The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
During the quarter ended March 31, 2016, the Company recorded $724,280 in discounts on 11% convertible debentures.
During the quarter ended June 30, 2016, the Company recorded $186,744 in discounts on 11% convertible debentures.
During the quarter ended March 31, 2015, the Company recorded $211,501 in discounts on 11% convertible debentures.
During the quarter ended June 30, 2015, the Company recorded $705,000 in discounts on 11% convertible debentures.
During the quarter ended June 30, 2015, the holder of 11% Convertible Debentures, converted $30,000 into 250,000 shares of the Company's common stock.
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Zivo Bioscience, Inc. and its wholly-owned subsidiaries (collectively, the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of the Companys management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. These consolidated financial statements are condensed, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Companys December 31, 2015 consolidated audited financial statements and Notes thereto included in the Annual Report on Form 10-K filed with the SEC on March 29, 2016.
The results of operations for the six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2016, or any other period.
The Company had a net loss of $3,687,047 and $3,296,862 for the six months ended June 30, 2016 and 2015, respectively. In addition, the Company had a working capital deficiency of $6,276,692 and a stockholders deficit of $11,114,812 at June 30, 2016. For the six months ended June 30, 2016 and 2015, the Company had no revenue, and was entirely dependent on debt issuance and capital raising activities to fund its operations. These factors continue to raise substantial doubt about the Company's ability to continue as a going concern. During the first six months of 2016, the Company raised $1,250,000 from the issuance of Convertible Debt and $42,316 from net loans payable to related parties. There can be no assurance that the Company will be able to raise additional capital.
The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Zivo Bioscience
, Inc. and its wholly-owned Subsidiaries, Health Enhancement Corporation, HEPI Pharmaceuticals, Inc., WellMetris, LLC, and Zivo Biologic, Inc. All significant intercompany transactions and accounts have been eliminated in consolidation.
Accounting Estimates
The Companys condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management uses its best judgment in valuing these estimates and may, as warranted, solicit external professional advice and other assumptions believed to be reasonable.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. At June 30, 2016, the Company did not have any cash equivalents.
Property and Equipment
Property and equipment consists of furniture, office equipment, and leasehold improvements, and are carried at cost less allowances for depreciation and amortization. Depreciation and amortization is determined by using the straight-line method over the estimated useful lives of the related assets. Repair and maintenance costs that do not improve service potential or extend the economic life of an existing fixed asset are expensed as incurred.
7
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value Measurements
The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.
The Companys financial instruments include cash, prepaid expenses, accounts payable, accrued liabilities and loans payable - related parties. All of these items were determined to be Level 1 fair value measurements.
The carrying amounts of cash, prepaid expenses, accounts payable, accrued liabilities, loans payable - related parties and the current portion of convertible debt all approximate fair value because of the short maturity of these instruments. The recorded value of long-term convertible debt approximates fair value as the terms and rates approximate market rates.
Revenue Recognition
For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on managements judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. For the six months ended June 30, 2016 and 2015, the Company had no revenue.
Shipping and Handling Costs
Shipping and handling costs are expensed as incurred. For the six months ended June 30, 2016 and 2015, no shipping and handling costs were incurred.
Research and Development
Research and development costs are expensed as incurred. The majority of the Company's research and development costs consist of clinical study expenses. These consist of fees, charges, and related expenses incurred in the conduct of clinical studies conducted with Company products by independent outside contractors. External clinical studies expenses were approximately $475,000 and $556,000 for the six months ended June 30, 2016 and 2015, respectively.
8
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Based Compensation
We account for stock-based compensation in accordance with FASB ASC 718,
Compensation Stock Compensation.
Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the awards fair value and is recognized as expense over the requisite service period. The Company generally issues grants to its employees, consultants and board members. At the date of grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period. The fair value of the stock option or warrant award is calculated using the Black Scholes option pricing model.
During the six months ended June 30, 2016 and 2015, as a result of the vesting of warrants to directors and the issuances of warrants to certain employees, directors and consultants, the Company recorded stock based compensation expense of $1,113,200 and $302,599 for these periods, respectively.
