Zivo Bioscience, Inc 10-K for FY2024
Zivo Bioscience, Inc. (ZIVO)
About this 10-K
Zivo Bioscience, Inc filed this 10-K on March 18, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $157.22K
- up 468.6% from $27.65K a year earlier
- Net loss
- $13.38M
- compared with a net loss of $7.78M a year earlier
- Diluted EPS
- -$4.23
- compared with -$4.60 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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(Mark One)
For the fiscal year ended
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For the transition period from ______ to ______
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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.
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).
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 | ☐ |
☒ | Smaller reporting company | ||
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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.
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. ☐
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
As of June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of shares of the registrant’s common stock held by non-affiliates of the registrant based upon the June 28, 2024 price at which the common equity was last sold was approximately $
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Documents Incorporated by Reference
Portions of the Company’s proxy statement for the Annual Meeting of the Stockholders to be held June 9, 2025 are incorporated by reference into Part III of this report. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2024. Additionally, portions of the Annual Report are incorporated by reference in this Form 10-K in response to Items within Part II.
FORM 10-K
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES INDEX
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Annual Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to statements regarding:
| · | our ability to continue as a going concern and our history of losses; |
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| · | our ability to obtain additional financing; |
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| · | our relatively new business model and lack of revenues; |
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| · | our ability to prosecute, maintain or enforce our intellectual property rights; |
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| · | disputes or other developments relating to proprietary rights and claims of infringement; |
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| · | the accuracy of our estimates regarding expenses, future revenues and capital requirements; |
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| · | the implementation of our business model and strategic plans for our business and technology; |
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| · | the successful development of our production capabilities; |
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| · | the successful development of our sales and marketing capabilities; |
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| · | the potential markets for our products and our ability to serve those markets; |
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| · | the rate and degree of market acceptance of our products and any future products; |
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| · | our ability to retain key management personnel; |
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| · | regulatory developments and our compliance with applicable laws; |
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| · | our liquidity; and |
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| · | other factors described in the “Risk Factors” section of this Annual Report on From 10-K |
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” “targets,” “intends,” and similar expressions intended to identify forward looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this report to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. We qualify all of our forward-looking statements by these cautionary statements.
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You should refer to the section entitled “Risk Factors” of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. No forward-looking statement is a guarantee of future performance.
You should read this Annual Report on Form 10-K and the documents that we incorporate by reference herein completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Annual Report on Form 10-K and the documents we incorporate by reference herein represent our views as of the date of this Annual Report on Form 10-K. We anticipate that subsequent events and developments will cause our views to change. However, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.
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PART I
Item 1. Business.
Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “our,” “us,” “ZIVO,” “the Registrant” or “the Company” refer to Zivo Bioscience, Inc., a Nevada corporation, and its subsidiaries.
Overview
We are a research and development company operating in both the biotech and agtech sectors, with an intellectual property portfolio comprised of proprietary algal and bacterial strains, biologically active molecules and complexes, production techniques, cultivation techniques and patented or patent-pending inventions for applications in human and animal health.
We believe that our proprietary algal culture and materials derived therefrom show promise in benefiting both animal and human health, primarily through inflammation-modulating and immune-boosting properties. Overall, our efforts have been centered around two potential value-creating initiatives; the first being the identification of bioactive extracts or novel bioactive molecules from our proprietary algal culture to treat various diseases, and second, the utilization of our proprietary algal culture in its whole form as a food product to leverage its nutritional value. In the first quarter of 2022, we reformulated our biotech and agtech businesses around these two concepts. We reviewed the market potential (scale and profit) and the technical and business risks associated with each of the opportunities we had been working on and developed a focused strategy for each business.
Available Information
We maintain an internet website at https://ir.zivobioscience.com. We make available on or through our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practical after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. We do not intend the address of our website to be an active link or to otherwise incorporate the contents of our website into this Annual Report.
Therapeutic (Biotech) Business Strategy
Our strategy is to develop bioactive extracts, fractions, and molecules derived from our proprietary algal culture, targeting human and animal diseases, such as poultry coccidiosis, bovine mastitis, human cholesterol, and canine osteoarthritis. As part of our therapeutic strategy, we will continue to seek strategic partners for development at any stage, regulatory compliance and commercialization of our products in key global markets.
We seek to partner with established animal health companies and create value through licensing and/or other commercial arrangements, while accelerating product development and mitigating market introduction risk.
After identification and study of active materials obtained from our proprietary algal culture and assessing their potential treatment applications, we have identified an effective product candidate for mitigating the effects of coccidiosis in broiler chickens. The focus on coccidiosis is driven by the potential to rapidly generate significant revenue, primarily due to the widespread prevalence of coccidiosis as a global issue in the poultry industry and the lack of effective and innovative, non-antibiotic alternatives for fighting the disease. Additionally, the clinical testing cycle for chickens is comparatively shorter than that for other species.
The coccidiosis market within the global animal health sector is currently populated with predominantly antibiotic- or ionophore-based products and marginally effective vaccines. What we believe distinguishes ZIVO’s product candidate from available treatments is its innovative non-antibiotic method of action. As an immune modulator, ZIVO’s product candidate augments the chicken's immune system to combat the effects of the coccidiosis causing parasite and other pathogens. We believe that unlike established treatments, our novel non-antibiotic technology addresses both industry and consumer concerns related to residual antibiotics and chemicals in the global food supply.
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We expect that this departure from the conventional products that have dominated the market for the past six decades will provide us with a strategic advantage in this market. We aim to bring much-needed innovation to an area that has experienced limited advancements, potentially offering a disruptive and effective solution for treating coccidiosis in broiler chickens. Our emphasis on a non-antibiotic approach aligns with evolving industry-wide expectations and supports a commitment to providing safer and more sustainable solutions in animal health.
Coccidiosis Product Candidate
In numerous studies conducted by independent research institutions and contractors, ZIVO’s product candidate has demonstrated multiple benefits, including:
| · | Minimized or eliminated the negative effects of coccidiosis on the digestive health in broiler chickens as assessed using numerous measures of gut health and overall well-being; |
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| · | Reduced the incidence of Campylobacter, Salmonella, E. coli, and Clostridium perfringens, all significant sources of food-borne illness, in the digestive tract of broiler chickens in the absence of antibiotics or other antimicrobial compounds; and |
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| · | Reduced mortality. |
The predominant treatment for coccidiosis in the poultry industry, in-feed anticoccidial drugs, targets the Eimeria parasite directly and requires constant use over the lifespan of the animal for efficacy and can over time result in the development of resistant Eimeria strains. Other treatment strategies, such as vaccines, require several weeks for immunity to manifest, which can significantly impact growth potential. Often, several treatment products are used in combination, increasing costs in an industry already facing heavy inflationary pressures and thin profit margins. As a result, the poultry industry is actively searching for a novel solution.
We believe our treatment alternative represents an innovative new product class that aims to strengthen the immune system of chickens through multiple complementary immune pathways to afford a rapid, robust, and effective response to disease-causing pathogens without the adverse effects associated with traditional antimicrobial drugs and chemicals.
Nutrition (Agtech) Business Strategy
For the nutrition side of our business, we have developed our proprietary algal culture to be commercially viable as a nutritional product. The dry, powdered form contains over 50% protein, is an excellent source of other essential vitamins and nutrients and has little odor and a mild taste compared with other algae products. When we conducted a review of our nutrition business, we were very satisfied with the nature of the product; however, we identified gaps in customer acquisition and in scale-up technology preventing us from growing our proprietary algae in quantities to sufficiently meet the potential demand. We have, therefore, focused our nutrition strategy on developing a cost effective, commercial-scale growing technology.
In 2021, we initiated a long-term collaboration, commencing a development agreement with Grupo Alimenta, a well-established family-run Peruvian agricultural conglomerate. A combined Grupo Alimenta and ZIVO team has dedicated their efforts to perfecting the cultivation process and constructing commercial-scale algae ponds using ZIVO's proprietary cultivation process and pond design. By early 2023, the team successfully had demonstrated the continuous production of high-quality dried algae at the production site in Peru (Alimenta Algae SAC), and the facility passed food safety and cGMP audits, conducted independently by local, Peruvian state, and a reputable and FDA certified 3rd party company, to meet all requirements to produce and import food products into the United States via the FDA Foreign Supplier Verification Program. Subsequently, focus shifted to commercial production and increased production volumes. Plans are to complete build-out at Alimenta Algae to reach full capacity in 2027, with capability to produce roughly 100,000 kg per year.
A significant milestone in this partnership is the transition from the development agreement to a commercial agreement. Under a contract manufacturing arrangement, Alimenta is set to make essential investments in the Peru site to facilitate production scale-up. In turn, ZIVO, through its ZIVOLife, LLC subsidiary (“ZIVOLife”), commits to purchasing the entire output from that facility. We believe this collaborative effort marks a pivotal step in advancing our shared goals in the algae production venture.
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In June 2023, ZIVOLife commenced commercial shipments of our dried green algae powder intended for human consumption as a food or food ingredient. Through a global distribution agreement, ZWorldwide, Inc., based in Miami, has taken on the role of selling the Peruvian-grown product under the brand name ZivolifeTM. The primary market focus for the product's introduction is the North American green powder food market. ZWorldwide, functioning as a marketing and distribution company, is actively retailing the ZivolifeTM product directly to consumers through its online platform at www.zivo.life. At this stage, our product volumes remain relatively low and are anticipated to be constrained as we complete the scale-up process with our contract manufacturing partner in Peru. This strategic approach is designed to ensure a controlled expansion of our presence in the market, balancing demand considerations with maintaining product quality and process discipline. The offtake agreement with ZWorldwide, Inc. includes provisions to purchase all ZIVOLife production through 2024 and at least 24,000 kg per year for a minimum of five years.
Additional Indications
Pending additional funding, ZIVO may also pursue the following indications:
Therapeutic (Biotech):
| o | Avian Influenza: A recent proof of concept study indicated that active materials derived from ZIVO’s algal culture showed positive effects in chickens challenged with a low pathogenicity strain of the avian influenza virus. |
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| o | Bovine Mastitis: ZIVO intends to continue development of a treatment for bovine mastitis based on previous successful proof of concept studies using active materials derived from its proprietary algal culture. |
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| o | Canine Joint Health: Studies have indicated a potential chondroprotective effect when a compound fraction from ZIVO’s algal culture was introduced into ex vivo canine joint tissues. |
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| o | Human Immune Modulation: Early in vitro studies involving human immune cells and in vivo studies performed in non-clinical species have indicated that one of the isolated and characterized biologically active molecules in the Company’s portfolio may serve as an immune modulator with potential application in multiple disease situations. |
Nutrition (Agtech):
| o | Companion Animal Food Ingredient: The self-affirmed GRAS process was completed for ZIVO algal biomass in late 2018 and updated in May 2023 to validate its suitability as a safe product for human consumption as an ingredient in foods and beverages. We plan to leverage this work into viable food and nutritional supplements for companion animals. |
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| o | Skin Health: ZIVO is developing its algal biomass as a skin health ingredient, with topical skin product testing started in the third quarter of 2020, and clinical efficacy claim studies planned for ingestible and topical products. |
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| o | NDI (New Dietary Ingredient): The algal biomass may also be sold as a dietary supplement or dietary ingredient in a dietary supplement, in which case it needs to notify the FDA prior to sales. The notification package includes studies and reports that support its record of safe human consumption, its safe manufacture, and marketing claims. ZIVO’s GRAS study and cGMP audit record with Alimenta Algae may be leveraged for this work. |
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Our Market Opportunity
Therapeutic (Biotech)
Livestock and Companion Animal Health
The annual global market sizes for animal health technology and products under development by ZIVO are: vaccines $13.7 billion in 2023, phytogenics $1.1 billion in 2023, and eubiotics $5.1 billion in 2024. And specifically, the annual market sizes in the companion animal health are: drugs $19.6 billion in 2023, vaccines $3.8 billion in 2024, and feed additives and supplements $1.9 billion in 2024.
Poultry Gut Health
Coccidiosis, a parasitic disease of the intestinal tract, is one of the largest health and animal welfare problems facing poultry flocks. This disease represents a significant economic challenge for the global poultry industry, with the estimated annual costs in excess of $15 billion annually. Products for treating coccidiosis are mostly antibiotic- or ionophore-based, and no significant new commercial technology has been introduced in the past 60 years. The global poultry industry spent approximately $1.1 billion in 2024 on coccidiosis control, primarily using decades-old compounds that industry and consumers alike want to replace due to the risks of developing drug resistance. Consumer and regulatory pressures have created what we believe to be an opportunity to develop and market an alternative to various additives routinely mixed into chicken feed. The Company has developed a non-antibiotic product candidate expected to boost immune response, thereby combatting a broad range of infective pathogens, with the goal of simultaneously improving feed conversion, productivity, and overall bird health.
Avian Influenza
The current Highly Pathogenic Avian Influenza (HPAI) panzootic in the United States began in February 2022, with the first reported case in Dubois County, Indiana, according to the Centers for Disease Control and Prevention. Since then, 868 commercial poultry flocks—including broilers (meat chickens), layer hens, and turkeys—have been affected nationwide, as reported by the U.S. Department of Agriculture. The economic impact has been significant. As of November 2024, the outbreak had cost the United States approximately $1.4 billion, primarily in indemnity and compensation payments to farmers for culled flocks. ZIVO’s proprietary active ingredients represent potential preventative measures for reducing the spread of Low Pathogenicity Avian Influenza (LPAI) virus in commercial poultry operations and enhancing overall flock health. Zivo is presently developing multiple products and evaluating the most effective strategies against LPAI. We believe treatment for LPAI can lead to successful treatments for HPAI.
Bovine Mastitis
Bovine mastitis, or inflammation of the udder, can halt milk production and may result in unsaleable milk. The U.S. dairy cow herd averaged 9.3 million cows in 2024 and U.S. milk production hit approximately 216 billion pounds in 2024. Bovine mastitis affects approximately 1.5 million out of the 9.3 million dairy cows in the U.S. on an annual basis, and the average loss per cow per year in milk output is 846 pounds, or 1.3 billion pounds of milk in aggregate per year. Current treatments are primarily antibiotic-based, which require a holding period and disposal of milk during that holding period.
Canine Joint Health
Osteoarthritis (OA) is one of the most common ailments among pet dogs, with prevalence believed to be greater than 20%. The U.S. is expected to hold the largest share of the global market for veterinary pain management due to the vast pet population in the region, increasing animal healthcare expenditure, large number of hospitals and clinics, growing pool of veterinarians, and high prevalence of diseases causing pain. According to IBISWorld, the U.S. veterinary services market showed a solid, steady increase in consumer spending over the past few years.
Human Immune Modification
Immune-related and infectious diseases represent a vast range of health issues affecting millions of humans. New applications in pharma, food and nutraceuticals are continually introduced into this growing market. The annual market sizes for the antibiotics, eubiotics, autoimmune, and the antidiabetic markets were approximately $40.0 billion in 2020, $37.9 billion in 2019, $110.0 billion in 2017 and $48.8 billion in 2018, respectively. Including arthritis, there are more than 80 types of clinically different autoimmune diseases. Many major pharmaceutical and biopharmaceutical companies have extensive licensing and development programs focused on autoimmune/anti-inflammatory R&D. The rise in strategic alliances by discovery stage R&D companies like ZIVO is one of the latest trends that may gain traction in the autoimmune and anti-inflammatory therapeutics market in the coming years.
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Nutrition (Agtech)
Human Functional Food Ingredients
The market for healthy foods, health foods, vegan and vegetarian food products continue to gain traction in the US and worldwide, especially as consumers look for healthful and nutritional ingredients to improve overall health and immune response. The market's growth is largely driven by the increasing shift toward plant-based diets. Vegan food is gaining widespread popularity worldwide. Once primarily associated with regions where avoiding meat stemmed from moral or spiritual beliefs, the movement has now expanded across diverse demographics.
Growing concerns over the environmental impact of excessive animal-based food consumption have prompted more consumers to seek sustainable, eco-friendly alternatives. Beyond environmental factors, many people are adopting plant-based proteins for their proven health benefits. A well-rounded plant-based diet provides all nine essential amino acids through diverse vegetable based protein sources. Additionally, shifting from meat-based proteins to plant-based alternatives has been linked to a reduced risk of heart disease, hypertension, high cholesterol, various cancers, obesity, stroke, and type 2 diabetes.
In 2023, the global vegan protein powder market was estimated to be $4.6 billion. The Company’s ZivolifeTM product is a new entrant to this market and is the first algae of its kind found in this large and growing consumer market.
Clinical Development and Regulatory Pathway
Clinical Experience, Future Development and Clinical Trial Plans
Our product candidates are at different stages of development for different applications. Accordingly, the various regulatory processes required for the various applications are at different stages of completion. With respect to human food applications, we have completed the FDA’s self-affirmed Generally Regarded as Safe (“GRAS”) process for our dried algal biomass which allows for product commercialization with a consumption limit of up to five grams per day.
Beyond use of the dried algal biomass in human food in the U.S. with nutritional claims, ZIVO has not yet received the required approvals for commercialization for any product form or application. To date, however, we have performed a number of studies required by regulatory bodies including bench top and pre-clinical tests (which include animal testing, performance, and other tests) for various product forms and applications pertinent to qualified health claims and structure/function claims. As described below, the Company intends to perform additional testing of its products in connection with obtaining the requisite regulatory approvals.
Poultry Gut Health
We are actively developing a product candidate targeting poultry gut health. We have conducted 23 clinical trials to date, most recently in January of 2024. The early studies focused on determining the general effects of various product candidates, while the more recent studies have been focused on optimizing and validating a single lead product candidate including study of dosage levels, treatment regimes, interactions with vaccines and other existing products, and various product formulations.
In late 2022, a third party performed a four-month study on behalf of a potential partner company, which included a 42-day coccidiosis trial in broiler chickens. That study evaluating the Company's novel immune-modulating biologic for treating coccidiosis in broiler chickens produced questionable results due to a high disease burden among tested chickens.
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Subsequent studies, including abbreviated and full-length 42-day coccidiosis challenge studies found health benefits including a statistically significant reduction in intestinal damage caused by the Eimeria parasite compared with untreated control birds. This improvement in intestinal health following parasite exposure was on par with the market-leading commercial ionophore. We believe that this reduction in intestinal damage enables poultry farms to optimize feed utilization as measured by the Feed Conversion Ratio (FCR), which is the primary driver of profitability. Similar to the outcomes related to intestinal damage, our product also resulted in statistically significant improvement in FCR compared with untreated controls. These results were not statistically different from the market-leading commercial ionophore.
ZIVO’s approach for developing our coccidiosis product candidate as feed additives enables us to generate products that boost the immune response and reduce the effects of disease, while maintaining a single regulatory relationship, which is with the U.S. Department of Agriculture (USDA).
The USDA’s Center for Veterinary Biologics (CVB) sent us a notice claiming jurisdiction for reviewing our immune-modulating biologic for treating coccidiosis in broiler chickens. This important jurisdictional determination de-risks our regulatory path and opens the door to further discussions with the CVB on the final product development plan, regulatory strategy, and data requirements for licensure. This was a significant milestone as USDA approval is likely to provide a favorable timeline to approval relative to the alternative involving the FDA.
Avian Influenza
We also intend to advance development work to identify, optimize, and validate a product candidate for preventing or treating various viral diseases of poultry including disease caused by LPAI. To this end, in December of 2024, we completed an initial proof of concept study involving LPAI challenged birds at the University of Delaware with the goal of confirming applicability of our active materials for this purpose. Key findings of statistical significance from the study include:
| · | A reduction in viral titers (viral shedding) in infected birds receiving ZIVO’s products compared with untreated infected controls. |
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| · | A delay in transmission of LPAI when healthy birds treated with ZIVO’s products were exposed to infected birds, suggesting a slower and less aggressive spread of disease. |
The two-part controlled study evaluated the efficacy of ZIVO’s proprietary active ingredients, previously shown to be efficacious for mitigating the effects of coccidiosis in broiler chickens, against LPAI.
In the first part of the study, infected birds receiving a mixture of ZIVO’s proprietary active ingredients showed an early significant decrease in viral titers compared with untreated, infected controls, thereby reducing amount of detectable virus that was shed. At the end of the study, although not significant in nature, a numerical decrease in virus was noted in birds receiving ZIVO’s product. In the second part, healthy chickens were housed with infected birds, replicating a real-world, high-risk environment for disease transmission. Compared to an untreated control group, birds that received ZIVO’s proprietary active ingredients that were housed with infected birds experienced a statistically significant delay in viral detection. This observed delay suggests that ZIVO’s products limit viral replication within a host.
These favorable results indicate that ZIVO’s proprietary active ingredients represent potential preventative measures for reducing the spread of LPAIV in commercial poultry operations and enhancing overall flock health. Multiple products were explored to identify the most effective strategies against LPAI. While some products were better at lowering the viral titer, others were more effective at slowing the spread, suggesting that an optimal product configuration could provide more comprehensive protection. We believe the study’s positive outcomes justify further research and product development, supporting the potential of ZIVO’s pipeline to address both LPAIV infections as well as a broad spectrum of other viral challenges faced by the poultry industry.
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Potential Additional Indications
Following development of our initial product candidate for the above mentioned poultry applications, the Company intends to continue to pursue the below indications:
Therapeutic:
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Bovine Mastitis
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| The Company has conducted multiple in vitro and ex vivo experiments as well as four clinical trials to determine general effects and to evaluate product modalities and methods of administration.
These studies include two (2) multianalyte in vivo studies of mastitis-inducing pathogens, most recently staph aureus.
Discovery Stage, pre-GMP, pre-GLP |
| The Company expects to conduct three or more small studies to validate a product candidate previously validated in poultry, among other similar candidates and to make refinements to same before offering to potential licensees. |
Canine Joint Health |
| The Company has conducted multiple in vitro inflammatory experiments, followed by two in vivo trials with mice, and two ex vivo experiments using canine hip joint tissue.
Discovery Stage, pre-GMP, pre-GLP |
| Additional ex vivo experiments are necessary to gauge effectiveness of product candidate, to be followed by two in vivo studies to determine dosage and tolerance, likely followed by one or more validation studies on behalf of prospective licensees.
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Human Immune Modulation
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| The Company has conducted six in vitro experiments using human immune cells attenuated by proprietary TLR4 inhibitor.
