What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-06-14 compared with 2024-03-18 · 64 added, 39 removed, 88 unchanged (54% of the section changed)

24 unchanged sentences

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’s leading product, Zofin™ (also known as Organicell TM 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 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 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.

To date, revenues from PPX™ continue to be minimal.

The Company has recently began to expand the use of its proprietary products in future formulations for a variety of topical use applications in the skin-care industry.

The Company is currently exploring the use of its proprietary products in future formulations for a variety of topical use applications in the skin-care industry.

To date, the Company has obtained certain Investigational New Drug (“IND”), and 18 emergency IND (“eIND”) approvals from the FDA, including applicable Institutional Review Board (“IRB”) approvals which authorized the Company to commence clinical trials or treatments in connection with the use of Zofin™ and related treatment protocols.

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Results of Operations

Three months ended January 31, 2024 as compared to three months ended January 31, 2023

Our revenues for the three months ended January 31, 2024 were $1,154,000, compared to revenues of $1,070,000 for the three months ended January 31, 2023.

The increase in revenues during the three months ended January 31, 2024 of $84,000 or 7.9%, was primarily the result of an increase of approximately 10.5% (approximately $104,000) in the overall unit sales of its high concentration biologic products during the three months ended January 31, 2024 and an increase of approximately $34,000 of revenues associated with its recently launched PPX™ service platform during the three months ended January 31, 2024, compared with the three months ended January 31, 2023, partially offset by a decrease of approximately 5.2% (approximately $54,000) in the average sales prices for the high concentration biologic products sold during the three months ended January 31, 2024, compared with the three months ended January 31, 2023.

The decrease in the average sales prices realized on high concentration biologic products sold during the three months ended January 31, 2024, compared with the three months ended January 31, 2023, was due to the sales of a newly introduced lower priced medical grade product during the three months ended January 31, 2024 that was not offered during the three months ended January 31, 2023.

The percentage of overall unit sales of the Company’s high concentration medical grade biologic product offerings increased to 62.4% from 49.4% and decreased to 37.6% from 50.6% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the three months ended January 31, 2024, compared to the three months ended January 31, 2023.

Three months ended April 30, 2024 as compared to three months ended April 30, 2023

Our revenues for the three months ended April 30, 2024 were $1,131,000, compared to revenues of $845,000 for the three months ended April 30, 2023.

The increase in revenues during the three months ended April 30, 2024 of $286,000 or 33.8% from the three months ended April 30, 2023, was primarily the result of an increase of approximately 19.2% (approximately $163,000) in the overall unit sales of its high concentration biologic products during the three months ended April 30, 2024, an increase of approximately 3.8% (approximately $31,000) in the average sales prices for the high concentration biologic products sold during the three months ended April 30, 2024, and an increase of approximately $92,000 of revenues associated with its recently launched PPX™ service platform during the three months ended April 30, 2024.

The increase in the overall unit sales of its high concentration biologic products and revenues associated with its recently launched PPX™ service platform during the three months ended April 30, 2024, as compared to the three months ended April 30, 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 percentage of overall unit sales of the Company’s high concentration medical grade biologic product offerings decreased to 46.6% from 49.1% and increased to 53.4% from 50.9% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

Cost of Revenues .

Our cost of revenues for the three months ended January 31, 2024 were $159,000, compared with cost of revenues of $104,000 for the three months ended January 31, 2023.

The increase in the cost of revenues for the three months ended January 31, 2024 of $55,000 or 52.6%, from the three months ended January 31, 2023, was due the increase of approximately 10.5% (approximately $11,000) in the overall unit sales of its high concentration biologic products, an increase of approximately 11.6% (approximately $11,000) in the average cost of revenues for the high concentration biologic products, and an increase of approximately $33,000 of cost of revenues associated with its recently launched PPX™ service platform during the three months ended January 31, 2024, compared with the three months ended January 31, 2023.

Our cost of revenues for the three months ended April 30, 2024 was $284,000, as compared to cost of revenues of $108,000 for the three months ended April 30, 2023.

