IVF US Equity☆

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

WASHINGTON,

D.C. 20549

FORM

10-K

For the fiscal year ended December 31, 2022

or

For the transition period from to

INVO

BIOSCIENCE, INC.

(Exact

name of registrant as specified in Charter)

5582

Broadcast CourtSarasota, Florida, 34240

(Address

of Principal Executive Offices)

Registrant’s

telephone number, including area code: (978)878-9505

Securities

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

Title of each class Trading symbol(s) Name of each exchange on which registered

Common Stock, $0.0001 par value per share INVO The Nasdaq Stock Market LLC

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

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 has

filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting

under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its

audit report. Yes ☐ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate

by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously

issued financial statements. Yes ☐ No ☐

Indicate by

check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate

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

The

aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the registrant as of the last business

day of the registrant’s most recently completed second fiscal quarter ended June 30, 2022 was $7,763,391 based upon the closing

price of the registrant’s common stock of $0.64 on the NASDAQ as of that date.

The

number of shares outstanding of the registrant’s common stock, $0.0001 par value, as of April 17, 2023 was 13,971,283.

DOCUMENTS

INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2023Annual Meeting

of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such

proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended

December 31, 2022.

FORM

10-K

INVO

BIOSCIENCE, INC.

TABLE

OF CONTENTS

Page

Part I

Item 1. Business 4

Item 1A. Risk Factors 13

Item 1B. Unresolved Staff Comments 27

Item 2. Properties 27

Item 3. Legal Proceedings 27

Item 4. Mine Safety Disclosures 27

Part II

Item 6. [Reserved] 29

Item 7A. Quantitative and Qualitative Disclosure About Market Risk 41

Item 8. Financial Statements and Supplementary Data 42

Item 9A. Controls and Procedures 43

Item 9B. Other Information 44

Part III

Item 10. Directors, Executive Officers and Corporate Governance 44

Item 11. Executive and Director Compensation 44

Item 14. Principal Accountant Fees and Services 44

Part IV

Item 15. Exhibits, Financial Statement Schedules 45

SIGNATURES 48

SPECIAL

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain

statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives,

and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E

of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,”

“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,”

“plan,” “may,” “will,” “would,” “will be,” “will continue,” “will

likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions

for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for

purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions

that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a

material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic

conditions, legislative/regulatory changes, availability of capital, interest rates, competition, the impact of the COVID-19 pandemic

on our ability to advance our clinical programs and raise additional financing and generally accepted accounting principles. These risks

and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such

statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,

future events or otherwise. Further information concerning our business, including additional factors that could materially affect our

financial results, is included herein and in our other filings with the SEC.

Part

I

Item

1. Business

Introduction

This

Annual Report on Form 10-K should be read together and in connection with the other reports that have been filed by us with the SEC for

a comprehensive description of our financial condition and operating results. In the interest of disclosure, we have included in this

Form 10-K certain material events and developments that have taken place through the date of filing of this Form 10-K with the SEC.

In

this Annual Report on Form 10-K, INVO Bioscience, Inc. (INVO Bioscience, Inc., together with its subsidiaries, is referred to in this

document as “we”, “us”, “INVO Bioscience”, “INVO,” or the “Company”), incorporates

by reference certain information from parts of other documents filed with the Securities and Exchange Commission (“SEC”).

The SEC allows us to disclose important information by referring to it in that manner. Please refer to all such information when reading

this Annual Report on Form 10-K. All information is as of December 31, 2022, unless otherwise indicated. For a description of the risk

factors affecting or applicable to our business, see “Risk Factors,” below.

The

Company

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 at a more affordable cost in comparison to in vitro fertilization

(“IVF”), the other advanced ART treatment. The IVC procedure can deliver comparable results to 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) and the acquisition of existing IVF clinics, in addition to continuing to sell our technology solution into existing fertility clinics.

Recent

Developments

January

and March 2023 Convertible Note and Warrant Financings

In

January and March 2023, we sold unsecured convertible notes of the Company in the aggregate original principal amount of $410,000 (the

“Convertible Notes”) with a fixed conversion prices of $0.50 (for the $275,000 of January 2023 Notes) and $0.60 (for the

$135,000 of March 2023 Notes) and (ii) 5-year warrants (the “Note Warrants”) to purchase 387,500 shares of the Company’s

common stock at an exercise price of $1.00 (subject to adjustments) (the “Note and Warrant Private Placement”). The proceeds

were used for working capital and general corporate purposes.

