Zeo ScientifiX, Inc 10-K, filed Jan 29, 2025
Zeo ScientifiX, Inc. (ZEOX)
About this 10-K
Zeo ScientifiX, Inc filed this 10-K on January 29, 2025, covering the fiscal year ended October 31, 2024.
Headline figures
Fiscal year ended October 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.62M
- up 1.4% from $4.56M a year earlier
- Net loss
- $4.71M
- compared with a net loss of $6.99M a year earlier
- Diluted EPS
- -$0.74
- compared with -$0.99 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended:
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.) |
(Address of principal executive offices)
(
(Issuer’s telephone number)
Securities registered under 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 under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $
As of January 28, 2025, there were shares of common stock, $0.001 par value per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and certain information incorporated herein by reference contain forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of our products by the market, and management’s plans and objectives. In addition, certain statements included in this and our future filings with the Securities and Exchange Commission (the “SEC”), in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “expectation,” “anticipate,” “estimate,” “intend,” “seeks,” “plan,” “project,” “continue,” “predict,” “will,” “should,” and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are found at various places throughout this Annual Report and in the documents incorporated herein by reference. These statements are based on our current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.
Forward-looking statements include, but are not limited to, the following:
| ● | Our products’ advantages; |
| ● | Expectations regarding our future growth; |
| ● | Expectations regarding available cash resources to fund current operations and future growth; |
| ● | Our ability to comply with regulations governing the production and sale of our products; |
| ● | Our ability to receive regulatory approvals; |
| ● | Market opportunities for our services and products; |
| ● | Clinical trial outcomes; |
| ● | Our ability to compete effectively; |
| ● | Our ability to respond to market forces; and |
| ● | Our ability to protect our intellectual property. |
Actual results and outcomes may differ materially from those expressed or implied in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors, below. Except as expressly required by the federal securities laws, we undertake no obligation to update any such factors, or to publicly announce the results of, or changes to any of the forward-looking statements contained herein to reflect future events, developments, changed circumstances, or for any other reason.
Various trademarks, service marks, trade names and logos of the Company appear in this Annual Report and are the property of Zeo. Other trademarks, service marks or trade names appearing in this Annual Report are the property of their respective holders. Solely for convenience, trademarks, service marks, trade names and logos referred to in this Annual Report may appear without the ®, ™ and ℠ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks, trade names, service marks and logos.
Unless otherwise noted, as used in this Annual Report, the terms “Zeo,” the “Company,” “we,” “our” and “us” refer to Zeo ScientifiX, Inc., a Nevada corporation, and its subsidiaries consolidated as a combined entity.
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PART I
Item 1. 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 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 has recently developed and begun to distribute additional products that incorporate its proprietary ingredients for products to be used in topical aesthetic applications and is actively exploring further development of additional products to be used in other topical aesthetic applications.
To date, the Company has obtained certain Investigational New Drug (“IND”), 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.
In March 2003 and July 2024, the Company invested $100,000 and $45,000, respectively, in Exotropin, LLC (“Exotropin”) a privately held formulator of skin care products in exchange for a minority equity interest (approximately 8.9% as of October 31, 2024). During November 2024, the Company received a capital call notice from Exotropin (“November Capital Call”). The Company has yet committed to participating in the November Capital Call. If the Company does not elect to participate, its interest in Exotropin would be reduced to approximately 5.6% based on all other members fulling participating in the November Capital Call. The investment in Exotropin was made in an effort to accelerate the Company’s development of expertise with respect to the skincare industry and to expand the use of its proprietary products in future formulations for a variety of topical use applications. In addition, we have also entered into a sales representation agreement with Exotropin pursuant to which we will receive commissions on sales made by Exotropin to customers that were introduced by the Company to Exotropin. During November 2024, the Company announced that it was launching the first planned collaborative product with Exotropin; “ZEO HAIR GROW™ Powered By Exotropin™”
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Corporate Information
The Company was incorporated in the state of Nevada on August 9, 2011, under the name “Bespoke Tricycles Inc.,” changed its name to “Biotech Products Services and Research, Inc.” effective November 4, 2015, to “Organicell Regenerative Medicine, Inc.” effective June 20, 2018 and assumed its current name of “Zeo ScientifiX, Inc.” effective February 20, 2024.
Our executive offices are located at 3321 College Avenue, Suite 246, Davie, Florida and our telephone number is (888) 963-7881. Our corporate website is www.zeoscientifix.com. Information appearing on our website is not part of this Annual Report.
Industry Overview
The traditional health care industry in the United States is predominantly controlled by the rules of the Centers for Medicare & Medicaid Services (“CMS”) (www.cms.gov) and commercial health insurance companies with respect to payor coverage for medical diagnostics and therapies. This control of coverage currently limits patients’ access to alternative medical therapies, although emerging medical research demonstrates highly beneficial outcomes in the field of anti-aging and regenerative medicine. Traditional allopathic medicine of health care provided to patients in the United States relies on government and commercial health insurance for payment of the costs associated with their day-to-day health care. Because of this close relationship, physicians must follow government and commercial insurers guidelines in order to receive reimbursement for most services. In addition, physicians may be hesitant to adopt new treatments because of perceived legal ramifications and/or lack of knowledge concerning recent research supporting the use of cutting-edge anti-aging and regenerative medical treatments. In addition, many physicians provide alternative therapies that are not yet covered by payors in a “private-pay” or concierge medicine model.
Despite the above, anecdotal and medical literature has shown an increased demand by patients for access to alternative medical therapies and treatments. Patients are seeking these alternatives to traditional allopathic medicine, due to the adverse events associated with traditional pharmaceuticals, risks associated with surgeries, and that traditional medicine and insurers are not addressing wellness or preventive medicine sufficiently. To address a wide variety of common and debilitating conditions related to aging, the Company is developing safer alternatives to traditional therapies, leveraging the latest regenerative technologies. As described above, these alternative therapies face significant restrictions because of regulations imposed by the FDA, other regulatory bodies and insurers due to lack of a sufficient body of randomized controlled studies. Nonetheless, many published case series and some randomized trials demonstrate the safety and efficacy of regenerative therapies, and payor coverage may expand as the body of supportive research grows. Notwithstanding these current dynamics, patients and consumers are looking to safe alternatives compared to more traditional medicine, including the following:
| ● | Cellular/ Tissue based therapies |
| ○ | Adipose-derived stromal vascular fraction | |
| ○ |
Bone marrow-derived stem cell therapies |
| ○ | Peripheral blood derived therapies (i.e., platelet rich plasma); | |
| ○ | Placental-based therapies |
| Ø | Technology documented since 1910 for safety and efficacy, tissue processed from human amniotic membrane and fluid, donated by consenting mothers delivering a full-term healthy baby by scheduled Caesarean section, avoiding any ethical or moral concerns, proven safety record, case series documented success in a multitude of systemic and local pathologies |
| ○ | Growth factor, cytokine therapies |
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| ● | Anti-Aging |
| ○ | Supplements |
| Ø | Vitamin |
| Ø | Mineral |
| Ø | Medical foods |
| ○ | Weight control |
| ○ | Topical lotions and creams for the largest organ the skin |
| ● | Nontraditional medical alternatives |
| ○ | Acupuncture |
| ○ | Naturopathic |
| ○ | Chiropractic |
| ● | Self-directed |
| ○ | Meditation |
| ○ | Yoga |
| ○ | Tai Chi |
Currently, patients who desire alternative treatments rely on the following options:
| ● | Medical Tourism |
| ○ | In United States |
| ○ | Off-shore United States |
| Ø | Central and South America |
| Ø | Caribbean |
| Ø | Europe |
| ● | Consulting directly with physicians knowledgeable in providing regenerative medical services |
| ● |
Unlicensed life coaches |
Current Business Strategy
Our current business strategy is to achieve the following goals and milestones:
| ● | Execute on our current strategy to complete existing clinical studies and secure approval to commence larger Phase II studies for other specific indications that we identify that the use of our products will provide more favorable and desired health related benefits for patients seeking alternative treatment options than are currently available; |
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| ● | Perform clinical based studies associated with the use of our products (independently and/or in conjunction with Providers, Manufacturers, Government Agencies and Educational Institutions) and seek accelerated approval where available for each product application in accordance with the 21st Century Cures Act (“Cures Act”) and/or through the granting of an FDA-approved biologics application (“BLA”) to allow products to be lawfully marketed and/or sold in the United States; |
| ● | Assure the Company maintains compliance with existing and the anticipated changes to FDA regulations, including the guidance related to the use and sale of tissue-based products (“HCT/Ps”) which was published in November 2017 and took effect in May 2021 (postponed from November 2020 due to the COVID-19 pandemic), as well as readiness to respond to ongoing future changes to regulations impacting our products; |
| ● | Expand our laboratory facilities to meet expected production, processing and research requirements; |
| ● | Engage high profile and industry recognized medical advisors, researchers and/or scientists to help identify and develop new and emerging technologies concerning biologics and to assure our Products remain cutting edge and competitive to products offered by other companies; |
| ● | Identify alternative products and services to (a) offset any potential decline in revenues resulting from FDA limitations on the sales and distribution of our existing products currently being sold and distributed and/or future expected FDA restrictions on RAAM products; and (b) provide our Providers with alternative product and treatment options to remain competitive with the market and our Providers to meet the needs and demands of their patients; |
| ● | Identify sources of exclusive and superior suppliers of RAAM products and/or raw materials used by us in processing our RAAM products; |
| ● | Identify strategic relationships and acquisition targets that would enhance and/or accelerate the growth of the Company with third parties such as (a) existing raw material and/or medical device suppliers or owners of IP associated with existing and/or additional desired RAAM products; (b) Providers that specialize in RAAM products; and/or (c) companies that market and distribute RAAM products; |
| ● | Develop and expand operations to provide for growth of our revenues |
| ○ | Expand our sales market and network of Providers within and outside of the United States to increase revenues for RAAM related products through: |
| ● | Hiring additional in-house sales personnel; |
| ● | Selectively engaging independent distributors; |
| ● | Marketing private label products to distributors; |
| ● | Increasing market recognition for our brands from: marketing and participating in industry trade shows; |
| ○ | Increase the number of RAAM product offerings for various modalities using proprietary processing, formulas and administration techniques, and |
| ○ | Extend our referral network of Providers based on: |
| ● | Superior product offerings; |
| ● | Demonstrating a realistic and executable regulatory roadmap to assure Company and product compliance with current and anticipated FDA regulations; and |
| ● | Developing and providing educational support to Providers regarding our products and regulatory concerns; |
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| ● | Secure additional working capital |
| ○ | Fund shortfalls in working capital to fund ongoing expenses and required payments to vendors and creditors until revenues are stabilized; |
| ○ | Fund ongoing costs to complete current pipeline of clinical trials as well as future clinical trials; |
| ○ | Fund capital expenditures associated with maintaining compliance of our facilities and products; |
| ○ | Fund our strategy to develop and expand our revenues for the sales and distribution of RAAM related products described above; |
| ○ | Hire additional personnel to support our growth and planned expansion; and |
| ○ | Enhance our CRM, e-commerce and ERP capabilities to facilitate marketing, sales and distribution functionality and accounting for our operations. |
| ● | Enhance Company Corporate Governance |
| ○ | Continue to develop and expand the Company’s internal control policies; and |
| ○ | Continue to explore previously announced plans to uplist the Company to Nasdaq for the purpose of enhancing interest and investment opportunities for the Company once the Company is able to demonstrate compliance with initial listing requirements, including minimum share price and stockholder’s equity thresholds. |
Market Overview
The population of the United States and the developed world is getting older and living longer. According to a United States Consensus Bureau’s report, “An Aging World: 2015,” America’s 65-and-over population is projected to nearly double over the next three decades, ballooning from 48 million to 88 million by 2050 and that worldwide, the 65-and-over population will more than double to 1.6 billion by 2050. According to the report, in 2015, 14.9% of the U.S. population was 65 or over and the United States was the 48th oldest country out of 228 countries and areas in the world in 2015. Baby boomers began reaching age 65 in 2011 and by 2050 the older share of the U.S. population will increase to 22.1%.
The world average age of death has increased by 35 years since 1970, with declines in death rates in all age groups, including those aged 60 and older (Source: Institute for Health Metrics and Evaluation, 2013; Mathers et al., 2015). The leading causes of death are shifting, in part because of increasing longevity. Between 1990 and 2013, the number of deaths from non-communicable diseases (“NCDs”) has increased by 42%; and the largest increases in the proportion of global deaths took place among the population aged 80 and over. An estimated 42.8% of deaths worldwide occur in the population aged 70 and over, with 22.9% in the population aged 80 and over.
Also, according to the Centers for Disease Control (the “CDC”), “Medical Tourism” (a term commonly used to describe people traveling outside their home country for medical treatment) is a worldwide, multibillion-dollar phenomenon that is expected to grow substantially in the next 5–10 years. Studies have estimated that hundreds of thousands of medical tourists travel from the United States annually and that patients pursue medical care abroad for a variety of reasons, including a desire to receive a procedure or therapy not available in their country of residence. Common categories of procedures that US travelers pursue during medical tourism trips include orthopedic surgery, cosmetic surgery, cardiology (cardiac surgery), oncologic care, and dentistry. Common destinations include Thailand, Mexico, Singapore, India, Malaysia, Cuba, Brazil, Argentina, and Costa Rica.
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According to Precedence Research, the global regenerative treatment market value, in which cell therapy operates, is expected to grow to ~$174.72 billion by 2032 with a projected growth rate of 22.8% annually (2023-2032). North America is estimated to be the largest market for Regenerative Medicine with 49.1% global market share. Although the market is highly concentrated in North America (specifically the U.S.), international demand for approved gene, cell, and RNA therapies remains sizable, with over 107 therapies now approved for clinical use globally. ZEO operates at the crossroads of the biopharmaceutical, regenerative medicine, and cell therapy sectors. This growth can be attributed to demographic factors such as increased life expectancy and an aging population. In addition, growth is expected to be supported by macroeconomic factors including (anticipated) more favorable regulatory conditions and growing investor interest in the aforementioned three subsectors.
If we are able to fully implement our intended business plan, we believe that we will be well situated to address this increased consumer demand for alternative medical treatments.
Marketing and Sales
Currently, we market our RAAM products and services to a network of Providers through in-house, contracted sales personnel and/or from independent distributors. As of the date of this Annual Report, we had two in-house salespersons who marketed our RAAM products and services. In addition, we had arrangements with several independent distributors that were marketing and distributing our products. We intend in the future to expand our in-house sales force and independent distributors as our working capital improves, our product line expands and as volumes increase. We also intend to develop and offer ongoing training seminars to provide the best possible information on the latest advances on anti-aging, and regenerative medicine to Providers.
Raw Materials and Sources of Supply
We acquire the raw materials and supplies for our RAAM research and development and the manufacturing of our RAAM placental-related products from unaffiliated third-party laboratories pursuant to supply arrangements.
In the event any one or more of our current suppliers are unwilling or unable to sell us required raw materials and/or products, for any reason, we may not be able to provide replacement products to our customers, or if other supply arrangements can be made, the replacement products and terms may not be as favorable.
Customers
Our RAAM business is not dependent on any one or more customers, especially as our customer and distribution network expands. Our customer base is increasingly broad based and throughout the United States and worldwide.
Intellectual Property
The table below sets forth a summary of our intellectual property rights.
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Issued Patents: |
ZEO ScientifiX™ has one issued U.S. Patent for its Organicell™ line of products and the proprietary techniques used for processing perinatal fluid. U.S. Patent Application No. 17/990,522 (Continuation of 17/226,587) Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF Filed: November 18, 2022 Inventor: Maria Ines Mitrani Applicant: Organicell Regenerative Medicine, Inc. Issue Date: August 6, 2024 Patent No.: 12,053,494
Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) Recorded: March 17, 2023 Reel/Frame: 063014/0851 |
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Patent Applications: |
ZEO ScientifiX™ has one U.S. Patent Application on file for its Organicell™ line of products and the proprietary techniques used for processing perinatal fluid. U.S. Patent Application No. 17/226,587 Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF Filed: April 9, 2021 Inventor: Maria Ines Mitrani Applicant: Organicell Regenerative Medicine, Inc. | |
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Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) Recorded: April 9, 2021 Reel/Frame: 055878 / 0801 & 055878 / 0900 | ||
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ZEO ScientifiX™ has eight Ex-US Patent Applications on file for its Organicell™ line of products and the proprietary techniques used for processing perinatal fluid. These Applications are national stage entries of: International Patent Application No. PCT/IB2021/052982 Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF Filed: April 10, 2021 Inventor: Maria Ines Mitrani Applicant: Organicell Regenerative Medicine, Inc. | ||
| Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) | ||
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Country: Australia Application Number: 2021253889 Filing Date: April 10, 2021 | ||
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Country: Canada Application Number: 3179925 Filing Date: April 10, 2021 | ||
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Country: China Application Number: 202180041860.8 Filing Date: April 10, 2021 | ||
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Country: Costa Rica Application Number: 2022-570 Filing Date: April 10, 2021 | ||
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Country: Europe Application Number: 21784900.9 Filing Date: April 10, 2021 | ||
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Country: Japan Application Number: 2023-515253 Filing Date: April 10, 2021 | ||
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Country: Mexico Application Number: MX/a/2022/012692 Filing Date: April 10, 2021 |
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Country: Panama Application Number: 94165-01 Filing Date: April 10, 2021 | ||
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ZEO ScientifiX™ has a U.S. Patent Application on file for its Organicell™ PPX product and the proprietary techniques used in the administration of blood-derived exosomes to treat pain. U.S. Patent Application No. 18/063,227 Titled: COMPOSITIONS AND METHODS FOR TREATING PAIN WITH EXTRACELLULAR VESICLES Filed: December 8, 2022 Inventors: Maria Ines Mitrani, Michael Bellio, and Albert Mitrani Applicant: Organicell Regenerative Medicine, Inc. | ||
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Assignment: MARIA INES MITRANI (Assignor), MICHAEL BELLIO (Assignor), ALBERT MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) Recorded: April 19, 2023 Reel/Frame: 063370/0572 | ||
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ZEO ScientifiX™ has an International Patent Application on file for its Organicell™ PPX product and the proprietary techniques used in the administration of blood-derived exosomes to treat pain International Patent Application No. PCT/US2022/081146 Titled: COMPOSITIONS AND METHODS FOR TREATING PAIN WITH EXTRACELLULAR VESICLES Filed: December 8, 2022 Inventors: Maria Ines Mitrani, Michael Bellio, and Albert Mitrani Applicant: Organicell Regenerative Medicine, Inc. | ||
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Assignment: MARIA INES MITRANI (Assignor), MICHAEL BELLIO (Assignor), ALBERT MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) | ||
| Trademarks: |
Word Mark: ZOFIN Goods/Services: Biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001); Biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) Registration Number: 7,469,132 Filing Date: July 13, 2020 Owner: Organicell Regenerative Medicine, Inc. | |
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Word Mark: ORGANICELL Goods/Services: Biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001); Biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) Registration Number: 6,647,223 Filing Date: May 6, 2020 Owner: Organicell Regenerative Medicine, Inc. | ||
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Word Mark: PATIENT PURE X - PPX Goods/Services: plasma extracts for medical use, namely, plasma extract containing purified and concentrated exosomes derived from whole human blood (IC 005) Registration Number: 6,654,296 Filing Date: January 24, 2020 Owner: Organicell Regenerative Medicine, Inc. |
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Word Mark: PATIENT PURE X - PPX Goods/Services: plasma processing services for others, namely, extracting purified and concentrated exosomes based on whole blood harvested from patients for use by hospitals, clinics, or other organizations or persons involved in delivering healthcare services to patients (IC 040) Registration Number: 6,654,297 Filing Date: January 24, 2020 Owner: Organicell Regenerative Medicine, Inc. | ||
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Word Mark: XOTIN Goods/Services: Biologically derived nanoparticles, namely, exosomes and extracellular vesicles, developed from perinatal tissue for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) Registration Number: 6,815,780 Filing Date: September 9, 2020 Owner: Organicell Regenerative Medicine, Inc. | ||
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Word Mark: XOTIN Goods/Services: Biologically derived nanoparticles, namely, exosomes and extracellular vesicles, developed from perinatal tissue material for aesthetic purposes, other than for medical or veterinary purposes (IC 001) Registration Number: 6,847,416 Filing Date: September 9, 2020 Owner: Organicell Regenerative Medicine, Inc. | ||
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Word Mark: ZEO SCIENTIFIX Goods/Services: Manufacturing services for others in the field of regenerative medicine (IC 040); Scientific research services for others in the field of regenerative medicine; Scientific laboratory services; Design of biotechnological products being regenerative medicine products (IC 042) Serial Number: 98307890 Filing Date: December 11, 2023 Owner: Organicell Regenerative Medicine, Inc. Status: Non-Final Action Issued November 18, 2024 | ||
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Composite Mark: ZEO SCIENTIFIX (Stylized/Design) Goods/Services: Manufacturing services for others in the field of regenerative medicine (IC 040); Scientific research services for others in the field of regenerative medicine; Scientific laboratory services; Design of biotechnological products being regenerative medicine products (IC 042) Serial Number: 98307906 Filing Date: December 11, 2023 Owner: Organicell Regenerative Medicine, Inc. Status: Non-Final Action Issued November 18, 2024 | ||
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Word Mark: PPX Goods/Services: Biotechnological products, namely, blood-derived biologics being plasma extract containing concentrated nanoparticles derived from whole human blood (IC 005) Serial Number: 98341677 Filing Date: January 4, 2024 Owner: Organicell Regenerative Medicine, Inc. Status: Published for Opposition December 10, 2024 | ||
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Word Mark: ZEO GROWX Goods/Services: Hair growth serum Serial Number: 98883075 Filing Date: December 3, 2024 Owner: Zeo ScientifiX, Inc. |
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Word Mark: ZEO HAIR GROW Goods/Services: Hair growth serum Serial Number: 98884330 Filing Date: December 4, 2024 Owner: Zeo ScientifiX, Inc. | ||
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Word Mark: ZEO GROW BOOST Goods/Services: Hair growth serum Serial Number: 98884343 Filing Date: December 4, 2024 Owner: Zeo ScientifiX, Inc. |
Pursuant to our employment agreements with our executives, all work product that is created, prepared, produced, authored, edited, amended, conceived or reduced to practice by each executive individually or jointly with others during the period of their employment by the Company and relating in any way to the business or contemplated business, research or development of the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations thereof, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “Intellectual Property Rights”), the sole and exclusive property of the Company. All of the Work Product consisting of copyrightable subject matter shall be deemed “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company or if not applicable, deemed to be irrevocably assigned to the Company, for no additional consideration. The Intellectual Property Rights in any “Pre-existing Materials” included contained in the Work Product shall be retained by the executive but the executive shall be deemed to have granted to the Company an irrevocable, worldwide, unlimited, royalty-free license to use, publish, reproduce, display, distribute copies of, and prepare derivative works based upon, such Pre-Existing Materials and derivative works thereof. The Company may not assign, transfer and sublicense such rights to others without executive’s consent, other than to a wholly owned subsidiary of the Company. The executive shall provide written notice to the Company’s Chief Executive Officer therein notifying the Company new intellectual property including the Pre-Existing Materials.
Competition
The regenerative medicine field is highly competitive and subject to rapid technological change and regulation. Companies compete on the basis of regulatory compliance, product efficacy, pricing, and ease of handling/logistics. A critically important factor for growth in the US market is third-party reimbursement, which is difficult to obtain, and the process can be time-consuming and expensive. We expect that it will take some time before RAAM products will be widely accepted under health insurance coverage. In addition, growth of this industry is expected to expand as additional research and development into the benefits of regenerative products and specific products becomes more widely accepted as a result of FDA mandated or optional clinical trials are performed by industry stakeholders.
As stated previously, companies competing in the industry must now meet the new and more stringent regulatory deadlines imposed by the FDA in connection with regulation of RAAM products that went into effect in May 2021. As a result of these concerns, the Company and our competitors are expected to need to pursue research and development efforts, submit IND applications for FDA approval to commence clinical trials for RAAM products and ultimately obtaining a biologic license for their products to be sold, to assure that their respective operations and products remain compliant with FDA regulations and there is no adverse impact to future operations.
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 both domestically and internationally, expanding sales internationally and developing new product offerings and/or designations of products that would not fall under these regulations, including the Company’s recent launching of PPX™ and the recent development and distribution of additional products that incorporate its proprietary ingredients for products to be used in topical aesthetic applications.
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We intend to perform clinical trials for our RAAM Products for the purpose of obtaining biologics license status from the FDA to provide us with advantages over our competitors, including acceleration for acceptance of our products in traditional insurance plans, compliance with FDA regulations and/or to provide our customers with superior education and support of the benefits of our products. Initially we are positioning ourselves as a cash-based health care alternative for consumers that can provide higher levels of improvement, that is not available from traditional allopathic medicine at this time.
The Company competes in multiple areas of clinical treatment where regenerative biomaterials may be employed to modulate inflammation, enhance healing and reduce scar tissue formation: advanced wound care treatment, including spine, orthopedic, sports medicine, and surgical as well as regenerative and aesthetics applications.
The primary competitive products in this space and which are now subject to being classified as an HCT/P product that must meet current regulatory guidelines and require IND approvals, clinical trials, and ultimately biologic license are allogenic products derived from perinatal sources or blood/bone sources including placental powders, placental frozen tissues or liquids, cord blood derived products, and Wharton’s jelly derived products. These products vary significantly in terms of pricing, cellular counts, and biological components, including exosomes, extracellular vesicles, micro vesicles, nanoparticles, and bioactive proteins. As a result of the increased regulatory oversight of HCT/P’s, competitors have begun shifting their product portfolios to autologous solutions including serums derived from blood, bone marrow, and adipose tissue. These products are the fastest growing sector of regenerative medicine due to their compliant regulatory position with the FDA. In addition, many companies have emerged with products that are being targeted for aesthetic and/or topical use, which in some instances have less regulatory restrictions for the use of the products.
Allogenic competitors are primarily producer-distributor companies which historically included Kimera Labs, Frontier Biologics, Benev Company Inc., Exocel Bio, Re-gen Active Lab, Neobiosis, MiMedix Group, Inc., Invitrx Therapeutics, Liveyon Labs, DermaSciences, Signature Biologics, Direct Biologics and Vitti Labs LLC, as well as a number of distributors who sell white-labeled products from those producer-distributor entities. Additionally, there are a variety of accredited blood, bone, and soft tissue banks that we historically competed against. Currently one of the largest companies in the autologous segment is Regenexx.
In connection with the new FDA regulations that went into effect in May 2021 described above, the Company believes that several perinatal product manufacturers in the United States have closed their operations and that hundreds of other manufacturers and clinics have already received warning letters of violations of the new FDA regulations. To date, the Company has not received any warning letters or correspondence from the FDA indicating that our products were not in compliance with the current FDA regulations.
The aesthetic market consists of numerous products aimed at skin rejuvenation, anti-aging, and overall dermatologic health. These include advanced serums, creams, and other over-the-counter formulations that incorporate cutting-edge ingredients like peptides, growth factors, and nanoparticles. While these products are generally marketed as non-invasive and appeal directly to consumers and are often sold as “topical” and/or “cosmetics”, they compete indirectly with medical aesthetic procedures by offering lower-cost alternatives for achieving similar cosmetic improvements. This segment consists of many competitors, many of which have significantly greater resources than the Company to develop, research and market their products.
As stated previously, the demand for RAAM products is very high and expected to grow with the growing baby boomer generation getting older, the increase in patients desiring to seek health care options outside of traditional therapies, the growing trend in the desire of individuals to remain active longer in life and the ongoing rise in health care costs which RAAM products may provide a more efficient and economical alternative for certain conditions.
