ZIVO Zivo Bioscience, Inc. - 10-K

Item 1A. Risk Factors.

An investment in our securities has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Any of the risks and uncertainties set forth herein could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price or value of our securities. Additional risks not currently known to us or which we consider immaterial based on information currently available to us may also materially adversely affect us. As a result, you could lose all or part of your investment .

Risks Relating to Our Business

Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.

The health of the global economy, the credit markets and the financial services industry in particular, as well as the stability of the social fabric of our society, affects our business and operating results. For example, the credit and financial markets as well as global supply chains may be adversely affected by tariff and trade policies, global wars/military conflicts, terrorism or other geopolitical events. If the credit markets are not favorable, we may be unable to raise additional financing when needed or on favorable terms. Our customers may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. In addition, adverse economic conditions, such as recent supply chain disruptions, threatened tariff and trade wars, labor shortages and persistent inflation may adversely impact our suppliers’ ability to provide our manufacturer with materials and components, which may negatively impact our business. These economic conditions make it more difficult for us to accurately forecast and plan our future business activities.

The Company is exposed to risks of political instability and changes in government policies, laws and regulations in Peru.

The Company’s contract manufacturer for our algae products is located in the Republic of Peru, and may be adversely affected in varying degrees by political instability, government regulations relating to agriculture and foreign investment therein, and the policies of other nations in respect of Peru. Any changes in regulations or shifts in political conditions are beyond the Company’s control and may adversely affect the Company’s business. New laws, regulations and requirements may be retroactive in their effect and implementation. The Company’s operations may be affected in varying degrees by government regulations, including those with respect to restrictions on production, price controls, tariffs, export controls, income taxes, expropriation of property, employment, land use, water use, and environmental legislation.

We have incurred, and may continue to incur increased costs and demands upon management as a result of being a public company.

As a public company in the United States, quoted on the OTCQB, we incur significant legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and OTCQB, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

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Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board, on committees of our Board or as members of senior management.

We have a history of operating losses, and we may not be able to achieve or sustain profitability. In addition, we may be unable to continue as a going concern.

We have incurred net losses during each of our fiscal years since our inception. Our net loss for the year ended December 31, 2024 was approximately $13.4 million and our accumulated deficit totaled approximately $137.0 million as of December 31, 2024. We do not know whether or when we will become profitable, if ever. We currently expect operating losses and negative cash flows to continue for at least the next several years.

Our ability to generate sufficient revenue to achieve profitability depends on our ability, either alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our product candidates.

Our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our auditor’s report for the year ended December 31, 2024 contains an explanatory paragraph that we have incurred significant losses since our inception and we expect that we will continue to incur losses as we aim to successfully execute our business plan and will be dependent on additional public or private financings, collaborations or licensing arrangements with strategic partners, or additional credit lines or other debt financing sources to fund continuing operations. Based on our cash balances, recurring losses since inception and our existing capital resources to fund our planned operations for a twelve-month period, there is substantial doubt about our ability to continue as a going concern. As noted below, we will need to obtain additional funding from equity or debt financings, which may require us to agree to burdensome covenants, grant security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or grant licenses on terms that are not favorable. No assurance can be given at this time as to whether we will be able to achieve our fundraising objectives, regardless of the terms. If adequate funds are not available, the Company may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations.

We will require substantial additional financing to achieve our goals, and our failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development efforts.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with our planned research, development and product commercialization efforts. In addition, we will require additional financing to achieve our goals and our failure to do so could adversely affect our commercialization efforts. We anticipate that our expenses will increase substantially if and as we:

continue our development process for our product candidates;

seek to maintain, protect and expand our intellectual property portfolio; and

seek to attract and retain skilled personnel.

If we were to experience any delays or encounter issues with any of the above, it could further increase the costs associated with the above. Further, the net operating losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

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Our production of algae involves an agricultural process, subject to such risks as weather, disease, contamination, supply chain interruption, and water availability.

The production of our proprietary algae strain involves complex agricultural systems with inherent risks including weather, disease and contamination. These risks are unpredictable, and the efficient and effective cultivation of algae requires consistent light, warm temperatures, low rainfall and proper chemical balance in a very nutrient rich environment.

