Good day, and welcome to the INVO Bioscience Reports Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please, note this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please, go ahead.

All right. Thank you very much, Sarah. And good afternoon, everyone. Thank you all for joining us today for INVO Bioscience's Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. Joining us on today's call from the Company is INVO Bioscience's Chief Executive Officer, Steven Shum, the Company's Chief Operating Officer and Vice President of Business Development, Michael Campbell, and Andrea Goren, the Company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin with the event, we submit for the record the following statement. Certain matters discussed on this conference call by the management of INVO Bioscience, may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements regarding the Company's expected future financial position, results of operations, cash flows, financing plans, business strategies, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other similar expressions are forward-looking statements. All forward-looking statements involve risks and uncertainties, and contingencies, many of which are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Factors that may cause actual results to differ materially from those in the forward-looking statements include those set forth in the company's filings, www.sec.gov. Company is under no obligation and expressly disclaims any such obligation to update or alter forward-looking statements, whether results of the receipt of information, future events or otherwise. With that said, let me turn the call over to Steven Shum, Chief Executive Officer of INVO Bioscience. Steven, please proceed.

Thank you, Robert. And welcome, everyone. We filed the annual 10-K just prior to this call starting, but I also want to note that we filed an 8-K just now as well to both published a news release, but also published a presentation focused specifically on our INVO Center efforts in order to provide added details around how we're approaching this area of commercialization and some of our high-level goals and objectives. We prepared this targeted review because the INVO centers represent such critical part of our go-forward strategy now. That short summary presentation is also now posted on our website under the Investors section and we will cover aspects of it here on this call. We also believe it will answer some of the questions that many of you often asked regarding this effort. So we encourage everyone to take a look at that additional presentation when you have a chance. And of course, we will periodically update it as developments occur. Moving to our annual review and outlook, let me first state just how important and exciting 2021 was for the company, particularly the resulting progress and developments toward the end of the year. As a reminder, and I know we've stressed this frequently from a market strategy perspective, our commercialization efforts continue to focus on the substantial underserve patient population and on expanding access to advanced fertility treatment for those people. We believe INVOcell and IVC can help address the key challenges of affordability and capacity in order to help provide care to the vast number of patients that go untreated every year. As one of our key objectives, we set out to develop an entirely new commercial pathway for our solution by opening jointly-owned fertility centers focused on offering INVOcell and the IVC procedure to patients.…

Thank you, Steven. And good afternoon, everyone, and thanks for joining us today. As Steve mentioned, our initial commercial strategy is focused on the INVO Center concept, as well as selling our technology direct the U.S. based IVF credit into a distribution network to the rest of world markets. So I'm going to break my discussion into these two key areas, and starting off on building where Steve mentioned on the INVO Center model. So as you mentioned, our key objective here is to open clinics in high-growth potential areas where we can capture market share in short order. Before this, as Steve touched on, we are taking a data - centric as well as a qualitative review of each potential market. Some of those specific criteria include avoiding areas with comprehensive insurance, our fertility insurance mandate currently 19 U.S. dates have some fertility coverage in -- but only nine states have really comprehensive mandates in place right now. We also tend to avoid markets where our health system owns both the OB-GYN network and the fertility clinics which could result in a potentially reduced referral base for us. We will focus on areas that have sustained patient demographics, areas that have significant capacity issues, have large OB - GYN groups where we -- that we can partner with, and then areas that are primarily cash pay. As an example, in Tampa, St. Pete Clearwater area, we have just announced plans to open an INVO Center. They have the following key metrics: the general population is about $3 million people in the area. So half of those being women, and an estimated 30% of those women being childbearing age, that brings us to about 480,000 women in that demographic. And, typically, in fertility averages around 10%. So that's about 48,000…

Great. Thanks Michael. I'll just turn it straight to Andrea for a quick review of financials and then we'll open up for questions, Andrea.

