Zeo ScientifiX, Inc 10-Q for FY2025 Q1
Zeo ScientifiX, Inc. (ZEOX)
About this 10-Q
Zeo ScientifiX, Inc filed this 10-Q on September 16, 2024, covering the quarter ended July 31, 2024 (FY2025 Q1).
Headline figures
Quarter ended July 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.09M
- down 10.6% from $1.22M a year earlier
- Net loss
- $1.01M
- compared with a net loss of $1.62M a year earlier
- Diluted EPS
- -$0.16
- compared with -$0.23 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For the quarterly period ended
OR
For the transition period from _______________ to _______________
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of September 13, 2024, there were shares of common stock, $0.001 par value per share, issued and outstanding.
ZEO SCIENTIFIX, INC.
TABLE OF CONTENTS
i
Unless stated otherwise, the words “we,” “us,” “our,” the “Company” or “ZEO” in this Quarterly Report on Form 10-Q (this “Report”) refer to Zeo ScientifiX, Inc. (f/k/a Organicell Regenerative Medicine, Inc.), a Nevada corporation, and its subsidiaries.
Cautionary Note Regarding Forward- Looking Statements
The statements contained in this Report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “may,” “could,” “should,” “expect,” “plan,” “project,” “strategy,” “forecast,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” or similar expressions help identify forward-looking statements.
The forward-looking statements contained in this Report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Report are not guarantees of future performance, and management cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will in fact occur. The Company’s actual results may differ materially from those anticipated, estimated, projected or expected by management.
All forward-looking statements speak only as of the date of this Report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
ii
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
Zeo ScientifiX, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts rounded to the nearest thousand except share amounts)
| July 31, 2024 |
October 31, 2023 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for bad debts | ||||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Inventories | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Security deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Advances payable to former officer | ||||||||
| Finance lease obligations | ||||||||
| Convertible promissory note, net of debt discount of $ |
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| Deferred revenue | ||||||||
| Total Current Liabilities | ||||||||
| Long term finance lease obligations | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shares Subject To Possible Redemption | ||||||||
| Series C Preferred Stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Deficit | ( |
) | ( |
) | ||||
| TOTAL LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Zeo ScientifiX, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts rounded to the nearest thousand except share amounts)
(Unaudited)
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues (includes sales to related parties of approximately $ |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Write-off of advances payable to former officer | ||||||||||||||||
| Resolution and settlement of long outstanding payables | ||||||||||||||||
| Reserve of non-marketable securities | ( |
) | ( |
) | ||||||||||||
| Commissions on sales of Formulator products | ||||||||||||||||
| Proceeds from insurance claim | ||||||||||||||||
| Other income | ||||||||||||||||
| Change in Commitment Fee Shortfall Obligation | ( |
) | ||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Zeo ScientifiX, Inc
CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Three Months And Nine Months Ended July 31, 2024 and 2023
(Amounts rounded to the nearest thousand except share amounts)
(Unaudited)
Three Months Ended July 31,
| Additional | Total Stockholders’ | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Equity | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance May 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Fair value of equity instruments issued for compensation: | ||||||||||||||||||||
| Fair value of vested shares issued | ||||||||||||||||||||
| Fair value of vested options and warrants issued | - | |||||||||||||||||||
| Return of former executive’s shares and warrants | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance May 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Fair value of equity instruments issued for compensation: | ||||||||||||||||||||
| Fair value of vested shares issued | - | |||||||||||||||||||
| Fair value of vested options and warrants issued | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
3
Nine Months Ended July 31,
| Additional | Total Stockholders’ | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Equity | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance October 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Fair value of equity instruments issued for compensation: | ||||||||||||||||||||
| Fair value of vested shares issued | ||||||||||||||||||||
| Fair value of vested options and warrants issued | - | |||||||||||||||||||
| Issuance of Common stock and Warrants as commitment fee for SPA 23 Note | ||||||||||||||||||||
| Stock issued in satisfaction of Commitment Fee Shortfall Obligation | ||||||||||||||||||||
| Cancellation of shares repurchased in connection with litigation | ( | ) | ||||||||||||||||||
| Return of former executive’s shares and warrants | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance October 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Reverse split round-up adjustment | ||||||||||||||||||||
| Cancellation of shares in connection with litigation | ( | ) | ( | ) | ||||||||||||||||
| Exchange of accounts payable for stock | ||||||||||||||||||||
| Fair value of equity instruments issued for compensation: | ||||||||||||||||||||
| Fair value of vested shares issued | ||||||||||||||||||||
| Fair value of vested options and warrants issued | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Zeo ScientifiX, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts rounded to the nearest thousand except share amounts)
(Unaudited)
|
Nine Months Ended July 31, |
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| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of OID and commitment fee discount – Promissory notes | ||||||||
| Change in Commitment Fee Shortfall Obligation | ||||||||
| Write-off of fixed assets | ||||||||
| Write-off of receivables from officers and other receivable | ||||||||
| Write-off of advances payable to former officer | ( |
) | ||||||
| Reserve of non-marketable securities – related party | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Other receivables | ( |
) | ||||||
| Prepaid expenses | ( |
) | ||||||
| Inventories | ( |
) | ||||||
| Accounts payable and accrued expenses | ( |
) | ||||||
| Security deposits | ||||||||
| Deferred revenue | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | ( |
) | ||||||
| Investment in non-marketable equity securities – related party | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of Promissory Note | ||||||||
| Shares repurchased in connection with litigation | ( |
) | ||||||
| Payments on finance lease | ( |
) | ( |
) | ||||
| Repayments of notes payable | ( |
) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by (used in) financing activities | ( |
) | ||||||
| Decrease in cash | ( |
) | ( |
) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| Reduction in accounts payable for equipment returned to vendor | $ | $ | ||||||
| Exchange of shares for payables | $ | $ | ||||||
| OID discount on proceeds received from promissory notes | $ | $ | ||||||
| Common stock and warrants issued as commitment fee for promissory notes | $ | $ | ||||||
| Common stock issued in satisfaction of Commitment Fee Shortfall Obligation | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Zeo ScientifiX, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Zeo ScientifiX, Inc. (“ZEO” or the “Company”) (f/k/a Organicell Regenerative Medicine, Inc.) was incorporated on August 9, 2011 in the State of Nevada under the name Bespoke Tricycles Inc. (changed to Biotech Products Services and Research, Inc. during September 2015 and to Organicell Regenerative Medicine, Inc., effective June 20, 2018). Effective February 20, 2024, we further amended our Articles of Incorporation to assume our current name, Zeo ScientifiX, Inc.
