Quarterly report pursuant to Section 13 or 15(d)

DEFERRED REVENUE PARTICIPATION AGREEMENTS

v3.21.2
DEFERRED REVENUE PARTICIPATION AGREEMENTS
6 Months Ended
Jun. 30, 2021
DEFERRED REVENUE PARTICIPATION AGREEMENTS  
NOTE 8 - DEFERRED REVENUE - PARTICIPATION AGREEMENTS

NOTE 8 - DEFERRED REVENUE - PARTICIPATION AGREEMENTS

 

From April 13, 2020, through June 30, 2021, the Company entered into twenty-one (21) License Co-Development Participation Agreements (the “Participation Agreements”) with certain accredited investors (“Participants”) for an aggregate of $2,985,000. The Participation Agreements provide for the issuance of warrants to such Participants and allows the Participants to participate in the fees (the “Fees”) from licensing or selling bioactive ingredients or molecules derived from ZIVO’s algae cultures. Specifically, ZIVO has agreed to provide to the Participants a 44.78% “Revenue Share” of all license fees generated by ZIVO from any licensee (See the Table below).

 

According to the terms of the Agreements, and pursuant to ASC 470-10-25 “Debt – Sales of Future Revenues” the Company has bifurcated the proceeds of $2,985,000 as follows: 1) the 106,315 warrants sold were attributed a value of $953,897 based on the Black Scholes pricing model using the following assumptions: volatilities ranging from 139.55% to 154.26%; annual rate of dividends 0%; discount rates ranging from 0.26% to 0.45%, and recorded as Additional Paid In Capital; 2) the remaining $2,031,103 was recorded as Deferred Revenue – Participation Agreements. Since the Company believes there is a rebuttable presumption pursuant to ASC 470-10-25.2, the Deferred Revenue – Participation Agreements will be amortized into income, using an estimate to be determined by Management, if and when the Company derives income from the license or sale of bioactive ingredients or molecules (including its TLR4 Inhibitor molecule) derived from the Company’s algae cultures.

 

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 fifteen 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. Four 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.  See below a summary of the Participation Agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buy-back

 

 

Buy-back

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premium

 

 

Premium

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minimum

 

 

%

 

 

%

 

Agreement

 

 

Date of

 

Amount

 

 

 

 

 

 

 

Exercise

 

 

Revenue

 

 

Payment 

 

 

pre-18

 

 

post 18

 

#

 

 

Funding

 

Funded

 

 

Warrants

 

 

Term

 

Price

 

 

Share

 

 

Threshold

 

 

mos.

 

 

mos.

 

 

1

 

 

Apr 13, 2020

 

$ 100,000

 

 

 

3,750

 

 

5 Years

 

$ 9.60

 

 

 

1.50 %

 

 

-

 

 

 

40 %

 

 

40 %

 

2

 

 

Apr 13, 2020

 

 

150,000

 

 

 

5,625

 

 

5 Years

 

 

9.60

 

 

 

2.25 %

 

 

-

 

 

 

40 %

 

 

40 %

 

3

 

 

Apr 13, 2020

 

 

150,000

 

 

 

5,625

 

 

5 Years

 

 

9.60

 

 

 

2.25 %

 

 

-

 

 

 

40 %

 

 

40 %

 

4

 

 

May 7, 2020

 

 

250,000

 

 

 

9,375

 

 

5 Years

 

 

9.60

 

 

 

3.75 %

 

 

-

 

 

 

40 %

 

 

40 %

 

5

 

 

Jun 1, 2020

 

 

275,000

 

 

 

10,313

 

 

5 Years

 

 

8.80

 

 

 

4.13 %

 

$ 82,500

 

 

 

40 %

 

 

50 %

 

6

 

 

Jun 3, 2020

 

 

225,000

 

 

 

8,438

 

 

5 Years

 

 

8.80

 

 

 

3.38 %

 

 

67,500

 

 

 

40 %

 

 

50 %

 

7

 

 

Jul 8, 2020

 

