zivo_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________.

Commission File Number: 001-40449

Zivo Bioscience, Inc.

(Exact name of registrant as specified in its charter)

Nevada		87-0699977
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

21 East Long Lake Road, Ste. 100, Bloomfield Hills MI		48304
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 248-452-9866

______________________________

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ZIVO	The Nasdaq Stock Market LLC
Warrants to purchase shares of Common Stock, par value $0.001 per share	ZIVOW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

At May 8, 2023, there were 9,419,660 issued and outstanding shares of Common Stock of the registrant.

FORM 10-Q

ZIVO BIOSCIENCE, INC.

INDEX

		Page
PART I - FINANCIAL INFORMATION.

	Item 1. Condensed Financial Statements (Unaudited)	3

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	17

	Item 4. Controls and Procedures.	17

PART II - OTHER INFORMATION.

	Item 1. Legal Proceedings.	20

	Item 1A. Risk Factors.	20

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	20

	Item 3. Defaults upon Senior Securities.	20

	Item 4. Mine Safety Disclosures.	20

	Item 5. Other Information.	20

	Item 6. Exhibits	21

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PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	March 31,			December 31,
	2023			2022
ASSETS

CURRENT ASSETS:
Cash	$	208,601		$	1,799,263
Prepaid expenses		719,613			102,416
Total current assets		928,214			1,901,679
PROPERTY AND EQUIPMENT, NET		-			-
OTHER ASSETS:
Operating lease - right of use asset		167,692			189,282
Security deposit		32,058			32,058
Total other assets		199,750			221,340
TOTAL ASSETS	$	1,127,964		$	2,123,019

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT):
CURRENT LIABILITIES:
Accounts payable	$	670,280		$	490,670
Current portion of long-term operating lease		103,076			99,259
Convertible debentures payable		240,000			240,000
Deferred R&D obligations - participation agreements		432,150			525,904
Deferred R&D obligations – participation agreements related parties		144,153			175,427
Loan Payable		538,311			-
Accrued interest		98,878			98,286
Accrued liabilities – payroll and directors fees		563,745			398,176
Total current liabilities		2,790,593			2,027,722
LONG TERM LIABILITIES:
Long-term operating lease, net of current portion		79,033			105,919
Total long-term liabilities		79,033			105,919
TOTAL LIABILITIES		2,869,626			2,133,641
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.001 par value, 150,000,000 and 150,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 9,419,660 and 9,419,660 issued and outstanding at March 31, 2023, and December 31, 2022, respectively		9,420			9,420
Additional paid-in capital		116,026,590			115,784,488
Accumulated deficit		(117,777,672	)		(115,804,530	)
Total stockholders’ equity (deficit)		(1,741,662	)		(10,622	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,127,964		$	2,123,019

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

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months ended March 31, 2023			Three Months ended March 31, 2022
REVENUES:
Service revenue	$	-		$	-
Total revenues		-			-

COSTS AND EXPENSES:
General and administrative		1,568,377			1,346,742
Research and development		401,797			679,773

Total costs and expenses		1,970,174			2,026,515

LOSS FROM OPERATIONS		(1,970,174	)		(2,026,515	)

OTHER EXPENSE:
Interest expense		2,968			1,805
Total other expense		2,968			1,805

NET LOSS	$	(1,973,142	)	$	(2,028,320	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.21	)	$	(0.22	)
WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING		9,419,660			9,419,660

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

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND MARCH 31, 2022

(UNAUDITED)

					Additional Paid in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2021		9,419,660	$	9,420	$	113,092,025	$	(107,059,236	)	$	6,042,209
Employee and director equity-based compensation		-		-		570,629		-			570,629
Net loss for the three months ended March 31, 2022		-		-		-		(2,028,320	)		(2,028,320	)
Balance, March 31, 2022		9,419,660	$	9,420	$	113,662,654	$	(109,087,556	)	$	4,584,518

					Additional Paid in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2022		9,419,660	$	9,420	$	115,784,488	$	(115,804,530	)	$	(10,622	)
Employee and director equity-based compensation		-		-		242,102		-			242,102
Net loss for the three months ended March 31, 2023		-		-		-		(1,973,142	)		(1,973,142	)
Balance, March 31, 2023		9,419,660	$	9,420	$	116,026,590	$	(117,777,672	)	$	(1,741,662	)