Interest

on the Convertible Notes accrues at a rate of ten percent (10%) per annum and is payable at the holder’s option either in cash

or in shares of the Company’s common stock at the conversion price set forth in the Convertible Notes on December 31, 2023, unless

converted earlier.

All

amounts due under the Convertible Notes are convertible at any time after the issuance date, in whole or in part (subject to rounding

for fractional shares), at the option of the holders into the Company’s common stock at a fixed conversion price for the Notes

as described above.

Upon

any issuance by the Company of any of its equity securities in an underwritten offering, including Common Stock, for cash consideration,

indebtedness or a combination thereof after the date hereof (a “Subsequent Equity Financing”), each holder shall have the

option to convert the outstanding principal and accrued but unpaid interest of its Convertible Note into the number of fully paid and

non-assessable shares of securities issued in the Subsequent Equity Financing equal to the product of unpaid principal, together with

the balance of unpaid and accrued interest and other amounts payable hereunder, divided by the price per share paid by the investors

in the Subsequent Equity Financing multiplied by 80%, provided however, that any conversion shall only be allowed if the Subsequent Equity

Financing conversion price is equal to or greater than the Minimum Price (as defined in the Convertible Notes) including an appropriate

allocation any warrants offered.

A

Convertible Note may not be converted and shares of common stock may not be issued under the Convertible Notes if, after giving effect

to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the Company’s

outstanding ordinary shares.

The

Company may prepay the Convertible Notes at any time in whole or in part by paying a s sum of money equal to 100% of the principal amount

to be redeemed, together with accrued and unpaid interest.

The

Company entered into a registration rights agreement with the holders of and of even date with the Convertible Notes (the “Note

RRA”). Pursuant to the terms of Note RRA, if the Company determines to register any of its securities, either for its own account

or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans on Form S-8 (or

any successor form) or (ii) a registration relating solely to a Commission Rule 145 transaction on Form S-4 (or any successor form),

the Company will include in such registration, and in any underwriting involved therein, the shares underlying the Convertible Notes

and Note Warrants delivered pursuant to the Note and Warrant Purchase Agreements, subject to, in the case of an underwritten registration,

the discretion of the managing underwriter to reduce any or all piggyback registration shares if in its good faith judgment such inclusion

would affect the successful marketing of the underwritten offering.

February

2023 Convertible Debentures

On

February 3, and February 17, 2023, the Company entered into securities purchase agreements (the “February Purchase Agreements”)

with accredited investors (the “February Investors”) for the purchase of (i) convertible debentures of the Company in the

aggregate original principal amount of $500,000 (the “February Debentures”) for a purchase price of $450,000, (ii) warrants

(the “February Warrant”) to purchase 250,000 shares (the “February Warrant Shares”) of the Company’s common

stock par value $0.0001 per share (“Common Stock”) at an exercise price of $0.75 per share, and (iii) 83,333 shares of Common

Stock (the “February Commitment Shares”) issued as an inducement for issuing the Debentures. The proceeds, net of placement

agent and legal fees, are being used for working capital and general corporate purposes.

Pursuant

to the February Debentures, interest on the February Debentures accrues at a rate of eight percent (8%) per annum and is payable at maturity,

one year from the date of the February Debentures.

All

amounts due under the February Debentures are convertible at any time after the issuance date, in whole or in part, at the option of

the February Investors into Common Stock at an initial price of $0.52 per share. This conversion price is subject to adjustment for stock

splits, combinations or similar events and anti-dilution provisions, among other adjustments and is subject to a floor price.

The

Company may prepay the February Debentures at any time in whole or in part by paying a sum of money equal to 105% of the principal amount

to be redeemed, together with accrued and unpaid interest.

While

any portion of each February Debenture remains outstanding, if the Company receives cash proceeds of more than $2,000,000 (the “Minimum

Threshold”) in the aggregate from any source or series of related or unrelated sources, the February Investors shall have the right

in their sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company above the Minimum

Threshold to repay the outstanding amounts owed under the February Debentures.

The

Company entered into a Registration Rights Agreement (the “February RRA”) with the February Investor that signed its purchase

agreement on February 3, 2023 (the “Feb 3 Investor”). Pursuant to the terms of February RRA, the Company has agreed to file

with the SEC an initial registration statement on Form S-3 (or Form S-1 if S-3 is not available) covering the resale of all of the securities

acquired by the Feb 3 Investor under its February Purchase Agreement. The filing of such initial registration statement is to occur within

90 days of February 3, 2023.