Government Regulation
General
The Company’s operations are subject to FDA regulations in connection with the sales and distribution of its RAAM products. In addition, the Company relies on supply agreements with birth tissue recovery companies, supply manufacturers and/or third party distributors for the supply of RAAM products and/or the Company’s intended objectives to conduct research and development and clinical trials of RAAM products, all of whom are required to comply with FDA regulations. We anticipate these regulations will be heavily enforced and subject to more restrictive regulations by the FDA in the future. A summary of the current FDA regulations is set forth below.
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FDA Premarket Clearance and Approval Requirements
Tissue Products
Currently the products that are sold by the Company are derived from human tissue that is purchased by the Company and processed directly in the Company’s laboratory facilities. As discussed below, some tissue-based products are regulated solely under Section 361 of the Public Health Service Act as human cells, tissues and cellular and tissue-based products, or HCT/Ps, which do not require premarket clearance or approval by the FDA. Other tissue products are regulated as biologics and, in order to be lawfully marketed in the United States, require an FDA-approved BLA.
The Company’s leading product, Zofin™ (also known as Organicell™ Flow), is an acellular, biologic therapeutic derived from perinatal sources and is manufactured to retain naturally occurring microRNAs, without the addition or combination of any other substance or diluent.
The Company’s recently launched autologous product called Patient Pure X™ (PPX™). PPX™ is a non-manipulated biologic containing the nanoparticle fraction from a patient’s own peripheral blood.
The Company also supplies products to third party manufacturers that are used as ingredients in formulations or use in conjunction with topical products or topical procedures.
The FDA is continually changing and formulating new guidelines for this industry.
Products Regulated as HCT/Ps
The FDA has specific regulations governing human cells, tissues and cellular and tissue-based products, or HCT/Ps. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) are not subject to approval requirements and they are subject to post-market regulatory requirements.
To be a 361 HCT/P, a product generally should meet following criteria:
| ● | Be minimally manipulated, no structural change, or be mixed with anything; |
| ● | Be intended for homologous use, essentially used for the same purpose that it was used in the donor; |
| ● | Its manufacture must not involve combination with another article, except for water, crystalloids or a sterilizing, preserving or storage agent; and |
| ● | It must not be dependent upon the metabolic activity of living cells for its primary function. |
Products Regulated as Biologics- The BLA Pathway
The typical steps for obtaining FDA approval of a BLA to market a biologic product in the U.S. include:
| ● | Completion of preclinical laboratory tests, animal studies and formulations studies under the FDA’s good laboratory practices regulations; |
| ● | Submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which must become effective before human clinical trials may begin and which must include independent Institutional Review Board (“IRB”) approval at each clinical site before the trials may be initiated; |
| ● | Performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy of the product for each indication; |
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| ● | Submission to the FDA of a Biologics License Application for marketing the product, which includes, among other things, reports of the outcomes and full data sets of the clinical trials, and proposed labeling and packaging for the product; |
| ● | Satisfactory completion of an FDA Advisory Committee review; and |
| ● | Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with Current Good Manufacturing Practices (“cGMP”) regulations. |
Generally, clinical trials are conducted in three phases:
| ● | Phase I trials typically involve a small number of healthy volunteers and are designed to provide information about the product safety. |
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Phase II trials are conducted in a larger but limited group of patients afflicted with a specific diagnosis in order to determine preliminary efficacy, and to identify possible adverse effects. | |||
| ○ | Dosage studies are designated as Phase IIA and efficacy studies are designated as Phase IIB. | |||
| ● | Phase III clinical trials are generally large-scale, multi-center, comparative trials conducted with patients who have a specific condition in order to provide statistically valid proof of efficacy, as well as safety and potency. |
| ● | In some cases, the FDA will require Phase IV, or post-marketing trials, to collect additional data after a product is on the market. |
The process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years to complete.
FDA Post-Market Regulation
Tissue processors are required to register as an establishment with the FDA. We intend on becoming a registered establishment, accredited by the American Association of Tissue Banks (“AATB”) for the storage and distribution of tissue products that we purchase directly or indirectly from third party manufacturers. Once we are registered, we will be required to comply with regulations, including those regulations regarding storage, controls, access, labeling, record keeping, security, processes, compliance with established Good Tissue Practices, and documentation associated with the sale of our products by our customers to their patients. Our facilities will be subject to periodic inspections to assess our records and determination of our compliance with the regulations.
Products covered by a BLA, 510(k) clearance, or a PMA are subject to numerous additional regulatory requirements, which include, among others, compliance with cGMP, which imposes certain procedural, substantive and record keeping requirements, labeling regulations, the FDA’s general prohibition against promoting products for unapproved or “off-label” uses, and additional adverse event reporting.
Other Regulation Specific to Tissue Products
The AATB, has issued operating standards for tissue banking, whether manufacturing and/or storing products as a distributor of manufactured products by third parties. Compliance with these standards is a requirement in order to become a licensed tissue bank.
21st Century Cures Act
In December 2016, President Obama signed the 21st Century Cures Act (the “Cures Act”) into law. The Cures Act includes many provisions that aim to speed up the process of bringing new drugs and devices to market. One of the Cures Act’s most significant amendments to the Federal Food, Drug and Cosmetic Act allows the FDA to grant accelerated approval to regenerative medicine products, while also providing the agency with wide discretion on creating new approaches to regenerative medicine. This legislative development is the result of increased pressure from patients and other stakeholders to move regenerative medicine advancements more quickly from the lab into the clinic.
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Specifically, the new accelerated approval pathway authorized by the Cures Act allows certain regenerative medicine products to be designated as “regenerative advanced therapy” and become eligible for priority review by FDA. To qualify for this pathway, the product must be aimed at a serious disease and have the potential to deal with currently unmet medical needs. It must also meet the Cures Act’s new definition of a regenerative advanced therapy, which is defined as “cell therapy, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the Public Health Service Act.” This broad definition would seem to encompass the majority of regenerative medicine products known to be currently in the development stages.
As with the existing accelerated approval pathway for drugs and biologics, this new regulatory pathway would allow a regenerative medicine product to be approved for marketing based on surrogate or intermediate clinical trial endpoints rather than longer term clinical outcomes. The use of such endpoints can decrease the number, duration, and complexity of clinical trials that are needed to prove a longer-term outcome. Subsequently, a sponsor would have to conduct confirmatory clinical trials to ensure that the surrogate or intermediate endpoint was in fact predictive of patients’ clinical response to the product, otherwise the accelerated approval could be withdrawn.
The Cures Act also requires the FDA to work with the National Institute of Standards and Technology (“NIST”) and other stakeholders to develop standards and consensus definitions for regenerative medicine products. Such standards are expected to play a large role in advancing this nascent industry by allowing companies to rely on FDA-recognized standards, rather than creating and validating their own as is the case today.
The Cures Act attempts to create a research network and a public-private partnership to assist developers in generating definitive evidence about whether their proposed therapies indeed provide clinical benefits that are hoped for. The Cures Act also requires the FDA to track and report the number and type of applications filed for regenerative medicine products, including the number of products approved through the new accelerated approval pathway. The law also includes provisions that require the FDA to publish guidance on how it will design and implement an approval process for regenerative medicine devices.
Guidance Documents
In November 2017, the FDA released two final guidance documents in an effort to implement a “comprehensive policy framework” for existing laws and regulations governing regenerative medicine products, including human cells, tissues, and cellular and tissue-based products (“HCT/Ps”). These guidance documents build upon the previous regulatory framework for these products, which was completed in 2005. A guidance document cannot alter a regulation, but can clarify how the FDA intends to enforce the regulation.
The two guidance documents below clarify the FDA’s interpretation of the risk-based criteria manufacturers use to determine whether a product is subject to the FDA’s premarket review.
The first guidance provides greater clarity around when cell and tissue-based products would be exempted from the established regulations if they are removed from and implanted into the same individual within the same surgical procedure and remain in their original form. The second final guidance helps stakeholders better understand how existing regulatory criteria apply to their products by clarifying how the agency interprets the existing regulatory definitions “minimal manipulation” and “homologous use.” As this field advances, the FDA has noted that there are a growing number of regenerative medicine products subject to FDA premarket authorization. These guidance documents will help explain how the FDA will provide a risk-based framework for its oversight. The policy framework defines how the FDA intends to take action against unsafe products while facilitating continued innovation of promising technologies.
To accomplish this goal, the guidance document has clarified the FDA’s view of “minimal manipulation” and “homologous use.” These are two concepts that are defined in current regulation to establish the legal threshold for when a product is subject to the FDA’s premarket approval requirements. By further clarifying these terms in the final guidance, the FDA is applying a modern framework for its oversight.
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FDA regulations at 21 C.F.R. Part 1271, previous draft guidance documents, and untitled letters establish the agency’s approach to regulating HCT/Ps. Some HCT/Ps are exempt from premarket approval and are subject to regulation solely under section 361 of the Public Health Service Act (“PHS Act”) (so-called “361 HCT/Ps”) whereas others require premarket approval (i.e., as a drug, device, or biologic) (so-called “351 HCT/Ps”). Both 361 HCT/Ps and 351 HCT/Ps are subject to FDA requirements (at Part 1271) for registration and listing, donor-eligibility, current good tissue practices, and other requirements intended to prevent transmission of communicable diseases. Those that are the subject of the “same surgical procedure” exception – are exempt from both premarket approval requirements and the requirements of Part 1271. This regime is outlined in a flow chart, which is one of the few new features of the final guidance documents and is presented below:
Enforcement Discretion
In order to allow manufacturers of products time to comply with the requirements, the FDA announced that it intended (originally through November 2020 and extended to May 2021 because of the COVID-19 pandemic) to exercise enforcement discretion for certain products that are subject to the FDA’s premarket review under the existing regulations, but are not currently meeting these requirements. The FDA does not intend to exercise such enforcement discretion for those products that pose a potential significant safety concern. Going forward, the FDA will apply a risk-based approach to enforcement, taking into account how products are being manufactured, marketed and administered as well as the diseases and conditions for which they are being used. This risk-based approach allows product manufacturers time to engage with the FDA, as to determine if they need to submit a marketing authorization application and, if so, submit their application to the FDA for approval.
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The FDA’s enforcement discretion policy for IND and premarket approval requirements does not apply to products that have been associated with reported safety concerns or have the potential to cause significant safety concerns to patients. The FDA has stepped up its oversight of cellular and related products in recent years and has issued compliance actions, including numerous warning and untitled letters, and pursued litigation for serious violations of the law, including some involving patient harm.
The FDA has indicated it intends to focus enforcement actions on “products with higher risk,” taking into account factors such as non-autologous (allogeneic) use, the route of administration, the site of administration, and whether the product is intended for homologous or non-homologous use. For example, HCT/Ps administered via intravenous injection or infusion, aerosol inhalation, intraocular injection, or injection or infusion into the central nervous system, will be prioritized over HCT/Ps administered by intradermal, subcutaneous, or intra-articular injection. Similarly, HCT/Ps intended for non-homologous use, particularly those intended to treat serious or life-threatening conditions, “are more likely to raise significant safety concerns than HCT/Ps intended for homologous use.”
The Company believes that the new regulatory restrictions being implemented by the FDA are intended to assure that all parties involved in the chain of gathering, processing, distributing and/or administrating RAAM related products have met the required standards to assure that the manufacturing, marketing the administration of the RAAM regulated products are not misleading and are performed in a safe and ethical manner and in accordance with the “objective intent” of the manufacturer.
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.
Fraud, Abuse and False Claims
We are directly and indirectly subject to various federal and state laws governing relationships with healthcare providers and pertaining to healthcare fraud and abuse, including anti-kickback laws. In particular, the federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and Medicaid programs. (See 42 U.S.C. § 1320a-7b). Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. In implementing the statute, the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) has issued a series of regulations, known as the “safe harbors.” These safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute.
AdvaMed has established guidelines and protocols for medical device manufacturers in their relationships with healthcare professionals on matters including research and development, product training and education, grants and charitable contributions, support of third-party educational conferences, and consulting arrangements. Adoption of the AdvaMed Code by a medical device manufacturer is voluntary, and while the OIG and other federal and state healthcare regulatory agencies encourage its adoption and may look to the AdvaMed Code, they do not view adoption of the AdvaMed Code as proof of compliance with applicable laws. We have incorporated the principles of the AdvaMed Code in our standard operating procedures, sales force training programs, and relationships with health care professionals.
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Manufacturing (Processing)
We intend on becoming a registered establishment, accredited by the American Association of Tissue Banks (“AATB”) for the storage and distribution of tissue products that we purchase directly or indirectly from third party manufacturers.
Our laboratory and distribution facilities are subject to periodic unannounced inspections by regulatory authorities based on the activities in which we may be engaged, and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies based on our operations. We intend to seek American Association Blood Banks (“AABB”) or AATB accreditation in connection with the storage of products we intend to distribute.
FDA Compliance Steps
The Company’s leading product, Zofin™ (also known as Organicell™ Flow), is an acellular, biologic therapeutic derived from perinatal sources and is manufactured to retain naturally occurring microRNAs, without the addition or combination of any other substance or diluent. The Company’s recently launched a service platform for its first autologous product called Patient Pure X™ (PPX™). PPX™ is a non-manipulated biologic containing the nanoparticle fraction from a patient’s own peripheral blood.
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”).
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. In connection with the studies described above, there were no reported therapy-related safety events or significant adverse events.
Based on the results from the clinical trials or treatments in connection with the use of Zofin™ and PPX™ and related treatment protocols performed to date, the Company has determined that there was sufficient Phase I safety data obtained from the existing enrolled patients using Zofin™ and/or PPX™ and accordingly there was no longer any benefit from continued enrollment to obtain additional patient Phase 1 safety related data among the above studies. As a result, the studies and the related sites where the studies were performed have been closed.
In addition, the Company is reviewing the benefit from continued efforts to commence and/or complete additional Phase I safety related trials as well as which indications should be pursued for Phase II efficacy related research and whether any of the existing approved and open IND’s should be modified, terminated and/or replaced.
The ability for the Company to initiate any future Phase II studies are subject to many uncertainties, including FDA approval of the respective IND applications and the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given.
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.
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Environmental Laws
Our laboratory facilities process or directly handled biomedical materials whereby we receive and/or generate wastes that are required to be disposed. We contract with third parties for the transport, treatment, and disposal of the waste that we obtain and at all times plan on being compliant with applicable laws and regulations promulgated by the Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency and similar state agencies.
Employees
As of October 31, 2024, we had 20 full-time employees and no part-time employees. We also engaged 2 other consultants that assisted with various regulatory, marketing, administrative activities and distribution services. From time to time, the Company engages independent contractors for sales and administration activities. There are no collective bargaining agreements.
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Item 1A. Risk Factors.
This Annual Report contains certain statements relating to future events or the future financial performance of our Company. Prospective investors are cautioned that such statements are only predictions and involve risks and uncertainties, and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Annual Report, including the matters set forth below, which could cause actual results to differ materially from those indicated by such forward-looking statements.
If any of the following or other risks materialize, the Company’s business, financial condition, and results of operations could be materially adversely affected which, in turn, could adversely impact the value of our securities. In such a case, investors in our securities could lose all or part of their investment.
Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information contained in this Annual Report and the financial resources available to them. The risks described below do not purport to be all the risks to which the Company could be exposed. This section is a summary of certain risks and is not set out in any particular order of priority. They are the risks that we presently believe are material to the operations of the Company. Additional risks of which we are not presently aware or which we presently deem immaterial may also impair the Company’s business, financial condition or results of operations.
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Risks Related to Our Business
We have incurred significant losses, have limited cash on hand and there is substantial doubt as to our ability to continue as a going concern.
The Company incurred net losses of $4,705,000 and $6,987,000 for the years ended October 31, 2024 and October 31, 2023, respectively. In addition, the Company had accumulated deficits of $62,213,000, and $57,508,000 at October 31, 2024 and October 31, 2023, respectively, accumulated stockholders deficit of $1,653,000 and $1,241,000 at October 31, 2024 and October 31, 2023, respectively, and had a working capital deficit of $2,123,000, and $1,808,000 at October 31, 2024 and October 31, 2023, respectively. In their report for the fiscal year ended October 31, 2024, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. We have incurred operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
We have a relatively limited operating history in our current business upon which investors can evaluate our future prospects.
Our current business operations, including our laboratory and processing facility have only been operating since May 2019. Therefore, we have a relatively short operating history upon which an evaluation of our current business plan or performance and prospects can be made. The business and prospects of the Company must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a relatively new established business. The risks include, but are not limited to, the possibility that we will not be able to develop or identify functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that the Company can successfully address these challenges. If it is unsuccessful, the Company and its business, financial condition and operating results could be materially and adversely affected.
Given our relatively short operating history, management has little basis on which to forecast future demand for our products from our existing customer base, much less new customers. The current and future expense levels of the Company are based largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately forecast future revenues because the business of the Company is new, and its market has not been developed. If the forecasts for the Company prove incorrect, the business, operating results and financial condition of the Company will be materially and adversely affected. Moreover, the Company may be unable to adjust its spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.
We depend upon our officers and key personnel, the loss of which could seriously harm our business.
Our operating performance is substantially dependent on the continued services of our executive officers and key employees. The unexpected loss of the services of any of our executive officers and key employees could have a material adverse effect on our business, operations, financial condition and operating results, as well as the value of our common stock.
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We may not be able to compete successfully with current and future competitors.
We have many potential competitors in the regenerative medicine industry. We will compete, in our current and proposed businesses, with other established companies, most of which have greater marketing and financial resources and experience than we do. We cannot guarantee that we will be able to penetrate our intended markets and be able to compete profitably, if at all. In addition to established competitors, there are moderate obstacles for competitors to enter this market, but they are not insurmountable if they have the financial resources and intellectual team. Effective competition could result in price reductions, reduced margins or have other negative implications, any of which could adversely affect our business and chances for success. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including, but not limited to, larger staffs, greater name recognition, larger and established customer bases and substantially greater financial, marketing, technical and other resources. To be competitive, we must respond promptly and effectively to industry dynamics, evolving standards and competitors’ innovations by continuing to enhance our services and sales and marketing channels. Any pricing pressures, reduced margins or loss of market share resulting from increased competition, or our failure to compete effectively, could fatally damage our business and chances for success.
We currently rely on non-exclusive supply arrangements with birth tissue recovery companies for obtaining the raw material used in manufacturing the products we sell.
If our current supply arrangements with birth tissue recovery companies or third-party manufacturers or distributors of products from third party manufacturers are disrupted for any reason, we may not be able to provide products to our customers, or if other supply arrangements can be made, the products and terms may not be as favorable, and that will adversely impact our operations and profitability.
If we do not continually update our products and/or services, they may become obsolete and we may not be able to compete with other companies.
We cannot assure you that we will be able to keep pace with technological advances, or that our current suppliers will be able to keep pace with technological advances and as such, our products and/or services may become obsolete. We cannot assure you that competitors will not develop related or similar services and offer them before we do, or do so more successfully, or that they will not develop services and products more effective than any that we and/or our suppliers have or are intending to develop. In addition, although we may be able to identify new suppliers that can provide more effective services and products to be more competitive, we may not be able to arrange satisfactory arrangements in a timely manner, if at all. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected.
We enter into supply arrangements for the raw materials and/or products we sell, which make us vulnerable to the ability of such suppliers to remain current and innovative in their product offerings, to timely process and supply the products we desire to purchase, and to remain compliant with the current and changing regulatory environment. If our raw material and/or product suppliers are not successful in managing these responsibilities, it will have an adverse effect on our operations and profitability.
Our current birth tissue supply arrangements for manufacturing the products we sell and our third-party supply arrangements for the supply of products we sell provide for the supply and pricing for those products. There can be no assurance that our suppliers will continue to produce the products that we currently purchase under our existing arrangements, that our suppliers will be able to comply with the required FDA regulations for the manufacturing of such products, that our suppliers will continue to develop technology associated with their manufactured products to remain competitive with other companies, or that our suppliers will remain a going concern in the future. If any of our suppliers were to cause a disruption in our ability to obtain products as desired and expected and/or we are not provided advance notice of such potential disruption, we may not be able to timely identify and replace our current suppliers, if at all, and as a result, we may not be able to provide products to our customers, which will have an adverse impact to our operations.
We depend on a limited number of third-party suppliers for the raw materials and supplies for our RAAM research and development and the manufacturing of our RAAM placental-related products, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
We may not procure volumes sufficient to receive favorable pricing, which could impact our gross margins if we are unable to pass along price differences to our customers. Recent global economic cost inflation trends could unfavorably impact pricing from our suppliers.
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In the event of default under our outstanding indebtedness, or we are unable to pay other obligations and accounts payable when due, our creditors may file a creditors petition or force us into involuntary bankruptcy which may have an adverse impact on our business.
The Company had working capital deficits of $2,123,000 and $1,808,000 at October 31, 2024 and October 31, 2023, respectively. 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 additional sources of working capital through operations or debt and/or equity financings are realized. Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses. The Company does not have significant fixed and/or intangible assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on short term supply agreements to obtain the supply of raw materials used in manufacturing the products it currently sells and distributes to its customers. The Company’s current market capitalization and common stock liquidity will hinder its ability to raise equity proceeds to implement its business plan and could adversely affect the value of our securities, including the common stock.
The Company currently has $725,000 of 8% Notes, payable annually, which mature on September 30, 2026, unless converted into shares of our common stock by the holders of the Notes. The shares underlying the Notes are being registered by the registration statement of which this prospectus forms a part. There is no assurance that the Company will make all of the required payments when due or that in the alternative, the holders of the 8% Notes will convert them into shares of our common stock.
We have borrowed and may be required to borrow funds in the future.
If the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of the Company’s stockholders. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.
Currently the Company has limited assets which could be used as collateral in obtaining future borrowings. Because of the Company’s inability to provide lenders with collateral and a limited history of successful operations, the Company may not be successful in its efforts to obtain additional funds though borrowings and as a result may not be able to fund required costs of operations.
Our growth depends on external sources of capital, which may not be available on favorable terms or at all.
Our access to capital will depend upon a number of factors over which we have little or no control, including general market conditions, government regulations and the market’s perception of our current and potential future earnings. If general economic instability or downturn leads to an inability to borrow at attractive rates or at all, our ability to obtain capital to finance working capital requirements could be negatively impacted.
If we are unable to obtain capital on terms and conditions that we find acceptable, we likely will have to scale back our business operations. In addition, our ability to refinance all or any debt we may incur in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all. All of these events would have a material adverse effect on our business, financial condition, liquidity and results of operations.
Failure to establish or enhance our brand recognition could have a material adverse effect on our business and results of operations.
We believe we will need to expend significant time, effort and resources to enhance the recognition of our brands. We believe developing our brand will be important to our sales and marketing efforts. If we fail to establish or enhance the recognition of our brands, it could have a material adverse effect on our ability to sell our products and adversely affect our business and results of operations. If we fail to develop a positive public image and reputation, our business with our existing customers could decline and we may fail to develop additional business, which could adversely affect our results of operations.
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Defects in the products we sell or failures in quality control related to our distribution of products could impair our ability to sell our products or could result in product liability claims, litigation and other significant events involving substantial costs.
Detection of any significant defects in our products that we sell or failure in our quality control procedures or the quality control procedures of our suppliers may result in, among other things, delay in time-to-market, loss of sales and market acceptance of our products, diversion of development resources, injury to our reputation and restrictions imposed by governmental agencies. The costs we may incur in correcting any product defects may be substantial and we may not be able to identify adequate remedies, if required. Additionally, errors, defects or other performance problems could result in financial or other damages to our customers, which could result in litigation. Product liability litigation, even if we prevail and/or our suppliers, would be time consuming and costly to defend, and if we and/or our product suppliers do not prevail, could result in the imposition of a damages award. We presently maintain product liability insurance and we are named insured on our suppliers’ insurance policy; however, it may not be adequate to cover any claims.
Our ability to become profitable and continue as a going concern will be dependent on our ability to attract, employ and retain highly skilled individuals to serve our clients.
The nature of our business requires that we employ skilled persons to perform highly skilled and specialized tasks for our Company. Our failure to retain such personnel could have a material adverse effect on our ability to offer services to clientele and could potentially have a negative effect on our business. There is no guarantee that skilled persons will be available and willing to work for us in the future, nor is there any guarantee that we could afford to retain them if they are available at a future time.
We may not be able to manage our growth effectively.
We must continually implement and improve our products and/or services, operations, operating procedures and quality controls on a timely basis, as well as expand, train, motivate and manage our work force in order to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product development, client service and sales. We can give no assurance that our personnel, systems, procedures and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results and financial condition.
If we make any acquisitions or enter into a merger or similar transaction, our business may be negatively impacted.
We have no present plans for any specific acquisition. However, in the event that we make acquisitions in the future, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions, mergers and other similar transactions are accompanied by a number of inherent risks, including, without limitation, the following:
| ● | the difficulty of integrating acquired products, services or operations; | |
| ● | the potential disruption of the ongoing businesses and distraction of our Management and the management of acquired companies; |
| ● | the difficulty of incorporating acquired rights or products into our existing business; | |
| ● | difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities; | |
| ● | difficulties in maintaining uniform standards, controls, procedures and policies; |
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| ● | the potential impairment of relationships with employees and customers as a result of any integration of new management personnel; | |
| ● | the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers; | |
| ● | the effect of any government regulations which relate to the business acquired; and | |
| ● | potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition. |
Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
There might be unanticipated obstacles to the execution of our business plans.
The Company’s business plans may change significantly. The Company’s potential business endeavors are capital intensive. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.
We may engage in transactions that present conflicts of interest.
The Company’s officers and directors may enter into agreements with the Company from time to time which may not be equivalent to similar transactions entered into with an independent third party. A conflict of interest arises whenever a person has an interest on both sides of a transaction. While we believe that it will take prudent steps to ensure that all transactions between the Company and any officer or director is fair, reasonable, and no more than the amount it would otherwise pay to a third party in an “arms-length” transaction, there can be no assurance that any transaction will meet these requirements in every instance.
Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.
We are subject to the following factors, among others, that may negatively affect our operating results:
| ● | The announcement or introduction of new products by our competitors; |
| ● | Failure of Government and private health plans to adequately and timely reimburse the users of our products; |
| ● | Our ability to upgrade and develop our systems and infrastructure to accommodate growth; |
| ● | Our ability to attract and retain key personnel in a timely and cost effective manner; |
| ● | The continued safety and efficacy of our products; |
| ● | The amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; |
| ● | Regulation by Federal, State or Local Governments; and |
| ● | General economic conditions (including fallout from current and future pandemics) as well as economic conditions specific to the healthcare industry. |
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We have based our current and future expense levels largely on our investment plans and estimates of future events, although certain of our expense levels are, to a large extent, fixed. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenue relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material and adverse effect on our business, results of operations and financial condition. Due to the foregoing factors, our revenue and operating results are and will remain difficult to forecast.
Adverse global economic conditions could have a negative effect on our business, results of operations and financial condition and liquidity.
A general slowdown in the global economy, including a recession, or in a particular region or industry, an increase in trade tensions with U.S. trading partners, inflation or a tightening of the credit markets could negatively impact our business, financial condition and liquidity. Adverse global economic conditions have from time to time caused or exacerbated significant slowdowns in the industries and markets in which we operate, which have adversely affected our business and results of operations. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, and may make it more difficult to raise or refinance debt.
Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the conflict between Russia and Ukraine and between Israel and Hamas, disruptions in the banking system and financial markets, lingering threat of pandemics, increased inflation and rising interest rates. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected. Our vendors may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. In addition, adverse economic conditions, such as recent supply chain disruptions and labor shortages and persistent inflation, have affected, and may continue to adversely affect our suppliers’ ability to provide our manufacturers with materials and components, which may negatively impact our business. These economic conditions make it more difficult for us to accurately forecast and plan our future business activities.
We are in a highly competitive and evolving field and face competition from well-established tissue processors and medical device manufacturers, as well as new market entrants.
Our business is in a very competitive and evolving field. Competition from other tissue processors, medical device companies and from research and academic institutions is intense, expected to increase, subject to rapid change, and could be significantly affected by new product introductions. The presence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make us profitable or prevent us from selling our products at all. Our success will depend on our ability and/or the ability of our suppliers to perfect and protect their intellectual property rights related to their technologies as well as to develop new technologies and new applications for our technologies. Our failure to compete effectively would have a material and adverse effect on our business, results of operations and financial condition.
Rapid technological change could cause our products to become obsolete.
The technologies underlying the products we sell and intend to sell are subject to rapid and profound technological change. Competition intensifies as technical advances in each field are made and become more widely known. We can give no assurance that our suppliers will be able to develop services, products, or processes with significant advantages over the competing products, services, and processes. Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
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Our products are dependent on the availability of sufficient quantities of tissue from human donors, and any disruption in supply could adversely affect our business.
The success of the human tissue products we sell depends upon, among other factors, the availability of sufficient quantities of tissue from human donors. The availability of donated tissue could be adversely impacted by regulatory changes, public opinion of the donor process as well as our and our suppliers’ reputations in the industry. Any disruption in the supply of donated human tissue could restrict our growth and could have a material adverse impact on our business and financial condition. We cannot be sure that the supply of human tissue will continue to be available at current levels or will be sufficient to meet our future needs.
The products we offer are derived from human tissue and therefore have the potential for disease transmission.
The utilization of human tissue creates the potential for transmission of communicable disease, including, but not limited to, HIV, viral hepatitis, syphilis and other viral, fungal or bacterial pathogens. Our suppliers are required to comply with federal and state regulations intended to prevent communicable disease transmission.
Although we believe that our suppliers maintain strict quality controls over the procurement and processing of the human tissue used to make the products we sell, there is no assurance that these quality controls are or will continue to be adequate. In addition, negative publicity concerning disease transmission from other companies improperly processed donated tissue could have a negative impact on the demand for our products.
In order to grow revenues from certain of our products, we must expand our relationships with distributors and independent sales representatives.
We derive significant revenues through our relationships with distributors and independent sales representatives. If such relationships were terminated for any reason, it could materially and adversely affect our ability to generate revenues and profits. We intend to obtain the assistance of additional distributors and independent sales representatives to continue our sales growth with respect to certain of our products. We may not be able to find additional distributors and independent sales representatives who will agree to market and/or distribute those products on commercially reasonable terms, if at all. In addition, adding new distributors and independent sales representatives require additional administrative and accounting efforts for which the Company may not have sufficient resources to manage effectively. If we are unable to establish new distribution and independent sales representative relationships or renew current distribution and sales agency agreements on commercially acceptable terms or manage the growth effectively, our business, financial condition and results of operations could be materially and adversely affected.
We continue to invest significant capital in expanding our internal sales force, and there can be no assurance that these efforts will result in increases in sales.
We are engaged in a major initiative to build and further expand our internal sales and marketing capabilities to increase our level of sales. As a result, we continue to invest in a direct sales force for certain of our products to allow us to reach new customers. These expenses impact our operating results, and there can be no assurance that we will be successful in expanding the sales of our products.
Our revenues may need to depend on adequate reimbursement from public and private insurers and health systems.
Currently, a significant number of public and private insurers and health systems do not provide reimbursement for our products. Our success and extent of our growth depends on the extent to which reimbursement for the costs of our products and related treatments will be available from third party payers, such as public and private insurers and health systems. Government and other third-party payers attempt to contain healthcare costs by limiting both coverage and the level of reimbursement of new products. Therefore, significant uncertainty usually exists as to the reimbursement status of new healthcare products. If we are not successful in obtaining adequate reimbursement for our products from these third-party payers, the market’s acceptance of our products could be adversely affected. Inadequate reimbursement levels also likely would create downward price pressure on our products. Even if we do succeed in obtaining widespread reimbursement for our products, future changes in reimbursement policies could have a negative impact on our business, financial condition and results of operations.
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To be commercially successful, we must convince physicians that our products are compliant with regulations, safe and effective alternatives to existing treatments and that our products should be used in their procedures.
We believe physicians will only adopt our products if they determine, based on experience, clinical data and published peer reviewed journal articles, that the use of our products in a particular procedure is a favorable alternative to conventional methods. Physicians may be slow to change their medical treatment practices for the following reasons, among others:
| ● | Their lack of experience with prior procedures in the field using our products; |
| ● | Lack of evidence supporting additional patient benefits and our products over conventional methods; |
| ● | Perceived liability risks generally associated with the use of new products and procedures; |
| ● | Perceived exposure from regulatory agencies that monitor the use of our products; |
| ● | Limited availability of reimbursement from third party payers; and |
| ● | The time that must be dedicated to training. |
In addition, we believe recommendations for and support of our products by influential physicians are essential for market acceptance and adoption. If we do not receive this support or if we are unable to demonstrate favorable long-term clinical data, physicians and hospitals may not use our products, which would significantly reduce our ability to achieve expected revenue and would prevent us from sustaining profitability.
We will need to expand our organization and managing growth may be more difficult than expected.
Managing our growth may be more difficult than we expect. We anticipate that a period of significant expansion will be required to penetrate and service the market for our existing and anticipated future products and to continue to develop new products. This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of our operations and personnel, we must both modify our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff. Management may be unable to hire, train, retain, motivate and manage necessary personnel or to identify, manage and exploit existing and potential strategic relationships and market opportunities.
We may be unable to obtain or maintain adequate product liability insurance.
Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human tissue products. We may be subject to such claims if the products we sell cause, or appear to have caused, an injury. Claims may be made by patients, healthcare providers or others selling our products. We currently maintain product liability insurance that contain limits of coverage for the insured. Defending a lawsuit, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market. There can be no assurance that adequate insurance will be available in the event of a lawsuit, if at all. A product liability claim could result in significant costs and significant harm to our business.
We may implement a product recall or voluntary market withdrawal, which could significantly increase our costs, damage our reputation and disrupt our business.
The manufacturing, marketing and processing of the tissue products we sell or intend to sell involve an inherent risk that they do not meet applicable quality standards and requirements. In that event, there may be recall or market withdrawal required by a regulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources. A recall or withdrawal of one of the products we sell, or a similar product processed, also could impair sales of our products as a result of confusion concerning the scope of the recall or withdrawal, or as a result of the damage to our reputation for quality and safety.
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Significant disruptions of information technology systems or breaches of information security could adversely affect our business.
We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Although we may obtain cyber-insurance coverage that may cover certain events described above, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.
New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving. In developing and marketing new lines of business and new products and services, we may invest significant time and resources. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition.
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Risks Related to Our Intellectual Property
If we are unable to adequately protect our intellectual property, our ability to compete in the market will be harmed.
Our commercial success will depend in part on patents and other intellectual property protection. To date we have applied for several patent applications and plan to file for additional patents with respect to our products and we intend to defend our patents and other intellectual property against third party challenges. However, there can be no assurance that any patents applied for will be issued, that scope of protection afforded by any patents issued will be as broad as claimed or if challenged, patents may be found to be invalid or unenforceable. Moreover, there can be no assurance that we will have the financial resources to protect our intellectual property.
There can be no assurances of protection for proprietary rights or reliance on trade secrets.
In certain cases, the Company may rely on trade secrets to protect intellectual property, proprietary technology and processes, which the Company has acquired, developed or may develop in the future. There can be no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. The Company, in common with other firms, may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.
Our suppliers’ ability to protect their intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which could have a material and adverse effect on us.
We depend significantly on our suppliers’ ability to protect their proprietary rights to the technologies used in the products we purchase from them and resell. Traditional legal means afford only limited protection and may not adequately protect their rights or permit them to gain or keep any competitive advantage. To the extent that they are unable to protect their intellectual property against infringement by others or by claims of infringement by such suppliers, our business could be materially adversely affected.
We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets of others.
Some of our employees were previously employed at other medical device or tissue companies. We may also hire additional employees who are currently employed at other medical device or tissue companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or independent contractors have used or disclosed any party’s trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or new products, which could severely harm our business.
If we are unable to protect our patents and trademarks from infringement, our business prospects may be harmed.
We currently have applied for various patents and received registered trademarks for our suite of biologic products offered in the United States. Although we may take steps to monitor the possible infringement or misuse of our patents and trademarks once they are obtained, it is possible that third parties may infringe, dilute or otherwise violate our intellectual property rights. Any unauthorized use of our intellectual property could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and any remedy obtained may constitute insufficient redress relative to the damages we may suffer. Our business may be materially adversely affected in the event we are unable to protect our intellectual property.
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Risks Related to Regulatory Approval of Our Products and Other Government Regulations
Our business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly and our failure to comply could result in negative effects on our business.
The FDA has specific regulations governing our tissue-based products, or HCT/Ps. The FDA has broad post-market and regulatory and enforcement powers. The FDA’s regulation of HCT/Ps includes requirements for registration and listing of products, donor screening and testing, processing and distribution (“Current Good Tissue Practices”), labeling, record keeping and adverse-reaction reporting, and inspection and enforcement.
Biologics and medical devices are subject to even more stringent regulation by the FDA. Even if pre-market clearance or approval is obtained, the approval or clearance may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed, may require warnings to accompany the product or impose additional restrictions on the sale and/or use of the product. In addition, regulatory approval is subject to continuing compliance with regulatory standards, including the FDA’s quality system regulations.
If we fail to comply with the FDA regulations regarding our tissue products or medical devices, the FDA could take enforcement action, including, without limitation, any of the following sanctions and the manufacture of our products or processing of our tissue could be delayed or terminated:
| ● | Untitled letters, warning letters, fines, injunctions, and civil penalties; |
| ● | Recall or seizure of our products; |
| ● | Operating restrictions, partial suspension or total shutdown of production; |
| ● | Refusing our requests for clearance or approval of new products; |
| ● | Withdrawing or suspending current applications for approval or approvals already granted; |
| ● | Refusal to grant export approval for our products; and |
| ● | Criminal prosecution. |
It is likely that the FDA’s regulation of HCT/Ps will continue to evolve in the future. Complying with any such new regulatory requirements may entail significant time delays and expense, which could have a material adverse effect on our business. The AATB has issued operating standards for tissue banking. Compliance with these standards is a requirement in order to become an accredited tissue bank. In addition, some states have their own tissue banking regulations.
In November 2017, the FDA released two final guidance documents in an effort to implement a “comprehensive policy framework” for existing laws and regulations governing regenerative medicine products, including human cells, tissues, and cellular and tissue-based products (“HCT/Ps”). These guidance documents build upon the previous regulatory framework for these products, which was completed in 2005. The Comprehensive regenerative medicine policy framework intends to spur innovation, efficient access to potentially transformative products, while ensuring safety and efficacy.
The framework builds upon the FDA’s existing risk-based regulatory approach to more clearly describe what products are regulated as drugs, devices, and/or biological products. Further, two of the guidance documents propose an efficient, science-based process for helping to ensure the safety and effectiveness of these therapies, while supporting development in this area. The suite of guidance documents also defines a risk-based framework for how the FDA intends to focus its enforcement actions against those products that raise potential significant safety concerns. This modern framework is intended to balance the agency’s commitment to safety with mechanisms to drive further advances in regenerative medicine so innovators can bring new, effective therapies to patients as quickly and safely as possible. The policy also delivers on important provisions of the Act.
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The FDA guidance with regard to 351 HCT/Ps requiring premarket approval became effective in May 2021. The guidance states that, in order to “give manufacturers time to determine if they need to submit an IND or marketing application in light of this guidance,” the FDA intends to exercise enforcement discretion (i.e., the agency may permit marketing without an approved marketing application) if the HCT/P “is intended for autologous use and its use does not raise reported safety concerns or potential significant safety concerns.” As of the date of this Annual Report, we are not aware of whether any further extension of effectiveness and enforcement of these regulations is or will be issued by the FDA.
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. However, if our products are deemed by the FDA to fall within the new guidelines and we are unable to successfully challenge any such determination, our business, results of operations and financial condition may be significantly harmed.
In addition, procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act (“NOTA”), which prohibits the transfer of certain human organs, including skin and related tissue for valuable consideration, but permits the reasonable payment associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue and skin. We reimburse tissue banks, hospitals and physicians for their services associated with the recovery, storage and transportation of donated human tissue. Although we have independent third party appraisals that confirm that reasonableness of the service fees we pay, if we were to be found to have violated NOTA’s prohibition on the sale or transfer of human tissue for valuable consideration, we would potentially be subject to criminal enforcement sanctions, which could materially and adversely affect our results of operations.
Finally, as discussed above, we and other manufacturers of skin substitutes are required to provide ASP information to CMS on a quarterly basis. The Medicare payment rates are updated quarterly based on this ASP information. If a manufacturer is found to have made a misrepresentation in the reporting of ASP, such manufacturer is subject to civil monetary penalties of up to $10,000 for each misrepresentation for each day in which the misrepresentation was applied.
To the extent our products do not qualify for regulation as human cells, tissues and cellular and tissue-based products under Section 361 of the Public Health Service Act, this could result in removal of the applicable products from the market, would make the introduction of new tissue products more expensive and significantly delay the expansion of our tissue product offerings and subject us to additional post-market regulatory requirements.
The products we offer are derived from human tissue. The FDA has specific regulations governing human cells, tissues and cellular and tissue-based products, or HCT/Ps. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) are not subject to any premarket clearance or approval requirements and are subject to less stringent post-market regulatory requirements.
If a product is deemed not to be a 361 HCT/P, FDA regulations will require premarket clearance or approval requirements that will involve significant time and cost investments by the Company. Further, there can be no assurance that the FDA will not, at some future point, change its position on current or future products’ 361 HCT/P status, and any regulatory reclassification could have adverse consequences for us and make it more difficult or expensive for us to conduct our business by requiring premarket clearance or approval and compliance with additional post-market regulatory requirements with respect to those products. Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including 361 HCT/Ps. We also cannot assure you that the FDA will not impose more stringent definitions with respect to products that qualify as 361 HCT/Ps.
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If the FDA does allow the Company to continue to market those products that fall under the new regulations without a biologics license either prior to or after finalization of the draft guidance documents, it may impose conditions, such as labeling restrictions and compliance with cGMP. Although the Company is preparing for these requirements in connection with its pursuit of a BLA for certain of its products, compliance with these conditions would require significant additional time and cost investments by the Company. It is also possible that the FDA will not allow the Company to market any form of its products without a biologics license even prior to finalization of the draft guidance documents and could even require the Company to recall its products, which would likely result in significant harm to our business, results of operations and financial condition.
In November 2017, the FDA issued guidance documents to clarify the FDA’s interpretation of the risk-based criteria manufacturers used to determine which manufactured tissue products are subject to the FDA’s premarket review and in order to be lawfully marketed in the United States, require an FDA-approved BLA.
The FDA guidance with regard to allowing manufacturers for certain products that are subject to the FDA’s premarket review under the existing regulations but are not currently meeting these requirements became effective in May 2021.
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. However, if our products are deemed by the FDA to fall within the new guidelines and we are unable to successfully challenge any such determination, our business, results of operations and financial condition may be significantly harmed.
Our ability to commence and complete clinical studies and other research and development objectives that are required by the FDA, will require that we be properly funded to assure that we can commence and proceed with the required research activities promptly and that the results are favorable.
The Company is pursuing efforts to commence and complete 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 timely and sufficient available working capital to fund the substantial costs of completing clinical trials, and ultimately the approval from the FDA.
We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause a material adverse effect on our business, financial condition and results of operations.
Our relationships with physicians, hospitals and other healthcare providers are subject to scrutiny under various federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are complex, and even minor, inadvertent violations can give rise to claims that the relevant law has been violated. Possible sanctions for violation of these fraud and abuse laws include monetary fines, civil and criminal penalties, exclusion from federal and state healthcare programs, including Medicare, Medicaid, Veterans Administration health programs, workers’ compensation programs and TRICARE (the healthcare system administered by or on behalf of the U.S. Department of Defense for uniformed services beneficiaries, including active duty and their dependents, retirees and their dependents), and forfeiture of amounts collected in violation of such prohibitions. Certain states have similar fraud and abuse laws, imposing substantial penalties for violations. Any Government investigation or a finding of a violation of these laws would likely result in a material adverse effect on the market price of our common stock, as well as our business, financial condition and results of operations.
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Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for the referral of an individual or the ordering or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid or other Government-sponsored healthcare programs. We will enter into consulting agreements, speaker agreements, research agreements and product development agreements with physicians, including some who may order our products or make decisions to use them. In addition, some of these physicians own our stock, which they purchased in arm’s length transactions on terms identical to those offered to non-physicians, or received stock awards from us as consideration for services performed by them. While these transactions were structured with the intention of complying with all applicable laws, including state anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may in the future view these transactions as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties. As discussed above, we have incorporated the AdvaMed code principles into our relationships with healthcare professionals under our consulting agreements, and our policies regarding payment of travel and lodging expenses, research and educational grant procedures and sponsorship of third-party conferences. In addition, we have conducted training sessions on these principles. However, there can be no assurance that regulatory or enforcement authorities will view these arrangements as being in compliance with applicable laws or that one or more of our employees or agents will not disregard the rules we have established. Because our strategy relies on the involvement of physicians who consult with us on the design of our products, perform clinical research on our behalf or educate the market about the efficacy and uses of our products, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial relationships with physicians who refer or order our products to be in violation of applicable laws and determine that we would be unable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of the physicians we engage to provide services on our behalf. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally funded healthcare programs, including Medicare and Medicaid, for non-compliance.
The Federal False Claims Act (“FCA”) imposes civil liability on any person or entity that submits, or causes the submission of, a false or fraudulent claim to the U.S. Government. Damages under the FCA can be significant and consist of the imposition of fines and penalties. The FCA also allows a private individual or entity with knowledge of past or present fraud against the Federal Government to sue on behalf of the Government to recover the civil penalties and treble damages. The U.S. Department of Justice (“DOJ”) on behalf of the Government has previously alleged that the marketing and promotional practices of pharmaceutical and medical device manufacturers, including the off-label promotion of products or the payment of prohibited kickbacks to doctors, violated the FCA, resulting in the submission of improper claims to federal and state healthcare entitlement programs such as Medicaid. In certain cases, manufacturers have entered into criminal and civil settlements with the federal government under which they entered into plea agreements, paid substantial monetary amounts and entered into corporate integrity agreements that require, among other things, substantial reporting and remedial actions going forward.
The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or future activities under these laws. Any investigation or challenge could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory or enforcement review of us, regardless of the outcome, would be costly and time consuming. Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only.
We face significant uncertainty in the industry due to government healthcare reform.
There have been and continue to be proposals by the federal government, state governments, regulators and third-party payers to control healthcare costs, and generally, to reform the healthcare system in the United States. There are many programs and requirements for which the details have not yet been fully established or the consequences are not fully understood. These proposals may affect aspects of our business. We also cannot predict what further reform proposals, if any, will be adopted, when they will be adopted, or what impact they may have on us.
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Risks Related to our Status as a Public Company
We are subject to the periodic reporting requirements of the Exchange Act that requires us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.
We are required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm has to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel has to review and assist in the preparation of such reports. The incurrence of such costs is an expense to our operations, may increase as the Company grows and therefore have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if an active trading market for our common stock ever develops or is sustained, could drop significantly.
Our internal controls are inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, 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 and includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Our Interim Chief Executive Officer and Chief Financial Officer noted the following material weaknesses that have caused management to conclude that, as of October 31, 2024, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level in that:
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which there is insufficient independent review of duties performed. |
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which do not have the ability to implement internal controls over the granting of access to our IT environment. |
| ● | As a result of the limited number of accounting personnel, we rely on inexperienced staff and outside consultants for the preparation of our financial reports, including tax preparation, which could require adjustments and lead to overlooking items requiring disclosure. |
| ● | As a result of the Company’s limited financial and personnel resources, there may be difficulties in timely analyzing and identifying potential operational and disclosure transactions within management and to comply with financial reporting regulations. |
We have taken and are continuing to take additional steps to remedy these material weaknesses. However, in doing so, we have incurred and expect to incur additional expenses and diversion of management’s time in order to do so, which may adversely affect our business, results of operations and financial condition. Further effective internal controls, particularly those related to receipts and expenditures as well as disclosures, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. There can be no assurance that our remedial measures will be sufficient to address the material weaknesses or that our internal control over financial reporting will not be subject to additional material weaknesses in the future If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
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Risks Relating to Ownership of Our Common Stock
Two of our stockholders control 51% of the combined voting power of our capital stock regardless of the number of shares of common stock outstanding and accordingly, have the ability to control the election of our directors and the outcome of matters submitted to our stockholders.
Two of our stockholders, Ian T. Bothwell (“Bothwell”), our Interim Chief Executive Officer and Chief Financial Officer and Greyt Ventures LLC (”Greyt”) hold our Series C Preferred Shares, which accord them 51% of the combined voting power of our capital stock, regardless of the number of shares of common stock outstanding. Accordingly, Bothwell and Greyt have the ability to control the election of our directors and influence the outcome of issues submitted to our stockholders. As a consequence, it will be difficult, if not impossible for the other stockholders to remove our management. The voting control of the Company by Bothwell and Greyt could also deter unsolicited takeovers, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.
Our articles of incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors have the authority to issue up to 10,000,000 shares of our preferred stock terms of which may be determined by the Board without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a new series of preferred stock (in addition to the Series C Preferred Shares) that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a new series of preferred stock, subject to the consent of the holders of the Series C Preferred Shares that has even greater voting power than the Series C Preferred Shares, to our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders. Although we have no present intention to issue any new additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.
You may experience dilution of your ownership interests because of the future issuance of additional shares of common stock.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our shareholders. We may also issue additional shares of our securities that are convertible into or exercisable for common stock, as the case may be, in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of common stock may create downward pressure on the value of our securities. There can be no assurance that we will not be required to issue additional shares of common stock, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which our shares may be valued or are trading in a public market.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of their shares of our common stock, or shares of our common stock underlying any outstanding securities held by them, in the public market under Rule 144 or upon registration of such shares pursuant to an effective registration statement, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
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There can be no assurances that an active trading market will develop for our common stock, or if developed, be maintained.
The average trading volume in our stock has been historically low, with little or no trading at all on some days. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time. There can be no assurance that a more active market for the common stock will develop, or if one should develop, there is no assurance that it will be maintained. This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| ● | that a broker or dealer approve a person’s account for transactions in penny stocks; and | |
| ● | the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
| ● | obtain financial information and investment experience objectives of the person; and | |
| ● | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:
| ● | the basis on which the broker or dealer made the suitability determination; and | |
| ● | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
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Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock and have an adverse effect on the market for shares of our common stock.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| ● | actual or anticipated variations in our operating results; | |
| ● | announcements of developments by us or our competitors; | |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; | |
| ● | adoption of new accounting standards affecting our Company’s industry; | |
| ● | additions or departures of key personnel; | |
| ● | sales of our common stock or other securities in the open market; and | |
| ● | other events or factors, many of which are beyond our control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.
If securities analysts do not initiate coverage or continue to cover our common stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.
The trading market for the common stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the common stock. If securities analysts do not cover the common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
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We have agreed to indemnify our officers and directors against lawsuits to the fullest extent of the law.
Zeo is a Nevada corporation. Nevada law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Nevada law also authorizes Nevada corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. Our organizational documents provide for this indemnification to the fullest extent permitted by law.
Although we currently maintain directors and officers insurance coverage, there is no guarantee that such coverage or that any future insurance coverage we elect to maintain would protect us from any damages or loss claims filed against us.
We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or paid on the common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
The “market overhang” from options, warrants and convertible securities could adversely impact the market price of our shares.
The “market overhang” from options, warrants and convertible securities could adversely impact the market price of our shares as a result of the dilution which would result if such securities were exercised for or converted into shares.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
In the normal course of business, we may collect and store personal information and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, patient information, sensitive third-party information and employee information. To protect this information, our existing cybersecurity policies require continuous monitoring and detection programs, network security precautions, encryption of critical data and in-depth security assessments of vendors. We maintain various protections designed to safeguard against cyberattacks, including firewalls and virus detection software. We have established and regularly test our disaster recovery plan, and we protect against business interruption by backing up our major systems. In addition, we periodically scan our environment for any vulnerabilities, perform penetration testing and engage third parties to assess the effectiveness of our data security practices. Our information technology (“IT”) team is responsible for these ongoing monitoring and detection activities.
The governance of our cybersecurity risks involves active and informed participation from our management team, our IT team and our board of directors. This oversight includes briefings by our IT team on the nature of the risks we face and the steps we are taking to mitigate these risks, as well as immediately reporting any significant cybersecurity incident that occurs to management and the board of directors.
We have not experienced a cybersecurity incident that had a material impact on our business strategy, results of operations, or financial condition. We continue to monitor potential cybersecurity threats and incorporate findings into our risk management strategies.
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Item 2. Properties.
The Company’s administrative, research, processing and sales and distribution activities are housed in approximately 1,200 square feet of space at the Nova Southeastern University Center for Collaborative Research, 3321 College Avenue, Suite 246, Davie, Florida 33314. This space is currently being licensed on a month-to-month basis with the University for an annual base license fee of $20,230. The Company is currently exploring options for remaining at the University under a long-term license agreement or relocating to another location.
Item 3. Legal Proceedings.
In addition to matters previously reported in our periodic filings with the SEC, 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.
On June 17, 2021, the Company received a subpoena dated June 14, 2021, from the Atlanta Regional Office of the SEC requiring the production of certain documents and communications in connection with the treatment and results of various COVID-19 patients, as discussed in the Company’s Current Reports on Form 8-K filed with the SEC during the period from May 27, 2020 through May 11, 2021. The Company fully cooperated with the SEC’s investigation.
On November 25, 2024, the SEC notified the Company that it had concluded its investigation and does not intend to recommend an enforcement action by the Commission against the Company.
On November 19, 2024, Howard Golub, M.D., the Company’s former Chief Science Officer, filed a complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida against the Company, alleging a breach of contract as a result of the Company’s failure to pay him severance in the amount of $150,000 in connection with the non-renewal of Dr. Golub’s employment agreement with the Company. Dr. Golub is demanding judgment in the amount of $150,000 plus interest and attorney’s fees. The Company is currently exploring its legal options and intends to vigorously defend against the lawsuit.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. under the symbol “ZEOX.” The trading market for our common stock is limited and sporadic. We can provide no assurance that our shares of common stock will continue to be traded on the over-the counter market or another national securities exchange, or if traded, that any public market for our common stock will be active and sustained.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, stockholders may have difficulty selling those securities.
Common Stock
As of January 28, 2025, 6,344,817 shares of our common stock were outstanding.
Holders of Our Common Stock
As of January 28, 2025, we had approximately 199 holders of record of our common stock. One of these holders is CEDE and Company which is the mechanism used for brokerage firms to hold securities in book entry form on behalf of their clients and as of January 28, 2025, they held approximately 2,293.119 shares of common stock for these stockholders (based on the last report provided to us, the Company had approximately 4,800 non-objecting beneficial stockholders).
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Transfer Agent
The transfer agent for our common stock is Securities Transfer Corporation, 2901 Dallas Pkwy Suite 380, Plano, TX 75093.
