Zeo ScientifiX, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE NO. Zeo ScientifiX, Inc. Report of Independent Registered Public Accounting Firms F-2 Consolidated Balance Sheets as of October 31, 2024 and 2023 F-4 Consolidated Statements of Operations for the Years Ended October 31, 2024 and 2023 F-5 Consolidated Statement of Changes In Stockholders’ Equity (Deficit) for the Years Ended October 31, 2024 and 2023 F-6 Consolidated Statements of Cash flows for the Years Ended October 31, 2024 and 2023 F-7 Notes to Consolidated Financial Statements F-8 – F-29 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. Weinberg & Company P.A. 572 Los Angeles, CA 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 $ 657,000 $ 1,756,000 Accounts receivable, net of allowance for bad debts 194,000 18,000 Other receivables 3,000 12,000 Prepaid expenses 79,000 106,000 Inventories 232,000 310,000 Total Current Assets 1,165,000 2,202,000 Property and equipment, net 478,000 573,000 Security deposits - 7,000 TOTAL ASSETS $ 1,643,000 $ 2,782,000 LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT Current Liabilities Accounts payable and accrued expenses $ 1,719,000 $ 2,612,000 Advances payable to former officer - 221,000 Finance lease obligations 5,000 23,000 Convertible promissory note, net of debt discount of $ 45,000 and $ 68,000 680,000 657,000 Deferred revenue 884,000 497,000 Total Current Liabilities 3,288,000 4,010,000 Long term finance lease obligations 8,000 13,000 Total Liabilities 3,296,000 4,023,000 Commitments and contingencies Shares Subject To Possible Redemption Series C Preferred Stock, $ 0.001 par value, 100 shares authorized; 100 and 100 shares issued and outstanding, respectively - - Stockholders’ Deficit Common stock, $ 0.001 par value, 2,500,000,000 shares authorized; 6,344,817 and 7,283,483 shares issued and outstanding, respectively 6,000 7,000 Additional paid-in capital 60,554,000 56,260,000 Accumulated deficit ( 62,213,000 ) ( 57,508,000 ) Total Stockholders’ Deficit ( 1,653,000 ) ( 1,241,000 ) TOTAL LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT $ 1,643,000 $ 2,782,000 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 $ 199,000 and $ 181,000 , respectively) $ 4,620,000 $ 4,558,000 Cost of revenues 844,000 508,000 Gross profit 3,776,000 4,050,000 General and administrative expenses 9,095,000 10,818,000 Loss from operations ( 5,319,000 ) ( 6,768,000 ) Other income (expense) Interest expense ( 92,000 ) ( 431,000 ) Change in Commitment Fee Shortfall Obligation - ( 19,000 ) Impairment of non-marketable securities in a related entity ( 45,000 ) ( 100,000 ) Gain on sale of assets - 341,000 Other income 751,000 ( 10,000 ) Net loss $ ( 4,705,000 ) $ ( 6,987,000 ) Net loss per common share - basic and diluted $ ( 0.74 ) $ ( 0.99 ) Weighted average number of common shares outstanding - basic and diluted 6,336,392 7,028,638 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 7,395,632 $ 7,000 $ 52,403,000 $ ( 50,521,000 ) $ 1,889,000 Sale of common stock 22,282 - 100,000 - 100,000 Fair value of equity instruments issued for compensation: Fair value of vested shares issued 25,969 - 452,000 - 452,000 Fair value of vested options and warrants issued - - 2,757,000 - 2,757,000 Issuance of Common stock and Warrants as commitment fee for SPA 23 Note 75,000 - 283,000 - 283,000 Discount on warrants issued with convertible debt - - 72,000 - 72,000 Stock issued in satisfaction of Commitment Fee Shortfall Obligation 58,600 - 193,000 - 193,000 Cancellation of shares repurchased in connection with litigation ( 124,000 ) - - - - Return of former executive’s shares and warrants ( 170,000 ) - - - - Net loss - - - ( 6,987,000 ) ( 6,987,000 ) Balance October 31, 2023 7,283,483 7,000 56,260,000 ( 57,508,000 ) ( 1,241,000 ) Sale of common stock 250,000 - 500,000 - 500,000 Reverse split round-up adjustment 5,803 - - - - Cancellation of shares in connection with litigation ( 1,164,742 ) ( 1,000 ) 1,000 - - Purchase of shares in connection with litigation ( 237,602 ) - ( 80,000 ) - ( 80,000 ) Exchange of accounts payable for stock 20,000 - 20,000 - 20,000 Fair value of equity instruments issued for compensation: Fair value of vested shares issued 187,875 - 450,000 - 450,000 Fair value of vested options issued - - 953,000 - 953,000 Fair value of vested warrants issued - - 2,450,000 - 2,450,000 Net loss - - - ( 4,705,000 ) ( 4,705,000 ) Balance October 31, 2024 6,344,817 $ 6,000 $ 60,554,000 $ ( 62,213,000 ) $ ( 1,653,000 ) 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 $ ( 4,705,000 ) $ ( 6,987,000 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 74,000 486,000 Amortization of OID and commitment fee discount – Promissory notes 23,000 349,000 Bad debt expense 9,000 - Change in Commitment Fee Shortfall Obligation - 19,000 Gain from sale of assets - ( 341,000 ) Write-off of advances payable to former officer ( 221,000 ) - Reserve of non-marketable securities – related party 45,000 100,000 Write-off of receivables from officers and other receivable - 142,000 Write-off of fixed assets - 36,000 Stock-based compensation 3,853,000 3,209,000 Changes in operating assets and liabilities: Accounts receivable, net of allowance for bad debts ( 185,000 ) 37,000 Other receivable 9,000 ( 17,000 ) Prepaid expenses 27,000 69,000 Inventories 78,000 ( 62,000 ) Accounts payable and accrued expenses ( 851,000 ) 233,000 Security deposits 7,000 33,000 Deferred revenue 387,000 497,000 Net cash used in operating activities ( 1,450,000 ) ( 2,197,000 ) CASH FLOWS FROM INVESTING Purchase of fixed assets - ( 26,000 ) Proceeds from sale of assets - 741,000 Investment in non-marketable equity securities – related party ( 45,000 ) ( 100,000 ) Net cash provided by (used in) investing activities ( 45,000 ) 615,000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of Promissory notes - 1,230,000 Shares repurchased in connection with litigation ( 80,000 ) ( 500,000 ) Payments on finance leases ( 24,000 ) ( 115,000 ) Repayments of Promissory notes - ( 1,130,000 ) Proceeds from sale of common stock 500,000 100,000 Net cash (used in) provided by financing activities 396,000 ( 415,000 ) Increase (decrease) in cash ( 1,099,000 ) ( 1,997,000 ) Cash at beginning of period 1,756,000 3,753,000 Cash at end of period $ 657,000 $ 1,756,000 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for taxes $ - $ - Cash paid for interest $ 68,000 $ 67,000 NON-CASH INVESTING AND FINANCING TRANSACTIONS: Reduction in accounts payable for equipment returned to vendor $ 21,000 $ - Exchange of shares for payables $ 20,000 $ - Warrants issued in connection with convertible notes $ - $ 72,000 Finance lease assigned to buyer in connection with asset sale $ - $ 213,000 OID discount on proceeds received from Promissory Note $ - $ 11,000 Common stock issued as commitment fee for Promissory Note $ - $ 283,000 Common stock issued in satisfaction of Commitment Fee Shortfall Obligation $ - $ 193,000 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 $ 250,000 per institution. At October 31, 2024, the Company held in one financial institutions a total of $ 47,000 of cash balances in excess of FDIC insurance coverage limits. Major Customer During the year ended October 31, 2024, the Company sold products and services totaling approximately $ 661,000 ( 14.3 % ) to a large distributor and the distributor’s customers and approximately $ 556,000 ( 12.0 % ) to another large distributor and the distributor’s customers. F- 8 During the year ended October 31, 2023, the Company sold products and services totaling approximately $ 1,301,000 ( 28.5 % ) to a large distributor and the distributor’s customers, approximately $ 459,000 ( 10.1 % ) to another large distributor and the distributor’s customers and approximately $ 460,000 ( 10.1 % ) to an individual medical practice. As of October 31, 2024, the Company had accounts receivable from three customers which comprised 60 % , 17 % and 12 % of its gross accounts receivable, respectively. As of October 31, 2023, the Company had accounts receivable from one customer which comprised 50 % . There were no other customers that accounted for more than 10 % of accounts receivable at October 31, 2024 or 2023. 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 $ 135,000 . 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 $ 113,100 and $ 86,900 or 57.0 % and 43.0 % , respectively, of the total amount of tissue raw material purchased during that period. 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 $ 9,000 and $ 0 , respectively. 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. Net Income (Loss) Per Common Share 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 3,522,527 common shares issuable upon the exercise of options and warrants (vested and unvested), 185,000 unvested restricted stock and $ 725,000 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 2,571,656 common shares issuable upon the exercise of warrants (vested and unvested) and 100,000 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. Stock-Based Compensation 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 $ 164,000 and $ 923,000 for the years ended October 31, 2024 and 2023, respectively. The research and development costs primarily relate to the filing and approval of IND applications and the performance of clinical trials. F- 11 In come 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 $ 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. 