10-K: ZIVO Bioscience Reports Increased Revenue but Significant Net Loss in 2024 10-K Filing

ZIVO Bioscience's 2024 10-K filing reveals increased revenue from product sales but also a substantial net loss and concerns about its ability to continue as a going concern.

Summary

• ZIVO Bioscience, a biotech and agtech company, filed its 10-K report for the year ended December 31, 2024.
• The company focuses on developing bioactive extracts from its proprietary algal culture for human and animal health applications, as well as utilizing the whole algal culture as a nutritional food product.
• Revenue increased to $157,220 in 2024 from $27,650 in 2023, driven by higher product volumes, although selling prices were lower.
• Cost of goods sold also increased to $108,268 in 2024 from $16,040 in 2023 due to higher product volumes.
• The company reported a gross margin of $48,952 in 2024, up from $11,610 in 2023, but the gross margin percentage decreased from 42% to 31%.
• General and administrative expenses rose to $10.3 million in 2024 from $5.9 million in 2023, primarily due to increased labor and overhead expenses.
• Research and development expenses increased to $3.1 million in 2024 from $1.4 million in 2023, mainly due to higher stock-related compensation costs.
• The company's net loss for 2024 was $13.4 million, compared to $7.8 million in 2023.
• As of December 31, 2024, the company had $1.5 million in cash deposits.
• The report expresses substantial doubt about the company's ability to continue as a going concern, citing recurring losses and the need for additional funding.
• The company will need to secure additional funding through public or private equity or debt financings, or through collaborations or partnerships with other companies.
• Management identified material weaknesses in internal control over financial reporting as of December 31, 2024.
• The company is taking steps to remediate these material weaknesses.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with increased revenue but significant losses and going concern uncertainties. The identified material weaknesses in internal control further contribute to a negative sentiment.

Positives

• Revenue increased to $157,220 in 2024 from $27,650 in 2023, driven by higher product volumes.
• The company is actively developing a product candidate targeting poultry gut health and has conducted 23 clinical trials to date.
• ZIVO completed an initial proof of concept study involving LPAI challenged birds at the University of Delaware with the goal of confirming applicability of our active materials for this purpose.

Negatives

• The company's net loss widened to $13.4 million in 2024 from $7.8 million in 2023.
• The 10-K filing expresses substantial doubt about ZIVO's ability to continue as a going concern.
• Management identified material weaknesses in internal control over financial reporting as of December 31, 2024.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses and the need for additional funding.
• Failure to obtain additional financing could force the company to delay, limit, reduce, or terminate its product development efforts.
• The company's production of algae involves an agricultural process, subject to risks such as weather, disease, contamination, and water availability.
• The company relies on third parties to grow its proprietary algae strains and conduct research, and these third parties may not perform satisfactorily.
• The animal health industry is highly competitive.
• Management identified material weaknesses in internal control over financial reporting as of December 31, 2024.

Future Outlook

The company expects to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless it generates an adequate level of revenue from potential commercial sales to cover expenses. The company will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources.

Management Comments

• Management has determined that the company's recurring losses and negative working capital raise substantial doubt about its ability to continue as a going concern.
• Management is taking steps to remediate the identified material weaknesses in internal control over financial reporting.

Industry Context

The animal health industry is highly competitive, with competitors including standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. The market for healthy foods, health foods, vegan and vegetarian food products continue to gain traction in the US and worldwide, especially as consumers look for healthful and nutritional ingredients to improve overall health and immune response.

Comparison to Industry Standards

• Conventional poultry production typically involves the use of ionophores, other anticoccidial compounds, and vaccines, some of which are produced by HuvePharma, Elanco, Zoetis, and Phibro, among others.
• As an algae powder, the company believes that its primary competition will come from other established microalgae and green powder food and nutraceutical businesses like Earthrise, Cyanotech, and AG1.
• As an ingredient in other foods, ZIVO sees innovators in food technology such as DSM, Cognis, ConAgra, Cargill and Nestle, each of which has active M&A efforts, a large scientific staff and a generous R&D budget to develop supplements and ingredients for a wide range of applications, as potential competitors or potential partners.

Related Party Transactions

• During the year ended December 31, 2024, the Company issued 195,435 shares of common stock for total proceeds of $1,318,882 including $1,240,781 in cash and $78,101 in accounts payable to four related parties.
• In addition to the issued common stock, warrants for 6,185 shares were issued to related parties with no additional proceeds to the Company.

Stakeholder Impact

• Shareholders face the risk of dilution if the company raises additional capital through equity offerings.
• Employees may be affected by potential cost-cutting measures if the company is unable to secure additional funding.
• Customers may experience disruptions in product availability if the company faces financial difficulties.

Next Steps

• The company intends to fund ongoing activities by utilizing its current cash on hand and by raising additional capital through equity or debt financings.
• The company is taking steps to remediate the identified material weaknesses in internal control over financial reporting.

Key Dates