ZIVO BIOSCIENCE(ZIVO) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides unaudited condensed financial statements, management's discussion, market risk disclosures, and controls and procedures for the reporting period Item 1. Condensed Financial Statements (Unaudited) This section presents the Company's unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with notes addressing going concern issues Condensed Consolidated Balance Sheets This section provides a snapshot of the Company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) | | June 30, 2025 ($) | December 31, 2024 ($) | |:---|:---|:---| | ASSETS | | | | Cash | $9,823 | $1,542,442 | | Accounts receivable | $34,364 | $2,211 | | Prepaid expenses | $365,707 | $90,789 | | Total current assets | $409,894 | $1,635,442 | | Operating lease - right of use asset | $285,753 | $- | | Security deposit | $7,680 | $7,680 | | TOTAL ASSETS | $703,327 | $1,643,122 | | LIABILITIES | | | | Accounts payable | $860,939 | $547,090 | | Accounts payable – related party | $70,056 | $194,762 | | Customer deposits | $34,364 | $- | | Current portion of long-term operating lease | $63,219 | $- | | Convertible debentures payable | $138,510 | $138,164 | | Loan payable – current portion | $292,919 | $- | | Accrued interest | $65,628 | $65,628 | | Accrued liabilities – employee bonus | $1,433,953 | $1,096,179 | | Total current liabilities | $2,959,588 | $2,041,823 | | Lease liabilities | $237,523 | $- | | Long-term note payable, net of current portion | $46,962 | $116,197 | | Total long-term liabilities | $284,485 | $116,197 | | TOTAL LIABILITIES | $3,244,073 | $2,158,020 | | STOCKHOLDERS' EQUITY (DEFICIT) | | | | Common stock | $3,817 | $3,621 | | Additional paid-in capital | $140,273,406 | $136,448,032 | | Accumulated deficit | $(142,817,969) | $(136,966,551) | | Total stockholders' equity (deficit) | $(2,540,746) | $(514,898) | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $703,327 | $1,643,122 | - Cash decreased significantly from $1,542,442 at December 31, 2024, to $9,823 at June 30, 2025[9] - Total assets decreased from $1,643,122 to $703,327, while total liabilities increased from $2,158,020 to $3,244,073[10] - Total stockholders' equity (deficit) worsened from $(514,898) to $(2,540,746)[10] Condensed Consolidated Statements of Operations This section details the Company's revenues, costs, and expenses, culminating in net loss for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | |:---|:---|:---|:---|:---| | REVENUES | | | | | | Product revenue | $53,400 | $- | $53,400 | $35,720 | | Total revenues | $53,400 | $- | $53,400 | $35,720 | | COSTS OF GOODS SOLD | | | | | | Product costs | $35,478 | $- | $35,478 | $23,218 | | Total cost of goods sold | $35,478 | $- | $35,478 | $23,218 | | GROSS MARGIN | $17,922 | $- | $17,922 | $12,502 | | COSTS AND EXPENSES | | | | | | General and administrative | $1,171,137 | $5,977,277 | $2,610,689 | $6,952,851 | | Research and development | $479,657 | $2,252,325 | $3,248,892 | $2,565,092 | | Total costs and expenses | $1,650,794 | $8,229,602 | $5,859,581 | $9,517,943 | | LOSS FROM OPERATIONS | $(1,632,872) | $(8,229,602) | $(5,841,659) | $(9,505,441) | | OTHER (EXPENSE) | | | | | | Interest expense | $(7,360) | $(6,766) | $(9,759) | $(9,413) | | Total other expense | $(7,360) | $(6,766) | $(9,759) | $(9,413) | | NET LOSS | $(1,640,232) | $(8,236,368) | $(5,851,418) | $(9,514,854) | | BASIC AND DILUTED LOSS PER SHARE ($) | $(0.43) | $(2.78) | $(1.55) | $(3.31) | | WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING (Shares) | 3,810,065 | 2,961,606 | 3,780,238 | 2,875,631 | - Product revenue for the three months ended June 30, 2025, was $53,400, a significant increase from $0 in the comparable prior year period[12] - Net loss for the three months ended June 30, 2025, decreased to $(1,640,232) from $(8,236,368) in the prior year, and for the six months, it decreased to $(5,851,418) from $(9,514,854)[13] - Basic and diluted loss per share improved to $(0.43) for the three months ended June 30, 2025, from $(2.78) in the prior year[13] Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit) This section outlines changes in the Company's equity, including common stock, additional paid-in capital, and accumulated deficit over the reporting period - The accumulated deficit increased from $(136,966,551) at