The Company is a clinical-stage biopharmaceutical company principally focusing on the development of innovative biological therapeutics for the treatment of degenerative diseases and regenerative medicine. The Company’s proprietary products, including Zofin™, are derived from perinatal sources and manufactured to retain the naturally occurring extracellular vesicles, proteins and cell secreted nanoparticles and Patient Pure X™ (“PPX™”), an autologous biologic containing a nanoparticle fraction that is precipitated from a patient’s own peripheral blood (“RAAM Products”). Our RAAM Products and related services are principally used in the health care industry administered through doctors and clinics (“Providers”).
For the nine months ended July 31, 2024 and 2023, the Company principally operated through General Surgical of Florida, Inc., a Florida corporation and wholly owned subsidiary, which was formed to sell the Company’s therapeutic products to Providers.
The Company is currently exploring the use of its proprietary products in future formulations for a variety of topical use applications in the skin-care industry.
Effective November 28, 2023, we implemented a one-for-200 reverse stock split (the “Reverse Split”). The par value of the Company’s common stock was unchanged at $0.001 per share after the Reverse Split. As a result, on the effective date of the Reverse Split, the stated capital on the Company’s balance sheet attributable to the Company’s common stock was reduced proportionately based on the Reverse Split ratio of one-for-200 and the additional paid-in capital account was credited with the amount by which the stated capital was reduced. All share and per share amounts referenced herein give effect to the Reverse Split as of the earliest period presented.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the condensed unaudited consolidated financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position as of July 31, 2024, the results of its operations for the three months and nine months ended July 31, 2024 and 2023 and the cash flows for the nine months ended July 31, 2024 and 2023. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
6
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities Exchange Commission, although we believe that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended October 31, 2023 filed with the Securities and Exchange Commission.
All amounts presented have been rounded to the nearest thousand except share amounts, share prices and earnings per share.
Concentrations of Risk
Credit Risk
The balance sheet items that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $
Major Customer
During the three months ended July 31, 2024, the Company sold products and services totaling approximately $
During the nine months ended July 31, 2024, the Company sold products and services totaling approximately $
The Company’s sales agreements are non-exclusive and the Company does not believe it has any exposure based on the customers of its products.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires 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 the reported amounts of revenues and expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Those estimates and assumptions include estimates for credit loss reserves for accounts receivable, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing equity instruments issued for services, and assumptions used in the determination of the Company’s liquidity.
7
Revenue Recognition
The Company follows the guidance of FASB Accounting Standards Update (“ASU”) Topic 606 “Revenue from Contracts with Customers” which requires the Company to recognize revenue in amounts that reflect the prorata completion of the performance obligations of the Company required under the contracts.
The Company recognizes revenue only when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service. Our performance obligations are satisfied and control is transferred at a point-in-time, which is typically when the transfer and title to the product sold has taken place and there is evidence of our customer’s satisfactory acceptance of the product shipment or delivery except in those instances when the customer has made prior arrangements with the Company to store the product purchased by the customer at the Company’s facilities that is to be delivered at a later date to be designated by the customer. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the Company’s consolidated balance sheet.
Basic income (loss) per common share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of fully vested common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of fully vested shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity instruments.
At July 31, 2024, the Company had common shares issuable upon the exercise of options and warrants and unvested shares of restricted stock that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the three months and nine months ended July 31, 2024
At July 31, 2023, the Company had common shares issuable upon the exercise of options and warrants and unvested shares of restricted stock that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the three months and nine months ended July 31, 2023.
All stock-based payments are recognized in the financial statements based on their fair values.
The Company periodically issues stock options and stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.
8
Research and Development Costs
Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred. Our research and development expenses were approximately $
Income Taxes
The Company files a consolidated tax return that includes all of its subsidiaries.
Provisions for income taxes are based on taxes payable or refundable for the current year taxable income for federal and state income tax reporting purposes and deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of the operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with FASB Topic 740 – Income Taxes. This pronouncement prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. The interpretation also provides guidance on recognition, derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
For the three months and nine months ended July 31, 2024 and 2023 the Company incurred operating losses, and therefore, there was not any income tax expense amount recorded during those periods. There is a full valuation allowance established for the tax benefit associated with the net losses for the nine months ended July 31, 2024 and 2023.
Fair Value of Financial Instruments
The Company includes fair value information in the notes to financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made.
The Company follows FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It 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 most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities and convertible debt. The estimated fair value of cash, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.
9
The Company follows the provisions of ASC 820 with respect to its financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
Level one — Quoted market prices in active markets for identical assets or liabilities;
Level two — Inputs other than level one inputs that are either directly or indirectly observable such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level three — Unobservable inputs that are supported by little or no market activity and developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
Segment Information
For the three months and nine months ended
July 31, 2024 and 2023, the Company operated only
Subsequent Events
The Company has evaluated subsequent events that occurred after July 31, 2024 through the financial statement issuance date for subsequent event disclosure consideration.
NOTE 3 – GOING CONCERN
The unaudited accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company incurred net losses of $
United States Food and Drug Administration (“FDA”) regulations which were announced in November 2017 and which became effective in May 2021 require that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”). The Company has not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products it currently produces would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s.
As a result of the above, the Company’s efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be achieved and ultimately may prove to be unsuccessful unless (a) the Company’s ability to process, sell and distribute the products currently being produced or developed in the future are not restricted; and/or (b) additional sources of working capital through operations or debt and/or equity financings are realized. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
10
Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses and research and development costs related to development of new products and to perform required clinical studies in connection with the sale of its products. The Company does not have any assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on its ability to produce and sell products it manufactures that are subject to changing technology and regulations that it currently sells and distributes to its customers. The Company’s current market capitalization, common stock liquidity and available authorized shares may hinder its ability to raise equity proceeds. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive, if available at all.
In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (a) the Company is able to continue to produce products or obtain products under supply arrangements which are in compliance with current and future regulatory guidelines; (b) the Company will be able to establish a stabilized source of revenues, including efforts to expand sales internationally and the development of new product offerings and/or designations of products; (c) obligations to the Company’s creditors are not accelerated; (d) the Company’s operating expenses remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations; (e) the Company is able to continue its research and development activities, particularly in regards to remaining compliant with the FDA and ongoing safety and efficacy of its products; and/or (f) the Company obtains additional working capital to meet its contractual commitments and maintain the current level of Company operations through debt or equity sources.
There is no assurance that the products we currently produce will not be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s and/or the Company will be able to complete its revenue growth strategy. There is no assurance that the Company’s research and development activities will be successful or that the Company will be able to timely fund the required costs of those activities. Without sufficient cash reserves, the Company’s ability to pursue growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful in achieving a stabilized source of revenues.
If revenues do not increase and stabilize, if the Company’s ability to process, sell and/or distribute the products currently being produced or developed in the future are restricted, and/or if additional funds cannot otherwise be raised, the Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.