Dividend Policy
We have never paid or declared dividends on our securities. The payment of cash dividends, if any, in the future is within the discretion of our board of directors and will depend upon our earnings, our capital requirements, financial condition and other relevant factors. We do not expect to pay dividends for the foreseeable future, and intend to retain future earnings, if any, towards the use in our business and growth strategies.
Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Board Stock Compensation Plan(1) | -0- | - | 22,566 | |||||||||
| 2021 Equity Incentive Plan | 772,538 | $ | 2.70 | 1,113,712 | ||||||||
| (1) | The Company is no longer using the Board Stock Compensation Plan to compensate its non-executive directors. |
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under Item 1A. Risk Factors and elsewhere in this report.
Results of Operations
Fiscal year ended October 31, 2024 as compared to fiscal year ended October 31, 2023
Revenues. Our revenues for the year ended October 31, 2024 were $4,620,000, as compared to revenues of $4,558,000 for the year ended October 31, 2023. The increase in revenues for the year ended October 31, 2024 of $62,000 or 1.4%, was primarily the result of an increase of approximately $474,000 of revenues associated with our recently launched PPX™ service platform during the year ended October 31, 2024, compared with the year ended October 31, 2023 and an increase of approximately 7.9% (approximately $293,000) in the overall unit sales of our high concentration biologic products during the year ended October 31, 2024, compared with the year ended October 31, 2023, partially offset by a decrease of approximately 16.0% (approximately $705,000) in the average sales prices for the high concentration biologic products sold during the year ended October 31, 2024, compared with the year ended October 31, 2023.
The increase in the overall unit sales of our high concentration biologic products and revenues associated with its recently launched PPX™ service platform during the year ended October 31, 2024, as compared to the year ended October 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.
The decrease in the average sales prices for the high concentration biologic products sold during the year ended October 31, 2024, compared to the year ended October 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 42.4% from 54.8% and increased to 57.6% from 45.2% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the year ended October 31, 2024, as compared to the year ended October 31, 2023.
Cost of Revenues. Our cost of revenues for the year ended October 31, 2024 were $844,000, as compared to cost of revenues of $508,000 for the year ended October 31, 2023. The increase in the cost of revenues for the year ended October 31, 2024 of $336,000 or 66.1%, from the year ended October 31, 2023, was due to an increase of approximately $187,000 of cost of revenues associated with its recently launched PPX™ service platform during the year ended October 31, 2024, as compared to the year ended October 31, 2023, the increase of approximately 25.9% (approximately $108,000) in the average cost of revenues for the high concentration biologic products during the year ended October 31, 2024, as compared to the year ended October 31, 2023 and the increase of approximately 7.9% (approximately $41,000) in the overall unit sales of its high concentration biologic products, during the year ended October 31, 2024, as compared to the year ended October 31, 2023.
Gross Profit. Our gross profit for the year ended October 31, 2024 was $3,776,000 (81.7% of revenues), compared to gross profit of $4,050,000 (88.9% of revenues) for the year ended October 31, 2023. The minor change in gross profit during the year ended October 31, 2024 compared to the year ended October 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 year ended October 31, 2024, compared to the year ended October 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 13.3% of revenues for the year ended October 31, 2024, as compared to 3.1% of revenues for the year ended October 31, 2023.
42
General and Administrative Expenses. General and administrative expenses for the year ended October 31, 2024 were $9,095,000, as compared to $10,818,000 for the year ended October 31, 2023, a decrease of $1,723,000 or 15.9%. The decrease in the general and administrative expenses for the year ended October 31, 2024, from the year ended October 31, 2023, was primarily the result of decreased research and development costs of approximately $759,000, decreased laboratory related costs of approximately $567,000, decreased commissions and travel costs of approximately $490,000, decreased marketing related costs of approximately $110,000, decreased administrative and office related costs of $177,000, reduced corporate insurance costs of $143,000 and decreased professional fees of approximately $701,000, which were partially offset by increased stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $644,000 and increased payroll and consulting fees of approximately $579,000 during the year ended October 31, 2024, as compared to the year ended October 31, 2023.
The decrease in research and development costs during the year ended October 31, 2024, from the year ended October 31, 2023 was principally the result of the Company’s completion of its Phase 1 trials during the year ended October 31, 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 year ended October 31, 2024, as compared to the year ended October 31, 2023. The decrease in commissions and travel costs during the year ended October 31, 2024, as compared to the year ended October 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 year ended October 31, 2024, as compared to the year ended October 31, 2023.
The increase in stock-based compensation costs during the year ended October 31, 2024, as compared to the year ended October 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 year ended October 31, 2024, as compared to the year ended October 31, 2023 was principally the result of payroll costs related to the Company’s hiring of a new executives during June 2023 and July 2023 which were paid for a shorter period during the year ended October 31, 2023, as compared to the year ended October 31, 2024 and the hiring of additional consultants during the year ended October 31, 2024 as compared to October 31, 2023.
Other income. Other income for the year ended October 31, 2024 was $751,000, as compared to other income of $331,000 for the year ended October 31, 2023. The increase in other income of $420,000 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 settlement of the Amended Skincare Agreement of $168,000, the abatement of IRS penalties of $93,000, the settlement of insurance claims of $89,000, the increases in commissions received from sales of Exotropin products of $87,000, the increases in income from the settlement of liabilities of approximately $93,000 and increases in other income of $10,000 during the year ended October 31, 2024 compared to the year ended October 31, 2023, partially offset from the decrease in the gain from the sale of the Basalt Lab of approximately $341,000 which occurred in the year ended October 31, 2023.
Other expense for the year ended October 31, 2024 was $137,000, as compared to other expense of $550,000 for the year ended October 31, 2023. The decrease in other expense of $413,000 during the year ended October 31, 2024, compared to the year ended October 31, 2023, was principally the result of reduced amortization of loan discounts of approximately $326,000, reduced IRS interest and penalties of approximately $13,000, reduced reserves against the carrying value of the Company’s investments in equity securities of $55,000 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 year ended October 31, 2024 as compared to the year ended October 31, 2023.
43
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 Fiscal Year Ended October 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash, beginning of year | $ | 1,756,000 | $ | 3,753,000 | ||||
| Net cash used in operating activities | (1,450,000 | ) | (2,197,000 | ) | ||||
| Net cash provided by (used in) investing activities | (45,000 | ) | 615,000 | |||||
| Net cash (used in) provided by financing activities | 396,000 | (415,000 | ) | |||||
| Cash, end of year | $ | 657,000 | $ | 1,756,000 | ||||
During the year ended October 31, 2024, the Company used cash in operating activities of $1,450,000, compared to $2,197,000 for the year ended October 31, 2023, a decrease in cash used of $747,000. 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 $2,353,000 for the year ended October 31, 2024 compared to the year ended October 31, 2023, partially offset by reductions in gross profit of $274,000 and reductions in cash provided from changes in operating assets and liabilities of $1,315,000 for the year ended October 31, 2024 compared to the year ended October 31, 2023.
The decrease in cash provided from changes in operating assets and liabilities was due to decreases in accounts payable and accrued expenses and accrued liabilities and deferred revenues and increases in accounts receivable partially offset from decreases in inventories during the year ended October 31, 2024 as compared to the year ended October 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 year ended October 31, 2024 as compared to the year ended October 31, 2023. The decrease in gross profit during the year ended October 31, 2024 as compared to the year ended October 31, 2023 was primarily the result of a greater mix of sales of lower priced units and increases in the sales of units that had a higher cost of goods sold per unit.
During the year ended October 31, 2024, the Company had cash used in investing activities of $45,000 compared to cash provided by investing activities of $615,000 for the year ended October 31, 2023, a decrease in cash provided by investing activities of $660,000. The decrease in cash provided by investing activities was due primarily due to reductions in proceeds received from the sale of the Company’s Basalt, Colorado lab facility of $741,000, partially offset from the decrease in cash used in investments in non-marketable securities of $55,000 and payments made in connection with the Company’s purchase of laboratory equipment of $26,000 during the year ended October 31, 2024 as compared to the year ended October 31, 2023.
During the year ended October 31, 2024, the Company had cash provided by financing activities of $396,000 compared to cash used in financing activities of $415,000 for the year ended October 31, 2023. The decrease in cash used in financing activities of $811,000 was due to the reduction in the shares repurchased in connection with litigation of $420,000, the reduction of payments on notes payable of $1,130,000 and reduction of payments on finance leases of approximately $91,000 during the year ended October 31, 2024 as compared to the year ended October 31, 2023. The decrease in cash provided by financing activities was due to decreases in proceeds from the issuance of promissory notes of $1,230,000, partially offset from increases in proceeds from the private sale of equity securities of $400,000 during the year ended October 31, 2024 as compared to the year ended October 31, 2023.
44
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. During the fiscal year ended October 31, 2024 and through the date of this Annual Report, the Company completed the following private sales of its securities:
On July 8, 2024, the Company raised $500,000 in the July 2024 Financing. In the July 2024 Financing, the Company sold and issued to the Investor 250,000 shares of common stock and warrants to purchase an additional 83,333 shares in a private transaction. In connection with the July 2024 Financing, the Company agreed to provide the Investor certain piggy-back registration rights under the Securities Act with respect to the shares purchased and the shares underlying the warrants purchased. The proceeds from the July 2024 Financing were used for working capital purposes.
Going Concern Consideration
The 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 $4,705,000 for the year ended October 31, 2024 and used $1,450,000 of cash from operating activities during that period. In addition, the Company had an accumulated deficit and a stockholders’ deficit of $62,213,000 and $1,653,000, respectively, at October 31, 2024. The Company had a working capital deficit of $2,123,000 at October 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.
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.
45
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.
As of October 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 October 31, 2024 and through the date of this report, we had no such arrangements.
Recently Issued Financial Accounting Standards
See Note 2 to our audited consolidated financial statements included in this report for a discussion of recent accounting pronouncements.
Critical Accounting Policies
Our audited 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 this report, “Summary of Significant Accounting Policies”.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this item of Form 10-K.
46
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Zeo Scientifix, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Zeo Scientifix, Inc. (the “Company”) as of October 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, during the year ended October 31, 2024 the Company incurred significant losses and utilized cash in operations, and had a stockholders’ deficit as of that date. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Recognition of and presentation of other income
As discussed in Note 15, the Company recognized other income of $751,000 during the year ended October 31, 2024. Such amount included (i) the write-off of advances from former officer of $221,000; (ii) a gain related to the termination of a supply agreement of $168,000; and (iii) commission income of $87,000 not related to the Company’s revenue producing business. We identified the recognition of other income as a critical audit matter because of the significance of the account balances and the significant management estimates involved in evaluating the appropriateness of the recognition and presentation other income. The auditing for this transaction required a high degree of audit judgement including evaluating the reasonableness of the significant judgements made by management in determining the appropriate accounting and financial statement presentation.
The primary audit procedures we performed to address this critical audit matter included the following, amongst others:
| ● | Obtaining and examining related documents supporting the extinguishment of the previously recorded liabilities, and ascertaining the liability extinguishment criteria had been met in accordance with relevant accounting standards. |
| ● | Obtaining independent legal assessments of the appropriateness of certain of the debt extinguishments recorded during the period. |
| ● | Obtaining the client’s evaluation of the appropriateness of financial statement presentation of these items as other income outside of loss from operations, including a determination that such items did not result from the Company’s principal revenue activities during the period. |
We have served as the Company’s auditor since 2023.
/s/ Weinberg & Company P.A.
January 29, 2025
F-3
Zeo ScientifiX, Inc.
CONSOLIDATED BALANCE SHEETS
As of October 31, 2024 and 2023
(Amounts rounded to the nearest thousand except share amounts)
| October 31, 2024 |
October 31, 2023 |
|||||||
| 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 $ |
||||||||
| 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 consolidated financial statements.
F-4
Zeo ScientifiX, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended October 31, 2024 and 2023
(Amounts rounded to the nearest thousand except share amounts)
| Year Ended October 31, |
||||||||
| 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 | ( |
) | ( |
) | ||||
| Change in Commitment Fee Shortfall Obligation | ( |
) | ||||||
| Impairment of non-marketable securities in a related entity | ( |
) | ( |
) | ||||
| Gain on sale of assets | ||||||||
| Other income | ( |
) | ||||||
| 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 consolidated financial statements.
F-5
Zeo ScientifiX, Inc.
CONSOLIDATED CHANGES TO STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended October 31, 2023 and 2024
(Amounts rounded to the nearest thousand except share amounts)
| 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 | ||||||||||||||||||||
| Discount on warrants issued with convertible debt | - | |||||||||||||||||||
| 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 October 31, 2023 | ( |
) | ( |
) | ||||||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Reverse split round-up adjustment | ||||||||||||||||||||
| Cancellation of shares in connection with litigation | ( |
) | ( |
) | ||||||||||||||||
| Purchase 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 issued | - | |||||||||||||||||||
| Fair value of vested warrants issued | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balance October 31, 2024 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Zeo ScientifiX, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 31, 2024 and 2023
(Amounts rounded to the nearest thousand except share amounts)
| Year Ended October 31, |
||||||||
| 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 | ||||||||
| Bad debt expense | ||||||||
| Change in Commitment Fee Shortfall Obligation | ||||||||
| Gain from sale of assets | ( |
) | ||||||
| Write-off of advances payable to former officer | ( |
) | ||||||
| Reserve of non-marketable securities – related party | ||||||||
| Write-off of receivables from officers and other receivable | ||||||||
| Write-off of fixed assets | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net of allowance for bad debts | ( |
) | ||||||
| Other receivable | ( |
) | ||||||
| Prepaid expenses | ||||||||
| Inventories | ( |
) | ||||||
| Accounts payable and accrued expenses | ( |
) | ||||||
| Security deposits | ||||||||
| Deferred revenue | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING | ||||||||
| Purchase of fixed assets | ( |
) | ||||||
| Proceeds from sale of assets | ||||||||
| Investment in non-marketable equity securities – related party | ( |
) | ( |
) | ||||
| Net cash provided by (used in) investing activities | ( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of Promissory notes | ||||||||
| Shares repurchased in connection with litigation | ( |
) | ( |
) | ||||
| Payments on finance leases | ( |
) | ( |
) | ||||
| Repayments of Promissory notes | ( |
) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash (used in) provided by financing activities | ( |
) | ||||||
| Increase (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 | $ | $ | ||||||
| Warrants issued in connection with convertible notes | $ | $ | ||||||
| Finance lease assigned to buyer in connection with asset sale | $ | $ | ||||||
| OID discount on proceeds received from Promissory Note | $ | $ | ||||||
| Common stock issued as commitment fee for Promissory Note | $ | $ | ||||||
| Common stock issued in satisfaction of Commitment Fee Shortfall Obligation | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Zeo ScientifiX, Inc.
(Formerly Organicell Regenerative Medicine, Inc.)
NOTES TO 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 years ended October 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 has recently developed and begun to distribute additional products that incorporate its proprietary ingredients for products to be used in topical aesthetic applications and is actively exploring further development of additional products to be used in other topical aesthetic applications.
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 consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
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 year ended October 31, 2024, the Company sold products and services totaling approximately $
F-8
During the year ended October 31, 2023, the Company sold products and services totaling approximately $
As of October 31, 2024, the Company had accounts receivable from three customers which comprised
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.
Major Supplier
The Company has contracts with more than one supplier of the tissue raw material used in manufacturing of its products. During the fiscal year ended October 31, 2024, the Company purchased the tissue raw material used in manufacturing of its products from one supplier in the amount of $
During the fiscal year ended October 31, 2023, the Company purchased the tissue raw material used in manufacturing of its products from two suppliers, of which each accounted for approximately $
The Company’s supply agreements are non-exclusive and the Company does not believe it has any exposure based on the availability of raw materials and/or products from other suppliers.
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 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.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are recorded at net realizable value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to pay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions.
F-9
Most of the Company’s sales do not provide for installment payments and amounts are typically due upon invoicing. However, for those customers that are granted payment terms, the policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company are exhausted, the determination for charging off uncollectible receivables is made. Management determined that no allowance for bad debts was necessary at October 31, 2024 and 2023. For the years ended October 31, 2024 and 2023, the Company recorded bad debt expense of $
Inventory
Inventory is stated at the lower of cost or net realizable value using the average cost method. The Company provides a reserve for potential excess, dated or obsolete inventories based on an analysis of forecasted demand compared to quantities on hand and any firm purchase orders, as well as product shelf life. At October 31, 2024 and 2023, the Company determined that no reserves were required in connection with our inventory.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of property and equipment range from 3 to 15 years. Upon sale or retirement, the cost and related accumulated depreciation and amortization are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
Non-marketable Securities
Non-marketable securities consist of equity investments in privately held companies, which are classified as other assets on the consolidated balance sheets. These non-marketable equity securities do not have readily determinable fair values. Under the measurement alternative election, the Company accounts for these non-marketable securities at cost and adjusted for observable price changes in orderly transactions for the identical or similar investments of the same issuer or upon impairment and are not eligible for the net-asset-value practical expedient from fair value measurement. The measurement alternative election is reassessed each reporting period to determine whether the non-marketable securities continue to be eligible for this election.
The Company periodically evaluates its non-marketable securities for impairment when events and circumstances indicate that the carrying amount of the investment may not be recovered. Impairment indicators may include, but are not limited to, a significant deterioration in earnings performance, credit rating, asset quality or business outlook or a significant adverse change in the regulatory, economic, or technological environment.
Under current U.S. GAAP, equity investments without readily determinable fair values are reported at cost minus impairment. However, impairment losses are recognized only if they are considered other-than- temporary. The Company evaluated its investment in non-marketable securities at October 31, 2024 and 2023, and determined such investment was impaired.
Leasehold Improvements
Leasehold improvements in excess of $1,000 that are made in connection with leases having a term of more than 12 months are capitalized by the Company and amortized over the shorter of the useful life of the asset or the remaining lease periods and renewals that are deemed to be reasonably certain at the date the leasehold improvements are purchased. Costs associated with leasehold improvements that do not exceed $1,000 are expensed as incurred.
Revenue Recognition
The Company follows the guidance of the Financial Accounting Standards Board (“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.
F-10
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 October 31, 2024, the Company had common shares issuable upon the exercise of options and warrants (vested and unvested), unvested restricted stock and $ of convertible debt securities that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the year ended October 31, 2024.
At October 31, 2023, the Company had common shares issuable upon the exercise of warrants (vested and unvested) and unvested restricted stock that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the year ended October 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.
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 $
F-11
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 years ended October 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 years ended October 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.
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.
F-12
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.
Operating Lease Obligations
Under the provisions of Accounting Standards Update (ASU) No. 2016-02 (Topic 842) (“ASC 842”), the Company recognizes a right of use (“ROU”) asset and corresponding lease liability for all operating leases upon commencement of the lease.
The Company’s policy is to treat operating leases that have a term of one year or less at lease commencement date and do not include a purchase option that is reasonably certain of exercise, consistent with the lease recognition approach as previously outlined under ASC 840. In addition, month to month leases which do not involve additional financial commitments on the part of the Company are also treated consistent with the lease recognition approach as previously outlined under ASC 840. The Company has established a capitalization threshold of $15,000 in determining whether any future operating leases will be capitalized.
Segment Information
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company has one component. Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment for the manufacture and distribution of its products.
Subsequent Events
The Company has evaluated subsequent events that occurred after October 31, 2024 through the financial statement issuance date for subsequent event disclosure or recording.
Recently Issued Accounting Pronouncements
In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company will adopt ASU 2023-07 beginning November 1, 2024. The Company does not believe the impact of the new guidance and related codification improvements had a material impact to its financial position, results of operations and cash flows.
We have reviewed all accounting pronouncements recently issued by the FASB and the SEC. The authoritative pronouncements that we have already adopted did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof, and except as otherwise noted above, we do not believe that any of the authoritative pronouncements that we have not yet adopted will have a material effect upon our financial condition, results of operations, cash flows or reporting thereof.
F-13
NOTE 3 – GOING CONCERN
The 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.
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.
As of October 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.
F-14
NOTE 4 – INVENTORIES
| Schedule of inventories | ||||||||
| October 31, 2024 |
October 31, 2023 |
|||||||
| Raw materials and supplies | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 5 – PROPERTY AND EQUIPMENT
| Schedule of property and equipment | ||||||||
| October 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 $
Effective, August 7, 2023, the Company sold its Basalt laboratory facility (“Sale”) to a non-affiliated third-party purchaser (“Purchaser”). The transaction included the assignment of lease for the premises and the lease for certain laboratory equipment and the sale of all leasehold improvements associated with the Basalt laboratory and inventory. In connection with the Sale, the Company recorded a gain of $
Depreciation expense totaled $
Amortization expense totaled $
NOTE 6 – EQUITY IN NON-MARKETABLE SECURITIES OF AFFILIATED ENTITY
| Schedule of equity in non marketable securities | ||||||||
| October 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 $100,000 in cash (representing a 10% equity interest at the time of the investment) in the non-marketable equity securities of Exotropin LLC, a privately held skin-care formulator (“Exotropin”) in an effort to accelerate the Company’s development of expertise with respect to the skincare industry and the potential supply of the Company’s products in future topical formulations. The Company evaluated its ownership, contractual and other interests in this entity and determined the Company does not have a variable interest in this entity and therefore it is not required to be consolidated in the Company’s consolidated financial statements, as the Company is not the primary beneficiary and does not have the power to direct activities that most significantly impact the entities’ economic performance. The Company’s maximum loss exposure is limited to the carrying value of this investment.
At the time of the investment, both Greyt Ventures, LLC (“Greyt”), a principal shareholder of the Company and Skycrest Holdings, LLC, (“Skycrest”) a former principal shareholder of the Company, each owned a 20% interest in Exotropin. In addition, Mr. Robert Smoley, a consultant and advisor to the Company was also the Chief Operating Officer of Exotropin (until November 2024). The equity interests of the Company, Greyt and Skycrest in Exotropin were later reduced to 8.96%, 17.93% and 17.93%, respectively, as a result of additional sales of equity interests in Exotropin to outside parties. In addition, the Company’s CMO was granted an option to acquire up to 200,000 membership interests in Exotropin, of which 100,000 vested immediately and the remaining 100,000 will vest based on future sales of Exotropin attributed to the CMO. The option price is $20,000 for the 200,000 membership interests.
F-15
During the year ended October 31, 2024, pursuant to a capital call notice received from Exotropin, the Company invested an additional $45,000 in cash (representing its 8.96% equity interest at the time of the capital call).
As of October 31, 2024 and 2023, the Company has recorded total reserves against the carrying value of its investment of Exotropin of $
During November 2024, the Company received a capital call notice from Exotropin, in which the Company’s pro-rata share was $126,000 (“November Capital Call”). The Company has yet committed to participating in the November Capital Call. If the Company does not elect to participate, its interest in Exotropin would be reduced to approximately 5.6% based on all other members fulling participating in the November Capital Call.
Sales Representative Agreement
During November 2023, the Company and Exotropin entered into a Sales Representative Agreement (“Sales Agreement”) in connection with the Company’s efforts to expand the use of its proprietary products for a variety of topical use applications. In connection with the Sales Agreement, the Company will receive commissions on the net sales value of Exotropin products that are sold to pre-approved retailers, wholesale distributors, private label customers and direct to consumer customers which were introduced to Exotropin by the Company of 10%, 5%, 10% and 15%, respectively.
In addition, under the terms of the Sales Agreement, the Company and Exotropin also agreed to co-develop a new product offering for the treatment of hair loss to be sold through physicians (“Collaboration”). Under the terms of the Collaboration, the Company will be responsible for the sales and marketing of the products and the parties will share equally in the net profits from the sales of the products after reimbursement of all direct cash costs incurred by either party in connection with the development, supply and sale of the products. As of October 31, 2024, $
Joint Supply Agreement
During September 2023, the Company and Exotropin entered into an agreement whereby Exotropin agreed to supply the Moisturizer that the Company is obligated to supply under the Amended Skincare Agreement. Pursuant to the Sales Agreement, the Company paid Exotropin $235,000 representing the amount of Initial Purchase Order associated with the Company’s arrangement with Exotropin to supply the Moisturizer (“Moisturizer Prepayment”). On August 12, 2024, in connection with the mutual agreement to terminate the Amended Skincare Agreement, the Company and Exotropin 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 Exotropin’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 Exotropin for the Moisturizer. In connection with the Release, Exotropin retained the Moisturizer Prepayment made by the Company to Exotropin, and Exotropin 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 (see Note 14).
NOTE 7 – LEASE OBLIGATIONS
Finance Lease Obligations:
During March 2019, the Company entered into a lease agreement for certain lab equipment in the amount of $
F-16
During October 2021, the Company entered into a second lease agreement in the amount of $
On August 7, 2023, in connection with the Company’s sale, transfer and assignment of its Basalt lab location, certain equipment under the second lease agreement that remained at that location were assigned to the purchaser resulting in the reduction of the Company’s remaining aggregate lease obligations by $
As of October 31, 2024 and 2023, finance lease obligations were $
The weighted average remaining term of the Company’s finance lease as of October 31, 2024 was
Schedule of minimum lease payment to finance lease |
||||
| Year Ended October 31, | Minimum Rent | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total undiscounted finance lease payments | ||||
| Less: imputed interest | ( |
) | ||
| Present value of finance lease liabilities | $ | |||
NOTE 8 – RELATED PARTY TRANSACTIONS
For the year ended October 31, 2024 and 2023, the Company sold a total of approximately $
At October 31, 2023, advances payable to a former officer were $
In connection with the sale of securities to an Investor (see Note 12), 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 had the option until October 31, 2024 (subject to various conditions including the negotiation and execution of definitive agreements) to invest in a newly formed subsidiary through which ZEO intended to conduct clinical trials on its present and planned products. The option was not exercised and has expired.
F-17
During the year ended October 31, 2023, the Company invested $
NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| Schedule of account payable and accrued expenses | ||||||||
| October 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 | ||||||||
| October 31, 2024 |
October 31, 2023 |
|||||||
| Convertible Promissory Notes | $ | $ | ||||||
| Unamortized discount | ( |
) | ( |
) | ||||
| Total Notes Payable | $ | $ | ||||||
Promissory Note – SPA 23
On March 6, 2023, the Company entered into another Securities Purchase Agreement (“SPA 23”) with the Purchaser, pursuant to which we sold a promissory note in the principal amount of $
Pursuant to the terms of the SPA 23, the Company paid a commitment fee to the Purchaser (“Commitment Fee”) in the form of shares of the Company’s common stock (“Commitment Fee Shares”) and issued the Purchaser a Warrant exercisable for a five-year period to purchase up to shares of our common stock at a price of $ per share (“Warrant Shares”).
F-18
Upon the closing, the Company recorded a discount of the Promissory Note in the amount of $
Pursuant to the terms of the SPA 23, the Company granted certain piggyback registration rights under the Securities Act with respect to the Conversion Shares, the Warrant Shares and the Commitment Fee Shares.
Convertible Promissory Notes
During the period August 2023 through September 2023, the Company sold 2.9 Units (“Units”) to 4 investors in a private offering at a purchase price of $
Interest on the Convertible Promissory Notes are payable annually and together with the principal amount on the Maturity Date.
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 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 $
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.
The fair value of the Warrants issued was $
During the year ended October 31, 2024, the Company has paid $
The securities were offered and sold in a private offering exempt from the registration requirements of the Securities Act, pursuant to the exemptions from registration afforded by Rule 506(b) of Regulation D under the Securities Act.
F-19
NOTE 11 – INCOME TAXES
The Company files a consolidated federal income tax return that includes all of its subsidiaries. For the years ended October 31, 2024 and 2023, the Company incurred operating losses, and therefore, there was not any current income tax expense amount recorded during those periods.