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

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31, 2023			For the Three Months Ended March 31, 2022
Cash Flows for Operating Activities:
Net loss	$	(1,973,142	)	$	(2,028,320	)
Adjustments to reconcile net loss to net cash used by operating activities:
Non cash lease expense		21,590			21,197
Employee and director equity-based compensation		242,102			570,629
Amortization of deferred R&D obligations participation agreements		(125,028	)		(136,848	)
Changes in assets and liabilities:
Security deposits		-			(29,058	)
Prepaid expenses		(617,197	)		(797,179	)
Accounts payable		179,610			(133,966	)
Lease liabilities		(23,069	)		185
Accrued liabilities		166,161			(328,289	)
Net cash (used in) operating activities		(2,128,973	)		(2,861,649	)

Cash Flows from Investing Activities:
Net cash from by investing activities		-			-

Cash Flow from Financing Activities:
Proceeds of loans payable, other		605,600			628,600
Payments of loans payable, other		(67,289	)		(69,844	)
Net cash provided by financing activities		538,311			558,756

Increase (decrease) in cash		(1,590,662	)		(2,302,893	)
Cash at beginning of period		1,799,263			8,901,875
Cash at end of period	$	208,601		$	6,598,982

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	2,377		$	1,213
Income Taxes	$			$

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

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Three Months Ended March 31, 2023:

During the quarter ended March 31, 2022, the Company had no non-cash investing or financing transactions.

Three Months Ended March 31, 2022:

During the quarter ended March 31, 2022, the Company invested $195,804 in a right of use asset associated with the lease of office space.

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Zivo Bioscience, Inc. and its wholly- owned subsidiaries (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The condensed consolidated financial statements have also been prepared on a basis substantially consistent with, and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022 and the notes thereto, included in its Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on March 14, 2023.

Going Concern

The Company has incurred net losses since inception, experienced negative cash flows from operations for the quarter ended March 31, 2023, and has an accumulated deficit of $117,777,672. The Company has historically financed its operations primarily through the issuance of common stock, warrants, and debt.

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 is no assurance that the Company will achieve profitable operations, and, if achieved, whether it will be sustained on a continued basis. The Company intends to fund ongoing activities by utilizing its current cash on hand and by raising additional capital through equity or debt or both 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 and planned capital expenditures.

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 condensed 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.

NOTE 2 -NEW ACCOUNTING STANDARDS

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The Company adopted ASU 2020-06 effective January 1, 2023, using the modified retrospective approach. The adoption of AASU 2020-06 did not have an impact on any amounts recorded the Company's condensed consolidated financial statements. In addition, the adoption requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effect is more dilutive. There was no impact to diluted earnings per share for the three months ended March 31, 2023, as the convertible debentures were not in the money during the period.

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NOTE 3 - LEASES

The components of lease expense are as follows within our condensed consolidated statement of operations:

	For the		For the
	Quarter ended		Quarter ended
	March 31, 2023		March 31, 2022
Operating lease expense	$	27,236	$	26,112

Other information related to leases where we are the lessee is as follows:

	As of			As of
	March 31, 2023			December 31, 2022
Weighted-average remaining lease term:
Operating leases		1.71		1.94 Years

Discount rate:
Operating leases		11.00	%		11.00	%

Supplemental cash flow information related to leases where we are the lessee is as follows:

	For the		For the
	Quarter ended		Quarter ended
	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:	$	28,145	$	5,600
Non-cash investment in ROU asset	$	-	$	195,804

As of March 31, 2023, the maturities of our operating lease liability are as follows:

Year Ended:	Operating Lease
December 31, 2023	$	88,063
December 31, 2024		112,407
Total minimum lease payments		200,471
Less: Interest		(18,361	)
Present value of lease obligations		182,110
Less: Current portion		103,076
Long-term portion of lease obligations	$	79,033

NOTE 4 - DEBT

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 $605,600 carries a 8.4% annual percentage rate and will be paid down in nine equal monthly payments of $69,666 beginning on March 10, 2023. As of March 31, 2023, a principal balance of $538,311 remains.

NOTE 5 - DEFERRED R&D OBLIGATIONS - PARTICIPATION AGREEMENTS

In the three months ended March 31, 2023 and 2022, the Company recognized $125,030 and $136,848 as a contra R&D expense related to personnel and third-party expenses to develop the subject technology, respectively. For the three months ended March 31, 2023, $31,274 of this total contra R&D expense was attributed to deferred R&D obligations funded by a related party.