The independent auditor’s report dated January 29, 2024 included in our Annual Report on Form 10-K for the year ended October 31, 2023 included an explanatory paragraph as to the Company’s ability to continue as a going concern. As of July 31, 2024, based on the factors described above, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements.
NOTE 4 – INVENTORIES
| Schedule of inventories | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Raw materials and supplies | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
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NOTE 5 – PROPERTY AND EQUIPMENT
| Schedule of property and equipment | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Finance lease equipment | $ | $ | ||||||
| Manufacturing equipment | ||||||||
| Less: accumulated depreciation and amortization | ( |
) | ( |
) | ||||
| Total property and equipment, net | $ | $ | ||||||
During February 2024, in connection with the expiration of the lease for certain lab equipment originally valued at $
Depreciation expense totaled $
Amortization expense totaled $
NOTE 6 – LEASE OBLIGATIONS
Finance Lease Obligations:
During March 2019, the Company entered into a lease agreement for certain lab equipment in the amount of $
During October 2021, the Company entered into a second lease agreement in the amount of $
As of July 31, 2024, finance lease obligations were $
NOTE 7 – EQUITY IN NON-MARKETABLE SECURITIES OF AFFILIATED ENTITY
| Schedule of equity in non marketable securities | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Equity in non-marketable securities | $ | |||||||
| Reserve on carrying value of investment in non-marketable securities | $ | ( |
) | ( |
) | |||
| Equity in non-marketable securities | $ | |||||||
During the year ended October 31, 2023, the Company invested $
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At the time of the investment, both Greyt Ventures, LLC and Skycrest Holdings, LLC, principal shareholders of the Company, each owned a 20% interest in the Formulator. In addition, Mr. Robert Smoley, a consultant and advisor to the Company is also the Chief Operating Officer of the Formulator. The Company’s, Greyt Ventures, LLC’s and Skycrest Holdings, LLC’s equity interests in the Formulator have since been reduced to 8.96%, 17.93% and 17.93%, respectively, as a result of additional sales of equity interests in the Formulator to outside parties.
As of October 31, 2023, the Company recorded a reserve against the carrying value of its investment of the Formulator of $
During the quarter ended July 31, 2024, pursuant to a capital call notice received from the Formulator, the Company invested an additional $45,000 in cash (representing its 8.96% equity interest at the time of the capital call). As of July 31, 2024, the Company has recorded an additional reserve against the carrying value of its investment of the Formulator in connection with the additional investment of $45,000 based on the limited financial history of the Formulator to date to ascertain the fair value of the Formulator and the Company’s limited rights to control future dilution to the Company’s interests and the timing of available distributions, if any, of the Formulator.
As of July 31, 2024, the Company has recorded total reserves against the carrying value of its investment of the Formulator of $
NOTE 8 – RELATED PARTY TRANSACTIONS
For the three months and nine months ended July 31, 2024, the Company sold a total of approximately $
For the three months and nine months ended July 31, 2023, the Company sold a total of approximately $
At October 31, 2023, advances payable to a former officer were $
During the quarter ended July 31, 2024, pursuant to a capital call notice received from the Formulator, as discussed in Note 7, the Company invested an additional $
In connection with the sale of securities to the Investor (see Note 11), the Company entered into a supply agreement with an affiliate of the Investor to sell our products to such party and entered into a non-binding term sheet with another affiliate of the Investor pursuant to which such affiliate will have the option (subject to various conditions including the negotiation and execution of definitive agreements) to invest in a newly formed subsidiary through which ZEO intends to conduct clinical trials on its present and planned products.
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NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| Schedule of account payable and accrued expenses | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Accrued payroll related liabilities | $ | $ | ||||||
| Lab equipment and supplies payables | ||||||||
| Clinical trial and research payables | ||||||||
| Legal fees payable | ||||||||
| Other professional fees payable | ||||||||
| Accrued IRS penalty | ||||||||
| Accrued commissions payable | ||||||||
| Construction payables | ||||||||
| Other payables and accrued expenses | ||||||||
| Total Accounts Payable and Accrued Expenses | $ | $ | ||||||
During February 2024, the Internal Revenue
Service (“IRS”) notified the Company that the Company’s appeal for full abatement of penalties and interest
($
NOTE 10 – NOTES PAYABLE
| Schedule of notes payable | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Convertible Promissory Notes | $ | $ | ||||||
| Unamortized discount | ( |
) | ( |
) | ||||
| Total Notes Payable | $ | $ | ||||||
Convertible Promissory Notes
The Convertible Promissory Notes are due
The Convertible Promissory Notes may be prepaid by the Company, in whole, but not in part, at any time prior to the Maturity Date, subject to payment of a premium of 10%, provided that the Company gives the holders fifteen (15) business notice prior to prepayment, during which period, Investors may elect to convert the Notes and accrued but unpaid interest thereon into Shares at a conversion price equal to 80% of the average of the daily VWAP of the Shares (as defined in the Note) for twenty consecutive (
Holders of the Convertible Promissory Notes will have the right, at any time during the period commencing on April 1, 2024 and ending on the earliest to occur of the Maturity Date, the date of a Prepayment or the date of an automatic conversion, to convert the Convertible Promissory Note in whole, but not in part, and accrued interest thereon into shares of common stock (“Shares”) at a conversion price equal to 80% of the average of the daily VWAP of the Shares (as defined in the Convertible Promissory Note) for twenty consecutive (20) trading days ending on the date the investor gives the Company a notice of conversion, subject to a minimum conversion price of $
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In addition, the Convertible Promissory Notes and accrued but unpaid interest thereon will automatically convert into Shares in the event that prior to the Maturity Date, the Company consummates a “Qualified Financing” or a “Qualified Sale” (as defined in the Convertible Promissory Note) at a conversion price equal to 80% of the offering price of Shares sold in the Qualified Financing or 80% of the purchase price per Share to be received by stockholders following consummation of a Qualified Sale.
In connection with the issuance of the Convertible Promissory Notes, the Company recorded a discount in the amount of $
NOTE 11 – CAPITAL STOCK
Common Stock
On November 7, 2023, the Company filed a certificate of amendment to its Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-two-hundred basis. The reverse stock split was effective with FINRA on November 28, 2023 (the “Reverse Split”). The par value of the Company’s common stock was unchanged at $ per share after the Reverse Split. All share and per share amounts have been retroactively adjusted to reflect the split as if it occurred at the earliest period presented.