The consolidated provision for income taxes for October 31, 2024 and 2023 consists of the following:
| Schedule of provision for income tax | ||||||||
| Year Ended October 31, 2024 |
Year Ended October 31, 2023 |
|||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Current Income Tax Expense (Benefit) | $ | $ | ||||||
| Deferred: | ||||||||
| Federal | $ | ( |
) | $ | ( |
) | ||
| State | ( |
) | ( |
) | ||||
| Deferred Income Tax Expense (Benefit) | ( |
) | ( |
) | ||||
| Change in Valuation Allowance | ||||||||
| Income tax provision | $ | $ | ||||||
Effective tax rates differ from the federal statutory rate of
| Schedule of effective income tax rate | ||||||||
|
October 31, 2024 |
October 31, 2023 |
|||||||
| Tax at federal statutory rate | $ | ( |
) | $ | ( |
) | ||
| State taxes, net of federal benefit | ( |
) | ( |
) | ||||
| Permanent differences | ||||||||
| Stock-based compensation | ||||||||
| Other | ( |
) | ||||||
| Total income tax expense (benefit) | ( |
) | ( |
) | ||||
| Change in valuation allowance | ||||||||
| Income tax provision | $ | $ | ||||||
The Company had a federal net operating loss carryover of $
The tax effects of temporary differences and carry-forwards that give rise to deferred tax assets and liabilities for the Company were as follows:
| Schedule of deferred tax assets and liabilities | ||||||||
| October 31, 2024 |
October 31, 2023 |
|||||||
| Deferred Tax Assets: | ||||||||
| Stock based compensation | $ | $ | ||||||
| Net operating loss carryforward-Federal | ||||||||
| Net operating loss carryforward-State | ||||||||
| Other | ||||||||
| Total deferred tax assets: | ||||||||
| Deferred Tax Liabilities: | ||||||||
| Property and equipment | ||||||||
| Total deferred tax liabilities: | ||||||||
| Valuation Allowance | ( |
) | ( |
) | ||||
| Net deferred tax assets | $ | $ | ||||||
F-20
FASB ASC 740 requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. At October 31, 2024 and October 31, 2023, the net deferred tax asset was offset by a full valuation allowance.
Pursuant to Code Sec. 382 of the Internal Revenue Code (“the Code”), the utilization of net operating loss carryforwards may be limited as a result of a cumulative change in stock ownership of more than 50% over a three-year period. The Company may be subject to such limitation.
IRS Penalties
As of October 31, 2023, the Company had accrued $
NOTE 12 – CAPITAL STOCK
Preferred Stock
The Company is authorized to issue shares of $ par value preferred stock in one or more designated series, each of which shall be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. The Company’s board of directors is authorized, without stockholders’ approval, within any limitations prescribed by law and the Company’s Articles of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock.
On August 17, 2022, the Company filed a Certificate of Designation for a newly created Series C Non-Convertible Preferred Stock consisting of shares, $ par value of authorized but unissued preferred stock of the Company (“Series C Preferred Shares”). The Company initially issued each of Skycrest and Greyt, 50 shares of the Series C Preferred Shares in connection with a “change in control” transaction” consummated in August 2022 (see Note 16). On December 17, 2024, the Company filed an Amendment (the “Amendment”) to the Certificate of Designation of our Series C Preferred Shares.
The Series C Preferred Shares vote together with shares of our common stock as a single class on all matters presented to a vote of stockholders and represent 51% of the voting control of the Company, except as required by law. The Series C Preferred Shares are not convertible into common stock, do not have any dividend rights and do have a nominal liquidation preference. The Series C Preferred Shares also have certain protective provisions, such as requiring the vote of a majority of Series C Preferred Shares to change or amend their rights, powers, privileges, limitations and restrictions, including the assignment of interests and redemption provisions.
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 $0.001 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
F-21
Issuances of Common Stock – Stock Based Compensation:
On December 1, 2022, the Company granted shares of common stock to an employee as provided for in the employment agreement valued at $ per share, the closing price of the common stock of the Company on the grant date. The Company recorded $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2023.
On December 29, 2022, the Company agreed to issue shares of common stock to a service provider in exchange for the provider providing discounts of 10% on all services provided retroactive to August 2022. The common stock granted was valued at $ based on the closing price of the common stock of the Company on the date of the agreement of $ per share. The Company recorded $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2023.
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 $ of stock-based compensation expense during the year ended October 31, 2024, 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 $
Equity Line Of Credit Commitment:
Pursuant to the Purchase Agreement dated as of September 1, 2022 (“Agreement”), by and between the Company and Tysadco Partners, LLC (“Tysadco”), to provide the Company with a $
On February 23, 2024, pursuant to the Purchase Agreement, the Company provided Tysadco formal notice that it was terminating the Agreement and the ELOC.
Grant of Unvested Restricted Common Stock:
2021 Plan
In September 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”). The 2021 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares (an “Award”) to any person who is an employee or director of, or consultant to the Company. The maximum aggregate number of shares that may be issued pursuant to all Awards was shares. On June 6, 2023, the Company’s board of directors and stockholders holding a majority of the Company’s voting power, approved an increase in the number of shares of the Company’s common stock reserved for issuance under the Company’s 2021 Plan from shares to shares.
F-22
The 2021 Plan is administered by (a) the board of the directors of the Company; or (b) a committee designated by the board, which Committee shall be constituted in such a manner as to satisfy the applicable laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the board. The board of directors may at any time amend, suspend, or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable laws.
As of October 31, 2024, a total of Awards (net of Awards redeposited for future issuance) that have been awarded under the 2021 Plan remain issued and outstanding. As of October 31, 2023, a total of Awards (net of Awards redeposited for future issuance) had been awarded under the 2021 Plan and were issued and outstanding.
A summary of unvested restricted stock activity for the years ended October 31, 2024 and 2023 are presented below:
| Schedule of non vested share activity | ||||||||||||
| Number of Non-vested Shares |
Fair Value | Weighted- Average Grant Date Value |
||||||||||
| Non-vested Shares at October 31, 2022 | $ | $ | ||||||||||
| Non-vested Shares Granted | $ | $ | ||||||||||
| Vested | ( |
) | $ | $ | ||||||||
| Expired/Forfeited | ( |
) | $ | $ | ||||||||
| Non-vested Shares at October 31, 2023 | $ | $ | ||||||||||
| Non-vested Shares Granted | $ | $ | ||||||||||
| Vested | $ | ( |
) | $ | ||||||||
| Expired/Forfeited | ( |
) | $ | $ | ||||||||
| Non-vested Shares at October 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 August 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 $
The Company recorded a total of $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2024, respectively.
There was approximately $
F-23
NOTE 13 – 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 years ended October 31, 2024 and 2023 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, 2022 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | ( |
) | $ | $ | ||||||||||||
| Outstanding at October 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | ( |
) | $ | $ | ||||||||||||
| Outstanding at October 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at October 31, 2024 | $ | $ | ||||||||||||||
During the year ended October 31, 2023, the Board approved the granting of options to purchase shares of its common stock to Dr. Leider, former Chief Executive Officer of the Company, Dr. Golub, former Chief Operating Officer of the Company and Ms. Swartz, Chief Product Officer of the Company in accordance with their employment agreements. The options are exercisable until the fifth anniversary date of the date of issuance and had an aggregate fair value of $
| Schedule of assumptions used for the options granted | ||||
| Exercise prices |
$ - $ |
|||
| Expected dividends | ||||
| Expected volatility | - | % | ||
| Risk free interest rate | - | % | ||
| Expected term of options | years |
During the year ended October 31, 2023, in connection with the resignation of the Company’s former Chief Executive Officer, Chief Operating Officer and a director, previously granted options in the aggregate of were forfeited.
During the year ended October 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
| Schedule of assumptions used | ||||
| Exercise prices |
$ - $ |
|||
| Expected dividends | ||||
| Expected volatility | - | % | ||
| Risk free interest rate | - | % | ||
| Expected term of options | years |
F-24
During the year ended October 31, 2024, all options issued to Dr. Leider, the former Chief Executive Officer, that were not vested amounting to 190,000 at the time of the expiration of his employment agreement on May 31, 2024, were forfeited. In addition, all options issued to Dr. Leider and Dr. Howard Golub, the former Chief Science Officer, an employee, that were vested amounting to , , and , respectively, at the time of the expiration of their employment agreements, were not exercised by August 31, 2024 as required under the Incentive Plan, and as a result expired.
During the year ended October 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 October 31, 2024 that will be amortized over their respective remaining service periods.
Warrants:
A summary of the Company’s warrant activity for the years ended October 31, 2024 and 2023 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, 2022 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | ( |
) | $ | - | $ | |||||||||||
| Outstanding at October 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | $ | - | $ | |||||||||||||
| Outstanding at October 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at October 31, 2024 | $ | $ | ||||||||||||||
2023 Warrants
As described in Note 10, in connection with the issuance of the SPA 23 on March 6, 2023, the Company issued the Purchaser’s commitment Warrant Shares exercisable for a five-year period at a price of $ per share. The Company valued the warrants on the dates of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate , (2) term of years, (3) expected stock volatility of , and (4) expected dividend rate of . All of the warrants vested immediately. The grant date fair value of the warrants issued was $. The Company recorded $ as a loan discount which was amortized over the term of the SPA 23.
As described in Note 10, during the period August 2023 through September 2023, the Company sold 2.9 Units (“Units”) to 4 investors in a private offering at a purchase price of $250,000 per Unit for an aggregate purchase price of $
2024 Warrants
On July 8, 2024, in connection with the Financing (see Note 12), the Company issued the Investor a cashless warrant to purchase an aggregate of
F-25
On July 11, 2024, the Company granted warrants to purchase
In August 2024, the Company entered into an 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
During the year ended October 31, 2024 and 2023, the Company amortized $ and $, respectively, of stock compensation costs associated with warrants issued.
There was approximately $ of unamortized compensation associated with warrants outstanding as of October 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.
NOTE 14 – 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 $
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 Exotropin. 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 $
During November 2023, the Supplier paid the Company $
F-26
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”). As of the date of the Settlement, both the Company and Exotropin had yet to deliver the Ingredient or the Moisturizer to the Supplier. 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 Exotropin 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 Exotropin’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 Exotropin for the Moisturizer. In connection with the Release, Exotropin retained the Moisturizer Prepayment that was paid by the Company of $235,000 in November 2023, and Exotropin 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.
As a result of the above settlements, the Company has recorded $
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. As of October 31, 2023, $101,000 of product inventory was invoiced and delivered reducing the deferred revenue amount to $399,000. During the period November 1, 2023 thru July 29, 2024, $399,000 of product inventory was invoiced and delivered, reducing the deferred revenue balance to $0. On August 5, 2024, the Purchaser prepaid an amount of $375,000 to the Company which is to be applied against future invoices for specific product inventory to be delivered over time which amount was initially recorded as deferred revenue. As of October 31, 2024, $132,000 of product inventory was invoiced and delivered reducing the deferred revenue amount to $
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.
Amounts received by the Company for products that have yet to be delivered to the customers as of October 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 | ||||||||
| October 31, 2024 |
October 31, 2023 |
|||||||
| Advances On Future Purchases Of Inventory | $ | $ | ||||||
| Sales To Customers Not Yet Delivered | ||||||||
| Total Deferred Revenue | $ | $ | ||||||
F-27
Legal Matters
SEC Matter
On June 17, 2021, the Company received a subpoena dated June 14, 2021, from the Atlanta Regional Office of the SEC requiring the production of certain documents and communications in connection with the treatment and results of various COVID-19 patients, as discussed in the Company’s Current Reports on Form 8-K filed with the SEC during the period from May 27, 2020 through May 11, 2021. The Company fully cooperated with the SEC’s investigation.
On November 25, 2024, the SEC notified the Company that it had concluded its investigation and does not intend to recommend an enforcement action by the Commission against the Company.
Daniel Pepock and Tracy Yourke
The Company terminated the employment agreements with the former Sales Executives Daniel Pepock (“Pepock”) and Tracy Yourke (“Yourke”) effective June 30, 2022. On August 22, 2022, Mr. Pepock, Ms. Yourke and the Company agreed to a material settlement term sheet (“Settlement”) which provided for the resolution and full settlement and release of all claims among the parties and for the Company to buy back all of the shares of common stock of the Company issued to and owned by Mr. Pepock and Ms. Yourke at the time of the Settlement (represented by Mr. Pepock and Ms. Yourke to be in excess of shares) in exchange for a payment by the Company of $
Albert Mitrani and Dr. Maria Ines Mitrani
On June 7, 2023, the Company filed a four-count complaint with the Seventeenth Judicial Circuit in and for Broward County, Florida against Albert Mitrani and Dr. Maria Ines Mitrani, co-founders of the Company. Albert Mitrani was a former director and executive officer of the Company (most recently serving as Chief Executive Officer from September 2019 to July 2022 and as Executive Vice President of Sales from July 2022 until his termination in May 2023) and Dr. Mitrani is a former director and former executive officer of the Company (serving as Chief Science Officer from November 2016 until her termination in April 2023). The complaint alleges (i) breach of contract; (ii) breach of fiduciary duty; and (iii) tortious interference with business relationships; and seeks injunctive relief, in connection with, inter alia, non-solicitation and non-competition violations, misappropriation of Company materials and proprietary information resulting in unjust enrichment, causing detriment to business relationships and goodwill towards customers and physicians, self-dealing and misconduct afoul to the Company’s business interests as members of the Company’s board of directors, executive officers and minority equity interest holders—all causing irreparable harm to the Company. The complaint seeks injunctive relief, in addition to both compensatory and punitive damages.
Effective November 13, 2023, the Company entered into a settlement agreement with Albert Mitrani and Dr. Maria Ines Mitrani, 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 the Company’s common stock held by them respectively and the parties exchanged mutual releases.
Consultants
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 $
F-28
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.
On November 19, 2024, Howard Golub, M.D., (“Plaintiff”), filed a complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida against the Company, alleging a breach of contract as a result of the Company’s failure to pay Plaintiff severance in the amount of $
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 15 – OTHER INCOME
| Schedule of other Income | ||||||||
| Year Ended October 31, |
||||||||
| 2024 | 2023 | |||||||
| Other income (expense) | ||||||||
| Gain on write-off of advances payable to former officer and settlement on outstanding payables (see Note 8) | $ | $ | ||||||
| Gain, net of obligations in connection with termination of supply agreement (see Note 14) | ||||||||
| Resolution and settlement of long outstanding payables | ||||||||
| Commissions on sales of Exotropin products | ||||||||
| Proceeds from insurance claim | ||||||||
| Other | ( |
) | ||||||
| Total | $ | $ | ( |
) | ||||
NOTE 16 – SUBSEQUENT EVENTS
Series C Preferred Shares
During December 2024, Skycrest requested that it be allowed to transfer the 50 shares of Series C Preferred Shares of the Company it holds to Ian T. Bothwell, the Company’s Interim Chief Executive Officer and Chief Financial Officer (“Transfer”). In December 2024, the Board of Directors of the Company approved the Transfer and the Transfer was completed.
F-29
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Controls and Procedures.
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 31, 2023, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
General
Our management (currently Ian Bothwell, our Interim Chief Executive Officer and Chief Financial Officer) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of October 31, 2024, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework of 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.
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Based on that evaluation under this framework, our management concluded that as of October 31, 2024, our internal control over financial reporting was not effective because of the following material weaknesses:
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which there is insufficient independent review of duties performed. |
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which do not have the ability to implement internal controls over the granting of access to our IT environment. |
| ● | As a result of the limited number of accounting personnel, we rely on inexperienced staff and outside consultants for the preparation of our financial reports, including tax preparation, which could require adjustments and lead to overlooking items requiring disclosure. |
| ● | As a result of the Company’s limited financial and personnel resources, there may be difficulties in timely analyzing and identifying potential operational and disclosure transactions within management and to comply with financial reporting regulations. |
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have expanded our accounting and administrative support staff during the fiscal year ended October 31, 2024. We also continue to engage outside tax consultants to assist in advising the Company in tax matters on an ongoing basis.
If and when the Company obtains sufficient capital resources, the Company intends to hire additional personnel with sufficient U.S. GAAP knowledge and business experience and to segregate appropriate duties among them. The Company has also begun efforts to further automate its accounting, sales ordering and inventory management functions.
Our board of directors consists of a majority of independent directors. We have also established an audit committee of our board of directors consisting of two independent directors, which is responsible for the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management). We plan to seek additional independent director candidates in the proximate future.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls
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 fourth quarter ended October 31, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
| (a) | None. |
| (b) | During the fiscal quarter ended October 31, 2024, none of our officers or directors, as defined in Rule 16a-1(f), informed us of the adoption, modification or termination of any “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K. |
The Company has adopted insider trading policies and procedures governing the purchase, sale and/or other dispositions of our securities by directors, officers, employees, and the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations and listing standards.
During the fiscal quarter ended October 31, 2024, the Company
has not
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Below are the names of and certain information regarding the Company’s current executive officers and directors:
| Name: | Age: | Position: | Director or Officer Since: | |||
| Ian T. Bothwell | 64 | Interim Chief Executive Officer Chief Financial Officer and Director | November 4, 2016 | |||
| Dr. George Shapiro | 64 | Chief Medical Officer and Director | February 7, 2019 | |||
| Chuck Bretz | 67 | Director – Chairman of the Board | September 23, 2022 | |||
| Gurvinder Pal Singh | 63 | Director | September 23, 2022 | |||
| S. Jerry Glauser | 77 | Director | September 23, 2022 | |||
| Leathem Stearn | 76 | Director | September 23, 2022 |
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
Executive officers are appointed by, and serve at the pleasure of, the board of directors of the Company, subject to any contractual arrangements.
Professional Experience
Ian T. Bothwell was elected as a member of the board of directors of the Company effective September 11, 2019. Mr. Bothwell previously served as a member of the board of directors of the Company from March 8, 2017 until his resignation in April 2018, when the Company executed a Plan and Agreement of Reorganization. Mr. Bothwell serves as the Interim Chief Executive Officer (since June 1, 2024) and Chief Financial Officer of the Company (since November 4, 2016). In addition, he previously served as Interim Chief Executive Officer of the Company from November 22, 2022, until June 6, 2023. From 2003 through November 2015, Mr. Bothwell served in various executive positions for Central Energy GP LLC, the general partner of Central Energy Partners LP, a previously publicly traded master limited partnership. From July 2007 through November 2015, Mr. Bothwell served as President and a director of Regional Enterprises, Inc. Since April 2007, Mr. Bothwell has served as the President and controlling member of Rover Advanced Technologies, LLC, a company formed to provide management solutions to the public transportation industry. Since 2015, Mr. Bothwell has also served as the President and controlling member of CountOnMe Inc., a company that provides software solutions for the educational industry. Mr. Bothwell received his Bachelor of Science in Business Administration from Boston University in 1984.
Dr. George Shapiro was elected as a member of the board of directors of the Company effective February 2019. Since September 2018, Dr. Shapiro has served as the Company’s Chief Medical Officer. George C. Shapiro has been in practice for over 27 years. His career in medicine began in 1988 when he graduated from New York Medical College. An internship and residency then followed at Albert Einstein college of Medicine, after which, Dr. Shapiro completed a Cardiovascular Disease fellowship at Columbia University College of Physicians and Surgeons in 1994. Dr. Shapiro is currently a cardiologist in private practice.
Chuck Bretz became a director of the Company and Vice Chairman of the Board on September 23, 2022. Mr. Bretz has been a practicing attorney for the last 40 years in both the private and public sectors. Since 1999, Mr. Bretz, has been a principal of the Joliet, Illinois law firm he founded, which is now known as Chuck Bretz & Associates, P.C. The firm advises various businesses in multiple commercial and real estate matters. Mr. Bretz is also currently actively involved in advising entrepreneurs across the country in structuring and negotiating business and real estate transactions.
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Gurvinder Pal Singh joined our Board of Directors on September 23, 2022, has over 35 years of professional experience in business strategy, corporate finance and financial accounting covering varied areas such as mergers and acquisitions, statutory compliance, capital raising, budgeting and internal controls, audit, financial management, risk management, investor relations and tax planning. Since 1996, he has served as Chief Finance Officer of Modi Holdings, whose holdings include various companies in India, Singapore and the U.S., in the fields of mobile services, mobile devices, mobile retain, healthcare, new energy and wellness. Mr. Singh is a graduate of the University of New Delhi and a Chartered Accountant in India.
S. Jerry Glauser joined the Company’s board of directors on September 23, 2022. He has been in the automobile business for 50 years, starting in the family business in South New Jersey. In 1973, Mr. Glauser bought his first dealership in Sarasota Florida and over the next three decades expanded to ownership of a dozen dealerships in Florida. In 2004, he sold his Florida dealerships and acquired a Mercedes-Benz dealership in Denver, Colorado, which he sold in 2006. He then bought a Mercedes-Benz dealership in Houston, Texas, which he operated until its sale. For the last eight years, Mr. Glauser has been a private investor in various biotech companies and real estate ventures.
Leathem Stearn joined the board of directors on September 23, 2002. Since 1970, Mr. Stearn been an inventor, designer, entrepreneur and investor in various industries and with multiple companies. In 1986, Mr. Stearn founded Scunci International, LLC, where he developed the “Scrunchy” product and Scunci Brand of women hair accessories. He managed the Company until its sale in 1988, but continues to hold and license the Scunci Trademark® world-wide. From 1992 to1995, Mr. Stearn was a partner and CEO of Artnet, a company which he co-founded that became the leading art information company in the Art industry. Mr. Stearn has also founded or co-founded, developed and managed a number of other ventures including; Showcase International, LLC (from 1989 to 1992), which developed the first entertainment industry multi-media portfolio database; Smith Stearn Yachts LLC (from 2004 to 2010), which developed and operated a yacht sharing business and a number of other companies in the maritime industry.
Family Relationships
None.
Board Committees
The Board has established three standing committees; an audit committee, a compensation committee and a nominating and corporate governance committee. The members of the audit committee are Messrs. Singh and Glauser, with Mr. Singh acting as Chairman, the members of the compensation committee are Mr. Bretz and Mr. Stearn, with Mr. Bretz acting as Chairman and the members of the nominating and corporate governance committee are Messrs. Bretz and Singh, with Mr. Bretz serving as Chairman.
Independence
The Board has determined that each of our non-executive directors is “independent” within the meaning of the applicable rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market.
In addition, we believe Mr. Singh qualifies an “audit committee financial expert” as the term is defined by the applicable rules and regulations of the SEC and the Nasdaq Stock Market listing standards, based on his business professional experience in the financial and accounting fields. At the time of the listing of our common stock for trading on the Nasdaq Stock Market, we are required to certify to the Nasdaq Stock Market, that our audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with under Section 16 of the Exchange Act during the fiscal year ended October 31, 2024 and up through the date of this Annual Report, except that Mr. Albert Mitrani and Dr. Maria Ines Mitrani, former directors and executive officers of the Company have not filed Form 4 reports with respect to 682,161 and 481,831 of our common stock held by them, respectively, which was returned to the Company on November 14, 2023, in connection with the settlement of various claims the Company had against the Mitranis.
Rule 10b5-1 Trading Arrangements
During the quarter ended October 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
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Item 11. Executive Compensation.
The following table sets forth information concerning the total compensation paid or accrued by the Company during the last two fiscal years indicated to (i) all individuals that served as the Company’s principal executive officer or acted in a similar capacity for the Company at any time during the fiscal years ended October 31, 2024 and October 31, 2023; (ii) all individuals that served as the Company’s principal financial officer or acted in a similar capacity for the Company at any time during the fiscal years ended October 31, 2024 and October 31, 2023; and (ii) the other individuals who were serving as executive officers of the Company at the end of the fiscal year ended October 31, 2024 whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All
Other Consideration ($) |
Total
Actually Received ($) |
||||||||||||||||||||||||||
| Harry Leider, MD | 2024 | 189,583 | -0- | -0- | 133,000 | (1) | -0- | -0- | 47,199 | (7) | 369,782 | ||||||||||||||||||||||||
| Former Chief Executive Officer(1) | 2023 | 135,584 | -0- | -0- | 95,000 | (1) | -0- | -0- | 4,383 | (7) | 234,967 | ||||||||||||||||||||||||
| Ian T. Bothwell, | 2024 | 245,461 | -0- | -0- | 59,487 | (2) | -0- | -0- | 19,222 | (8) | 324,170 | ||||||||||||||||||||||||
| Interim Chief Executive Officer and Chief Financial Officer(2) | 2023 | 166,667 | -0- | -0- | -0- | -0- | -0- | 41,648 | (8) | 208,315 | |||||||||||||||||||||||||
| Matthew Sinnreich, | 2024 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||
| Former Acting Chief Executive Officer(3) | 2023 | -0- | -0- | 49,618 | (3) | -0- | -0- | -0- | -0- | 49,618 | (3) | ||||||||||||||||||||||||
| Howard Golub, | 2024 | 87,500 | -0- | -0- | 350,000 | (4) | -0- | -0- | -0- | 437,500 | |||||||||||||||||||||||||
| (Former) Chief Science Officer and Executive Vice President(4) | 2023 | 62,500 | -0- | -0- | 250,000 | (4) | -0- | -0- | -0- | 312,500 | |||||||||||||||||||||||||
| Dr. George Shapiro, | 2024 | 146,667 | -0- | -0- | 59,487 | (5) | -0- | -0- | -0- | 206,154 | |||||||||||||||||||||||||
| Chief Medical Officer(5) | 2023 | 100,000 | -0- | -0- | -0- | -0- | -0- | -0- | 100,000 | ||||||||||||||||||||||||||
| Albert Mitrani - | 2024 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||
| Former Chief Executive Officer(6) | 2023 | 93,750 | -0- | -0- | -0- | -0- | -0- | 22,834 | (9) | 116,584 | |||||||||||||||||||||||||
| (1) | Dr. Leider served as Chief Executive Officer of the Company from June 6, 2023 until May 31, 2024. During the year ended October 31, 2023, Dr. Leider received an option to purchase 285,000 shares of common stock of the Company with an aggregate grant value of $684,000, of which 55,417 options ($133,000) and 39,583 options ($95,000) was vested for the years ended October 31, 2024 and 2023, respectively. See Note 13 to the October 31, 2024 audited consolidated financial statements for a description of the assumptions used in determining the value of the options granted. |
All options issued to Dr. Leider, that were not vested amounting to 190,000 at the time of the expiration of his employment agreement were forfeited. In addition, all options issued to Dr. Leider that were vested amounting to 95,000 at the time of the expiration of his employment agreement, were not exercised by August 31, 2024 as required under the Incentive Plan, and as a result expired.
| (2) | Mr. Bothwell has served as Interim Chief Executive officer since June 1, 2024 and Chief Financial Officer of the Company since November 4, 2016. From November 22, 2022, through June 6, 2023, he served as Interim Chief Executive Officer. During the year ended October 31, 2024, Mr. Bothwell received an option to purchase 125,000 shares of common stock of the Company with an aggregate grant value of $293,750, of which 24,306 options ($133,000) was vested for the year ended October 31, 2024. See Note 13 to the October 31, 2024 audited consolidated financial statements for a description of the assumptions used in determining the value of the options granted. |
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| (3) | Matthew Sinnreich served as Acting Chief Executive Officer and Chief Operating Officer of the Company from July 21, 2022 to September 23, 2022 and as Acting Chief Executive Officer and President from September 23, 2022 to November 22, 2022, when he resigned. Mr. Sinnreich was also issued 120,000 shares of common stock of the Company in lieu of any cash salary during his first year of employment with an aggregate grant value of $823,200, of which 7,233 ($49,618) was vested for the year ended October 31, 2023. In July 2023, Mr. Sinnreich paid the Company $50,000 and returned to the Company all shares and options to purchase shares previously issued in connection with his employment agreement. | |
| (4) | Dr. Golub served as Vice President and Chief Science Officer of the Company from June 6, 2023 until May 31, 2024. During the year ended October 31, 2023, Dr. Golub was issued a warrant to purchase 250,000 shares of common stock of the Company with an aggregate grant value of $600,000, of which 145,833 warrants ($350,000) and 104,167 warrants ($250,000) was vested for the years ended October 31, 2024 and 2023, respectively. See Note 13 to the October 31, 2024 audited consolidated financial statements for a description of the assumptions used in determining the value of the options granted. |
All options issued to Dr. Golub that were vested amounting to 250,000 at the time of the expiration of his employment agreement, were not exercised by August 31, 2024 as required under the Incentive Plan, and as a result expired.
| (5) | Dr. George Shapiro has served as the Chief Medical Officer of the Company since September 2018. During the year ended October 31, 2024, Dr. Shapiro received an option to purchase 125,000 shares of common stock of the Company with an aggregate grant value of $293,750, of which 24,306 options ($133,000) was vested for the year ended October 31, 2024. See Note 13 to the October 31, 2024 audited consolidated financial statements for a description of the assumptions used in determining the value of the options granted. | |
| (6) | Albert Mitrani served as Chief Executive Officer from September 2019 until July 21, 2022 when he stepped down from that position and assumed the position of Executive Vice President of Sales. Mr. Mitrani was terminated in May 2023. | |
| (7) | Dr. Leider received benefits totaling approximately $7,199 and $4,383 during fiscal years ended October 31, 2024 and 2023, respectively. 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. | |
| (8) | Ian Bothwell received benefits totaling approximately $19,222 and $41,648 during fiscal years ended October 31, 2024 and 2023, respectively. | |
| (9) | Albert Mitrani and his wife, Dr. Maria I. Mitrani, former Chief Science Officer of the Company received benefits totaling approximately $0 and $22,834 during fiscal years ended October 31, 2024 and 2023, respectively. |
We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.
In response to Item 402(x)(1) of Regulation S-K, the Company does not currently grant new awards of stock options, stock appreciation rights, or similar option-like instruments within four business days before or one business day after the release of a Form 10-Q, 10-K, or 8-K that discloses material nonpublic information (MNPI). Accordingly, the Company has no specific policy or practice on the timing of awards of such options in relation to the disclosure of MNPI by the Company. In the event the Company determines to grant new awards of such options, the Board will evaluate the appropriate steps to take in relation to the foregoing.
Executive Employment Agreement
The Company is party to an executive employment agreement with Ian T. Bothwell, our Interim Chief Executive Officer and Chief Financial Officer.
Mr. Bothwell’s executive employment agreement, as amended to date, provides for a term expiring on December 31, 2025, an annual base salary currently fixed at $250,000. Mr. Bothwell’s executive employment agreement contains customary confidentiality and non-competition covenants. and specified expense reimbursement allowances.
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Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Name (a) |
Number of Securities Underlying Unexercised Options Exercisable (b) |
Number of Securities Underlying Unexercised Options Unexercisable (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (d) |
Option Exercise Price (e) |
Option Expiration Date (f) |
Stock Awards Number of Shares or Units of Stock That Have Not Vested (g) |
Market Value of Shares or Units of Stock That Have Not Vested (h) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (i) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested (j) |
|||||||||||||||||||||||||
| Ian T. Bothwell | 37,500 | - | - | $ | 5.60 | 02/26/30 | - | - | - | $ | - | |||||||||||||||||||||||
| 150,000 | - | - | $ | 4.00 | 07/13/32 | - | - | - | $ | - | ||||||||||||||||||||||||
| 24,306 | - | 100,694 | $ | 2.35 | 07/10/34 | - | - | - | $ | - | ||||||||||||||||||||||||
| Dr. George Shapiro | 15,750 | - | - | $ | 4.00 | 07/13/32 | - | - | - | $ | - | |||||||||||||||||||||||
| 24,306 | - | 100,694 | $ | 2.35 | 07/10/34 | - | - | - | $ | - | ||||||||||||||||||||||||
2021 Plan
In September 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”). The 2021 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares (an “Award”) to any person who is an employee or director of, or consultant to the Company. The maximum aggregate number of shares that may be issued pursuant to all Awards was 1,250,000 shares. On June 6, 2023, the Company approved an increase in the number of shares of the Company’s common stock reserved for issuance under the Company’s 2021 Plan from 1,250,000 shares to 2,500,000 shares.
The 2021 Plan is administered by (a) the board of the directors of the Company; or (b) a committee designated by the board, which Committee shall be constituted in such a manner as to satisfy the applicable laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the board. The board of directors may at any time amend, suspend, or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable laws.
As of October 31, 2024, a total of 1,386,288 Awards (net of 1,211,500 Awards redeposited for future issuance) that have been awarded under the 2021 Plan remain issued and outstanding.
Compensation of Directors Table
The following table summarizes all compensation paid to our non-executive directors for the fiscal year ended October 31, 2024.
| Name | Fees Earned Or Paid In Cash ($) |
Option/Equity Awards (#) |
Non-Equity Plan Compensation ($) |
Non-Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
||||||||||||||||||
| Chuck Bretz | - | 55,000 | - | - | - | - | ||||||||||||||||||
| Jerry Glauser | - | 380,000 | - | - | - | - | ||||||||||||||||||
| Leathem Stearn | - | 255,000 | - | - | - | - | ||||||||||||||||||
| Gurvinder Pal Singh | - | 5,000 | - | - | - | - | ||||||||||||||||||
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Narrative Disclosure to the Director Compensation Table
Each of our non-executive directors will be party to a Director’s Service Agreement. Pursuant to that agreement, non-employee directors will be compensated for their services by the annual issuance of warrants to acquire up to 5,000 shares of the Company’s common stock at an exercise price equal to fair market value of the common stock as of the date of grant (the “Director Warrants”). The Director Warrants shall be exercisable for a period of ten (10) years from the date of grant and shall vest in equal monthly installments of 416.67 shares, subject to continued service by the director as a member of the board of directors. The agreement will also provide for indemnification of directors to the fullest extent permitted by Nevada law.
It is contemplated that non-executive directors will be granted a comparable amount of Director Warrants or stock options for each year of service. The Company has not yet authorized or issued Director Warrants or stock options for the third year of service of its non-executive directors, which commenced on September 23, 2024.
Non-employee directors are also reimbursed for out-of-pocket costs incurred in connection with attending meetings.
Other Issuances
On April 1, 2024, pursuant to the 2021 Plan, the Board awarded 125,000 and 62,500 shares of common stock to Jerry Glauser and Leatham Stern or their nominees, respectively (“Stock Grants”). The Stock Grants vest in full as of the date of the grant.
On July 11, 2024, pursuant to the 2021 Plan, the Board granted options to purchase 125,000 shares, 125,000 shares and 50,000 shares of common stock (“Options”) to Jerry Glauser, Leatham Stern and Chuck Bretz or their nominees, respectively. The Options vest in equal monthly installments over a period of eighteen (18) months from the date of grant, subject to continued service to the Company. Once vested, the Options are exercisable for a period of ten (10) years from the date of grant at an exercise price of $2.35 per share (subject to adjustment for stock splits, stock dividends and similar recapitalization events) and are subject to the other terms of the 2021 Plan.
Code of Ethics
Due to our small size, we have not adopted a Code of Ethics and Business Conduct that applies to our officers, directors and employees. We intend to adopt a Code of Ethics and Business Conduct in the near future as we grow our operations and hire additional employees.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of January 28, 2025, the beneficial ownership of our common stock by each director and executive officer, by each person known by us to beneficially own 5% or more of our common stock and by directors and executive officers as a group. Unless otherwise stated, the address of the persons set forth in the table is c/o the Company, 3321 College Ave, Suite 246, Davie, Florida 33314:
| Officers and Directors | Title | Shares | % of Class(1) |
% of Voting Power(2) |
||||||||||
| Ian Bothwell(3) | Interim Chief Executive Officer and Chief Financial Officer and Director | 986,622 | 14.97 | % | 32.83 | % | ||||||||
| Dr. George Shapiro(4) | Chief Medical Officer and Director | 477,799 | 7.44 | % | 3.65 | % | ||||||||
| Chuck Bretz(5) | Director – Chairman of the Board | 33,611 | * | * | ||||||||||
| Jerry Glauser(6) | Director | 327,362 | 5.10 | % | 2.50 | % | ||||||||
| Leathem Stearn(7) | Director | 197,362 | 3.08 | % | 1.51 | % | ||||||||
| Gurvinder Pal Singh(8) | Director | 10,000 | * | * | ||||||||||
| All officers and directors as a group (6 persons) | 2,032,755 | 29.68 | % | 40.05 | % | |||||||||
| Other 5% or Greater Stockholders | ||||||||||||||
| Greyt Ventures LLC(9) | 1,165,278 | 16.05 | % | 33.36 | % | |||||||||
| Dr. Bhupendra Kumar Modi(10) | 500,000 | 7.88 | % | 3.86 | % | |||||||||
| Gary Kompothecras(11) | 333,333 | 5.19 | % | 2.54 | % | |||||||||
| * | Less than 1%. |
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| (1) | Based on 6,344,817 shares of vested common stock outstanding as of January 28, 2025. |
| (2) | Based on 6,344,817 shares of vested common stock and 100 Series C Preferred Shares outstanding as of January 28, 2025. The shares of common stock and the Series C Preferred Shares vote together as a single class on all matters presented to stockholders, except as required by Nevada law. Each Series C Preferred Share entitles the holder to 51.0% of the combined voting power of the Company’s capital stock and an aggregate of 51.0% for all 100 Series C Preferred Shares outstanding, notwithstanding the number of shares of common stock outstanding. |
| (3) | Includes vested warrants to purchase 37,500 shares of common stock of the Company, vested options to purchase 195,139 shares of common stock of the Company under the Plan, options to purchase 13,889 shares of common stock of the Company under the Plan that vest within sixty (60) days of January 28, 2025 and 50 Series C Preferred Shares. |
| (4) | Includes vested options to purchase 60,889 shares of common stock of the Company under the Plan and options to purchase 13,889 shares of common stock of the Company under the Plan that vest within sixty (60) days of January 28, 2025. |
| (5) | Includes vested options to purchase 28,056 shares of common stock of the Company under the Plan and options to purchase 13,889 shares of common stock of the Company under the Plan that vest within sixty (60) days of January 28, 2025. |
| (6) | Includes vested options to purchase 55,139 shares of common stock of the Company under the Plan and options to purchase 13,889 shares of common stock of the Company under the Plan that vest within sixty (60) days of January 28, 2025. |
| (7) | Includes 125,000 shares of common stock held of record by Stearn Enterprises LLC, of which Mr. Stearn is the sole beneficial owner. Includes vested options to purchase 55,139 shares of common stock of the Company under the Plan and options to purchase 13,889 shares of common stock of the Company under the Plan that vest within sixty (60) days of January 28, 2025. |
| (8) | Includes vested options to purchase 10,000 shares of common stock of the Company under the Plan. |
| (9) | 20533 Biscayne Blvd., Suite 648, Aventura, FL 33180. Represents 250,000 shares of common stock, vested warrants to purchase 876,389 shares of common stock, warrants to purchase 38,889 shares of common stock of the Company that vest within sixty (60) days of January 28, 2025 and 50 Series C Preferred Shares held of record by Greyt Ventures LLC, of which Ms. Wendy Grey is the sole member and manager. |
| (10) | 6 Marina Boulevard # 63-18, Singapore 018985. Represents 250,000 shares of common stock held of record by Beyond 100 FZE and 250,000 shares of common stock held of record by Smart Co. Holding Pte. Ltd., each of which Dr. Modi is the sole beneficial owner. |
| (11) | 6910 Point of Rocks Rd., Sarasota, FL 34242. Represents 250,000 shares of common stock and warrants to purchase 83,333 shares of common stock held of record by Gary Kompothecras and Elizabeth Kompothecras Joint Tenants By Entireties. |
The Company has not received any other filings by a third party indicating beneficial ownership of more than 5% of our outstanding voting capital stock that are not listed herein.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. Beneficial ownership is determined in accordance with SEC rules and includes only vested securities and those securities which a person or entity may have the right to acquire and/or vest in the next 60 days, but excludes shares of common stock underlying options or other convertible securities held by any other person. Except as noted otherwise, the amounts reflected above are based upon information provided to the Company and filings with the SEC.
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Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Board Stock Compensation Plan(1) | -0- | - | 22,570 | |||||||||
| 2021 Equity Incentive Plan | 772,538 | $ | 2.70 | 1,113,712 | ||||||||
| (1) | The Company is no longer using the Board Stock Compensation Plan to compensate its non-executive directors. |
Item 13. Certain Relationships and Related Transactions and Director Independence.
Review, Approval and Ratification of Related Party Transactions
Review, approval, or ratification of transactions with our executive officers, directors and significant stockholders are subject to approval or ratification by a majority of disinterested directors. Once our board of directors is comprised of a majority of independent directors, we anticipate that such transactions will require approval or ratification by a majority of our independent directors or a committee of the board of directors consisting of independent directors.
Reimbursements
In connection with Mr. Bothwell’s executive employment agreement, the Company agreed to reimburse Rover Advanced Technologies, LLC (“Rover”), a company owned and controlled by Mr. Bothwell for office rent and other direct expenses (phone, internet, copier and direct administrative fees, etc.) totaling $0 and $41,648 for the years ended October 31, 2024 and 2023, respectively.
Advances by Executive Officer
Manuel Iglesias, the Company’s former Chief Executive Officer, and/or his affiliates (“Iglesias”) previously advanced funds to the Company to pay for certain expenses of the Company. At October 31, 2023, advances payable to Iglesias were $221,000. The advances were non-interest bearing and there were no formal arrangements regarding the repayment of the advances. During the year ended October 31, 2024, the Company had determined that the statute of limitations had run for the ability of Iglesias to enforce a claim to collect the advances. As a result, the Company wrote-off the full balance of the advances payable to Iglesias of $221,000. The Company recorded the write-off as other income during the year ended October 31, 2024.
Interests in Affiliated Entities
During the year ended October 31, 2023, the Company invested $100,000 in cash (representing a 10% equity interest at the time of the investment) in the non-marketable equity securities of Exotropin LLC, a privately held skin-care formulator (“Exotropin”). Both Greyt, a principal shareholder of the Company and Skycrest, a former principal shareholder of the Company, each owned a 20% interest in Exotropin. In addition, Mr. Robert Smoley, a consultant and advisor to the Company was also the Chief Operating Officer of Exotropin (until November 2024). In addition, the Company’s Chief Medical Officer was granted an option to acquire up to 200,000 membership interests in Exotropin, of which 100,000 vested immediately and the remaining $100,000 will vest based on future sales of Exotropin attributed to the Chief Medical Officer. The option price is $20,000 for the 200,000 membership interests.
57
During the year ended October 31, 2024, pursuant to a capital call notice received from Exotropin, the Company invested an additional $45,000 in cash (representing its 8.96% equity interest at the time of the capital call).
During November 2024, the Company received a capital call notice from Exotropin, in which the Company’s pro-rata share was $126,000 (“November Capital Call”). The Company has yet committed to participating in the November Capital Call. If the Company does not elect to participate, its interest in Exotropin would be reduced to approximately 5.6% based on all other members fulling participating in the November Capital Call.
The Company and Exotropin also have entered into arrangements and intend to continue to collaborate on future opportunities on a case-by-case basis in connection with the development, sales and/or distribution of products.
Sales to Related Parties
For the year ended October 31, 2024 and 2023, the Company sold a total of approximately $199,000 and $181,000 of product to a management services organization (“MSO”) that provides administrative services and contracts for medical supplies for several medical practices, of which Dr. George Shapiro, the Company’s Chief Medical Officer and a member of the board of directors has an indirect economic interest in the parent company that owns the MSO.
Transfer Of Series C Preferred Stock
In December 2024, Skycrest requested that it be allowed to transfer the 50 shares of Series C Preferred Shares of the Company it holds to Ian T. Bothwell, the Company’s Interim Chief Executive officer and Chief Financial officer (“Transfer”). In December 2024, the Board of Directors of the Company approved the Transfer and the Transfer was completed.
Item 14. Principal Accounting Fees and Services.
Weinberg & Company P.A. (“Weinberg”) as served as the Company’s independent registered public accounting firm for the fiscal years ended October 31, 2024 and October 31, 2023.
Audit Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2024 and October 31, 2023 for professional services rendered by Weinberg for their audit of our annual financial statements and review of financial statements included in our quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
| Fiscal Year Ended October 31, 2024: | $ | 150,000 | ||
| Fiscal Year Ended October 31, 2023: | $ | 150,000 |
Audit-Related Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2024 and October 31, 2023 for assurance and related services by Weinberg that are reasonably related to the performance of the audit or review of the registrant’s financial statements and are not reported under Item 9(e)(1) of Schedule 14A.
| Fiscal Year Ended October 31, 2024: | $ | 10,300 | ||
| Fiscal Year Ended October 31, 2023: | $ | 25,000 |
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Tax Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2024 and October 31, 2023 for professional services rendered by Weinberg for tax compliance, tax advice, and tax planning.
| Fiscal Year Ended October 31, 2024: | $ | 25,000 | ||
| Fiscal Year Ended October 31, 2023: | $ | 25,213 |
All Other Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2024 and October 31, 2023 for products and services provided by Weinberg, other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A.
| Fiscal Year Ended October 31, 2024: | $ | - | ||
| Fiscal Year Ended October 31, 2023: | $ | - |
Pre-Approval Policies and Procedures
We have not used Weinberg for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We did not engage Weinberg to provide compliance outsourcing services.
Our Board pre-approves all services provided by our independent registered public accounting firms. All of the above services and fees were reviewed and approved by the Board either before or after the respective services were rendered. The Board has considered the nature and amount of fees billed by Weinberg and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independence.
59
PART IV
Item 15. Exhibits and Financial Statement Schedules.
The following documents are filed as part of this Report:
| (1) | Financial Statements. The following consolidated financial statements and the report of our independent registered public accounting firm, are filed as “Item 8. Financial Statements and Supplementary Data” of this Report: |
| (2) | Financial Statement Schedules. |
Financial Statement Schedules are omitted because the information required is not applicable or the required information is shown in the financial statements or notes thereto.
60
| (3) | Exhibits. |
61
| Exhibit No: | Description: | |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer and Chief Financial Officer (filed herewith) | |
| 32.1 | Section 1350 Certification of Chief Executive 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 |
| + | Management compensation plan or arrangement. |
| ** |
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or filing 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. |
62
Item 16. Form 10-K Summary.
None.
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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, Chief Financial Officer | ||
|
(Principal Executive, Financial and Accounting Officer) January 29, 2025 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Ian T. Bothwell |
Interim Chief Executive Officer, Chief Financial Officer, Director |
January 29, 2025 | ||
| Ian T. Bothwell | (Principal Executive, Financial and Accounting Officer) | |||
| /s/ George Shapiro, M.D. |
Chief Medical Officer, Director |
January 29, 2025 | ||
| George Shapiro, M.D. | ||||
| /s/ Chuck Bretz | Director and Chairman of the Board | January 29, 2025 | ||
| Chuck Bretz | ||||
| /s/ Gurvinder Pal Singh | Director | January 29, 2025 | ||
| Gurvinder Pal Singh | ||||
| /s/ S. Jerry Glauser | Director | January 29, 2025 | ||
| S. Jerry Glauser | ||||
| /s/ Leathem Stearn | Director | January 29, 2025 | ||
| Leathem Stearn |
64
Exhibit 3.1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20244538678 Filed On 12/17/2024 1:14:00 PM Number of Pages 2
4 1 J 01 : 14 : 39p . m . 1 2 1 1 - 2 024 To : Nevada SOS 188s61188n Page : 4of4 2024 - 12 - 1721 : 15:41 GMT Oocusign Envelope ID : 1DCCDCC4 - 0B7A - 4891 - 9038 - 3O883CO2CB2F 18886118813 From : Vcorp Services , LL( EXHIBIT A TO CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATION OF SERIES C CONVERTIBLE PREFERRED STOCK " 7 . Redemption . Reference is made to that Securities Purchase Agreement dated August 19 , 2022 (the "Purchase Agreement"), by and among the Company , Skycrest Holdings , LLC ( " Skycrest") and Greyt Ventures LLC ("Greyt") . The Series C Preferred Stock held by Skycrest or Greyt or any permitted assignee of Skycrest or Greyt (a "Permitted Assignee") shall be automatically redeemed by the Company and cease to be outstanding at a redemption price of $ 1 . 00 per share, at such time as (a) with respect to Skycrest or a Permitted Assignee of Skycrest , Skycrest no longer beneficially owns more than fifty percent ( 50 % ) of the shares (of Common Stock of the Company purchased by the Skycrest pursuant to the Purchase Agreement ; (b) with respect to Greyt or a Permitted Assignee of Greyt, Greyt no longer beneficially owns more than fifty percent ( 50 % ) o f the shares (of Common Stock of the Company purchased by Greyt pursuant to the Purchase Agreement ; or (b) if Skycrest , Greyt or an Permitted Assignee ofSkycrest or Greyt , transfers or attempts to transfer ownership of the shares of Series C Preferred Stock held by it to any third party , other than with the affirmative vote or the unanimous written consent of the Company ' s board of directors" .