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| The Company has additional testing planned, beginning with repeated in vitro testing of different dosages and purities. |
Nutrition:
Algal biomass for human consumption
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| The Company completed the self-affirmed GRAS in November 2018, and the dossier was updated to current FDA standards and Zivo production methods in May 2023.
No clinical testing is required for commercialization. |
| ZivolifeTM met safe human consumption requirements and sales began in June 2023.
ZIVO continues to review its GRAS status to be current with new FDA regulations and to complete studies supporting increases in the allowable daily intake (ADI).
In addition, ZIVO is looking into regulatory requirements to sell ZivolifeTM outside United States |
Biomass for supporting skin health / anti-aging |
| The Company is planning several investigations to establish definitive support for the mechanism of action associated with skin health / anti-aging. Support for the indication is a prerequisite to the human new dietary ingredient (NDI) application.
Topical skin product testing began in 2020. |
| The Company is planning additional studies to support skin health/anti-aging.
Pending the outcome of these tests, we expect to notify the Food and Drug Administration about these ingredients and our intent to market according to Section 413(d) of the FD&C Act, 21 U.S.C. 350b(d). |
Competition and Functional Equivalents
Therapeutic (Biotech)
Our industries are all very competitive and subject to rapid and significant innovation and change. In addition to companies cultivating and creating homeopathic and natural remedies, our potential competitors and functional equivalents include large pharmaceutical and biopharmaceutical companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. Key competitive factors affecting our products’ commercial success will include efficacy, safety, tolerability, reliability and price.
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Poultry Gut Health and Avian Influenza: Conventional poultry production typically involves the use of ionophores, other anticoccidial compounds, and vaccines, some of which are produced by HuvePharma, Elanco, Zoetis, and Phibro, among others. No Antibiotics Ever (NAE) poultry production, relies on effective and economically sound alternatives, such as vaccines and antimicrobial chemicals, as well as product candidates offered by ZIVO.
Bovine Mastitis: Branded antibiotic solutions include ToDay™ and Masti-Clear; homeopathic solutions include Amoxi-Mast™; topical and salve solutions include Germicidal teat dips, Fight Bac™ teat disinfectant spray, and Sterosol™ Pre/Post Teat Dip. Vaccine and antimicrobial solutions include Lysigin and Spectramast LC™.
Canine Joint Health: The global veterinary pain management drugs market is segmented into opioids, agonists, local anesthetics, NSAIDs (Non-steroidal Anti-Inflammatory Drugs), Disease-modifying Osteoarthritis Drugs (DMOAD) and others. The key players of the global veterinary pain management drugs market are Boehringer Ingelheim, Zoetis, Inc., Merck Animal Health, Elanco, Bayer AG, Vetoquinol S.A., Ceva Sante Animale, Virbac Group, Norbrook Laboratories Ltd, and Dechra Pharmaceuticals.
Human Immune Modulation: Several companies have TLR4 inhibitors currently in development. Eritoran (Eisai Research Institute of Boston, Andover, MA) and Resatorvid (TAK-242; Takeda Pharmaceutical Company) appear to be the lead candidates. Their mechanism of action (MOA) is cited as inhibition of the production of lipopolysaccharide (LPS)-induced inflammatory mediators by binding to the intracellular domain of TLR4. Eritoran has reached the clinical trial stage.
Nutrition (Agtech)
Human Food and Food Ingredient: As an algae powder, we believe that our primary competition will come from other established microalgae and green powder food and nutraceutical businesses like Earthrise, Cyanotech, and AG1. As an ingredient in other foods, ZIVO sees innovators in food technology such as DSM, Cognis, ConAgra, Cargill and Nestle, each of which has active M&A efforts, a large scientific staff and a generous R&D budget to develop supplements and ingredients for a wide range of applications, as potential competitors or potential partners.
Skin Health & Anti-Aging: There are a multitude of topical treatments and dietary supplements marketed for skin health and/or anti-aging applications, including premium multi-collagen peptides capsules such as, Well Roots Biotin Rich Plus Collagen, Heliocare Skin Care Dietary Supplement, CoQ10 Supplement, Vitamin C, Peptan®, Verisol®, and Pure Gold Collagen®.
Narrative Description of Business Relationships
Distribution Agreement
In September 2022, the Company through its ZIVOLife LLC subsidiary entered into a Marketing, Sales, and Distribution Agreement (“Distribution Agreement”) with ZWorldwide, Inc., based in Miami, Florida. ZWorldwide has taken on the role of selling the Peruvian-grown product under the brand name ZivolifeTM. The primary market focus for the product's introduction is the North American green powder food market. ZWorldwide, functioning as a direct-to-consumer marketing company, is actively retailing the ZivolifeTM product directly to consumers through its online platform at www.zivo.life. This agreement grants ZWorldwide exclusive worldwide rights to the Zivolife product as a food or food additive for human use.
On July 26, 2023, the parties amended the Distribution Agreement to include purchase commitments from ZWorldwide for ZIVOLife product including that ZWorldwide would purchase the entire supply of Zivolife produced in the first 18 months. And, subject to certain capacity limitations, ZWorldwide has committed to purchasing at least 2,000 kilograms of our product per month through August 31, 2028. The parties further agreed to mutual approval of certain capacity improvements beyond a minimum amount.
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Supply Agreement
In July 2023, the Company through its ZIVOLife LLC subsidiary and Alimenta Algae SA, a Peruvian company, signed a binding Contract Manufacturing Agreement (the “Manufacturing Agreement”). The Manufacturing Agreement includes a limited license for Alimenta to manufacture the Company’s dried green algae nutritional product known as ZivolifeTM. ZIVOLife committed to purchase all of the ZivolifeTM product produced by Alimenta at the site subject to certain capacity growth and overall limitations. Alimenta agreed to secure financing necessary to fund the expansion of cultivation and process capacity.
Renegotiated Convertible Notes
On November 12, 2024, the Company entered into a Debt Settlement Agreement (“Debt Settlement Agreement”) with three investors (each a “Creditor”) to restructure the outstanding $240,000 convertible debt and accrued interest of the Company. Each Creditor agreed to settle the Company’s existing debt in exchange for the Company issuing each Creditor an unsecured promissory note (each a “Note,” collectively, the “Notes”) pursuant to the terms agreed upon in each Debt Settlement Agreement. The Notes have an aggregate principal amount of $277,254. Each Note is payable in 24 equal monthly installments beginning November 30, 2024 and bears interest at a rate of 1.0% per annum.
Intellectual Property
Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patents, trademarks, copyrights, trade secrets as well as nondisclosure and assignment of invention agreements, material transfer agreements, confidentiality agreements and other measures to protect our intellectual property and other proprietary rights.
Patents and Proprietary Rights
ZIVO Algal Products & Derivatives
We have rights in certain granted patents, patent application publications and trademarks. With respect to patents and trademarks, we have secured patent and federal trademark registrations in the USPTO, including the below:
· | U.S. Patent No. 7,807,622 issued October 5, 2010, titled Composition and Use of Phyto-percolate for Treatment of Disease, relates to our proprietary complex algal culture. This invention relates generally to a method of preparation of a phyto-percolate that is derived from freshwater mixture including algae. The invention further relates to the potential use of the phyto-percolate in a variety of disease states. | |
· | U. S. Patent No. 8,586,053 issued November 19, 2013, titled Composition and Use of Phytopercolate for Treatment of Disease, relates to our proprietary algal culture. This invention relates generally to a method of preparation of a phyto-percolate that is derived from fresh water mixture including algae. The invention further relates to the use of the phyto-percolate in a variety of disease states. The phyto-percolate is believed to contain an activity that induces the reduction of soluble and insoluble fibrin. Further, the phyto-percolate is believed to reduce oxidative stress in the body. | |
· | U.S. Patent No. 8,791,060 issued July 29, 2014, titled Composition and Use of Phytopercolate for Treatment of Disease, relates to our proprietary culture. This invention relates generally to a method of preparation of a phyto- percolate that is derived from fresh water mixture including algae. The invention further describes proteolytic activity. | |
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· | U.S. Patent No. 9,486,005 issued November 8, 2016, titled Agents and Mechanisms for Treating Hypercholesterolemia, relates to our proprietary culture. This invention relates generally to a method of treating hypercholesterolemia in mammals, by administering an effective amount of microbial fermentation product and regulating genes involved in lipoprotein metabolism. | |
· | U.S. Patent No. 10,161,928, issued December 25, 2018, titled Wellness Panel, relates to a panel for monitoring levels of biomarkers. This invention relates generally to an assay having at least one inflammation monitoring test, at least one oxidative stress monitoring test, and at least one antioxidant activity monitoring test. A method of monitoring an individual’s health, by collecting a sample from the individual applying the sample to an assay panel performing at least one inflammation monitoring test, at least one oxidative stress monitoring test, and at least one antioxidant activity monitoring test in the panel, and determining levels of biomarkers related to inflammation, oxidative stress, and antioxidant activity and therefore providing information regarding the individual’s relative health and/or risk of developing one or more disease. |
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| · | U.S. Patent No. 10,166,270, issued January 1, 2019, titled Composition and Method for Affecting Cytokines and NF-KB, relates to disclosing a composition and method for effecting various cytokines and NF-KB. This invention relates generally to administering an effective amount of a phyto-percolate composition to an individual. In various exemplary embodiments, the composition is claimed to be useful for the effective treatment of inflammation, cancer, and/or various infections including HIV by regulation of various interleukins, such as IL-10 and Il-2, and of transcription factors including NF-KB. |
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| · | U.S. Patent No. 10,232,028, issued March 19, 2019, titled Compounds and Methods for Affecting Cytokines, relates to isolates and fractions from a phyto-percolate and methods for affecting various cytokines by administering an effective amount of one or more of said isolates or fractions to an animal. In various exemplary embodiments, the isolates are useful for the treatment of bovine, canine and swine infection or inflammation, including bovine mastitis, by regulation of TNF-a, lactoferrin, INF-y, IL-B, serum amyloid-A (SAA), IL-6 and/or B-defensin associated with infection or an immune response generally. |
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| · | U.S. Patent 10,765,732 issued September 8, 2020, titled Compounds and Methods for Affecting Cytokines, relates isolates and fractions from a phyto-percolate and methods for affecting various cytokines by administering an effective amount of one or more of said isolates or fractions to an animal. In various exemplary embodiments, the isolates are useful for the treatment of bovine, canine and swine infection or inflammation, including bovine mastitis. |
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| · | U.S. Patent 10,842,179 issued on November 24, 2020, titled Agents and Mechanisms for Treating Hypercholesterolemia, relates to methods of treating hypercholesterolemia in mammals using a microbial fermentation and the regulation of genes involved in lipoprotein metabolism. A related European family member, EP2538951, was also granted on April 22, 2020. |
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| · | U.S. Patent 11,065,287 issued on July 20, 2021, titled Methods of Modulating Immune and Inflammatory Responses Via Administration of an Algal Biomass, relates to algal biomass and supernatant derived from at least one species of algae exhibits anti-inflammatory and immune response modulating properties. Methods of reducing the symptoms of or treating a condition or disease in an animal, including bovine mastitis and Bovine Respiratory Disease Complex, and the pain and discomfort caused by osteoarthritis, injury or overexertion or muscle and connective tissue strains, A related Brazilian family member, BR112017017599, was also granted on November 16th, 2021. |
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| · | Canadian Patent CA3014897 issued on December 29, 2020, titled Nutritional Support for Animals Via Administration of an Algal Derived Supplement, relates to an algal biomass and supernatant derived from at least one species of algae exhibits the ability to maintain general health in humans and non-human animals and promote a healthy immune system in them. Food, feed and nutritional supplements comprising an algal biomass or supernatant derived from at least one species of algae are described. Methods of maintaining general health or promoting a healthy immune system in humans and non-human animals comprises administering to the animal in need thereof an algal biomass or supernatant derived from at least one species of algae, or an extract, derivative or homeopathic compound derived from the algae species, biomass or supernatant, or a composition thereof. |
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| · | Canadian Patent CA2631773 issued on April 26, 2022, titled Composition and Use of Phyto-Percolate for Treatment of Disease, relates to generally to a method of preparation of phyto-percolate that is derived from fresh water mixture including algae. The phyto-percolate is believed to contain an enzyme having proteolytic activity. The invention further relates to the use of the phyto-percolate in a variety of disease states. |
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| · | European Patent 2538951 issued on April 22, 2020, titled Agents and Mechanisms for Preventing Hypercholesterolemia, relates to the extractions from algae. In particular, the present inventor relates to cholesterol-lowering extractions from algae and extractions that have the ability to favorably shift HDL.LDL profile in mammals. |
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| · | U.S. Patent 11,806,375 B2 issued on November 7, 2023, titled Nutritional Support for Animals Via Administration of an Algal Derived Supplement, relates to an algal biomass and supernatant derived from at least one species of algae exhibits the ability to maintain general health in humans and non-human animals and promote a healthy immune system in them. Food, feed and nutritional supplements comprising an algal biomass or supernatant derived from at least one species of algae are described. Methods of maintaining general health or promoting a healthy immune system in humans and non-human animals comprises administering to the animal in need thereof an algal biomass or supernatant derived from at least one species of algae, or an extract, derivative or homeopathic compound derived from the algae species, biomass or supernatant, or a composition thereof. |
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| · | European Patent 3258948 issued on December 6, 2023, titled Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry, relates to an algal biomass used as a natural ingredient in poultry feed reverses the detrimental effects of coccidiosis and necrotic enteritis in poultry. Algal biomass augmented poultry feed was shown to improve feed conversion rates, reduce mortality rates, and reduce intestinal lesion scores. In various embodiments, the algal biomass comprises at least one species of klebsormidium. In various aspects, the algal biomass may be obtaining by continuously cultivating at least one species of klebsormidium in raceway ponds, separating the plant material and spray drying to obtain the algal biomass. |
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| · | European Patent 3897188 issued on November 29, 2023, titled Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry, relates to farm animal health and specifically to an algal derived feed ingredient used to improve feed conversion rates and growth rates in poultry when poultry health is challenged by various conditions. |
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| · | Hong Kong Patent HK1248545 issued on July 19, 2024, titled Methods of Modulating Immune Response and Inflammatory Response Via Administration of Algal Biomass, relates to methods of modulating immune responses and inflammatory responses in animals and in particular relates to an algal biomass having anti-inflammatory and autoimmune modulating properties and methods of treating bovine mastitis and other diseases in animals by administering same. |
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| · | Mexico Patent 417038 issued on September 24, 2024, titled Nutritional Support for Animals Via Administration of an Algal Derived Supplement, relates to nutritional support in human and non-human animals, and in particular to a composition comprising algal derived materials capable of supporting a healthy immune system in an animal and methods of treatment thereof. |
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| · | South Africa Patent 2023/00973 issued on May 30, 2024, titled The Use of Variovorax Microbes as a Coccidiostat, relates to the use of a bacteria-based compound in the prevention and treatment of disease. More particularly, the present invention relates to a compound and the use of a compound such as that derived from a lipopolysaccharide (LPS) of Gram-negative bacteria that selectively modulates the Toll-like receptor (TLR) pathway in the prevention and treatment of disease in both animals and humans. |
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| · | South Africa Patent 2022/11697 issued on February 28, 2024, titled Use of TLR4 Modulator in the Treatment of Coccidiosis, relates to an effective treatment mechanism in controlling a variety of diseases by modulating the inflammatory response often associated with disease is disclosed. The disclosed inventive concept is based on the modulation of TLR4 by use of a member of the Variovorax group or the Rhodobacter group. Specifically, the Gram-negative bacterium Variovorax paradoxus or the Gram-negative bacterium Rhodobacter sphaeroides is used according to the disclosed inventive concept in the treatment of disease by reducing or inhibiting inflammatory responses. |
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Patents
The term of individual patents and patent applications will depend upon the legal term of the patents in the countries in which they are obtained. In most countries, the patent term is 20 years from the date of filing of the patent application (or parent application, if applicable). For example, if an international Patent Cooperation Treaty (“PCT”) application is filed, any patent issuing from the PCT application in a specific country expires 20 years from the filing date of the PCT application. In the United States, using the Paris Convention route, if a patent was in force on June 8, 1995, or issued on an application that was filed before June 8, 1995, that patent will have a term that is the greater of 20 years from the filing date, or 17 years from the date of issue.
Under the Hatch-Waxman Act, the term of a patent that covers an FDA-approved drug or biological product may also be eligible for patent term extension (“PTE”). PTE permits restoration of a portion of the patent term of a U.S. patent as compensation for the patent term lost during product development and the FDA regulatory review process if approval of the application for the product is the first permitted commercial marketing of a drug or biological product containing the active ingredient. The patent term restoration period is generally one-half the time between the effective date of an investigational new drug (IND) and the submission date of a biological license application (“BLA”) plus the time between the submission date of a BLA and the approval of that application. The Hatch-Waxman Act permits a PTE for only one patent applicable to an approved drug, and the maximum period of restoration is five years beyond the expiration of the patent. A PTE cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and a patent can only be extended once, and thus, even if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions may be available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a BLA, we expect to apply for PTEs for patents covering our therapeutic candidates and products and their methods of use.
The following patent filings are pertinent to the operation of the ZIVO business:
Application Name | Country | Application No. | Status |
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Agents and Method for improving Gut Health | US | 17/465,457 | Under Prosecution; Published April 28, 2022 |
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Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | US | 17/415,221 | Under Prosecution; Notice of Publication March 10, 2022 |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Brazil | 12021012229 | Under Prosecution |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Canada | 3124190 | Under Prosecution |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Hong Kong | 62022046143 | Under Prosecution |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Mexico | MX/a/a2021/007359 | Under Prosecution |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Peru | 1048-2021 | Under Prosecution |
Algal Feed Ingredient for Controlling Coccidiosis and Necrotic Enteritis in Poultry | Thailand | 2101003721 | Under Prosecution |
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Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | US | 17/576,339 | Under Prosecution; published July 21, 2022 |
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Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Australia | 202209715 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Canada | 3,204,145 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | New Zealand | 801560 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Japan | 2023-542922 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Russia | 2023118590 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | China | 202280010396.0 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Brazil | BR 11 2023 014244 0 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Europe | 22743011.3 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Mexico | MX/a/2023/008373 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | Peru | 2054-2023 | Under prosecution |
Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Complete) | South Africa | 2023/069858 | Under prosecution |
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Algoriphagus SP, Bosea SP, Brevundimonas SP, Desulfovibrio SP, Microbacterium SP, Sphingomonas SP, and Variovorax SP for Use in Disease Prevention and Treatment (Simplified) | US | 17/576,444 | Under Prosecution; Published July 21, 2022 |
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Brevundimonas SP for Use in Disease Prevention | US | 18/077,132 | National Stage Deadline June 7, 2024 |
Brevundimonas SP for Use in Disease Prevention | Australia | 2022407031 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Brazil | BR1120240114465 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Canada | 3237976 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | China | 202280082728.4 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Europe | 22905094.3 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Mexico | Mx/a/2024/006877 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | New Zealand | 810635 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Russia | 2024112387 | Under prosecution |
Brevundimonas SP for Use in Disease Prevention | Thailand | 2401003486 | Under prosecution |
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Composition and Method For Affecting Cytokines and NF-κB | Brazil | BR 11 2012 011678 9 | Under Prosecution |
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Dietary Supplements, Food Ingredients and Foods Comprising High-Protein Algal Biomass | Thailand | 190105502 | Under Prosecution |
Dietary Supplements, Food Ingredients and Foods Comprising High-Protein Algal Biomass | Hong Kong | 62020009617 | Under Prosecution |
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Enhancement of Vaccine Efficacy Via Biomass and/or Related Material in Animal Feed | US | 17/367,193 | Under Prosecution |
Enhancement of Vaccine Efficacy Via Biomass and/or Related Material in Animal Feed | Europe | 22182898.1 | Under Prosecution |
Enhancement of Vaccine Efficacy Via Biomass and/or Related Material in Animal Feed | Brazil | BR 102022013331-0 | Under Prosecution |
Enhancement of Vaccine Efficacy Via Biomass and/or Related Material in Animal Feed | China | 202210757383.1 | Under Prosecution |
Enhancement of Vaccine Efficacy Via Biomass and/or Related Material in Animal Feed | India | 202244038199 | Under Prosecution |
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Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | US | 18/444,286 | Under prosecution; published October 24, 2024 |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Austria | 2021296916 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Brazil | 112022026479-8 | Under Prosecution |
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Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Canada | 3182630 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | China | 202180050311.7 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Europe | 21828842.1 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Japan | 2022-580155 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Mexico | MX/a/2023/000158 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | New Zealand | 795393 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Peru | 29562321 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | Russia | 2022133478 | Under Prosecution |
Immune Priming To Accelerate/Enhance Immune Response Through Administration of Natural Immune Modulator | South Africa | 2022-13483 | Under Prosecution |
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Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | US | 17/587,582 | Under Prosecution; Published August 4, 2022 |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | New Zealand | 801882 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Australia | 2022213400 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Japan | 2023-546076 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Russia | 2023118986 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Brazil | BR 11 2023 0149223 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Canada | 3,205,544 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | China | 202280012094.7 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Europe | 22746711.5 | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Mexico | MX/a/2023/008874 | Under prosecution |
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Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | Peru | 002229-2023/DIN | Under prosecution |
Maturation of Immune and Metabolic Processes via Algal Biomass and/or Related Material Administered to Animals | South Africa | 2023/07227 | Under prosecution |
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Method of Modulating Immune Response and Inflammatory Response Via Administration Algal Biomass | Brazil | BR 1120170175991 | Under Prosecution |
Methods of Modulating Immune Response and Inflammatory Response Via Administration of Algal Biomass | Canada | 3,011,687 | Under Prosecution |
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Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | US | 17/410,016 | Under Prosecution; Published July 28, 2022 |
Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | Europe | 21848954 | Under prosecution |
Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | Brazil | BR 112023001466-2 | Under prosecution |
Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | Russia | 2023100901 | Under prosecution |
Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | China | 202180064154.5 | Under prosecution |
Natural Feed Composition Derived from Fresh Water Algal Cultures for the Promotion of Animal Growth | Mexico | MX/a/2023/001221 | Under Prosecution |
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Nutritional Support for Animals Via Administration of an Algal Derived Supplement | Europe | 17753729.7 | Under Prosecution |
Nutritional Support for Animals Via Administration of an Algal Derived Supplement | Hong Kong | 19,125,173 | Under Prosecution |
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Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | US | 17/358,953 | Under Prosecution; Published February 24, 2022 |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Australia | 202129453 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Brazil | 112022026461-5 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Canada | 3,182,236 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | China | 21856718.8 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Europe | 21829178.9 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Japan | 2022-580177 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Mexico | MX/a/2023/000166 | Under Prosecution |
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Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | New Zealand | 795328 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Peru | 003043-2022-DIN | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | Russia | 2022133470 | Under Prosecution |
Positive Latency Effects on Coccidiosis Prevention and Treatment via Animal Feed | South Africa | 2022/13479 | Under Prosecution |
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The Use of Variovorax Microbes as a Coccidiostat | US | 17/400,790 | Under Prosecution; Published February 17, 2022 |
The Use of Variovorax Microbes as a Coccidiostat | Canada | 3,187,128 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Australia | 202136515 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Peru | 000249-2023/DIN | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Brazil | BR 112023001738-6 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Russia | 2023101488 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Japan | 2023-509572 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | China | 202180055783.1 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Europe | 21856718.8 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | Mexico | MX/a/2023/001775 | Under prosecution |
The Use of Variovorax Microbes as a Coccidiostat | New Zealand | 796429 | Under prosecution |
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Use of TLR4 Modulator in the Treatment of Coccidiosis | US | 18/139,749 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Australia | 2021271805 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Brazil | BR 11 2022 022083 9 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Canada | 3177327 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | China | 202180034578.7 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Europe | 21805132.4 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Japan | 2022-560562 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Mexico | MX/a/2022/04213 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | New Zealand | 793737 | Under Prosecution |
Use of TLR4 Modulator in the Treatment of Coccidiosis | Russia | 2022128942 | Under Prosecution |
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The following trademark filings are pertinent to the operation of ZIVO’s business:
Trademark | Filing Date | Application No. | Country | Status |
ZIVO | 7/22/2022 | 97/516,573 | US | Under Prosecution |
ZIVO | 7/30/2020 | 48512762 (Class 29) | CN | Issued |
ZIVO | 7/30/2020 | 48512762 (Class 5) | CN | Issued |
ZIVO | 7/30/2020 | 48512744 (Class 31) | CN | Issued |
ZIVO Bioscience | 1/18/2023 | 97/759,042 | US | Under Prosecution |
ZIVO Bioscience and Device | 7/30/2020 | 48512743 (Class 5) | CN | Issued |
ZIVO Bioscience and Device | 7/30/2020 | 48512742 (Class 29) | CN | Issued |
ZIVO Bioscience and Device | 7/30/2020 | 48512741 (Class 31) | CN | Issued |
Zivolife | 10/3/2024 | 98/783,713 | US | Under Prosecution |
Zivolife and design | 10/3/2024 | 98/783,858 | US | Under Prosecution |
Trade Secrets
We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. We seek to protect such intellectual property and proprietary information by generally requiring our employees, consultants, contractors, scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements upon the commencement of their employment or engagement as the case may be. Our agreements with our employees prohibit them from providing us with any intellectual property or proprietary information of third parties. We also generally require confidentiality agreements or material transfer agreements with third parties that receive or have access to our confidential information, data or other materials. Notwithstanding the foregoing, there can be no assurance that our employees and third parties that have access to our confidential proprietary information will abide by the terms of their agreements. Despite the measures that we take to protect our intellectual property and confidential information, unauthorized third parties may copy aspects of our products or obtain and use our proprietary information.