The fair value of warrants was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:
|
|
|
|
|
Six Months Ended June 30,
|
|
2016
|
|
2015
|
Expected volatility
|
168.01% to 170.23%
|
|
128.36% to 155.43%
|
Expected dividends
|
0%
|
|
0%
|
Expected term
|
5 years
|
|
3 5 years
|
Risk free rate
|
.76% to.97%
|
|
.51% to 1.75%
|
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Companys employee warrants have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion the existing models may not necessarily provide a reliable single measure of the fair value of its employee options.
Loss Per Share
Basic loss per share is computed by dividing the Companys net loss by the weighted average number of common shares outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock such as shares issuable pursuant to the exercise of warrants and conversions of debentures. Potentially dilutive securities as of June 30, 2016, consisted of 88,195,105 common shares from convertible debentures and related accrued interest and 30,530,818 common shares from outstanding warrants. Potentially dilutive securities as of June 30, 2015, consisted of 60,515,395 common shares from convertible debentures and related accrued interest and 12,402,393 common shares from outstanding warrants. For the six months ended June 30, 2016 diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive.
Advertising Costs
Advertising costs are charged to operations when incurred. There were no advertising costs for the six months ended June 30, 2016 and 2015, respectively.
9
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation (FDIC) limit of $250,000 at times during the year.
Reclassifications
Certain items in these consolidated financial statements have been reclassified to conform to the current period presentation.
Future Impact of Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 superseded the revenue recognition requirements in Revenue Recognition (Topic 605) , and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. ASU 2014-09 is not expected to have a material impact on the Companys financial position or results of operations.
Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2016 and December 31, 2015 consists of the following:
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
|
(Unaudited)
|
|
|
Furniture and fixtures
|
$
|
20,000
|
$
|
20,000
|
Equipment
|
|
80,000
|
|
80,000
|
|
|
|
|
|
|
|
100,000
|
|
100,000
|
Less accumulated depreciation and amortization
|
|
(68,750)
|
|
(56,250)
|
|
|
|
|
|
|
$
|
31,250
|
$
|
43,750
|
Depreciation and amortization was $12,500 and $12,500 for the six months ended June 30, 2016 and 2015 respectively.
10
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 LOAN PAYABLE, RELATED PARTIES
During 2015, Mr. Christopher Maggiore, a director and a significant shareholder of the Company, advanced the Company $21,735, for a total advanced as of December 31, 2015 of $156,405, which amount remained unpaid as of June 30, 2016. The Company has agreed to pay 11% interest on this loan. As of June 30, 2016 and December 31, 2015 accrued interest on this indebtedness totaled $28,437 and $19,835, respectively, and is included in Accrued Liabilities on the Condensed Consolidated Balance Sheet.
As of December 31, 2015, there were outstanding advances of $2,000 from the Company's Officers. These funds were repaid during the first quarter of 2016 and there are no outstanding liabilities owed to Officers as of June 30, 2016.
During the year ended December 31, 2015, HEP Investments, LLC loaned the Company $2,246,202 (see Note 5 - Convertible Debt). Pursuant to the terms of the agreement with HEP Investments, $2,067,500 of these loans were converted to 11% Convertible Secured Promissory Notes, leaving a remaining balance of $178,702 as of December 31, 2015. During the six months ended June 30, 2016, HEP Investments, LLC loaned the Company $1,294,315 (see Note 5 - Convertible Debt). Pursuant to the terms of the agreement with HEP Investments, $1,250,000 of these loans were converted to 11% Convertible Secured Promissory Notes, leaving a remaining balance of $223,017 as of June 30, 2016.
NOTE 5 CONVERTIBLE DEBT
HEP Investments, LLC
On December 2, 2011, the Company and HEP Investments, LLC, a Michigan limited liability company (Lender), entered into the following documents, effective as of December 1, 2011, as amended through December 31, 2015: (i) a Loan Agreement under which the Lender has agreed to advance up to $12,500,000 to the Company, subject to certain conditions, (ii) a Convertible Secured Promissory Note in the principal amount of $12,500,000 (Note) (of which $8,677,200 has been advanced as of June 30, 2016) and (iii) a Security Agreement, under which the Company granted the Lender a security interest in all of its assets and (iv) an Intellectual Property security agreement under which the Company and its subsidiaries granted the Lender a security interest in all their respective intellectual properties, including patents, in order to secure their respective obligations to the Lender under the Note and related documents. In addition, the Companys subsidiaries have guaranteed the Companys obligations under the Note. The Company has also made certain agreements with the Lender which shall remain in effect as long as any amount is outstanding under the Loan. These agreements include an agreement not to make any change in the Companys senior management, without the prior written consent of the Lender. Two representatives of the Lender will have the right to attend Board of Director meetings as non-voting observers.