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20243819841 Filed On 2/13/2024 11:01:00 AM Number of Pages 2
11 : 01 : 12a . m . 0 2 - 13 - 2024 4 I 18886118813 fa: Nevada SOS Page: 4 of4 2024 - 02 - 1319:01 : 09 GMT BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov 18886118813 From: Vcorp Services , LLC 4 T 5 C c 6 ( T Profit Corporation: Certificate of Amendment cPuRsuANTTo NRs 78.380 & 78.385178.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PuRsuANT To NRs 76.403) Officer's Statement PuRsuANT To NRs ao . 030 Date : f 02/20/:2¢? : =: Time : i a: _ q - o rTl (ET . ) . .. . (must not be later than 90 days after the cert i ficate is filed) . Effective Date and ime: (Optional) Changes to takes the following effect: '. x } The entity name has been amended. The registered agent has been changed. (attach Cert i ficate of Acceptance from new registered agent) The purpose of the entity has been amended . - i The authorized shares have been amended. The directors , managers or general partners have been amended. : IRS tax language has been added. ' Articles have been added. 1 Articles have been deleted . - " Other. The articles have been amended as follows : (provide article numbers , if available) Article 1. NAME ( attach add i t i onal page(s) if necessary) . Information Being hanged: (Domestic orporations only) X /s/ HARRY LEIDER • Chief Executive Officer . Signature: Required) Signature of Officer or Authorized Signer Title X - ------------- - i ' ······· ----- ··· · - --- ··· •• .! Signature of Officer or Au thorized Signer Title *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares , then the amendment must be approved by the vote , in addition to the affirmative vote otherwise requ i red , of the holders of shares representing a majority of the voting power of each class o r series affected by the amendment regardless to limitations or restrictions on the voting power thereof. Please include any required or optional information in space below: (attach additional page(s ) if necessary) he name of the corporation shall be "Zeo ScientifiX , Inc." (hereinafter , the "Corporation"). This form must be accompanied by appropriate fees. Pag e 2 of 2 Revised : 1 /1/2019
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20233610170 Filed On 11/6/2023 3:07:00 PM Number of Pages 2
04 : 07 : 21 p . m . 11 - 06 - 2023 4 I 18886118813 ro: Nevada SOS Page : 4 of4 2023 - 11 - 06 23 : 07 : 56 GMT From : Vcorp Services , LLC BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment cPuRsuANTTO NRs 78.380 & 78.385/78 . 390) Certificate to Accompany Restated Articles or Amended and Restated Articles <PURSUANT To NRs 76.403) Officer's Statement PuRsuANT To NRs ao.o30 18886118813 4. Effective Date and Time: (Optional) Date : : Time : ' . , i ...... . . ..... . (must not be later than 90 days after the certificate is filed) •• ··········· 1 5. lnfonnation Being Changed: (Domestic corporations only ) Changes to takes the following effect: ::: The entity name has been amended. The registered agent has been changed. (attach Certificate of Acceptance from new registered agent) The purpose of the entity has been amended. :; The authorized shares have been amended . . : : The directors , managers or general partners have been amended. :_ : IRS tax language has been added. _, Articles have been added. ! Articles have been deleted . • - Other. The articles have been amended as follows : (provide article numbers, if available) Article Ill is hereby amended as further indicated below. {attach additional page(s) if necessary) 6. Signature: (Required) X /s/ HARRY LEIDER Signature of Officer or Authorized Signer x _ : Chief Executive Officer · - · - · - · -- ··· --- · -- · · - · - ·· · - · -- · - · - ···· - · --- ·· - ·· - · · - Title Signature of Officer or Authorized Signer Title •it any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares , then the amendment must be approved by the vote , in addition to the affirmative vote otherwise required , of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof. Please include any required or optional information in space below: (attach additional page(s) i f necessary) Article Ill of the Corporation's Articles of Incorporation is hereby amended by adding the following language : "Each share of common stock of the Corporation issued and outstanding as of the record date set by the Corporation will be subject to a 1 - for - 200 reverse stock split, with all fractional shares being rounded up to the nearest whole share. The par value of the shares of common stock will remain $0.001. The reverse stock split (i) will not change the number of authorized shares of common stock or preferred stock and (i i ) shall become effective upon the date announced by the Financial Industry Regulatory Authority." This form must be accompanied by appropriate fees. Pag e 2 o f 2 Revised : 1/ 1 /20 1 9
TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT Name of entity: ORGANICELL REGENERATIVE MEDICINE, INC. Entity or Nevada Business Identification Number (NVID): NV20111522349 1. Entity information: Time: For Certificate of Designation or Date: 2. Effective date and time: Amendment to Designation Only (Optional): (must not be later than 90 days after the certificate is filed) The class or series of stock being designated within this filing: SERIES C NON - CONVERTIBLE PREFERRED STOCK 3. Class or series of stock: (Certificate of Designation only) The original class or series of stock being amended within this filing: 4. Information for amendment of class or series of stock: Certificate of Amendment to Designation - Before Issuance of Class or Series As of the date of this certificate no shares of the class or series of stock have been issued. 5 . Amendment of class or series of stock : Certificate of Amendment to Designation - After Issuance of Class or Series The amendment has been approved by the vote of stockholders holding shares in the corporation entitling them to exercise a majority of the voting power, or such greater proportion of the voting power as may be required by the articles of incorporation or the certificate of designation. By resolution of the board of directors pursuant to a provision in the articles of incorporation this certificate establishes OR amends the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights of the following class or series of stock.* 6.Resolution: (Certificate of Designation and Amendment to Designation only) Designation being Date of Withdrawn: Designation: No shares of the class or series of stock being withdrawn are outstanding. The resolution of the board of directors authorizing the withdrawal of the certificate of designation establishing the class or series of stock: * 7. Withdrawal: X Matthew Sinnreich Date: 08/17/2022 Signature of Officer 8. Signature: (Required) BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov www.nvsilverflume.gov Certificate, Amendment or Withdrawal of Designation NRS 78.1955, 78.1955(6) Certificate of Designation Certificate of Amendment to Designation - Before Issuance of Class or Series Certificate of Amendment to Designation - After Issuance of Class or Series Certificate of Withdrawal of Certificate of Designation This form must be accompanied by appropriate fees. page1 of 1 Revised: 1/1/2019 Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20222553657 Filed On 08/17/2022 13:32:40 PM Number of Pages 5
Exhibit A ORGANICELL REGENERATIVE MEDICINE CERTIFICATE OF DESIGNATION OF SERIES C NON - CONVERTIBLE PREFERRED STOCK Organicell Regenerative Medicine, Inc . , a Nevada corporation (the “ Company ”) , acting pursuant to Chapter 78 of the Nevada Revised Statutes, does hereby submit the following Certificate of Designation of newly created Series C Non - Convertible Preferred Stock (this “ Certificate ”) . FIRST: The name of the Company is Organicell Regenerative Medicine, Inc. SECOND : By unanimous written consent of the Board of Directors of the Company (the “ Board of Directors ” or the “ Board ”), the following resolutions were duly adopted : WHEREAS , the Articles of Incorporation of the Company, as amended (the “ Articles of Incorporation ”) authorize the issuance of up to 10 , 000 , 000 shares of Preferred Stock, par value $ 0 . 001 per share (“ Preferred Stock ”), issuable from time to time in one or more series ; and WHEREAS , the Board of Directors is authorized, subject to limitations prescribed by law and by the provisions of the Articles of Incorporation, to establish and fix the number of shares to be included in any series of Preferred Stock and the designate the rights, preferences, powers, restrictions and limitations of the shares of such series ; and WHEREAS , it is the desire of the Board to establish and fix the number of shares to be included in a new series of Preferred Stock and the designation of rights, preferences, powers, restrictions and limitations of the shares of such new series of Preferred Stock . NOW , THEREFORE , BE IT RESOLVED , that pursuant to the Articles of Incorporation there is hereby established a new series of 100 shares of Series C Non - Convertible Preferred Stock of the Company having the rights, preferences, powers, restrictions and limitations set forth in a supplement to the Articles of Incorporation as follows : 1. Designation and Number of Shares . The series will be known as Series C Non - Convertible Preferred Stock (the Series C Preferred Stock ”) and will consist of one hundred ( 100 ) shares of the authorized but unissued Preferred Stock of the Company . The face amount of each share of Series C Preferred Stock shall be $ 0 . 001 per share (the “ Stated Value ”) . 2. Dividends . The holders of shares of the Series C Preferred Stock shall not be entitled to receive any dividends . 3. Preferences on Liquidation . Subject to the provisions of Section 6 (a) below, in the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20222553657 Filed On 08/17/2022 13:32:40 PM Number of Pages 5 {00017223.DOCX.4} 1 | P a g e
Company, the holders of shares of the Series C Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus or earnings, an amount equal to one dollar ( $ 1 . 00 ) per share . 4. Voting Rights . Except as otherwise required by law or by the Articles of Incorporation and except as set forth in Section 6 (b) below, the outstanding shares of Series C Preferred Stock shall vote together with the Company’s outstanding shares of Common Stock and other voting securities of the Company as a single class and, each the total of all shares of Series C Preferred Stock outstanding shall represent 51 percent ( 51 % ) of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent of stockholders . 5. No Impairment . The Company will not, by amendment to the Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of the Articles of Incorporation and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Series C Preferred Stock against impairment . 6. Ranking; Changes Affecting Series. (a) The Series C Preferred Stock shall, with respect to distribution rights on liquidation, winding up and dissolution, (i) rank senior to any of the shares of Common Stock of the Company, and any other class or series of stock of the Company which by its terms shall rank junior to the Series C Preferred Stock ; and (ii) rank junior to any other series or class of preferred stock of the Company and any other class or series of stock of the Company which by its term shall rank senior to the Series C Preferred Stock . (b) So long as any shares of Series C Preferred Stock are outstanding, the Company shall not (i) alter or change any of the powers, preferences, privileges or rights of the Series C Preferred Stock : or (ii) amend the provisions of this Section 6 ; in each case, without first obtaining the approval by vote or written consent, in the manner provided by law, of the holders of at least a majority of the outstanding shares of Series C Preferred Stock, as to changes affecting the Series C Preferred Stock . 7. Redemption . The Series C Preferred Stock held by a holder thereof (the “ Holder ”) shall be automatically redeemed by the Company and cease to be outstanding at a redemption price of $ 1 . 00 per share, at such time as the Holder (a) no longer beneficially owns more than fifty percent ( 50 % ) of (i) the shares of Common Stock of the Company purchased by the Holder pursuant to that certain Securities Purchase Agreement dated August , 2022 , by and among the Company, Skycrest Holdings, LLC and Greyt Ventures, LLC ; and (ii) the Warrants issued by the Company to the Holder pursuant to a Consulting Services Agreement dated August , 2022 and the shares of Common Stock of the Company issued or issuable or pursuant to exercise of the Warrants ; or (b) if the Holder transfers or attempts to transfer ownership of the shares of Series C Preferred Stock to any third party, other than by the laws of descent and distribution . {00017223.DOCX.4} 2 | P a g e
8. No Conversion . The Series C Preferred Stock is not convertible into Common Stock or any other capital stock of the Company . 9. Protective Provisions . So long as any shares of Series C Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by Chapter 78 of the Nevada Revised Statutes) of the Holders of at least a majority of the then outstanding shares of Series C Preferred Stock : (a) alter or change the rights, preferences or privileges of the Series C Preferred Stock ; (b) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series C Preferred Stock ; (c) create any new class or series of capital stock having a preference over the Series C Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company (as previously defined, “ Senior Securities ”) ; (d) create any new class or series of capital stock ranking pari passu with the Series C Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company (as previously defined, “ Pari Passu Securities ”) ; (e) increase the authorized number of shares of Series C Preferred Stock; (f) issue any shares of Series C Preferred Stock other than pursuant to the Securities Purchase Agreement with the original parties thereto ; (g) issue any additional shares of Senior Securities; or (h) redeem, declare or pay any cash dividend or distribution on, any Junior Securities. If holders of at least a majority of the then outstanding shares of Series C Preferred Stock agree to allow the Company to alter or change the rights, preferences or privileges of the shares of Series C Preferred Stock pursuant to subsection (a) above, then the Company shall deliver notice of such approved change to the Holders of the Series C Preferred Stock that did not agree to such alteration or change . 10. Merger, Consolidation, Etc. (a) If at any time or from time to time there shall be (i) a merger, or consolidation of the Company with or into another corporation, (ii) the sale of all or substantially all of the Company’s capital stock or assets to any other person, (iii) any other form of business combination or reorganization in which the Company shall not be the continuing or surviving entity of such business combination or reorganization, or (iv) any transaction or series of transactions by the Company in which in excess of fifty percent ( 50 % ) of the Company’s voting power is transferred (each, a “ Reorganization ”), then as a part of such Reorganization, provision shall be made so that the holders of the Series C Preferred Stock shall thereafter be entitled to receive the same kind and amount of stock or other securities or {00017223.DOCX.4} 3 | P a g e
property (including cash) of the Company, or of the successor corporation resulting from such Reorganization. (b) The provisions of this Section 10 are in addition to and not in lieu of the provisions of Section 2 hereof. 11 . Lost or Stolen Certificates . Upon receipt by the Company of (a) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) ; (b) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company ; or (c) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Company shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date . IN WITNESS WHEREOF , this Certificate of Designation is executed on behalf of the Company by its Authorized Officer this 17th day of August, 2022. By: /s/ Matthew Sinnreich Matthew Sinnreich, Acting CEO {00017223.DOCX.4} 4 | P a g e
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20211232319 Filed On 2/10/2021 3:13:00 PM Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20200744723 Filed On 6/23/2020 8:00:00 AM Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20180274501 - 40 Filed On 06/18/2018 Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20180269044 - 96 Filed On 06/14/2018 Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20180230042 - 62 Filed On 05/21/2018 Number of Pages 2
COl \ TINCATIOl \ SIIEET TO CERTIFICATE OF AMENDME'.'/T BIOTECH PRODUCTS SERVICES AND RESEARCH, INC. May 17, 2018 AMENDMENT TO CERTIFICATE OF DESIGNATION AFTER ISSUANCE or CLASS OR SERIES BIOTECH PROD!:CTS SERVICES A: \ D RESEARCH, INC. continued from page I: ARTICLE lll ··Section 1. Authorized Shares. The aggregate number or shares which the Corporation shall have authority to issue is two hundred sixty million shares, consisting of two classes to be designated, respectively ··common Stock'" and ··Prcfr:rrcd Stock", with all of such shares having a par value of $.001 per share. ·1·he total number of shares of Common Stock that the Corporation shall have authority to issue is two hundred fifty million (250,000,000) shares. ·rhc total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million(] 0,000,000) shares. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof. The voting powers, designations, preferences, limitations, restrictions, and relative participating, optional and other rights, and the qualifications, limitations, or restrictions thereof of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article TTL''
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20180227908 - 69 Filed On 05/17/2018 Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20170268311 - 91 Filed On 06/22/2017 Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20170094765 - 81 Filed On 03/02/2017 Number of Pages 1
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20160481868 - 14 Filed On 11/01/2016 Number of Pages 5
F1om Philip Megri Fu /64 ) 502 - 5900 fo P g S o/8 111()1120165:Z PM Exhibit A CERTIFICATE OF THE UESJG: - ,JATIONS, POWERS, PREft'EREJ' \ 'CES A"iD RIGHTS OF THE SERIF,S A N'O: - ,J - COJ'li"VERTIBLE PREFERRED STOCK ($0.001 PAR VALUI<: P:rn SHARI•:) OF BIOTECII PRODUCTS SF,RVICES A'•m RESEARCH, l'. \ 'C. (a evada corporation) Pursuant to the - : - .revada Revised Statutes and the bylaws of BIOTECH PRODUCTS SERVICES A D RESEARCH, INC., a corporation orgamzed and existing under the laws of the state of Nevada (the "Corporation"), the Corporation does hereby submit the following. WHEREAS, the Articles of Incorporation of the Corporation (the "Art ides of Incorporation") authonzes the issuance of up to 10,000.000 shares of preforrcd stock. par value $0.001 per share, of the Corporation ("Preferred Stock") in one or more series, and expressly authorizes the Board of Directors of the Corporation (the "Board"), su ject to limitations prescribed by law. to provide, out of the unissued shares of Preferred Stock for series of Preferred Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, nghts, preferences, powers, restrictions and limitations of the shares of such sencs, and \ 1/HERRAS, it 1s the desire of the Board to establish a ne \ .v senes of Preferred Stock to be designated "Series A Non - Convertible Preferred Stock" consisting of 100 shares and havmg the 11ghts, preferences and limitations set forth herein .' \ 'OW, THEREFORE, BE IT RESOLVED, that the Board does hereby establish a series of Preferred Stock designated as "Series A :Kon - Convertible Preferred Stock" and does hereby in this Certificate of Designation (the "Certificate of Designation") establish and fix and herein state and express the designation, rights, preferences, powers, restrictions and limitations of such series of Preferred Stock as follows: 1. Des1gnat10n and Amow1t. This series of Preferred Stock shall be designated "Series A : \ "on - Converti hie Preferred Stock" and the authorized number of shares constituting such series shall be One Hundred ( 100 ) The par value of the Senes A Non - Convertible Preferred Stock shall be SO 001 per share . Shares of the Senes A Non Convertible Preferred Stock shall have a stated value of $ 0 . 001 per share (the "'Stated Value'') .
F1om Philip Magri Fa . 1646) 50 - 5900 fo Fa,, +1 ,702.' 48628S8 Page 6 of8 11/01l201652 PM The holders of shares of Series A ! \ on - Convertible Preferred Stock shall not be entitled to receive any dividends . 3. Preferences on Liquidation. Subject to the pruvJS 1 ons of Section 6 (a) below, in the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, the holders of shares of the Senes A Non Convertible Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or eammgs, an amount equal tu one dolbr ( $ 1 00 ) per shMe . 4. Voting Rights. Except as otherwise required by law or by tht : Articles of Incorporation and except as , ; et forth in Section 6 (b) below, the outstanding shares of Sencs A "' . 'l"on - Convert 1 ble Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Corporation 11 s a single class and, regardless of the number of shares of Senes A Kon - Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Non - Convertible Preferred Stock is outstanding, shall represent eighty percent ( 80 % ) of all votes entitled to be voted at any annual or special meeting of shareholders of the Corporation or action by written consent of shareholders Each out tanding share of the Senes A ' \ 'on - Convertible Preferred Stock shall represent its proportionate share of the 80 % which is allocated to the outstanding shares of Series A Kon - Convertible Preferred Stock . 5. :'Jegll:tivc Coven_<.!_nts The Corporation will not, by amendment of the Articles of Incorporat 10 n or through any reorganization, tr 11 nsfcr of assets, consolidation, merger, dissolution . issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times m good faith assist in the carrying out of all the provisions of this Articles of Incorporation and m the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Series A . I \ on Convertible Preferred Stock against unpairment . 6. Ranking; Chan_ges t_ \ :ffccting Se_ries. (a) The Series A} \ ."on - Convertible Preferred Stock shall, with respect to distribution nghts on liquidation, winding up and dissolution, (i) rank senior to any of the shMes of Common Stock of the Corporation, and any other class or series of stock of the Corporation which by its terms shall rank.Junior to the Scncs A :'. \ "on - Convertible Preferred Stock, and (ii) rankjumor to any other senes or class of preferred stock of the Corporation and any other class or series of stock of the Corporation which by its term shall rank senior to the Series A '."Jon - Convertible Preferred Stock. (b) So long as any shares of Scnes A Non - Convertible Preferred Stock are outstanding, the Corporation shall not (i) alter or change any of the powers, preferences, privileges or rights of the Series A Non - Convertible Preferred Stock, or (ti) amend the provmons of this Section 6; m each case, without first obtaining the approval by vote or written consent, m the manner provided by law, of the holders oLlt least a majonty of the outstandmg shares of Series A "'.'l"on - Convertible Preferred Stock, as to changes affecting the Series A ' \ "on - Convertible Preferred Stock. 2
From. Ph1l1p Magri 3 Fax. /646) 502 - 5900 fo Fa, -- +1 17021 4H62888 Page 7 or a 1'10112016 5·2:? PM 7. ' \ lo Redemption The shares of the Series A Non - Convertible Preferred Stock are not redeemable. 8. Protection Prov1s1ons. So long as any shares of Sencs A on - Convertible Preferred Stock are outstandmg, the Corporation shall not, without first obtaining the approval (by vote or written consent, as provided by the : \ cvada Business Corporation Act) of the Holders of at least a majority of the then outstandmg shares of Series A Non - Convertible; Preferred Stock: (a) alter or change the rights, preferences or privileges of the Series A Non - Convertible Preferred Stock; (b) alter or change the rights, preferences or pnv1lcgcs of any capital stock of the Corporation so as to affect adversely the Senes A Non - Convertible Preferred Stock; (c) create any new class or series of capital stock having a preference over the Series A :' \ /on Convertible Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up ofthe Corporation (as previously defined, "Senior Securities"); (d) create any new class or series of capital stock ranking pari passu with the Senes A Non Convertible Preferred Stock as to distribution of assets upon liquidation, dissolution or wmding up of the Corporation (as previously defined, "Pari Passu Securities''), (e) increase the authorized number of shares of Senes A Kun - Convertible Preferred Strn.:k; (f) issue any shares of Sencs A Non - Convertible Preferred Stock other than pursuant to the Securities Purchase Agreement with the original parties thereto; (g) issue any additional shares of Senior Securities, or (h) redeem, or declare or pay any cash drvidend or distribution on, any Jumor Securities. If holders of at least a maJority of the then outstanding shares of Series A 1 \ "on - Convcrtrble Preferred Stock agree to allow the Coiporation to alter or change the rights, preferences or pnvilcgcs of the shares of Senes A Non - Convertible Preferred Stock pursuant to subsection (a) above, then the Corporation shall deliver notice of such approved change to the Holders of the Senes A Non - Convertible Preferred Stock that did not agree to such alteration or change (the "Dissenting Holders"). 9. Merger, Consolidation, Etc. (a) If at any time or from time to time there shall be (i) a merger, or consolidation of the Corporation with or into another corporation, (ii) the sale of all or substantially all of the Corporation's c . apital stock or assets to any other person, (iii) any other form of business combination or reorgamzation
Frnm Philip Magri 4 Fu. (646 \ 502 - 5900 fo. Fu +1 17D2J 4862888 Page a of a 1110112nm 5 22 PM in which the C - 0rporation shall not be the continuing or surviving entity of such busmess combinatrnn or reorgamzation, or (iv) any transaction or series of transactions by the Corporation in which in excess of 50 percent of the Corporation's voting power is transferred (each, a '"Reorganization"), then as a part of such Reorganization, provision shall be made so that the holders of the Series A "'.'Jon - Convertible Preferred Stock shall thereafter be ent1tkd to n:ceivc the same kind and amount of stock or other securities or property (mcluding cash) of the Corporation, or of1he successor corporation resulting from such Reorgamzatmn (b) The provmons of this Section 9 are in addition to and not m heu of the provisions of Section 2 hereof 10. No Impairment_ The Corporation will not, by amendment of its Articles of Incorporation or through any reorgamzation, recapitalizatmn, transfer of assets, consohdat10n, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or perfonned hereunder by the Corporation, but will at all tin1cs m good faith assist in the carrying out of all the prov1s10ns of this Certificate of Designation and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A ' \ Jon - Convertible Preferred Stock against impairment. I I I,ost or Stolen c:crtificates . Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate( s) and (ii) 111 the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Corporation, or (iii) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s). the Corporation shall execute and deliver new Preferred Stock Ccrt.Ificatc(s) of like tenor and date. I WITJ \ ""ESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation by its Authorized Officer this 31st day of October, 2016 By /s/ Albert . \ 1itram :'.'.Jame: Albert . \ 11trani Title: President and Director
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20160481895 - 44 Filed On 11/01/2016 Number of Pages 9
F,om. Philip Magri Fax. (648) 502 - 59D0 To, Fa . +11702., 4862888 Page 5 of121110112018528PM Exhibit B CERTIFICATE OF THEDESIGNATIOl \ ;S, POWERS, PREFERK: \ CES Al \ TI RIGHTS OF THE SERIES B CO:' \ \ l'ERTIBLE PREFF.RRED STOCK (S0.001 PAR VALUE PER SHARE) OF BIOTECII PRODUCTS SI<;RVICES A='l"D RESEARCH, INC. (a Kevada corporation) Pursuant to Section 78 . 1955 of Chapter 78 of the Nevada Revised Statutes, BIOTRCH PRODUCTS SERVICI< ; S AND RESEARCH, 1 : \ C, corpor ; ition organiLed and existing under the Stak of "' . ' - Jevada (the "Corporation"), m accordance with the provisions thereof' . does hereby submit the following· \ VHEREAS, the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation") authonzes the issuance of up to 10 , 000 , 000 shares of preferred stock, par value S 0 . 001 per share, of the Corporation (''Preferred Stock") m one or more series, and expressly authonzes the Board of Directors of the Corporation (the "Board"), subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions and limitatiom of the shares of such scncs ; and \ \ - 11 EREAS, that pursuant to the authority vested m tht : Board by the C - 0 rporation's Articles of Incorporation, as amended, a new senes of Preferred Stock of the Corporation 1 s created out of the authonzcd but unissued shares of Preferred Stock of the Corporation, rnch series to be designated Series B Convertible Preferred Stock, to com 1 st of Om : Millmn ( 1 , 000 , 000 ) shares, with the nghts, preferences, pnvi!eges and restnctions of which shall be as follows· NOW, THEREFORE, BE IT RESOLVI< : D, that the Board does hereby in this Certificate of Designation (the "Certificate of Designation") establish and fix and herein state and express the designation, rights, preferences . powers, restrictions and limitations of a series of Preferred Stock as follows . 1. DESIGNATIONS A : "lD AMOUNT One Million ( 1 , 000 , 000 ) shares of the Preferred Stock of the Corporation, S 0 . 001 par value per share, shall constitute a new class of Preferred Stock designated as "Series B Convertible Preferred Stock" (the "Series B Preferred Stock'') with a stated value of $ 0 . 00 I per shart : (the "Stated Value") 2. (;ff' \ VRRSIOX (a) Conversion at the Option of the Holder . Each holder of Series B Preferred Stock ("Holder'') shall have tht : nght, at such Holder's option, at any time or from time tu timt : from and after the day immediately follow mg the date the Series B Preferred Stock is first issued, to convert each I
From. Phmp Magri 2 Fax /646: - 502 - 5900 fo Fa, +1 t7021 4862888 Pag 6 f12111{)1120165:28PM share ("Share") of Series B Prcfcm:d Stock mto Twenty (20) fully - paid and non - assessable share of common stock, par value SO DD I per share, of the Corporation (the "'Common Stock"). (b) ri . - lechanics of Conversion . In order to effect a Conversion, a Holder shall : (x) fax (or otherwise deliver) a copy of the fully executed : \ otice of Conversion (attached hereto) to the Corporation for the Common Stock and (y) surrender or cause to be surrendered the original certificates representing the Scm : s B Preferred Stock being converted (the '"Preferred Stock Certificates"), duly endorsed . along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation or the transfer agent . The Corporatrnn shall not be obligated to issue shares of Common Stock upon a conversion unless either the Preferred Stock Certificates are delivered lo the Corporation or the transfer agent as provided above, or the Holder notifies the Corporation or the transfer agent that such certificates have been lost, stolen or destroyed (subjed to the requirements of Section 11 ) . "Conversion Date" means the date specified m the "' . 'Jotice of Convers 10 n m the form attached hereto, so long as the copy of the Notice of Convers 10 n is faxed (or delivered by other means resulting in notice) to the Corporation before Midnight, Eastern U . S . time, on the Conversion Date indicated in the : \ "otice of Conversion . If the Xobce of Conversion is not so faxed or otherwise delivered bd"ore such time, then the Conversion Date shall be the date a Holder faxes or otherv,'JSC delivers the Xotice of Conversion to the Corporation . (i) Delivery of Common Stock upon (_ ;:: onversion . Cpon the surrender of Preferred Stock Certificates from a Holder of Scncs B Preferred Stock accompanied by a Notice of Conversion (attached hereto), the Corporation shall, no later than the ten business days following the later of (a) the Conversion Date (heremafter defined) and (b) the date of such surrender (or, in the case of lost . stolen or destroyed certificates, after provision of indemnity pursmmt to Section 11 (the '"Delivery Period"), issue and deliver to the Holder (x) that number of shares of Common Stock issuable upon conversion of such shares of Scnes B Preferred Stock bcmg com·erted and (y) a certificate representing the number of shares of Series B Preferred Stock not being converted, if any . (ii) Taxes . The Corporation shall pay any and all taxes and all other reasonable expenses, which may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the converston of the Series B Preferred Stock . (iii) No Fra( 2 ; honal Shares . If any conversion of Series B Preferred Stock would result in the issuance of a fractional share of Common Stock . such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion of the Series I 3 Preferred Stock shall be the next higher whole nwnber of shares . (c) Partial Conversion . In the event some but not all of the shares of Sem :: s B Preferred Stock represented by a certificate(s) surrendered by a Holder are converted, the Corporation shall execute and deliver to or on the order of the Holder, at the expense of the Corporabon, a new certificate representing the number of shares of Scncs B Preferred Stock which were not converted .
