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 September 30, 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)

(IRS Employer

Identification No.)

21 E. Long Lake Road,Suite 100, Bloomfield Hills, MI 48304

(Address of principal executive offices) (Zip code)

(248) 452 9866

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on

Which Registered

Common Stock, par value$0.001 per share

ZIVO

The Nasdaq Stock Market LLC

Warrants

ZIVOW

The Nasdaq Stock Market LLC

Indicate by checkmark 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 ST (Sec. 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 checkmark 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	☒	Smaller reporting company
☐	Accelerated filer	☐	Emerging growth company
☒	Non-accelerated filer

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 12-b2 of the Exchange Act). Yes ☐ No ☒

There were 1,819,523 shares of common stock, $0.001 par value, outstanding at November 9, 2023.

FORM 10-Q

ZIVO BIOSCIENCE, INC.

INDEX

		Page
PART I - FINANCIAL INFORMATION		3

Item 1.	Financial Statements (Unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	25

PART II - OTHER INFORMATION		27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

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PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	September 30, 2023			December 31, 2022
ASSETS
CURRENT ASSETS:
Cash	$	1,484,644		$	1,799,263
Accounts receivable		2,593			-
Prepaid expenses		460,632			102,416
Total current assets		1,947,869			1,901,679

PROPERTY AND EQUIPMENT, NET		-			-

OTHER ASSETS
Operating lease - right of use asset		122,110			189,282
Security deposit		32,058			32,058
Total other assets		154,168			221,340
TOTAL ASSETS	$	2,102,037		$	2,123,019

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	643,812		$	490,670
Current portion of long-term operating lease		110,398			99,259
Convertible debentures payable		240,000			240,000
Deferred R&D obligations - participation agreements		57,906			525,904
Deferred R&D obligations - participation agreements related parties		19,316			175,427
Short term loans payable, net of discount		1,129,696			-
Accrued interest		149,145			98,286
Accrued liabilities - payroll and directors fees		823,779			398,176
Total Current Liabilities		3,174,052		$	2,027,722
LONG-TERM LIABILITIES:
Long-term operating lease, net of current portion		22,027			105,919
Total long-term liabilities		22,027			105,919

TOTAL LIABILITIES		3,196,079		$	2,133,641
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 25,000,000 shares authorized; 1,741,610 and 1,569,943 issued and outstanding at September 30, 2023 and December 31, 2022 (a)		1,742			1,570
Additional paid-in capital (a)		120,577,382			115,792,337
Accumulated deficit		(121,673,166	)		(115,804,529	)
Total stockholders' equity		(1,094,042	)		(10,622	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,102,037		$	2,123,019

(a)	Results have been adjusted to reflect the 1-for-6 Reverse Split in October 2023. See Note 9, “Subsequent Events” for details regarding the stock split.

See accompanying notes to unaudited condensed consolidated financial statements.

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months ended September 30, 2023			For the Three Months ended September 30, 2022			For the Nine Months ended September 30, 2023			For the Nine Months ended September 30, 2022
REVENUES:
Product revenue	$	11,800		$	-		$	15,850		$	-
Total revenues		11,800			-			15,850			-

COSTS OF GOODS SOLD
Product and other costs		7,670			-			8,371			-
Total cost of goods sold		7,670			-			8,371			-

GROSS MARGIN		4,130			-			7,479			-

COSTS AND EXPENSES:
General and Administrative		1,355,865			1,396,989			4,309,343			4,373,285
Research and Development		220,653			603,105			1,064,563			1,720,925

Total costs and expenses		1,576,518			2,000,094			5,373,906			6,094,210

LOSS FROM OPERATIONS		(1,572,388	)		(2,000,094	)		(5,366,427	)		(6,094,210	)

OTHER EXPENSE:
Interest expense		(32,736	)		(4,245	)		(67,498	)		(10,288	)
Amortization of debt discount		(219,798	)		-			(434,712	)		-
Total other expense		(252,534	)		(4,245	)		(502,210	)		(10,288	)

NET LOSS	$	(1,824,922	)	$	(2,004,339	)	$	(5,868,637	)	$	(6,104,498	)

BASIC AND DILUTED LOSS PER SHARE (a)	$	(1.05	)	$	(1.28	)	$	(3.64	)	$	(3.89	)
WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING (a)		1,735,887			1,569,943			1,610,861			1,569,943

(a)	Results have been adjusted to reflect the 1-for-6 Reverse Split in October 2023. See Note 9, “Subsequent Events” for details regarding the stock split.