During the year ended December 31, 2015, the Company recorded a debt discount, related to the $2,067,500 of Notes described previously, in the amount of $1,916,501, to reflect the beneficial conversion feature of the convertible debt and fair value of the warrants pursuant to Emerging Issues Task Force (EITF) 00-27: Application of EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features on Contingently Adjustable Conversion Rates, to certain convertible instruments. In accordance with EITF 00-27, the Company valued the beneficial conversion feature and recorded the amount of $1,773,078 as a reduction to the carrying amount of the convertible debt and as an addition to paid-in capital. Additionally, the relative fair value of the warrants was calculated and recorded at $143,423 as a further reduction to the carrying amount of the convertible debt and an addition to additional paid-in capital. The Company is amortizing the debt discount over the term of the debt. Amortization of discounts was $1,866,842 for the year ended December 31, 2015.
11
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 CONVERTIBLE DEBT (continued)
During the six months ended June 30, 2016, the Company recorded a debt discount, related to the $1,250,000 of Notes issued in the amount of $911,024, to reflect the beneficial conversion feature of the convertible debt and fair value of the warrants pursuant to Emerging Issues Task Force (EITF) 00-27: Application of EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features on Contingently Adjustable Conversion Rates, to certain convertible instruments. In accordance with EITF 00-27, the Company valued the beneficial conversion feature and recorded the amount of $860,530 as a reduction to the carrying amount of the convertible debt and as an addition to paid-in capital. Additionally, the relative fair value of the warrants was calculated and recorded at $50,494 as a further reduction to the carrying amount of the convertible debt and an addition to additional paid-in capital. During the six months ended June 30, 2015, the Company recorded a deferred debt discount in the amount of $916,501, to reflect the beneficial conversion feature of the convertible debt and fair value of the warrants. The Company valued the beneficial conversion feature and recorded the amount of $528,040 as a reduction to the carrying amount of the convertible debt and as an addition to paid-in capital. Additionally, the relative fair value of the warrants was calculated and recorded at $388,461 as a further reduction to the carrying amount of the convertible debt and an addition to additional paid-in capital. The Company is amortizing the debt discount over the term of the debt. Amortization of debt discounts were $
949,117
and $964,969 for the six months ended June 30, 2016 and 2015, respectively.
Amounts as of June 30, 2016 advanced under the Note (i) are convertible into the Companys restricted common stock according to the following schedule: (A) $3,402,200 at $.10 per share, (B) $2,600,000 at $.12 per share, (C) $1,285,000 at $.15 per share, (D) $640,000 at $.22 per share, and (E) $750,000 at $.30 per share, (ii) bear interest at the rate of 11% per annum. The Seventh Amended and Restated Senior Secured Convertible Promissory Note (effective December 31, 2015) resets the Due Dates of Tranches 1 through 13 (totaling $3,740,000) to October 17, 2017, the remaining Tranches must be repaid as follows: accrued interest must be paid on the first and second anniversary of the Note and unpaid principal not previously converted into common stock must be repaid on the second anniversary of the Note. The Company determined that the modification of these Notes was not a substantial modification in accordance with ASC 470-50, Modifications and Extinguishments. The Lender has converted $60,000 of the debt (convertible at $.12 per share) through the date of this report. In July 2016, the Lender agreed to rolling 30 day extensions until notice is given to the Company to the contrary. Any Note that has not yet matured may be prepaid upon sixty days written notice, provided that the Company shall be required to pay a prepayment premium equal to 5% of the amount repaid.