Thank you, Steven. Revenue for the year totaled $4.2 million, compared to $1 million in the prior-year period. We recorded a net loss of $6.7 million, compared to a net loss of $8.3 million in the prior year. Excluding non-cash charges mainly related to equity-based compensation, our adjusted EBITDA loss was $2.8 million, compared to an adjusted EBITDA loss of $3.7 million last year. The $2.8 million adjusted EBITDA loss for the quarter included approximately $0.7 million attributable to our joint ventures. As such, an apples-to-apples comparison of our adjusted EBITDA loss would be $2.1 million in the current year, compared to $3.7 million last year. This was consistent with our internal operational goals. Revenue consisted primarily of staring license revenue. As a result of the termination of our distribution agreement with Ferring, the approximate $3.6 million in 2021 license revenue included approximately $2.9 million that was scheduled for future recognition. Our product revenue increased from $323,000 in 2020 to $545,000 in 2021. And we recognized an initial $44,000 in consolidated revenue from our INVO Center in Atlanta, Georgia. As of December 31, 2021, we had three operating INVO Center joint ventures with the support of subject matter experts, we further evaluated the proper accounting treatment for these operations and determine that the Georgia JV should be consolidated in our financial statements, while the Alabama and Mexico JVs should be accounted for using the equity method, the Georgia JV generated $44,000 in revenue from September through December of last year, and its operating expenses were approximately $0.6 million for the year. The expenses include certain one-time start-up costs of approximately $75,000 as well as non-cash equity expenses of $300,000. In the near-term, we expect ongoing cash expenses to approximate $200,000 per quarter before any offset from revenue and gross profit.…

Great. Thanks, Andrea, I know we went a little long here on today's prepared remarks. So let's just go ahead and open up for questions and Operator.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble our roster. Our first question comes from John Heerdink with Vista Partners, LLC. Please, go ahead.

Good afternoon, gentlemen. Thanks for the update. As you know, I'm excited about what you guys are doing as I express myself quite often in a number of ways. Question I have for you, when I look at this market, is that -- although I'm excited about the three and soon to be five and soon to be hopefully 20 as you plan, can you address the bigger picture here and correct my understanding if it needs to be corrected. As I understand it, we're going after a market that is approximately 90% under-served. The patient population cannot get carried through the current system of IVF. And so many go away from being served and don't get to enjoy the process of having a baby and children. In this case, right now we have about 450 or so clinics that are in operation in the U.S. alone. Again, only serving about 10% and leaving 90% of the viable population without care. If we are moving forward, is the opportunity quite greater than what we're looking at today? And I know we got to walk and then jog and then run before building out a bunch of clinics. But is it crazy to think that we can actually put one of these clinic s near, right next door, to one of these IVF clinics that are again, not serving this for a number of reasons, costs, etc., and even access? Is that opportunity there in the U.S. alone to be able to fill, again, 90% of the country's population not being served today?

There's quite a few questions in there, John, but I guess I'll first say that we certainly think the potential is beyond the initial target cities that we've referred to, and we certainly think the market could support a higher number of centers to help properly treat the patient population. The often talked about 90% going without care, remember, Michael made this point. It's not that necessarily every patient is seeking care, so there's probably some appropriate discount to apply to that, but regardless, we can see even with our own activities, our own initial centers, feedback from the market that there is certainly a large number of patients to go without care, a lot of that often has to do with affordability factors. We see markets where there are clinics that have four to six month wait list to get into the clinic. So even if there's an ability to afford, there's challenges getting scheduled in to seek treatment. And of course, as we all know, age is one of the biggest negative factors affecting fertility. So if you're on a wait list to get into a clinic, that's potentially further lowering your chances of success. Again, the broad statement that I would say is, absolutely, we think that there -- the market is -- could support well beyond the initial 20 target. The other key point I would highlight here is that the idea of bringing additional, more affordable care through an INVO Center to a specific market is not about trying to take market share from the existing clinics in that market. Our goal, as you pointed out, is to open up access and treat the under-served patient population. So if you look at Tampa, and Michael already called this out, the potential gap that exists between those that are potentially in need of care and those actually receiving care, and again, even if you apply a discount, is pretty supportive of additional capacity. And that's our focus, is fulfilling patients that need care, not disrupting the current market. And there's actually several successful examples of this. Our own partner in Birmingham, with their previous clinic, validated this distinction, and it's something we've previously highlighted. But there's other examples even within the IVF landscape where a new IVF practice entered an existing market with a lower price point and achieved substantial success with close to zero impact to the existing higher-priced practices in the area, which just further demonstrates the potential additional demand that exists at different price levels. We speak to this all the time but in our opinion, there's really clear proof of it. And in fact, in some of these markets where there are lengthy waits to get into a clinic, are targets of ours. Michael, feel free to add to that, but I think Michael would concur here that there's definitely the potential to expand beyond our initial target over the long haul.

Steven, I agree with all the points, and again, it's not just us saying it, there's a lot of information out there from folks both within the industry and from the investment community that recognize the need for an additional channel potentially to treat this unmet need. So it's pretty well known.