F1om. Ph1l,p M gri 3 Fax. /646) 502·5900 fo "••· +1 \ 702/4862888 Poge 7 ol1211, \ l1l2016528PM (d) Reservation of Common Stock . The Corporation shall at all times reserve and keep available out of iL authonzed but umssued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferrr ;: d Stock ; and 1 f at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the convers 10 n of all then outstandmg shares of the Series B Preferred Stock, m addibon to such other remedies as shall be available to the Holder of such Series B Preferred Stock . the Corporatmn shall take such corporate action as may, m the opmion of its counsel, be necessary to increase, and shall increase, its authonzed but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes . (e) No Reissuance of Series B Preferred Stock . In the event any shares of Senes H Preferred Stock shall he converted pursuant to this Section 2 or otherwise reacquired by the Corporation, the shares so converted or reacquired shall be canceled . The Certificate of Incorporation of the Corporation may be appropriately amended from time to time to effect the corresponding reduction in the Corporation's authorized capital stock . ( 1 ) Notices . In the e,,ent of any taking by the Corporation of a record of the holders of any class of securities for the purpose of detennmmg the holders thereof who are entitled to recerve any distribution, any right to subscribe for, purchase or otherwise acqmre any shares of stock of any class or any other securities or property, or to receive any other nght . , the Corporation shall mail to each Holder of Series B Preferred Stock . at least twenty ( 20 ) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, disttibution or right . (g) Transactional Taxes . The Corporation shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of shares of capital stock of the Corporation upon conversion of any shares of Senes I 3 Preferred Stock ; pmv 1 ded, however, that the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer mvolved in the issuance or delivery of any certificate for such shares in a name other than that of the Holder of the shares of Series I 3 Preferred Stock in respect of which such shares are being issued . (h) Validity of Common Stock . All shares of Common Stock which may be issued in connection with the conversmn provisions set forth herem w 1 lL upon tssuance by the Corporation, be validly issued, fully paid and nonassessahle and free from all taxes (except income taxes), liens or charges with respect tht . 7 clo . 3. RAJ \ "K.Except as specifically provided below, the Scncs B Preferred Stock shall, with respect to dividend rights. rights on liquidation, wmding up and dissolution, rank Jimior to the Scncs A Kon -
Fram Philip Magri 4 F• - (MB) 502 - 59D0 fo Fay: +1 · - 7021 4862888 Page 8 of 121110·,120!6 5·28 PM Convertible Preferred Stock of the Corporation and senior to (i) all classes of Common Stock of the Corporation and {ii) any class or series of capital stock of the Corporation hereafter created (unless, with the consent of the Ilolder(s) of Sen es I 3 Preferred Stock) . 4. LIQUIDATTOI \ ' PREFERF . NrE . Except as otherwise prnvided by the Kevada Revised Statutes and subJc I to the provis 10 rn of Section 3 . or elsewhere m this Certificate of Designation, in the event of any voluntary or involuntary liquidation, d 1 ssolution, or wmdmg up of the Corporation, the Holders of shares of the Senes I 3 Preferred Stock then outstanding shall be entitled to be paid . out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, an amount equal to the Stated Value . 5. LIQUTDATTOJ \ ' Subject to the provisions of Section 3 , in the event of any voluntary or mvoluntary liquidation, dissolution, or winding up of the Corporation, the Holders of shares of the Series B Preferred Stock then outstanding shall be entitled to be paid, out of the asset< ; of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, an amount equal to the Stated Value per share . 6. DIVIDE S/STOCK SPLITS. (a) If the Corporation declares or pays a dividend or distnbutmn on the C'ommon Stock, whether such dividend or dJStribution is payable m cash, securities or other properly, including the purchase 01 redemption by the Corporation of shares of C - 0 mmon Stock for cash, securities or property, but excluding any repwchases of Common Stock held by employees or conqu \ tants of the Corporation upon termination of their employment or services pursuant to agreements providing for such repurchase . the Corporation shall simultaneously declare and pay a dividend on the Series B Preferred Stock on a pro rata basis with the Common Stock determined on an as converted basis assummg all outstanding shares of Senes B Preferred Stock had been converted pursuant lo St!Ction 2 as of immediakly pr 10 r to the record date of the applicable dividend (or if no record date is fixed, the date as of which the record holders of Common Stock entitled to such dividends are to be determmed) . (b) The number of shares of Common Stock of the Corporation issuable pursuant to the conversion of outstanding shares of Series B Preferred Stuck shall be adjusted for any forward stock splits, but not any reverse stock splits, by the Company of its outstandmg shares of Common Stock . 7. VOTI.'IIG RIGHTS. (a) Each holder of outstanding Shares of Series B Preferred Stock shall be entitled to vote with holders of outstanding shares of Common Stock . voting together as a smgle class, with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration (whether at a meeting of stockholders of the Corporation, by written action of stockholders in lieu of a meeting or otherwise), except as provided by law or by the provisions of Section 8 below . In any such vote, each Share of Series I 3 Preferred Stock shall be entitled to a
F1om. Philip Magri 5 ax /646) 50 - 5900 fo Fo,. +1 t7 Ƒ 2J 4862888 Poge 9 cf1211/01l2016528PM number of votes equal to the number of shares of Common Stock mto which the Share is convertible pursuant to Section 2 herem as of the record date for such vote or v .. ritten consent or, if there 1 s no specified record date, as of the date of sm : h vote or written consent . Each holder of outstanding Shares of Sencs B Preferred Stock shall be entitled to notice of all stockholder meetmgs (or requests for written consent) in accordance with the Corporation's bylaws . (b) To the extent that under the Kevada Revised Statutes the vote of tht : Holders of the Series B Preferred Stock, voting separately as a class or series, as applicable, is rcqmrcd tu authorize a gJVen action of the Corporation, the affirmative vote or consent of the Holders of at least a maJority of the shares of the Series Il Preferred Stock represented at a duly held meeting at which a quorum is pre . sent or by written consent of a maJonty of the shares of Series B Preferred Stock (except as otherwise may be required under the Nevada Rensed Statutes) shall constitute the approval of such action by the class . To the extent that under the Nevada Revised Statutes, Holders of the Senes D Preferred Stock are entitled to vote on a matter with Holders of Common Stock, voting together as one class . each share of Scnes B Preferred Stock shall be entitled to twenty ( 20 ) vote(s) . 8. PROTECTIO : ' 11 PROVISIOl \ "S . So long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent, as provided by the Nevada Revised Statutes) of the Holders of at least a maJority of the then outstandmg shares of Series B Preferred Stock : (a) alter or change the nghL,;, preferences or privileges of the Series B Preferred Stock; (b) alter or change the nghts, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Senes B Preferred Stock, (c) create any nev . - class or scncs of capital stock havmg a preference over the Series B Preferred Stock as to distribution of assets upon liquidation, dissolution or wmding up of the Corporation (as prevwusly defined, "Senior Securities"), (d) create any new class or series of capital stock ranking pari passu with the Series H Preferred Stuck as to distribution of assets upon liquidation, dissolution or wmding up of the Corporation (as prr . ,·vwusly defined, "Pari Passu Securities") ; (e) mcrease the authorued nwnber of shares of Senes B Preferred Stock, (f) issue any additional shares of Senior Securities; or (g) redeem, or declare or pay any cash dividend or distribution on, any Jurnor Securities. If Holders of at least a maJority of the then outstanding shares of Senes B Preferred Stock agree to allow the Corporation to alter or change tl1c nghts, preferences or privileges of the shares of Series B Preferred Stock
F,om. Philip M gr, 6 Fax (646) 502 - 5900 fo Page 10of 121'.101l2016528PM pursuant to subsection (a) above. then the Corporation shall deliver notice of such approved change to the Holders of the Series I3 Preferred Stock that did not agree to such alteration or change (the '"Dissenting Holders"). 9. MERGER, CO::XSOLIDATION, ETC. (a) If at any time or from time to time there shall be (i) a merger, or consolidation of the Corporation with or into another corporation, (ii) the sale of all or substantially all of the C',orporation 's capital stock or assets to any other person, (iii) an}' other form of business combination or reorganization m which the Corporation shall not be the continumg or surviving entity of such busmess combination or rcorgamzat 10 n, or (iv) any transaction or Series oftransachons by the Corporation in which in excess of 50 percent of the Corporation's voting power 1 s transferred (each, a "Reorganization"), then as a part of such Reorganizatmn, provision shall be made so that the Holders of the Series R Preferred Stock shall thereafter be entitled to receive the same kind and amount of stock or other securities or property (rncluding cash) of the Corporation . or of the successor corporation resulting from such Reorgamzation . (b) The provisions of this Section 9 arc in addition to and not m lieu of the prov1S1ons of Section 6 hereof. 10. NO IMPAIRMENT . The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation . merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the obseivance m performance of any of the tcnns to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the canying out of all the provisions of this Certificate of Designation a . nd in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holders of the Series R Preferred Stock against imparrment 11. LOST OR STOLEJ \ ' C . RRTIFICATES . Cpon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilatwn of any PrdCrred Stock Ccrtificate(s) and (ii) (y) in the case of loss . theft or destruction, of indemnity reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Ccrtificate(s), the Corporation shall ext : cute and dehve 1 new Preferred Stock Certificate(s) of like tenor and date . [SIGKATURE PAGE FOLLOWS]
Frnm. Philip Magri 7 Fa,, /846) 50:1 - 5900 fo Fa,·· +1 17021 4862288 Page 110( 1217J01120165:2SPM I:'J \ \ ·'ITl \ "ESS \ \ 'HEREOF, this Certificate of Designation 1s executed on behalf of the Corporation by its Authonze<l Officr.:r this October 31, 2016. BIOTECH PRODUCTS SERVICES AND RESEARCll, l:XC. Ry /s/ J)bcrt : rvlitJ : ani "' . 'Jame : Albert v 1 itrani Title : President
F1om. Philip Magri Fax (646) 502 - 5900 Fax +1 {702,, 4862888 Page 12of 1211101120165:28PM NOTICE OF CO' \ 'VERSION (To be Executed by the Registered Holder in order to Convert the Series I3 Preferred Stock) The undersigned hereby irrevocably elects to convert shares of Series B Preferred Stock (the ''Conversion"), represented by stock certificate : ' . \ lo . (s) . (the ··Preferred Stock Certificates") into shares of common stock, par value $ 0 . 001 per share (the '"Common Stock"'), of I 3 IOTECH PRODUCTS SERV 1 CES MD RESEARCH, Inc . , a "' . 'J"evada corporation (the ··corporation"), according to the conditions of the Certificate of Designations, Preferences and Rights of Senes D Preferred Stock (the '"Certificate of Designation"), as of the date written below . If securities are to be issued m the name of a person other than the undersigned, the undersigned wi!l pay all transfer taxes payable with respect thereto . :: \ o fee will be charged to the Holder for any convers 10 n, except for transfer taxes, if any A copy of each Preferred Stock Certificate 1 s attached hereto (or evidence of loss, theft or destrnctwn thereof) . The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Series H Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933 . as amended (the "Act"), or pursuant to an exemption from registration under the Act . [ l The undersigned hereby requests that the Coll)oration transmit the Common Stock issuable pursuant to this Notice ofConversrnn tu the address of the undersigned. Date of Conversion" Applicable ConvE!rsion Rate· Each share of Series B Preferred Stock is convertible mto one share of Common Stock ] \ umber of Shares of Common Stock to be Issued: _ Signature. "' The Corporation is not required to issue shares of Common Stock until the original Preferred Stock Ccrtificate(s) (or evidence of loss, theft or destruction thereof) to be converted arc received by the Corporation or its transfer agent The Corporation shall issue and deliver shares of Common Stock to an overnight courier not later than the later of (a) two ( 2 ) business days followmg receipt of this : \ "ohcc of Conversion and (b) delivery of the original Preferred Stock Certificates (or evidence of loss, theft or destruction thereof) and shall make payments pursuant to the Certificate of Designation for the failure to make tuncly delivery . 8
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20150392163 - 82 Filed On 09/01/2015 Number of Pages 3
Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) CONTINUED FROM PAGE 1 ARTICLE III CAPITAL STOCK Section I . Authorized Shares The aggregate number of shares which the Corporation shall have authority to issue is two hundred and sixty million ( 260 , 000 , 000 ) shares, consisting of two classes to he designated, respectively, "Common Stock" and "Preferred Stock," with all of such shares having a par value of S . 001 per share . The total number of shares of Common Stock that the Corporation shall have authority to issue is two hundred and fifty mi!lion ( 250 , 000 , 000 ) . The total number of shares of Preferred Stock that the Corporation sha!l have authority to issue is ten million ( 10 , 000 , 000 ) shares . The Preferred Stock may be issued in one or more series, each series to he appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof . The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article Ill . Section 2. Common Stock. (a) Dividend Rate . Subject to the rights of holders of any Preferred Stock having preference as to dividends and except as otherwise provided by these Articles of Incorporation, as amended from time to time (hereinafter, the "Articles") or the " \ /evada Revised Statues (hereinafter, the "! \ RS"), the holders of Common Stock shall be entitled to receive dividends when, as and if declared by the board of directors out of assets legally available therefor . (b) Voting Rights . Except as otherwise provided by the " \ IRS, the holders of the issued and outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock . Ko holder of shares of Common Stock shall have the right to cumulate votes . (c) Liquidation Rights. In the event of liquidation, dissolution. or winding up of the affairs of the Corporation, whether "oluntary or involuntary, subject to the prior rights of holders of Preferred Stock to share ratably in the Corporation's assets. the Common Stock and any shares of Preferred Stock which are not entitled to any preference in liquidation shall 5hare equally and ratabl)' in the Corporation's assets available for distribution after giving effect to any liquidation preference of any shares of Preferred Stock. A merger, conversion, exchange or consolidation of the Corporation with or into any other person or sale or transfer of all or any part ofthc assets ofthe Corporation (which shall not in fact result in the liquidation of1hc Corporation and the distribution of <bsets to stockholders) shall not be deemed to be a voluntary or involuntlli)' liquidation, dissolution or winding up of the affairs of the Corporation. (d) ,Vo Conversion, Redemption, or Preemptive Rights. The holders of Common Stock shall not have any conversion, redemption, or preemptive rights. (e) Consideration for Shares . The Common Stock authorized by this Article shall be issued for such consideration as shall be fixed, from time to time, by the board of directors . Section 3. Preferred Stock. (a) Designation. The hoard of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding Pg.2
the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing : the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be full or limited, may vary over time, and may be applicable generally or only upon any stated fact or event) ; the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock ; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation ; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable) ; whether the shares of any series of Preferred Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other terms and conditions of such redemption . The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the Articles or resolution . As used in this section "fact or event" includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government . The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series . Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock . (b) Certificate . Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the board of directors, and establishing the voting powers, designations, preferences, the relative, participating, optional . or other rights, if any, and the 4 ualifications . limitations, and restrictions . if any, relating to the shares of Preferred Stock of such series . and the number of shares of PrcfCrred Stock of such series authorized by the board of directors to be i sued shall be made and signed by an officer of the corpora 1 ion and filed in the manner prescribed by the NRS . Section 4 . Non - Assessment of Stock . The capital stock of the Corporation, after the amount of the subscription price has been fully paid, shall not he asse sable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles shall not be amended in this particular . No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation . Pg.3
Business Number E0448942011 - 9 Filed in the Office of Secretary of State State Of Nevada Filing Number 20110587116 - 62 Filed On 08/09/2011 Number of Pages 5
ARTICLES OF INCORPORATION OF BESPOKE TRICYCLES, INC ARTICLE I NAME The name of the corporation shall be Bespoke Tricycles, Inc (hereinafter, the "Corporation"). ARTICLE II REGISTERED OFFICE The initial office of the Corporation shall be 5 Wollacombe Road, London, United Kingdom SE 3 8 QJ . The initial registered agent of the Corporation shall be Cane Clark Agency, LLC at 3273 E . Warm Springs, Rd . , Las Vegas, NV 89120 . The Corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada . The Corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada . ARTICLE III CAPITAL STOCK Section l . Authorized Shares . The aggregate number of shares which the Corporation shall have authority to issue is one hundred million { 100 , 000 , 000 ) shares, consisting of two classes to be designated, respectively, "Common Stock" and "Preferred Stock," with all of such shares having a par value of $ . 00 l per share . The total number of shares of Common Stock that the Corporation shall have authority to issue is ninety million ( 90 , 000 , 000 } shares . The total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million ( 10 , 000 , 000 } shares . The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof . The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article rn. Section 2. Common Stock. (a) Dividend Rate . Subject to the rights of holders of any Preferred Stock having preference as to dividends and except as otherwise provided by these Articles of Incorporation, as amended from time to time (hereinafter, the "Articles") or the Nevada Revised Statues (hereinafter, the "NRS"), the holders of Common Stock shall be entitled to receive dividends when, as and if declared by the board of directors out of assets legally available therefor . (b) Voting Rights . Except as otherwise provided by the NRS, the holders of the issued and outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock . No holder of shares of Common Stock shall have the right to cumulate votes . (c) Liquidation Rights . In the event of liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, subject to the prior rights of holders of Preferred Stock to share ratably in the Corporation's assets, the Common Stock and any shares
2 of Preferred Stock which are not entitled to any preference in liquidation shall share equally and ratably in the Corporation's assets available for distribution after giving effect to any liquidation preference of any shares of Preferred Stock . A merger, conversion, exchange or consolidation of the Corporation with or into any other person or sale or transfer of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation . (d) No Conversion, Redemption, or Preemptive Rights . The holders of Common Stock shall not have any conversion, redemption, or preemptive rights . (e) Consideration for Shares . The Common Stock authorized by this Article shall be issued for such consideration as shall be fixed, from time to time, by the board of directors . Section 3 . Preferred Stock . (a) Designation . The board of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing : the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be full or limited, may vary over time, and may be applicable generally or only upon any stated fact or event) ; the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock ; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation ; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjnstment thereof, the time or times dtrring which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable) ; whether the shares of any series of Prefemid Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other tenns and conditions of such redemption . The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the A 1 ticles or resolution . As used in this section "fact or event" includes, without limitation, the existence of a fact or occmrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government . The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series . Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Prefe,red Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Prefe 1 ,ed Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock . (b) Certificate . Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the board of directors, and establishing the voting powers, designations, preferences, the relative,
3 participating, optional, or other rights, if any, and the qualifications, limitations, and restrictions, if any, relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the board of directors to be issued shall be made and signed by an officer of the corporation and filed in the manner prescribed by the NRS . Section 4 . Non - Assessment of Stock . The capital stock of the Corporation, after the amount of the subscription price has been fully paid, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles shall not be amended in this particular . No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation . ARTICLE IV DIRECTORS AND OFFICERS Section l . Number of Directors . The members of the governing board of the Corporation are styled as directors . The board of directors of the Corporation shall be elected in such manner as shall be provided in the bylaws of the Corporation . The board of directors shall consist ofat least one {l} individual and not more than thirteen { 13 ) individuals . The number of directors may be changed from time to time in such manner as shall be provided in the bylaws ofthe Corporation . Section 2 . Initial Directors . The name and post office box or street address of the director(s} constituting the initial board of directors is : Name John Goodhew Sonja Brewin Address 5 Wollacombe Road, London, United Kingdom SE3 BQJ 5 Wollacombe Road, London, United Kingdom SE3 BQJ Section 3 . Limitation of Liability . The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS . If the NRS is amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to ti . me . Section 4 . Payment of Expenses . In addition to any other rights of indemnification permitted by the laws of the State of Nevada or as may be provided for by the Corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the Corporation or member, manager, or managing member of a predecessor limited liability company or affiliate of such limited liability company or while serving in any capacity at the request of the Corporation as a director, officer, employee, agent, member, manager, managing member, pmtner, or fiduciary of, or in any other capacity for, another corporation or any pmtnership,joint venture, trust, or other enterprise, shall be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation . To the extent that an officer or director is successful on the merits in defense of any such action, suit or proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify him or her against expenses, including attorneys' fees, actually and reasonably incurred by him or her in coilllection with the defense . Notwithstanding anything to the contrary contained herein or in the bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, that such director or officer incurred in his or her capacity as a stockholder, including, but not
limited to, in connection with such person being deemed an Unsuitable Person (as defined in Article VII hereof). Section 5 . Repeal And Conflicts . Any repeal or modification of Sections 3 or 4 above approved by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the liability of a director or officer of the Corporation existing as of the time of such repeal or modification . Jn the event of any conflict between Sections 3 or 4 above and any other Article of the Articles, the tenns and provisions of Sections 3 or 4 above shall control . ARTICLEV COMBINATlONS WITH INTERESTED STOCKHOLDERS At such time, if any, as the Corporation becomes a 11 resident domestic corporation \ as that tenn is defined in NRS 78 . 427 , the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78 . 411 to 78 . 444 , inclusive, as may be amended from time to time, or any successor statute . ARTICLE VI BYLAWS The board of directors is expressly granted the exclusive power to make, amend, alter, or repeal the bylaws of the Corporation pursuant to NRS 78.120. IN WITNESS WHEREOF, the Corporation has caused these articles of incorporation to be executed mis ,,,m, by i• lncmporatoc o" July 28, 2011. L - 4
Exhibit 19.1
ZEO SCIENTIFIX, INC.
INSIDER TRADING POLICY
2025
I. Introduction
The purpose of this Insider Trading Policy (the “Policy”) is to promote compliance with applicable securities laws by Zeo ScientifiX, Inc. and its subsidiaries (“ZEO” or the “Company”) and all directors, officers and employees of the Company, in order to preserve the reputation and integrity of ZEO as well as that of all persons affiliated with ZEO.
II. Applicability
The Policy is applicable to all directors, officers and employees of ZEO. The Policy applies equally to our employees located in and outside the United States.
Questions regarding this policy should be directed to the Company’s Chief Financial Officer.
III. Policy
If a director, officer or any employee of the Company or any agent or advisor of the Company has material, nonpublic information relating to the Company, it is the Company’s policy that neither that person nor any Related Person (as defined below) may buy or sell securities of the Company (the “Company Securities”) or engage in any other action to take advantage of, or pass on to others, that information.
To avoid even the appearance of impropriety, additional restrictions on trading Company Securities apply to directors and members of executive management. See Section VI.
IV. Definitions/Explanations
A. Who is an “Insider?”
Any person who possesses material, nonpublic information is considered an insider as to that information. Insiders include Company directors, officers, employees, independent contractors and those persons in a special relationship with the Company, e.g., its auditors, consultants or attorneys. The definition of insider is transaction specific; that is, an individual is an insider with respect to each material, nonpublic item of which he or she is aware.
B. What is “Material” Information?
The materiality of a fact depends upon the circumstances. A fact is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell or hold a security or where the fact is likely to have a significant effect on the market price of the security. Material information can be positive or negative and can relate to virtually any aspect of a company’s business or to any type of security – debt or equity.
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Some examples of material information include:
| ● | Unpublished financial results |
| ● | News of a pending or proposed company transaction |
| ● | Significant changes in corporate objectives |
| ● | News of a significant sale of assets |
| ● | Changes in dividend policies |
| ● | Financial liquidity problems |
| ● | Significant agreement with a new or existing customer |
The above list is only illustrative; many other types of information may be considered “material,” depending on the circumstances. The materiality of particular information is subject to reassessment on a regular basis.
C. What is “Nonpublic” Information?
Information is “nonpublic” if it is not available to the general public. In order for information to be considered public, it must be widely disseminated in a manner making it generally available to investors through such electronic media as Yahoo Finance or other large, printed media. The circulation of rumors, even if accurate and reported in the media, does not constitute effective public dissemination.
In addition, even after a public announcement of material information, a reasonable period of time must elapse in order for the market to react to the information. Generally, one should allow approximately two full trading days following publication as a reasonable waiting period before such information is deemed to be public. Therefore, if an announcement is made before the commencement of trading on a Monday, an employee may trade in Company Securities starting on Wednesday of that week, because two full trading days would have elapsed by then (all of Monday and Tuesday). If the announcement is made on Monday after trading begins, employees may not trade in Company Securities until Thursday. If the announcement is made on Friday after trading begins, employees made not trade in Company Securities until Wednesday of the following week.
D. Who is a “Related Person?”
For purposes of this Policy, a “Related Person” includes your spouse, minor children and anyone else living in your household; partnerships in which you are a general partner; trusts of which you are a trustee; estates of which you are an executor; and other equivalent legal entities that you control. Although a person’s parent or sibling may not be considered a Related Person (unless living in the same household), a parent or sibling may be a “tippee” for securities laws purposes. See Section V.D. below for a discussion on the prohibition on “tipping.”
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V. Guidelines
A. Non-disclosure of Material Nonpublic Information
Material, nonpublic information must not be disclosed to anyone, except the persons within the Company or third-party agents of the Company (such as investment banking advisors or outside legal counsel) whose positions require them to know it, until such information has been publicly released by the Company.
B. Prohibited Trading in Company Securities
No person may place a purchase or sell order or recommend that another person place a purchase or sell order in Company Securities when he or she has knowledge of material information concerning the Company that has not been disclosed to the public. Loans, pledges, gifts, charitable donations and other contributions of Company Securities are also subject to this Policy.
C. Twenty-Twenty Hindsight
If securities transactions ever become the subject of scrutiny, they are likely to be viewed after- the-fact with the benefit of hindsight. As a result, before engaging in any transaction an insider should carefully consider how his or her transaction may be construed in the bright light of hindsight. Again, in the event of any questions or uncertainties about the Policy, please consult the Company’s Chief Financial Officer or someone that he or she has delegated responsibility for advising of the Policy.
D. “Tipping” Information to Others
Insiders may be liable for communicating or tipping material nonpublic information to any third-party (“tippee”), not limited to just Related Persons. Further, insider trading violations are not limited to trading or tipping by insiders. Persons other than insiders also can be liable for insider trading, including tippees who trade on material, nonpublic information tipped to them and individuals who trade on material, nonpublic information which has been misappropriated.
Tippees inherit an insider’s duties and are liable for trading on material, nonpublic information illegally tipped to them by an insider. Similarly, just as insiders are liable for the insider trading of their tippees, so are tippees who pass the information along to others who trade. In other words, a tippee’s liability for insider trading is no different from that of an insider. Tippees can obtain material, nonpublic information by receiving overt tips from others or through, among other things, conversations at social, business or other gatherings.
E. Avoid Speculation
Directors, officers and employees, and their Related Persons may not trade in options, warrants, puts and calls or similar instruments on Company Securities or sell Company Securities “short”, including a “sale against the box,” defined as a sale with delayed delivery. In addition, directors, officers and employees, and their Related Persons may not hold Company Securities in margin accounts. Investing in Company Securities provides an opportunity to share in the future growth of the Company. Investment in the Company and sharing in the growth of the Company, however, does not mean short-range speculation based on fluctuations in the market. Such activities may put the personal gain of the director, officer or employee in conflict with the best interests of the Company and its securityholders. Anyone may, of course, in accordance with this Policy and other Company policies, exercise options granted to them by the Company.
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F. Trading in Other Securities
No director, officer or employee may place purchase or sell orders or recommend that another person place a purchase or sell order in the securities of another company if the person learns of material, nonpublic information about the other company in the course of his/her employment with ZEO.
VI. Additional Restrictions and Requirements for Directors, Officers and “Control Groups”
A. Who is part of a “Control Group”
All directors, officers, executives at the Vice President level or higher and all employees reporting directly to the Chief Financial Officer and all Related Persons to this group of people are part of the “Control Group.”
B Black-out period, transactions prohibited and allowed
Period
The Black-out period is the period which starts on the first day of the last calendar month of the fiscal quarter until two full trading days after the release of the Company’s quarterly or annual earnings. In addition to the standard end-of-quarter blackout periods, the Company may, from time to time, impose other blackout periods upon notice to those persons who are affected. Employees not otherwise subject to the blackout periods are encouraged to refrain from trading Company Securities during blackout periods to avoid the appearance of improper trading.
Prohibited transactions
During the Black-out period members of the Control Group may not purchase or sell Company securities, or exercise stock options where all or a portion of the acquired stock is sold during the blackout period.
Allowed transactions
| ● | Exercise of stock options where no Company Securities are sold in the market to fund the option exercise. |
| ● | Gifts of Company Securities, unless you have reason to believe the recipient intends to sell the shares during the current blackout period. |
| ● | Transfers of Company Securities to or from a trust. |
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| ● | Transactions that comply with SEC Rule 10b5-1 pre-arranged written plans; provided that: |
| (i) | the Rule 10b5-1 Plan was adopted during a window period and while the person adopting the Rule 10b5-1 Plan was not in possession of material non- public information; |
| (ii) | the Rule 10b5-1 Plan and all amendments, other than termination amendments, were approved by Chief Financial Officer or Chief Executive Officer, with such approval not to be unreasonably withheld; and |
| (iii) | a correct and complete copy of the Rule 10b5-1 Plan, including all amendments thereto, has been provided to the Chief Financial Officer or Chief Executive Officer. |
For further information about pre-arranged plans, please contact the Chief Financial Officer.
C. Pre-Clearance
Any member of the Control Group (as defined above) must obtain prior clearance from the Company’s Chief Financial Officer, Chief Executive Officer, or their respective designee, before he, she or a Related Person makes any purchases or sales of Company Securities.
Prior clearance is required for all purchases or sales. Each proposed transaction will be evaluated to determine if it raises insider trading concerns. Any advice will relate solely to the restraints imposed by law and will not constitute advice regarding the investment aspects of any transaction or the notice and filing requirements thereof (e.g., Form 4, etc.) which remain the sole responsibility of the individual. Clearance of a transaction is valid only for a 48-hour period. If the transaction order is not placed within that 48-hour period, clearance of the transaction must be re-requested. If clearance is denied, the fact of such denial must be kept confidential by the person requesting such clearance.
VII. Other
The Board of Directors may, in its discretion, authorize additional exceptions to any restrictions set forth in this policy, upon a determination by the Board of Directors or the Audit Committee, as applicable, that such exception would be consistent with the overarching purpose of this policy to prohibit officers, directors and employees from trading in the public markets in securities of ZEO or its business Partners while in the possession of material, nonpublic information regarding the issuer of such securities.
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VIII. Certification
INSIDER TRADING POLICY CERTIFICATION
To Zeo ScientifiX, Inc.:
I, _________________ (name), have received and read a copy of the foregoing Insider Trading Policy (the “Policy”) adopted by Zeo ScientifiX, Inc. (the “Company”). I hereby agree to comply with the specific requirements of the Policy in all respects during my employment or other service relationship with the Company. I understand that my failure to comply in all respects with the Policy is a basis for termination for cause of my employment or other service relationship with the Company and may result in other civil or criminal penalties.
| (Signature) | |
| (Print Name) | |
| (Date) |
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Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Below is a list of subsidiaries of Zeo ScientifiX, Inc. (the “Company”), all of which are wholly owned by the Company, other than noted by an asterisk.
| Subsidiary Name: | Date
of Formation: |
State
of Formation: |
|||||
| 1. | General Surgical Florida, Inc. | 1/15/16 | FL | ||||
| 2. | ClearMind Ventures, LLC (inactive) | 8/16/24 | DE | ||||
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in the Registration Statement of Zeo ScientifiX Inc. (Formerly Organicell Regenerative Medicine, Inc.) on Form S-8 (File No. 333-260261) of our report dated January 29, 2025, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audit of the consolidated financial statements of Zeo ScientifiX, Inc. as of October 31, 2024 and 2023 and for the years then ended, which report is included in this Annual Report on Form 10-K of Zeo ScientifiX, Inc. for the year ended October 31, 2024.
/s/ Weinberg & Company P.A.
Los Angeles, CA
January 29, 2025
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 am the Interim Chief Executive Officer and Chief Financial Officer (principal executive, financial and accounting officer of Zeo ScientifiX, Inc., a Nevada corporation (the “Registrant”) and have reviewed this Annual Report on Form 10-K for the fiscal year ended October 31, 2024 (the “Report”); |
| 2. | Based on my knowledge, this Report does not contain any untrue statement of a 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. | 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 reporting 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 my 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. | 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: January 29, 2025 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive 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
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 Annual Report on Form 10-K of the Company for the fiscal year ended October 31, 2024 (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 the Registrant. |
| Date: January 29, 2025 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial and Accounting Officer) |