Issuances Of Common Stock - Sales:
On July 8, 2024, the Company completed a $500,000 private financing (“Financing”) with a single accredited investor (“Investor”). In the Financing, the Company sold and issued to the Investor shares of common stock (“Shares”) and warrants to purchase an additional
Issuance of Common Stock for Services:
On April 1, 2024, pursuant to the Company’s 2021 Incentive Stock Plan (“Incentive Plan”), the Company’s Board of Directors (“Board”) awarded and shares of Zeo common stock to Jerry Glauser and Leatham Stern or their nominees, respectively (“Stock Grants”), both members of the Board, valued at $ per share, the closing price of the common stock of the Company on the grant date. The Stock Grants vest in full as of the date of the grant. The Company recorded a total of $ and $ of stock-based compensation expense during the three months and nine months ended July 31, 2024, respectively, in connection with the Stock Grants.
Issuances of Common Stock – Exchange of balances due on accounts payable for stock:
Effective January 31, 2024, the Company and a legal firm performing services to the Company agreed to exchange $
Shares Repurchased – Settlement of Litigation:
In connection with a settlement agreement entered into during November 2023 (see Note 13), Albert Mitrani and Dr. Maria Ines Mitrani returned to the Company and shares of ZEO common stock held by them respectively and the parties exchanged mutual releases.
15
Equity Line Of Credit Commitment:
On February 23, 2024, pursuant to the Purchase Agreement dated as of September 1, 2022 (“Agreement”), by and between the Company and Tysadco Partners, LLC (“Tysadco”), the Company provided Tysadco formal notice that it was terminating the Agreement and the $10,000,000 equity line of credit facility (“ELOC”).
Grant of Restricted Common Stock:
A summary of restricted stock activity for the nine months ended July 31, 2024 are presented below:
| Schedule of non vested share activity | ||||||||||||
| Number of Non-vested Shares |
Fair Value | Weighted- Average Grant Date Value |
||||||||||
| Non-vested at October 31, 2023 | $ | $ | ||||||||||
| Non-vested Shares Granted | $ | $ | ||||||||||
| Vested | $ | ( |
) | $ | ||||||||
| Expired/Forfeited | $ | $ | ||||||||||
| Non-vested at July 31, 2024 | $ | $ | ||||||||||
Effective April 1, 2024, the Company entered into sales distribution agreement with a sales and marketing company (“Salesco”). Salesco will be entitled to receive commissions on sales of the Company’s products to customers introduced by Salesco in the form of cash and common stock of the Company based on sales milestones. In connection with the agreement, the Company agreed to pay Salesco a monthly advance of $
During April 2024 thru July 2024, in consideration for agreeing to serve on the Company’s medical advisory board, the Board approved the issuance to a total of twenty individuals an aggregate of shares of unregistered common stock valued at ranges between $ per share and $ per share, the closing price of the common stock of the Company on the respective grant dates. The shares vest annually over the three-year period from the date of grant. The Company will amortize $
There was approximately $
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NOTE 12 – STOCK OPTIONS AND WARRANTS
The Company has issued option securities under its Incentive Plan and warrants entitling the holder to purchase shares of its common stock at specified prices and for specified exercise periods.
Options:
A summary of the Company’s option activity for the nine months ended July 31, 2024 are presented below:
| Schedule of stock options and warrants | ||||||||||||||||
| Number of Shares |
Weighted-average Exercise Price |
Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
| Outstanding at October 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | ( |
) | $ | $ | ||||||||||||
| Outstanding at July 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at July 31, 2024 | $ | $ | ||||||||||||||
During the nine months ended July 31, 2024, under its Incentive Plan, the Board approved the granting of options to certain employees, officers and directors to purchase shares of its common stock. The options vest over various periods ranging from
The assumptions used for the options granted during the period are as follows:
| Schedule of assumptions used for the options granted | ||||
| Exercise prices | $ |
- |
||
| Expected dividends | - | |||
| Expected volatility |
- |
% | ||
| Risk free interest rate |
- |
% | ||
| Expected life of options |
During the nine months ended July 31, 2024 and 2023, the Company amortized $ and $, respectively, of stock compensation costs associated with options issued.
There was approximately $ of unamortized compensation associated with options outstanding as of July 31, 2024 that will be amortized over their respective remaining service periods.
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Warrants:
A summary of the Company’s warrant activity for the nine months ended July 31, 2024 are presented below:
| Schedule of warrant activity | ||||||||||||||||
| Number of Shares |
Weighted-average Exercise Price |
Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
| Outstanding at October 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | $ | - | $ | |||||||||||||
| Outstanding at July 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at July 31, 2024 | $ | $ | ||||||||||||||
On July 8, 2024, in connection with the Financing (see Note 11), the Company issued the Investor a cashless warrant to purchase an aggregate of
On July 11, 2024, our board of directors granted warrants to purchase
During the nine months ended July 31, 2024 and 2023, the Company amortized $ and $, respectively, of stock compensation costs associated with warrants issued.
There was approximately $3,631,000 of unamortized compensation associated with warrants outstanding as of July 31, 2024 that will be amortized over their respective remaining service periods.
All stock compensation expense is classified under general and administrative expenses in the consolidated statements of operations.
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NOTE 13 – COMMITMENTS AND CONTINGENCIES
Skincare Agreement
In September 2022, the Company entered into a joint development agreement and supply agreement with a third-party supplier (“Supplier”) that develops and manufactures various devices and related equipment and consumables used in the skincare industry (“Skincare Agreement”) that are marketed and sold directly and/or through its affiliates or third parties, in the United States of America and in most major international markets. Under the terms of the Skincare Agreement, the Company was obligated to provide and the Third Party was obligated to purchase a minimum volume of raw material ingredient (“Ingredient”) from the Company to be used as part of formulations in exclusive biologic topical products (“Products”) to be marketed and sold by Supplier during the first year of the Agreement in the amount of $167,000 (“Minimum Purchase”) and mutually agreed upon minimal annual amounts thereafter. In June 2023, the Supplier informed the Company that there were delays in the Supplier’s development of the Products, including the timing of providing a purchase order for the Minimum Purchase of the Company’s Ingredient.
During September 2023, the Company and the Supplier agreed to enter into an Amendment and Restatement of the Skincare Agreement (“Amended Skincare Agreement”). Under the terms of the Amended Skincare Agreement, the products to be provided by the Company was modified to include both the Ingredient and a topical moisturizer (“Moisturizer”) supplied by the Formulator. The Ingredient and the Moisturizer are hereinafter referred to as the “Combined Product”. The Supplier was obligated to deliver a purchase order for a minimum of $403,000 of the Combined Product by September 30, 2023 (“Initial Purchase Order”) and a total of $648,000 of the Combined Product during the first year of the Amended Skincare Agreement.