The increase in the cost of revenues for the three months ended April 30, 2024 of $176,000 or 163.0%, from the three months ended April 30, 2023, was due the increase of approximately 19.2% (approximately $34,000) in the overall unit sales of its high concentration biologic products, an increase of approximately 66.4% (approximately $70,000) in the average cost of revenues for the high concentration biologic products, and an increase of approximately $72,000 of cost of revenues associated with its recently launched PPX™ service platform during the three months ended April 30, 2024, compared with the three months ended April 30, 2023.

Gross Profit .

Our gross profit for the three months ended January 31, 2024 was $995,000 (86.3% of revenues), compared with gross profit of $966,000 (90.3% of revenues) for the three months ended January 31, 2023.

The increase in gross profit during the three months ended January 31, 2024 of $29,000 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, partially offset from the increase in costs of revenues associated with those product sales during the three months ended January 31, 2024, compared to the three months ended January 31, 2023.

Our gross profit for the three months ended April 30, 2024 was $847,000 (74.9% of revenues), as compared to gross profit of $737,000 (87.2% of revenues) for the three months ended April 30, 2023.

The increase in gross profit during the three months ended April 30, 2024 of $110,000 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, partially offset from the increase in costs of revenues associated with those product sales during the three months ended April 30, 2024, compared to the three months ended April 30, 2023.

In addition, the percentage of the Company’s revenues associated with its recently launched PPX™ service platform, which has a lower gross margin percentage as compared to the Company’s high concentration biologic product offerings, increased to 10.5% of revenues for the three months ended April 30, 2024, as compared with 3.2% of revenues for the three months ended April 30, 2023.

General and Administrative Expenses .

General and administrative expenses for the three months ended January 31, 2024 were $2,157,000, compared with $3,142,000 for the three months ended January 31, 2023, a decrease of $985,000 or 31.3%.

The decrease in the general and administrative expenses for the three months ended January 31, 2024, from the three months ended January 31, 2023, was primarily the result of decreased research and development costs of approximately $169,000, decreases in insurance costs of approximately $97,000, decreased marketing and investor relations costs of approximately $151,000, decreases in commissions from sales of the Company’s products and travel and entertainment costs of approximately $105,000, decreases in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $202,000, decreased office related expenses of approximately $55,000, decreased laboratory related costs of approximately $242,000 and decreased professional fees of approximately $171,000, which were partially offset by increased payroll and consulting fees of approximately $207,000.

The decrease in stock-based compensation costs during the three months ended January 31, 2024 compared with the three months ended January 31, 2023 was principally the result of reduced amortization of costs from warrants issued as stock-based compensation to consultants in connection with the August 2022 change of control and restructuring of the company, stock issued as payment for services, and warrants issued to outside directors.

The decrease in laboratory related costs was principally the result of the Company’s sale of the Basalt laboratory facility in August 2023 and as a result, there were no associated costs associated with operating that facility during the three months ended January 31, 2024 compared with the three months ended January 31, 2023.

The decrease in research and development costs during the three months ended January 31, 2024, compared with the three months ended January 31, 2023 was principally the result of the Company’s completion of its Phase 1 trials during July 2023, and there being no other significant ongoing clinical trial costs incurred since that time.

The decrease in professional fees was principally the result of reduced audit fees, tax preparation fees and legal fees during the three months ended January 31, 2024, compared with the three months ended January 31, 2023.

General and administrative expenses for the three months ended April 30, 2024 were $2,411,000, as compared with $2,650,000 for the three months ended April 30, 2023, a decrease of $239,000 or 9.0%.

The decrease in the general and administrative expenses for the three months ended April 30, 2024, from the three months ended April 30, 2023, was primarily the result of decreased research and development costs of approximately $401,000, decreased laboratory related costs of approximately $265,000, decreased office related expenses of approximately $70,000 and decreased professional fees of approximately $106,000, which were partially offset by increased in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $487,000 and increased payroll and consulting fees of approximately $76,000 during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

The decrease in laboratory related costs was principally the result of the Company’s sale of the Basalt laboratory facility in August 2023 and as a result, there were no associated costs associated with operating that facility during the three months ended April 30, 2024, as compared with the three months ended April 30, 2023.