On

March 31, 2023, having received notice from the February Investor that signed its purchase agreement on February 17, 2023 (the “Feb

17 Investor”) requesting repayment of its February Debenture, the Company paid the Feb 17 Investor $170,000, including interest

and the prepayment premium. After such payment, the principal due the Feb 17 Investor under its debenture was reduced from $200,000 to

$39,849.

On

April 3, 2023, having received notice from the Feb 3 Investor requesting repayment of its February Debenture, the Company paid the

Feb 3 Investor $213,879, including interest and the prepayment premium. After such payment, the principal due the Feb 3 Investor

under its debenture was reduced from $300,000 to $100,000.

February

2023 Equity Purchase Agreement

On

February 3, 2023, the Company entered into an equity purchase agreement (the “ELOC”) and registration rights agreement (the

“ELOC RRA”) with the Feb 3 Investor pursuant to which the Company has the right, but not the obligation, to direct the Feb

3 Investor to purchase up to $10.0 million (the “Maximum Commitment Amount”) of shares of Common Stock, in multiple tranches.

Further, under the ELOC and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit notices

to the Feb 3 Investor to purchase shares of Common Stock (i) in a minimum amount of not less than $25,000 and (ii) in a maximum amount

of up to the lesser of (a) $750,000 or (b) 200% of the Company’s average daily trading value of the Common Stock.

Also on February 3, 2023, the Company issued to the

Feb 3 Investor 150,000 shares of Common Stock for its commitment to enter into the ELOC.

The

obligation of the Feb 3 Investor to purchase shares of Common Stock pursuant to the ELOC ends on the earlier of (i) the date on which

the purchases under the ELOC equal the Maximum Commitment Amount, (ii) 24 months after the date of the ELOC (February 3, 2025), (iii)

written notice of termination by the Company, (iv) the date that the ELOC RRA is no longer effective after its initial effective date,

or (v) the date that the Company commences a voluntary case or any person or entity commences a proceeding against the Company pursuant

to or within the meaning of federal or state bankruptcy law, a custodian is appointed for the Company or for all or substantially all

of its property, or the Company makes a general assignment for the benefit of its creditors (the “Commitment Period”).

During

the Commitment Period, the price that Feb 3 Investor will pay to purchase the shares of Common Stock that it is obligated to purchase

under the ELOC shall be 97% of the “market price,” which is defined as the lesser of (i) the lowest closing price of our

Common Stock during the 7 trading day-period following the clearance date associated with the applicable put notice from the Company

or (ii) the lowest closing bid price of the Common Stock on the principal trading market for the Common Stock (currently, the Nasdaq

Capital Market) on the trading day immediately preceding a put date.

Execution

of Definitive Agreements to Acquire the Wisconsin Fertility Institute

On

March 16, 2023, INVO, through Wood Violet Fertility LLC, a Delaware limited liability company (“Wood Violet”) and wholly

owned subsidiary of INVO Centers LLC, a Delaware company (“INVO CTR”) wholly-owned by INVO, entered into binding

purchase agreements to acquire Wisconsin Fertility Institute (“Wisconsin Fertility”) for a combined purchase price of $10

million.

The

purchase price is payable in four installments of $2.5 million each (which payments may be offset by assumption of certain Wisconsin Fertility liabilities,

payable at closing and on each of the subsequent three anniversaries of closing. The sellers have the option to take all or a portion

of the final three installments in shares of INVO common stock valued at $6.25, $9.09, and $14.29, for the second, third, and final installments,

respectively.

Wisconsin

Fertility is comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin

professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company,

Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owns, operates and manages the

Clinic’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care

and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW

provides WFRSA with related laboratory services.

March

2023 Registered Direct Offering

On

March 23, 2023, INVO entered into a securities purchase agreement (the “March Purchase Agreement”) with a certain institutional

investor, pursuant to which the Company agreed to issue and sell to such investor (i) in a registered direct offering, 1,380,000 shares

(the “March Shares”) of Common Stock, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 2,300,000

shares of Common Stock, at an exercise price of $0.01 per share, and (ii) in a concurrent private placement, common stock purchase warrants

(the “March Warrants”), exercisable for an aggregate of up to 5,520,000 shares of Common Stock, at an exercise price of $0.63

per share. The securities to be issued in the registered direct offering (priced at the marked under Nasdaq rules) were offered pursuant

to the Company’s shelf registration statement on Form S-3 (File 333-255096) (the “Shelf Registration Statement”), initially

filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 7, 2021 and

declared effective on April 16, 2021. The Pre-Funded Warrants are exercisable upon issuance and will remain exercisable until all of

the Pre-Funded Warrants are exercised in full.