During November 2023, the Supplier paid the Company $403,000 in connection with the Initial Purchase Order. Pursuant to Sales Agreement with the Formulator, the Company paid the Formulator $235,000 representing the amount of Initial Purchase Order associated with the Company’s arrangement with the Formulator to supply the Moisturizer (“Moisturizer Prepayment”). As of July 31, 2024, both the Company and the Formulator had yet to deliver the Ingredient or the Moisturizer to the Supplier. As of July 31, 2024, the Company has recorded deferred revenues of $
On August 12, 2024, in connection with the mutual agreement to terminate the Amended Skincare Agreement, the Company and the Supplier entered into a settlement agreement and general release (“Settlement”). In connection with the Settlement, the parties released each other from all outstanding duties and/or obligations owed by one party to the other party as set forth in the Settlement, including but not limited to the Company’s obligation to supply any Combined Product to the Supplier and the Supplier’s obligation to make or place any additional orders to the Company for the Combined Product. In connection with the Settlement, the Company retained the $403,000 payment that the Supplier made to the Company in connection with the Initial Purchase Order, and the Company was not obligated to deliver any of the Combined Product to the Supplier, including the portion of the Combined Product to be provided in connection with the Initial Purchase Order. Concurrent with the execution of the Settlement, the Company and the Formulator entered into a settlement and general release (“Release”) whereby the parties released each other from all outstanding duties and/or obligations owed by one party to the other party as set forth in the Release including but not limited to the Formulator’s obligation to supply any Moisturizer to the Company pursuant to the Amended Skincare Agreement and the Company’s obligation to make or place any additional orders to the Formulator for the Moisturizer. In connection with the Release, the Formulator retained the Moisturizer Prepayment, and the Formulator was not obligated to deliver any of the Moisturizer to the Company, including portion of the Moisturizer to be provided in connection with the Moisturizer Prepayment.
19
Deferred Revenue
During the year ended October 31, 2023, the Company received an advance payment of $500,000 in connection with a distribution agreement entered into between the Company and a third party (“Purchaser”) which was to be applied against future invoices for product inventory to be delivered over time which amount was recorded as deferred revenue.
During July 2024, the Company received an advance payment of $500,000 in connection with a distribution agreement entered into between the Company and an affiliate of the Investor (see Note 11) which was to be applied against future invoices for product inventory to be delivered over time which amount was recorded as deferred revenue. As of July 31, 2024, $40,000 of product inventory was invoiced and delivered reducing the deferred revenue amount to $
Amounts received by the Company for products that have yet to be delivered to the customers as of July 31, 2024 and October 31, 2023 are reflected in the Company’s balance sheet as deferred revenues and were comprised of the following:
| Schedule of deferred revenue | ||||||||
| July 31, 2024 |
October 31, 2023 |
|||||||
| Initial Purchase Order – Amended Skincare Agreement | $ | $ | ||||||
| Advances On Future Purchases Of Inventory | ||||||||
| Sales To Customers Not Yet Delivered | ||||||||
| Total Deferred Revenue | $ | $ | ||||||
Investor Option
In connection with the sale of securities to the Investor (see Note 11), the Company entered into a non-binding term sheet with another affiliate of the Investor pursuant to which such affiliate will have the option (subject to various conditions including the negotiation and execution of definitive agreements) to invest in a newly formed subsidiary through which ZEO intends to conduct clinical trials on its present and planned products.
Legal Matters
Albert Mitrani and Dr. Maria Ines Mitrani
Effective November 13, 2023, the Company entered into a settlement agreement with Albert Mitrani and Dr. Maria Ines Mitrani (former executives of the Company), pursuant to which it resolved various claims against the Mitranis, including those set forth in the previously reported Florida state action the Company had filed against the Mitranis. As part of the settlement, Albert Mitrani and Dr. Maria Ines Mitrani returned to the Company and shares of ZEO common stock held by them respectively and the parties exchanged mutual releases.
20
Drs. Leider and Golub
The Company’s employment agreements with Dr. Harry Leider, its former Chief Executive Officer and Dr. Howard Golub, its former Chief Science Officer (“Employment Agreements”) had an initial term that ended May 31, 2024. The Employment Agreements were not renewed and accordingly, the Employment Agreements expired and the employment of Drs. Leider and Golub by the Company ended on May 31, 2024. Effective August 12, 2024, the Company and Dr. Leider entered into a settlement agreement and general release whereby the Company agreed to pay Dr. Leider $40,000 in exchange for each party executing mutual releases in connection with the non-renewal of Dr. Leider’s employment agreement.
All options issued to the former Chief Executive Officer that were not vested amounting to 190,000 at the time of termination were forfeited. In addition, all options issued to the former Chief Executive Officer and Dr. Howard Golub, its former Chief Science Officer that were vested amounting to 345,000 at the time of termination, were not exercised by August 31, 2024 as required under the Incentive Plan, and as a result expired.
Other
In addition to the foregoing, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any such matter may harm our business.
NOTE 14 – SUBSEQUENT EVENTS
During August 2024, the Company entered into a agreement with a third party to provide consulting services for a one-year period. As consideration for agreeing to provide consulting services to the Company, the Company agreed to issue the consultant vested warrants to purchase
Effective August 5, 2024, the Company entered into a settlement agreement with a prior consultant of the Company, pursuant to which it resolved various claims that had been brought by the Company against the consultants. As part of the settlement, the consultants agreed to return to the Company shares of ZEO common stock held by the consultants in exchange for a payment of $ and the parties exchanged mutual releases.
21
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Business Overview
We are a clinical-stage biopharmaceutical company principally focusing on the development of innovative biological therapeutics for the treatment of degenerative diseases and regenerative medicine. The Company’s proprietary products, including Zofin™, are derived from perinatal sources and manufactured to retain the naturally occurring extracellular vesicles, proteins and cell secreted nanoparticles and Patient Pure X™ (“PPX™”), an autologous non-manipulated biologic containing a nanoparticle fraction that is precipitated from a patient’s own peripheral blood (“RAAM Products”). Our RAAM Products and related services are principally used in the health care industry administered through doctors and clinics (“Providers”).
ZEO operates an extracellular vesicle processing laboratory in Davie, Florida for the purpose of performing research and development and the manufacturing and processing of the anti-aging and cellular therapy derived products that we sell and distribute to our customers.
The Company is currently exploring the use of its proprietary products in future formulations for a variety of topical use applications in the skin-care industry.
To date, the Company has obtained certain Investigational New Drug (“IND”), and 18 emergency IND (“eIND”) approvals from the FDA, including applicable Institutional Review Board (“IRB”) approvals which authorized the Company to commence clinical trials or treatments in connection with the use of Zofin™ and related treatment protocols. The Company is pursuing efforts to complete its already approved clinical studies as well as obtaining approval to commence additional studies for other specific indications it has identified that the use of its products will provide more favorable and desired health related benefits for patients seeking alternative treatment options than are currently available. The ability of the Company to succeed in these efforts is subject to among other things, the Company having sufficient available working capital to fund the substantial costs of completing clinical trials, which the Company currently does not have, and ultimately, obtaining approval from the FDA.