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 $ 164,000 $ 154,000 Finished goods 68,000 156,000 Total inventories $ 232,000 $ 310,000 NOTE 5 – PROPERTY AND EQUIPMENT Schedule of property and equipment October 31, 2024 October 31, 2023 Finance lease equipment $ 13,000 $ 260,000 Manufacturing equipment 757,000 535,000 770,000 795,000 Less: accumulated depreciation and amortization ( 292,000 ) ( 222,000 ) Total property and equipment, net $ 478,000 $ 573,000 During February 2024, in connection with the expiration of the lease for certain lab equipment originally valued at $ 240,000 , the Company exercised its buyout option for the equipment for a total cost of $ 1 (see Note 7). 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 $ 341,000 , net of transaction fees of approximately $ 11,000 , during the year ended October 31, 2023. Depreciation expense totaled $ 74,000 and $ 106,000 for the years ended October 31, 2024 and 2023, respectively. Amortization expense totaled $ 0 and 380,000 for the years ended October 31, 2024 and 2023, respectively. 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 $ 145,000 100,000 Reserve on carrying value of investment in non-marketable securities $ ( 145,000 ) ( 100,000 ) 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 $ 145,000 and $ 100,000 respectively, based on the limited financial history of Exotropin to date to ascertain the fair value of Exotropin and the Company’s limited rights to control future dilution to the Company’s interests and the timing of available distributions, if any, of Exotropin. As such, at October 31, 2024 and 2023, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $0. 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, $ 87,000 of commissions were earned under the Sales Agreement (see Note 15). 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 $ 240,000 (“Lease Agreement”). The Lease Agreement was accounted for as a finance lease obligation. The annual interest rate charged in connection with the lease was 4.5 % . The leased equipment is being depreciated over their estimated useful lives of 15 years. The lease expired in February 2024. Under the terms of Lease Agreement, the Company exercised its option to acquire all of the leased equipment for a nominal amount upon termination of the Lease Agreement. F- 16 During October 2021, the Company entered into a second lease agreement in the amount of $ 305,000 for certain lab equipment that was installed at the Company’s former Basalt lab location. Under the terms of the lease agreement, the Company was required to make 60 equal monthly payments of $ 6,000 plus applicable sales taxes. Under the lease agreement, the Company has the option to acquire all of the leased equipment for a nominal amount upon termination of the lease. The lease agreement is being accounted for as a finance lease obligation. The annual interest rate charged in connection with the lease is 3.0 % . Lease payments and depreciation of the leased equipment began during May 2022, the date that the Basalt lab location became operational. The leased equipment were being depreciated over their estimated useful lives of 15 years. 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 $ 213,000 , and reducing payments under the second lease agreement from $6,000 per month to $1,000 per month. As of October 31, 2024 and 2023, finance lease obligations were $ 13,000 and $ 36,000 , respectively, of which $ 5,000 and $ 23,000 were current, respectively. The weighted average remaining term of the Company’s finance lease as of October 31, 2024 was 30 months. The minimum lease payments pursuant to the finance lease are as follows: Schedule of minimum lease payment to finance lease Year Ended October 31, Minimum Rent 2025 $ 5,000 2026 5,000 2027 4,000 2028 - 2029 - Thereafter - Total undiscounted finance lease payments 14,000 Less: imputed interest ( 1,000 ) Present value of finance lease liabilities $ 13,000 NOTE 8 – RELATED PARTY TRANSACTIONS 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. At October 31, 2023, advances payable to a former officer were $ 221,000 . The advances are 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 the affiliate to enforce a claim to collect the advances. As a result, the Company wrote-off the full balance of the advances payable to an affiliate of a former executive of $ 221,000 . The Company recorded the write-off as other income during the year ended October 31, 2024. 