See accompanying notes to 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 SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

(UNAUDITED)

					Additional
	Common Stock				Paid in		Accumulated
	Shares (a)		Amount (a)		Capital (a)		Deficit			Total

Balance, June 30, 2022		1,569,943	$	1,570		114,168,248	$	(111,159,395	)	$	3,010,423
Employee and director equity-based compensation		-		-		518,161		-			518,161
Net loss for the three months ended September 30, 2022		-		-		-		(2,004,339	)		(2,004,339	)
Balance, September 30, 2022		1,569,943	$	1,570	$	114,686,409	$	(113,163,734	)	$	1,524,245

					Additional
	Common Stock				Paid in		Accumulated
	Shares (a)		Amount (a)		Capital (a)		Deficit			Total

Balance, June 30, 2023		1,569,943	$	1,570		116,701,842	$	(119,848,244	)	$	(3,144,832	)
Private offering issuance of stock and warrants		171,666		172		3,634,791		-			3,634,963
Employee and director equity-based compensation		-		-		240,749		-			240,749
Net loss for the three months ended September 30, 2023		-		-		-		(1,824,922	)		(1,824,922	)
Balance, September 30, 2023		1,741,609	$	1,742	$	120,577,382	$	(121,673,166	)	$	(1,094,042	)

(a)	Results have been adjusted to reflect the 1-for-6 Reverse Split in October 2023. See Note 9, “Subsequent Events” for details regarding the stock split.

See accompanying notes to 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 NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

(UNAUDITED)

	Common Stock		Common Stock		Additional Paid in		Accumulated
	Shares (a)		Amount (a)		Capital (a)		Deficit			Total
Balance, December 31, 2021		1,569,943	$	1,570	$	113,099,875	$	(107,059,236	)	$	6,042,209
Employee and director equity-based compensation		-		-		1,586,534		-			1,586,534
Net loss for the nine months ended September 30, 2022		-		-		-		(6,104,498	)		(6,104,498	)
Balance, September 30, 2022		1,569,943	$	1,570	$	114,686,409	$	(113,163,734	)	$	1,524,245

					Additional Paid in		Accumulated
	Shares (a)		Amount (a)		Capital (a)		Deficit			Total
Balance, December 31, 2022		1,569,943	$	1,570	$	115,792,337	$	(115,804,529	)	$	(10,622	)
Private offering issuance of stock and warrants		171,666		172		3,634,791		-			3,634,963
Employee and director equity-based compensation		-		-		710,661		-			710,661
Warrants issued with related party note		-		-		439,593		-			439,593
Net loss for the nine months ended September 30, 2023		-		-		-		(5,868,637	)		(5,868,637	)
Balance, September 30, 2023		1,741,609	$	1,742	$	120,577,382	$	(121,673,166	)	$	(1,094,042	)

(a)	Results have been adjusted to reflect the 1-for-6 Reverse Split in October 2023. See Note 9, “Subsequent Events” for details regarding the stock split.

See accompanying notes to unaudited condensed consolidated financial statements.

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ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended September 30, 2023			For the Nine Months Ended September 30, 2022
Cash Flows for Operating Activities:
Net loss	$	(5,868,637	)	$	(6,104,498	)
Adjustments to reconcile net loss to net cash used by operating activities:
Non cash lease expense		67,172			58,159
Amortization of deferred R&D obligations participation agreements		(624,110	)		(702,045	)
Amortization of debt discount		434,712			-
Employee and director equity compensation		710,661			1,586,534
Changes in assets and liabilities:
Prepaid expenses		(358,217	)		(284,487	)
Accounts payable		(99,536	)		(47,352	)
Lease liabilities		(72,752	)		(32,238	)
Security deposits		-			(29,058	)
Accounts receivable		(2,593	)		-
Accrued liabilities		729,140			(100,605	)
Net cash (used in) operating activities		(5,084,160	)		(5,655,590	)

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

Cash Flow from Financing Activities:
Proceeds from notes payable, other		605,600			628,600
Payments on notes payable, other		(471,023	)		(488,911	)
Proceeds from note payable, related party		1,000,000			-
Net proceeds from sales of common stock and warrants		3,634,963			-
Net cash provided by financing activities		4,769,540			139,689

Decrease in Cash		(314,620	)		(5,515,901	)
Cash at Beginning of Period		1,799,264			8,901,875
Cash at End of Period	$	1,484,644		$	3,385,974

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	16,639		$	8,493
Income Taxes	$	-		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

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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” or “ZIVO”). 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 three and nine months ended September 30, 2023, and has an accumulated deficit of $121,673,166. 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 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.

Stock Split

On October 26, 2023, the Company effected a 1-for-6 reverse stock split of its common stock and proportionately decreased the number of authorized shares of common stock. All share, per share, options, and warrants information has been retroactively adjusted to reflect the reverse split. The shares of common stock retain a par value of $0.001 per share.

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 ASU 2020-06 did not have an impact on any amounts recorded in 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 and nine months ended September 30, 2023, as the convertible debentures were not in the money during the period.

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock Based Compensation

The Company accounts for stock-based compensation in accordance with FASB Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation. Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. The Company, from time to time, issues common stock or grants common stock options to its employees, consultants and board members. At the date of grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period. Issuances of common stock are valued at the closing market price on the date of issuance and the fair value of any stock option or warrant awards is calculated using the Black Scholes option pricing model and employing the simplified term method as the Company does not have a historical basis to determine the term. The Company records forfeiture of options when they occur.