The

March Warrants (and the shares of Common Stock issuable upon the exercise of the Private Warrants) were not registered under the Securities

Act and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of

the Securities Act and Rule 506(b) promulgated thereunder. The March Warrants are immediately exercisable upon issuance, will expire

eight years from the date of issuance, and in certain circumstances may be exercised on a cashless basis.

On

March 27, 2023, the Company closed the offering, raising gross proceeds of approximately $3 million before deducting placement agent

fees and other offering expenses payable by the Company. In the event that all March Warrants are exercised for cash, the Company would

receive additional gross proceeds of approximately $3.5 million. Under the March Purchase Agreement, the Company may use a portion of

the net proceeds of the offering to (a) repay February Debentures, and (b) to pay the down payment for Wisconsin Fertility acquisition.

The remainder of the net proceeds will be used for working capital, capital expenditures, and other general corporate purposes.

Under

the March Purchase Agreement, the Company is required within 30 days of the closing date of the offering to file a registration statement

on Form S-1 (the “Resale Registration Statement”) registering the resale of the shares of Common Stock issuable upon the

exercise of the March Warrants. The Company is required to use commercially reasonable efforts to cause such registration to become effective

within 75 days of the closing date of the offering (or 120 days if the registration statement is subject to a full-review by the SEC),

and to keep such registration statement effective at all times until no March Warrants remain outstanding.

In

addition, pursuant to certain “lock-up” agreements, our officers and directors have agreed, for a period of 180 days from

the date of the offering, not to engage in any of the following, whether directly or indirectly, without the consent of the March Purchase

Agreement investor: offer to sell, sell, contract to sell pledge, grant, lend, or otherwise transfer or dispose of our common stock or

any securities convertible into or exercisable or exchangeable for Common Stock (the “Lock-Up Securities”); enter into any

swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up

Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto,

with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge, or other arrangement relating to

any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.

Notices

from Nasdaq of Failure to Satisfy Continued Listing Rules.

Notice

Regarding Non-Compliance with Minimum Stockholders’ Equity

On

November 23, 2022, we received notice (the “Stockholders’ Equity Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”)

advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq

Capital Market. Nasdaq Listing Rule 5550(b)(1) requires companies listed on The Nasdaq Capital Market to maintain stockholders’

equity of at least $2,500,000 (the “Stockholders’ Equity Requirement). In our Quarterly Report on Form 10-Q for the quarter

ended September 30, 2022, we reported stockholders’ equity of $1,287,224, which is below the Stockholders’ Equity Requirement

for continued listing. Additionally, as of the date of the Notice, we did not meet either of the alternative Nasdaq continued listing

standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing

operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years.

The

Notice has no immediate effect on the listing of our common stock and our common stock continues to trade on The Nasdaq Capital Market

under the symbol “INVO” subject to our compliance with the other continued listing requirements.

Pursuant

to the Notice, Nasdaq gave us 45 calendar days, or until January 7, 2023, to submit to Nasdaq a plan to regain compliance. If our plan

is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice to evidence compliance.

On

January 18, 2023, we received a letter from Nasdaq under which it stated that based on our submission that Nasdaq has determined to grant

us an extension of time to regain compliance with Nasdaq Listing Rule 5550(b) until May 22, 2023. We must furnish to the SEC and Nasdaq

a publicly available report (e.g. a Form 8-K) which report, among other things, includes a description of the completed transaction or

event that enabled us to satisfy the stockholders’ equity requirement for continued listing After filing the publicly available

report described above, if we fail to evidence compliance upon filing its periodic report for the June 30, 2023, with the SEC and Nasdaq,

we may be subject to delisting. In the event we do not satisfy these terms, Nasdaq will provide written notification that its securities

will be delisted. At that time, we may appeal Nasdaq’s determination to a Hearings Panel.

Notice

Regarding Failure to Maintain Minimum Bid Price

On

January 11, 2023, we received a letter from the staff (the “Staff”) of Nasdaq listing qualifications group indicating that,

based upon the closing bid price of our common stock for the last 30 consecutive business days, we were not in compliance with the requirement

to maintain a minimum bid price of $1.00 per share for continued listing under Nasdaq Listing Rule 5550(a)(2).

The

notice has no immediate effect on the listing of our common stock, and our common stock will continue to trade on The Nasdaq Capital

Market under the symbol “INVO.”