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NOTE 6 - COMMITMENTS AND CONTINGENCIES

Employment Agreements

At March 31, 2023, the Company had compensation agreements with its President / Chief Executive Officer, and Chief Financial Officer.

Legal Contingencies

On April 13, 2022, AEGLE Partners, 2 LLC (“AEGLE”) initiated an arbitration in Michigan against the Company with the American Arbitration Association. AEGLE asserted claims related to a certain Supply Chain Consulting Agreement entered into between AEGLE and the Company in 2019 (as amended from time to time, the “Supply Chain Consulting Agreement”), and a disagreement between AEGLE and the Company regarding whether AEGLE is entitled to payment of certain fees and warrants pursuant to the Supply Chain Consulting Agreement. AEGLE's complaint seeks, among other things, three times the payment of such alleged fees and warrants and recovery of AEGLE's costs and expenses. On April 20, 2023, the Company and AEGLE Partners, 2 LLC (“AEGLE”) settled the pending arbitration matter for an immaterial amount.

The Company may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving the Company that would have a material adverse effect upon the Company’s financial condition, results of operation or cash flows.

NOTE 7 - INCOME TAX

The Company and its subsidiaries are subject to US federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. 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. Deferred tax assets are reduced by a valuation allowance when, in the opinion of Management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The Company does not expect to realize the net deferred tax asset and as such has recorded a full valuation allowance.

Income tax expense for the three months ended March 31, 2023 and 2022 is based on the estimated annual effective tax rate. Based on the Company’s effective tax rate and full valuation allocation, tax expense is expected to be $0 for 2023.

NOTE 8 - SUBSEQUENT EVENTS

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 10% promissory note with a principal amount of $1 million (the “Note”) and a warrant (the “Warrant”) to purchase 390,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) at an exercise price of $2.91.

The Note bears interest at a fixed rate of 10% per annum and requires us to repay the principal and accrued and unpaid interest thereon on October 2, 2023 (the “Maturity Date”), with an option to extend the Maturity Date an additional six months. There is no penalty on prepayment of the Note.

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The Warrant is exercisable commencing on the date of issuance and expires on the three-year anniversary of the issuance date. The exercise price and number of the shares of our common stock issuable upon exercising the Warrant will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described therein.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These 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 raise the funds we need to continue our operations;
·	our goal to generate revenues and become profitable;
·	regulation of our product;
·	market acceptance of our product and derivatives thereof;
·	the results of current and future testing of our product;
·	the anticipated performance and benefits of our product;
·	the ability to generate licensing fees; and
·	our financial condition or results of operations.

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” 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.

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.

Biotech - ZIVO Product Candidates

ZIVO is developing bioactive compounds derived from its proprietary algal culture, targeting human and animal diseases, such as poultry coccidiosis, bovine mastitis, human cholesterol, and canine osteoarthritis. As part of its strategy, ZIVO will continue to seek strategic partners for late stage development, regulatory preparation and commercialization of its products in key global markets.

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Review of isolated active materials derived from our proprietary algal culture and their potential treatment applications led us to identify a product candidate for treating coccidiosis in broiler chickens as the best option for most rapidly generating significant revenue because coccidiosis is a global poultry industry issue, and because the clinical testing cycle for chickens is shorter than for other species. Most of the global animal health companies have products for the coccidiosis market; however, they are mostly antibiotic- or ionophore-based with essentially no new technology having been introduced in the last 60 years.

Agtech - ZIVO’s Algal Biomass

ZIVO’s algal biomass is currently produced in Peru. ZIVO’s algal biomass contains Vitamin A, protein, iron, important fatty acids, non-starch polysaccharides and other micronutrients that position the product as a viable functional food ingredient and nutritional enhancement for human and animal use and as a viable functional ingredient for skin care products.

Through our direction and technology, a site in Peru has been successful in consistently producing our proprietary algae. Our team has been working toward building commercial-scale algae ponds using a ZIVO proprietary design, and we are in the middle of a project to grow our algae in a penultimate scale pond. Once we are successful at this scale, we plan, in the first quarter of 2023, to invest in full commercial-scale ponds and product processing equipment.

The Company currently has contracts for the sale of its algal biomass, however, no sales have been made pursuant to these contracts at this time and we don’t expect any sales to be made until we expand production of our algal biomass.

