ZIVO 10-K & 10-Q changes, risk factors and insider trading

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 the current conflicts between Russiatariff and Ukraine,trade Israelpolicies, andglobal Hamas,wars/military andconflicts, measuresterrorism takenor inother responsegeopolitical thereto.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’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.

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. We must materially increase the number of our growers and if we cannot, it will adversely impact our financial condition and our business.

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. Any of our executive officers could leave our employment at any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.

IncreasedFrom regulatorytime scrutinyto time there are movements in the United States and other markets to increase the regulation of nutritionaldietary supplementssupplements. asIn wellthe asevent new regulations that are beingproposed or adopted in some of our markets with respect to nutritional supplementssupplements, could result in more restrictivethese regulations may impose additional restrictions or requirements on us and harmincrease ourthe resultscost of doing business. Additionally, if our supplements or 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.regulations, we may be subject to fines or other means of regulatory enforcement.

InIt Augustis 2016,possible in the FDAfuture publishedthat itswe revisedmay draftsee guidancefit onto Dietarysell Supplements:one Newor Dietarymore Ingredientof Notificationsour andproducts Relatedas Issues.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.

The growth of our agtechnutrition sector depends in part on market acceptance of products that contain our algae.

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.

As of December 31, 2023,2024, our largest shareholder, HEP Investments, LLC (“HEP” or “HEP Investments”), beneficially owns approximately 18.0%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.

Interest expense primarily consists of interest costs related to our convertible notesnotes, term notes, and for interest on short term debt, as discussed in detail below.

During the year ended December 31, 2023,2024, the Company recorded commercial revenue relating to sales of the Company’s dried algal biomass product as a human food or food ingredient. The $27,650$157,220 for the year ending December 31, 20232024 is an approximately $130,000 increase over the $0$27,650 in revenue in the prior year. The $27,650 increase is the result of product volume increases partially offset by lower selling prices for product sold in the year ended December 31, 2023,2024 versus no recorded product volume or revenue in the year ended December 31, 2022.2023.

Cost of goods sold for the year ended December 31, 20232024 was $16,040.$108,268. This is $16,040approximately $92,000 higher than $16,040 in cost of goods sold from the same period last year,year. The increase in cost of goods sold is essentially all attributable to product volume asincreases no product was shipped infrom the comparable prior year period.

General and administrative expenses were $5.9$10.3 million for the 12 monthsyear ended December 31, 2023,2024, which is about $600,000$4.4 lowermillion higher than the approximately $6.5$5.9 million for the comparable prior period, explained by the following changes: aan decreaseincrease of $270,000$2.8 million in labor expense ($750,000increase of $3.5 million non-cash decreaseemployee compensation due to stock options issued to employees partially offset by a roughly $480,000$700,000 increasedecrease in cashbonus compensation and benefitsexpense), and aan decreaseincrease in overhead expense of $330,000$1.6 million ($820,000$2.9 decreasemillion increase in directors fees, $290,000 decrease in consultant expense, partially offset by an increase of $260,000$100,000 in accounting,lower increasedirectors ofand $430,000officers insurance premiums, $110,000 in legal,lower exchange listing and increaserelated fees, $30,000 in otherlower overheadtravel ofexpense, $90,000$300,000 in lower accounting fees, and $800,000 lower legal fees). The increasesdecreases 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 2023.2023 that were not incurred in 2024.

Of these costs in 2023,2024, $1.2$3.1 million is for salary and other internal costs, aan decreaseincrease of approximately $325,000$1.9 million from the prior year. The decreaseincrease is primarily explained by lowerhigher stock related compensation costs for non-employee directors of $260,000$2 million and loweran increase of $50,000 in consultant expense, partially offset by employee costs of $160,000 and travel expense byof $30,000.$20,000. Third party research and development spending of $856,000$20,000 was $610,000approximately $840,000 lower than the prior year due to fewerelimination of essentially all the Company-funded third-party research studies and the end of our development program in our nutrition business.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,Agreements. roughlyThere $70,000was lowerno thanamortization of spending obligations in the amountyear researchending andDecember development31, was2024 reducedas the Company completed all the funding for this program in 2022.the prior year. (See Note 8: Deferred R&D Obligations - Participation Agreements)

As of December 31, 2023,2024, our principal source of liquidity consisted of cash deposits of 274,380.$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.

From January 1, 20222023 to December 31, 2023,2024, the Company received gross proceeds of $2,384,200$2,273,160 in unsecured loans. As of December 31, 2023,2024, all the loans were repaid and no principal andor accrued interest remained outstanding under such loans.

In the year ending December 31, 2023,2024, we entered into Subscription Agreements with accredited investors pursuant to which we, in private placements, issued and sold an aggregate of 734,682793,489 shares of common stock for gross proceeds in the amount of $4,640,000.$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.

Going Concern, Funding Requirements and Outlook

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 noteddetermined thethat existencethese offactors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm has included explanatory paragraphs in thetheir reportsreport on our financial statements as of and for the yearsyear ended December 31, 2023,2024, 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.filing and liabilities of the Company such as accounts payable, accrued expenses, and our term debt. To continue to fund operations,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.

Cash Flows from Operating Activities. During the 12 months ended December 31, 2023,2024, our operating activities used $5.8$4.3 million in cash, a decrease of cash used of roughly $1.3$1.5 million from the comparable prior period. The approximate $1.3$1.5 million decrease in cash used by operating activities was primarily attributable to the following (all of which are approximated): a $900,000$5.6 decreasemillion increase in net loss, aan decreaseincrease in non-cash expenses of $1.3$8.9 million (explained by aan decreaseincrease of stock issued for services of $1.8$8.6 million, higherlower debt discount amortization of $(440,000400,000), and lower amortization of deferred R&D obligations of $(70,000)$700,000), and cash used to fund changes is assets and liabilities of $1.7$1.8 million (mostly explained by ana increasereduction in accrued liabilities for unpaid bonus payments to certain employees of $940,000,$(800,000), ana increasedecrease in accounts payable of $720,000$(925,000), includinga $170,000decrease in overdueaccounts boardpayable to related parties of directors$(175,000), feespartially andoffset $570,000by an increase of $100,000 in legalprepaid and accounting professional servicesexpenses).

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. The following table shows a summary of our cash flows for the periods indicated:

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 comprehensive lossoperations as a fair value change in derivative and warrant liabilities.

Recent Accounting Pronouncements - Adopted

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 therapeutic strategy, ZIVO will continue to seek strategic partners for late stagelate-stage development, regulatory preparation and commercialization of its products in key global markets.

Results of Operations for the three months ended JuneSeptember 30, 2025 and 2024

During the three months ended JuneSeptember 30, 2025, the Company recorded commercial revenue of $53,400approximately $65,000 relating to sales of the Company’s dried algal biomass product as a human food or food ingredient. This is a $53,400$34,000 increase from the same period last year. The increase is the result of nohigher product volumevolumes sold in the three months ended JuneSeptember 30, 2024.

Cost of goods sold for the quarterthree months ended JuneSeptember 30, 20242025, was $35,478.$44,337. This is $35,478$22,000 higher than the same period last year, fully attributable to the increased product volume asthis noperiod productversus wasthe amount shipped in this the three months ending JuneSeptember 30, 2024.

General and administrative expenses were approximately $1.2 million$840,000 for the three months ended JuneSeptember 30, 2025, as compared to approximately $6.0$1.9 million for the comparable prior year period. The decrease of approximately $4.8$1.1 million in general and administrative expense versus the same period in 2024 is due to a decrease in labor related expenses of approximately $3.0 million,$400,000, a decrease in professional services of $1.8 million,$700,000, other overhead costs remained mostly unchanged. The $3.0 million$400,000 decrease in labor related costs is explained by a $3.4 million$400,000 decrease in non-cash equity related compensation awarded by the Board of Directors to certain Company employees; which was partially offset by a $400,000 increase in bonus expense due a 2024 agreement between the Board and the CEO to exchange an unpaid cash bonus for common stock options.employees. The $1.8 million$700,000 year over year decrease in professional services expense is primarily due to equity compensation awarded to the Board of Directors totalingtotalling approximately $1.7 million,$600,000, and by lower legal and consulting expenses of approximately $100,000.$110,000. Lower rent and insurance costs were offset by an increase in travel and entertainment expense.