December 31, 2024, to $(142,817,969) at June 30, 2025[16] - Total stockholders' equity (deficit) worsened from $(514,898) at December 31, 2024, to $(2,540,746) at June 30, 2025[16] - Issuances of common stock for employee and director equity-based compensation, exchange agreements, and private sales contributed to additional paid-in capital[14][16] Condensed Consolidated Statement of Cash Flows This section presents the Company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statement of Cash Flows (Unaudited) | | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | |:---|:---|:---| | Cash Flows for Operating Activities: | | | | Net loss | $(5,851,418) | $(9,514,854) | | Adjustments to reconcile net loss to net cash used by operating activities: | | | | Non-cash lease expense | $(14,828) | $49,877 | | Employee and director equity-based compensation | $937,288 | $7,661,759 | | Other expenses related to extinguishment of colicense agreements | $2,738,282 | $- | | Prepaid expenses | $(274,918) | $(345,399) | | Customer deposits | $34,364 | $15,000 | | Accounts receivable | $(32,153) | $3,735 | | Accounts payable | $313,849 | $100,379 | | Accounts payable – related party | $(124,706) | $(93,265) | | Lease liabilities | $29,818 | $(55,422) | | Accrued liabilities | $337,774 | $(144,582) | | Net cash (used in) operating activities | $(1,906,648) | $(2,322,772) | | Cash Flows from Investing Activities: | | | | Net cash from by investing activities | $- | $- | | Cash Flow from Financing Activities: | | | | Proceeds of loans payable, other | $488,198 | $517,560 | | Payments of loans payable, other | $(195,279) | $(230,027) | | Payment of term debt | $(68,890) | $- | | Proceeds from private sales of common stock - other | $100,000 | $972,544 | | Proceeds from private sales of common stock – related party | $50,000 | $790,781 | | Net cash provided by financing activities | $374,029 | $2,050,858 | | Increase (decrease) in cash | $(1,532,619) | $(271,914) | | Cash at beginning of period | $1,542,442 | $274,380 | | Cash at end of period | $9,823 | $2,466 | - Net cash used in operating activities decreased by approximately $400,000, from $(2,322,772) in H1 2024 to $(1,906,648) in H1 2025[18] - Net cash provided by financing activities significantly decreased from $2,050,858 in H1 2024 to $374,029 in H1 2025[18] - Cash at the end of the period decreased substantially from $1,542,442 at the beginning of the period to $9,823 at June 30, 2025[18] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1 - Basis of Presentation and Going Concern This note describes the accounting principles used and addresses the Company's ability to continue as a going concern - The Company has incurred net losses and negative cash flows since inception, resulting in an accumulated deficit of $142,817,969, raising substantial doubt about its ability to continue as a going concern[25][27] - Operations are historically financed through common stock, warrants, and debt, with future funding dependent on raising additional capital without assurance of success[25][26] Note 2 - Leases This note details the Company's lease agreements, including new operating leases and associated assets and liabilities - The Company entered new operating lease agreements in January 2025 for facilities in Fort Myers, Florida (36 months) and Troy, Michigan (63 months)[21][28][29] - Total operating lease assets and liabilities of $315,571 were recorded at lease commencement[21] Operating Lease Expense | Period | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 6 Months Ended June 30, 2025 ($) | 6 Months Ended June 30, 2024 ($) | |:---|:---|:---|:---|:---| | Operating lease expense | $23,515 | $27,235 | $47,030 | $54,471 | Note 3 - Debt This note provides information on the Company's debt obligations, including short-term unsecured loans - On March 5, 2025, the Company entered a short-term unsecured loan for $488,198 at 7.85% APR, with a principal balance of $292,919 outstanding as of June 30, 2025[33] - A similar loan from March 2024 for $517,560 at 8.5% APR was fully paid by November 9, 2024[34] Note 4 - Deferred R&D Obligations - Participation Agreements This note details the Company's deferred R&D obligations from participation agreements and subsequent exchange agreements - The Company entered into 21 Participation Agreements (2020-2021) for $2,985,000, granting participants a 44.78% 'Revenue Share' from licensing ZIVO's algae cultures, with the R&D obligation fully amortized by December 31, 2023[35][36] - From January to April 2025, the Company executed 17 Exchange Agreements, issuing 146,660 common shares (including 47,320 to related parties) to cancel future revenue share rights, valued at $2,738,282 and expensed as R&D[19][38][39] Note 5 - Stockholders' Equity (Deficit) This note provides details on changes in stockholders' equity, including common stock issuances and equity compensation expenses Equity Sales (Proceeds and Shares Issued) | Period | Total Proceeds ($) | Total Shares Issued (Shares) | Related Party Proceeds ($) | Related Party Shares Issued (Shares) | |:---|:---|:---|:---|:---| | 3 Months Ended June 30, 2025 | $150,000 | 10,632 | $50,000 | 3,488 | | 3 Months Ended June 30, 2024 | $659,999 | 83,887 | $659,999 | 83,887 | | 6 Months Ended June 30, 2025 | $150,000 | 10,632 | $50,000 | 3,488 | | 6 Months Ended June 30, 2024 | $1,763,325 | 491,186 | $790,781 | 140,553 | Equity Compensation Expense | Period | Total Expense ($) | R&D Expense ($) | G&A Expense ($) | |:---|:---|:---|:---| | 3 Months Ended June 30, 2025 | $336,743 | $19,424 | $317,319 | | 3 Months Ended June 30, 2024 | $7,549,655 | $2,025,580 | $5,524,075 | | 6 Months Ended June 30, 2025 | $937,288 | $59,992 | $877,296 | | 6 Months Ended June 30, 2024 | $7,661,759 | $2,060,228 | $5,601,531 | - As of June 30, 2025, there was no remaining unrecognized compensation expense related to Restricted Stock Awards (RSAs), compared to $1,055,454 at June 30, 2024[55] Note 6 - Commitments and Contingencies This note outlines the Company's contractual commitments and potential liabilities, including compensation agreements and legal matters - The Company has compensation agreements with its President/CEO and CFO[61] - Management believes there are no pending legal matters that would have a material adverse effect on the Company's financial condition, results of operation or cash flows[62] Note 7 - Segment Reporting This note describes the Company's operating segments and how financial results are managed and evaluated - The Company operates in one reportable segment: microalgae technology, focusing on research and development in both therapeutic and nutritional sectors[63] - Financial results are managed and evaluated on a consolidated basis by the Chief Executive Officer, who serves as the Chief Operating Decision Maker (CODM)[64] Note 8 - Income Tax This note explains the Company's income tax position, including deferred tax assets and valuation allowances - The Company has recorded a full valuation allowance against its net deferred tax asset, as realization is not more likely than not[66] - Income tax expense is expected to be $0 for 2025 based on the Company's effective tax rate and full valuation allocation[67] Note 9 - Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 4, 2025, the Board approved an unsecured convertible loan program for up to $2 million[68] - On July 8, 2025, the Company entered a Convertible Loan Agreement for $250,000 at 10% interest over 24 months, issuing a warrant to purchase 1,793 shares at $13.94 per share[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition and operational results, covering revenue, expenses, liquidity, and capital resources, emphasizing R&D focus and ongoing funding needs Special Note Regarding Forward-Looking Statements This note cautions readers about forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements subject to known and unknown risks and uncertainties that may cause actual results to differ materially[69][70] - Readers are cautioned not to place undue reliance on these statements, which represent estimates and assumptions only as of the report date[70] - Important factors that may cause actual results to differ are discussed in the 'Risk Factors' section of the Company's Annual Report on Form 10-K[71] Overview This section provides a general description of ZIVO's business, focusing on its research and development activities in biotech and agtech sectors - ZIVO is a research and development company operating in biotech and agtech sectors, with an intellectual property portfolio of proprietary algal and bacterial strains, bioactive molecules, and production techniques[72] - In biotech, ZIVO develops bioactive compounds from its algal culture for human and animal diseases, seeking strategic partners for development and commercialization[73][74] - In agtech, ZIVO's algal biomass, produced in Peru, is positioned as a functional food ingredient and nutritional enhancement (branded Zivolife®) for human and animal use, and for skin care products[75][78] Results of Operations (Three Months Ended June 30, 2025 vs 2024) This section analyzes the Company's financial performance for the three months ended June 30, 2025, compared to the same period in 2024 Operating Results (Three Months Ended June 30) | | 2025 ($) | 2024 ($) | |:---|:---|:---| | Total revenue | $53,400 | $- | | Total cost of goods sold | $35,478 | $- | | Gross margin | $17,922 | $- | | Research and development | $479,657 | $2,252,325 | | General and administrative | $1,171,137 | $5,977,277 | | Loss from operations | $(1,632,872) | $(8,229,602) | | Total other expense | $(7,360) | $(6,766) | - Revenue increased to $53,400 in Q2 2025 from $0 in Q2 2024, driven by sales of dried algal biomass[83] - General and administrative expenses decreased by approximately $4.8 million, primarily due to a $3.4 million decrease in non-cash equity compensation and $1.8 million lower professional services[85] - Research and development expenses decreased to $480,000, with a $2.0 million decrease in gross R&D spending (excluding amortization of exchange agreements) due to lower non-cash equity compensation and headcount[86][87] Results of Operations (Six Months Ended June 30, 2025 vs 2024) This section analyzes the Company's financial performance for the six months ended June 30, 2025, compared to the same period in 2024 Operating Results (Six Months Ended June 30) | | 2025 ($) | 2024 ($) | |:---|:---|:---| | Total revenue | $53,400 | $35,720 | | Total costs of goods sold | $35,478 | $23,218 | | Gross margin | $17,922 | $12,502 | | Research and development | $3,248,892 | $2,565,092 | | General and administrative | $2,610,689 | $6,952,851 | | Loss from operations | $(5,841,659) | $(9,505,441) | | Total other expense | $(9,759) | $(9,413) | | Net loss | $(5,851,418) | $(9,514,854) | - Revenue increased by approximately $20,000 to $53,400 in H1 2025 from $35,720 in H1 2024, due to higher sales volumes[91] - General and administrative expenses decreased by approximately $4.4 million, primarily due to $3.0 million lower labor-related costs (non-cash equity compensation) and $1.3 million lower professional services[93] - Research and development expenses increased to $3.2 million in H1 2025, primarily due to $2.7 million amortization of exchange agreements; excluding this, gross R&D spending decreased by $2.1 million[94][95] Liquidity and Capital Resources This section discusses the Company's ability to meet its short-term and long-term financial obligations and its sources of funding - As of June 30, 2025, the Company's cash balance was $9,823, and management noted substantial doubt about its ability to continue as a going concern[97][102] - The Company estimates a need for approximately $6.0 million in cash over the next 12 months for basic operations, excluding R&D initiatives, and historically has had difficulty raising external funds[102][108] Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | |:---|:---|:---| | Operating activities | $(1,906,648) | $(2,322,772) | | Investing activities | $- | $- | | Financing activities | $374,029 | $2,050,858 | | Net increase (decrease) in Cash | $(1,532,619) | $(271,914) | Critical Accounting Policies and Significant Judgments and Estimates This section outlines the key accounting policies and the significant judgments and estimates made by management in preparing the financial statements - The financial statements are prepared in accordance with US GAAP, requiring management to make estimates, judgments, and assumptions that affect reported amounts[109] - There have been no material changes to the critical accounting estimates previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[110] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Zivo Bioscience, Inc. is not required to provide quantitative and qualitative disclosures about market risk - This item is not applicable for smaller reporting companies[112] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures, concluding