In

accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an initial period of 180 calendar days, or until July 10, 2023,

to regain compliance with the minimum bid price requirement. If at any time before July 10, 2023, the closing bid price of our common

stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that

we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. If we do not regain compliance

prior to July 10, 2023, then Nasdaq may grant us a second 180 calendar day period to regain compliance, provided we (i) meets the continued

listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other

than the minimum closing bid price requirement, and (ii) notifies Nasdaq of its intent to cure the deficiency within such second 180

calendar day period, by effecting a reverse stock split, if necessary.

We

will continue to monitor the closing bid price of our common stock and will consider implementing available options to regain compliance

with the minimum bid price requirement under the Nasdaq Listing Rules. If we do not regain compliance with the minimum bid price requirement

within the allotted compliance periods, we will receive a written notification from Nasdaq that its securities are subject to delisting.

We would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that we will regain compliance

during either compliance period, or maintain compliance with the other Nasdaq listing requirements.

Operations

We

operate with a core internal team and outsource certain operational functions in order to help accelerate our efforts as well as reduce

internal fixed overhead needs and in-house capital equipment requirements. Our most critical management and leadership functions are

carried out by our core management team. We have contracted out the manufacturing, packaging/labeling and sterilization of the device

to a contract medical manufacturing company that completes final product manufacturing as well as manages the gamma sterilization process

at a U.S. Food and Drug Administration (“FDA”) registered contract sterilization facility.

Employees

As

of December 31, 2022, we had fifteen full time and one part time employee. We also engage consultants to further support our operations.

Market

Opportunity

The

global ART marketplace is a large, multi-billion industry growing at a strong pace in many parts of the world as increased infertility

rates, increased patient awareness, acceptance of treatment options, and improving financial incentives such as insurance and governmental

assistance continue to drive demand. According to the European Society for Human Reproduction 2020 ART Fact Sheet, one in six couples

worldwide experience infertility problems. Additionally, the worldwide market remains vastly underserved as a high percentage of patients

in need of care continue to go untreated each year for many reasons, but key among them are capacity constraints and cost barriers. While

there have been large increases in the use of IVF, there are still only approximately 2.6 million ART cycles, including IVF, IUI and

other fertility treatments, performed globally each year, producing around 500,000 babies. This amounts to less than 3% of the infertile

couples worldwide being treated and only 1% having a child though IVF. The industry remains capacity constrained which creates challenges

in providing access to care to the volume of patients in need. A survey by “Resolve: The National Infertility Association,”

indicates the two main reasons couples do not use IVF is cost and geographical availability (and/or capacity).

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 the 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, 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.

The

IVC procedure is currently being offered at several IVF clinics at a price range of $5,000 - $11,000 per cycle and from $4,500 to

$7,000 at the existing INVO Centers, thereby making it more affordable than conventional IVF (which tends to average $12,000 to

$17,000 per cycle or higher).

Improved

efficiency providing for greater capacity and improved access to care and geographic availability. In many parts of the world, including

the U.S., IVF clinics tend to be concentrated in higher population centers and are often capacity constrained in terms of how many patients

a center can treat, with volume often 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 three-pronged strategy (IVF clinics, INVO

Centers and OB/GYN practices), in addition to lowering costs, we believe INVOcell and the IVC procedure can address our industry’s

key challenges, capacity and cost, by their ability to expand and decentralize treatment and increase the number of points of care for

patients in need. This powerful combination of lower cost and added capacity has the potential to dramatically open up access to care

for 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 ethical or religious concerns, or fears of laboratory mix-ups.

Sales

and Marketing

Our

approach to market is focused on identifying partners within targeted geographic regions that we believe can best support our efforts

to expand access to advanced fertility treatment for the large number of underserved infertile people hoping to have a baby. We believe

that the INVOcell-based IVC procedure is an effective and affordable treatment option that greatly reduces the need for more expensive

IVF lab facilities and allows providers to pass on related savings to patients without compromising efficacy. We have been cleared to

sell the INVOcell in the United States since November 2015 after receiving de novo class II clearance from the FDA. Our primary focus

over the past two years has been on establishing INVO Centers in the U.S. and abroad to promote the INVOcell and the IVC procedure and

acquiring existing U.S.-based IVF clinics where we can integrate the INVOcell. While we continue selling the INVOcell directly to IVF

clinics and via distributors and other partners around the world, we have transitioned INVO from being a medical device company to one

that is mostly focused on providing fertility services.