Current FDA guidance requires that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue-based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”).
We have not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products we currently produce would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s. However, we do not believe that our products fall within these guidelines and intend to vigorously defend against any adverse interpretation by the FDA on the classification of our products that may be deemed as falling under this defined regulation, if any. Notwithstanding the foregoing, we are undertaking efforts on an ongoing basis to mitigate any potential risks associated with an adverse ruling by the FDA and the subsequent limitations on our ability to continue to generate revenues from the sale of our products in the United States until the Company obtains the required licenses. The efforts include continuing with clinical trials, expanding sales internationally and developing new product offerings and/or designations of products that would not fall under these regulations.
22
All share and per share amounts referenced herein give effect as of the earliest period presented to a 200 for one reverse stock split implemented effective November 28, 2023.
The following discussion of the Company’s results of operations and liquidity and capital resources should be read in conjunction with our condensed unaudited financial statements and related notes thereto appearing in “Item 1. Financial Statements” of Part I of this Report.
Results of Operations
Three months ended July 31, 2024 as compared to three months ended July 31, 2023
Revenues. Our revenues for the three months ended July 31, 2024 were $1,091,000, compared to revenues of $1,221,000 for the three months ended July 31, 2023. The decrease in revenues during the three months ended July 31, 2024 of $130,000 or 10.6% from the three months ended July 31, 2023, was primarily the result of a decrease of approximately 18.3% (approximately $212,000) in the average sales prices for the high concentration biologic products sold during the three months ended July 31, 2024, compared with the three months ended July 31, 2023, partially offset by an increase of approximately 142.8% (approximately $92,000) of revenues associated with its recently launched PPX™ service platform during the three months ended July 31, 2024, compared with the three months ended July 31, 2023.
The increase in the overall unit sales associated with its recently launched PPX™ service platform was primarily due the Company’s expanded sales and marketing efforts which included engaging additional sales representatives, participation in industry related conferences and sponsoring of educational webinars.
The decrease in the average sales prices for the high concentration biologic products sold during the three months ended July 31, 2024, compared to the three months ended July 31, 2023 was due to a reduction in sales of the Company’s higher priced medical grade biologic product offerings as compared to the Company’s lower priced aesthetic biologics product offerings. Although the total number of unit sales of its high concentration biologic products did not change significantly during the three months ended July 31, 2024, compared to the three months ended July 31, 2023 (a difference of 1.0%), the percentage of overall unit sales of the Company’s high concentration medical grade biologic product offerings decreased to 42.1% from 57.1% and increased to 57.9% from 42.8% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
Cost of Revenues. Our cost of revenues for the three months ended July 31, 2024 was $176,000, as compared to cost of revenues of $162,000 for the three months ended July 31, 2023. The increase in the cost of revenues for the three months ended July 31, 2024 of $14,000 or 8.6%, from the three months ended July 31, 2023, was due the increase of approximately $37,000 of cost of revenues associated with its recently launched PPX™ service platform during the three months ended July 31, 2024, compared with the three months ended July 31, 2023, partially offset from a decrease of approximately 18.2% (approximately $24,000) in the average cost of revenues for the high concentration biologic products for the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
Gross Profit. Our gross profit for the three months ended July 31, 2024 was $915,000 (83.9% of revenues), as compared to gross profit of $1,059,000 (86.7% of revenues) for the three months ended July 31, 2023. The decrease in gross profit during the three months ended July 31, 2024 of $144,000 was the result of decreases in the average sales prices from its high concentration biologic products sold, partially offset from the increases in the sales of its recently launched PPX™ service platform and the increase in costs of revenues associated with those product sales during the three months ended July 31, 2024, compared to the three months ended July 31, 2023.
In addition, the percentage of the Company’s revenues associated with its recently launched PPX™ service platform, which has a lower gross margin percentage as compared to the Company’s high concentration biologic product offerings, increased to 14.4% of revenues for the three months ended July 31, 2024, as compared with 5.3% of revenues for the three months ended July 31, 2023.
23
General and Administrative Expenses. General and administrative expenses for the three months ended July 31, 2024 were $2,083,000, as compared with $2,505,000 for the three months ended July 31, 2023, a decrease of $422,000 or 16.8%. The decrease in the general and administrative expenses for the three months ended July 31, 2024, from the three months ended July 31, 2023, was primarily the result of decreased research and development costs of approximately $233,000, decreased laboratory related costs of approximately $80,000, decreased commissions and travel costs of approximately $187,000 and decreased professional fees of approximately $102,000, which were partially offset by increased in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $55,000 and increased payroll and consulting fees of approximately $209,000 during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
The decrease in research and development costs during the three months ended July 31, 2024, from the three months ended July 31, 2023 was principally the result of the Company’s completion of its Phase 1 trials during July 2023, and there being no other significant clinical trial costs incurred since that time. The decrease in laboratory related costs was principally the result of the Company’s sale of the Basalt laboratory facility in August 2023 and as a result, there were no associated costs associated with operating that facility during the three months ended July 31, 2024, as compared with the three months ended July 31, 2023. The decrease in professional fees was principally the result of reduced audit fees, tax preparation fees and legal fees during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023. The decrease in commissions and travel costs during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023 was principally the result of reduced sales and a larger percentage of sales that were generated from house accounts with much lower commission costs than paid to distributors and/or independent sales representatives.
Other income. Other income for the three months ended July 31, 2024 was $224,000, as compared to other income of $0 for the three months ended July 31, 2023. The increase in other income was principally due to the write-off of advances payable to an affiliate of a former executive of $221,000 resulting from the inability of the affiliate to enforce a claim to collect the advances as the period of statute of limitations had run during the three months ended July 31, 2024.
Other expense for the three months ended July 31, 2024 was $68,000, as compared to other expense of $172,000 for the three months ended July 31, 2023. The decrease in other expense of $104,000 during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023, was principally the result of reduced amortization of loan discounts of approximately $149,000, partially offset from increases in the reserve against the carrying value of the Company’s investments in equity securities of $45,000 during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
Nine months ended July 31, 2024 as compared to nine months ended July 31, 2023
Revenues. Our revenues for the nine months ended July 31, 2024 were $3,376,000, as compared to revenues of $3,136,000 for the nine months ended July 31, 2023. The increase in revenues for the nine months ended July 31, 2024 of $240,000 or 7.7%, was primarily the result of an increase of approximately $208,000 of revenues associated with its recently launched PPX™ service platform during the nine months ended July 31, 2024, compared with the nine months ended July 31, 2023 and an increase of approximately 8.6% (approximately $242,000) in the overall unit sales of its high concentration biologic products during the nine months ended July 31, 2024, compared with the nine months ended July 31, 2023, partially offset by a decrease of approximately 7.0% (approximately $210,000) in the average sales prices for the high concentration biologic products sold during the nine months ended July 31, 2024, compared with the nine months ended July 31, 2023.