Additional Indications

Pending additional funding, ZIVO may also pursue the following indications:

Biotech:

	o	Bovine Mastitis: ZIVO is developing a treatment for bovine mastitis derived from its proprietary algal culture and the bioactive agents contained within.

	o	Canine Joint Health: Studies have indicated the potential of a chondroprotective property when a compound fraction was introduced into ex vivo canine joint tissues.

	o	Human Immune Modulation: Early human immune cell in vitro and in vivo studies 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.

Agtech:

	o	Human Food Ingredient: The self-affirmed GRAS process was completed for ZIVO algal biomass in late 2018 to validate its suitability for human consumption as an ingredient in foods and beverages.

	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.

Results of Operations for the three months ended March 31, 2023 and 2022

The following table summarizes ZIVO’s operating results for the periods indicated

	Quarter ended March 31,
	2023			2022
Total revenues	-			$	-
Costs and expenses:
Research and development		401,797			679,773
General and administrative		1,568,377			1,346,742
Total costs and expenses		1,970,174			2,026,515
Loss from operations		(1,970,174	)		(2,026,515	)
Other expense
Interest expense		2,968			1,805
Total other expense		2,968			1,805
Net loss	$	(1,973,142	)	$	(2,028,320	)

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Net Sales

The Company had no sales during the three months ended March 31, 2023 and 2022.

Cost of Sales

The Company had no cost of sales during the three months ended March 31, 2023 and 2022.

General and Administrative Expenses.

General and administrative expenses were approximately $1.6 million for the three months ended March 31, 2023, as compared to approximately $1.3 million for the comparable prior period. The $300,000 increase versus the same quarter last year was primarily driven by a $200,000 increase in labor expenses, no change in professional fees and $100,000 increase in other overhead. Labor related increases of $200,000 included $180,000 higher salary expense and higher non-cash equity-based compensation of $60,000 due to the prior year favorable effects of the termination of the Company's CEO in the quarter ended March 31, 2022, partially offset by $40,000 lower payroll tax and benefits expense. Professional services were unchanged; including lower non-cash directors fees of $250,000, consultants of $70,000, offset by higher legal and accounting fees of $120,000, and offering related expenses of $200,000. Other overhead increased by $100,000 almost fully explained by an increase in D&O insurance premiums versus the prior year.

Research and Development Expenses

For the three months ended March 31, 2023, ZIVO incurred roughly $400,000 in R&D expenses, as compared to roughly $680,000 for the comparable period in 2022. All of these expenses were associated with research relating for our biotech and agtech businesses. In the quarter ended March 31, 2023, the Company’s research and development spending included roughly $125,000 of amortization of deferred R&D obligations for the participation agreements; there was no amortization of deferred R&D in the prior year period. (See Note 5: Deferred R&D Obligations - Participation Agreements)

In the quarter ended March 31, 2023, excluding this amortization, the Company had gross R&D spending of approximately $530,000; a $290,000 decrease in spending from the first quarter of 2022. Of these costs in 2023, $330,000 is for salary related cost, decrease of approximately $185,000 from the prior year. The decrease is fully explained by lower stock related compensation costs. Third party research and development spending and other expenses of $190,000 was about $110,000 lower from the prior year.

	Quarter ended March 31, 2023			Quarter ended March 31, 2022
Labor and other internal expenses	$	333,359		$	515,478
External research expenses		193,468			301,143
Total gross R&D expenses		526,827			816,621
Less contra-expense for amortization of deferred R&D obligation - participation agreements		(125,030	)		(136,848	)
Research and development	$	401,797		$	679,773

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Subject to the availability of funding, the Company expects its 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 are focused on the metabolic aspects of oxidation and inflammation, with a parallel program to validate and license products for healthy immune response.

Capital Resources

As of March 31, 2023, our principal source of liquidity consisted of cash of $208,601. The Company expects 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. The sources of cash to date have been limited proceeds from the issuances of notes with warrants, common stock with and without warrants and unsecured loans, with the terms of our most recent financings described below.

Participation Agreements

From April 13, 2020, through May 14, 2021, the Company entered into twenty-one License Co-Development Participation Agreements (the “Participation Agreements”) with certain accredited investors (“Participants”) for an aggregate of $2,985,000. The Participation Agreements provide for the issuance of warrants to such Participants and allows the Participants to participate in the fees (the “Fees”) from licensing or selling bioactive ingredients or molecules derived from ZIVO’s algae cultures. Specifically, ZIVO has agreed to provide to the Participants a 44.775% “Revenue Share” of all license fees generated by ZIVO from any licensee.