Other Debt
In September 2014, the Lender of the 1% Convertible notes payable agreed to rolling 30 day extensions until notice is given to the Company to the contrary. The Company determined that the modification of these Notes was not a substantial modification in accordance with ASC 470-50, Modifications and Extinguishments.
|
|
|
|
|
Convertible debt consists of the following:
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
|
(Unaudited)
|
|
|
1% Convertible notes payable, due July 2016
|
$
|
240,000
|
$
|
240,000
|
|
|
|
|
|
11% Convertible note payable - HEP Investments, LLC, a related party, net of unamortized discount of $1,805,838 and $1,843,931, respectively, due at various dates ranging from July 2016 to May 2018
|
|
6,871,362
|
|
5,583,269
|
|
|
7,111,362
|
|
5,823,269
|
Less: Current portion
|
|
2,241,993
|
|
1,224,510
|
|
|
|
|
|
Long term portion
|
$
|
4,869,369
|
$
|
4,598,759
|
Amortization of the debt discount on the remaining notes was $949,118 and $964,969 for the six months ended June 30, 2016 and 2015, respectively.
12
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS DEFICIT
Board of Directors fees
As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Philip M. Rice (CFO and a Director) in January, 2015, at an exercise price of $.09 per share. The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter). The warrants were valued at $3,664 using the Black Scholes pricing model relying on the following assumptions: volatility 128.38%; annual rate of dividends 0%; discount rate 0.68%. In addition, Mr. Rice will receive $10,000 for each annual term served, paid quarterly
As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Thomas K. Cox in June, 2015, at an exercise price of $.15 per share. The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter). The warrants were valued at $6,185 using the Black Scholes pricing model relying on the following assumptions: volatility 155.43%; annual rate of dividends 0%; discount rate 1.09%. In addition, Mr. Cox is entitled to receive $10,000 for each annual term served.
On September 10, 2015, the board of directors amended its policy for the compensation of its directors. The Board granted to each of its Directors warrants to purchase 250,000 shares of common stock at an exercise price of $.10 per share. The warrants have a term of five years and vest immediately. The unvested portion of the previously granted warrants were cancelled due to the Companys change to a program where all director warrant grants are made once per year at the same time. As such, Mr. Rices unvested warrant of 15,890 shares and Mr. Coxs unvested warrant of 36,986 were cancelled.
As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 125,000 shares of common stock to Robert O. Rondeau, a new Director, in March 2016, at an exercise price of $.09 per share. The warrants have a term of five years and vest immediately. The warrants were valued at $10,588 using the Black Scholes pricing model relying on the following assumptions: volatility 168.01%; annual rate of dividends 0%; discount rate 0.97%. In addition, Mr. Rondeau will receive $10,000 for each annual term served, paid quarterly.
The Company recorded directors fees of $30,588 and $29,912 for the six months ended June 30, 2016 and 2015, respectively, representing the fees expensed and the value of the vested warrants described above.
Stock Based Compensation
During the six months ended June 30, 2016, the Company issued warrants to purchase 14,500,000 shares of common stock at an exercise price of $.08 with a term of 5 years pursuant to agreements with financial consultants. The warrants were valued at $1,095,063 using the Black Scholes pricing model relying on the following assumptions: volatility 170.07%; annual rate of dividends 0%; discount rate 0.89%.
During the six months ended June 30, 2015, the Company issued 500,000 shares of common stock to an investor relations consulting firm. The shares were valued at $30,000. The Company also issued warrants to purchase 3,125,000 shares of common stock at an exercise price of $.08 with a term of 5 years pursuant to an agreement with a financial consultant. The warrants were valued at $285,305 using the Black Scholes pricing model relying on the following assumptions: volatility 143.36% to 150.93%; annual rate of dividends 0%; discount rate 0.15% to 1.75%.
Stock Issuances
During the six months ended June 30, 2015, the Company received proceeds of $48,500 from the issuance of 970,000 shares of common stock. The Company also issued 384,300 shares of common stock valued at $38,300 and warrants to purchase 1,067,500 shares of common stock at an exercise price of $.10 per share as financing cost related to the issuance of the 11% convertible debt. The warrants were valued at $384,111 using the Black Scholes pricing model relying on the following assumptions: volatility 138.6% to 150.9%; annual rate of dividends 0%; discount rate 0.62% to 1.75%.
13
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS DEFICIT (continued)
Executive Compensation
As compensation for serving as Chief Financial Officer, the Company, quarterly, will issue warrants to Philip M. Rice to purchase 50,000 shares of common stock at the prevailing market price with a term of 5 years, provided that the preceding quarterly and annual filings were submitted in a timely and complaint manner, at which time such warrants would vest.
On April 6, 2015 the Company issued warrants to purchase 50,000 shares of common stock at $.085. The warrants were valued at $3,800 using the Black Scholes pricing model relying on the following assumptions: volatility 143.17%; annual rate of dividends 0%; discount rate 1.31%.
On May 13, 2015, the Company issued warrants to purchase 50,000 shares of common stock at $.08. The warrants were valued at $3,582 using the Black Scholes pricing model relying on the following assumptions: volatility 143.464%; annual rate of dividends 0%; discount rate 1.57%.
On March 29, 2016 the Company issued warrants to purchase 50,000 shares of common stock at $.08. The warrants were valued at $3,771 using the Black Scholes pricing model relying on the following assumptions: volatility 169.28%; annual rate of dividends 0%; discount rate 0.78%.
On May 13, 2016, the Company issued warrants to purchase 50,000 shares of common stock at $.08. The warrants were valued at $3,777 using the Black Scholes pricing model relying on the following assumptions: volatility 170.23%; annual rate of dividends 0%; discount rate 0.76%.
A summary of the status of the Companys warrants is presented below.
|
|
|
|
|
|
June 30, 2016
|
December 31, 2015
|
|
Number of
|
Weighted Average
|
Number of
|
Weighted Average
|
|
Warrants
|
Exercise Price
|
Warrants
|
Exercise Price
|
|
|
|
|
|
Outstanding, beginning of year
|
14,705,818
|
$ 0.13
|
9,053,005
|
$ 0.16
|
Issued
|
15,975,000
|
0.08
|
7,192,500
|
0.09
|
Exercised
|
-
|
-
|
-
|
-
|
Cancelled
|
-
|
-
|
(96,575)
|
0.14
|
Expired
|
(150,000)
|
0.21
|
(1,443,112)
|
0.13
|
Outstanding, end of period
|
30,530,818
|
$ 0.105
|
14,705,818
|
$ 0.13
|
14
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS DEFICIT (continued)
Warrants outstanding and exercisable by price range as of June 30, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Warrants
|
|
Exercisable Warrants
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Average
|
|
Range of
|
|
Number
|
|
Contractual Life in Years
|
|
Exercise Price
|
|
Number
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.08
|
|
18,025,000
|
|
4.52
|
$
|
0.08
|
|
18,025,000
|
$
|
0.08
|
|
0.085
|
|
50,000
|
|
3.77
|
|
0.085
|
|
50,000
|
|
0.085
|
|
0.088
|
|
50,000
|
|
3.87
|
|
0.088
|
|
50,000
|
|
0.088
|
|
0.09
|
|
209,110
|
|
3.20
|
|
0.09
|
|
209,110
|
|
0.09
|
|
0.10
|
|
4,802,200
|
|
4.11
|
|
0.10
|
|
4,802,200
|
|
0.10
|
|
0.12
|
|
2,635,367
|
|
1.03
|
|
0.12
|
|
2,635,367
|
|
0.12
|
|
0.14
|
|
50,000
|
|
3.12
|
|
0.14
|
|
50,000
|
|
0.14
|
|
0.15
|
|
2,485,274
|
|
1.80
|
|
0.15
|
|
2,485,274
|
|
0.15
|
|
0.17
|
|
50,000
|
|
2.75
|
|
0.17
|
|
50,000
|
|
0.17
|
|
0.19
|
|
100,000
|
|
1.96
|
|
0.19
|
|
100,000
|
|
0.19
|
|
0.20
|
|
250,000
|
|
0.83
|
|
0.20
|
|
250,000
|
|
0.20
|
|
0.22
|
|
477,004
|
|
0.34
|
|
0.22
|
|
477,004
|
|
0.22
|
|
0.25
|
|
707,000
|
|
2.02
|
|
0.25
|
|
707,000
|
|
0.25
|
|
0.30
|
|
250,000
|
|
2.41
|
|
0.30
|
|
250,000
|
|
0.30
|
|
0.33
|
|
250,000
|
|
2.00
|
|
0.33
|
|
250,000
|
|
0.33
|
|
0.36
|
|
39,863
|
|
0.34
|
|
0.36
|
|
39,863
|
|
0.36
|
|
0.38
|
|
100,000
|
|
0.28
|
|
0.38
|
|
100,000
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,530,818
|
|
1.42
|
|
|
|
30,530,818
|
$
|
0.105
|
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Employment Agreement
The Companys Chief Executive Officer, Andrew Dahl, is serving under the terms of an employment agreement dated December 16, 2011 as amended August 11, 2016. Under the agreement Mr. Dahl serves as CEO for one year terms, subject to automatic renewal, unless either party terminates the Agreement on sixty days notice prior to the expiration of the term of the agreement. Mr. Dahl is compensated as follows: he receives an annual base salary of $240,000. In addition, Mr. Dahl is entitled to monthly bonus compensation equal to 2% of the Companys revenue, but only to the extent that such bonus amount exceeds his base salary for the month in question. In addition, Mr. Dahl will be entitled to warrants having an exercise price of $.25 per share, upon the attainment of specified milestones as follows: 1) Warrants for 500,000 shares upon identification of bio-active agents in the Companys product and filing of a patent with respect thereto, 2) Warrants for 500,000 shares upon entering into a business contract under which the Company receives at least $500,000 in cash payments, 3) Warrants for 1,000,000 shares upon the Company entering into a co-development agreement with a research company to develop medicinal or pharmaceutical applications (where the partner provides at least $2 million in cash or in-kind outlays), 4) Warrants for 1,000,000 shares upon the Company entering into a co-development agreement for nutraceutical or dietary supplement applications (where the partner provides at least $2 million in cash or in-kind outlays), 5) Warrants for 1,000,000 shares upon the Company entering into a pharmaceutical development agreement. Further, as it relates to Companys wholly-owned subsidiary, WellMetris, LLC (WellMetris), in the event the Company ceases to own a controlling interest in WellMetris for any reason whatsoever, the Company shall cause WellMetris to grant Mr. Dahl warrants to purchase a seven percent (7%) equity interest in WellMetris at the time outside funding is closed and/or at the time an event occurs whereby the Company relinquishes majority control of WellMetris. Such Warrant shall be priced at the per-unit or per-share price at the time of the applicable closing or change of control with respect to WellMetris. As of June 30, 2016, none of the milestones referred to had been achieved and there has been no notice of contract termination.
15
ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - OTHER INCOME (EXPENSE)
On July 15, 2014, the Company settled a dispute with one of its vendors. The settlement agreement calls for the Company to make 10 payments of $6,250. If the payments are not made timely, a total liability of $97,463 out of the gross amount recorded on the Companys books of $191,146 will be due. As a result of this settlement, the difference of $93,683 is recognized as other income for the period ending September 30, 2014. For the six months ended June 30, 2015, the Company met its obligation for timely payments and recognized $34,963 as other income (the difference between the $97,463 remaining liability and the agreed upon payments of $62,500).
NOTE 9 - SUBSEQUENT EVENTS
11% Convertible Debt - HEP Investments, LLC
During the period from July 1, 2016 to August 12, 2016, HEP Investments LLC funded an additional loan of $230,000. Due to this additional funding, the Company issued to the Lender for aggregate consideration of $250,000, an 11% convertible note, and warrants to purchase 250,000 shares of common stock, at an exercise price of $.10 for a term of five years. The Company also issued 90,000 shares of common stock as financing cost related to the issuance of the 11% convertible debt. The Convertible Notes accrue interest at the rate of 11% per annum, are non-amortizing, have a term of two years, subject to the Lenders right to extend the term as noted in Note 5 Convertible Debt, and are convertible, at any time prior to the maturity date into shares of common stock, at a rate equal to $.10 per share. The Company recorded a deferred debt discount, related to the $250,000 Note, in the amount of $113,046, to reflect the beneficial conversion feature of the convertible debt and fair value of the warrants pursuant to Emerging Issues Task Force (EITF) 00-27: Application of EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features on Contingently Adjustable Conversion Rates, to certain convertible instruments. In accordance with EITF 00-27, the Company valued the beneficial conversion feature and recorded the amount of $108,065 as a reduction to the carrying amount of the convertible debt and as an addition to paid-in capital. Additionally, the relative fair value of the warrants was calculated and recorded at $4,981 as a further reduction to the carrying amount of the convertible debt and an addition to additional paid-in capital. The Company is amortizing the debt discount over the term of the debt.
Loan Payable, Related Parties
During the period from July 1, 2016 to August 12, 2016, Mr. Maggiore advance the Company an additional $10,000, for a total advanced of $166,405.
16