The decrease in research and development costs during the three months ended April 30, 2024, from the three months ended April 30, 2023 was principally the result of the Company’s completion of its Phase 1 trials during July 2023, and there being no other significant clinical trial costs incurred since that time.

The decrease in professional fees was principally the result of reduced audit fees, tax preparation fees and legal fees during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

The increase in stock-based compensation costs during the three months ended April 30, 2024, as compared to the three months ended April 30, 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.

Other income (expense).

Other income for the three months ended January 31, 2024 was $149,000, compared with other income of $0 for the three months ended January 31, 2023.

The increase in other income was due to the settlement of insurance claims of $89,000, increases in commissions received from sales of Formulator products of $34,000 and increases in income from the settlement of liabilities of approximately $26,000 during the three months ended January 31, 2024, compared to the three months ended January 31, 2023.

Other expense for the three months ended January 31, 2024 was $27,000, compared with other expense of $111,000 for the three months ended January 31, 2023.

The decrease in other expense of $84,000 during the three months ended January 31, 2024, compared to the three months ended January 31, 2023, was principally the result of reduced interest and amortization of loan discounts of approximately $35,000 and reduced costs associated with changes in the fair value of the Commitment Fee of $49,000 during the three months ended January 31, 2024, compared to the three months ended January 31, 2023.

Other income for the three months ended April 30, 2024 was $185,000, as compared to other income of $31,000 for the three months ended April 30, 2023.

The increase in other income was due to the abatement of IRS penalties of $93,000, increases in commissions received from sales of Formulator products of $53,000 and increases in income from the settlement of liabilities of approximately $37,000 during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023, partially offset from reduced income associated with changes in the fair value of a commitment fee of $31,000 related to a January 2022 $600,000 debt financing, during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

Other expense for the three months ended April 30, 2024 was $20,000, as compared to other expense of $109,000 for the three months ended April 30, 2023.

The decrease in other expense of $89,000 during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023, was principally the result of reduced amortization of loan discounts of approximately $86,000, reduced IRS interest and penalties of approximately 13,000, partially offset from increased interest expenses on debt obligations of $10,000 during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

Six months ended April 30, 2024 as compared to six months ended April 30, 2023

Our revenues for the six months ended April 30, 2024 were $2,285,000, as compared to revenues of $1,915,000 for the six months ended April 30, 2023.

The increase in revenues for the six months ended April 30, 2024 of $370,000 or 19.3%, was primarily the result of an increase of approximately 14.7% (approximately $271,000) in the overall unit sales of its high concentration biologic products during the six months ended April 30, 2024 and an increase of approximately $116,000 of revenues associated with its recently launched PPX™ service platform during the six months ended April 30, 2024, from the six months ended April 30, 2023, partially offset by a decrease of approximately 1.0% (approximately $18,000) in the average sales prices for the high concentration biologic products sold during the six months ended April 30, 2024, compared with the six months ended April 30, 2023.

The increase in the overall unit sales of its high concentration biologic products and revenues associated with its recently launched PPX™ service platform during the six months ended April 30, 2024, as compared to the six months ended April 30, 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 percentage of overall unit sales of the Company’s high concentration medical grade biologic product offerings increased to 54.4% from 49.3% and decreased to 45.6% from 50.7% for the Company’s high concentration aesthetic biologics product offerings, respectively, for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Cost of Revenues .

Our cost of revenues for the six months ended April 30, 2024 were $443,000, as compared to cost of revenues of $212,000 for the six months ended April 30, 2023.

