8-K: Zivo Bioscience Initiates $2 Million Convertible Debt Offering to Fund Operations

Zivo Bioscience, Inc. has commenced a new convertible debt offering to raise up to $2,000,000, issuing an initial bridge promissory note and accompanying warrants to an accredited investor.

Summary

• Zivo Bioscience, Inc. has launched a new convertible debt offering with an aggregate target of $2,000,000.
• The offering involves the issuance of unsecured convertible notes and accompanying warrants to accredited investors.
• On July 8, 2025, an initial Bridge Promissory Note in the principal amount of $250,000 was issued, along with a warrant to purchase 1,793 shares of the company's common stock.
• Each note will bear interest at 10% per annum, compounded annually.
• Notes are due and payable upon the request of the majority holders on or after the earlier of a Qualified Financing (total proceeds of at least $5,000,000) or two years from the date of issuance (Maturity Date).
• Outstanding principal and unpaid accrued interest will automatically convert into common stock at a conversion price equal to the lower of the per share closing price on the issuance date or 80% of the price per share determined in the Qualified Financing.
• Warrants have a five-year term, an exercise price equal to the common stock's closing price on the issuance date, and become exercisable immediately.
• The number of shares issuable upon warrant exercise is calculated as 10% of the original principal amount of the note divided by the common stock's closing price on the issuance date.
• The company may prepay a note with the consent of a majority of holders or upon 30 days' prior written notice at a cash amount equal to 115% of the outstanding principal plus any unpaid accrued interest.

Sentiment

Score: 6

Explanation: The capital raise provides necessary funding for operations, which is positive for the company's continuity and growth prospects. However, the terms involve potential dilution for existing shareholders and a relatively high interest rate, balancing the overall sentiment to moderately positive, reflecting a standard financing move for a company in this position.

Positives

• Secures up to $2,000,000 in capital, providing essential funding for the company's business operations.
• The initial $250,000 note provides immediate capital, addressing short-term funding needs.
• Warrants include provisions for cashless exercise, offering flexibility to holders if a registration statement is not effective for resale.
• The offering includes customary fundamental transaction language, which helps protect warrant holders' rights in the event of a merger or acquisition.

Negatives

• The notes are unsecured and rank junior to all secured indebtedness, increasing the risk for noteholders in a default scenario.
• The 10% annual interest rate is relatively high, which will increase the company's debt servicing costs.
• The company can prepay notes at a premium of 115% of the outstanding principal plus accrued interest, which is an additional cost if the company chooses to prepay.
• Potential for significant dilution of existing shareholders upon the conversion of notes and exercise of warrants, especially if the conversion occurs at 80% of a higher Qualified Financing price.

Risks

• Dilution Risk: The conversion of notes into common stock and the exercise of warrants will increase the number of outstanding shares, potentially diluting the ownership percentage of existing shareholders.
• Subordination Risk: The notes are unsecured and explicitly rank junior to all secured indebtedness, meaning noteholders face higher risk of loss in the event of the company's bankruptcy or liquidation.
• Default Risk: The notes become immediately due and payable upon specified events of default, including failure to pay amounts when due or bankruptcy, which could trigger accelerated repayment obligations.
• Market Price Volatility: The conversion price of the notes and the exercise price of the warrants are tied to the common stock's closing price, making the value of these instruments susceptible to market fluctuations.
• Funding Uncertainty: While the offering targets $2,000,000, only an initial $250,000 note has been issued, meaning the full amount of capital is not yet secured.

Future Outlook

The company intends to use the proceeds from this convertible debt offering solely for the operations of its business, indicating a focus on sustaining and advancing current activities.

Management Comments

• The Company's Board of Directors has approved the issuance of this Note based upon a reasonable belief that the issuance of this Note is appropriate for the Company after reasonable inquiry concerning the Company's financing objectives and financial situation.

Industry Context

Bridge promissory notes and warrants are common financing instruments for smaller, publicly traded companies, particularly those in growth phases or seeking to bridge funding gaps before larger equity rounds. The terms, including a 10% interest rate and conversion features, are typical for such unsecured, junior debt, reflecting the risk profile often associated with companies raising capital in this manner.

Comparison to Industry Standards

• The 10% annual interest rate is within the typical range for unsecured bridge notes issued by smaller companies, which often face higher borrowing costs than larger, more established entities.
• The conversion feature, allowing conversion at a discount (80% of Qualified Financing price) or at the issuance date price, is a common incentive for investors in convertible debt, providing downside protection and upside participation.
• The five-year warrant term is standard, offering long-term equity participation. The 4.99% beneficial ownership limitation (with an option to increase to 9.99%) is a common protective measure to prevent immediate, significant control shifts.
• The junior and unsecured nature of the debt is typical for bridge financing that aims to be less restrictive than senior secured debt, but it places noteholders at a higher risk in a default scenario compared to senior creditors.

Stakeholder Impact

• Shareholders: Face potential dilution from the conversion of notes and exercise of warrants, but benefit from the capital infusion supporting ongoing business operations and potential future growth.
• Creditors: New noteholders are in a junior and unsecured position relative to existing secured indebtedness, implying higher risk.
• Company Operations: The capital raised is specifically earmarked for business operations, which should enable the company to continue its activities and pursue strategic objectives.

Next Steps

• Continue to issue additional unsecured convertible notes and accompanying warrants to accredited investors to reach the aggregate $2,000,000 offering amount.
• Potentially pursue a Qualified Financing of at least $5,000,000, which would trigger automatic conversion of the notes.
• Manage the conversion or repayment of notes upon maturity or a change of control event.

Key Dates

Recommendation

Keywords

Zivo Bioscience, ZIVO, convertible debt, promissory note, warrants, capital raise, equity financing, SEC filing, 8-K, unsecured debt, dilution, corporate finance, bridge financing