During the three months ended September 30, 2023, no options were granted to directors of the Company. During the three months ended September 30, 2022, 36,731 options were granted to employees, consultants or directors of the Company. The Company recorded compensation expense for issued grants during the three months ended September 30, 2023 and 2022, and for vesting of previous grants in the amount of $240,750 and $518,161 for these periods, respectively. During the nine months ended September 30, 2023, and 2022, 10,878 and 65,481 stock options, respectively were granted to directors and employees of the Company. The Company recorded compensation expense for issued grants during the nine months ended September 30, 2023, and 2022, and for vesting of previous grants in the amount of $710,661 and $1,586,534 for these periods, respectively.

The fair value of stock options was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:

	Three Months Ended September 30,
	2023		2022
Expected volatility		-	120.99% to 121.19		%
Expected dividends		-		-
Expected term		-	5.31 to 5.75 years
Risk free rate		-	2.69% to 3.25		%

	Nine Months Ended September 30,
	2023			2022
Expected volatility		112.28	%		120.99% to 130.18	%
Expected dividends		-			-
Expected term	5.3 years			5.31 to 5.75 years
Risk free rate		3.88	%		1.88% to 3.25	%

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. In considering the expected term of the options, the Company employs the simplified method. The Company uses this method as it does not have a history of option exercises to establish a robust estimated term based on experience. The simplified term is used for the determination of expected volatility as well as the identification of the risk-free rate.

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Warrants

The Company accounts for warrants issued on June 2, 2021 in connection with a public offering of commons stock and common stock warrants, and traded on the Nasdaq under the symbol ZIVOW, (“Public Warrants”) and Private Placement Warrants, see Note 6 – STOCKHOLDERS’ EQUITY (DEFICIT), (collectively “Warrants”) as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the Warrants are indexed to the Company’s own stock and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The fair value of Warrants is estimated using Black Scholes modeling. Inputs under the model include the Company’s Common Share price, the risk-free interest rate, the expected term, the volatility, and the dividend rate. Warrants that are determined to require liability classifications are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classifications measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, (“ASC 820”) provides guidance on the development and disclosure of fair value measurements. Pursuant to ASC 820, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. This determination requires significant judgments to be made by the Company.

As of September 30, 2023 and December 31, 2022, the recorded values of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable, and accrued expenses and other liabilities approximate their fair values due to the short-term nature of these items.

NOTE 4 - LEASES

On December 17, 2020, the Company entered into a 25 ½ month lease agreement for a facility that contains office, warehouse, lab and research and development space in Ft. Myers, Florida. The lease agreement commenced on December 17, 2020 and the original term ended on January 31, 2023. The agreement provided for a total rent of $54,993 over the period. Occupancy of the property commenced on December 17, 2020, there was a 6-week rent holiday and a commencement date of February 1, 2021. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Rent is $3,291 per month from January 15, 2021 to January 31, 2022 and $1,154 from February 1, 2022 to January 31, 2023. On June 5, 2022, the Company exercised an option to extend the lease through December 31, 2024. The lease extension rent is $2,261 per month for calendar year 2023, and $2,300 per month for calendar year 2024, and totals an additional rent obligation of $54,743 of rent over the extension period.

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On January 14, 2022, the Company entered into a 34-month sublease agreement for an office in Bloomfield Hills, Michigan. The Company moved its headquarters to this location. The agreement commenced on January 29, 2022 and ends on November 30, 2024. The agreement provided for a total rent of $232,464. Occupancy of the property commenced on January 29, 2022, there was a three-month rent holiday with a rent commencement date of April 29, 2022. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Rent is $7,265 per month from commencement to November 30, 2022, $7,466 from November 30, 2022 to November 30, 2023, and $7,668 from November 30, 2023 to the lease end date.

The balances for our operating lease where we are the lessee are presented as follows within our condensed consolidated balance sheet:

Operating leases:

	For the Nine Months Ended		For the Year Ended
Assets:	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	122,110	$	189,282

Liabilities:
Current portion of long-term operating lease	$	110,398	$	99,259
Long-term operating lease, net of current portion		22,027		105,918
	$	132,425	$	205,177

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

For the Three Months Ended

For the Nine Months Ended

September 30,

2023

September 30,

2022

September 30,

2023

September 30,

2022

Operating lease expense

27,236

27,479

81,707

74,770

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

	For the			For the
	Nine Months Ended			Year Ended
	September 30, 2023			December 31, 2022
Weighted-average remaining lease term:
Operating leases	1.21 Years			1.94 Years

Discount rate:
Operating leases		11.00	%		11.00	%

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

	For the		For the
	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:	$	86,720	$	48,849
Non-cash investment in ROU asset	$	-	$	195,804

As of September 30, 2023, the maturities of our operating lease liability are as follows:

Year Ended:	Operating Lease
December 31, 2023		29,489
December 31, 2024		112,407
Total minimum lease payments		141,896
Less: Interest		(9,471	)
Present value of lease obligations		132,425
Less: Current portion		(110,398	)
Long-term portion of lease obligations	$	22,027

NOTE 5 - DEBT

Short Term Loan

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 an 8.4% annual percentage rate and will be paid down equal monthly payments of $69,666, which payment began March 10, 2023. The principal balance as of September 30, 2023 was $134,578.