they were ineffective due to material weaknesses, and outlines remediation plans Evaluation of Disclosure Controls and Procedures This section presents the CEO and CFO's conclusion on the effectiveness of the Company's disclosure controls and procedures - The CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025[113][114] - Material weaknesses identified as of December 31, 2024, in the Annual Report on Form 10-K continue to exist[114] Material Weaknesses in Internal Control Over Financial Reporting This section identifies specific material weaknesses in the Company's internal control over financial reporting, affecting its control environment, risk assessment, and control activities - Material weaknesses include a lack of structure, insufficient qualified resources, and inadequate oversight in the control environment, as well as ineffective risk assessment and evaluation of internal control components[115] - Additional material weaknesses exist in control activities and information/communication, including inappropriate IT general controls and lack of formal accounting policies and procedures across business processes[116][120] - Despite these material weaknesses, management concluded that the consolidated financial statements fairly present the Company's financial position, results of operations, and cash flows in conformity with U.S. GAAP[117] Remediation Plans This section outlines the Company's planned actions to address and remediate the identified material weaknesses in internal control over financial reporting - Remediation actions include developing training programs on the COSO Internal Control Framework, implementing a risk assessment process, and developing comprehensive accounting policies and procedures[119][128] - The Company plans to enhance policies for documentary evidence of management review controls, engage outside resources for complex accounting matters, and develop monitoring activities for control effectiveness[128] - Further actions involve segregating key functions in financial and IT processes, reassessing IT policies, and continuing to formalize accounting, business operations, and IT policies for accurate financial reporting[128] Changes in Internal Control Over Financial Reporting This section reports on any material changes in the Company's internal control over financial reporting during the quarter - No other material changes in internal control over financial reporting occurred during the quarter ending June 30, 2025, except for the ongoing remediation actions[121] PART II - OTHER INFORMATION This section provides additional disclosures not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Company is not a party to any material legal proceedings and is unaware of any pending or threatened actions that would materially impact its financial condition or operations - Management believes there are no pending legal matters involving the Company that would have a material adverse effect upon its financial condition, results of operation or cash flows[62][124] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the Company issued 10,632 common shares in unregistered private sales, generating $150,000 in proceeds, exempt from registration under Section 4(a)(2) or Rule 701 Unregistered Sales of Common Stock (April 1 - June 30, 2025) | Name | Form | Date | Amount Received ($) | Common Stock Shares (Shares) | |:---|:---|:---|:---|:---| | David Mendelson | Purchase of Common Stock | 24-Apr-25 | $100,000.00 | 7,144 | | HEP Investments, LLC | Purchase of Common Stock | 13-Jun-25 | $50,000.00 | 3,488 | - The sales were exempt from registration under Section 4(a)(2) or Rule 701 of the Securities Act, with recipients representing intentions to acquire for investment only[129] Item 3. Defaults upon Senior Securities This item is not applicable to the Company - Not applicable[130] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[131] Item 5. Other Information There is no other information to report under this item - None[132] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant forms, certifications, and XBRL interactive data files - Exhibits include Articles of Incorporation, By-laws, Description of Securities, various Forms of Warrants, Certifications (Principal Executive Officer, Principal Financial Officer), and Inline XBRL documents[134][135]