The increase in the overall unit sales of its high concentration biologic products and revenues associated with its recently launched PPX™ service platform during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023 was primarily due the Company’s expanded sales and marketing efforts which included engaging additional sales representatives, participation in industry related conferences and sponsoring of educational webinars.
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The decrease in the average sales prices for the high concentration biologic products sold during the nine months ended July 31, 2024, compared to the nine months ended July 31, 2023 was due to increases in unit sales of lower priced products comprising the Company’s higher priced medical grade biologic product offerings and an increase in the Company’s lower priced aesthetic biologics product offerings. The percentage of overall unit sales of the Company’s high concentration medical grade biologic product offerings decreased to 50.1% from 52.3% and increased to 49.9% from 47.7% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
Cost of Revenues. Our cost of revenues for the nine months ended July 31, 2024 were $619,000, as compared to cost of revenues of $375,000 for the nine months ended July 31, 2023. The increase in the cost of revenues for the nine months ended July 31, 2024 of $244,000 or 65.1%, from the nine months ended July 31, 2023, was due an increase of approximately $142,000 of cost of revenues associated with its recently launched PPX™ service platform during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, the increase of approximately 20.2% (approximately $67,000) in the average cost of revenues for the high concentration biologic products during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023 and the increase of approximately 8.6% (approximately $35,000) in the overall unit sales of its high concentration biologic products, during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
Gross Profit. Our gross profit for the nine months ended July 31, 2024 was $2,757,000 (81.7% of revenues), compared to gross profit of $2,761,000 (88.1% of revenues) for the nine months ended July 31, 2023. The minor change in gross profit during the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023 was the result of increases in the amount of high concentration biologic products sold and increases in the sales of its recently launched PPX™ service platform, offset from the increase in costs of revenues associated with those product sales during the nine months ended July 31, 2024, compared to the nine months ended July 31, 2023.
The percentage of the Company’s revenues associated with its recently launched PPX™ service platform, which has a lower gross margin percentage as compared to the Company’s high concentration biologic product offerings, increased to 9.6% of revenues for the nine months ended July 31, 2024, as compared to 3.8% of revenues for the nine months ended July 31, 2023.
General and Administrative Expenses. General and administrative expenses for the nine months ended July 31, 2024 were $6,651,000, as compared to $8,297,000 for the nine months ended July 31, 2023, a decrease of $1,646,000 or 19.8%. The decrease in the general and administrative expenses for the nine months ended July 31, 2024, from the nine months ended July 31, 2023, was primarily the result of decreased research and development costs of approximately $803,000, decreased laboratory related costs of approximately $588,000, decreased commissions and travel costs of approximately $281,000, decreased marketing related costs of approximately $98,000 and decreased professional fees of approximately $379,000, which were partially offset by increased in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $341,000 and increased payroll and consulting fees of approximately $492,000 during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
The decrease in research and development costs during the nine months ended July 31, 2024, from the nine months ended July 31, 2023 was principally the result of the Company’s completion of its Phase 1 trials during July 2023, and there being no other significant ongoing clinical trial costs incurred since that time. The decrease in laboratory related costs was principally the result of the Company’s sale of the Basalt laboratory facility in August 2023 and as a result, there were no associated costs associated with operating that facility during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023. The decrease in commissions and travel costs during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023 was principally the result of a larger percentage of sales that were generated from lower priced products and sales through house accounts with much lower commission costs than paid to distributors and/or independent sales representatives. The decrease in professional fees was principally the result of reduced audit fees, tax preparation fees and legal fees during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
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The increase in stock-based compensation costs during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023 was principally the result of increased amortization of costs from shares and options issued to executives and advisors and options issued to employees and outside directors.
The increase in payroll and consulting fees during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023 was principally the result of the Company’s hiring of a new executives during June 2024 and July 2024 are there no associated costs during the nine months ended July 31, 2023, as compared to the nine months ended July 31, 2024.
Other income. Other income for the nine months ended July 31, 2024 was $558,000, as compared to other income of $0 for the nine months ended July 31, 2023. The increase in other income was due to the write-off of advances payable to an affiliate of a former executive of $221,000 resulting from the inability of the affiliate to enforce a claim to collect the advances as the period of statute of limitations had run, the abatement of IRS penalties of $93,000, the settlement of insurance claims of $89,000, the increases in commissions received from sales of Formulator products of $87,000 and the increases in income from the settlement of liabilities of approximately $61,000 during the nine months ended July 31, 2024.
Other expense for the nine months ended July 31, 2024 was $115,000, as compared to other expense of $360,000 for the nine months ended July 31, 2023. The decrease in other expense of $245,000 during the nine months ended July 31, 2024, compared to the nine months ended July 31, 2023, was principally the result of reduced amortization of loan discounts of approximately $266,000, reduced IRS interest and penalties of approximately 16,000, and reduced costs associated with changes in the fair value of a commitment fee of $19,000 related to a January 2022 $600,000 debt financing, during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, partially offset from increased interest expenses on debt obligations of $9,000 and from increases in the reserve against the carrying value of the Company’s investments in equity securities of $45,000 during the three months ended July 31, 2024, as compared to the three months ended July 31, 2023.
Liquidity and Capital Resources
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented:
| For the Nine Months Ended July 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash, beginning of period | $ | 1,756,000 | $ | 3,753,000 | ||||
| Net cash used in operating activities | (1,084,000 | ) | (2,418,000 | ) | ||||
| Net cash used in investing activities | (45,000 | ) | (120,000 | ) | ||||
| Net cash provided by (used in) financing activities | 478,000 | (582,000 | ) | |||||
| Cash, end of period | $ | 746,000 | $ | 633,000 | ||||
During the nine months ended July 31, 2024, the Company used cash in operating activities of $1,084,000, as compared to $2,418,000 for the nine months ended July 31, 2023, a decrease in cash used of $1,334,000. The decrease in cash used was primarily the result of a reduction in general and administrative expenses and other income (expense) after adjusting for non-cash related activities of $1,713,000 and increases in gross profit of $85,000 for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, partially offset by reductions in cash provided from changes in operating assets and liabilities of $465,000 for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
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The decrease in cash provided from changes in operating assets and liabilities was due to decreases in accounts payable and accrued expenses and prepaid expenses, partially offset from increases in deferred revenues during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023. The reduction in general and administrative expenses and other income (expense) after adjusting for non-cash related activities was the result of reduced operating expenses associated with professional fees, payroll, consulting costs, research and laboratory related expenses during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
During the nine months ended July 31, 2024, the Company had cash used in investing activities of $45,000, compared to cash used in investing activities of $120,000 for the nine months ended July 31, 2023, a decrease in cash used from investing activities of $75,000. The decrease in cash used by investing activities was primarily due to the decrease in investments from non-marketable securities of $55,000 and the reduction of payments made in connection with the Company’s purchase of laboratory equipment of $20,000 during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023.
During the nine months ended July 31, 2024, the Company had cash provided by financing activities of $500,000, as compared to cash provided by financing activities of $604,000 for the nine months ended July 31, 2023. During the nine months ended July 31, 2024, the Company had cash used in financing activities of $22,000, as compared to cash used in financing activities of $1,186,000 for the nine months ended July 31, 2023.
The decrease in cash provided by financing activities of $104,000 was due to decreases in proceeds from the issuance of promissory notes of $504,000, partially offset from increases in proceeds from the sale of equity securities of $400,000 during the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023. The decrease in cash used in financing activities of $1,164,000 was due to the reduction in repayment of notes payable of $600,000, reductions in shares repurchased in connection with litigation of $500,000 and decreases in payments on finance leases of approximately $64,000.
Capital Resources
The Company has historically relied on the sale of debt or equity securities, the restructuring of debt obligations and/or the issuance and/or exchange of equity securities to meet the shortfall in cash to fund its operations.
Going Concern Consideration
The unaudited accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company incurred net losses of $3,451,000 for the nine months ended July 31, 2024 and used $1,084,000 of cash from operating activities during that period. In addition, the Company had a stockholders’ deficit of $1,422,000 at July 31, 2024. The Company had a working capital deficit of $1,909,000 at July 31, 2024.
United States Food and Drug Administration (“FDA”) regulations which were announced in November 2017 and which became effective in May 2021 require that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”). The Company has not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products it currently produces would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s.
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As a result of the above, the Company’s efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be achieved and ultimately may prove to be unsuccessful unless (a) the Company’s ability to process, sell and distribute the products currently being produced or developed in the future are not restricted; and/or (b) additional sources of working capital through operations or debt and/or equity financings are realized. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses and research and development costs related to development of new products and to perform required clinical studies in connection with the sale of its products. The Company does not have any assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on its ability to produce and sell products it manufactures that are subject to changing technology and regulations that it currently sells and distributes to its customers. The Company’s current market capitalization, common stock liquidity and available authorized shares may hinder its ability to raise equity proceeds. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive, if available at all.
In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (a) the Company is able to continue to produce products or obtain products under supply arrangements which are in compliance with current and future regulatory guidelines; (b) the Company will be able to establish a stabilized source of revenues, including efforts to expand sales internationally and the development of new product offerings and/or designations of products; (c) obligations to the Company’s creditors are not accelerated; (d) the Company’s operating expenses remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations; (e) the Company is able to continue its research and development activities, particularly in regards to remaining compliant with the FDA and ongoing safety and efficacy of its products; and/or (f) the Company obtains additional working capital to meet its contractual commitments and maintain the current level of Company operations through debt or equity sources.
There is no assurance that the products we currently produce will not be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s and/or the Company will be able to complete its revenue growth strategy. There is no assurance that the Company’s research and development activities will be successful or that the Company will be able to timely fund the required costs of those activities. Without sufficient cash reserves, the Company’s ability to pursue growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful in achieving a stabilized source of revenues.
If revenues do not increase and stabilize, if the Company’s ability to process, sell and/or distribute the products currently being produced or developed in the future are restricted, and/or if additional funds cannot otherwise be raised, the Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.
The independent auditor’s report dated January 29, 2024 included in our Annual Report on Form 10-K for the year ended October 31, 2023 included an explanatory paragraph as to the Company’s ability to continue as a going concern. As of July 31, 2024, based on the factors described above, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements.
Off-Balance Sheet Arrangements
Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of July 31, 2024 and through the date of this report, we had no such arrangements.
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Recently Issued Financial Accounting Standards
There were no recently issued financial accounting standards that would have an impact on the Company’s financial statements.
Critical Accounting Policies
Our unaudited consolidated financial statements reflect the selection and application of accounting policies which require us to make significant estimates and judgments. See Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023, “Summary of Significant Accounting Policies”.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported in accordance with the rules of the Securities and Exchange Commission (“SEC”). Disclosure controls are also designed with the objective of ensuring that such information is accumulated appropriately and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosures.
Our Interim Chief Executive Officer and Chief Financial Officer (our principal executive, financial and accounting officer) evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 31, 2024, the end of the period covered by this report. Based on that evaluation, our Interim Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. See the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023, for a description of the Company’s material weaknesses in internal control over financial reporting.
Changes in Internal Controls over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended July 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II – OTHER INFORMATION
| Item 1. | Legal Proceedings. |
In addition to matters which have been resolved as reported in previous periodic Exchange Act filings, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any such matter may harm our business.
| Item 1A. | Risk Factors. |
As a “smaller reporting company” we are not required to disclose information under this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information. |
None.
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| Item 6. | Exhibits. |
| Exhibit No: | Description: | |
| 31.1* | Rule 13(a)-14(a)/15(d)-14(a) Certification of Interim Chief Executive Officer and Chief Financial Officer (filed herewith) | |
| 32.1* | Section 1350 Certification of Interim Chief Executive Officer and Chief Financial Officer (filed herewith) | |
| 101.INS ** | XBRL Instance Document | |
| 101.SCH** | XBRL Taxonomy Extension Schema Document | |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB** | XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
| * | Filed herewith. |
| ** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ZEO SCIENTIFIX, INC. | ||
| By: | /s/ Ian T. Bothwell | |
| Ian T. Bothwell | ||
| Interim Chief Executive Officer and Chief Financial Officer | ||
| (Principal Executive, Financial and Accounting Officer) | ||
| September 16, 2024 | ||
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Exhibit 31.1
CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ian T. Bothwell, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 31, 2024 of Zeo ScientifiX, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | As the Registrant’s Interim Chief Executive Officer and Chief Financial Officer (principal executive, financial and accounting officer), I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reports to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | As the Registrant’s principal executive, financial and accounting officer, I have disclosed, based on the most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 16, 2024 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Zeo ScientifiX, Inc. on Form 10-Q for the quarter ended July 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Ian T. Bothwell, Interim Chief Executive Officer and Chief Financial Officer (principal executive, financial and accounting officer) of Zeo ScientifiX, Inc., a Nevada corporation (the “Company”), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zeo ScientifiX, Inc. |
| Date: September 16, 2024 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial and Accounting Officer) |