10-Q: Zivo Bioscience Faces Going Concern Amid Low Cash

Zivo Bioscience reported a reduced net loss for Q2 2025 but faces substantial doubt about its ability to continue as a going concern due to critically low cash reserves.

Summary

• Reported a net loss of $1,640,232 for the three months ended June 30, 2025, a significant reduction from $8,236,368 in the comparable prior year period.
• Generated product revenue of $53,400 for the three months ended June 30, 2025, compared to no revenue in the same period last year.
• Cash balance stood at $9,823 as of June 30, 2025, a sharp decline from $1,542,442 at December 31, 2024.
• Accumulated deficit increased to $142,817,969 as of June 30, 2025.
• General and administrative expenses decreased by approximately $4.8 million to $1.2 million for Q2 2025, primarily due to a $3.4 million decrease in non-cash equity-related compensation.
• Research and development expenses decreased to $479,657 for Q2 2025 from $2.3 million in Q2 2024, with $230,000 attributable to amortization of exchange agreements.
• Cash used in operating activities for the six months ended June 30, 2025, was $1,906,648, an improvement from $2,322,772 in the prior year period.
• Cash provided by financing activities decreased significantly to $374,029 for the six months ended June 30, 2025, from $2,050,858 in the prior year period.
• Entered into 17 Exchange Agreements with Participants to cancel future revenue share rights in exchange for 146,660 shares of common stock, valued at $2,738,282.
• Secured a new unsecured convertible loan agreement for $250,000 on July 8, 2025, with a 10% interest rate and a 24-month term, including a warrant to purchase 1,793 shares.

Sentiment

Score: 2

Explanation: The company faces severe liquidity issues with a critically low cash balance and an explicit 'going concern' warning. While net losses decreased, this was largely due to non-cash adjustments, and the company remains highly dependent on external financing, which is becoming harder to secure. The persistent material weaknesses in internal controls add to the negative outlook.

Positives

• Net loss significantly reduced to $1.64 million in Q2 2025 from $8.24 million in Q2 2024.
• Achieved product revenue of $53,400 in Q2 2025, compared to no revenue in the prior year period.
• General and administrative expenses decreased substantially by $4.8 million, largely due to reduced non-cash equity compensation.
• Research and development expenses decreased, indicating a more controlled spending environment, though partially due to non-cash items.
• Successfully converted 17 Participation Agreements into common stock exchanges, reducing future revenue share obligations.
• Secured a new $250,000 convertible loan post-period end, providing immediate, albeit limited, liquidity.

Negatives

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and negative cash flows.
• Cash balance is critically low at $9,823 as of June 30, 2025, insufficient to fund operations for the next 12 months.
• Accumulated deficit continues to grow, reaching $142.8 million.
• Material weaknesses in internal control over financial reporting persist as of June 30, 2025.
• Significant decrease in cash provided by financing activities, indicating challenges in raising capital.
• The reduction in G&A and R&D expenses is largely attributable to non-cash equity compensation adjustments rather than fundamental operational efficiency improvements.

Risks

• Ability to continue as a going concern and history of losses.
• Ability to obtain additional financing on acceptable terms or at all.
• Relatively new business model and lack of substantial revenues.
• Ability to prosecute, maintain, or enforce intellectual property rights.
• Disputes or other developments relating to proprietary rights and claims of infringement.
• Accuracy of estimates regarding expenses, future revenues, and capital requirements.
• Successful development of production capabilities.
• Successful development of sales and marketing capabilities.
• Potential markets for products and ability to serve those markets.
• Rate and degree of market acceptance of products and any future products.
• Ability to retain key management personnel.
• Regulatory developments and compliance with applicable laws.
• Liquidity challenges and potential need to reduce scope of operations or cease altogether if capital is not raised.

Future Outlook

The company expects to continue incurring significant operating losses and net cash outflows until it generates sufficient revenue to cover its cost structure. It intends to fund ongoing activities by utilizing current cash and raising additional capital through equity and/or debt financings. There is no assurance of achieving profitable operations or securing necessary additional capital on acceptable terms. Failure to raise capital may compel the company to reduce the scope of operations and planned capital expenditures, potentially having a material adverse effect or leading to cessation of operations.

Management Comments

• Management noted the existence of substantial doubt about the company's ability to continue as a going concern.
• Current cash will not be sufficient to fund operating expenses through at least twelve months from the date of this filing.
• The company will need to secure additional funding through public or private equity or debt financings, collaborations, or other sources.
• The company may not be able to raise additional capital on terms acceptable or at all.
• If unable to raise additional funds or if anticipated operating results are not achieved, planned expenditures may need to be reduced to extend existing resources.