If the chemical composition of a pond changes from its required balance, unusually high levels of contamination due to the growth of unwanted organisms or other biological problems may occur and would result in a loss of harvestable output. These often arise without warning and sometimes there are few or no clear indicators as to appropriate remediation or corrective measures. However, environmental factors cannot be controlled in an open-air environment, therefore, we cannot, and do not attempt to, provide any form of assurance with regard to our systems, processes, location, or cost-effectiveness. In the event that our growers need to take steps to correct any chemical imbalance or contamination of their ponds, including by re-inoculating the ponds, such measures may not be effective and could interrupt production. To the extent that our production is negatively impacted by environmental factors, we may be unable to fill large orders for one or more months until such time that production improves.

We rely on third parties to grow our proprietary algae strains and conduct research, and preclinical and clinical testing, and these third parties may not perform satisfactorily.

We do not currently, and do not expect to in the future, independently conduct any aspects of the growth of our proprietary algae strains, research and monitoring and management of our ongoing preclinical and clinical programs. We currently rely, and expect to continue to rely, on third parties with respect to these items, and control only certain aspects of their activities.

Any of these third parties may terminate their engagements with us at any time unless otherwise stated in contractual agreements. If we need to enter into alternative arrangements, our commercialization activities or our therapeutic candidate development activities may be delayed or suspended. Our reliance on these third parties for research and development activities, reduces our control over these activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards and any applicable trial protocols.

Any of these events could lead to delays in the development of our product candidates, including delays in our trials, or failure to obtain regulatory approval for our product candidates, or it could impact our ability to successfully commercialize our current product candidates.

Because our ZIVO algae is currently produced by only one grower, the loss of this grower would have a material adverse impact on our operating results and cash flows.

Currently, only one facility grows our ZIVO algae. Any termination of a business relationship with, or a significant sustained reduction in business received from this grower could delay our production efforts and could have a material adverse effect on our operating results and cash flows.

Because our algae product is marketed and distributed by only one distributor, the loss of this distributor would have an adverse effect on near term revenue generation and cash flows.

Currently only one distributor markets and sells our ZIVO algae as Zivolife TM , and the distributor has worldwide exclusivity as long as the agreement terms are met. Any termination of a business relationship with, or a significant sustained reduction in business and offtake from this distributor could delay could have a material adverse effect on our operating results and cash flows. ZIVO currently does not have internal sales, marketing and distribution capability for our products and the cost of establishing and maintaining such an organization may exceed the benefit of doing so.

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Failure to proportionally advance both our manufacturing capacity and distribution networks could adversely affect our operating results, and near-term and long-term growth plans.

We are attempting to launch a new product, in a new market, utilizing new cultivation processes. As such, we face challenges in managing both the growth of supply from our contract manufacturer and demand from our distribution partner. Each partner faces independent challenges in meeting their contractual objectives, such as financing constraints, market conditions, and scaling of production and distribution networks. If either of these partners fails to meet their contractual objectives on the scheduled timelines, it may adversely affect the other partner and us. For example, if capacity outstrips demand, our grower may have trouble profitably maintaining the capacity. Conversely, if demand outstrips supply, our distributor may not have sufficient product to sell. In either scenario our operating results and near-term and long-term growth plans could be adversely affected.

If we fail to attract and keep our Chief Executive Officer and Chief Financial Officer, senior management and key scientific personnel, we may be unable to successfully develop our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates.

We are highly dependent on the members of our executive team, including our Chief Executive Officer and Chief Financial Officer, the loss of whose services may adversely impact the achievement of our objectives. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.

Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

If we are unable to enter into agreements with third parties to market and sell our product candidates, if approved, we may be unable to generate any revenues.

We currently do not have internal sales, marketing and distribution capability for our products and the cost of establishing and maintaining such an organization may exceed the benefit of doing so. In order to market any products that may be eligible for commercialization, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We have limited prior experience in the marketing, sale or distribution of approved products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our therapeutic candidates.

Because the results of preclinical studies and clinical trials are not necessarily predictive of future results, we can provide no assurances that our other product candidates will have favorable results in future studies or trials.

Positive results from preclinical studies or clinical trials should not be relied on as evidence that later or larger-scale studies or trials will succeed. Even if our product candidates achieve positive results in early-stage preclinical studies or clinical trials, there is no guarantee that the efficacy of any product candidate shown in early studies will be replicated or maintained in future studies and/or larger populations. Similarly, favorable safety and tolerability data seen in short-term studies might not be replicated in studies of longer duration and/or larger populations. If any product candidate demonstrates insufficient safety or efficacy in any preclinical study or clinical trial, we would experience potentially significant delays in, or be required to abandon, development of that product candidate.