 

100,000

 

 

 

3,750

 

 

5 Years

 

 

9.60

 

 

 

1.50 %

 

 

30,000

 

 

 

40 %

 

 

50 %

 

8

 

 

Aug. 24, 2020

 

 

125,000

 

 

 

4,688

 

 

5 Years

 

 

9.60

 

 

 

1.88 %

 

 

37,500

 

 

 

40 %

 

 

50 %

 

9

 

 

Sept. 14, 2020

 

 

150,000

 

 

 

5,625

 

 

5 Years

 

 

9.60

 

 

 

2.25 %

 

 

45,000

 

 

 

40 %

 

 

50 %

 

10

 

 

Sept.15, 2020

 

 

50,000

 

 

 

1,875

 

 

5 Years

 

 

9.60

 

 

 

0.75 %

 

 

15,000

 

 

 

40 %

 

 

50 %

 

11

 

 

Sept.15, 2020

 

 

50,000

 

 

 

1,875

 

 

5 Years

 

 

9.60

 

 

 

0.75 %

 

 

15,000

 

 

 

40 %

 

 

50 %

 

12

 

 

Sept.25, 2020

 

 

300,000

 

 

 

5,625

 

 

5 Years

 

 

9.60

 

 

 

4.50 %

 

 

420,000

 

 

 

40 %

 

 

50 %

 

13

 

 

Oct. 8, 2020

 

 

500,000

 

 

 

18,750

 

 

5 Years

 

 

9.60

 

 

 

7.50 %

 

 

150,000

 

 

 

40 %

 

 

40 %

 

14

 

 

Oct. 4, 2020

 

 

100,000

 

 

 

3,750

 

 

5 Years

 

 

9.60

 

 

 

1.50 %

 

 

30,000

 

 

 

40 %

 

 

40 %

 

15

 

 

Oct. 8, 2020

 

 

250,000

 

 

 

9,375

 

 

5 Years

 

 

9.60

 

 

 

3.75 %

 

 

75,000

 

 

 

40 %

 

 

40 %

 

16

 

 

Oct. 9, 2020

 

 

50,000

 

 

 

1,875

 

 

5 Years

 

 

9.60

 

 

 

0.75 %

 

 

15,000

 

 

 

40 %

 

 

40 %

 

17

 

 

Dec. 16, 2020

 

 

10,000

 

 

 

375

 

 

5 Years

 

 

9.60

 

 

 

0.15 %

 

 

3,000

 

 

 

40 %

 

 

50 %

 

18

 

 

Jan. 22, 2021

 

 

40,000

 

 

 

1,500

 

 

5 Years

 

 

11.20

 

 

 

0.60 %

 

 

12,000

 

 

 

40 %

 

 

50 %

 

19

 

 

Jan. 25, 2021

 

 

40,000

 

 

 

1,500

 

 

5 Years

 

 

11.20

 

 

 

0.06 %

 

 

12,000

 

 

 

40 %

 

 

50 %

 

20

 

 

Jan. 27, 2021

 

 

25,000

 

 

 

938

 

 

5 Years

 

 

11.20

 

 

 

0.38 %

 

 

7,500

 

 

 

40 %

 

 

50 %

 

21

 

 

May 14, 2021

 

 

45,000

 

 

 

1,688

 

 

5 Years

 

 

10.40

 

 

 

0.68 %

 

 

13,500

 

 

 

40 %

 

 

50 %

 

 

 

 

 

 

$ 2,985,000

 

 

 

106,315

 

 

 

 

 

 

 

 

 

44.78 %

 

$ 1,030,500

 

 

 

 

 

 

 

 

 

  

Certain of the Participation Agreements are owned by related parties.  Participation Agreements numbers 8, 14, and 19 totaling $265,000 are owned by HEP Investments, Participation Agreement 21 in the amount of $45,000 is owned by MKY MTS LLC an entity controlled by the owners of HEP Investments, and Participation Agreement 13 in the amount of $500,000 is owned by Strome.