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 65,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”). The Company had the ability to prepay all or a portion of the outstanding Note principal and accrued and unpaid interest without any prepayment fee.

Each warrant is exercisable for a period of three years from issuance at a per-share exercise price equal to $17.46. 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.

The allocation of fair value between the Note and the Warrant was recorded at the issuance date using a relative fair value allocation method. The Company determined the fair value of the Warrants as of April 3, 2023 using the Black-Scholes option pricing model and applying the following assumptions:

Fair value of common stock	$	18.66
Expected term (in years)		3
Risk-free interest rate		3.73	%
Dividend yield		-
Volatility		99.89	%

As a result, $433,594 or the proceeds were allocated to the Warrant and the debt discount. The Warrant, which qualified for the derivatives scope exception, met equity classification, and were recognized as a component of permanent stockholders’ equity within additional paid-in-capital and as a debt discount on the condensed consolidated balance sheet.

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The Note matured on October 2, 2023 and bore interest at an annual rate of 10.0%. The debt discount was amortized using the effective interest rate method over the term of the Note. The effective interest rate on the Note, including the amortization of the discount was 54.0% as of September 30, 2023. In the three and nine months ended September 30, 2023, the Company recorded $504,458 of interest expense related to the Note, which included $439,594 of non-cash amortization of the loan discount. The Note was satisfied in full on October 2, 2023.

Balance sheet information related to the Note is as follows:

	Quarter Ended September 30, 2023
Short Term Loan	$	1,000,000
Less: Unamortized debt discount		4,882
Carrying value of Term Loan	$	995,118

NOTE 6 - STOCKHOLDERS’ EQUITY (DEFICIT)

June 2023 Registered Direct Offering and 2023 Private Placement Warrants

On July 5, 2023, the Company, closed on a Securities Purchase Agreement dated June 30, 2023 (the “Purchase Agreement”) with a single institutional investor (the “Investor”), pursuant to which the Investor agreed to purchase from the Company, in a registered direct offering (the “Registered Offering”), (i) an aggregate of 171,666 shares of the Company’s Class A Common Stock, par value $0.001 per share at a price of $16.02 per share, (ii) an aggregate of 78,021 pre-funded warrants to purchase 78,021 shares of Common Stock, at an offering price of $16.0194 per pre-funded warrant at an exercise price of $0.0006 per share, with a term of exercise of five years (collectively, the “Registered Offering Securities”). The gross proceeds to the Company from the Registered Offering and concurrent private placement described below were approximately $4,000,000 (before deducting the placement agent’s fees and other offering expenses paid by the Company in the amount of $364,997).

As additional consideration for the purchase of the Private Placement Securities, we agreed to issue to the Investors Series A Warrants to purchase 249,688 shares of common stock at an exercise price of $16.80 per share, and Series B Warrants to purchase 249,688 shares of common stock at an exercise price of $16.80 per share (collectively, the “Private Placement Warrants”). The exercise price of the Private Placement Warrants is $16.80 per share, however, is subject to adjustment 100% of the highest VWAP during the period beginning on the trading day immediately preceding a public announcement of an applicable fundamental transaction and ending within 30 trading days following the fundamental transaction. In such event, the Investor shall have the right to receive, for each Private Placement Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, at the option of the Investor, the number of Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of Shares for which this Private Placement Warrant is exercisable. Further, if the Company is given any choice as to the securities, cash or property to be received in a fundamental transaction, then the Investor shall be given the same choice as to the alternate consideration it receives upon any exercise of these Private Placement Warrants following such fundamental transaction.

The net proceeds of the offering, including the fair value assigned to the Private Placement Warrants were recorded as a component of stockholders’ equity within additional paid-in-capital.

2021 Equity Incentive Plan

On October 12, 2021, after approval from the stockholders at the Company’s 2021 annual meeting of stockholders, the Company adopted the 2021 Plan for the purpose of enhancing the Company’s ability to attract and retain highly qualified directors, officers, key employees and other persons and to motivate such persons to improve the business results and earnings of the Company by providing an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. The 2021 Plan is administered by the compensation committee of the Board who will, amongst other duties, have full power and authority to take all actions and to make all determinations required or provided for under the 2021 Plan. Pursuant to the 2021 Plan, the Company may grant options, share appreciation rights, restricted shares, restricted share units, unrestricted shares and dividend equivalent rights. The 2021 Plan has a duration of 10 years.