Further, data obtained from clinical trials are susceptible to varying interpretations. If we delay or abandon our efforts to develop any of our product candidates, we may not be able to generate sufficient revenues to become profitable, and our reputation in the industry and in the investment community would likely be significantly damaged, each of which would cause our stock price to decrease significantly.

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Development of certain of our products involves a lengthy and expensive process, with uncertain outcomes. We may, and our current or future licensees may, incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product .

We may, and our current or future licensees may, experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our products, including:

regulators may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

the failure to successfully complete pre-clinical testing requirements required by the FDA and international organizations;

delays may occur in reaching, or failing to reach, agreement on acceptable clinical trial contracts with third parties or clinical trial protocols with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites;

the cost of clinical trials of our products may be greater than we anticipate;

delays or difficulties in obtaining an FDA No Objection letter for human consumption of our algal biomass.

If we are required to conduct additional clinical trials or other testing of our biotech product candidates under development or algal biomass beyond those that we contemplate, if we are unable to successfully complete clinical trials of our product candidates under development or algal biomass or other testing, if the results of these trials or tests are not favorable or if there are safety concerns, we may, or our existing or future licensees may:

not obtain marketing approval at all;

be delayed in obtaining marketing approvals in a jurisdiction; or

be subject to additional post-marketing testing requirements.

We may experience increased regulatory scrutiny of nutritional supplements.

From time to time there are movements in the United States and other markets to increase the regulation of dietary supplements. In the event new regulations are proposed or adopted with respect to nutritional supplements, these regulations may impose additional restrictions or requirements on us and increase the cost of doing business. Additionally, if our advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations, we may be subject to fines or other means of regulatory enforcement.

It is possible in the future that we may see fit to sell one or more of our products as dietary supplements. If a company sells a dietary supplement containing an ingredient that FDA considers either not a dietary ingredient or a new dietary ingredient (“NDI”) that needs an NDI notification, the agency may threaten or initiate enforcement against such company. For example, it might send a warning letter that can trigger consumer lawsuits, demand a product recall, or even work with the Department of Justice to bring a criminal action. Our operations could be harmed if new guidance or regulations require us to reformulate products or effect new registrations, if regulatory authorities make determinations that any of our products do not comply with applicable regulatory requirements, if the cost of complying with regulatory requirements increases materially, or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations. In addition, our operations could be harmed if governmental laws or regulations are enacted that restrict the ability of companies to market or distribute nutritional supplements or impose additional burdens or requirements on nutritional supplement companies.

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The growth of our nutrition sector depends in part on market acceptance of products that contain our algae.

The success of our nutrition business involves the use of our algal biomass in various animal and human products. There can be no assurance regarding the successful distribution and market acceptance of products containing our algae. The expenses or losses associated with lack of market acceptance of our products could harm our ability to find or maintain new licensees for these products.

If our computer systems are hacked, or we experience any other cybersecurity incident, we may face a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Additionally, we collect and store certain data, including proprietary business information, and may have access to confidential or personal information in certain of our businesses that is subject to privacy and security laws and regulations. These technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components; power outages; telecommunications or system failures; terrorist attacks; natural disasters; employee error or malfeasance; server or cloud provider breaches; and computer viruses or cyberattacks. Cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures, known as advanced persistent threats, directed at us, our products, customers and/or our third-party service providers. It is possible a security breach could result in theft of trade secrets or other intellectual property or disclosure of confidential customer, supplier or employee information. Should we be unable to prevent security breaches or other damage to our information technology systems, disruptions could have an adverse effect on our operations, as well as expose us to costly litigation, liability or penalties under privacy laws, increased cybersecurity protection costs, reputational damage, and product failure.

The animal health industry is highly competitive.

The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. Several new start-up companies also compete in the animal health industry. We also face competition from manufacturers of drugs globally, as well as producers of nutritional health products. These competitors may have access to greater financial, marketing, technical and other resources. As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities.

Competitive pressure could arise from, among other things, more favorable safety and efficacy product profiles, limited demand growth or a significant number of additional competitive products being introduced into a particular market, price reductions by competitors, the ability of competitors to capitalize on their economies of scale, the ability of competitors to produce or otherwise procure animal health products at lower costs than us and the ability of competitors to access more or newer technology than us.