Ferring

On

November 12, 2018, we entered into a U.S. Distribution Agreement (the “Ferring Agreement”) with Ferring International Center

S.A. (“Ferring”), which became effective 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 for 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. 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 in the fourth quarter of fiscal year 2021. During the years ended December

31, 2022, and 2021, we recognized nil and $3.6 million of revenue related to the Ferring license agreement, respectively, and, as of

December 31, 2022, we had no deferred revenue related to the Ferring Agreement.

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

Mexico (a) Positib Fertility, S.A. de C.V. Sept 2020 TBD** Completed

Malaysia iDS Medical Systems Nov 2020 3-year Completed

Pakistan Galaxy Pharma Dec 2020 1-year In process

Thailand IVF Envimed Co., Ltd. April 2021 1-year Completed

Nigeria G-Systems Limited Sept 2020 5-year Completed

Iran Tasnim Behboud Dec 2020 1-year Completed

Sri Lanka Alsonic Limited July 2021 1-year In process

China Onesky Holdings Limited May 2022 5-year In process

Investment

in Joint Ventures and Partnerships

As

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

The

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

Affiliate Name Country Percent (%) Ownership

HRCFG INVO, LLC United States 50 %

Bloom Invo, LLC United States 40 %

Positib Fertility, S.A. de C.V. Mexico 33 %

Ginekalix INVO Bioscience LLC Skopje Republic of North Macedonia 50 %

The

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

Partner Country Partnership Split

Lyfe Medical United States 40 %

Alabama

JV Agreement

On

March 10, 2021, 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.

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.

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.

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 December 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 December

31, 2022, the Bay Area Clinic was not yet operational.

Competition

The

fertility treatment regimens that the INVOcell and IVC procedure compete with when infertile people, in conjunction with their physician,

are choosing the treatment method include drug-only stimulation, IUI, and conventional IVF. The fertility industry is highly competitive

and characterized by long-standing well-entrenched procedures as well as technological improvements. Our INVOcell enables the first new

advanced treatment alternative in over forty years. We face competition from all ART practitioners and device manufacturers. To date,

most advancements in the ART market have been limited to incremental improvements to the various products designed to simply support

conventional IVF.

Our

principal ART medical device competitor for INVOcell is an intrauterine device called AneVivoTM, developed by Anecova, a Swiss life

sciences company. The principal difference between the INVOcell and AneVivoTM is its placement inside the woman’s uterus for

early embryo development. We believe that placing the device in the uterus may be more invasive and thus may increase the risk to patients

compared to the INVOcell, which is placed in the vaginal cavity. Currently, AneVivoTM has obtained a CE Mark, but has not received

FDA approval.

For

additional information about competition, see Risk Factors in Item 1A of this Annual Report on Form 10-K.

Government

Regulation

In

November 2015, FDA granted our petition for de novo classification of the INVOcell. The INVOcell is intended for use in preparing, holding,

and transferring human gametes or embryos during IVC procedure with or without intra-cytoplasmic sperm injection fertilization (“ICSI”).

The special controls include clinical and non-clinical performance testing, biocompatibility, sterility and shelf-life testing, and labeling.

These special controls also apply to competing products that seek 510(k) clearance under the classification regulation for IVC systems,

including our own 510(k) effort to expand the labeling on INVOcell from a 3-day incubation period to up to a 5-day incubation period.

We

are subject to regulation in each of the foreign countries where our products are sold. Many of the regulations applicable to our products

in such countries are similar to those of the FDA. The national health or regulatory organizations of certain countries require that

our products be qualified before they can be marketed in those countries. Many of the countries we are targeting either do not have a

formal approval process of their own or will rely on either FDA clearance or the European approval, the CE mark – although many

of these countries do require specific registration processes in order to list the INVOcell and make it available for sale.

With

our CE marking, we have the necessary regulatory authority to distribute our product, after registration, in the European Economic Area

(i.e., Europe, Australia, and New Zealand). In addition, we will have the ability to market in various parts of the Middle East, Asia

and South America. Every country has different regulatory and registration requirements, and we have begun or completed registrations

in a number of countries. In general, we are registering the product based on the size of the market and our ability to service it given

our resources as well as based on interest received from, and the execution of, agreements with distribution and joint venture partners.

We

may be subject to healthcare fraud, waste, and abuse regulation and enforcement by the federal government and the governments in the

states and foreign countries in which we might conduct our business. The federal laws and many state laws generally apply only to entities

or individuals that provide items or services for which payment may be made under a government healthcare program. These include laws

that prohibit: