications, INVO’s limited warranty provides that the Products will not have significant defects in materials or workmanship that make the Product unusable. If the Product is deemed unusable or defective by the Parties, such limited warranty entitles DISTRIBUTOR to the sole remedy of receiving replacement Product from INVO for any Products still under warranty. INVO makes no warranty or representation that the Products will meet any customer-specific requirements. INVO makes no warranty, implied or otherwise, regarding the performance or reliability of any third-party products such as culture medium. This limited warranty does not cover damage of any sort resulting from, but not limited to, accidents, improper storage, improper operation, alterations, tampering, abuse, neglect, fire, flood, war, or acts of God. Additionally, this limited warranty does not cover unintended use, failure to follow IFUs, re-use, modification to the Products or INVO Procedure or unauthorized repair/modification of the Products. INVO EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.

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4.17.

Warranty Return Procedures. DISTRIBUTOR shall be responsible for all communication concerning warranty claims, maintenance and support requests. DISTRIBUTOR shall comply with INVO’s Product return procedures. This procedure is called the “return material authorization” (“RMA”) procedure. At its option, INVO may (a) replace defective Product(s) that are covered by INVO’s limited warranty and returned in accordance with INVO’s RMA procedure or (b) provide a refund to the DISTRIBUTOR of the price paid to INVO for such Product. INVO shall pay freight charges on shipments to DISTRIBUTOR of the replaced Product(s) under warranty and be responsible for the import tax and duty incurred by replacing the Product(s); provided, however, that DISTRIBUTOR shall pay all taxes (other than import tax) if applicable and other charges on such shipments. Products that INVO determines are not defective, not under warranty or not returned in compliance with INVO’s RMA procedure shall be returned to DISTRIBUTOR and DISTRIBUTOR shall pay all freight, insurance, taxes and other charges related to these Products. It is DISTRIBUTOR’s responsibility to manage its inventory of INVO Products. Any Products that exceed the expiration date (shelf life) may be used for demonstration purposes and training only.

4.18.

Indemnification.

4.18.1.

DISTRIBUTOR shall defend, indemnify and hold harmless INVO, its officers, directors, their successors, representatives and assigns, and INVO affiliated companies against any and all liability, claims, causes of action, suits, damages and expenses (including reasonable attorneys’ fees and expenses), which they, or any of them are or become liable for, or may incur, or be compelled to pay by reason of any acts, whether of omission or commission, that may be committed by DISTRIBUTOR, any of its servants, affiliates or employees or any other persons who are connected with the distribution and use of the Products in the Territory in connection with the performance of this Agreement. DISTRIBUTOR releases INVO and its affiliated companies from any direct, collateral, incidental or consequential damages, whether for personal injury or property damage, in connection with DISTRIBUTOR’s or such other persons’ use or other disposal of any Product in the Territory. DISTRIBUTOR shall also be liable for any and all liability, claims, causes of action, suits, damages and expenses suffered or may be suffered by INVO due to the breach of this Agreement by DISTRIBUTOR.

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4.18.2.

INVO will defend, indemnify and hold harmless DISTRIBUTOR, its officers, directors, their successors, representatives and assigns, and DISTRIBUTOR affiliated companies against any and all liability, claims, causes of action, suits, damages and expenses (including reasonable attorneys’ fees and expenses), which they, or any of them are or become liable for, or may incur, or be compelled to pay by reason of any acts, arising from INVO’s breach of this Agreement. INVO releases DISTRIBUTOR and its affiliated companies from any direct, collateral, incidental or consequential damages, whether for personal injury or property damage, in connection with INVO’s or such other persons’ sale or other disposal of any Product, except for such damages as are covered by insurance. DISTRIBUTOR will not be liable to INVO for any claim arising from or based upon the manufacture of the INVOcell. INVO will not be liable to DISTRIBUTOR for any claim arising from or based upon the combination or use of any Product with other products not supplied by INVO, or arising from any alteration, modification or misuse by DISTRIBUTOR or others of Products or by an error committed during an INVO Procedure.

4.18.3.

The provisions of this Section 4.18 will survive the termination or expiration of this Agreement.

4.19.

Status of the Parties. DISTRIBUTOR and DISTRIBUTOR’s employees are in no way the sales representatives or agents of INVO for any purpose whatsoever and have no right or authority to represent themselves or act as such or in any way to bind INVO to any obligation to a third party, and they will not assume or create in writing or otherwise any obligation of any kind, express or implied, in the name of or on behalf of INVO, unless specifically authorized to do so in writing by INVO and in accordance with the conditions specified by INVO.

4.20.

Independent Contractor. DISTRIBUTOR warrants and agrees that it will be at all times an independent contractor, and that it will do business at its own risk and for its own profit and not as a joint venture, agent or employee of INVO or of any of its affiliated companies. DISTRIBUTOR and employees will not be entitled to any benefits, privileges or compensation given or extended by INVO to INVO’s employees. All personnel of DISTRIBUTOR will be deemed to be DISTRIBUTOR’s employees exclusively, and their entire management, direction and control will be the responsibility of DISTRIBUTOR.

4.21.

Limitation of Actions. Any cause of action for breach of warranty must be brought by DISTRIBUTOR, if at all, within fifteen (15) days from the date the cause of action occurred.

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5. REPRESENTATIONS AND WARRANTIES OF DISTRIBUTOR

5.1.

DISTRIBUTOR specifically represents, warrants and agrees to the following and agrees to indemnify, defend and hold INVO and its affiliated companies harmless from the results of any failure on its part to comply with the following:

5.1.1.

Onesky is a corporation duly incorporated in Hong Kong, and KangCheng is a limited liability company duly incorporated in China. DISTRIBUTOR each has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as contemplated to be conducted. DISTRIBUTOR is duly qualified to transact business as a corporation in its jurisdiction, and is in good standing in its jurisdiction in which the failure to do so would have a material adverse effect on its business, properties, prospects or condition (financial or otherwise).

5.1.2.

The DISTRIBUTOR will make available to INVO upon request true, correct, and complete copies of its business license, certificate of incorporation, its bylaws and any similar documents all as in effect on the Commencement Date, as well as an officially stamped copy of its certificate of good standing or similar document.

5.1.3.

The DISTRIBUTOR has all requisite corporate power and authority to execute and deliver this Agreement and to perform fully its obligations hereunder. The execution and delivery of this Agreement and any related documents, and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary corporate action on the part of the DISTRIBUTOR. This Agreement has been duly executed and delivered by the DISTRIBUTOR and constitutes legal, valid and binding obligations of the DISTRIBUTOR, enforceable against the DISTRIBUTOR in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, regardless of whether enforceability is considered in a proceeding at law or in equity.

5.1.4.

The execution, delivery and performance by the DISTRIBUTOR of this Agreement and any related document, and the performance of all of the obligations of the DSITRIBUTOR under this Agreement and any related document have been authorized by the DISTRIBUTOR’s board of directors, and no other corporate action on the part of the DISTRIBUTOR and no other corporate or other approval or authorization is required on the part of the DISTRIBUTOR or any other individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated organization, joint venture, joint stock company, or a government or any agency or political subdivision thereof or other entity of any kind (each a “Person”), by law or otherwise, in order to make this Agreement and any related documents the valid, binding and enforceable obligations (subject to (i) laws of general application relating to bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief, or other equitable remedies) of the DISTRIBUTOR, as the case may be.

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5.1.5.

DISTRIBUTOR is not in violation of or default under any provision of its business license, certificate of incorporation, its bylaws or any similar document. The execution, delivery, and performance of, and compliance with this Agreement, and the consummation of the transactions contemplated hereby, have not and will not:

5.1.5.1.

violate, conflict with or result in a breach of any provision of or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, any of the terms, conditions or provisions of the DISTRIBUTOR’s, business license, certificate of incorporation, its bylaws or similar document, or any Material Contract (as defined below); or

5.1.5.2.

violate any law of any court or federal, state, county or local government or any other governmental, regulatory or administrative agency or authority which is applicable to the DISTRIBUTOR, or any of their assets, properties or businesses.

“Material Contract” shall mean any written and oral contract, agreement, deed, mortgage, lease, sublease, license, instrument, note, commitment, commission, undertaking, arrangement or understanding (i) which by its terms involves, or would reasonably be expected to involve, aggregate payments by or to the DISTRIBUTOR during any 12-month period in excess of $50,000, or (ii) the breach of which by the DISTRIBUTOR or any subsidiary would be material to the DISTRIBUTOR or such subsidiary.

5.1.6.

DISTRIBUTOR will, and DISTRIBUTOR shall ensure that each of its Sub-distributors will, comply in all respects with all federal and state laws and laws, regulations and standards in the Territory and other jurisdictions that are applicable to its activities under this Agreement as such laws, regulations and standards may be amended from time to time, including without limitation any applicable export or import laws and regulations of the United States of America, China and Hong Kong (“Applicable Law”), and will conduct its activities in accordance with professional business practices of honesty and integrity. In that connection, the DISTRIBUTOR represents and agrees that: (1) it will from time to time confirm to INVO, upon written request by INVO, that it is in compliance with Applicable Law, INVO’s code of conduct and any other INVO policy, protocol and procedure relating to the transaction of business in the Territory that has been communicated in writing to the DISTRIBUTOR; and (2) none of its partners, owners, principals, officers or staff members are officials, officers or representatives of any government or political party or a candidate for political office, and no part of the revenue it is to receive as a result of this Agreement will be used for any purpose which would violate Applicable Law.

Page 18 of 34

5.1.7.

DISTRIBUTOR will, and DISTRIBUTOR shall ensure that each of its Sub-distributors will, employ its own personnel and ensure it is well-trained on regulatory compliance issues to perform DISTRIBUTOR’S marketing, contract negotiations, and billing and collections activities.

5.1.8.

DISTRIBUTOR will enter into its own contracts with Customers and vendors, and will maintain, manage and ship Products from its own inventory.

5.1.9.

DISTRIBUTOR represents and warrants that it is adequately and appropriately capitalized and insured, as reasonable and customary for a medical device distributor with significant investment, and has purchased adequate insurance policies (to the extent such insurance policy is commercially available in the Territory) for its business operation and performing its obligations under this Agreement.

5.1.10.

Unless otherwise stated in this Agreement, DISTRIBUTOR will be responsible for any and all expenses, charges, fees, and taxes that may be levied or imposed by any authority within the Territory or elsewhere, upon DISTRIBUTOR by reason of its activities under this Agreement.

5.1.11.

The DISTRIBUTOR understands and confirms that INVO is relying on the foregoing representations in transacting business with the DISTRIBUTOR. No representation or warranty by the DISTRIBUTOR contained in this Agreement contains any untrue statement of a material fact or omits to state a material fact in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

6. RESPONSIBILITIES OF INVO

6.1.

INVO will furnish to DISTRIBUTOR current information on procedures, protocols, Products, and any information changes concerning the Products, and will inform DISTRIBUTOR in writing of all changes to the Price outlined in Exhibit A.

6.2.

INVO will cooperate with DISTRIBUTOR in promoting the use of the Products and will supply DISTRIBUTOR with copies of product bulletins, advertising material, published literature and other sales promotion aides, of a type that INVO believes will allow DISTRIBUTOR to enhance the marketing and marketability of the Products and INVO Procedure’s adoption. The shipping costs, taxes, and other applicable expenses of such materials will be paid by DISTRIBUTOR under Incoterm EXW guidelines as that term is defined in Incoterm 2010, unless otherwise agreed in writing by the Parties. INVO will furnish to DISTRIBUTOR, upon request, photographs, retouching, negatives or engravings from INVO available stock, but DISTRIBUTOR will pay for all literature or advertising in which it uses any such materials.

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6.3.

INVO will furnish to the DISTRIBUTOR such reasonable quantity of Product samples free of charge, technical and clinical advice, assistance and support as INVO believes is reasonable to enable DISTRIBUTOR to register and sell the Products in the Territory.

6.4.

INVO shall provide Product training to DISTRIBUTOR’s product manager, sales personnel and key account Customers on an as-needed basis during the Term of this Agreement to enable DISTRIBUTOR to promote the sales of Product and to perform post-sales customer training, technical assistance and support for its Customers. Such Product training shall be conducted, at mutually agreed upon frequency, times and locations requested by DISTRIBUTOR and agreed upon by INVO, and will be free of charge provided, however, that DISTRIBUTOR shall be responsible for all out-of-pocket expenses incurred in connection with such Product training, including travel, airfare and lodging expenses incurred by DISTRIBUTOR’s personnel while attending such training.

7. MINIMUM PURCHASE AMOUNTS

During the term of this Agreement, DISTRIBUTOR agrees to purchase from INVO a minimum number of Products per year commencing the date of NMPA approval, as outlined in Exhibit D. DISTRIBUTOR expressly acknowledges that (a) such commitment is a reasonable estimate of the amount of Products it can distribute within the Territory; and (b) that to maintain the exclusive nature of this Agreement, DISTRIBUTOR will need to pay INVO the Price associated with such minimum Product amounts.

8. USE OF OTHER PRODUCTS

8.1.

Upon termination of the Agreement by DISTRIBUTOR or INVO for cause, DISTRIBUTOR will not, and DISTRIBUTOR will not, without INVO’s prior written consent, during the Term, use, manufacture, aid in the manufacture, export, sell, distribute or otherwise handle such competing products or offer competing in-vivo intravaginal fertility services or directly or indirectly facilitate or promote the use, distribution or sale of any competing products or hold or acquire, directly or indirectly, any participation in any organization or entity using, selling, distributing or otherwise handling competing products or manufacture or reproduce, in whole or in part, any Products, unless otherwise agreed to in writing prior to the execution of this Agreement. For the purposes hereof, “competing products” means any products similar to any of the Products manufactured by INVO or which can be put to identical or similar in-vivo intravaginal fertility procedure uses or which might compete with or hinder the sale of such Products and INVO Procedures, a specific name list of competing products to be provided by INVO in writing. Non-compliance by DISTRIBUTOR with the provisions of this Section 8.1 during the Term will constitute an incurable default under this Agreement.

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8.2.

If this Section 8 or any part of it is held by a court or arbitration panel, administrative body or governmental agency of competent jurisdiction to be invalid, illegal or unenforceable for any reason, it is agreed that within such jurisdiction the restrictions set forth in this Section 8 will automatically be considered modified to embrace the greatest possible time and area of restriction then permitted under Applicable Law, and such invalidity, illegality or unenforceability will not impair the enforceability of these restrictions as so modified nor in any manner otherwise affect the remaining provisions of this Agreement.

9. TECHNICAL INFORMATION; CONFIDENTIALITY

9.1.

INVO will furnish to DISTRIBUTOR technical information to assist DISTRIBUTOR in the sales, distribute and use of the Products in the Territory. DISTRIBUTOR acknowledges that this Agreement, all technical and commercial information and know-how furnished by INVO and its affiliated companies to DISTRIBUTOR and discussions between the Parties (collectively, the “Confidential Information”) during the term of this Agreement are proprietary and are of a highly confidential and secret nature. Both Parties further acknowledge that Confidential Information shall also include, without limitation, information concerning the other Party’s or its affiliated companies’ distributor network, business development plans, marketing strategies, budget and/or other financial/accounting information or materials in whatever form not generally known to the public.

9.2.

Both Parties agree that all Confidential Information provided by one Party to the other Party is given and received in strict confidence and is to be used by both Parties solely for the purpose of carrying out the purpose of this Agreement. Both Parties will keep in strict confidence the Confidential Information and will not, for any reason whatsoever, reveal, disclose, sell or transfer any part of such Confidential Information, directly or indirectly, to its own employees or agents or to any third party except as permitted by the terms of this Agreement.

9.3.

In the performance of its obligations under this Section 9, both Parties will, at their own cost, take all precautions and steps which may be reasonably requested in order to protect Confidential Information (including the bringing of legal action in order to ensure that others respect this undertaking of confidentiality). Nothing in this Agreement should be interpreted as prohibiting either Party from bringing such legal actions at its own expense within or outside the Territory as it may choose.

9.4.

Both Parties will have the right to disclose Confidential Information to those of its employees, agents and any subsidiaries who require the information on a need-to-know basis and both Parties agree to exercise a reasonably high degree of care in the selection of its employees, subsidiaries and agents to whom Confidential Information will be disclosed, and to bind them to obligations of confidentiality at least as stringent as those provided for in this Agreement. Both Parties will indemnify and hold the other Party harmless for the consequences of any unauthorized disclosure or misuse of such Confidential Information because of the breach of this Section 9.

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9.5.

Both Parties obligations set forth in this Section 9 will survive and remain in effect even after the expiration or the termination of this Agreement.

9.6.

It is expressly agreed that the obligations of both Parties to maintain the confidentiality of Confidential Information under this Section 9 will not apply to any information which:

9.6.1.

was in the public domain at the time of disclosure to the other Party;

9.6.2.

was in the possession of the other Party without binder of secrecy prior to disclosure to it; or

9.6.3.

though confidential at the time of disclosure, subsequently becomes part of the public domain through no fault of the either Party.

9.7.

Each Party will immediately inform the other if it becomes aware of any violations of Confidential Information rights within the Territory or otherwise. If either Party, after consultation with the other Party but in its entire discretion, decides to institute a legal action in its own name, it may do so at its own expense. The other Party may participate in such legal action at its own cost. The initiating Party will have the final decision with regard to the conduct of all such legal actions and will retain all settlements, recoveries and judgments arising from such actions, after reimbursement to the other Party for out-of-pocket expenses, if any, incurred by the other Party in connection with legal action taken at the initiating Party’s specific request. If the other Party decides not to participate in such legal action, it will cooperate with the initiating Party and assign to the initiating Party any claims it may have, without compensation.

9.8.

Both Party’s obligations upon the expiration or termination of the Agreement are to return all Confidential Information upon written request from the other Party.

9.9.

DISTRUBUTOR shall be liable for any breach of this Section 9 of its Affiliates or the Sub-distributors who have received the Confidential Information.

10. TRADEMARKS, BRANDING and PATENT RIGHTS

10.1.

DISTRIBUTOR acknowledges that the INVO Trademarks are the exclusive property of INVO and/or its affiliated companies. DISTRIBUTOR undertakes throughout the Term to display the INVO Trademarks in publications, signs and displays and in other suitable advertising and sales promotion media of all types in association with the names and/or illustrations of the INVO Procedure and the Products or on such Products themselves only in a manner that is in compliance with such rules and regulations regarding their use as INVO provides to DISTRIBUTOR. Neither DISTRIBUTOR nor any assistant, employee or affiliate/subsidiary of DISTRIBUTOR will acquire any right or interest whatsoever, as a result of this Agreement, in any patents, the INVO Trademarks or other trademarks, trade names, branding, logos owned by INVO or its affiliated companies or other industrial property rights of INVO or its affiliated companies or will use same in any manner except as explicitly authorized by INVO.

Page 22 of 34

10.2.

If any case of unfair competition or infringement by third parties in the Territory of the INVO Trademarks or other trade names, trademarks, branding or other industrial property rights of INVO or its affiliated companies or of the manufacturers of Products which are not INVO Products comes to the knowledge of DISTRIBUTOR, the latter will inform INVO immediately. INVO will, at its own discretion, decide whether it will prosecute any such case of which it is so notified and in what manner it will prosecute. At the request of INVO, DISTRIBUTOR will assist INVO to the best of its ability.

10.3.

DISTRIBUTOR may not directly or indirectly, in whole or in part use any of the INVO Trademarks, branding or any other trademark, branding or trade name that is now or may hereafter be owned by INVO or its affiliated companies as part of DISTRIBUTOR’s corporate or business name, or in away in connection with DISTRIBUTOR’s business, unless INVO has specifically consent to any such use in writing.

10.4.

DISTRIBUTOR acknowledges that any patent developed by or during the Term for any use of, with or for the INVOcell or the INVO Procedure will be owned by INVO. DISTRIBUTOR shall not reverse engineering any Product or patent owned or developed by INVO.

10.5.

DISTRIBUTOR acknowledges that any breach of its obligations regarding INVO Confidential Information will cause INVO irreparable injury for which there are no adequate remedies at law, and therefore INVO will be entitled to equitable relief in addition to all other remedies provided by this Agreement or available at law.

11. NOTICES

Any notice regarding this Agreement should be in writing and should be sent by registered or certified mail, postage prepaid, to the party notified, addressed to the Party at its address outlined below, or any updated address that a Party may have submitted in writing to the other Party:

INVO:		INVO Bioscience, Inc.
		Attn: Chief Financial Officer
		5582 Broadcast Court
		Sarasota, FL 34240
		legal@invobio.com

Page 23 of 34

DISTRIBUTOR:		Onesky Holdings Limited
		Attn: Director
		Room 2214, 22^nd Floor Mira Place Tower A
		132 Nathan Road, Kowloon, Hong Kong
		cmchan@biomedichk.com

CC:		Guangzhou Kang Cheng Medical Devices Co., Limited
		Attn: CEO
		Room 2701A R&F To-Win Building
		30 Hua Xia Road, Tianhe District
		Guangzhou, China 510623
		ralf@biomedichk.com

12. ENTIRE AGREEMENT; MODIFICATIONS

This Agreement, including exhibits, forms the entire Agreement and understanding between the Parties regarding this license and distributorship relationship. This Agreement may only be amended in writing signed by duly authorized representatives of both Parties.

13. FORCE MAJEURE

Neither Party will be liable for any claim regarding a failure to perform under this Agreement if the failure to perform is due to any cause beyond the Party’s reasonable control, including without limitation, acts of God, acts of civil or military authority, labor disputes, fire, riots, civil commotions, sabotage, war, embargo, blockade, floods, epidemics, power shortages, or governmental restrictions.

14. ENGLISH LANGUAGE TEXT

This Agreement has been executed in the English language, and any interpretation or construction of this Agreement will be based on the English language text.

15. GOVERNING LAW

This Agreement has been entered into in the State of New York and will be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of law. The Parties also agree that all sales made by INVO to DISTRIBUTOR during the term of this Agreement will be made, if made, by the acceptance by INVO of orders in any state of the United States of America in which INVO operates. This Agreement will not be subject to the United Nations Convention for the International Sale of Goods. Non-exclusive jurisdiction of any disputes under this Agreement will lie in Federal courts of the Southern District of the State of New York, without prejudice to the right of the parties to commence legal proceedings in any other jurisdiction.

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16. ASSIGNABILITY ; SUCCESSORS AND ASSIGNS

This Agreement and the rights and obligations of DISTRIBUTOR outlined in this Agreement are not assignable by DISTRIBUTOR, by operation of law or otherwise, without the prior written consent of INVO. Any attempted assignment in violation of this Section 16 will be considered void. INVO will have the right, without notice to DISTRIBUTOR, to assign all or any part of its rights and obligations under this Agreement, but only to one of its affiliated companies. It is expressly agreed that this Agreement will be binding on and will benefit the successors and permitted assigns of the Parties.

17. WAIVER

The failure of either Party at any time to require performance by the other Party of any provision in this Agreement will not affect the full right to require such performance at a future date, and a waiver of any one breach should not be considered a waiver of any other breaches.

18. EQUITABLE RELIEF

Both Parties acknowledges that any breach of its obligations regarding Confidential Information for each Party will cause the other Party irreparable injury for which there are no adequate remedies at law, and therefore the breached Party will be entitled to equitable relief in addition to all other remedies provided by this Agreement or available at law. DISTRIBUTOR further acknowledges that any breach of its obligations regarding INVO Trademarks will cause INVO irreparable injury for which there are no adequate remedies at law, and therefore the INVO will be entitled to equitable relief in addition to all other remedies provided by this Agreement or available at law.

Page 25 of 34

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized respective officers as of the Commencement Date.

DISTRIBUTOR:

Onesky Holdings Limited INVO: INVO Bioscience, Inc.

By:	/s/ Chan Chi Ming	By:	/s/ Michael Campbell
Name:	Chan Chi Ming	Name:	Michael Campbell
Title:	Director	Title:	COO\VP Business Development


DISTRIBUTOR: Guangzhou Kang Cheng
Medical Devices Co., Limited

By:	/s/ Xiang Shu Qin
Name:	Xiang Shu Qin
Title:	CEO

Page 26 of 34

EXHIBIT A

Products, Pricing and Payment Terms

(US dollars)

PRODUCTS

PRODUCT	PART #	DISTRIBUTOR PRICING (Incoterm 2010: EXW)
INVOcell	FG-002	[***] USD
The INVOcell is a single use three-part sterile assembly
INVOcell Retention Device		Included with INVOcell FG-002
The INVOcell retention device is a specially designed single use retention device that supports the retention of the INVOcell within the vaginal cavity.

INVO Bioscience will not increase the price for the first three (3) years after receiving NMPA approval, and such new Distributor Price will not be effective until ninety (90) days after INVO gives DISTRIBUTOR written notice of such change.

INVO warehouse facility:

NORTHEAST 3PL

20 North Wentworth Avenue

Londonderry, NH 03053, USA

Minimum volume for each purchase order:

INVOcell comes in a box of 6 units, minimum order is 12 boxes.

PAYMENTS TERMS & TAXES

At the time of shipping the Products to DISTRIBUTOR, INVO shall invoice DISTRIBUTOR for the Products included in such shipment. All orders will be invoiced and billed to Onesky Holdings Limited. DISTRIBUTOR shall pay each such invoice within thirty (30) days after the date thereof. DISTRIBUTOR shall make all payments in United States Dollars, in immediately available funds, by wire transfer to such account as INVO designates for such purpose. Any late payment by DISTRIBUTOR shall be a material breach of this Agreement set forth in Section 3.3.

DISTRIBUTOR shall pay all sales, use and transfer taxes and other charges arising out of the purchase and sale of the Products, including any VAT and personal property taxes and all customs inspection fees and duties, applicable to the sale and transport of the Products by DISTRIBUTOR in the Territory which are applicable thereto. INVO shall not be responsible for any business, occupation, withholding or similar tax, or any taxes of any kind, relating to the purchase and sale of the Products.

DISTRIBUTION FACILTY

INVO will ship to DISTRIBUTOR’s preferred facility to hold inventory for direct distribution in the Territory by DISTRIBUTOR. INVO will invoice DISTRIBUTOR for the shipment costs.

Page 27 of 34

EXHIBIT B

Territory

People’s Republic of China, excluding Hong Kong, Macau and Taiwan.

Page 28 of 34

EXHIBIT C

[deleted]

Page 29 of 34

EXHIBIT D

Minimums; Business Plan; Forecast

As a requisite to retain exclusivity in the Territory, the following milestones, based on a review of the Territory and its market potential, must be adhered too by DISTRIBUTOR.

MINIMUM PURCHASE AMOUNTS

Year 1 after NMPA approval Date: 640,000 USD

Year 2 after NMPA approval Date: 1,280,000 USD

Year 3 after NMPA approval Date: 3,200,000 USD

Year 4 after NMPA approval Date: 4,000,000 USD

Year 5 after NMPA approval Date: 5,000,000 USD

For the avoidance of doubt, Minimum Purchase Amount shall include sales of Products directly purchased by DISTRIBUTOR

See attached as Exhibit E.

FORECAST

DISTRIBUTOR will provide a non-binding, 12-month rolling forecast updated bi-annually to allow INVO to maintain sufficient inventory to meet DISTRIBUTOR’s requirements.