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Subject to adjustment as described in the 2021 Plan, the aggregate number of shares of common stock available for issuance under the 2021 Plan is initially set at 166,666 shares; this number is automatically increased each January 1st by an amount equal to 5% of the number of common stock shares outstanding at that date, resulting in an increase in available shares under the 2021 Plan at January 1, 2023 of 78,497. As of September 30, 2023, 232,101 options have been issued and remain outstanding under the 2021 Plan, and 91,559 shares remained available for issuance.

2019 Omnibus Long-Term Incentive Plan

Prior to the adoption of the 2021 Equity Incentive Plan, the Company maintained a 2019 Omnibus Long-Term Incentive Plan (the “2019 Plan”). Following the approval by the shareholders of the 2021 Plan, no additional awards have been or will be made under the 2019 Plan. As of September 30, 2023, 130,203 stock options had been issued under the 2019 Plan with terms between 5 years and 10 years, of which 60,415 remained outstanding.

Common Stock Options

A summary of the status of the Company’s options issued under the Company’s equity incentive plans is presented below. As of September 30, 2023 there is no intrinsic value in any of the Company's outstanding options as the market price of the Company's common stock is in all cases lower than the exercise price of options:

	September 30, 2023				September 30, 2022
	Number of Options		Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Outstanding, beginning of year		281,638	$	36.29		286,838		$	44.28
Forfeited		-		-		(140,375	)		43.26
Issued		10,878		16.74		65,481			27.54
Outstanding, end of period		292,516	$	35.56		211,953		$	39.78

Options outstanding and exercisable by price range as of September 30, 2023, were as follows:

Outstanding Options							Exercisable Options
	Range of Exercise Price	Number		Average Weighted Remaining Contractual Life in Years			Range of Exercise Price	Number		Weighted Average Exercise Price
$	12.00-17.99		68,075		9.34	$	12.00-17.99		65,351	$	16.57
	18.00-23.99		36,727		8.90		18.00-23.99		22,308		22.94
	24.00-29.99		8,885		8.04		24.00-29.99		8,876		26.88
	30.00-35.99		118,414		8.14		30.00-35.99		80,868		33.00
	48.00-53.99		1,042		1.79		48.00-53.99		1,041		52.80
	54.00-59.99		4,166		1.88		54.00-59.99		4,166		57.60
	66.00-71.99		27,083		7.06		66.00-71.99		19,270		67.20
	72.00-77.99		28,124		1.39		72.00-77.99		28,121		76.80
			292,516		7.65				230,001	$	35.88

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Common Stock Warrants - Private

A summary of the status of the Company’s private warrants is presented below:

	September 30, 2023					September 30, 2022
	Number of Warrants			Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price
Outstanding, beginning of year		267,013		$	47.10		425,605		$	45.42
Issued		642,397			14.82		-			-
Exercised		-			-		-			-
Cancelled		-			-		-			-
Expired		(105,390	)	$	47.24		(48,619	)		32.94
Outstanding, end of period		804,020		$	21.29		376,986		$	47.04

Private warrants outstanding and exercisable by price range as of September 30, 2023, were as follows:

Outstanding Warrants							Exercisable Warrants
	Exercise Price	Number		Average Weighted Remaining Contractual Life in Years			Exercise Price	Number		Weighted Average Exercise Price

$	0.00-5.99		78,021		9.77	$	0.00-5.99		78,021	$	0.00
	12.00-17.99		564,376		3.18		12.00-17.99		564,376		16.88
	30.00-35.99		36,800		2.67		30.00-35.99		36,800		33.00
	36.00-41.99		5,309		0.99		36.00-41.99		5,309		38.40
	48.00-53.99		79,097		0.45		48.00-53.99		79,097		48.19
	54.00-59.99		38,543		1.95		54.00-59.99		38,543		57.60
	60.00-65.99		281		2.62		60.00-65.99		281		62.40
	66.00-71.99		760		2.02		66.00-71.99		760		67.20
	84.00-89.99		833		1.24		84.00-89.99		833		86.40
			804,020		3.45				804,020	$	21.29

Common Stock Warrants - Public

A summary of the status of the Company’s Public Warrants is presented below:

	September 30, 2023				September 30, 2022
	Number of Public Warrants		Weighted Average Exercise Price		Number of Public Warrants		Weighted Average Exercise Price
Outstanding, beginning of year		495,917	$	33.00		495,917	$	33.00
Issued		-		-		-		-
Exercised		-		-		-		-
Cancelled		-		-		-		-
Expired		-		-		-		-
Outstanding, end of period		495,917	$	33.00		495,917	$	33.00

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Public warrants outstanding and exercisable by price range as of September 30, 2023, were as follows:

Outstanding Public Warrants						Exercisable Public Warrants
Exercise Price		Number		Average Weighted Remaining Contractual Life in Years		Exercise Price		Number		Weighted Average Exercise Price

$	33.00		495,917		2.68	$	33.00		495,917		33.00

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Employment Agreements

As of September 30, 2023, the Company had compensation agreements with its President / Chief Executive Officer, and Chief Financial Officer.

Legal Contingencies

The Company may become a party to litigation in the normal course of business. In the opinion of management, other than the item above, 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 8 - 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 and nine months ended September 30, 2023 and 2022 is based on the estimated annual effective tax rate. Based on the Company’s effective tax rate and full valuation allowance, tax expense is expected to be $0 for 2023.

NOTE 9 - SUBSEQUENT EVENTS

Stock Split

On October 24, 2023, the Company authorized a 1-for-6 reverse stock split of its issued and outstanding common stock. Additionally, on October 24, 2023, the Company amended its Articles to reduce the authorized shares of stock in the same 1-for-6 reverse split from 150,000,000 shares to 25,000,000 shares.

On October 26, 2023, the Company effected a 1-for-6 reverse stock split of its common stock and proportionately decreased the number of authorized shares of common stock. All share, per share, warrants, and options information throughout the condensed consolidated financial statements has been retroactively adjusted to reflect the reverse split. The shares of common stock retain a par value of $0.001 per share.

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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.

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

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.

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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 to invest in full commercial-scale ponds and product processing equipment.

The Company currently has contracts for the sale and production of its algal biomass. ZIVO has engaged an independent distributor, ZWorldwide, Inc., who has begun to sell the product, branded Zivolife^TM, with an initial focus on the North American green powder food market with the product being grown in Peru.

Additional Indications

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

Biotech (Therapeutic):

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

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

·	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 (Nutrition):

·	Companion Animal Food Ingredient: The self-affirmed GRAS process was completed for ZIVO algal biomass in late 2018 and updated in early 2023 to validate its suitability for human consumption as an ingredient in foods and beverages. We plan to leverage this work into viable food and nutritional supplements for companion animals.

·	Skin Health: ZIVO is developing its algal biomass as a skin health ingredient, the Company has engaged in some limited topical skin product testing started in the third quarter of 2020, and we plan to perform clinical efficacy claim studies planned for ingestible and topical products.

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Results of Operations for the three months ended September 30, 2023 and 2022

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

	Quarter ended September 30,
	2023			2022
Total revenue:	$	11,800		$	-
Total cost of goods sold		7,670			-
Gross margin		4,130			-
Costs and expenses:
Research and development		220,653			603,105
General and administrative		1,355,865			1,396,989
Total costs and expenses		1,576,518			2,000,094
Loss for operations		(1,572,388	)		(2,000,094	)
Other expense:
Total other income, net		(252,534	)		(4,245	)
Net loss	$	(1,824,922	)	$	(2,004,339	)

Revenue

During the three months ended September 30, 2023, the Company recorded commercial revenue relating to sales of the Company’s dried algal biomass product as a human food or food ingredient. The $11,800 for the quarter ending September 30, 2023 is an increase over the $0 in revenue in the same quarter in the comparable prior year. The $11,800 increase is the result of no recorded revenue in the three months ended September 30, 2022.

Costs of Goods Sold

Cost of goods sold for the quarter ended September 30, 2023 was $7,670. This is $7,670 higher than the same period last year, attributable to product volume as no product was shipped in the comparable prior year period.

General and Administrative Expenses

General and administrative expenses were approximately $1.36 million for the three months ended September 30, 2023, as compared to approximately $1.40 million for the comparable prior year period. The decrease of approximately $40,000 in general and administrative expense during 2023 is due primarily to a reduction in labor related expenses of approximately $50,000, unchanged overall professional services, partially offset by an increase in other overhead of approximately $10,000. The reduction in labor related costs are due to decreases in non-cash compensation of approximately $80,000 and tax and benefits of approximately $10,000, partially offset by higher employee bonus expenses. versus the third quarter of 2022. The unchanged overall professional fees were driven by lower directors’ fees of approximately $90,000 and a reduction in spending on consultants of approximately $130,000, fully offset by increases in accounting and legal fees to support fund raising activities of approximately $70,000 and approximately $150,000 respectively. The $10,000 increase in other overhead spending is attributable to higher listing and filing fees of approximately $20,000 partially offset by lower travel and entertainment expense of approximately $10,000.

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Research and Development Expenses

For the three months ended September 30, 2023, the Company incurred approximately $220,000 in research and development expenses, as compared to approximately $600,000 for the comparable period in 2022. All of these expenses were associated with research relating to our biotech and agtech businesses. In the quarter ended September 30, 2023, the Company’s research and development spending included approximately $190,000 of amortization of deferred research and development obligations for the participation agreements compared to approximately $300,000 of amortization in the prior year period. In the quarter ended September 30, 2023, excluding this amortization, the Company had gross research and development spending of approximately $410,000; an approximately $490,000 decrease in spending from the second quarter of 2022. Of these costs in the third quarter of 2023, approximately $320,000 was attributable to labor and other internal research and development costs, a decrease of approximately $90,000 from the comparable prior year. The decrease is essentially all the result of lower non-cash compensation related costs. Third party research and development spending of approximately $90,000 was approximately $390,000 lower than the comparable prior year period due to an decrease in third party research and consultant spending.

