10-Q: Zivo Bioscience Reports Q1 2024 Financial Results, Cites Revenue Growth and Cost Reductions

Zivo Bioscience reports increased revenue and reduced expenses in Q1 2024, but acknowledges ongoing concerns about its ability to continue as a going concern.

Summary

• Zivo Bioscience, Inc. reported its financial results for the quarter ended March 31, 2024.
• The company is a research and development company in the biotech and agtech sectors, focusing on algal and bacterial strains for human and animal health applications.
• Zivo is developing bioactive compounds from its proprietary algal culture, targeting diseases like poultry coccidiosis and bovine mastitis.
• The company is also producing algal biomass in Peru for use as a functional food ingredient and nutritional enhancement.
• For Q1 2024, Zivo reported product revenue of $35,720, compared to no revenue in the same period last year.
• The cost of goods sold was $23,218 for the quarter.
• General and administrative expenses decreased to $975,574 from $1,568,377 in the prior year's quarter.
• Research and development expenses were $312,767, compared to $401,797 in the same period last year.
• The net loss for the quarter was $1,278,486, an improvement from the $1,973,142 loss in Q1 2023.
• The company raised approximately $1.1 million from the direct sale of 407,299 shares of common stock in private transactions.
• Zivo acknowledges substantial doubt about its ability to continue as a going concern and will need additional funding to sustain operations.
• Management estimates a need for approximately $5 million in cash over the next 12 months to fund basic operations, excluding R&D initiatives.

Sentiment

Score: 4

Explanation: The sentiment is cautiously negative. While the company shows some revenue growth and cost reduction, the going concern warning and material weaknesses in internal controls raise significant concerns. The need for additional funding adds further uncertainty.

Positives

• The company generated revenue of $35,720 in Q1 2024, compared to no revenue in the same period last year, indicating initial commercial traction.
• General and administrative expenses decreased by approximately $590,000, reflecting cost-cutting measures.
• The net loss decreased by approximately $700,000 compared to the first quarter of 2023.
• The company successfully raised $1.1 million through private sales of common stock.
• The company has contracts for the sale and production of its algal biomass.

Negatives

• The company has an accumulated deficit of $124,860,200.
• The company experienced negative cash flows from operations for the quarter ended March 31, 2024.
• Management expresses substantial doubt about the company's ability to continue as a going concern.
• The company needs to raise approximately $5 million in cash over the next 12 months to fund basic operations.
• Material weaknesses in internal control over financial reporting were identified.

Risks

• The company's ability to continue as a going concern is dependent on securing additional funding.
• Failure to raise additional capital could compromise the company's ability to execute its business plan.
• The development of product candidates is subject to numerous uncertainties and costly processes.
• The company may be subject to litigation and claims in the normal course of business.
• Material weaknesses in internal control over financial reporting could lead to material misstatements in financial statements.

Future Outlook

The company expects to continue incurring significant expenses and increasing operating and net losses for the foreseeable future until it generates an adequate level of revenue from potential commercial sales to cover expenses; the company expects its R&D costs to grow as it works to complete the research in the development of natural bioactive compounds for use as dietary supplements and food ingredients, as well as biologics for medicinal and pharmaceutical applications in humans and animals.

Management Comments

• Management has noted the existence of substantial doubt about our ability to continue as a going concern.
• Management has concluded that, as of March 31, 2024, our internal control over financial reporting was not effective and could lead to a material misstatement of account balances or disclosures.
• 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.

Industry Context

Zivo Bioscience operates in the competitive biotech and agtech sectors, focusing on developing novel solutions for animal and human health. The company's focus on algal-based products aligns with the growing interest in sustainable and natural ingredients. The coccidiosis market, which Zivo is targeting, is dominated by established animal health companies with antibiotic-based products, presenting an opportunity for innovative, non-antibiotic alternatives.

Comparison to Industry Standards

• It is difficult to compare Zivo directly to industry standards due to its unique focus on algal-based solutions and its early stage of commercialization.
• Many established biotech companies have significantly higher R&D spending, reflecting their advanced clinical trial stages.
• Agtech companies focused on sustainable agriculture are also attracting significant investment, but their revenue models and operational scales differ from Zivo's current state.
• For example, companies like DSM and BASF invest heavily in animal nutrition and health, but their scale and product portfolios are much larger.
• Similarly, algal biomass producers like Corbion and AlgaEnergy have established production facilities and distribution networks, which Zivo is still developing.

Related Party Transactions

• During the quarter ended March 31, 2024, 56,666 shares of common stock were sold to related parties for proceeds of $130,782.
• The Company sold and issued 42,288 shares of common stock in three private transactions on April 2, 2024, April 26, 2024, and May 7, 2024, to a related party investor for total proceeds of $330,000.

Stakeholder Impact

• Shareholders face the risk of dilution if the company raises additional capital through equity financings.
• Employees' job security is uncertain due to the company's going concern warning.
• Customers may be affected if the company is unable to continue operations and supply its products.
• Suppliers and creditors face the risk of non-payment if the company's financial situation deteriorates.
• The company's ability to develop and commercialize its products is crucial for its long-term success and impact on the animal and human health markets.

Next Steps

• The company plans to continue developing bioactive compounds for human and animal health.
• Zivo intends to pursue strategic partnerships for late-stage development, regulatory preparation, and commercialization of its products.
• The company plans to invest in full commercial-scale algae ponds and product processing equipment.
• The company needs to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources.
• 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.

Key Dates

Keywords

Zivo Bioscience, financial results, algal biomass, biotech, agtech, revenue, expenses, net loss, going concern, funding, research and development, private placement, coccidiosis, mastitis