The increase in the cost of revenues for the six months ended April 30, 2024 of $231,000 or 109.0%, from the six months ended April 30, 2023, was due the increase of approximately 14.7% (approximately $42,000) in the overall unit sales of its high concentration biologic products, an increase of approximately 43.5% (approximately $85,000) in the average cost of revenues for the high concentration biologic products, and an increase of approximately $104,000 of cost of revenues associated with its recently launched PPX™ service platform during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Gross Profit .

Our gross profit for the six months ended April 30, 2024 was $1,842,000 (80.6% of revenues), compared to gross profit of $1,703,000 (88.9% of revenues) for the six months ended April 30, 2023.

The increase in gross profit during the six months ended April 30, 2024 of $139,000 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, partially offset from the increase in costs of revenues associated with those product sales during the six months ended April 30, 2024, compared to the six months ended April 30, 2023.

In addition, the percentage of the Company’s revenues associated with its recently launched PPX™ service platform, which has a lower gross margin percentage as compared to the Company’s high concentration biologic product offerings, increased to 7.4% of revenues for the six months ended April 30, 2024, as compared to 2.8% of revenues for the six months ended April 30, 2023.

General and Administrative Expenses .

General and administrative expenses for the six months ended April 30, 2024 were $4,568,000, as compared to $5,792,000 for the six months ended April 30, 2023, a decrease of $1,224,000 or 21.1%.

The decrease in the general and administrative expenses for the six months ended April 30, 2024, from the six months ended April 30, 2023, was primarily the result of decreased research and development costs of approximately $569,000, decreases in insurance costs of approximately $123,000, decreased marketing and investor relations costs of approximately $123,000, decreases in commissions from sales of the Company’s products and travel and entertainment costs of approximately $94,000, decreased office related expenses of approximately $99,000, decreased laboratory related costs of approximately $508,000 and decreased professional fees of approximately $277,000, which were partially offset by increased payroll and consulting fees of approximately $283,000 and increases in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $286,000.

The decrease in research and development costs during the six months ended April 30, 2024, from the six months ended April 30, 2023 was principally the result of the Company’s completion of its Phase 1 trials during July 2023, and there being no other significant ongoing clinical trial costs incurred since that time.

The decrease in laboratory related costs was principally the result of the Company’s sale of the Basalt laboratory facility in August 2023 and as a result, there were no associated costs associated with operating that facility during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

The decrease in professional fees was principally the result of reduced audit fees, tax preparation fees and legal fees during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

The increase in stock-based compensation costs during the six months ended April 30, 2024, as compared to the six months ended April 30, 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.

Other income (expense).

Other income for the six months ended April 30, 2024 was $334,000, as compared to other income of $0 for the six months ended April 30, 2023.

The increase in other income was due to the abatement of IRS penalties of $93,000, settlement of insurance claims of $89,000, increases in commissions received from sales of Formulator products of $87,000 and increases in income from the settlement of liabilities of approximately $61,000 during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Other expense for the six months ended April 30, 2024 was $47,000, as compared to other expense of $189,000 for the six months ended April 30, 2023.

The decrease in other expense of $142,000 during the six months ended April 30, 2024, compared to the six months ended April 30, 2023, was principally the result of reduced amortization of loan discounts of approximately $117,000, reduced IRS interest and penalties of approximately 16,000, and reduced costs associated with changes in the fair value of a commitment fee of $19,000 related to a January 2022 $600,000 debt financing, during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, partially offset from increased interest expenses on debt obligations of $10,000 during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Liquidity and Capital Resources

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The Company held no cash equivalents for any of the periods presented:

Three Months Ended

Cash, beginning of year

Six months Ended

Cash, beginning of period

Net cash used in operating activities

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Net cash (used in) provided by financing activities

Cash, end of year

During the three months ended January 31, 2024, the Company used cash in operating activities of $575,000, compared to $1,283,000 for the three months ended January 31, 2023, a decrease in cash used of $708,000.