Government Regulation
Therapeutic (Biotech)
As a discovery-stage licensor, we do not intend to fund and oversee the final regulatory approvals and commercialization processes of our product candidates, as we expect these to be borne by the licensee in all cases.
Nutrition (Agtech)
As the licensor of food technology, and producer of culture inoculum for cultivation, ZIVO and its licensed growers must furnish to customers algae-based products that are compliant with all food standards and FDA regulations. In all cases, the compliance efforts involve GRAS affirmation and ZIVO has already obtained self-affirmed GRAS status for human use.
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Food Ingredient - Human
The food ingredient industry is regulated by several federal agencies. Anything that is introduced into food or beverages, whether to prevent spoilage, optimize processing or to enhance its nutritive value, must meet standards set and enforced rigorously by the FDA and USDA.
GRAS (Generally Regarded as Safe)
The FDA requires that ingredients introduced into human foods and beverages are safe and are manufactured in a consistent manner that guarantees consumer safety. The standard that the Company must meet for food ingredient safety is GRAS (Generally Recognized As Safe). The Company opted to self-affirm GRAS status for its algal biomass, and upon completion in November 2018, and updated in 2023, of the self-affirmation process, the algae biomass may be used as a food ingredient. To sell as a dietary supplement, the Company may submit the self-affirmed GRAS report to the FDA in expectation the agency will respond to the Company noting “no questions” concerning our data. In the first quarter of 2023, the Company worked with EAS Consulting to update its GRAS dossier to reflect the present production methods and to be consistent with current FDA regulations.
Foreign Supplier Verification Process (FSVP) and Current Good Manufacturing Practice Compliance
To sell food products in the United States, food must be produced in compliance with FDA 21 CFR 117 (Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Human Food), which covers the standards necessary to consistently make a food product that is safe for human consumption. If the food manufacturer is outside the United States, then compliance with 21 CFR 117 is assured through the FDA Foreign Supplier Verification Program.
The Company, working with our contract manufacturer, Alimenta Algae in Peru, completed all the requirements to import and sell our algae product in the United States. Alimenta Algae passed (annual recurring) food safety and cGMP audits conducted by with Peruvian local and state regulatory authorities. In addition, the Alimenta Algae passed a separate food safety audit conducted by a reputable and FDA certified company, which was required to obtain ability to import food products into the United States via FDA-FSVP. Zivo and Alimenta Algae employed an independent consultant to review all facility food production processes and final product safety in accordance with 21 CFR 117. After the verification process and audits were completed, the consulting company now serves as the FSVP importer of record on all commercial product imported for sale in the U.S.
Dietary Supplements
Dietary supplements, which include vitamins, minerals, nutritive substances, and natural products that are standalone products (“nutraceuticals”) fall under the jurisdiction of the FDA and must comply with the Dietary Supplement Health Education Act (“DSHEA”) legislation passed in 1994 and updated several times since, along with the Food Safety Modernization Act of 2011.
NDI Application
As human dietary supplement applications are being readied for market launch, the Company is required to file a New Dietary Ingredient (NDI) Notification. The standard applied to NDI Notifications is “reasonable expectation of safety” for intended use as a supplement. As part of the notification process, ZIVO would be required to conduct at least one human study, and possibly two, in support of any potential health benefits or claims. These studies can run concurrently but should not be conducted by the same clinical research organization. To date, ZIVO has not run these studies. One such study may be the same dose tolerance study planned to increase the maximum allowable consumption limit as discussed above.
Skin Care and Topical Uses
The US Congress is contemplating the implementation of a statute requiring all skin care and cosmetics production to follow cGMP. If this legislation is passed the Company will need to ensure that it and any contract manufacturers are certified to be cGMP compliant.
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Structure/Function Claims
The Company is marketing with structure/function claims based on the known composition of product and published studies linking that algal biomass and its nutritional components to various health claims, for example the ability to maintain a healthy immune response or a beneficial anti-inflammatory response. This is the most basic of FDA standards and essentially means that as long as cGMP standards are met, a study has been conducted and in-process toxicology reports are available, the Company is able to market its product.
The market reality is that nutraceutical and supplement makers won’t take on the product unless its chemical makeup is generally described, the plant or animal is properly classified (in this case, algae), the manufacturing process is free of health hazards, and cGMP protocols are observed, all of which the Company intends to meet or exceed.
USP Certification
The DSHEA regulations also require that a safe dosage is established for any vitamin, mineral or dietary supplement, whether it is natural or synthetic in composition. The United States Pharmacopeia (“USP”) is the official pharmacopeia of the United States. USP establishes written (documentary) and physical (reference) standards for medicines, food ingredients, dietary supplement products and ingredients.
These standards are used by regulatory agencies and manufacturers help to ensure that these products are of the appropriate identity, as well as strength, quality, purity, and consistency. The Company will endeavor to adhere to the most basic USP standard in order to maintain speed to market. It or its licensees will then consider the USP Verified products designation.
Feed Ingredients & Supplements - Companion Animals
Although state and AAFCO officials regulate companion animal feeds, treats and supplements, the supervision and standards are largely handled by the FDA and the CVM on a national level. We currently do not have approval to sell companion animal feed ingredients since we must first develop the specie-specific safety and health data required to do so. Companion animal products are aimed primarily at dogs and horses. We believe that a single safety/tox study and a separate dose/benefit study per animal applications will be sufficient. As with humans, we would seek to obtain a GRAS affirmation.
To clarify, an “application” is a single ingredient in a single formulation and a single claim for a single animal species. Therefore, a dietary supplement derived from the Company’s algal biomass, intended as a joint health supplement for adult dogs, constitutes a single application. That single application requires its own studies before any dog treat manufacturer would consider licensing or purchasing the Company’s material. Any change to the claims (e.g. more energy, shinier coat, etc.) or the target specie requires a new study. This is the current state of regulation, and it holds true for all human and animal applications.
Employees
As of December 31, 2024 we had seven full-time employees, consisting of clinical development, product development, regulatory, manufacturing, quality, finance, and administration. We also regularly use independent contractors across the organization. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
Corporate Information
We were incorporated under the laws of the State of Nevada on March 28, 1983, under the name of “L. Peck Enterprises, Inc.” On May 27, 1999, we changed our name to “Western Glory Hole, Inc.” From 1990 until October 2003, we had no business operations; we were in the development stage and were seeking profitable business opportunities. On October 30, 2003, we acquired 100% of the outstanding shares of Health Enhancement Corporation (“HEC”) in exchange for 112,500 of our shares, making HEC our wholly-owned subsidiary. In connection with this transaction, we changed our name to Health Enhancement Products, Inc. On October 14, 2014, at the annual meeting of the stockholders of the Company, a proposal was passed to change the name of the Company from Health Enhancement Products, Inc. to Zivo Bioscience, Inc. On October 30, 2014, the Financial Industry Regulatory Authority approved the name Zivo Bioscience, Inc. for trading purposes and the symbol changed to ZIVO effective November 10, 2014.
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Item 1A. Risk Factors.
An investment in our securities has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Any of the risks and uncertainties set forth herein could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price or value of our securities. Additional risks not currently known to us or which we consider immaterial based on information currently available to us may also materially adversely affect us. As a result, you could lose all or part of your investment.
Risks Relating to Our Business
Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.
The health of the global economy, the credit markets and the financial services industry in particular, as well as the stability of the social fabric of our society, affects our business and operating results. For example, the credit and financial markets as well as global supply chains may be adversely affected by tariff and trade policies, global wars/military conflicts, terrorism or other geopolitical events. If the credit markets are not favorable, we may be unable to raise additional financing when needed or on favorable terms. Our customers may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. In addition, adverse economic conditions, such as recent supply chain disruptions, threatened tariff and trade wars, labor shortages and persistent inflation may adversely impact our suppliers’ ability to provide our manufacturer with materials and components, which may negatively impact our business. These economic conditions make it more difficult for us to accurately forecast and plan our future business activities.
The Company is exposed to risks of political instability and changes in government policies, laws and regulations in Peru.
The Company’s contract manufacturer for our algae products is located in the Republic of Peru, and may be adversely affected in varying degrees by political instability, government regulations relating to agriculture and foreign investment therein, and the policies of other nations in respect of Peru. Any changes in regulations or shifts in political conditions are beyond the Company’s control and may adversely affect the Company’s business. New laws, regulations and requirements may be retroactive in their effect and implementation. The Company’s operations may be affected in varying degrees by government regulations, including those with respect to restrictions on production, price controls, tariffs, export controls, income taxes, expropriation of property, employment, land use, water use, and environmental legislation.
We have incurred, and may continue to incur increased costs and demands upon management as a result of being a public company.
As a public company in the United States, quoted on the OTCQB, we incur significant legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and OTCQB, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
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Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board, on committees of our Board or as members of senior management.
We have a history of operating losses, and we may not be able to achieve or sustain profitability. In addition, we may be unable to continue as a going concern.
We have incurred net losses during each of our fiscal years since our inception. Our net loss for the year ended December 31, 2024 was approximately $13.4 million and our accumulated deficit totaled approximately $137.0 million as of December 31, 2024. We do not know whether or when we will become profitable, if ever. We currently expect operating losses and negative cash flows to continue for at least the next several years.
Our ability to generate sufficient revenue to achieve profitability depends on our ability, either alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our product candidates.
Our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our auditor’s report for the year ended December 31, 2024 contains an explanatory paragraph that we have incurred significant losses since our inception and we expect that we will continue to incur losses as we aim to successfully execute our business plan and will be dependent on additional public or private financings, collaborations or licensing arrangements with strategic partners, or additional credit lines or other debt financing sources to fund continuing operations. Based on our cash balances, recurring losses since inception and our existing capital resources to fund our planned operations for a twelve-month period, there is substantial doubt about our ability to continue as a going concern. As noted below, we will need to obtain additional funding from equity or debt financings, which may require us to agree to burdensome covenants, grant security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or grant licenses on terms that are not favorable. No assurance can be given at this time as to whether we will be able to achieve our fundraising objectives, regardless of the terms. If adequate funds are not available, the Company may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations.
We will require substantial additional financing to achieve our goals, and our failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development efforts.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with our planned research, development and product commercialization efforts. In addition, we will require additional financing to achieve our goals and our failure to do so could adversely affect our commercialization efforts. We anticipate that our expenses will increase substantially if and as we:
| · | continue our development process for our product candidates; |
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| · | seek to maintain, protect and expand our intellectual property portfolio; and |
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| · | seek to attract and retain skilled personnel. |
If we were to experience any delays or encounter issues with any of the above, it could further increase the costs associated with the above. Further, the net operating losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.
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Our production of algae involves an agricultural process, subject to such risks as weather, disease, contamination, supply chain interruption, and water availability.
The production of our proprietary algae strain involves complex agricultural systems with inherent risks including weather, disease and contamination. These risks are unpredictable, and the efficient and effective cultivation of algae requires consistent light, warm temperatures, low rainfall and proper chemical balance in a very nutrient rich environment.
If the chemical composition of a pond changes from its required balance, unusually high levels of contamination due to the growth of unwanted organisms or other biological problems may occur and would result in a loss of harvestable output. These often arise without warning and sometimes there are few or no clear indicators as to appropriate remediation or corrective measures. However, environmental factors cannot be controlled in an open-air environment, therefore, we cannot, and do not attempt to, provide any form of assurance with regard to our systems, processes, location, or cost-effectiveness. In the event that our growers need to take steps to correct any chemical imbalance or contamination of their ponds, including by re-inoculating the ponds, such measures may not be effective and could interrupt production. To the extent that our production is negatively impacted by environmental factors, we may be unable to fill large orders for one or more months until such time that production improves.
We rely on third parties to grow our proprietary algae strains and conduct research, and preclinical and clinical testing, and these third parties may not perform satisfactorily.
We do not currently, and do not expect to in the future, independently conduct any aspects of the growth of our proprietary algae strains, research and monitoring and management of our ongoing preclinical and clinical programs. We currently rely, and expect to continue to rely, on third parties with respect to these items, and control only certain aspects of their activities.
Any of these third parties may terminate their engagements with us at any time unless otherwise stated in contractual agreements. If we need to enter into alternative arrangements, our commercialization activities or our therapeutic candidate development activities may be delayed or suspended. Our reliance on these third parties for research and development activities, reduces our control over these activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards and any applicable trial protocols.
Any of these events could lead to delays in the development of our product candidates, including delays in our trials, or failure to obtain regulatory approval for our product candidates, or it could impact our ability to successfully commercialize our current product candidates.
Because our ZIVO algae is currently produced by only one grower, the loss of this grower would have a material adverse impact on our operating results and cash flows.
Currently, only one facility grows our ZIVO algae. Any termination of a business relationship with, or a significant sustained reduction in business received from this grower could delay our production efforts and could have a material adverse effect on our operating results and cash flows.
Because our algae product is marketed and distributed by only one distributor, the loss of this distributor would have an adverse effect on near term revenue generation and cash flows.
Currently only one distributor markets and sells our ZIVO algae as ZivolifeTM, and the distributor has worldwide exclusivity as long as the agreement terms are met. Any termination of a business relationship with, or a significant sustained reduction in business and offtake from this distributor could delay could have a material adverse effect on our operating results and cash flows. ZIVO currently does not have internal sales, marketing and distribution capability for our products and the cost of establishing and maintaining such an organization may exceed the benefit of doing so.
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Failure to proportionally advance both our manufacturing capacity and distribution networks could adversely affect our operating results, and near-term and long-term growth plans.
We are attempting to launch a new product, in a new market, utilizing new cultivation processes. As such, we face challenges in managing both the growth of supply from our contract manufacturer and demand from our distribution partner. Each partner faces independent challenges in meeting their contractual objectives, such as financing constraints, market conditions, and scaling of production and distribution networks. If either of these partners fails to meet their contractual objectives on the scheduled timelines, it may adversely affect the other partner and us. For example, if capacity outstrips demand, our grower may have trouble profitably maintaining the capacity. Conversely, if demand outstrips supply, our distributor may not have sufficient product to sell. In either scenario our operating results and near-term and long-term growth plans could be adversely affected.
If we fail to attract and keep our Chief Executive Officer and Chief Financial Officer, senior management and key scientific personnel, we may be unable to successfully develop our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates.
We are highly dependent on the members of our executive team, including our Chief Executive Officer and Chief Financial Officer, the loss of whose services may adversely impact the achievement of our objectives. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
If we are unable to enter into agreements with third parties to market and sell our product candidates, if approved, we may be unable to generate any revenues.
We currently do not have internal sales, marketing and distribution capability for our products and the cost of establishing and maintaining such an organization may exceed the benefit of doing so. In order to market any products that may be eligible for commercialization, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We have limited prior experience in the marketing, sale or distribution of approved products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our therapeutic candidates.
Because the results of preclinical studies and clinical trials are not necessarily predictive of future results, we can provide no assurances that our other product candidates will have favorable results in future studies or trials.
Positive results from preclinical studies or clinical trials should not be relied on as evidence that later or larger-scale studies or trials will succeed. Even if our product candidates achieve positive results in early-stage preclinical studies or clinical trials, there is no guarantee that the efficacy of any product candidate shown in early studies will be replicated or maintained in future studies and/or larger populations. Similarly, favorable safety and tolerability data seen in short-term studies might not be replicated in studies of longer duration and/or larger populations. If any product candidate demonstrates insufficient safety or efficacy in any preclinical study or clinical trial, we would experience potentially significant delays in, or be required to abandon, development of that product candidate.
Further, data obtained from clinical trials are susceptible to varying interpretations. If we delay or abandon our efforts to develop any of our product candidates, we may not be able to generate sufficient revenues to become profitable, and our reputation in the industry and in the investment community would likely be significantly damaged, each of which would cause our stock price to decrease significantly.
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Development of certain of our products involves a lengthy and expensive process, with uncertain outcomes. We may, and our current or future licensees may, incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product.
We may, and our current or future licensees may, experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our products, including:
| · | regulators may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
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| · | the failure to successfully complete pre-clinical testing requirements required by the FDA and international organizations; |
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| · | delays may occur in reaching, or failing to reach, agreement on acceptable clinical trial contracts with third parties or clinical trial protocols with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites; |
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| · | the cost of clinical trials of our products may be greater than we anticipate; |
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| · | delays or difficulties in obtaining an FDA No Objection letter for human consumption of our algal biomass. |
If we are required to conduct additional clinical trials or other testing of our biotech product candidates under development or algal biomass beyond those that we contemplate, if we are unable to successfully complete clinical trials of our product candidates under development or algal biomass or other testing, if the results of these trials or tests are not favorable or if there are safety concerns, we may, or our existing or future licensees may:
| · | not obtain marketing approval at all; |
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| · | be delayed in obtaining marketing approvals in a jurisdiction; or |
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| · | be subject to additional post-marketing testing requirements. |
We may experience increased regulatory scrutiny of nutritional supplements.
From time to time there are movements in the United States and other markets to increase the regulation of dietary supplements. In the event new regulations are proposed or adopted with respect to nutritional supplements, these regulations may impose additional restrictions or requirements on us and increase the cost of doing business. Additionally, if our advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations, we may be subject to fines or other means of regulatory enforcement.
It is possible in the future that we may see fit to sell one or more of our products as dietary supplements. If a company sells a dietary supplement containing an ingredient that FDA considers either not a dietary ingredient or a new dietary ingredient (“NDI”) that needs an NDI notification, the agency may threaten or initiate enforcement against such company. For example, it might send a warning letter that can trigger consumer lawsuits, demand a product recall, or even work with the Department of Justice to bring a criminal action. Our operations could be harmed if new guidance or regulations require us to reformulate products or effect new registrations, if regulatory authorities make determinations that any of our products do not comply with applicable regulatory requirements, if the cost of complying with regulatory requirements increases materially, or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations. In addition, our operations could be harmed if governmental laws or regulations are enacted that restrict the ability of companies to market or distribute nutritional supplements or impose additional burdens or requirements on nutritional supplement companies.
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The growth of our nutrition sector depends in part on market acceptance of products that contain our algae.
The success of our nutrition business involves the use of our algal biomass in various animal and human products. There can be no assurance regarding the successful distribution and market acceptance of products containing our algae. The expenses or losses associated with lack of market acceptance of our products could harm our ability to find or maintain new licensees for these products.
If our computer systems are hacked, or we experience any other cybersecurity incident, we may face a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition.
We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Additionally, we collect and store certain data, including proprietary business information, and may have access to confidential or personal information in certain of our businesses that is subject to privacy and security laws and regulations. These technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components; power outages; telecommunications or system failures; terrorist attacks; natural disasters; employee error or malfeasance; server or cloud provider breaches; and computer viruses or cyberattacks. Cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures, known as advanced persistent threats, directed at us, our products, customers and/or our third-party service providers. It is possible a security breach could result in theft of trade secrets or other intellectual property or disclosure of confidential customer, supplier or employee information. Should we be unable to prevent security breaches or other damage to our information technology systems, disruptions could have an adverse effect on our operations, as well as expose us to costly litigation, liability or penalties under privacy laws, increased cybersecurity protection costs, reputational damage, and product failure.
The animal health industry is highly competitive.