Page 30 of 34

EXHIBIT E

Business Plan

See attached file named “INVO Onesky business plan - Exhibit E.pdf”.

Page 31 of 34

EXHIBIT F

INVO Trademarks and Branding

REGISTERED TRADEMARKS

INVOcell^®

INVO^®

INVO Bioscience^®

INVO Center^®

BRANDING

INVOcell, Life Begins Within

Intravaginal Culture (IVC)

Product logos:

BRANDING

DISTRIBUTOR must use language and messaging approved by INVO when describing the Products. Please see invobio.com and invocell.com for approved content. Examples:

●

Intravaginal culture (IVC) is the process where a woman’s body acts as a natural incubator. The first and only FDA-cleared, CE-marked medical device for IVC, INVOcell holds the eggs and sperm within the woman’s body during fertilization and early embryo development. A safe, intimate way for women to be connected right from the very beginning. With INVOcell, Life Begins Within.

●

INVOcell allows fertilization and early embryo development to take place within the woman’s body. It creates efficiencies throughout the whole process, making it easier to treat more people.

Page 32 of 34

EXHIBIT G

Medical Device Reporting

In the event DISTRIBUTOR considers or has reason to believe that a Product that it has placed on the market is not in conformity with Applicable Law or regulations, is defective or falsified, DISTRIBUTOR shall suspend sales and immediately inform INVO, so that INVO may address the issue and promptly inform any relevant authority.

DISTRIBUTOR shall cooperate with INVO and the competent authorities to ensure that necessary corrective action(s) are taken to bring any non-conforming Product into conformity, to withdraw it, and/or recall it.

DISTRIBUTOR shall immediately report to INVO all matters of vigilance in writing, including complaints or reports of suspected incidents related to Products that DISTRIBUTOR has placed on the market. INVO will inform any relevant authority of such matters. DISTRIBUTOR shall provide INVO the information required on Form-028, attached hereto as Exhibit H regarding the alleged product issue.

DISTRIBUTOR shall keep a register of complaints, of defective Products and of any recalls and withdrawals for a minimum of ten (10) years after the related Products were shipped by DISTRIBUTOR to Customers. DISTRIBUTOR shall provide INVO with a copy of such register and information to allow an investigation to occur. INVO will inform any relevant authority of any such investigation.

DISTRIBUTOR shall maintain proper traceability records of Products for a minimum of ten (10) years after shipment by DISTRIBUTOR to Customers, including information regarding:

5.1.

All details on Products directly received by DISTRIBUTOR; and

5.2.

All details on recipients to whom DISTRIBUTOR has supplied Products, in particular any health institution or healthcare professional.

DISTRIBUTOR shall co-operate with INVO or its authorized representative, if applicable, in matters of vigilance and compliance to Applicable Law.

DISTRIBUTOR shall ensure that, while Products are under its responsibility, storage and/or transport conditions shall comply with the conditions set by INVO.

Page 33 of 34

EXHIBIT H

Page 34 of 34

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF INVO BIOSCIENCE INC.

PUSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Shum, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of INVO Bioscience Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the unaudited condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	INVO BIOSCIENCE

Date: May 16, 2022	By:	/s/ Steven Shum
		Steven Shum
		Principal Executive Officer

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF INVO BIOSCIENCE INC.

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrea Goren, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of INVO Bioscience Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the unaudited condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	INVO BIOSCIENCE

Date: May 16, 2022	By:	/s/ Andrea Goren
		Andrea Goren
		Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of INVO Bioscience, Inc. (the “Company”) for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Steven Shum, Chief Executive Officer of the Company, and Andrea Goren, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	INVO BIOSCIENCE

Date: May 16, 2022	By:	/s/ Steven Shum
		Steven Shum
		Chief Executive Officer
		(Principal Executive Officer)

	INVO BIOSCIENCE

Date: May 16, 2022	By:	/s/ Andrea Goren
		Andrea Goren
		Chief Financial Officer
		(Principal Financial and Accounting Officer)