Results of Operations for the sixnine months ended JuneSeptember 30, 2025 and 2024

In the sixnine months ended on JuneSeptember 30, 2025 the Company recorded commercial revenue of $53,400approximately $120,000 for sales of the Company’s dried algal biomass product as a human food or food ingredient. The $53,400$120,000 for the sixnine months ending JuneSeptember 30, 20242025 is ana $52,000 increase over the $35,720$67,000 in revenue in the same six monthnine-month period ended JuneSeptember 30, 2024. The approximately $20,000 increaseamount is duefully toexplained higherby increases in sales volumes.volumes versus last year’s period.

Cost of goods sold for the sixnine months ended JuneSeptember 30, 2025 was $35,478.approximately $80,000. This is approximately $12,000$35,000 higher than the same period last year, explained by the increase in sales volume.

General and administrative expenses were approximately $2.6$3.4 million for the sixnine months ended JuneSeptember 30, 2025, a decrease from the $7.0$8.9 million in the comparable prior year period. The decrease of approximately $4.4$5.5 million in general and administrative expense during 20242025 is explained by lower labor related costs of approximately $3.0$3.4 million and $1.3$2.0 million lower professional services, and a reduction in other overhead of $40,000.$55,000. The $3.0$3.4 million decrease in labor related expenses is attributable to lower non-cash equity related employee compensation of $3.4$3.8 million partially offset by increases in bonus expense of $400,000. Professional services expense decreases of $1.3$2.0 million is due to non-employee board of directors' compensation reductions of $1.4$2.0 million, and lower consultant expense of $50,000$100,000 and lower legal expense of $70,000 partially offset by higher accounting ($175,000$170,000) and legal ($5,000).expenses. The approximately $40,000$55,000 reduction in other overhead is attributable to a $40,000$60,000 reduction in insurance expense, lower rent of $10,000,$15,000, offset by increased spending on travel and entertainment.entertainment of $20,000. The Board has determined, beginning August 20, 2025, to forgo compensation of non-employee directors until the Company's financial condition improves.

As of JuneSeptember 30, 2025, our principal source of liquidity consisted of cash of $9,823.$57,222. 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.

From January 9, 2025, through April 16, 2025, the Company has entered into a series of seventeen Exchange Agreements (“Exchange Agreements”) with Participants to the 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 $5,306,500. The Company’s board of directors approved Exchange Agreements that would provide for the cancellation of the Purchase Agreements and accompanying forfeiture of each Investor’s right to earn certain cash from the revenue share and buy-out option in exchange for the Company’s common stock. As of JuneSeptember 30, 2025, four of the original Participation Agreements remained outstanding. See NOTE 4 - DEFERRED R&D OBLIGATIONS - PARTICIPATION AGREEMENTS

Cash Flows from Operating Activities. During the sixnine months ended JuneSeptember 30, 2025, our operating activities used $1.9$2.2 million in cash, a decrease of cash used of approximately $400,000$1.2 million from the comparable prior year period when the Company used approximately $2.3$3.4 million for operating activities. After adjusting the comparison period’s net income for non-cash expenses including equity-based compensation and amortization of lease liabilities, the Company incurred approximately $400,000$100,000 more of additional cash net loss than in the comparable prior year period. In addition, for the sixnine months ended JuneSeptember 30, 2024, the Company generated about $800,000$1.3 million more cash than the prior year period through changes in working capital accounts.

Cash Flows from Investing Activities. During the sixnine months ended JuneSeptember 30, 20252025, and 2024, there were no investing activities.

Cash Flows from Financing Activities. During the sixnine months ended JuneSeptember 30, 2025, our financing activities generated approximately $400,000,$700,000, a decrease of approximately $1.7$2.3 million from the comparable prior year period when the Company generated approximately $2.1$3.3 million from financing activities. In the sixnine months ending JuneSeptember 30, 2025, the Company received proceeds of $150,000$400,000 through direct sales of common stock,stock and warrants, raised a net $300,000$150,000 from proceeds of a short-term financing agreement, issued convertible notes for approximately $250,000, and paid $70,000$100,000 to repay an outstanding loan. In the sixnine months ended JuneSeptember 30, 2024, the Company received net proceeds of $1.8$3.2 million from direct sales of common equity to investors, and raised a net $300,000$100,000 from proceeds of a short term financing agreement.