And let me ask you, the market in the U.S. that the IVF clinic serve, what does that represent from a dollar revenue standpoint? Do we have an approximate number or when it did in any recent year?

Yes. I think if you assume what is often considered the average cycle cost for IVF treatment, look at the number of cycles per the CDC statistics, you'd probably usefully get close to $5 billion range for existing care in the market. And again, that's the other point that we often make is if we can bring additional access, additional capacity, do it at an affordable price, we're not trying to carve out a piece of that $5 billion existing market worse if they're trying to expand the market and we think that expansion opportunity, even at a lower price point, is still in the multiple billions of dollars potential expansion of the market.

Yes. So if I'm hearing you right, if we would be grabbing just another 10% and were approximately half the price, that would mean that's about a $2.5 billion opportunity. You just that grabbing 10%, adding 10% to that 90% that's not being served. Is that correct?

Yes. That's correct. That's certainly an opportunity for sure.

Yeah. It seems quite significant. So again, I think it will be interesting to see how this plays out, but it just seems like a very significant opportunity as we go out and open the stores, the patients should be -- or the clinic should show up. If it's so as it is right now, you're starting to see great traction at these first three. So it's starting to see that. And as far as financing, a possibly speeding up the rollout, is it rational to think that being, if you were just targeting the same markets, typically you have real estate firms that are out there in the marketplace that are seeking to partner with companies and rollouts. And I've had conversations with different co-investors here that have had success with the village and these. The one Medical's, etc. that have successfully rolled out similarly sized clinics, obviously in different areas of primary care, etc. But there seems to be a footprint out there where partnerships are being created, etc. Is that a possibility here too for it to help potentially efficiently rollout across the U.S. and possibly even look at maybe in partnering in some way and financing with them so that the? dilution could be minimized?

We think there are those kinds of tools out there for sure. Yeah. I think that says Andrea. Andrea mentioned we're evaluating what we think makes the most sense, including that that's something that would most likely be lesser, or even non - dilutive as potential option for some of the upfront costs. Yes, I think those are tools that are potentially available that we're exploring.

Okay. And then one last thing before I jump in the queue, just help me understand and other investors. Since INVO, centers are fertility clinics that are offering the specialized technology INVOcell that you guys control or will bias as control. What's -- but you have a number of patients that come through and I think IVF they have clinics also. They have maybe say a 100 or whatever might come through the office and some might immediately the next month grow through in 15% range to a cycle. In your case, what does experience in the first three clinics regarding those? Are you seeing about the same and then also, can you speak to are you seeing revenues drive well beyond the cycles for other services Just like an IVF clinic or fertility clinic would?

Yes, there's a couple of questions there, but on other revenues, you're correct. Patients, they move when they come through a consultation, if they progress to testing, there's various diagnostics that are often performed to assess what some of the issues are. And those are typically those are services provided by the clinic once they are charged services. So that's certainly a revenue source. Our clinics, if it's appropriate and there are certainly cases that are they may perform IUI cycle so that's a revenue source. So there are definitely revenue components to the clinics, just like any fertility clinics that are beyond just simply an IVC or a treatment. So yes, I think that as far as conversion rates, it's a little early to draw conclusions, but I would say I think we feel our practitioners feel that's consistent with what you would normally see. And remember not every patient that comes in for a consultation necessarily immediately moves to diagnostic testing. And even those that do -- they may not be a candidate for treatment. but may decide to wait a little bit before they proceed. So I think all of those dynamics are similar in our clinics, and I often say that a patient that may go through initial consultation and testing and is a candidate for treatment, if they don't proceed right away, it's not really a patient lost they may just be making a decision on what to do and when to do it, and so we would see that still has potential patients in our pipeline for the specific centers. Michael, again, I'll call on Michael and see if he wants to add anything further to that, but that's --

No, I think that's very accurate, Steven. But I will say that Corringham and Birmingham does have a very, very high closure in all the metrics in front of me, but she does convert a lot of the consults to actual cases. So there is some magic to that process as well.

Thank you, team. Again, congratulations on the progress announced and the plans forward, and look forward to seeing how -- to all of our success as you guys move forward.

Thanks, John.

[Operator Instructions] Our next question comes from Lawrence Fidel with Fidelity Investments. Please go ahead.

Hi, guys.

Hey, Lawrence.

You had -- you have a I don't know what's -- could you could you review your status of the clinics that you have out of the country?

Well, we don't -- the only official INVO Center we have up and running outside the country is our Mexico clinic with our Mexico partner. Is that what you mean, Lawrence? Are you talking more on our distribution business where we're just selling the device to other fertility clinics?

I thought you had the clinics -- potential clinics in India and --

Our India -- our India partner, as we've noted over the past year, has -- really was impacted pretty severely by COVID, which -- and they were experiencing significant delays. And we just recently agreed that we would put a stop to that. We really hadn't -- they hadn't made forward progress at moving it along to our satisfaction. And I think, again, they -- with what happened with COVID, they adjusted some of their focus and so it made sense for us to terminate the India, which we just did just the other day as part of filing our 10-K. We made that decision with them. And we've had a few other inquiries in India market. But, you're right, that was one of the first JV agreements we signed but, like I said, the partner, right after we had signed that agreement, really struggled and COVID hit, and so we thought it was best to free ourselves to be able to engage and have conversations with a few other potential parties.

Okay. You did announce that you have a deal in the Middle East, am I right?

We have a partner in Malaysia and Michael referred they are in the mix still and. What's that?

Is that a firm deal?

We have an agreement with them, but it's really -- is one of the points that we made earlier in our prepared remarks that for us the internet, we're a lot more focused right now on our North American operations and we're, we're willing to engage with partners internationally that are interested in and most centers. But we're putting more of the owners on them to do the necessary work to bring us enter operational and we don't have as much control. And it's hard for us to really manage the half from here. So it's really got to be the right partner.

Lawrence, it's Michael just on the Malaysia deal with the trial is important as well. As I mentioned, we initiated a trial through the government sector. We have some cases are ongoing and in Malaysia, and as most of the rest of the world markets, they want data within their countries as well. And we did that in Europe, we had to go to Spain. We did some procedures and some trials in Spain before we can engage with the overall clinic group too. It's pretty much standard operating procedure to build a beachhead if you will, get local data. And then these guys make decisions based on how this thing works in their hands. So in Malaysia, yes, we do have two interested parties, yes. One of these parties is our official distributor, if you will. In order to register a product in an international market, you have to have a local distribution company as part of this arrangement so they actually have this distributor and they are also do have plans to build an INVO Center. So that's all is ongoing.

Getting back --

And, Lawrence, we do have distribution partners in the Middle East, Turkey and Jordan. We've mentioned those long ago, Africa of course, which Michael highlighted because they really started ramping up their efforts to get trained and placed a first order I hear recently. So sometimes these have long, especially with COVID, impacted the whole world. But some of these activities have taken quite a while, but what we see is in certain areas they're progressing.

Let me just ask a theoretical type of question, but if -- suppose somebody pays a thousand dollars to a clinic that you own or have an interest in. How would you -- how do you record that money? How do you show the money?

Well, I'll let -- I can answer it, but I'm going to let Andrea take a turn here for us and address the accounting for us, the current centers, by -- and then what we contemplate maybe in the future center. So anyway, Andrea?

Yes, so they're two methods that we're using for the existing clinics. One is we -- we're deemed to control the key activities that most significantly impact the economic performance of the clinics, which is kind of the standard under U.S. GAAP we get to consolidate it. So if there is, they have a thousand in revenue that would become our revenue and their expenses would become our operating expenses. And then we would have typically a non-controlling interest which is backed out below the line. That is the case for the Atlanta joint venture with Alabama as Birmingham and Monterrey, Mexico, we don't meet that standard, so we're using the equity method. It becomes more of a balance sheet activity. The income statement only gets impacted by our share of their profit or loss below the line. And we did provide some. In the press release, you will see that there is a table with some information on the joint ventures performance as a whole, and we did provide a little bit of a breakdown in some information on our investment in and how we recognize the performance in our own accounting. Does that answer what you were asking?

I think one other last point, Lawrence, for you on this topic. I think as we look forward in the new centers and particularly how we're approaching those, I don't want to say always the case, depends on sometimes the specific arrangement with the physician partner, but most likely the forward centers will more likely be consolidated rather than treated as an equity method. But again, not necessarily in every instance, but most likely the majority of the future ones will likely be consolidated.

Okay. All right. Another -- just another question. What's going on with the five-day trial?

Well, as I noted on my prepared remarks, it's been a lengthy process to not just collect the data, but then have to go back and do some back and forth with individual clinics. In terms of when we got the volume of data, I won't bore you with the details, but it was a lot, and we had to do a lot of scrubbing and make sure everything was standardized because we're trying to create statistics to support what the FDA is looking for around that data. So you have to make sure every data point from every clinic is conformed in the same way so that you can roll it up into averages and so forth. And we had some inconsistencies across some of the clinics, and so we had to do a lot of back and forth and that took quite a bit of time. And I believe we are, as I said in my prepared remarks, we're largely through that. We have it and we're now doing the statistical calculations. I'm hopeful that there won't be any last-minute inconsistencies. But even if they are, it should be a quick turnaround. And we're looking to get that data submitted over to the FDA here very, very soon. And that's all based on the retrospective -- we're using the retrospective data to try to support the 5-10 K effort as the real market usage data.

Okay. Thank you.

Thanks Lawrence.

Our next question comes from Scott Proctor, a Private Investor. Please go ahead.

Hey, Steven, congrats on the progress, really exciting to see the effort here in the North American centers. I guess, as I'm thinking about how you guys move forward, I'm looking at projected 12,000 cycles when leads are fully operational, which is actually a pretty big percentage of the overall IVF cycle market in the U.S. which is exciting on its own merit. But I was wondering if you could speak a little bit about just the revenue opportunity on the uptick in devices you anticipate selling to those clinics or is there some special rate, I don't know if that's disclosed, but I'm just thinking about how to model that in when looking at the investment opportunity.

Are you talking about the transfer price rate we use to the INVO Centers?

Yes, correct.

Yeah. We haven't that varies a little bit center-by-center. Specifically, I guess if it's between Mexico versus the U.S. centers. But we haven't really disclosed that. I would tell you it's a little bit better price point than our transfer rate priced than what we sell to non INVO, centers. But I think until we're -- I would say it probably just leave it at that for now. It's slightly a better pricing then.

Fair enough. I appreciate the color. And I guess just a quick follow-up to that, just looking at the timeline of how you're projecting these INVO centers to go into the future to get to $2.3 million revenue year in Year 2, and 425 grands in profitability. That's super exciting. And I'm sure what you're seeing in the existing clinics has given you a lot of confidence. Just in that vein, I know that INVO doesn't provide guidance historically, especially around stuffs like clinics. But with Atlanta and with Alabama, are you seeing the performance there in line with what these slides are showing. Is there any big variance there, as you work through the plan on these early centers?

Birmingham, yes. As we try to note. I would probably -- I think we would assess that Atlanta and Mexico are maybe a couple of months behind. Obviously we have a lot more detailed month by month plans in how we see the centers. And I think if you were to slide the month-by-month over maybe two to three months, then it would line up, and we attribute that to when those clinics open, we were still obviously learning, and we also really hadn't brought to some of the marketing activities to help drive awareness, things like that. So as Michael noted, we were admittedly probably a little slower implementing some of the programs on the marketing efforts in the physician referral activities and so forth. So if you contemplate that that's why we we feel comfortable, and again, this is why we're going to take here in these early days of the marketing activities will refine, we'll take what's working best, and that's going to be a big advantage in our mind for the new centers because we will initiate those activities even before they necessarily -- on some of those activities before they even open their doors. And so with the idea of allowing them to hit the ground running at a little faster pace out of the gate. So again, from our vantage point, we're comfortable. And again Birmingham is pacing quite well. And the others, again, if you just slide a little bit and we look at that is -- it really how we initiated some of the marking programs and us being a little bit late doing so after they had already opened, basically.

Got it, that all make sense why it's it's a really bold than an ambitious undertaking and I think it's really exciting for all the existing shareholders and anyone who's kind of considering an initial investment in INVO Bioscience. The company, and the presentation certainly looks very different from how it looked even one or two quarters ago in terms of the commercial strategy with this new focus. So really exciting congrats again on the progress and I'll look forward to track in the story.

Scott it's Michael, a lot of that has to do with the recently announcement of the Ferring agreement. We really weren't getting to have the ability to accelerate our marketing plan, which we do now so that's really been the major driver.

Excellent. Yeah, that makes sense and thanks for that additional color. When Ferring got out of the way, I think everyone who understands the story has been following along, understands there's actually a huge positive for INVO going forward. So yes, excited to see what you guys could do with it in your own hands.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you, everyone. Again, we appreciate your time for joining us today. Please do not hesitate to reach out to us directly or to our IR firm should you have any follow-up questions. And we look forward to -- we'll probably be back with you here in about 45 days for the first quarter where we will look to further add additional data points. As the -- as our existing centers mature, our goal is to provide more and more information around how they're doing as we move forward from here. So we look forward to doing that on our first quarter call here in the near-term. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.