Industry Context

The company operates in the niche biotech and agtech sectors, focusing on microalgae-derived compounds. Its strategy to target poultry coccidiosis aligns with a global animal health market seeking alternatives to traditional antibioticor ionophore-based treatments, where new technology has been scarce for decades. The pursuit of functional food ingredients and nutritional enhancements from algal biomass also taps into growing consumer demand for natural and sustainable health products. However, the company's early stage of commercialization and significant funding needs contrast with more established players in these industries.

Comparison to Industry Standards

• The company's revenue of $53,400 for the quarter is minimal compared to established biotech or agtech companies, which often generate millions or billions in sales, reflecting its early commercialization stage.
• The net loss reduction is positive, but the company's accumulated deficit of over $142 million and critically low cash balance of $9,823 are far below typical financial health benchmarks for publicly traded companies, especially those in R&D-intensive sectors.
• The reliance on non-cash equity compensation to reduce G&A and R&D expenses, while improving reported net loss, is not indicative of sustainable operational efficiency gains seen in mature, profitable industry peers.
• The explicit 'going concern' warning is a severe indicator of financial distress, a condition rarely seen in financially stable industry leaders like Zoetis (animal health) or major food ingredient suppliers, which typically have robust cash flows and strong balance sheets.
• The company's pursuit of commercial-scale algae ponds and various product candidates (e.g., coccidiosis treatment) positions it against large animal health companies (e.g., Elanco, Merck Animal Health) and food ingredient companies (e.g., ADM, Cargill), which possess significantly greater R&D budgets, production capacities, and market reach.

Management Changes

Corporate Governance

Legal Proceedings

• Not currently a party to any material legal proceedings, and not aware of any pending or threatened legal proceedings that are material to financial condition.

Related Party Transactions

• Accounts payable to related parties decreased from $194,762 at December 31, 2024, to $70,056 at June 30, 2025.
• Sold common stock in a private unregistered transaction to a related party for proceeds of $50,000 and the issuance of 3,488 shares during Q2 2025.
• Four of the seventeen Exchange Agreements were consummated with Related Parties, resulting in the issuance of 47,320 new shares of Common Stock valued at $862,473.
• Issued warrants for 348 shares to a Related Party, tied to direct placements of common stock.
• A $400,000 increase in bonus expense was due to a 2024 agreement between the Board and the CEO to exchange an unpaid cash bonus for common stock options.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing equity issuances and potential future capital raises due to the company's precarious financial position.
• Employees and directors are receiving equity-based compensation, which aligns their interests with share performance but also contributes to dilution.
• Creditors face increased risk due to the company's 'going concern' warning and low liquidity, potentially impacting the recoverability of outstanding loans.
• Customers and suppliers may experience uncertainty regarding the company's long-term viability, potentially affecting supply chain stability or product availability if operations are curtailed.

Next Steps

• Secure additional funding through public or private equity or debt financings, or through collaborations/partnerships.
• Continue to develop bioactive compounds derived from proprietary algal culture, targeting human and animal diseases.
• Seek strategic partners for late-stage development, regulatory preparation, and commercialization of biotech products.
• Continue working towards building commercial-scale algae ponds and investing in full commercial-scale ponds and product processing equipment.
• Pursue additional indications for biotech and agtech products, including Avian Influenza, Bovine Mastitis, Canine Joint Health, Human Immune Modulation, Companion Animal Food Ingredient, Skin Health, and New Dietary Ingredient (NDI) notification.
• Implement remediation measures to address material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

The company's financial health is extremely precarious, evidenced by a critically low cash balance of $9,823 and an explicit 'going concern' warning. While net losses decreased, this was largely due to non-cash accounting adjustments rather than fundamental operational improvements. The company's ability to fund its operations for the next 12 months is in substantial doubt, requiring significant additional capital that may not be secured on favorable terms or at all. Persistent material weaknesses in internal controls further compound the risk. Given the severe liquidity crisis and the high probability of further dilution or operational curtailment, the stock presents an exceptionally high risk profile.

Keywords

Biotech, Agtech, Algae, Microalgae, Proprietary Strains, Bioactive Compounds, Coccidiosis, Bovine Mastitis, Human Cholesterol, Canine Osteoarthritis, Nutritional Supplements, Functional Food Ingredient, SEC Filing, 10-Q, Financial Results, Going Concern, Liquidity, Capital Raise, Research and Development