The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. Several new start-up companies also compete in the animal health industry. We also face competition from manufacturers of drugs globally, as well as producers of nutritional health products. These competitors may have access to greater financial, marketing, technical and other resources. As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities.
Competitive pressure could arise from, among other things, more favorable safety and efficacy product profiles, limited demand growth or a significant number of additional competitive products being introduced into a particular market, price reductions by competitors, the ability of competitors to capitalize on their economies of scale, the ability of competitors to produce or otherwise procure animal health products at lower costs than us and the ability of competitors to access more or newer technology than us.
Our R&D relies on evaluations of animals, which may become subject to bans, additional restrictive regulations or increased attention from activism movements.
We are required to evaluate the effect of our product candidates in animals. Animal testing in certain industries has been the subject of controversy and adverse publicity. Some organizations and individuals have attempted to ban animal testing or encourage the adoption of new regulations applicable to animal testing. To the extent that the activities of such organizations and individuals are successful, our R&D, and by extension our business, financial condition and results of operations, could be materially adversely affected. In addition, negative publicity about us or our industry could harm our reputation. For example, farm animal producers may experience decreased demand for their products or reputational harm as a result of evolving consumer views of animal rights, nutrition, health-related or other concerns. Any reputational harm to the farm animal industry may also extend to companies in related industries, including our Company. Adverse consumer views related to the use of one or more of our product candidates in farm animals also may result in a decrease in the use of such products and could have a material adverse effect on our operating results and financial condition.
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Use of social media could give rise to liability or reputational harm.
We and our employees use social media to communicate externally. There is risk that the use of social media by us or our employees to communicate about our product candidates or business may give rise to liability, lead to the loss of trade secrets or other intellectual property or result in public exposure of personal information of our employees, clinical trial patients, customers, and others. Furthermore, negative posts or comments about us or our product candidates in social media could seriously damage our reputation, brand image, and goodwill. Any of these events could have a material adverse effect on our business, prospects, operating results, and financial condition and could adversely affect the price of our common stock.
Risks Relating to Our Intellectual Property
We may not be able to protect our proprietary algae cultures and bioactive compounds in the marketplace.
Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing on the proprietary rights of others. We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property of our products. Patents might not be issued or granted with respect to our patent applications that are currently pending, and issued or granted patents might later be found to be invalid or unenforceable, be interpreted in a manner that does not adequately protect our products or any future products, or fail to otherwise provide us with any competitive advantage. As such, we do not know the degree of future protection that we will have on our products, if any, and a failure to obtain adequate intellectual property protection with respect to our products could have a material adverse impact on our business.
Patent protection may not be available for some of the therapeutic candidates or products we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing, potentially for large fees, patents or other proprietary rights held by others, our business, results of operations and financial condition may be harmed.
Claims of intellectual property infringement by or against us could seriously harm our businesses.
From time to time, we may be forced to respond to or prosecute intellectual property infringement claims to defend or protect our rights. These claims, regardless of merit, may consume valuable management time, result in costly litigation or cause product shipment delays. Any of these factors could seriously harm our business and operating results. We may have to enter into royalty or licensing agreements with third parties who claim infringement. These royalty or licensing agreements, if available, may be costly to us. If we are unable to enter into royalty or licensing agreements with satisfactory terms, our business could suffer.
Risks Related to Our Common Stock
Our Common Stock has been delisted by Nasdaq, which may affect liquidity.
The Company’s common stock was suspended from trading and delisted from the Nasdaq Capital Market on November 27, 2023. Beginning November 27, 2023, the Company’s common stock had been trading over the counter on the OTC Markets’ Pink Sheets, and since January 26, 2024 the Company’s common stock has been trading over the counter on the OTCQB® market tier, an electronic quotation service operated by OTC Markets Group Inc., under its current trading symbol ZIVO. Similarly, since November 27, 2023, the Company’s warrants are traded over the counter on the OTC Markets’ Pink Sheets market tier under its current trading symbol ZIVOW.
Our shares of common stock are thinly traded. If an active market for our common stock with meaningful trading volume does not develop or is not maintained, the market price of our common stock may decline materially and you may not be able to sell your shares. Similarly, if our common stock is ever determined to be a “penny stock”, brokers trading in our common stock will be required to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities.
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The market price and trading volume of our securities may be volatile and may be affected by economic conditions beyond our control, which could lead to losses for stockholders.
The market price and trading volume of our securities is likely to be volatile. Some specific factors that could negatively affect the price of our securities or result in fluctuations in its price and trading volume include:
| · | results of trials of our product candidates; |
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| · | results of trials of our competitors’ products; |
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| · | regulatory actions with respect to our therapeutic candidates or products or our competitors’ products; |
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| · | actual or anticipated fluctuations in our quarterly operating results or those of our competitors; |
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| · | our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; |
| · | issuances by us of debt or equity securities; |
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| · | litigation involving our Company, including stockholder litigation; investigations or audits by regulators into the operations of our company; or proceedings initiated by our competitors or clients; |
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| · | strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
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| · | trading volume of our common stock; |
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| · | announcement or expectation of additional financing efforts; |
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| · | terrorist acts, acts of war or periods of widespread civil unrest; |
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| · | natural disasters and other calamities; |
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| · | changes in market conditions for biotech or agtech stocks; |
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| · | influence of retail investors and/or social media on our common stock, such as a massive short squeeze rally; and |
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| · | conditions in the U.S. financial markets or changes in general economic conditions. |
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
As of December 31, 2024, our largest shareholder, HEP Investments, LLC (“HEP” or “HEP Investments”), beneficially owns approximately 14.7% of our outstanding Common Stock. Therefore, HEP Investments will have the ability to influence us through this ownership position. This stockholder may be able to determine all matters requiring stockholder approval, including elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that an individual may believe are in the stockholders’ best interest. In July 2024, the Company’s board of directors added the principal of HEP Investments as a member of the board to fill a vacancy.
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Our management has identified certain internal control deficiencies, which management believes constitute material weaknesses. Our failure to establish and maintain an effective system of internal controls could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our common stock.
We review and update our internal controls, disclosure controls and procedures, and corporate governance policies as our Company continues to evolve. In addition, we are required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and management is required to report annually on our internal control over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX until the date we are no longer a “smaller reporting company” as defined by applicable SEC rules.
Our management’s evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2024 concluded that our controls were not effective, due to material weaknesses resulting from an ineffective overall control environment. The material weaknesses stem primarily from our small size and include the inability to (i) maintain appropriately designed information technology general controls in the areas of user access, vendor management controls, and segregation of duties, including controls over the recording of journal entries, related to certain information technology systems that support the Company’s financial reporting process; and (ii) design and maintain effective controls over complex accounting areas and related disclosures including income tax , stock-based compensation, and deferred research and development obligations - participation agreements. Specifically, management did not identify controls over the review of the tax provision, including the valuation analysis relating to deferred tax assets, considerations for uncertain tax positions, the preparation of income tax footnote and required disclosures and selecting and applying accounting policies, proper review of the financial statements and the application of GAAP relating to the accounting and classification of deferred research and development obligations - participation agreements. Management did not identify controls over the review of stock-based compensation, including the valuation of options granted under the Company’s equity-based compensation plans.
Such shortcomings could have an adverse effect on our business and financial results. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulation concerning control and procedures could have a material effect on our business, results of operation and financial condition. Any of these events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively affect the market price of our shares, increase the volatility of our stock price and adversely affect our ability to raise additional funding. The effect of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board and as executive officers.
Subject to limitations on liquidity, the Company is planning to take steps to remediate these material weaknesses. However, we cannot assure you that any of the measures we implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies.
As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.
Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor’s provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.
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Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to annual and quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
| · | variations in the level of expenses related to our product candidates, products or future development programs; |
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| · | if any of our product candidates receives regulatory approval, the level of underlying demand for these product candidates and wholesalers’ buying patterns; |
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| · | addition or termination of trials or funding support; |
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| · | our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; |
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| · | any intellectual property infringement lawsuit in which we may become involved; |
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| · | regulatory developments affecting our products or those of our competitors; |
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| · | the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time; |
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| · | our ability to attract, hire and retain qualified personnel; |
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| · | expenditures that we will or may incur to acquire or develop additional product candidates and technologies; |
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| · | future accounting pronouncements or changes in our accounting policies; and |
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| · | the timing and success or failure of clinical studies for our therapeutic candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners. |
If our annual or quarterly operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially. Furthermore, any annual or quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that annual and quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic collaborations or partnerships, or marketing, distribution or licensing arrangements with third parties, we may be required to limit valuable rights to our intellectual property, technologies, therapeutic candidates or future revenue streams, or grant licenses or other rights on terms that are not favorable to us. Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our therapeutic candidates.
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Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell our common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell our common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.
We are at risk of litigation.
We may become party to litigation from time to time in the ordinary course of business which could adversely affect our business. Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating and the market price for our shares and could use significant resources. Even if we are involved in litigation and win, litigation can redirect significant company resources.
Item 1B. Unresolved Staff Comments.
Not required for smaller reporting companies.
Item 1C. Cybersecurity.
Risk Management and Strategy
Many aspects of our business are dependent upon our computer systems, devices, and networks to collect, process, and store data necessary to conduct many aspects of our business, including the analysis of our products, the maintenance of our intellectual property, the recording and reporting of commercial and financial information, and payroll. We rely on standard operating systems and software from established and reliable third parties to provide security including Microsoft 365, QuickBooks, and Paylocity. The Company does not have in-house information technology personnel. Management makes concerted efforts to select third-party software providers with a demonstrated track-record of effectively addressing cyber-security concerns. In event of a cyber-security incident, we would rely upon these providers. In light of the Company's current size and relatively low cyber-risk profile, management believes that reliance upon experienced third-party providers is the most prudent and cost-effective course.
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To date, risks from cybersecurity threats or incidents have not materially affected our company. However, the sophistication of and risks from cybersecurity threats and incidents continues to increase, and the preventative actions that we have taken and continue to take to reduce the risk of cybersecurity threats and incidents and protect our systems and information may not successfully protect against all cybersecurity threats and incidents. For more information on how cybersecurity risk could materially affect our company's business strategy, results of operations, or financial condition, please refer to Item 1A Risk Factors.
Governance
Our board stays informed on data privacy and information security issues and vulnerabilities that may be applicable to the Company. We outsource most aspects of our information technology management and these third-party providers are available to address any cybersecurity issues that may arise.
Item 2. Properties.
The Company’s principal executive office is located at 2125 Butterfield Road, Suite 100, Troy, MI 48084 in a facility where we lease roughly 3,200 square feet. We believe that our existing facilities are adequate for our current needs. If we determine that additional or new facilities are needed in the future, we believe that sufficient options would be available to us on commercially reasonable terms. We also lease a laboratory and office (roughly 2,700 square feet) at 608 Danley Drive, Unit #1, Fort Myers, FL 33907.
Item 3. Legal Proceedings.
The Company may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is quoted on OTCBQ under the symbol “ZIVO”. Our public warrants are quoted on OTC Markets’ Pink Sheets under the symbol “ZIVOW”.
Holders
As of March 12, 2025, there were approximately 202 holders of record of our common stock. The number of holders of record is based on the actual number of holders registered on the books of our transfer agent and does not reflect holders of shares in “street name” or persons, partnerships, associations, corporations, or other entities identified in security position listings maintained by depository trust companies.
Dividend Policy
We have not paid any cash dividends on our common stock since our inception and do not anticipate paying any cash dividends in the foreseeable future. We plan to retain our earnings, if any, to provide funds for the expansion of our business.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors,” and other documents we file with the SEC. Historical results are not necessarily indicative of future results.
Overview
We have put in place a business model in which we may derive future income from licensing and selling natural bioactive ingredients including algal biomass and products that may be derived from or are initially based on the algal biomass. We expect that these planned new products will likely be sold or licensed to much larger, better-financed human and animal pharma companies, and to food, dietary supplement, and skin care manufacturers. The anticipated income streams are to be generated from a) sales of algal biomass or extracts thereof, and b) license payments in the form of royalties and / or other contractual payments for licensed natural bioactive ingredients. Our manufacturing strategy is to create contract manufacturers for our non-licensed products which products will be sold by us to food distributors and retailers, animal food, dietary supplement, and medical food processors and/or name-brand marketers. Further, we expect to license our bioactive fractions and molecules as lead compounds or templates for synthetic variants intended for therapeutic applications.
Financial Overview
Revenue
The Company earns revenue through the sales of its proprietary microalgae products which are presently sold as a dried green powder packaged for retail sale. The product is sold under the ZivolifeTM brand. We have one customer who distributes our products via a direct-to-consumer model through a ZivolifeTM branded webpage under a distribution, marketing, and limited license agreement.
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Cost of Goods Sold
Cost of goods sold for the Company included purchasing our proprietary dried green microalgae in a final packaged form from a contract grower located in Peru. We have established a contract manufacturing agreement and limited license with this grower to provide ZIVO pre-packaged product ready to be sold to our customer. The product is delivered directly to our customer.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs for personnel in functions not directly associated with research and development activities, professional fees and consultant expenses, and other overhead spending. Personnel related costs include cash compensation, benefits, and stock-based compensation expenses. Professional fees and consultant expenses consist primarily of legal fees relating to corporate matters, intellectual property costs, professional fees for consultants assisting with regulatory, and financial matters. Other overhead spending includes cost to support information technology, rent, insurances, public company listing, and supplies.
We anticipate that our general and administrative expenses will significantly increase in the future to support our continued research and development activities, potential commercialization of our product candidates, hiring of additional personnel, legal and professional services, and other public company related costs.
Research and Development
Research and development expenses are incurred in developing our product candidates, compensation and benefits for research and development employees, including stock-based compensation, research related overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to research consultants and other outside expenses. Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed.
We expect our research and development expenses to significantly increase over the next several years as we continue to develop product candidates targeting additional pharma and algal biomass applications. These additional activities will increase the need to conduct preclinical testing and clinical trials and will depend on the duration, costs and timing to complete our preclinical programs and clinical trials.
Interest Expense
Interest expense primarily consists of interest costs related to our convertible notes, term notes, and for interest on short term debt, as discussed in detail below.
Other Income
Other income consists of proceeds derived from activity outside of normal operating activity, including amortization of debt discounts where appropriate.
Results of Operations
Comparison of Year Ended December 31, 2024 and 2023
The following table summarizes our results of operations for the year ended December 31, 2024 and 2023:
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Total revenue |
| $ | 157,220 |
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| $ | 27,650 |
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Total cost of goods sold |
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| (108,268 | ) |
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| (16,040 | ) |
Gross margin |
| $ | 48,952 |
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| $ | 11,610 |
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Costs and expenses: |
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General and administrative |
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| 10,275,914 |
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| 5,897,594 |
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Research and development |
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| 3,134,935 |
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| 1,377,028 |
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Total costs and expenses |
| $ | 13,410,849 |
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| $ | 7,274,622 |
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Loss from operations |
| $ | (13,361,897 | ) |
| $ | (7,263,012 | ) |
Total interest and other (expense), net |
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| (22,939 | ) |
| $ | (514,172 | ) |
Net loss |
| $ | (13,384,836 | ) |
| $ | (7,777,184 | ) |
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Revenue
During the year ended December 31, 2024, the Company recorded commercial revenue relating to sales of the Company’s dried algal biomass product as a human food or food ingredient. The $157,220 for the year ending December 31, 2024 is an approximately $130,000 increase over the $27,650 in revenue in the prior year. The increase is the result of product volume increases partially offset by lower selling prices for product sold in the year ended December 31, 2024 versus the year ended December 31, 2023.
Costs of Goods Sold
Cost of goods sold for the year ended December 31, 2024 was $108,268. This is approximately $92,000 higher than $16,040 in cost of goods sold from the same period last year. The increase in cost of goods sold is essentially all attributable to product volume increases from the prior year period.
Gross Margin
Gross margin for the year ended December 31, 2024 was approximately $49,000. This is $37,000 higher than the same period last year. This increase is attributable to higher product volumes partially offset by lower selling prices than the prior year period. Gross margin percentage in the year ended December 31, 2024 was 31%, down from 42% shown in the year ended December 31, 2023.
General and Administrative Expenses
General and administrative expenses were $10.3 million for the year ended December 31, 2024, which is about $4.4 million higher than the approximately $5.9 million for the comparable prior period, explained by the following changes: an increase of $2.8 million in labor expense (increase of $3.5 million non-cash employee compensation due to stock options issued to employees partially offset by a roughly $700,000 decrease in bonus expense), and an increase in overhead expense of $1.6 million ($2.9 million increase in directors fees, partially offset by $100,000 in lower directors and officers insurance premiums, $110,000 in lower exchange listing and related fees, $30,000 in lower travel expense, $300,000 in lower accounting fees, and $800,000 lower legal fees). The decreases in accounting and legal fees versus the prior year period were largely the result of legal and accounting fees incurred in capital raising efforts in 2023 that were not incurred in 2024.
Research and Development Expenses
For the 12 months ended December 31, 2024, we incurred $3.1 million in net R&D expenses, as compared to $1.4 million for the comparable period in 2023.
Of these costs in 2024, $3.1 million is for salary and other internal costs, an increase of approximately $1.9 million from the prior year. The increase is primarily explained by higher stock related compensation costs for non-employee directors of $2 million and an increase of $50,000 in consultant expense, partially offset by employee costs of $160,000 and travel expense of $20,000. Third party research and development spending of $20,000 was approximately $840,000 lower than the prior year due to elimination of essentially all the Company-funded third-party research studies. For the year ending December 31, 2023, the Company recognized a reduction in gross research and development spending of roughly $700,000 to account for the amortization of the spending obligation created through the complete funding of the Participation Agreements. There was no amortization of spending obligations in the year ending December 31, 2024 as the Company completed all the funding for this program in the prior year. (See Note 8: Deferred R&D Obligations - Participation Agreements)
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| December 31, |
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| 2023 |
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Labor and other internal expenses |
| $ | 3,114,495 |
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| $ | 1,222,280 |
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External research expenses |
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| 20,440 |
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| 856,080 |
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Total gross R&D expenses |
| $ | 3,134,935 |
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| $ | 2,078,360 |
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Less contra-expense for amortization of deferred R&D obligation - Participation Agreements |
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| (701,332 | ) |
Net R&D expenses |
| $ | 3,134,935 |
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| $ | 1,377,028 |
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Subject to the availability of funding, we expect our R&D costs to grow as we work to complete the research in the development of natural bioactive compounds for use as dietary supplements and food ingredients, as well as biologics for medicinal and pharmaceutical applications in humans and animals. The Company’s scientific efforts presently are focused on the licensing products for healthy immune response in livestock and growing of our proprietary algal culture in commercial scale facilities.
Liquidity and Capital Resources
Historical Capital Resources
As of December 31, 2024, our principal source of liquidity consisted of cash deposits of $1.5 million. We expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate an adequate level of revenue from potential commercial sales to cover expenses.
We anticipate that our expenses will increase substantially as we develop and seek to commercialize our product candidates and continue to pursue pre-clinical and clinical trials, seek regulatory approvals, manufacture product candidates, hire additional staff, add operational, financial and management systems and continue to operate as a public company.
Our source of cash to date has been proceeds from the issuances of notes, common stock with and without warrants and unsecured loans, and the entry into Participation Agreements, the terms of which are further described below. See also “Funding Requirements and Outlook” below.
Unsecured Loans
From January 1, 2023 to December 31, 2024, the Company received gross proceeds of $2,273,160 in unsecured loans. As of December 31, 2024, all the loans were repaid and no principal or accrued interest remained outstanding under such loans.
Debt Settlement Agreements
On November 12, 2024, the Company entered into a Debt Settlement Agreement (“Debt Settlement Agreement”) with three investors (each a “Creditor”) to restructure the outstanding $240,000 convertible debt and accrued interest of the Company. Each Creditor agreed to settle the Company’s existing debt in exchange for the Company issuing each Creditor an unsecured promissory note (each a “Note,” collectively, the “Notes”) pursuant to the terms agreed upon in each Debt Settlement Agreement. The Notes have an aggregate principal amount of $277,254. Each Note is payable in 24 equal monthly installments beginning November 30, 2024 and bears interest at a rate of 1.0% per annum.
Private Placements
In the year ending December 31, 2024, we entered into Subscription Agreements with accredited investors pursuant to which we, in private placements, issued and sold an aggregate of 793,489 shares of common stock for gross proceeds in the amount of $5,602,269. Included in these transactions were the sale of 598,054 shares of common stock for $4,283,387 to unrelated private investors, and 195,435 shares of common stock for $1,318,882 to related parties.
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Going Concern, Funding Requirements and Outlook
At December 31, 2024, we had $1,542,442 in cash deposits.
The Company has incurred substantial losses during the years ended December 31, 2024 and 2023, and expects to continue to incur losses in the near future and has a negative working capital as of December 31, 2024. Management has determined that these factors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm has included explanatory paragraphs in their report on our financial statements as of and for the year ended December 31, 2024, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash is not sufficient to fund our operating expenses through at least twelve months from the date of this filing and liabilities of the Company such as accounts payable, accrued expenses, and our term debt. To continue to fund operations and execute on management’s plans, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute on our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditures may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.
Our material cash requirements also relate to the funding of our ongoing product development. See “Item 1-Business-Clinical Development and Regulatory Pathway-Clinical Experience, Future Development and Clinical Trial Plans” in this Report for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are able to estimate such costs.
The development of our product candidates is subject to numerous uncertainties, and we could use our cash resources sooner than we expect. Additionally, the process of development is costly, and the timing of progress in pre-clinical tests and clinical trials is uncertain. Our ability to successfully transition to profitability will be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Cash Flows
Cash Flows from Operating Activities. During the 12 months ended December 31, 2024, our operating activities used $4.3 million in cash, a decrease of cash used of roughly $1.5 million from the comparable prior period. The approximate $1.5 million decrease in cash used by operating activities was primarily attributable to the following (all of which are approximated): a $5.6 million increase in net loss, an increase in non-cash expenses of $8.9 million (explained by an increase of stock issued for services of $8.6 million, lower debt discount amortization of $(400,000), and lower amortization of deferred R&D obligations of $700,000), and cash used to fund changes is assets and liabilities of $1.8 million (mostly explained by a reduction in accrued liabilities of $(800,000), a decrease in accounts payable of $(925,000), a decrease in accounts payable to related parties of $(175,000), partially offset by an increase of $100,000 in prepaid expenses).
Cash Flows from Investing Activities. During the 12 months ended December 31, 2024 and 2023, there were no investing activities.
Cash Flows from Financing Activities. During the 12 months ended December 31, 2024, we generated $5.6 million in cash from financing activities; primarily from several board approved fund raising programs to sell unregistered common stock via private placements. These programs raised $4.3 million from accredited investors, and an additional $1.3 million from related parties. In the year ending December 31, 2023 the Company had financing activities that raised a total of $4.3 million through the sales of unregistered common stock of $485,000 to related parties, and an additional $155,000 to accredited investors. The Company also sold through a single transaction registered common stock with proceeds of $3.6 million.
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The following table shows a summary of our cash flows for the periods indicated:
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| Twelve months ended December 31, |
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| 2024 |
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| 2023 |
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Net cash provided by (used in): |
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Operating activities |
| $ | (4,313,510 | ) |
| $ | (5,799,893 | ) |
Investing activities |
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| - |
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| - |
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Financing activities |
|
| 5,581,572 |
|
|
| 4,275,010 |
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Net increase (decrease) in cash and cash equivalents |
| $ | 1,268,062 |
|
| $ | (1,524,883 | ) |
We estimate that we would require approximately $5 million in cash over the next 12 months in order to fund our basic operations, excluding our R&D initiatives. Based on this cash requirement, we have a near-term need for additional funding to continue to develop our products and intellectual property. Historically, we have had substantial difficulty raising funds from external sources. If we are unable to raise the required capital, we will be forced to curtail our business operations, including our R&D activities.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.
While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.
Fair Value of Financial Instruments
We account for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adhering to the Financial Accounting Standards Board (“FASB”) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| · | Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. |
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| · | Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. |
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| · | Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. |
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As of December 31, 2024 and December 31, 2023, fair values of cash, prepaid, other assets, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these assets or liabilities. We elected to account for the convertible notes while they were outstanding on a fair value basis under ASC 825 to comprehensively value and streamline the accounting for the embedded conversion options. The fair value of these convertible notes were based on both the fair value of our common stock, discount associated with the embedded redemption features, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs.
Complex Financial Instruments
We evaluate all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivative is accounted for separately on a fair market value basis. We record the fair value changes of a separated embedded derivative at each reporting period in the consolidated statements of operations as a fair value change in derivative and warrant liabilities.
Stock-Based Compensation
We account for share‑based compensation in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant‑date fair value. The Company records forfeitures when they occur. Share‑based compensation arrangements to non‑employees are accounted for in accordance with the applicable provisions of ASC 718.
Recent Accounting Pronouncements - Adopted
The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment. The Company adopted the guidance in the fiscal year beginning January 1, 2024 and there was no impact on the Company’s reportable segments identified.
Recent Accounting Pronouncements – Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
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In February 2024, the FASB issued ASU 2024-04 — Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This update is intended to improve the relevance and consistency in application of the induced conversion guidance in FASB Accounting Standards Codification Subtopic 470-20, Debt —Debt with Conversion and Other Options. Current generally accepted accounting principles provide guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). The amendments in the ASU clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This new standard is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
In November 2024, the FASB issued ASC 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. This new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently assessing the impact this ASU will have on the consolidated financial statements and footnote disclosures.
See “Note 3 - Summary of Significant Accounting Policies” in this Report regarding the impact of certain recent accounting pronouncements on our financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not required for smaller reporting companies.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the Consolidated Financial Statements, the Reports thereon, and the Notes thereto, commencing on page F-1 of this report, which Consolidated Financial Statements, Reports, Notes and data are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in the reports that we file or submit 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 and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, as our principal financial and accounting officer, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K and, based on their evaluation, have concluded that the disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting, described below.
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Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer 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.
Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management utilized the criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to conduct an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024. As previously reported, we identified material weaknesses that continued to exist at December 31, 2024.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Material Weaknesses in Internal Control Over Financial Reporting
Management has determined that the Company had the following material weaknesses in its internal control over financial reporting.
Control Environment, Risk Assessment, and Monitoring
Management did not design and maintain appropriate entity-level controls impacting the control environment, risk assessment procedures, and monitoring activities to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to: (i) lack of structure and responsibility, insufficient number of qualified resources, and inadequate oversight and accountability over the performance of controls, (ii) ineffective identification and assessment or risks impacting internal control over financial reporting, and (iii) ineffective evaluation and determination as to whether the components of internal control were present and functioning.
Control Activities and Information and Communication
These material weaknesses contributed to the following additional material weaknesses within certain business processes and the information technology environment:
| · | Management did not design and maintain appropriate information technology general controls in the areas of user access, vendor management controls, and segregation of duties, including controls over the recording and review of journal entries, related to certain information technology systems that support the Company’s financial reporting process. |
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| · | Management did not design, implement, and retain appropriate documentation of formal accounting policies, procedures, and controls across substantially all of the company's business processes over; (i) the financial reporting process, including management review controls over key disclosures and financial statement support schedules, (ii) the monthly financial close process, including journal entries and account reconciliations and (iii) the completeness and accuracy of information used by control owners in the operation of certain controls, to achieve timely, complete, accurate financial accounting, reporting. |
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| · | Management did not design and implement controls over the accounting, classification, and application of United States Generally Accounting Principles (“US GAAP”) relating to income taxes, stock-based compensation, and deferred research and development obligations - participation agreements accounting. Specifically: |
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| · | Management did not identify controls over the review of the tax provision, including the valuation analysis related to deferred tax assets, considerations for uncertain tax positions, the preparation of the income tax footnote and required disclosures and selecting and applying accounting policies; |
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| · | Management did not identify controls over the accounting and classification of deferred research and development obligations - participation agreements; and |
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| · | Management did not identify controls over the valuation of stock-based compensation for option awards to employees and members of the board of directors. |
Based on the assessment and identification of the material weaknesses described above, management has concluded that, as of December 31, 2024, our internal control over financial reporting was not effective and could lead to a material misstatement of account balances or disclosures. Accordingly, management has concluded that these control deficiencies constitute material weaknesses.
However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
Remediation
Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:
| · | Developing a training program and educating control owners concerning the principles of the Internal Control - Integrated Framework (2013) issued by COSO; |
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| · | Implementing a risk assessment process by which management identifies risks of misstatement related to all account balances; |
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| · | Developing internal controls documentation, including comprehensive accounting policies and procedures over financial processes and related disclosures; |
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| · | Enhancing policies and procedures to retain adequate documentary evidence for certain management review controls over certain business processes including precision of review and evidence of review procedures performed to demonstrate effective operation of such controls; |
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| · | Engaging outside resources for complex accounting matters and drafting and retaining position papers for all complex, non-recurring transactions; |
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| · | Developing monitoring activities and protocols that will allow us to timely assess the design and the operating effectiveness of controls over financial reporting and make necessary changes to the design of controls, if any |
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| · | Segregating key functions within our financial and information technology processes supporting our internal controls over financial reporting; |
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| · | Reassessing and formalizing the design of certain accounting and information technology policies relating to security and change management controls, including user access reviews, including assessing the need for implementing a more robust information technology system; |
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| · | Continuing to enhance and formalize our accounting, business operations, and information technology policies, procedures, and controls to achieve complete, accurate, and timely financial accounting, reporting and disclosures. |
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Changes in Internal Control Over Financial Reporting
Except for the material weaknesses discussed above, there was no other change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Incorporated by reference to “Proposal No. 1 - Election of Directors - Management,” “Information with Respect to the Board of Directors,” and “Management” in the Registrant’s 2025 Proxy Statement to be filed within 120 days after the Registrant’s fiscal year end.
Item 11. Executive Compensation
Incorporated by reference to “Executive Compensation” in the Registrant’s 2025 Proxy Statement to be filed within 120 days after the Registrant’s fiscal year end.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Incorporated by reference to “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” in the Registrant’s 2025 Proxy Statement to be filed within 120 days after the Registrant’s fiscal year end.
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2024, relating to compensation plans under which equity securities are authorized for issuance.
Plan Category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
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| Weighted-average exercise price of outstanding options, warrants and rights |
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| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
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| (a) |
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| (b) |
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| (c) |
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Equity compensation plans approved by security holders (1) |
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| 1,031,425 |
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| $ | 7.96 |
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| 261,090 | (2) |
Equity compensation plans not approved by security holders |
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| 0 |
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| n/a |
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| 429,510 |
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Total |
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| 1,031,425 |
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| $ | 7.96 |
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| 690,600 |
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(1) These securities are available under the 2021 Equity Incentive Plan. Incentive awards may include, but are not limited to, Incentive Stock Options, Non-statutory Stock Options, SARs, Restricted Stock Awards, RSU Awards, and Performance Awards.
(2) The 2021 Equity Incentive Plan includes an "evergreen" provision for calculating the number of shares issuable under the 2021 Equity Incentive Plan. The aggregate shares of common stock issuable automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to 5% of the total number of shares of the common stock outstanding on December 31 of the preceding year; provided, however, that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of the common stock.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Incorporated by reference to “Certain Relationships and Related Transactions” and “Proposal No. 1 - Election of Directors” in the Registrant’s 2025 Proxy Statement to be filed within 120 days after the Registrant’s fiscal year end.
Item 14. Principal Accountant Fees and Services
Incorporated by reference to “Proposal No. 2 - Ratification of Independent Registered Public Accounting Firm” in the Registrant’s 2025 Proxy Statement to be filed within 120 days after the Registrant’s fiscal year end. Information about aggregate fees billed to us by our principal accountant, BDO USA, P.C. (PCAOB ID No.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) (1) (2) Financial Statements.
Financial Statements begin on page F-1 of this report.
All schedules have been omitted because they are not applicable, or the required information is included in the Consolidated Financial Statements or Notes thereto.
(3) Exhibits.
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10.13 | Debt Settlement Agreement, dated November 12, 2024, by and between Merger Masters Pension Fund and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 15, 2024) | |
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10.14 | Debt Settlement Agreement, dated November 12, 2024, by and between Financial Trading Consultants Pension Fund and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 15, 2024) | |
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10.15 | Promissory Note, dated November 12, 2024, in favor of Howard Shapiro (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 15, 2024) | |
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10.16 | Promissory Note, dated November 12, 2024, in favor of Merger Masters Pension Fund (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 15, 2024) | |
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10.17 | Promissory Note, dated November 12, 2024, in favor of Financial Trading Consultants Pension Fund (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 15, 2024) | |
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101.INS* | Inline XBRL Instance Document | |
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101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
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101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
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101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
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101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
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101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
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104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
____________
* Filed herewith.
**Furnished herewith.
+ Indicates a management contract or compensatory plan.
†Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.
Item 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ZIVO BIOSCIENCE, INC. |
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Date: March 18, 2025 |
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| By: | /s/ Keith R. Marchiando |
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| Keith R. Marchiando |
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| Chief Financial Officer, and Secretary (principal financial and principal accounting officer) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ John B. Payne |
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| John B. Payne, |
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| Chief Executive Officer, President and Director (principal executive officer) |
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| March 18, 2025 |
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| By: | /s/ Keith R. Marchiando |
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| Keith R. Marchiando |
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| Chief Financial Officer, and Secretary (principal financial and principal accounting officer) |
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| March 18, 2025 |
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| By: | /s/ Christopher D. Maggiore |
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| Christopher D. Maggiore, |
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| Director |
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| March 18, 2025 |
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| By: | /s/ Nola E. Masterson |
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| Nola E. Masterson, |
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| March 18, 2025 |
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| By: | /s/ Alison A. Cornell |
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| Alison A. Cornell, |
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| March 18, 2025 |
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| By: | /s/ Laith Yaldoo |
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| Laith Yaldoo, |
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| Director |
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| March 18, 2025 |
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Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Zivo Bioscience, Inc.
Troy, Michigan
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Zivo Bioscience, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred net losses since inception, experienced negative cash flows from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
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Consolidated Financial Statements – Impact of Control Environment and Information Technology General Controls
As disclosed in management’s report on internal control over financial reporting, the Company identified material weaknesses as of December 31, 2024. These material weaknesses included ineffective (i) entity-level controls impacting the control environment, risk assessment procedures, and monitoring activities, (ii) information technology general controls (ITGCs), (iii) control activities over substantially all of the company's business processes, and (iv) controls over the accounting, classification, and application of United States Generally Accounting Principles (“US GAAP”) relating to certain transactions.
We identified a critical audit matter over the completeness and accuracy of the consolidated financial statements. Designing the appropriate procedures and evaluating audit evidence to ensure the completeness and accuracy of the consolidated financial statements with an ineffective control environment required especially challenging and subjective auditor judgment due to the increased extent of audit effort including the need to modify the nature and extent of audit evidence obtained.
The primary procedures we performed to address this critical audit matter included:
| · | Performing incremental procedures over material financial statement accounts such as revenue and expenses by i) increasing the sample sizes to perform certain audit procedures and ii) lowering the testing thresholds and for journal entries by expanding the types of entries to be tested. |
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| · | Evaluating the impact of improper segregation of duties and designing incremental procedures over disbursements. |
|
|
|
| · | Manually testing the completeness and accuracy of information provided by the Company and increasing the extent of our testing for items to be selected and agreed to source documents. |
/s/
We have served as the Company’s auditor since 2022.
March 18, 2025
| F-2 |
| Table of Contents |
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
ASSETS |
| |||||||
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| ||
CURRENT ASSETS: |
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Cash |
| $ |
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| $ |
| ||
Accounts receivable |
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Prepaid expenses |
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| ||
Total current assets |
| $ |
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| $ |
| ||
OTHER ASSETS: |
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|
Operating lease - right of use asset |
|
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| ||
Security deposit |
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Total other assets |
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TOTAL ASSETS |
| $ |
|
| $ |
| ||
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|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
CURRENT LIABILITIES: |
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|
Accounts payable |
| $ |
|
| $ |
| ||
Accounts payable – related party |
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| ||
Current portion of long-term operating lease |
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| ||
Convertible debentures payable |
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Current portion of note payable |
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Accrued interest |
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| ||
Accrued liabilities – employee bonus |
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Total current liabilities |
| $ |
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| $ |
| ||
LONG TERM LIABILITIES: |
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|
Long-term note payable, net of current portion |
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Total long-term liabilities |
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TOTAL LIABILITIES |
| $ |
|
| $ |
| ||
COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS’ (DEFICIT): |
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|
Common stock, $ |
| $ |
|
| $ |
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders’ (deficit) |
| $ | ( | ) |
| $ | ( | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the year ended December 31, 2024 |
|
| For the year ended December 31, 2023 |
| ||
REVENUE: |
|
|
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|
| ||
Product revenue |
| $ |
|
| $ |
| ||
Total Revenues |
| $ |
|
| $ |
| ||
|
|
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|
|
COST OF GOODS SOLD |
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Product costs |
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| ||
Total Cost of Goods Sold |
|
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| ||
|
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|
|
|
|
|
|
GROSS PROFIT |
|
|
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| ||
|
|
|
|
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|
|
|
|
OPERATING EXPENSES: |
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|
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|
General and administrative |
|
|
|
|
|
| ||
Research and development |
|
|
|
|
|
| ||
Total Operating Expenses |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE): |
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
|
|
|
| ( | ) | |
Interest expense - related parties |
|
|
|
|
| ( | ) | |
Interest expense - other |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Total Other Expense |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE |
|
|
|
|
|
|
|
|
BASIC AND DILUTED SHARES OUTSTANDING |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |||||
|
| Common Stock |
|
| Paid in |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
Balance, January 1, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and director equity-based compensation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Private offering issuance of stock and warrants, net of issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Debt discount for related party loan warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fractional Shares from Split |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock issued on prefunded warrant exercise |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||
Private sales of common stock - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Private sales of common stock – related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss for the year ended December 31, 2023 |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Balance, December 31, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |||||
|
| Common Stock |
|
| Paid in |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
Balance, January 1, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and director equity-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Private sales of common stock - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Private sales of common stock – related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss for the year ended December 31, 2024 |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Balance, December 31, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| For the Year Ended |
|
| For the Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization on debt discount |
|
|
|
|
|
| ||
Employee and director equity-based compensation expense |
|
|
|
|
|
| ||
Amortization of operating lease - right of use asset |
|
|
|
|
|
| ||
Amortization of deferred R&D obligations - participation agreements |
|
|
|
|
| ( | ) | |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
| ( | ) | |
Security deposits |
|
|
|
|
|
| ||
Accounts payable |
|
| ( | ) |
|
|
| |
Accounts payable – related party |
|
|
|
|
|
| ||
Accounts receivable |
|
|
|
|
| ( | ) | |
Lease liabilities |
|
| ( | ) |
|
| ( | ) |
Accrued liabilities |
|
| ( | ) |
|
|
| |
Net cash (used) in operating activities |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Net cash (used) in investing activities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds of loans payable, other |
| $ |
|
| $ |
| ||
Payment of loans payable, other |
|
| ( | ) |
|
| ( | ) |
Proceeds of loans payable, related party |
|
|
|
|
|
| ||
Payment of loans payable, related party |
|
|
|
|
| ( | ) | |
Proceeds from private placement of registered securities, net |
|
|
|
|
|
| ||
Exercise of common stock warrants |
|
|
|
|
|
| ||
Payment of term debt |
|
| ( | ) |
|
|
| |
Proceeds from direct sale of common stock, related party |
|
|
|
|
|
| ||
Proceeds from direct sales of common stock |
|
|
|
|
|
| ||
Net cash provided by financing activities |
| $ |
|
| $ |
| ||
Increase/(decrease) in cash |
| $ |
|
| $ | ( | ) | |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
| $ |
|
| $ |
| ||
Income taxes |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
Supplemental Schedule of Non-Cash Investing and Financing Activities:
For the Year Ended December 31, 2024:
During the year ended December 31, 2024, the Company had no non-cash investing or financing transactions.
For the Year Ended December 31, 2023:
During the year ended December 31, 2023, the Company had no non-cash investing or financing transactions.
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
| Table of Contents |
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
The business model of Zivo Bioscience, Inc. and its subsidiaries (Health Enhancement Corporation, HEPI Pharmaceuticals, Inc., Zivo Bioscience, LLC, Wellmetrix, LLC, WellMetris, LLC, Zivo Biologic, Inc., ZIVOLife, LLC, and Zivo Zoologic, Inc. (collectively the “Company”)) is to derive future income from licensing and selling natural bioactive ingredients derived from their proprietary algae cultures to animal, human and dietary supplement and medical food manufacturers.
NOTE 2 - BASIS OF PRESENTATION
Going Concern
The Company has incurred net losses since inception, experienced negative cash flows from operations for the year ended December 31, 2024 and has an accumulated deficit of $
The Company expects to continue to incur operating losses and net cash outflows until such time as it generates a level of revenue to support its cost structure. There can be no assurance that the Company will achieve profitable operations, and, if achieved, whether it will be sustained on a continued basis.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business; no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.
The Company intends to fund ongoing activities by utilizing its current cash on hand and by raising additional capital through equity or debt financings. There can be no assurance that the Company will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital, the Company may be compelled to reduce the scope of its operations.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Zivo Bioscience, Inc. and its wholly-owned subsidiaries, Health Enhancement Corporation, HEPI Pharmaceuticals, Inc., Wellmetrix, LLC, Wellmetris, LLC, Zivo Bioscience, LLC, Zivo Biologic, Inc., ZIVOLife, LLC, and Zivo Zoologic, Inc. All significant intercompany transactions and accounts have been eliminated in consolidation.
Accounting Estimates
The Company’s consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements and reported amount of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. Management uses its best judgment in valuing these estimates and may, as warranted, solicit external professional advice and other assumptions believed to be reasonable.
| F-8 |
| Table of Contents |
Cash
For the purpose of the statements of cash flows, cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents balances at financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Leases
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases, requires the recognition of a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet. ROU assets represent the right to use an underlying asset over the lease term and lease liabilities represent the obligation to make lease payments resulting from the lease agreement. ROU assets and lease liabilities are recognized on commencement of the lease agreement.
ROU assets are included within operating lease right-of-use assets, and the corresponding operating lease liabilities are recorded as current portion of long-term operating lease, and within long-term liabilities as long-term operating lease, net of current portion on the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023.
Lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Generally, we do not consider any additional renewal periods to be reasonably certain of being exercised, as comparable locations could generally be identified within the same trade areas for comparable lease rates. Because the Company's leases do not provide an implicit rate of return, the Company used its incremental borrowing rate in determining the present value of lease payments. We have elected the practical expedient not to separate lease and non-lease components for all of our building leases.
Revenue Recognition
Revenue is recognized in accordance with ASC 606, which utilizes five steps to determine whether revenue can be recognized and to what extent: (i) identify the contract with a customer; (ii) identify the performance obligation(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) determine the recognition period. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, Revenue from Contracts with Customers, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied when control of the product is transferred according to agreed shipping terms, and revenue is recognized at that single point in time.
Significant judgments exercised by management include the identification of performance obligations, and whether such promised goods or services are considered distinct. The Company evaluates promised goods or services on a contract-by-contract basis to determine whether each promise represents a good or service that is distinct or has the same pattern of transfer as other promises. A promised good or service is considered distinct if the customer can benefit from the good or service independently of other goods/services either in the contract or that can be obtained elsewhere, without regard to contract exclusivity, and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contact. If the good or service is not considered distinct, the Company combines such promises and accounts for them as a single combined performance obligation.
For the year ended December 31, 2024, the Company had only one product for sale, and one customer accounted for 100% of the revenue for its products.
| F-9 |
| Table of Contents |
Research and Development
Research and development (“R&D”) costs are expensed as incurred. The Company’s R&D costs, including internal expenses, consist of clinical study expenses as it relates to the therapeutic (biotech) business and the development and growing of algae as it relates to the nutrition (agtech) business. External clinical studies expenses were approximately $
Income Taxes
The Company follows the authoritative guidance for accounting for income taxes. Deferred income taxes are determined using the asset and liability method. Deferred 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 and operating loss and tax credit carry-forwards. 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.
The tax effects of temporary differences that gave rise to the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 were primarily attributable to net operating loss carry forwards. Since the Company has a history of losses, and it is more likely than not that some portion or all of the deferred tax assets will not be realized, a full valuation allowance has been established. In addition, utilization of net operating loss carry-forwards is subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code. The annual limitation may result in the expiration of net operating loss carry-forwards before utilization.
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with FASB ASC 718, Compensation - Stock Compensation. Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. The Company, from time to time, issues common stock or grants common stock options to its employees, consultants and board members. At the date of grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period. Issuances of common stock are valued at the closing market price on the date of issuance and the fair value of any stock option or warrant awards is calculated using the Black Scholes option pricing model and employing the simplified term method as the Company does not have a historical basis to determine the term. The Company records forfeiture of options when they occur.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. In considering the expected term of the options, the Company employs the simplified method. The Company uses this method as it does not have a history of option exercises to establish a robust estimated term based on experience. The simplified term is used for the determination of expected volatility as well as the identification of the risk-free rate.
Income (Loss) Per Share
Basic loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock such as shares issuable pursuant to the exercise of options and warrants and conversions of debentures. Potentially dilutive securities as of December 31, 2024, consisted of and
| F-10 |
| Table of Contents |
Segment Reporting
The Company manages the business activities on a consolidated basis and operates in one reportable segment, research and development of micro algae for applications in both the therapeutic and nutritional sectors. As the Company has one reportable segment, sales, cost of sales, research and development, and general and administrative expenses are equal to consolidated results. Financial results for the Company's reportable segment have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's Chief Operating Decision Maker ("CODM") in allocating resources and in assessing performance. The Company's CODM is the Chief Executive Officer. The measurement of segment profit or loss that the CODM uses to evaluate the performance of the Company's segment is net income attributable to Zivo Bioscience, Inc. Financial budgets and actual results used by the CODM to assess performance and allocate resources, as well as strategic decisions related to headcount and other expenditures are reviewed on a consolidated basis.
Warrants
The Company accounts for warrants issued on June 2, 2021 in connection with a public offering of commons stock and common stock warrants, and traded on the OTC Pink under the symbol ZIVOW, (“Public Warrants”) and Private Placement Warrants issued in the years ended December 31, 2023 and 2024, see Note 9 – STOCKHOLDERS’ EQUITY (DEFICIT), (collectively “Warrants”) as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the Warrants are indexed to the Company’s own stock and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The fair value of Warrants is estimated using Black Scholes modeling. Inputs under the model include the Company’s Common Share price, the risk-free interest rate, the expected term, the volatility, and the dividend rate. Warrants that are determined to require liability classifications are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classifications measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.
| F-11 |
| Table of Contents |
Fair Value of Financial Instruments
We account for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adhering to the Financial Accounting Standards Board (“FASB”) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| · | Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. |
|
|
|
| · | Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. |
|
|
|
| · | Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. |
As of December 31, 2024 and 2023, fair values of cash, prepaid expenses, accounts receivable, other assets, accounts payable, accrued expenses, and other liabilities approximated their carrying values because of the short-term nature of these assets or liabilities. As of December 31, 2024 and 2023 the fair value of the notes and convertible notes approximated their carrying value. We elected to account for the notes and the convertible notes while they were outstanding on a fair value basis under ASC 825 to comprehensively value and streamline the accounting for the embedded conversion options. The fair value of these convertible notes were based on both the fair value of our common stock, discount associated with the embedded redemption features, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company has historically maintained cash balances at financial institutions which exceed the current FDIC limit of $
The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such account.
Recent Accounting Pronouncements - Adopted
The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment. The Company adopted the guidance in the fiscal year beginning January 1, 2024 and there was no impact on the Company’s reportable segments identified. Additional required disclosures have been added in Note 13.
| F-12 |
| Table of Contents |
Recent Accounting Pronouncements – Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
In February 2024, the FASB issued ASU 2024-04 — Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This update is intended to improve the relevance and consistency in application of the induced conversion guidance in FASB Accounting Standards Codification Subtopic 470-20, Debt —Debt with Conversion and Other Options. Current generally accepted accounting principles provide guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). The amendments in the ASU clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This new standard is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring additional disclosures about specified categories of expenses included in certain expense captions presented on the face of the income statement. This standard will be effective for the Company as of and for the year ending December 31, 2027, and may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on the Company's consolidated financial statements.
NOTE 4 - LEASES
The Company leases a facility that contains office, warehouse, lab and R&D space in Ft. Myers Florida. Rent was $
| F-13 |
| Table of Contents |
The Company leases office space for its headquarters in Bloomfield Hills, Michigan. Rent was $
The balances for our operating lease where we are the lessee are presented as follows within our consolidated balance sheet:
Operating leases:
Assets: |
| December 31, 2024 |
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The components of lease expense are as follows within our consolidated statement of operations:
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Other information related to leases where we are the lessee is as follows:
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| F-14 |
| Table of Contents |
Supplemental cash flow information related to leases where we are the lessee is as follows:
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As of December 31, 2024, the Company has no remaining operating lease liabilities.
On September 13, 2024, the Company entered into a 63-month lease agreement for office space in Troy, Michigan. On January 6, 2025, the Company moved its headquarters to this location. The lease agreement commenced on January 1, 2025, and ends on March 31, 2030. The lease agreement provided for a total rent of $
On January 21, 2025,
NOTE 5 - LOAN PAYABLE, RELATED PARTIES
Payne Bridge Loan
On April 3, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with the Company’s Chief Executive Officer (the “Subscriber”), pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue and sell to the Subscriber a
Each warrant is exercisable for a period of three years from issuance at a per-share exercise price equal to $
The allocation of fair value between the Payne Note and the Payne Warrant was recorded at the issuance date using a relative fair value allocation method of which $
The Payne Warrant, which qualified for the derivatives scope exception, met equity classification, and was recognized as a component of permanent stockholders’ equity within additional paid-in-capital and as a debt discount on the consolidated balance sheet.
The Payne Note matured on October 2, 2023, and bore interest at an annual rate of
HEP Investments, LLC
On November 16, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with the HEP Investments, LLC a greater than
| F-15 |
| Table of Contents |
On December 5, 2023 the Company repaid the principal in full and $
As of December 31, 2024, there were no Loans Payable to related parties.
NOTE 6 - DEBT
On November 12, 2024, the Company entered into a Debt Settlement Agreement (“Debt Settlement Agreement”) with each of Howard Shapiro, Merger Masters Pension Fund, and Financial Trading Consultants Pension Fund (each a “Creditor”) to restructure certain debt of the Company. Each Creditor agreed to settle the Company’s existing debt in exchange for the Company issuing each Creditor an unsecured promissory note (each a “Note,” collectively, the “Notes”) pursuant to the terms agreed upon in each Debt Settlement Agreement. The Company issued a Note to each of Howard Shapiro, Merger Masters Pension Fund, and Financial Trading Consultants Pension Fund in the principal amount of $
Each Note is payable in 24 equal monthly installments beginning November 30, 2024, and bears interest at a rate of
NOTE 7 - NOTE PAYABLE
Short Term Loans
On March 5, 2024, the Company entered into a short-term, unsecured loan agreement to finance a portion of the Company’s directors’ and officers’, and employment practices liability insurance premiums. The note in the amount of $
On February 14, 2023, the Company entered into a short-term, unsecured loan agreement to finance a portion of the Company’s directors’ and officers’, and employment practices liability insurance premiums. The note in the amount of $
NOTE 8 - DEFERRED R&D OBLIGATIONS - PARTICIPATION AGREEMENTS
During 2020 and 2021 the Company entered into twenty-one (
According to the terms of the Agreements, and pursuant to ASC 730-20-25 the Company has bifurcated the proceeds of $2,985,000 as follows: 1) the
| F-16 |
| Table of Contents |
The Participation Agreements allow the Company the option to buy back the right, title and interest in the Revenue Share for an amount equal to the amount funded plus a minimum payment threshold, as applicable. Once this minimum threshold is met, the Company may exercise its option by delivering written notice to a Participant of its intent to exercise the option, along with repayment terms of the amount funded, which may be paid, in the Company’s sole discretion, in one lump sum or in four (4) equal quarterly payments. If the Company does not make such quarterly payments timely for any quarter, then the Company shall pay the prorated Revenue Share amount, retroactive on the entire remaining balance owed, that would have been earned during such quarter until the default payments have been made and the payment schedule is no longer in default. See below a summary of the Participation Agreements:
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| F-17 |
| Table of Contents |
Certain of the Participation Agreements are owned by related parties. Participation Agreement numbers 8, 14, and 19 totaling $
NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT)
June 2023 Registered Direct Offering and 2023 Private Placement Warrants
On July 5, 2023, the Company, closed on a Securities Purchase Agreement dated June 30, 2023 (the “Purchase Agreement”) with a single institutional investor (the “Investor”), pursuant to which the Investor agreed to purchase from the Company, in a registered direct offering (the “Registered Offering”), (i) an aggregate of
As additional consideration for the purchase of the Private Placement Securities, we agreed to issue to the Investors Series A Warrants to purchase
All the pre-funded warrants associated with the Registered Offering and the Series A and Series B warrants have been classified and accounted for in equity. The net proceeds of the offering, including the fair value assigned to the Private Placement Warrants were recorded as a component of stockholders’ equity within additional paid-in-capital.
Recapitalization - Reverse Stock Split
On October 26, 2023, the Company filed a certificate of amendment to its articles of incorporation with the Secretary of State of Nevada (the “Certificate of Amendment”), to (i) effectuate a reverse stock split (the “Reverse Stock Split”) of its issued and outstanding shares of common stock and treasury shares on a
The Company’s transfer agent, Issuer Direct Corporation, acted as the exchange agent for the Reverse Stock Split. The Reverse Stock Split did not alter the par value of the Company’s common stock or modify any voting rights or other terms of the common Stock. In addition, pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding stock options and warrants to purchase shares of common Stock, and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plan will be reduced proportionately.
All issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options, restricted stock units and warrants to purchase shares of common stock. A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans to reflect the Reverse Stock Split.
| F-18 |
| Table of Contents |
Stock Sales and Issuances
During the twelve months ended December 31, 2024, the Company sold and issued a total of
During the year ended December 2023, the Company sold and issued
Stock Warrants Issued
In the year ended December 31, 2024, the Company issued warrants to purchase
In the year months ended December 31, 2023, the Company issued warrants to purchase
Stock Warrants Exercised
In the year ended December 31, 2024, no stock warrants were exercised by any investor holding warrants.
During the year ended December 31, 2023, the Prefunded Warrants in connection with the Securities Purchase Agreement dated June 30, 2023, were exercised on a cash basis. The Company received $
Equity Based Compensation
The Company compensates executives, employees, directors, and some service providers from time-to-time with equity as a component of compensation for employment and other services. These equity awards are issued under established plans.
Equity Incentive Plan for Non-Employee Directors
On May 31, 2024, the Board of Directors adopted the 2024 Equity Incentive Plan for Non-Employee Directors (the “Director Equity Plan”). Material features of the Director Equity Plan are:
| · | The maximum number of shares of common stock to be issued under the Director Equity Plan is |
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| · | Shares reacquired by the Company to satisfy the exercise, strike or purchase price of any award or any shares that are reacquired to satisfy a tax withholding obligation in connection with the award will be added back to the share reserve under the Director Equity Plan. The withholding of shares that would otherwise be issued by the Company to satisfy the exercise, strike or purchase price of an award or the withholding of shares that would otherwise be issued by the Company to satisfy a tax withholding obligation in connection with an award will not be added back to the share reserve. |
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| · | The award of non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards is permitted. |
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| · | The aggregate value of all compensation granted or paid to any non-employee director with respect to any calendar year, including awards granted and cash fees paid |
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| · | All awards granted under the Director Equity Plan are subject to recoupment in accordance with the Company’s clawback policy. |
| F-19 |
| Table of Contents |
Non-employee directors are eligible to participate in the Director Equity Plan. As of December 31, 2024,
2021 Equity Incentive Plan
On October 12, 2021, after approval from the stockholders at the Company’s 2021 annual meeting of stockholders, the Company adopted the 2021 Plan for the purpose of enhancing the Company’s ability to attract and retain highly qualified directors, officers, key employees and other persons and to motivate such persons to improve the business results and earnings of the Company by providing an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. The 2021 Plan is administered by the compensation committee of the Board who will, amongst other duties, have full power and authority to take all actions and to make all determinations required or provided for under the 2021 Plan. Pursuant to the 2021 Plan, the Company may grant options, share appreciation rights, restricted shares, restricted share units, unrestricted shares and dividend equivalent rights. The 2021 Plan has a duration of
Subject to adjustment as described in the 2021 Plan, the aggregate number of shares of common stock available for issuance under the 2021 Plan is initially set at
On June 5, 2024, pursuant to a proposed equity compensation exchange approved by the Board of Directors, various option awards underlying
2019 Omnibus Long-Term Incentive Plan
Prior to the adoption of the 2021 Equity Incentive Plan, the Company maintained a 2019 Omnibus Long-Term Incentive Plan (the “2019 Plan”). Following the approval by the shareholders of the 2021 Plan, no additional awards have been or will be made under the 2019 Plan. As of June 30, 2024, all options issues under the 2019 Plan have been forfeited and no options remain outstanding. On May 31, 2024 the Company’s Board of Directors formally terminated the 2019 Plan.
Equity Based Compensation Expense
For the year ended December 31, 2024, the Company recognized a total stock based compensation expense of $
| F-20 |
| Table of Contents |
Board of Directors Equity Based Fees
On June 12, 2023, our Board of Directors awarded options pursuant to the Non-Employee Director Compensation Policy. The Board granted to each of the three non-employee directors $
On June 11, 2024, the Company restructured the Board of Directors compensation to award Restricted Stock Awards to the non-employee members of the Board and curtailed the practice of awarding common stock options to the non-employee Board members.
During the year ended December 31, 2024, the Board of Directors awarded
Board Annual Service
The equity compensation for the year ended December 31, 2024, for normal board annual service equity awards per the Company’s amended Board Compensation Policy of $
The remaining
Director Stock Option Replacement Program
From 2021 to 2023, the Company had issued stock options to its non-employee directors pursuant to the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides that the Board may cancel outstanding options and make a substitute grant of new options or other equity-based awards under the 2021 Plan or another equity plan of the Company (the “Director Stock Option Replacement Program”). On June 5, 2024, pursuant to the Director Stock Option Replacement Program,
Stock Award Grant
On May 31, 2024, the Board granted common stock RSAs with a value of $
| F-21 |
| Table of Contents |
Stock Award in Lieu of Unpaid Directors’ Fees
On May 31, 2024, the Board approved a Stock in Lieu of Unpaid Director's fees that would allow for the granting of a total of
The value of the shares granted to the non-employee directors pursuant to this exchange of stock in lieu of unpaid cash fees were exempted from the annual limitation of awards to non-employee directors set forth in the Director Equity Plan. These shares awards were issued under the Director Equity Plan and are subject to provisions thereof. The RSAs issued under this program vested 50% immediately on the date of grant, and the remaining 50% vested on January 1, 2025.
The Company determined the value of these awards based on the market price on the grant date of $
Undermarket Equity Purchases
Between July 24, 2024 and October 16, 2024 the Company sold common stock to non-employee board members at prices that were less than the fair value on the day of the transactions. The difference between fair value and the purchase price was $
Employee Stock Based Compensation
Common Stock Options
During the year ended December 31, 2024, the Company awarded options underlying
CEO 2023 Equity Award
On June 5, 2024, the Board awarded
Employee Stock Option Replacement Program
On June 5, 2024, pursuant to the Employee Stock Option Replacement Program,
| F-22 |
| Table of Contents |
The fair value of options was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:
Year Ended December 31,
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On October 15, 2024 the Company sold common stock to the CEO of the Company at a price that was less than the fair value on the day of the transaction. The difference between fair value and the purchase price was $
Common Stock Options
A summary of the status of the Company’s options issued under the Company’s equity incentive plans is presented below. Based on the closing market price of $
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| December 31, 2024 |
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As of December 31, 2024, there was $
Common Stock Restricted Stock Awards (RSA)
The total RSA expense recorded in 2024 and 2023 are as follows:
| Year Ended December 31, |
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Non-vested Stock Awards |
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As of December 31, 2024, there was $
The total fair value of RSAs vested during the years ended December 31, 2024 was $
| F-23 |
| Table of Contents |
Common Stock Warrants - Unregistered
A summary of the status of the Company’s unregistered warrants is presented below. Based on the closing market price of $
|
| December 31, 2024 |
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| December 31, 2023 |
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| ||||
Outstanding, beginning of year |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Issued |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Exercised |
|
| - |
|
|
| - |
|
|
| ( | ) |
|
| 0.00 |
|
Cancelled |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Unregistered warrants outstanding and exercisable by price range as of December 31, 2024 were as follows:
Outstanding Warrants |
|
| Exercisable Warrants |
| |||||||||||||||
| Range of |
| Number |
|
| Average Weighted Remaining Contractual Life in Years |
|
| Exercise Price |
| Number |
|
| Weighted Average Exercise Price |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
$ | 6.00-11.99 |
|
|
|
|
|
| $ | 6.00-11.99 |
|
|
|
|
|
| ||||
| 12.00-17.99 |
|
|
|
|
|
|
| 12.00-17.99 |
|
|
|
|
|
| ||||
| 18.00-23.99 |
|
|
|
|
|
|
| 18.00-23.99 |
|
|
|
|
|
| ||||
| 30.00-35.99 |
|
|
|
|
|
|
| 30.00-35.99 |
|
|
|
|
|
| ||||
| 48.00-53.99 |
|
|
|
|
|
|
| 48.00-53.99 |
|
|
|
|
|
| ||||
| 54.00-55.99 |
|
|
|
|
|
|
| 54.00-55.99 |
|
|
|
|
|
| ||||
| 60.00-65.99 |
|
|
|
|
|
|
| 60.00-65.99 |
|
|
|
|
|
| ||||
| 66.00-71.99 |
|
|
|
|
|
|
| 66.00-71.99 |
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
| ||||
Common Stock Warrants - Registered
A summary of the status of the Company’s registered warrants is presented below:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||||||||||
|
| Number of Registered Warrants |
|
| Weighted Average Exercise Price |
|
| Number of Registered Warrants |
|
| Weighted Average Exercise Price |
| ||||
Outstanding, beginning of year |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Issued |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cancelled |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
| F-24 |
| Table of Contents |
Registered warrants outstanding and exercisable by price range as of December 31, 2024, were as follows:
Outstanding Registered Warrants |
|
| Exercisable Registered Warrants |
| ||||||||||||||||||
Exercise Price |
|
| Number |
|
| Average Weighted Remaining Contractual Life in Years |
|
| Exercise Price |
|
| Number |
|
| Weighted Average Exercise Price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ | 33.00 |
|
|
|
|
|
|
|
| $ | 33.00 |
|
|
|
|
|
|
| ||||
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Alimenta Supply Agreement
In July 2023, the Company, through its ZIVOLife LLC subsidiary and Alimenta Algae SAC, a Peruvian company, signed a binding Contract Manufacturing Term Sheet (the “Term Sheet”). This binding Term Sheet commits ZIVOLife to purchase all of the ZivolifeTM product produced by Alimenta at the site subject to certain capacity growth plans and overall capacity limitations. The purchase commitment will end on August 31, 2028. During the year ended December 31, 2024, the Company purchased $
Legal Contingencies
We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operation or cash flows.
NOTE 11 - RELATED PARTY TRANSACTIONS
Loan Payable - Related Party
See “Note 5 - Loan Payable, Related Parties” for disclosure of loans payable to related parties.
Employment Agreement
The company presently has in place employment agreements with the Chief Executive Officer and the Chief Financial Officer.
Accounts Payable
On December 31, 2024, and December 31, 2023, the Company had accounts payable to related parties of $
Stock and Warrant Sales and Issuances
During the year ended December 31, 2024, the Company issued
During the year ended December 2023, the Company sold and issued
| F-25 |
| Table of Contents |
NOTE 12 - INCOME TAXES
The following table presents the components of net loss before income taxes:
|
| Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Domestic |
| $ | ( | ) |
| $ | ( | ) |
(Loss) before provision for income taxes |
|
| ( | ) |
|
| ( | ) |
There was no income tax for the years ended December 31, 2024 and December 31, 2023. The Company’s tax expense differs from the “statutory” tax expense for the years ended December 31, 2024, and 2023 as noted below:
|
| For the Years Ended December 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
| ||||||||||
Income tax (benefit) / Expense at federal statutory rate |
| $ | ( | ) |
|
| % |
| $ | ( | ) |
|
| % | ||
Apportioned state income taxes |
|
| ( | ) |
|
| % |
|
| ( | ) |
|
| % | ||
Expired or forfeited stock based compensation |
|
|
|
|
| ( | )% |
|
|
|
|
| ( | )% | ||
Rate change |
|
|
|
|
| ( | )% |
|
|
|
|
| ( | )% | ||
Return to provision adjustments |
|
|
|
|
| % |
|
|
|
|
| ( | )% | |||
Other non-deductible items |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Change in valuation allowance |
|
|
|
|
| ( | )% |
|
| 1,584,778 |
|
|
| ( | )% | |
Total income tax provision |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. The tax effects of significant items comprising the Company’s deferred taxes were as follows:
|
| For the Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Deferred tax assets/(liabilities) |
|
|
|
|
|
| ||
Federal net operating loss carryforwards |
| $ |
|
| $ |
| ||
State net operating loss carryforwards |
|
|
|
|
|
| ||
Stock based compensation |
|
|
|
|
|
| ||
Section 174 research and experimental expenditures |
|
|
|
|
|
| ||
Accrued compensation |
|
|
|
|
|
| ||
Operating leases |
|
|
|
|
|
| ||
Total deferred tax assets |
|
|
|
|
|
| ||
Other deferred tax liabilities |
| $ | ( | ) |
|
| ( | ) |
Total deferred tax assets, net |
|
|
|
| $ |
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Total deferred income taxes |
| $ |
|
| $ |
| ||
| F-26 |
| Table of Contents |
ASC 740 Income Taxes requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Management believes that realization of the deferred tax assets arising from the above-mentioned future tax benefits from operating loss carryforwards is currently not more likely than not and, accordingly, has provided a valuation allowance. The valuation allowance increased by $
As of December 31, 2024 and 2023 the Company’s deferred tax asset contains the tax effect of approximately $
|
| Net Operating Losses recorded as Federal deferred tax asset |
|
| Net Operating Losses recorded as State deferred tax asset |
| ||
Total expiring operating losses (incurred prior to December 31, 2017) |
|
|
|
|
|
| ||
Non-expiring operating losses (incurred after December 31, 2017) |
|
|
|
|
|
| ||
Total Operating Loss |
| $ |
|
| $ |
| ||
As of December 31, 2024, the Company has no uncertain tax positions. It is the Company’s policy to account for interest and penalties related to uncertain tax positions as interest expense and general and administrative expense, respectively in its statements of operations. No interest or penalties have been recorded related to the uncertain tax positions.
It is not expected that there will be a significant change in uncertain tax positions in the next 12 months. The Company is subject to U.S. federal and state income tax as well as to income tax in multiple state jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities. As of the date of the financial statements, there are no tax examinations in progress. The statute of limitations for tax years ended after December 31, 2020, are open for federal and state tax purposes.
In the ordinary course of its business the Company incurs costs that, for tax purposes, may be qualified research expenditures within the meaning of IRC Code Sec. 41 and, therefore, may be eligible for the Increasing Research Activities credit under IRC Code Sec. 41. The Company has not claimed a credit pursuant to IRC Code Sec. 41 on its federal returns, i.e. no deferred tax asset is recorded on the books.
The 2017 Tax Act amended Section 174 of the Internal Revenue Code which affects the Federal tax treatment of research and experimental (R&E) expenditures.
NOTE 13 - SEGMENT REPORTING
The Company manages the business activities on a consolidated basis and operates in one reportable segment. The Company's reportable segment is microalgae technology. The segment is research and development operating in both the therapeutic and nutritional sectors, with an intellectual property portfolio comprised of proprietary algal and bacterial strains, biologically active molecules and complexes, production techniques, cultivation techniques and patented or patent-pending inventions for applications in human and animal health. As the Company has one reportable segment, sales, cost of sales, research and development, and general and administrative expenses are equal to consolidated results.
Financial results for the Company's reportable segment have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's Chief Operating Decision Maker ("CODM") in allocating resources and in assessing performance. The Company's CODM is the Chief Executive Officer. The measurement of segment profit or loss that the CODM uses to evaluate the performance of the Company's segment is net income attributable to Zivo Bioscience, Inc. Financial budgets and actual results used by the CODM to assess performance and allocate resources, as well as strategic decisions related to headcount and other expenditures are reviewed on a consolidated basis. The CODM considers the impact of the significant segment expenses in the table below on net income when deciding where and when to make expenditures.
|
| Year ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Total revenue |
| $ |
|
| $ |
| ||
Total cost of goods sold |
|
| ( | ) |
|
| ( | ) |
General and administrative |
|
| ( | ) |
|
| ( | ) |
Research and development |
|
| ( | ) |
|
| ( | ) |
Total interest and other (expense), net |
|
| ( | ) |
|
| ( | ) |
Net loss |
| $ | ( | ) |
| $ | ( | ) |
NOTE 14 - SUBSEQUENT EVENTS
2021 Plan Evergreen Provision
On January 1, 2025,
| F-27 |
| Table of Contents |
Equity Incentive Plan for Non-Employee Directors Evergreen Provision
On January 1, 2025,
Short Term Loan
On February 21, 2025, the Company entered into a short-term unsecured loan agreement to finance a portion of the Company's directors' and officers', and employment practices liability insurance premiums. The note in the amount of $
Directors Stock Awards
On January 1, 2025 the Compensation Committee of the Board of Directors awarded
From January 1, 2024 through June 10, 2024 the Company accrued payments to the non-employee board members pursuant to the Non-Employee Directors Compensation Policy in place at the time. The total amount accrued for that time period was $
Additionally, from June 11, 2024 through December 31, 2024 the Company accrued payments to the non-employee board members in total of $
The Compensation Committee awarded Laith Yaldoo
Deferred R&D Obligations – Participant Agreements
From January 9, 2025, through March 10, 2025, the Company has entered into a series of Exchange Agreements (“Exchange Agreements”) with Participants to the Participation Agreements described in "Note 8 - Deferred R&D Obligations - Participation Agreements". Under the Participation Agreements, the Company had a buy-out option pursuant to which it could purchase the Investors’ right, title and interest in the revenue share for an aggregate minimum purchase price of $
| F-28 |
EXHIBIT 19
INSIDER TRADING COMPLIANCE POLICY
This Insider Trading Compliance Policy (this “Policy”) consists of four sections:
Section I provides an overview; Section II sets forth the policies of ZIVO BIOSCIENCE, INC., a Nevada corporation (the “Company”) prohibiting insider trading; Section III explains insider trading; and Section IV consists of various procedures which have been put in place by the Company to prevent insider trading.
I. SUMMARY.
Preventing insider trading is necessary to comply with securities laws and to preserve the reputation and integrity of the Company as well as that of all persons affiliated with it. “Insider trading” occurs when any person purchases or sells a security while in possession of inside information relating to the security. As explained in Section III below, “inside information” is information which is considered to be both “material” and “non-public.” Insider trading is a crime and the penalties for violating the law include imprisonment, disgorgement of profits, civil fines of up to three (3) times the profit gained or loss avoided, and criminal fines of up to $5,000,000 for individuals and $25,000,000 for entities. Insider trading is also prohibited by this Policy and could result in serious sanctions, including dismissal.
This Policy applies to all officers, directors and employees of the Company and extends to all activities within and outside an individual’s duties at the Company. This Policy also applies to any consultant or contractor to the Company that receives or has access to material, non-public information regarding the Company (each such consultant or contractor, including such consultant’s or contractor’s representatives and agents, a “Subject Contractor”). Every officer, director, employee and Subject Contractor must review and adhere to this Policy. The Company has appointed the Chief Financial Officer as the Company’s Insider Trading Compliance Officer (the “Compliance Officer”). The Audit Committee (the “Audit Committee”) of the Board of Directors of the Company is responsible for oversight of this Policy. The Compliance Officer is responsible for monitoring and updating this Policy, presenting any material updates to the Policy to the Audit Committee for approval, and providing a report, at least once annually, to the Audit Committee regarding his or her monitoring of this Policy. Questions regarding the Policy should be directed to the Compliance Officer.
II. STATEMENT OF POLICIES PROHIBITING INSIDER TRADING.
|
| A. | No officer, director, employee or Subject Contractor shall purchase or sell any type of security while in possession of material, non-public information relating to the security, whether the issuer of such security is the Company or any other company. |
|
|
|
|
|
| B. | Additionally, except as set forth in Section II.D. below and except for transactions effected under an approved Rule 10b5-1 Trading Plan as described in Section V below, no officer, director, employee or Subject Contractor shall purchase or sell any security of the Company during the period beginning on the last day of each fiscal quarter ending one (1) full “trading day” after the public release of the Company’s quarterly/annual report whether or not the Company or any of its officers, directors, employees or Subject Contractors is in possession of material, non-public information (the “Black-Out Period”). For the purposes of this Policy, a “trading day” shall mean a day on which national stock exchanges are open for trading. The Company also encourages officers, directors, employees and Subject Contractors to consider conducting transactions in the Company’s securities only during the first 20 calendar days following the end of the Black-Out Period. |
| 1 |
|
| C. | No officer, director, employee or Subject Contractor shall directly or indirectly tip material, non-public information to anyone while in possession of such information. In addition, material, non-public information should not be communicated to anyone outside the Company under any circumstances (absent prior approval by the Compliance Officer and execution of an appropriate confidentiality agreement), or to anyone within the Company other than on a need-to- know basis. |
|
|
|
|
|
| D. | This Policy does not apply in the case of the following transactions under Company plans, except as set forth under Section IV.D. (Pre-Clearance) and except as otherwise specifically noted: |
|
| 1. | This Policy does not apply to the exercise of stock options or the vesting of restricted stock units or restricted stock, in each case granted under Company’s equity compensation plans. This Policy does apply, however, to any sale of Company Stock (as defined below) as part of a broker-assisted cashless option exercise, or any other market sale of the Company Stock received upon exercise or vesting of any equity award, whether or not for the purpose of generating the cash needed to pay the exercise price of a stock option or to pay taxes. |
|
|
|
|
|
| 2. | This Policy does not apply to the surrender of shares directly to the Company to satisfy tax withholding obligations as a result of the issuance of shares upon vesting or exercise of restricted stock units, stock options or other equity awards granted under the Company’s equity compensation plans. Of course, any market sale of the Company Stock received upon exercise or vesting of any such equity awards remains subject to all provisions of this Policy, whether or not for the purpose of generating the cash needed to pay the exercise price or pay taxes. |
|
|
|
|
|
| 3. | This Policy does not apply to purchases of Company Stock under the Company’s Equity Incentive Plan (“Equity Incentive Plan”) on periodic designated dates in accordance with the Equity Incentive Plan. This Policy does apply, however, to an employee’s sale of Company Stock purchased pursuant to the Equity Incentive Plan. |
|
|
|
|
|
| 4. | This Policy does not apply to purchases of Company Stock on periodic designated dates in accordance with the Company’s Non-Employee Directors’ Compensation Policy (the “Directors’ Compensation Policy”). This Policy does apply, however, to a director’s election to receive Company Stock in lieu of cash compensation under the Directors’ Compensation Policy. Accordingly, such elections may not be effected during a Black-Out Period or when a director is otherwise in possession of material, non- public information relating to the Company or any of its securities. |
III. EXPLANATION OF INSIDER TRADING.
As noted above, “insider trading” refers to the purchase or sale of a security while in possession of “material,” “non-public” information relating to the security. “Securities” include not only stocks, bonds, notes and debentures, but also stock options, warrants and similar instruments. “Purchase” and “sale” are defined broadly under the federal securities laws. “Purchase” includes not only the actual purchase of a security, but any contract to purchase or otherwise acquire a security. “Sale” includes not only the actual sale of a security, but any contract to sell or otherwise dispose of a security. These definitions extend to a broad range of transactions including conventional cash-for-stock transactions, conversions, the grant and exercise of stock options and acquisitions and exercises of warrants or puts, calls or other options related to a security. It is generally understood that insider trading includes the following:
|
| · | Trading by insiders while in possession of material, non-public information; |
|
| · | Trading by persons other than insiders while in possession of material, non-public information where the information either was given in breach of an insider’s fiduciary duty to keep it confidential or was misappropriated; or |
|
| · | Communicating or tipping material, non-public information to others, including recommending the purchase or sale of a security while in possession of such information. |
| 2 |
A. WHAT FACTS ARE MATERIAL?
The materiality of a fact depends upon the circumstances. A fact is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell or hold a security or where the fact is likely to have a significant effect on the market price of the security. Material information can be positive or negative and can relate to virtually any aspect of a company’s business or to any type of security, debt or equity.
Examples of material information include (but are not limited to) facts concerning: dividends; corporate earnings or earnings forecasts; possible mergers or acquisitions; significant developments in borrowings or financings; information concerning product developments or clinical results; important business developments and major litigation developments. Moreover, material information does not have to be related to a company’s business. For example, the contents of a forthcoming newspaper column that is expected to affect the market price of a security can be material.
A good general rule of thumb: when in doubt, do not trade.
B. WHAT IS NON-PUBLIC?
Information is “non-public” if it is not available to the general public. In order for information to be considered public, it must be widely disseminated in a manner making it generally available to investors through such media as Dow Jones, Reuters, The Wall Street Journal, Business Wire, Globe Newswire, Associated Press, PR Newswire or United Press International or filed with the United States Securities and Exchange Commission (the “SEC”). The circulation of rumors, even if accurate and reported in the media, does not constitute effective public dissemination.
In addition, even after a public announcement, a reasonable period of time must lapse in order for the market to react to the information. Generally, one should allow approximately twenty-four (24) hours following publication as a reasonable waiting period before such information is deemed to be public.
C. WHO IS AN INSIDER?
“Insiders” include officers, directors and employees of a company and anyone else who has material inside information about a company, including Subject Contractors. Insiders have independent fiduciary duties to their company and its stockholders not to trade on material, non- public information relating to the company’s securities. All officers, directors, employees and Subject Contractors of the Company should consider themselves insiders with respect to material, non-public information about the Company’s business, activities and securities. Officers, directors, employees and Subject Contractors may not trade the Company’s securities while in possession of material, non-public information relating to the Company nor tip (or communicate except on a need-to-know basis) such information to others.
It should be noted that trading by members of an insider’s household can be the responsibility of such insider under certain circumstances and could give rise to legal and Company-imposed sanctions.
| 3 |
D. TRADING BY PERSONS OTHER THAN INSIDERS.
Insiders may be liable for communicating or tipping material, non-public information to a third party (a “tippee”), and insider trading violations are not limited to trading or tipping by insiders. Persons other than insiders also can be liable for insider trading, including tippees who trade on material, non-public information tipped to them or individuals who trade on material, non- public information which has been misappropriated.
Tippees inherit an insider’s duties and are liable for trading on material, non-public information illegally tipped to them by an insider. Similarly, just as insiders are liable for the insider trading of their tippees, so are tippees who pass the information along to others who trade. In other words, a tippee’s liability for insider trading is no different from that of an insider. Tippees can obtain material, non-public information by receiving overt tips from others or through, among other things, conversations at social, business or other gatherings.
E. PENALTIES FOR ENGAGING IN INSIDER TRADING.
Penalties for trading on or tipping material, non-public information can extend significantly beyond any profits made or losses avoided, both for individuals engaging in such unlawful conduct and their employers. The SEC and the Department of Justice have made the civil and criminal prosecution of insider trading violations a top priority. Enforcement remedies available to the government or private plaintiffs under the federal securities laws include:
|
| · | SEC administrative sanctions; |
|
| · | Securities industry self-regulatory organization sanctions; |
|
| · | Civil injunctions; |
|
| · | Damage awards to private plaintiffs; |
|
| · | Disgorgement of all profits; |
|
| · | Civil fines for the violator of up to three (3) times the amount of profit gained or loss avoided; |
|
| · | Civil fines for the employer or other controlling person of a violator (i.e., where the violator is an employee or other controlled person) of up to the greater of $1,000,000 or three (3) times the amount of profit gained or loss avoided by the violator; |
|
| · | Criminal fines for individual violators of up to $5,000,000 ($25,000,000 for an entity); and |
|
| · | Jail sentences of up to twenty (20) years. |
In addition, insider trading could result in serious sanctions by the Company, including dismissal. Insider trading violations are not limited to violations of the federal securities laws. Other federal and state civil or criminal laws, such as the laws prohibiting mail and wire fraud and the Racketeer Influenced and Corrupt Organizations Act, also may be violated upon the occurrence of insider trading.
F. EXAMPLES OF INSIDER TRADING.
Examples of insider trading cases include actions brought against: corporate officers, directors and employees who traded a company’s securities after learning of significant confidential corporate developments; friends, business associates, family members and other tippees of such officers, directors and employees who traded the securities after receiving such information; government employees who learned of such information in the course of their employment; and other persons who misappropriated, and took advantage of, confidential information from their employers.
| 4 |
The following are illustrations of insider trading violations. These illustrations are hypothetical and are not comprehensive, and, consequently, are not intended to reflect the actual activities or business of the Company or any other entity.
Trading by Insider
An officer of X Corporation learns that earnings to be reported by X Corporation will increase dramatically. Prior to the public announcement of such earnings, the officer purchases X Corporation’s stock. The officer, an insider, is liable for all profits as well as penalties of up to three (3) times the amount of all profits. The officer also is subject to, among other things, criminal prosecution, including up to $5,000,000 in additional fines and twenty (20) years in jail. Depending upon the circumstances, X Corporation and the individual to whom the officer reports also could be liable as controlling persons.
Trading by Tippee
An officer of X Corporation tells a friend that X Corporation is about to publicly announce that it has concluded an agreement for a major acquisition. This tip causes the friend to purchase X Corporation’s stock in advance of the announcement. The officer is jointly liable with his friend for all of the friend’s profits and each is liable for all penalties of up to three (3) times the amount of the friend’s profits. In addition, the officer and his friend are subject to, among other things, criminal prosecution, as described above.
G. INSIDER REPORTING REQUIREMENTS, SHORT-SWING PROFITS AND SHORT SALES.
1. Reporting Obligations Under Section 16(a) -SEC Forms 3, 4 and 5.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), generally requires all officers, directors and 10% stockholders, within ten (10) days after the insider becomes an officer, director or 10% stockholder (such person a “Section 16 reporting person”), to file with the SEC an “Initial Statement of Beneficial Ownership of Securities” on SEC Form 3 (“Form 3”) listing the amount of the Company’s Common Stock (the “Stock”), stock options and warrants which the insider beneficially owns. Following the initial filing on Form 3, every change in the beneficial ownership of the Company’s Stock, stock options and warrants must be reported on SEC Form 4 (“Form 4”) within two (2) business days after the date on which such change occurs or in certain cases on SEC Form 5 (“Form 5”) within forty-five (45) days after fiscal year end. Form 4 must be filed even if, as a result of balancing transactions, there has been no net change in holdings. In deciding the filing deadline for purposes of filing Form 4, the trade date rather than the settlement date is ordinarily determinative.
Special rules apply in certain situations. If any officer or director purchases or sells any of the Company’s Stock within six (6) months after the event which required him or her to file Form 3, the Form 4 filed with respect to that purchase or sale must also report any other purchases or sales he or she made within the preceding six (6) months which were not previously reported. Similarly, if an officer or director purchases or sells any of the Company’s Stock within six (6) months after his or her termination from such position, the transaction must be reported on Form 4 if he or she made any purchase or sale within the preceding six (6) months and prior to termination.
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2. Recovery of Profits Under Section 16(b).
For the purpose of preventing the unfair use of information which may have been obtained by an insider, any profits realized by any Section 16 reporting person from any “purchase” and “sale” of the Company’s Stock during a six (6) month period, so called “short-swing profits,” may be recovered by the Company. When such a purchase and sale occurs, good faith is no defense. The Section 16 reporting person is liable even if compelled to sell for personal reasons, and even if the sale takes place after full disclosure and without the use of any inside information.
The liability of a Section 16 reporting person under Section 16(b) of the 1934 Act is only to the Company itself. The Company, however, cannot waive its right to short-swing profits, and any Company stockholder can bring suit in the name of the Company. In this connection it must be remembered that reports of ownership filed with the SEC on Form 3, Form 4 or Form 5 pursuant to Section 16(a) (discussed above) are readily available to the public, and certain attorneys carefully monitor these reports for potential Section 16(b) violations. In addition, liabilities under Section 16(b) may require separate disclosure in the Company’s annual report to the SEC on Form 10-K or its proxy statement for its annual meeting of stockholders. No suit may be brought more than two (2) years after the date the profit was realized. However, if the Section 16 reporting person fails to file a report of the transaction under Section 16(a), as required, the two (2) year limitation period does not begin to run until after the transactions giving rise to the profit have been disclosed. Failure to report transactions and late filing of reports require separate disclosure in the Company’s proxy statements.
Officers and directors should consult the attached “Short-Swing Profit Rule Section 16(b) Checklist” attached hereto as ATTACHMENT A in addition to consulting with the Compliance Officer prior to engaging in any transactions involving the Company’s securities (see Section IV(A) below), including without limitation, the Company’s Stock, stock options or warrants.
3. Short Sales Prohibited Under Section 16(c).
Section 16(c) of the 1934 Act absolutely prohibits insiders from making short sales of the Company’s Stock, i.e., sales of shares which the insider does not own at the time of sale or sales of the Company’s Stock against which the insider does not deliver the shares within twenty (20) days after the sale. Under certain circumstances, the purchase or sale of put or call options, or the writing of such options, can result in a violation of Section 16(c). Insiders violating Section 16(c) face criminal liability.
The Compliance Officer should be consulted if you have any questions regarding reporting obligations, short-swing profits or short sales under Section 16.
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H. PROHIBITION OF RECORDS FALSIFICATIONS AND FALSE STATEMENTS.
Section 13(b)(2) of the 1934 Act requires companies subject to the 1934 Act to maintain proper internal books and records and to devise and maintain an adequate system of internal accounting controls. The SEC has supplemented the statutory requirements by adopting rules that prohibit (1) any person from falsifying records or accounts subject to the above requirements and (2) officers or directors from making any materially false, misleading or incomplete statement to any accountant in connection with any audit or filing with the SEC. These provisions reflect the SEC’s intent to discourage officers, directors and other persons with access to the Company’s books and records from taking action that might result in the communication of materially misleading financial information to the investing public.
IV. STATEMENT OF PROCEDURES PREVENTING INSIDER TRADING.
The following procedures have been established, and will be maintained and enforced, by the Company to prevent insider trading. Every officer, director, employee and Subject Contractor is required to follow these procedures.
A. IDENTIFYING MATERIAL, NON-PUBLIC INFORMATION.
Prior to directly or indirectly trading any security of the Company, every officer, director, employee and Subject Contractor is required to contact the Compliance Officer (as part of the pre-clearance procedure discussed below in Section IV.D) and make an initial determination whether the Company and/or such officer, director, employee and/or Subject Contractor is in possession of material, non-public information relating to such security. In making such assessment, the explanations of “material” and “non-public” information set forth above should be of assistance. If after consulting with the Compliance Officer it is determined that the Company and/or such officer, director, employee or Subject Contractor is in possession of material, non-public information, there can be no trading of such security.
I. INFORMATION RELATING TO THE COMPANY.
1. Access to Information.
Access to material, non-public information about the Company, including the Company’s business, clinical data or analyses, interactions with regulatory authorities, pending publication of scientific/clinical data or results, earnings or prospects, should be limited to officers, directors, employees and Subject Contractors of the Company on a need-to-know basis. In addition, such information should not be communicated to anyone outside the Company under any circumstances (absent prior approval by the Compliance Officer and execution of an appropriate confidentiality agreement) or to anyone within the Company other than on a need-to-know basis.
In communicating material, non-public information to employees of the Company, all officers, directors, employees and Subject Contractors must take care to emphasize the need for confidential treatment of such information and adherence to the Company’s policies with regard to confidential information.
2. Inquiries from Third Parties.
Inquiries from third parties, such as industry analysts or members of the media, about the Company should be directed to the Compliance Officer or his/her designee.
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J. LIMITATIONS ON ACCESS TO THE COMPANY INFORMATION.
The following procedures are designed to maintain confidentiality with respect to the Company’s information, business operations and activities.
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| 1. | All officers, directors, employees and Subject Contractors should take all steps and precautions necessary to restrict access to, and secure, material, non-public information by, among other things: |
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| · | Maintaining the confidentiality of Company related information; |
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| · | Conducting their business and social activities so as not to risk inadvertent disclosure of confidential information. Review of confidential documents in public places should be conducted so as to prevent access by unauthorized persons; |
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| · | Restricting access to documents and files (including computer files) containing material, non-public information to individuals on a need-to-know basis (including maintaining control over the distribution of documents and drafts of documents); |
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| · | Promptly removing and cleaning up all confidential documents and other materials from conference rooms following the conclusion of any meetings; |
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| · | Disposing of all confidential documents and other papers, after there is no longer any business or other legally required need, through shredders when appropriate; |
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| · | Restricting access to areas likely to contain confidential documents or material, non¬public information; and |
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| · | Avoiding the discussion of material, non-public information in places where the information could be overheard by others, such as in elevators, restrooms, hallways, restaurants, airplanes or taxicabs. |
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| 2. | Personnel involved with material, non-public information, to the extent feasible, should conduct their business and activities in areas separate from other Company activities. |
K. PRE-CLEARANCE OF TRADES BY OFFICERS, DIRECTORS, EMPLOYEES AND SUBJECT CONTRACTORS.
To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the purchase and sale of the Company securities, except as set forth in the paragraph below, all transactions in Company securities (including without limitation, acquisitions and dispositions of the Company’s Stock, the exercise of stock options, the sale of the Company’s Stock issued upon the exercise of stock options or the vesting of restricted stock units or restricted stock, and the sale of the Company’s Stock purchased under the Equity Incentive Plan) by officers, directors, employees and Subject Contractors must be pre-cleared by the Compliance Officer. A request for pre-clearance should be submitted to the Compliance Officer at least two (2) business days in advance of the proposed transaction.
Additionally, except as set forth in Section II.D. above, neither the Company nor any of its officers, directors, employees or Subject Contractors may trade in any securities of the Company during the Black-Out Period, unless authorized by the Compliance Officer. Also, please consult the “Insider Trading Reminders” attached hereto as ATTACHMENT B.
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The requirement for pre-clearance as set forth in the above paragraph does not apply to the following transactions:
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| · | the vesting of restricted stock units or restricted stock; |
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| · | purchases of Company Stock under the Equity Incentive Plan on periodic designated dates in accordance with the Equity Incentive Plan; |
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| · | purchases of Company Stock under on periodic designated dates in accordance with the Directors’ Compensation Policy; and |
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| · | transactions effected under an approved Rule 10b5-1 Trading Plan as set forth in Section V below. |
All other transactions in Company securities, including the exercise of stock options, are subject to pre-clearance as set forth in the above paragraph. A request for pre-clearance must be made in writing, preferably by submission of a completed Request for Pre-Clearance in the form of ATTACHMENT C to this Policy. Pre-cleared transactions should be effected promptly. Requestors are required to refresh the request for pre-clearance if a pre-cleared transaction is not effected within five business days after pre-clearance is received.
Furthermore, requestors must immediately notify the Compliance Officer following the execution of any transaction.
L. AVOIDANCE OF CERTAIN AGGRESSIVE OR SPECULATIVE TRADING.
Officers, directors, employees and Subject Contractors, and their respective family members (including spouses, minor children or any other family members living in the same household), as applicable, may not directly or indirectly participate in transactions involving trading activities which by their aggressive or speculative nature cause or even give the appearance of an impropriety, such as, for example, those listed in Nos. 1 and 2 below. If you are uncertain whether your proposed transaction may implicate these prohibitions, please contact the Compliance Officer for pre-approval.
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| 1. | PROHIBITION OF SPECULATIVE TRADING/HEDGING. All directors, officers, employees and Subject Contractors are prohibited from engaging in short sales; transactions in put or call options, hedging or monetization transactions; or other inherently speculative transactions with respect to the securities of the Company at any time. |
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| 2. | PROHIBITION ON PLEDGING. All directors, officers, employees and Subject Contractors are prohibited from holding any securities of the Company in a margin account or otherwise pledging any securities of the Company as collateral for any loan. |
V. RULE 10B5-1 TRADING PLANS.
A. OVERVIEW.
SEC Rule 10b5-1 (“Rule 10b5-1”) protects directors, officers and employees from insider trading liability under Rule 10b5-1 for transactions under a previously established contract, plan or instruction to trade the Company’s Stock (a “Trading Plan”) entered into in good faith and in accordance with the terms of Rule 10b5-1 of the 1934 Act and all applicable state laws and shall be exempt from the trading restrictions set forth in the Policy. The initiation of, and any modification to, any such Trading Plan will be deemed to be a transaction in the Company’s securities and such initiation or modification is subject to all limitations and prohibitions of transactions involving the Company’s securities. Each such Trading Plan, and any modification thereof, shall be submitted to and pre-approved by the Compliance Officer, or such other person as the Company’s Board of Directors may designate from time to time (the “Authorizing Officer”), who may impose such conditions on the implementation and operation of the Trading Plan as the Authorizing Officer deems necessary or advisable. Without limiting the generality of the foregoing, the Authorizing Officer may prescribe certain forms of Trading Plans to which each Trading Plan must conform. The Authorizing Officer may also require that Trading Plans be arranged with a specified broker. However, compliance of the Trading Plan to the terms of Rule 10b5-1 and the execution of transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the Trading Plan, not the Company or the Authorizing Officer.
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Rule 10b5-1 presents an opportunity for insiders to establish arrangements to sell (or purchase) the Company’s Stock without the restrictions of windows and blackout periods even when there is undisclosed material information. A Trading Plan might also help reduce negative publicity that may result when key executives sell the Company’s Stock. Rule 10b5-1 only provides an “affirmative defense” in the event there is an insider-trading lawsuit. It does not prevent someone from bringing a lawsuit.
A director, officer and employee may enter into a Trading Plan that outlines a pre-set plan for trading of the Company’s Stock, including the exercise of stock options only when he or she is not in possession of material, non-public information, and only during an open trading window period outside of the Black-Out Period. An individual may adopt more than one Trading Plan. Although transactions effected under a Trading Plan will not require further pre-clearance at the time of the trade, any transaction (including the quantity and price) made pursuant to a Trading Plan of a Section 16 reporting person must be reported to the Company promptly on the day of each trade to permit the Company’s Section 16 filing coordinator to assist in the preparation and filing of a required Form 4. Trades pursuant to a Trading Plan may occur at any time, subject to a 30-day waiting period after adoption of the Trading Plan during which time no transactions under the Trading Plan can be made.
From time to time, for legal or other reasons, the Authorizing Officer may direct that purchases and sales pursuant to any Trading Plan be suspended or discontinued. Failure to discontinue purchases and sales as directed shall constitute a violation of the terms of this Section V and result in a loss of the exemption set forth herein.
Please review the following description of how a Trading Plan works.
Pursuant to Rule 10b5-1, an individual’s purchase or sale of securities will not be “on the basis of” material non-public information if:
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| · | First, before becoming aware of the information, the individual enters into a binding contract to purchase or sell the securities, provides instructions to another person to sell the securities or adopts a written plan for trading the securities (i.e., the Trading Plan). |
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| · | Second, the Trading Plan must either: |
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| o | specify the amount of securities to be purchased or sold, the price at which the securities are to be purchased or sold and the date on which the securities are to be purchased or sold; |
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| o | include a written formula or computer program for determining the amount, price and date of the transactions; or |
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| o | prohibit the individual from exercising any subsequent influence over the purchase or sale of the Company’s Stock under the Trading Plan in question. |
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| · | Third, the purchase or sale must occur pursuant to the Trading Plan and the individual must not enter into a corresponding hedging transaction or alter or deviate from the Trading Plan. |
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B. REVOCATION/AMENDMENTS TO TRADING PLANS.
Revocation of Trading Plans (which includes terminations of Trading Plans) should occur only in unusual circumstances, and the effectiveness of any revocation of a Trading Plan will be subject to the prior review and approval of the Authorizing Officer. If an individual revokes a Trading Plan, then the individual may not enter into a new Trading Plan until thirty (30) days after termination of the Trading Plan or such longer period as the Authorizing Officer may determine in his or her discretion. Such new Trading Plan can be executed only when the individual is not in possession of material non-public information, and during a trading window period outside of a Black-Out Period. In addition, transactions pursuant to such new Trading Plan will be subject to a thirty (30) day waiting period after adoption of the new Trading Plan during which time no transactions under the new Trading Plan can be made.
Each Trading Plan must contain provisions allowing the Company to revoke or suspend a Trading Plan. Circumstances under which Trading Plans may be revoked or suspended include the announcement of a merger or the occurrence of an event that would cause the transaction either to violate applicable law or to have an adverse effect on the Company. The Authorizing Officer or administrator of the Company’s stock plans is authorized to notify the applicable broker in such circumstances.
Amendments to Trading Plans, which for these purposes would include any modifications to or voluntary suspensions of Trading Plans, should be made in only very limited circumstances and should be avoided if possible. Any amendment to a Trading Plan will be subject to the prior review and approval of the Authorizing Officer. Any amendment to a Trading Plan can be effected only when the individual is not in possession of material non-public information, and during a trading window period outside of a Black-Out Period. In addition, transactions pursuant to such amended Trading Plan will be subject to a thirty (30) day waiting period after adoption of the amended Trading Plan (or such longer period as the Authorizing Officer may determine in his or her discretion) during which time no transactions under the amended Trading Plan can be made.
C. DISCRETIONARY PLANS.
Discretionary Trading Plans, where the discretion or control over trading is transferred to a broker, are permitted if (i) pre-approved by the Authorizing Officer, (ii) the officer, director, or employee may not exercise influence over the broker’s trading decisions and (iii) the broker may not be in possession of any Company material non-public information.
The Authorizing Officer of the Company must pre-approve any Trading Plan, arrangement or trading instructions, etc., involving potential sales or purchases of the Company’s Stock or stock option exercises, including but not limited to, blind trusts, or limit orders. The actual transactions effected pursuant to a pre-approved Trading Plan will not be subject to further pre-clearance for transactions in the Company’s Stock once the Trading Plan or other arrangement has been pre-approved.
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D. REPORTING (IF REQUIRED).
SEC Form 144 (“Form 144”) will be filled out and filed by the individual/brokerage firm in accordance with the existing rules regarding Form 144 filings. A footnote at the bottom of the Form 144 should indicate that the trades “are in accordance with a Trading Plan that complies with Rule 10b5-1 and expires ______.” For Section 16 reporting persons, Form 4s should be filed before the end of the second (2nd) business day following the date that the broker, dealer or plan administrator informs the individual that a transaction was executed, provided that the date of such notification is not later than the third (3rd) business day following the trade date. A similar footnote should be placed at the bottom of the Form 4 as outlined above.
E. STOCK OPTIONS.
Cash exercise of stock options currently can be executed at any time. Same day sales exercises of stock options are subject to trading windows. However, the Company will permit same day sales under Trading Plans. Once a broker determines that the time is right to exercise the stock option and dispose of the shares in accordance with the Trading Plan, the broker will notify the Company in writing and the administrator of the Company’s stock plans will process the transaction. The insider should not be involved with this type of same day sale exercise.
F. TRADES OUTSIDE OF A TRADING PLAN.
During an open window, trades which differ from Trading Plan instructions that are already in place are allowed as long as the Trading Plan continues to be followed.
The Trading Plans do not exempt the Section 16 reporting person from the Section 16 six (6) month short-swing profit rules or liability.
G. PUBLIC ANNOUNCEMENTS.
The Company may make a public announcement that Trading Plans are being implemented in accordance with Rule 10b5-1. It will consider in each case whether a public announcement of a particular Trading Plan should be made. It may also make public announcements or respond to inquiries from the media as transactions are made under a Trading Plan.
H. PLEDGING THE COMPANY’S STOCK TO SECURE MARGIN OF OTHER LOANS.
The Company does not permit officers or directors to pledge the Company’s Stock or securities as collateral to secure loans. Such pledges also cannot be carried out through a Trading Plan. The Trading Plan must be consistent with Section IV E above.
I. PUT AND CALL OPTIONS AND OTHER HEDGING TRANSACTIONS.
Put and call options and other hedging transactions will not be permitted under a Trading Plan. In fact, such transactions outside of a Trading Plan may destroy the protection afforded by a Trading Plan. The Trading Plan must be consistent with Section IV E above.
J. POLICY TAKES PRECEDENCE.
In the event of any conflict between this Policy and any Trading Plan, this Policy shall control, to the extent the Trading Plan would permit activities otherwise prohibited by this Policy.
VI. EXECUTION AND RETURN OF CERTIFICATION OF COMPLIANCE.
After reading this policy statement all officers, directors, employees and Subject Contractors should execute and return to a Compliance Officer the applicable Certification of Compliance form attached hereto as ATTACHMENT D, ATTACHMENT E or ATTACHMENT F.
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ATTACHMENT A
SHORT-SWING PROFIT RULE SECTION 16(b) CHECKLIST
Note: ANY combination of PURCHASE AND SALE or SALE AND PURCHASE within six (6) months of each other results in a violation of Section 16(b), and the “profit” must be recovered by the Company. It makes no difference how long the shares being sold have been held or that you are an insider for only one of the two matching transactions. The highest priced sale will be matched with the lowest priced purchase within the six (6) month period.
1) SALES
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| a) | If a sale is to be made by an officer, director or 10% stockholder (or any family member living in the same household): | |
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| 1. | Have there been any purchases by the insider (or family members living in the same household) within the past six (6) months? |
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| 2. | Have there been any stock option exercises within the past six (6) months? |
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| 3. | Are any purchases (or stock option exercises) anticipated or required within the next six (6) months? |
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| 4. | Has a Form 4 been prepared? |
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| b) | Note: If a sale is to be made by an affiliate of the Company and unregistered stock is to be sold, has a Form 144 been prepared and has the broker been reminded to sell pursuant to Rule 144? | |
2) PURCHASES AND STOCK OPTION EXERCISES
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| a) | If a purchase or stock option exercise for stock is to be made: | |
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| 1. | Have there been any sales by the insider (or family members living in the same household) within the past six (6) months? |
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| 2. | Are any sales anticipated or required within the next six (6) months (such as tax- related or year-end transactions)? |
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| 3. | Has a Form 4 been prepared? |
BEFORE PROCEEDING WITH A PURCHASE OR SALE, CONSIDER WHETHER YOU ARE AWARE OF MATERIAL, NON-PUBLIC INFORMATION WHICH COULD AFFECT THE PRICE OF THE STOCK.
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ATTACHMENT B
INSIDER TRADING REMINDERS
Before engaging in any transaction in the Company’s securities, please read the following:
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| · | Both the federal securities laws and the Company’s policy prohibit transactions in the Company’s securities at a time when you may be in possession of material information about the Company which has not been publicly disclosed. This also applies to members of your household as well as all others whose transactions may be attributable to you. |
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| · | Material information, in short, is any information which could affect the price of the securities. Either positive or negative information may be material. Once a public announcement has been made, you should wait until the information has been made available to the public for at least twenty-four (24) hours before engaging in any transaction. |
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| · | Except as set forth in Section II.D. of our Insider Trading Compliance Policy and except for transactions effected under an approved Rule 10b5-1 Trading Plan as described in Section V of our Insider Trading Compliance Policy, neither the Company nor any of its officers, directors, employees or Subject Contractors may trade in any securities of the Company during the period beginning on the last day of each fiscal quarter ending one (1) full “trading day” after the public release of the Company’s quarterly/annual report whether or not the Company or any of its officers, directors, employees or Subject Contractors is in possession of material, non-public information, unless authorized by the Compliance Officer. |
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| · | Important: All transactions by officers, directors, employees and Subject Contractors must be pre-cleared with the Compliance Officer, except as specifically noted in Section IV.D. of our Insider Trading Compliance Policy. |
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| · | For further information and guidance, please refer to our Insider Trading Compliance Policy and do not hesitate to contact the Compliance Officer. |
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| · | ALL TRANSACTIONS IN ZIVO BIOSCIENCE, INC. SECURITIES BY OFFICERS, DIRECTORS, EMPLOYEES AND SUBJECT CONTRACTORS MUST BE PRE- CLEARED BY THE COMPLIANCE OFFICER. |
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ATTACHMENT C
Request for Pre-Clearance*
For pre-clearance to transact in Company Securities.
Upon executing a transaction, directors, officers and employees must immediately notify the Company.
| Transaction Vehicle (check one) | Transaction Initiated By (check one) | ||
| ☐ | Open Market Transaction | ☐ | Employee or immediate family member directly |
| ☐ | Equity Compensation Plan | ☐ | Court or government decree (e.g., divorce decree) |
| ☐ | Other (specify): | ☐ | Broker (provide name, firm, telephone and e-mail): |
Type of Transaction (check one)
| ☐ | Purchase or acquire common stock |
| ☐ | Sell or dispose of common stock |
| ☐ | Move Company Securities from one account to another (e.g., in or out of a trust) |
| ☐ | Dispose of fractional shares |
| ☐ | Pledge Company Securities for margin account, or otherwise |
| ☐ | Exercise options without subsequent sale |
| ☐ | Exercise options with subsequent sale (e.g., a “cashless exercise”) |
| ☐ | Other (describe): |
Transaction Detail (provide the following information)
Number of securities:
Estimated share price:
Contemplated execution date:
Date of your last “opposite way” transaction**:
Certification
I certify that I have fully disclosed the information requested in this form, I have read the ZIVO Bioscience, Inc. Insider Trading Compliance Policy, I am not in possession of material nonpublic information, and to the best of my knowledge and belief the proposed transaction will not violate the ZIVO Bioscience, Inc. Insider Trading Compliance Policy.
Signature:
Print Name:
Date:
* Capitalized terms used but not defined herein have the meanings ascribed to them in the ZIVO Bioscience, Inc. Insider Trading Compliance Policy.
** If a Section 16 insider buys and sells (or sells and buys) Company Securities within a six-month time frame and such transactions are not exempt under SEC rules, the two transactions can be “matched” for purposes of Section 16. The insider may be sued and will be strictly liable for any profits made, regardless of whether the insider was in possession of material nonpublic information.
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ATTACHMENT D
Outside Directors
CERTIFICATION OF COMPLIANCE
TO: Compliance Officer
FROM:
RE: INSIDER TRADING COMPLIANCE POLICY OF ZIVO BIOSCIENCE, INC.
I have received, reviewed and understand the above-referenced Insider Trading Compliance Policy and hereby undertake, as a condition to my present and continued affiliation with ZIVO Bioscience, Inc., to comply fully with the policies and procedures contained therein.
I hereby certify that to the best of my knowledge I have complied, and I will henceforth comply fully with all policies and procedures set forth in the above-referenced Insider Trading Compliance Policy.
SIGNATURE DATE
TITLE
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ATTACHMENT E
Officers, Management Directors & Employees
CERTIFICATION OF COMPLIANCE
TO: Compliance Officer
FROM:
RE: INSIDER TRADING COMPLIANCE POLICY OF ZIVO BIOSCIENCE, INC.
I have received, reviewed and understand the above-referenced Insider Trading Compliance Policy and hereby undertake, as a condition to my present and continued employment at ZIVO Bioscience, Inc., to comply fully with the policies and procedures contained therein.
I hereby certify that to the best of my knowledge I have complied, and I will henceforth comply fully with all policies and procedures set forth in the above-referenced Insider Trading Compliance Policy.
SIGNATURE DATE
TITLE
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ATTACHMENT F
Consultants, Contractors, Board Observers
CERTIFICATION OF COMPLIANCE
TO: Compliance Officer
FROM:
RE: INSIDER TRADING COMPLIANCE POLICY OF ZIVO BIOSCIENCE, INC.
The above named consultant or contractor to ZIVO Bioscience, Inc. has received, reviewed and understands the above-referenced Insider Trading Compliance Policy and hereby undertakes, as a condition to his, her or its present and continued consulting or other contractual relationship with ZIVO Bioscience, Inc., to comply fully with the policies and procedures contained therein.
The above named consultant or contractor hereby certifies that to the best of his, her or its knowledge such consultant or contractor has complied and will henceforth comply fully with all policies and procedures set forth in the above-referenced Insider Trading Compliance Policy.
SIGNATURE DATE
TITLE
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EXHIBIT 21.1
| Subsidiaries of the Registrant |
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| Zivo Bioscience, Inc. has the following Subsidiaries: |
| Jurisdiction of Incorporation or Organization |
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| Health Enhancement Corporation |
| Nevada Corporation |
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| HEPI Pharmaceuticals, Inc. |
| Nevada Corporation |
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| Wellmetrix, LLC |
| Delaware limited liability company |
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| Wellmetris, LLC |
| Delaware limited liability company |
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| Zivo Biologic, Inc. |
| Delaware corporation |
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| Zivo Bioscience, LLC |
| Florida limited liability company |
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| Zivo Zoologic, Inc. |
| Delaware corporation |
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| ZIVOLife LLC |
| Delaware limited liability company |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-272493) and Form S-8 (No. 333-265765) of Zivo Bioscience, Inc. (the Company) of our report dated March 18, 2025, relating to the consolidated financial statements, which appears in this Annual Report on Form 10-K. Our report contains an explanatory paragraph regarding the Company's ability to continue as a going concern.
/s/ BDO USA, P.C.
Troy, Michigan
March 18, 2025
EXHIBIT 31.1
RULE 13a-14(a) CERTIFICATIONS
I, John B. Payne, certify that:
1. I have reviewed this Annual Report on Form 10-K of Zivo Biosciences, 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 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.
Date: March 18, 2025
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| /s/ John B. Payne |
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| Name: John B. Payne Title: President, Chief Executive Officer |
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EXHIBIT 31.2
RULE 13a-14(a) CERTIFICATIONS
I, Keith Marchiando, certify that:
1. I have reviewed this Annual Report on Form 10-K of Zivo Biosciences, 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 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.
Date: March 18, 2025
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| /s/ Keith Marchiando |
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| Name: Keith Marchiando Title: Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, John B. Payne, the President and Chief Executive Officer of Zivo Biosciences, Inc. (the "Company"), hereby certify, that, to my knowledge:
1. The Annual Report on Form 10-K for the year ended December 31, 2024 (the "Report") of the Company fully complies with the requirements of Section 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.
Date: March 18, 2025
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| /s/ John B. Payne |
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| Name: John B. Payne Title: President, Chief Executive Officer |
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Keith Marchiando, the Chief Financial Officer of Zivo Biosciences, Inc. (the "Company"), hereby certify, that, to my knowledge:
1. The Annual Report on Form 10-K for the year ended December 31, 2024 (the "Report") of the Company fully complies with the requirements of Section 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.
Date: March 18, 2025
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| /s/ Keith R. Marchiando |
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| Name: Keith Marchiando Title: Chief Financial Officer |
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