Our R&D relies on evaluations of animals, which may become subject to bans, additional restrictive regulations or increased attention from activism movements.

We are required to evaluate the effect of our product candidates in animals. Animal testing in certain industries has been the subject of controversy and adverse publicity. Some organizations and individuals have attempted to ban animal testing or encourage the adoption of new regulations applicable to animal testing. To the extent that the activities of such organizations and individuals are successful, our R&D, and by extension our business, financial condition and results of operations, could be materially adversely affected. In addition, negative publicity about us or our industry could harm our reputation. For example, farm animal producers may experience decreased demand for their products or reputational harm as a result of evolving consumer views of animal rights, nutrition, health-related or other concerns. Any reputational harm to the farm animal industry may also extend to companies in related industries, including our Company. Adverse consumer views related to the use of one or more of our product candidates in farm animals also may result in a decrease in the use of such products and could have a material adverse effect on our operating results and financial condition.

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Use of social media could give rise to liability or reputational harm.

We and our employees use social media to communicate externally. There is risk that the use of social media by us or our employees to communicate about our product candidates or business may give rise to liability, lead to the loss of trade secrets or other intellectual property or result in public exposure of personal information of our employees, clinical trial patients, customers, and others. Furthermore, negative posts or comments about us or our product candidates in social media could seriously damage our reputation, brand image, and goodwill. Any of these events could have a material adverse effect on our business, prospects, operating results, and financial condition and could adversely affect the price of our common stock.

Risks Relating to Our Intellectual Property

We may not be able to protect our proprietary algae cultures and bioactive compounds in the marketplace.

Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing on the proprietary rights of others. We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property of our products. Patents might not be issued or granted with respect to our patent applications that are currently pending, and issued or granted patents might later be found to be invalid or unenforceable, be interpreted in a manner that does not adequately protect our products or any future products, or fail to otherwise provide us with any competitive advantage. As such, we do not know the degree of future protection that we will have on our products, if any, and a failure to obtain adequate intellectual property protection with respect to our products could have a material adverse impact on our business.

Patent protection may not be available for some of the therapeutic candidates or products we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing, potentially for large fees, patents or other proprietary rights held by others, our business, results of operations and financial condition may be harmed.

Claims of intellectual property infringement by or against us could seriously harm our businesses.

From time to time, we may be forced to respond to or prosecute intellectual property infringement claims to defend or protect our rights. These claims, regardless of merit, may consume valuable management time, result in costly litigation or cause product shipment delays. Any of these factors could seriously harm our business and operating results. We may have to enter into royalty or licensing agreements with third parties who claim infringement. These royalty or licensing agreements, if available, may be costly to us. If we are unable to enter into royalty or licensing agreements with satisfactory terms, our business could suffer.

Risks Related to Our Common Stock

Our Common Stock has been delisted by Nasdaq, which may affect liquidity.

The Company’s common stock was suspended from trading and delisted from the Nasdaq Capital Market on November 27, 2023.  Beginning November 27, 2023, the Company’s common stock had been trading over the counter on the OTC Markets’ Pink Sheets, and since January 26, 2024 the Company’s common stock has been trading over the counter on the OTCQB® market tier, an electronic quotation service operated by OTC Markets Group Inc., under its current trading symbol ZIVO. Similarly, since November 27, 2023, the Company’s warrants are traded over the counter on the OTC Markets’ Pink Sheets market tier under its current trading symbol ZIVOW.

Our shares of common stock are thinly traded. If an active market for our common stock with meaningful trading volume does not develop or is not maintained, the market price of our common stock may decline materially and you may not be able to sell your shares. Similarly, if our common stock is ever determined to be a “penny stock”, brokers trading in our common stock will be required to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities.

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The market price and trading volume of our securities may be volatile and may be affected by economic conditions beyond our control, which could lead to losses for stockholders.