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 $813,000 and increases in gross profit of $16,000 for the three months ended January 31, 2024, compared to the three months ended January 31, 2023, partially offset by reductions in cash provided from changes in operating assets and liabilities of $121,000 for the three months ended January 31, 2024, compared to the three months ended January 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 prepaid expenses, partially offset from increases in deferred revenues during the three months ended January 31, 2024, as compared to the three months ended January 31, 2023.

The reduction in general and administrative expenses and other oncome (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 three months ended January 31, 2024, as compared to the three months ended January 31, 2023.

During the three months ended January 31, 2024, the Company did not have any investing activities, compared to cash used in investing activities of $16,000 for the three months ended January 31, 2023 a decrease in cash used from investing activities of $16,000.

The decrease in cash used by investing activities was primarily due to the reduction of payments made in connection with the Company’s purchase of laboratory equipment.

During the three months ended January 31, 2024, the Company had cash used in financing activities of $9,000, compared to cash used in financing activities of $1,032,000 for the three months ended January 31, 2023.

The decrease in cash used in financing activities of $1,023,000 was due to the reduction in repayment of notes payable of $600,000, reductions in funds held in escrow for shares to be repurchased in connection with litigation of $500,000 and decreases in payments on finance leases of approximately $22,000, partially offset from decreases in proceeds from the sale of equity securities of $100,000.

Cash, end of period

During the six months ended April 30, 2024, the Company used cash in operating activities of $990,000, as compared to $1,954,000 for the six months ended April 30, 2023, a decrease in cash used of $964,000.

The decrease in cash used was primarily the result of a reduction in general and administrative expenses and other income (expense) after adjusting for non-cash related activities of $1,472,000 and increases in gross profit of $139,000 for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, partially offset by reductions in cash provided from changes in operating assets and liabilities of $647,000 for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

The decrease in cash provided from changes in operating assets and liabilities was due to decreases in accounts payable and accrued expenses and prepaid expenses, partially offset from increases in deferred revenues during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

The reduction in general and administrative expenses and other oncome (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 six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

During the six months ended April 30, 2024, the Company did not have any investing activities, compared to cash used in investing activities of $116,000 for the six months ended April 30, 2023 a decrease in cash used from investing activities of $116,000.

The decrease in cash used by investing activities was primarily due to the reduction of payments made in connection with the Company’s purchase of laboratory equipment and the decrease in investments from non-marketable securities of $100,000 during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

During the six months ended April 30, 2024, the Company had cash used in financing activities of $20,000, as compared to cash used in financing activities of $552,000 for the six months ended April 30, 2023.

The decrease in cash used in financing activities of $532,000 was due to the reduction in repayment of notes payable of $600,000, reductions in funds held in escrow for shares to be repurchased in connection with litigation of $500,000 and decreases in payments on finance leases of approximately $36,000, partially offset from decreases in proceeds from the sale of equity securities of $100,000 and decreases in proceeds from the issuance of promissory notes of $504,000 during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Capital Resources

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The Company has had limited revenues since its inception.

The Company incurred net losses of $1,040,000 for the three months ended January 31, 2024 and used $575,000 of cash from operating activities during that period.

In addition, the Company had a stockholders’ deficit of $1,508,000 at January 31, 2024.

The Company had a working capital deficit of $2,031,000 at January 31, 2024.

The Company incurred net losses of $2,439,000 for the six months ended April 30, 2024 and used $990,000 of cash from operating activities during that period.

In addition, the Company had a stockholders’ deficit of $1,700,000 at April 30, 2024.

The Company had a working capital deficit of $2,203,000 at April 30, 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”).

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bankruptcy laws.

As of January 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.

The independent auditor’s report dated January 29, 2024 included in our Annual Report on Form 10-K for the year ended October 31, 2023 included an explanatory paragraph as to the Company’s ability to continue as a going concern.

As of April 30, 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 January 31, 2024 and through the date of this report, we had no such 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 April 30, 2024 and through the date of this report, we had no such arrangements.

Recently Issued Financial Accounting Standards

There were no recently issued financial accounting standards that would have an impact on the Company’s financial statements.

See Note 2 to the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Critical Accounting Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis