The Company intends to approach the near-term markets first – nutritional products and ingredients for human and animal applications, while laying the groundwork for the more complex and longer-term opportunities in the medicinal and pharmaceutical market verticals. The following provides an overview of general categories and a discussion of other applications and market verticals.

Dietary Supplement & Nutraceutical

The success of pomegranate extract, Omega-3 fish oil, resveratrol, saw palmetto, and similar supplements attests to American and European consumers’ obsession with ‘natural’ products. The dietary supplement business is a $28 billion industry in the U.S. alone, and nearly twice that the world over. Even in this severe recession, nutraceutical sales have remained steady, as an aging population continues to consume more dietary supplements.

Furthermore, self-care is a growing trend for the Baby Boomer demographic, which presents a huge opportunity for establishing market share in the natural products and dietary supplement arena. Many Boomers wish to spend their aging years in their own homes, and of the 80 million current Boomers in the U.S., approximately 10,000 will retire each day for the next 17 years. Furthermore, over the next three years, more than half of the U.S. population will exceed 50 years of age. The Boomer population will seek reputable dietary and supplement options to enhance their self-care initiatives during the aging process.

Rather than attempting to market the healthy cholesterol support or inflammation-modulating active compounds as a branded nutraceutical or supplement, the Company will endeavor to private-label the compounds for larger, well-established marketers and retailers. This is a more efficient use of capital and resources while still retaining total control of the intellectual property, the manufacturing process, and the pricing power.

Food Ingredient

Functional foods, or health foods, represent a $20 billion recession-proof business in the U.S. and a $40 billion business in Europe. The Middle East, although significantly smaller in market size, is growing at a rate of 12-14% annually, followed closely by the newly-affluent in China and India. Functional foods are typically processed products that contain one or more staple foods augmented with a variety of health-enhancing ingredients.

The Company intends to enter the functional food market with its healthy cholesterol ingredient and its immune support ingredient as soon as both clear the most basic regulatory hurdles. In so doing, ZIVO will pursue licensing agreements and contract out the production of its natural compounds whenever possible. This will allow the Company to scale-up production rapidly in anticipation of market demand.

In terms of its market strategy, ZIVO hopes to emulate the success of other natural food ingredient companies that license their ingredients into 600+ foods and beverage products in the U.S. and abroad.

For example, brand-name companies that have been attempting to market a healthful sport beverage would be able to integrate the Company’s ingredient into their product lines and promote the benefits of healthy cholesterol balance, muscle recovery, joint health and/or immune boost as a structure/function claim with scientific support.

Animal Feed, Dietary Supplements and Animal Drug Development

A pilot study in dairy cows indicated that the Company’s algal culture may be effective in supporting bovine mammary gland health. This is important in maintaining overall dairy cow health and promoting continued milk production. Mammary gland issues affect 10% of the U.S. dairy herd at any given time, costing producers as much as $1,100 per animal. In the U.S. alone, production losses are near $3 billion annually.

The Company intends to move on three related fronts: 1) bringing an algal feed ingredient to market in the U.S. by amplifying the algae culture; 2) producing a bovine dietary supplement for mastitis in global dairy cattle using the same process; and 3) licensing out the isolated bioactive molecules as a potentially helpful supplement to support bovine mammary gland health.

The veterinarian who conducted the ZIVO dairy cow study believes that the same bioactives may support healthy immune functioning in beef cattle during shipping from the ranch to the feedlot prior to processing. Beef producers attribute a 30% loss in weight gain to beef cattle immune issues – a $10 billion problem in the U.S. alone. The Company is planning a field study with amplified algae cultures once all safety and compliance regulations are met.

A pilot study indicated that the Company’s algal culture may be effective in maintaining proper joint function and supporting healthy muscle functioning in active dogs. That same experiment will be repeated with amplified algae culture, followed by production development and an immediate release to production and sales. The canine dietary supplement industry tops $10 billion in the U.S. alone. The Company intends to sell its product as an exclusive ingredient to larger, well-established and profitable brand-names in the pet health industry.

With all of the above, the isolated bioactive molecules found in the amplified algae product can be licensed to others as a starting point for the development of synthetic variations, which may ultimately lead to a new therapeutic target or treatment. The Company expects that the process of developing and testing could take years, and is therefore inclined to out-license that intellectual property.

Therefore, as is common practice, the Company intends to negotiate a reasonable upfront licensing fee, milestone payments, and finally, a steady stream of royalties in the future. The other revenue streams generated by feed and supplement sales can begin to accrue in 2013.

Medical Food

Doctors prescribe medical foods prior to, during, and/or after various medical procedures, including surgery, chemotherapy, radiation therapy, and physical therapy. At times, medical foods are used to augment the effects of prescription drugs. In most cases, medical foods are used to ameliorate chronic conditions such as diabetes, allergies, or metabolic stress. These medicinal foods are expensive and may be reimbursed by health insurers. An AzCATI technician measures the algal biomass

The Company believes that the inflammation modulating properties of the algal extract (which seem to be unrelated to the healthy cholesterol support properties) can be isolated and produced as a medical food or solution to be prescribed by physicians.

This is an FDA-regulated sector, but the standards are somewhat less stringent than pharmaceutical applications and operating margins remain strong.

Once again, the Company will likely enter into a private-label arrangement with a larger, well-established brand to produce and distribute the product, maximizing return while remaining capital-efficient.


Ultimately, a prescription drug application, based on a naturally-occurring molecule, may create the largest and most dramatic long-term increase in the Company’s value. However, the process for developing new drugs is costly, complex, risky, and time-consuming. It is a multi-year undertaking well beyond the Company’s scope and expertise.

The Company will likely grant a license to a developer who will underwrite the risk and expense of the initial development process, and then share in the royalties once a molecule is licensed.