	Quarter ended September 30,			Quarter ended September 30,
	2023			2022
Labor and other internal expenses	$	321,866		$	413,505
External research expenses		88,467			484,561
Total gross R&D expenses		410,333			898,066
Less contra-expense for amortization of deferred R&D obligation - participation agreements		(189,680	)		(294,961	)
Research and development	$	220,653		$	603,105

Results of Operations for the nine months ended September 30, 2023 and 2022

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

	Nine Months ended September 30,
	2023			2022
Total revenue:	$	15,850		$	-
Total costs of goods sold		8,371			-
Gross margin		7,479			-
Costs and expenses:
Research and development		1,064,563			1,720,925
General and administrative		4,309,343			4,373,285
Total costs and expenses		5,373,906			6,094,210
Operating loss		(5,366,427	)		(6,094,210	)
Other income (expense):
Total other income, net		(502,210	)		(10,288	)
Net loss	$	(5,868,637	)	$	(6,104,498	)

Revenue

In the nine months ended on September 30, 2023 the Company recorded its first commercial revenue relating sales to of the Company’s dried algal biomass product as a human food or food ingredient. The $15,850 for the nine months ending September 30, 2023 is an increase over the $0 in revenue in the same nine month period ended September 30, 2022. The $15,850 increase is the result of no recorded revenue in the nine months ended September 30, 2022.

Costs of Goods Sold

Cost of goods sold for the nine months ended September 30, 2023 was $8,371. This is $8,371 higher than the same period last year, as no product was shipped in the prior year period.

General and Administrative Expenses

General and administrative expenses were approximately $4.31 million for the nine months ended September 30, 2023, slightly lower the approximately $4.37 million spent in the comparable prior year period. The decrease of approximately $60,000 in general and administrative expense during 2023 is explained by higher labor related costs of approximately $60,000 and $80,000 of other overhead, more than offset by a reduction in professional fees of approximately $200,000. The approximately $60,000 increase in labor related expenses is attributable to an increase in salary and bonus cost of approximately $220,000 partially offset by reductions in tax and benefits of approximately $50,000 and non-cash compensation of approximately $110,000. Other overhead increases are due to an approximately $30,000 increase in insurance costs and an approximately $50,000 increase in filing and listing fees. The reduction in professional service is attributable to an approximately $240,000 reduction in third party consultant spending and lower directors’ fees of approximately $470,000, partially offset by an increase in legal and accounting fees of approximately $510,000.

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Research and Development Expenses

For the nine months ended September 30, 2023, the Company incurred approximately $1.1 million in research and development expenses, as compared to approximately $1.7 million in the comparable period in 2022. All of these expenses were associated with research relating to our biotech and agtech businesses. In the nine months ended September 30, 2023, the Company’s research and development spending included approximately $620,000 of amortization of deferred research and development obligations for the participation agreements as compared to approximately $700,000 in the comparable prior year period.

In the nine months ended September 30, 2023, excluding this amortization, the Company had gross research and development spending of approximately $1.7 million; an approximately $700,000 decrease in spending from the nine months ended September 30, 2022. Of these costs in the nine months ended September 30, 2023, approximately $1.0 million was related to labor and other internal lab costs, a decrease of approximately $200,000 from the comparable prior year, primarily attributable to a decrease in non-cash compensation. Third party research and development spending of approximately $700,000 was approximately $500,000 lower from the comparable prior year period due to lower spending on studies, development, and consultants.

	Nine months ended September 30,			Nine months ended September 30,
	2023			2022
Labor and other internal expenses	$	986,534		$	1,221,539
External research expenses		702,139			1,201,431
Total gross R&D expenses		1,688,673			2,422,970
Less contra-expense for amortization of deferred R&D obligation - participation agreements		(624,110	)		(702,045	)
Research and development	$	1,064,563		$	1,720,925

Capital Resources

As of September 30, 2023, ZIVO’s principal source of liquidity consisted of cash of $1,484,644. 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.

June 2023 Registered Direct Offering and Private Placement

On June 30, 2023, the Company sold 171,666 shares of common stock, par value $0.001 per share, at an offering price of $16.02 per share, and pre-funded warrants to purchase up to an aggregate of 78,021 shares of Common Stock at an offering price of $16.0194 per pre-funded warrant, to a single institutional investor. In a concurrent private placement, the Company also directly sold to the purchaser Series A Common Warrants to purchase up to an aggregate of 249,688 shares of common stock, at an exercise price of $16.80 per share and Series B Common Warrants to purchase up to an aggregate of 249,688 shares of Common Stock, at an exercise price of $16.80 per share. The Series A Common Warrants are immediately exercisable, subject to a beneficial ownership limitation of the holder provided in the Series A Common Warrants, at any time on or after the date of issuance and will expire two years from the initial exercise date. The Series B Common Warrants are immediately exercisable, subject to a beneficial ownership limitation of the holder provided in the Series B Common Warrants, at any time on or after the date of issuance and will expire five years from the initial exercise date. The gross proceeds to the Company from the registered direct offering and concurrent private placement were approximately $4,000,000.00 (before deducting the placement agent’s fees and other offerings expenses paid by the Company in the amount of $364,997).

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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 in proceeds. 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.

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.

Statement of Cash Flows

Cash Flows from Operating Activities. During the nine months ended September 30, 2023, our operating activities used approximately $5.1 million in cash, a decrease of cash used of approximately $600,000 from the comparable prior year period when the Company used approximately $5.7 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 $100,000 more of additional net loss than in the comparable prior year period. In addition, for the nine months ended September 30, 2023, the Company generated approximately $630,000 of cash through increases in accounts payables and accrued expenses.

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Cash Flows from Investing Activities. During the nine months ended September 30, 2023 and 2022, there were no investing activities.

Cash Flows from Financing Activities. During the nine months ended September 30, 2023, our financing activities generated approximately $4.7 million, an increase of approximately $4.6 million from the comparable prior year period when the Company generated approximately $140,000 from financing activities. In the nine months ended September 30, 2023, the Company received net proceeds of $1.0 million from a term loan provided by a related party to the Company, which was repaid to the lender in full on October 2, 2023, and approximately $600,000 in proceeds from a short term financing instrument of which approximately $500,000 has been repaid. The Company also received approximately $3.6 million in net proceeds from the June 2023 Registered Direct Offering on July 5, 2023.

After giving effect to the approximately $3.6 million in net proceeds from the June 2023 Registered Direct Offering received on July 5, 2023, we estimate that we would require approximately $6.0 million in cash over the next 12 months in order to fund our basic operations, excluding our research and development 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 research and development activities. The following table shows a summary of our cash flows for the periods indicated:

	Nine months ended September 30,
	2023			2022
Net cash provided by (used in):
Operating activities	$	(5,084,160	)	$	(5,655,590	)
Investing activities		-			-
Financing activities		4,769,540			139,689
Net decrease in Cash	$	(314,620	)	$	(5,515,901	)

Critical Accounting Policies and Significant Judgments and Estimates

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

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Fair Value of Financial Instruments

We account for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adhering to the Financial Accounting Standards Board (“FASB”) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

As of September 30, 2023 and 2022, fair values of cash, prepaid, other assets, accounts payable, accrued expenses, and short term debt approximated their carrying values because of the short-term nature of these assets or liabilities. We elected to account for the convertible notes while they were outstanding on a fair value basis under ASC 825 to comprehensively value and streamline the accounting for the embedded conversion options. The fair value of these convertible notes were based on both the fair value of our common stock, discount associated with the embedded redemption features, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs.

Complex Financial Instruments

The Company accounts for Warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the Warrants are indexed to the Company’s own stock and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The fair value of Warrants is estimated using Black Scholes modeling. Inputs under the model include the Company’s Common Share price, the risk-free interest rate, the expected term, the volatility, and the dividend rate. All the Company’s Warrants have been classified for equity treatment and are not remeasured.

Stock-Based Compensation

We account for share‑based compensation in accordance with the provisions of the ASC 718, Compensation - Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant‑date fair value. The Company records forfeitures when they occur. Share‑based compensation arrangements to non‑employees are accounted for in accordance with the applicable provisions of ASC 718.

Recent Accounting Pronouncements

See “Note 2 - Summary of Significant Accounting Policies” in this Report regarding the impact of certain recent accounting pronouncements on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.

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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 Quarterly Report on Form 10-Q 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 September 30, 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:

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:

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	·	Management did not identify controls over the review of the tax provision, including the valuation analysis related to deferred tax assets, considerations for uncertain tax positions, the preparation of the income tax footnote and required disclosures and selecting and applying accounting policies;

	·	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 September 30, 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 Quarterly Report on Form 10-Q 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 Plan

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;

	·	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; and

	·	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 measures in connection with the material weaknesses described above, there were no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023, that have 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 other 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

None.

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 of Amendment effective May 28, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on June 2, 2021)

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 July 7, 2022)

4.1		Note (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on April 5, 2023)

4.2		Warrant (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on April 5, 2023)

4.3		Form of Series A Common Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on July 6, 2023)

4.4		Form of Series B Common Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on July 6, 2023)

4.5		Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on July 6, 2023)

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

10.2		Form of Securities Purchase Agreement, dated as of June 30, 2023, by and between Company and the Investor (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 6, 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: November 13, 2023	By:	/s/ John B. Payne
		John B. Payne
		Chief Executive Officer

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