The market price and trading volume of our securities is likely to be volatile. Some specific factors that could negatively affect the price of our securities or result in fluctuations in its price and trading volume include:

results of trials of our product candidates;

results of trials of our competitors’ products;

regulatory actions with respect to our therapeutic candidates or products or our competitors’ products;

actual or anticipated fluctuations in our quarterly operating results or those of our competitors;

our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

issuances by us of debt or equity securities;

litigation involving our Company, including stockholder litigation; investigations or audits by regulators into the operations of our company; or proceedings initiated by our competitors or clients;

strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

trading volume of our common stock;

announcement or expectation of additional financing efforts;

terrorist acts, acts of war or periods of widespread civil unrest;

natural disasters and other calamities;

changes in market conditions for biotech or agtech stocks;

influence of retail investors and/or social media on our common stock, such as a massive short squeeze rally; and

conditions in the U.S. financial markets or changes in general economic conditions.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of December 31, 2024, our largest shareholder, HEP Investments, LLC (“HEP” or “HEP Investments”), beneficially owns approximately 14.7% of our outstanding Common Stock. Therefore, HEP Investments will have the ability to influence us through this ownership position. This stockholder may be able to determine all matters requiring stockholder approval, including elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that an individual may believe are in the stockholders’ best interest.  In July 2024, the Company’s board of directors added the principal of HEP Investments as a member of the board to fill a vacancy.

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Our management has identified certain internal control deficiencies, which management believes constitute material weaknesses. Our failure to establish and maintain an effective system of internal controls could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our common stock .

We review and update our internal controls, disclosure controls and procedures, and corporate governance policies as our Company continues to evolve. In addition, we are required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“ SOX ”) and management is required to report annually on our internal control over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX until the date we are no longer a “smaller reporting company” as defined by applicable SEC rules.

Our management’s evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2024 concluded that our controls were not effective, due to material weaknesses resulting from an ineffective overall control environment. The material weaknesses stem primarily from our small size and include the inability to (i) maintain appropriately designed information technology general controls in the areas of user access, vendor management controls, and segregation of duties, including controls over the recording of journal entries, related to certain information technology systems that support the Company’s financial reporting process; and (ii) design and maintain effective controls over complex accounting areas and related disclosures including income tax , stock-based compensation, and deferred research and development obligations - participation agreements. Specifically, management did not identify controls over the review of the tax provision, including the valuation analysis relating to deferred tax assets, considerations for uncertain tax positions, the preparation of income tax footnote and required disclosures and selecting and applying accounting policies, proper review of the financial statements and the application of GAAP relating to the accounting and classification of deferred research and development obligations - participation agreements. Management did not identify controls over the review of stock-based compensation, including the valuation of options granted under the Company’s equity-based compensation plans.

Such shortcomings could have an adverse effect on our business and financial results. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulation concerning control and procedures could have a material effect on our business, results of operation and financial condition. Any of these events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively affect the market price of our shares, increase the volatility of our stock price and adversely affect our ability to raise additional funding. The effect of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board and as executive officers.

Subject to limitations on liquidity, the Company is planning to take steps to remediate these material weaknesses. However, we cannot assure you that any of the measures we implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies.

As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.

Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.

Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor’s provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.

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Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

We expect our operating results to be subject to annual and quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

variations in the level of expenses related to our product candidates, products or future development programs;

if any of our product candidates receives regulatory approval, the level of underlying demand for these product candidates and wholesalers’ buying patterns;

addition or termination of trials or funding support;

our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;

any intellectual property infringement lawsuit in which we may become involved;

regulatory developments affecting our products or those of our competitors;

the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time;

our ability to attract, hire and retain qualified personnel;

expenditures that we will or may incur to acquire or develop additional product candidates and technologies;

future accounting pronouncements or changes in our accounting policies; and

the timing and success or failure of clinical studies for our therapeutic candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.

If our annual or quarterly operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially. Furthermore, any annual or quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that annual and quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic collaborations or partnerships, or marketing, distribution or licensing arrangements with third parties, we may be required to limit valuable rights to our intellectual property, technologies, therapeutic candidates or future revenue streams, or grant licenses or other rights on terms that are not favorable to us. Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our therapeutic candidates.

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Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall .

We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell our common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell our common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.

We are at risk of litigation.

We may become party to litigation from time to time in the ordinary course of business which could adversely affect our business. Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating and the market price for our shares and could use significant resources. Even if we are involved in litigation and win, litigation can redirect significant company resources.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors,” and other documents we file with the SEC. Historical results are not necessarily indicative of future results.

Overview

We have put in place a business model in which we may derive future income from licensing and selling natural bioactive ingredients including algal biomass and products that may be derived from or are initially based on the algal biomass. We expect that these planned new products will likely be sold or licensed to much larger, better-financed human and animal pharma companies, and to food, dietary supplement, and skin care manufacturers. The anticipated income streams are to be generated from a) sales of algal biomass or extracts thereof, and b) license payments in the form of royalties and / or other contractual payments for licensed natural bioactive ingredients. Our manufacturing strategy is to create contract manufacturers for our non-licensed products which products will be sold by us to food distributors and retailers, animal food, dietary supplement, and medical food processors and/or name-brand marketers. Further, we expect to license our bioactive fractions and molecules as lead compounds or templates for synthetic variants intended for therapeutic applications.

Financial Overview

Revenue

The Company earns revenue through the sales of its proprietary microalgae products which are presently sold as a dried green powder packaged for retail sale.  The product is sold under the Zivolife TM brand.  We have one customer who distributes our products via a direct-to-consumer model through a Zivolife TM branded webpage under a distribution, marketing, and limited license agreement.

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Cost of Goods Sold

Cost of goods sold for the Company included purchasing our proprietary dried green microalgae in a final packaged form from a contract grower located in Peru.  We have established a contract manufacturing agreement and limited license with this grower to provide ZIVO pre-packaged product ready to be sold to our customer.  The product is delivered directly to our customer.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs for personnel in functions not directly associated with research and development activities, professional fees and consultant expenses, and other overhead spending. Personnel related costs include cash compensation, benefits, and stock-based compensation expenses. Professional fees and consultant expenses consist primarily of legal fees relating to corporate matters, intellectual property costs, professional fees for consultants assisting with regulatory, and financial matters. Other overhead spending includes cost to support information technology, rent, insurances, public company listing, and supplies.

We anticipate that our general and administrative expenses will significantly increase in the future to support our continued research and development activities, potential commercialization of our product candidates, hiring of additional personnel, legal and professional services, and other public company related costs.

Research and Development

Research and development expenses are incurred in developing our product candidates, compensation and benefits for research and development employees, including stock-based compensation, research related overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to research consultants and other outside expenses. Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to significantly increase over the next several years as we continue to develop product candidates targeting additional pharma and algal biomass applications. These additional activities will increase the need to conduct preclinical testing and clinical trials and will depend on the duration, costs and timing to complete our preclinical programs and clinical trials.

Interest Expense

Interest expense primarily consists of interest costs related to our convertible notes, term notes, and for interest on short term debt, as discussed in detail below.

Other Income

Other income consists of proceeds derived from activity outside of normal operating activity, including amortization of debt discounts where appropriate.

Results of Operations

Comparison of Year Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the year ended December 31, 2024 and 2023:

Year ended December 31,

Total revenue

Total cost of goods sold

Gross margin

Costs and expenses:

General and administrative

Research and development

Total costs and expenses

Loss from operations

Total interest and other (expense), net

Net loss

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Revenue

During the year ended December 31, 2024, the Company recorded commercial revenue relating to sales of the Company’s dried algal biomass product as a human food or food ingredient. The $157,220 for the year ending December 31, 2024 is an approximately $130,000 increase over the $27,650 in revenue in the prior year. The increase is the result of product volume increases partially offset by lower selling prices for product sold in the year ended December 31, 2024 versus the year ended December 31, 2023.

Costs of Goods Sold

Cost of goods sold for the year ended December 31, 2024 was $108,268. This is approximately $92,000 higher than $16,040 in cost of goods sold from the same period last year.  The increase in cost of goods sold is essentially all attributable to product volume increases from the prior year period.

Gross Margin

Gross margin for the year ended December 31, 2024 was approximately $49,000. This is $37,000 higher than the same period last year.  This increase is attributable to higher product volumes partially offset by lower selling prices than the prior year period.  Gross margin percentage in the year ended December 31, 2024 was 31%, down from 42% shown in the year ended December 31, 2023.

General and Administrative Expenses

General and administrative expenses were $10.3 million for the year ended December 31, 2024, which is about $4.4 million higher than the approximately $5.9 million for the comparable prior period, explained by the following changes: an increase of $2.8 million in labor expense (increase of $3.5 million non-cash employee compensation due to stock options issued to employees partially offset by a roughly $700,000 decrease in bonus expense), and an increase in overhead expense of $1.6 million ($2.9 million increase in directors fees, partially offset by $100,000 in lower directors and officers insurance premiums, $110,000 in lower exchange listing and related fees, $30,000 in lower travel expense, $300,000 in lower accounting fees, and $800,000 lower legal fees). The decreases in accounting and legal fees versus the prior year period were largely the result of legal and accounting fees incurred in capital raising efforts in 2023 that were not incurred in 2024.

Research and Development Expenses

For the 12 months ended December 31, 2024, we incurred $3.1 million in net R&D expenses, as compared to $1.4 million for the comparable period in 2023.

Of these costs in 2024, $3.1 million is for salary and other internal costs, an increase of approximately $1.9 million from the prior year. The increase is primarily explained by higher stock related compensation costs for non-employee directors of $2 million and an increase of $50,000 in consultant expense, partially offset by employee costs of $160,000 and travel expense of $20,000. Third party research and development spending of $20,000 was approximately $840,000 lower than the prior year due to elimination of essentially all the Company-funded third-party research studies.  For the year ending December 31, 2023, the Company recognized a reduction in gross research and development spending of roughly $700,000 to account for the amortization of the spending obligation created through the complete funding of the Participation Agreements.  There was no amortization of spending obligations in the year ending December 31, 2024 as the Company completed all the funding for this program in the prior year. (See Note 8: Deferred R&D Obligations - Participation Agreements )

December 31,

December 31,

Labor and other internal expenses

External research expenses

Total gross R&D expenses

Less contra-expense for amortization of deferred R&D obligation - Participation Agreements

Net R&D expenses

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Subject to the availability of funding, we expect our R&D costs to grow as we work 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. The Company’s scientific efforts presently are focused on the licensing products for healthy immune response in livestock and growing of our proprietary algal culture in commercial scale facilities.

Liquidity and Capital Resources

Historical Capital Resources

As of December 31, 2024, our principal source of liquidity consisted of cash deposits of $1.5 million. We expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate an adequate level of revenue from potential commercial sales to cover expenses.

We anticipate that our expenses will increase substantially as we develop and seek to commercialize our product candidates and continue to pursue pre-clinical and clinical trials, seek regulatory approvals, manufacture product candidates, hire additional staff, add operational, financial and management systems and continue to operate as a public company.

Our source of cash to date has been proceeds from the issuances of notes, common stock with and without warrants and unsecured loans, and the entry into Participation Agreements, the terms of which are further described below. See also “ Funding Requirements and Outlook ” below.

Unsecured Loans

From January 1, 2023 to December 31, 2024, the Company received gross proceeds of $2,273,160 in unsecured loans. As of December 31, 2024, all the loans were repaid and no principal or accrued interest remained outstanding under such loans.

Debt Settlement Agreements

On November 12, 2024, the Company entered into a Debt Settlement Agreement (“Debt Settlement Agreement”) with three investors (each a “Creditor”) to restructure the outstanding $240,000 convertible debt and accrued interest of the Company. Each Creditor agreed to settle the Company’s existing debt in exchange for the Company issuing each Creditor an unsecured promissory note (each a “Note,” collectively, the “Notes”) pursuant to the terms agreed upon in each Debt Settlement Agreement. The Notes have an aggregate principal amount of $277,254.  Each Note is payable in 24 equal monthly installments beginning November 30, 2024 and bears interest at a rate of 1.0% per annum.

Private Placements

In the year ending December 31, 2024, we entered into Subscription Agreements with accredited investors pursuant to which we, in private placements, issued and sold an aggregate of 793,489 shares of common stock for gross proceeds in the amount of $5,602,269.   Included in these transactions were the sale of 598,054 shares of common stock for $4,283,387 to unrelated private investors, and 195,435 shares of common stock for $1,318,882 to related parties.

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Going Concern, Funding Requirements and Outlook

At December 31, 2024, we had $1,542,442 in cash deposits.

The Company has incurred substantial losses during the years ended December 31, 2024 and 2023, and expects to continue to incur losses in the near future and has a negative working capital as of December 31, 2024.  Management has determined that these factors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm has included explanatory paragraphs in their report on our financial statements as of and for the year ended December 31, 2024, noting the existence of substantial doubt about our ability to continue as a going concern.  Our existing cash is not sufficient to fund our operating expenses through at least twelve months from the date of this filing and liabilities of the Company such as accounts payable, accrued expenses, and our term debt. To continue to fund operations and execute on management’s plans, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute on our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditures may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.

Our material cash requirements also relate to the funding of our ongoing product development. See “ Item 1-Business-Clinical Development and Regulatory Pathway-Clinical Experience, Future Development and Clinical Trial Plans ” in this Report for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are able to estimate such costs.

The development of our product candidates is subject to numerous uncertainties, and we could use our cash resources sooner than we expect. Additionally, the process of development is costly, and the timing of progress in pre-clinical tests and clinical trials is uncertain. Our ability to successfully transition to profitability will be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Cash Flows

Cash Flows from Operating Activities . During the 12 months ended December 31, 2024, our operating activities used $4.3 million in cash, a decrease of cash used of roughly $1.5 million from the comparable prior period. The approximate $1.5 million decrease in cash used by operating activities was primarily attributable to the following (all of which are approximated): a $5.6 million increase in net loss, an increase in non-cash expenses of $8.9 million (explained by an increase of stock issued for services of $8.6 million, lower debt discount amortization of $(400,000), and lower amortization of deferred R&D obligations of $700,000), and cash used to fund changes is assets and liabilities of $1.8 million (mostly explained by a reduction in accrued liabilities of $(800,000), a decrease in accounts payable of  $(925,000), a decrease in accounts payable to related parties of  $(175,000), partially offset by an increase of $100,000 in prepaid expenses).

Cash Flows from Investing Activities . During the 12 months ended December 31, 2024 and 2023, there were no investing activities.

Cash Flows from Financing Activities. During the 12 months ended December 31, 2024, we generated $5.6 million in cash from financing activities; primarily from several board approved fund raising programs to sell unregistered common stock via private placements.  These programs raised $4.3 million from accredited investors, and an additional $1.3 million from related parties.  In the year ending December 31, 2023 the Company had financing activities that raised a total of $4.3 million through the sales of unregistered common stock of $485,000 to related parties, and an additional $155,000 to accredited investors.  The Company also sold through a single transaction registered common stock with proceeds of $3.6 million.

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The following table shows a summary of our cash flows for the periods indicated:

Twelve months ended

December 31,

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

We estimate that we would require approximately $5 million in cash over the next 12 months in order to fund our basic operations, excluding our R&D initiatives. Based on this cash requirement, we have a near-term need for additional funding to continue to develop our products and intellectual property. Historically, we have had substantial difficulty raising funds from external sources. If we are unable to raise the required capital, we will be forced to curtail our business operations, including our R&D activities.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

Fair Value of Financial Instruments

We account for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adhering to the Financial Accounting Standards Board (“FASB”) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

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As of December 31, 2024 and December 31, 2023, fair values of cash, prepaid, other assets, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these assets or liabilities. We elected to account for the convertible notes while they were outstanding on a fair value basis under ASC 825 to comprehensively value and streamline the accounting for the embedded conversion options. The fair value of these convertible notes were based on both the fair value of our common stock, discount associated with the embedded redemption features, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs.

Complex Financial Instruments

We evaluate all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivative is accounted for separately on a fair market value basis. We record the fair value changes of a separated embedded derivative at each reporting period in the consolidated statements of operations as a fair value change in derivative and warrant liabilities.

Stock-Based Compensation

We account for share‑based compensation in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant‑date fair value. The Company records forfeitures when they occur. Share‑based compensation arrangements to non‑employees are accounted for in accordance with the applicable provisions of ASC 718.

Recent Accounting Pronouncements - Adopted

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment. The Company adopted the guidance in the fiscal year beginning January 1, 2024 and there was no impact on the Company’s reportable segments identified.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

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In February 2024, the FASB issued ASU  2024-04 — Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments.  This update is intended to improve the relevance and consistency in application of the induced conversion guidance in FASB Accounting Standards Codification Subtopic 470-20, Debt —Debt with Conversion and Other Options. Current generally accepted accounting principles provide guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). The amendments in the ASU clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion.  This new standard is effective for fiscal years beginning after December 15, 2025.  Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

In November 2024, the FASB issued ASC 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. This new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently assessing the impact this ASU will have on the consolidated financial statements and footnote disclosures.

See “ Note 3 - Summary of Significant Accounting Policies ” in this Report regarding the impact of certain recent accounting pronouncements on our financial statements.