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 forty percent (40%) premium, if the option is exercised less than 18 months following execution, and for either forty (40%) or fifty percent (50%) if the option is exercised more than 18 months following execution. Pursuant to the terms of twelve of the Participation Agreements, the Company may not exercise its option until it has paid the Participants a revenue share equal to a minimum of thirty percent (30%) of the amount such Participant’s total payment amount. Pursuant to the terms of the one of the Participation Agreements, the Company may not exercise its option until it has paid the Participant a revenue share equal to a minimum of one hundred forty percent (140%) of the amount such Participant’s total payment amount. Five of the Participation Agreements have no minimum threshold payment. 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 prorate 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.

Funding Requirements

Management has noted the existence of substantial doubt about our ability to continue as a going concern. Our existing cash may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, 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.

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Our material cash requirements relate to the funding of our ongoing product development. 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 three months ended March 31, 2023, our operating activities used $2.1 million in cash, a decrease of cash used of roughly $700,000 from the comparable prior period when the Company used approximately $2.9 million for operating activities. For the quarter ended March 31, 2023, the Company invested $180,000 less in prepaid expenses primarily for directors’ and officers’ insurance, spent $500,000 less by increasing accrued liabilities, $300,000 in increasing accounts payable and $50,000 on other cash related items.

Cash Flows from Investing Activities. During the three months ended March 31, 2023 and 2022, there were no investing activities.

Cash Flows from Financing Activities. During the three months ended March 31, 2023, our financing activities generated approximately $540,000, a decrease of approximately $20,000 from the comparable prior period when the Company generated approximately $560,000 from financing activities. The Company, in the quarter ended March 31, 2023, received net proceeds of $605,600 from the establishment of a short-term loan, this represented a $23,000 decrease in net loan proceeds from the first quarter of 2022.

We estimate that we would require approximately $4 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. The following table shows a summary of our cash flows for the periods indicated:

	Three months ended March 31,
	2023			2022
Net cash provided by (used in):
Operating activities	$	(2,128,973	)	$	(2,861,649	)
Investing activities		-			-
Financing activities		538,311			558,756
Net increase (decrease) in cash and cash equivalents	$	(1,590,662	)	$	(2,302,893	)

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.

Item 4.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 the material weaknesses identified as of December 31, 2022 and described below, continue to exist as of March 31, 2023.

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:

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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.

·	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.

·	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:

	·	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;

	·	Management did not identify controls over the accounting and classification of deferred research and development obligations - participation agreements; and

	·	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 March 31, 2023, 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 Plans

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;

·	Implementing a risk assessment process by which management identifies risks of misstatement related to all account balances;

·	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;

·	Engaging outside resources for complex accounting matters and drafting and retaining position papers for all complex, non-recurring transactions;

·	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

·	Segregating key functions within our financial and information technology processes supporting our internal controls over financial reporting;

·	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;

·	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.

Changes in Internal Control Over Financial Reporting

Except for the remediation actions 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.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business.

We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding.

Item 1A

Risk Factors

There have been no material changes in our risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. You should carefully consider the risks and uncertainties described therein.

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

All such issuances during the quarter were reported on Form 8-K.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number		Description

3.1		Articles of Incorporation of the Registrant as amended (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q filed on August 22, 2011)

3.2		Certificate of Amendment to Articles of Incorporation dated October 16, 2014 (incorporated by reference to Exhibit 3.12 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 2014)

3.3		Certificate to Amendment dated May 28, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 8-K filed on July 7, 2022)

3.4		Second Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on March 14, 2022)

4.1		Promissory Note, dated as of April 3, 2023 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 5, 2023)

4.2		Stock Purchase Warrant, dated as of April 3, 2023 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 5, 2023)

10.1		Subscription Agreement, dated as of April 3, 2023 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 5, 2023)

31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1		Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

32.2		Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Furnished herewith (all other exhibits are deemed filed)

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SIGNATURES

Pursuant to the requirements 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.
Date: May 10, 2023

	By:	/s/ John B. Payne
		John B. Payne
		Chief Executive Officer

	By:	/s/ Keith R. Marchiando
		Keith R. Marchiando
		Chief Financial Officer

SEC Form 10-Q filed by Zivo Bioscience Inc.