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 $ 100,000 in cash (representing a 10% equity interest at the time of the investment) in Exotropin (see Note 6). At the time of the investment, both Greyt Ventures, LLC, a principal shareholder of the Company (“Greyt”) and Skycrest Holdings, LLC, a former principal shareholder of the Company (“Skycrest”), 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 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. 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. NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Schedule of account payable and accrued expenses October 31, 2024 October 31, 2023 Accrued payroll related liabilities $ 667,000 $ 667,000 Lab equipment and supplies payables 54,000 407,000 Clinical trial and research payables 648,000 675,000 Legal fees payable 127,000 479,000 Other professional fees payable 119,000 81,000 Accrued IRS penalty - 86,000 Accrued commissions payable 18,000 102,000 Construction payables 9,000 9,000 Other payables and accrued expenses 77,000 106,000 Total Accounts Payable and Accrued Expenses $ 1,719,000 $ 2,612,000 During February 2024, the Internal Revenue Service (“IRS”) notified the Company that the Company’s appeal for full abatement of penalties and interest ($ 92,000 as of February 2024) associated with delinquent filed returns for the tax years ended 2012 – 2015 was granted. The Company recorded the abatement as other income for the year ended October 31, 2024. NOTE 10 – NOTES PAYABLE Schedule of notes payable October 31, 2024 October 31, 2023 Convertible Promissory Notes $ 725,000 $ 725,000 Unamortized discount ( 45,000 ) ( 68,000 ) Total Notes Payable $ 680,000 $ 657,000 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 $ 530,000 (“Note”) to the Purchaser in a private transaction for a purchase price of $519,400 (giving effect to original issue discount of $10,600). In connection with the sale of the Note, the Company also paid the Purchaser’s legal fees and due diligence costs of $ 15,000 , resulting in net proceeds to the Company of $ 504,400 , which were used for working capital and other general corporate purposes. The Note bears interest at the rate of 12 % per annum. The Note matured on September 6, 2023 and was paid in full. Pursuant to the terms of the SPA 23, the Company paid a commitment fee to the Purchaser (“Commitment Fee”) in the form of 75,000 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 50,000 shares of our common stock at a price of $ 12.00 per share (“Warrant Shares”). F- 18 Upon the closing, the Company recorded a discount of the Promissory Note in the amount of $ 308,000 , consisting of the original issue discount of $ 10,600 , transaction fees of $ 15,000 , the fair value of the Commitment Fee Shares of $ 169,500 and the fair value of the Warrant Shares of $ 113,000 . For the year ended October 31, 2023, $ 308,000 of the total discounts recorded in connection with the issuance of the Note have been amortized. 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 $ 250,000 per Unit for an aggregate purchase price of $ 725,000 . Each Unit consists of (a) a $ 250,000 in principal amount 8 % Convertible Promissory Note due September 30, 2026 (“Convertible Promissory Note ” ); and (b) 7,813 common stock purchase warrants (the “Warrants”), each entitling the holder to purchase one share of common stock, $ 0.001 par value (“Shares”) at an exercise price of $ 20.00 for a period of five years from the date of issuance. 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 ( 20 ) trading days ending on the date the Company gives the holders of the Convertible Promissory Notes notice of prepayment. 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 $ 6.00 per Share. 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 $ 80,000 . The Company has recorded a discount of the Promissory Note in the amount of $72,000, representing the allocable fair market value of the Note and the warrants. The discount is being amortized over the term of Note. For the years ended October 31, 2024 and 2023, $ 23,000 and $ 4,000 of the discounts recorded in connection with the issuance of the Note have been amortized, resulting to unamortized debt discount of $ 45,000 and $ 68,000 as of October 31, 2024 and 2023, respectively. During the year ended October 31, 2024, the Company has paid $ 64,000 of interest on the Convertible Promissory Notes. 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 $ ( 207,000 ) $ ( 385,000 ) State ( 10,000 ) ( 349,000 ) Deferred Income Tax Expense (Benefit) ( 217,000 ) ( 734,000 ) Change in Valuation Allowance 217,000 734,000 Income tax provision $ - $ - Effective tax rates differ from the federal statutory rate of 21 % for 2024 and 2023 applied to income before income taxes. A reconciliation of the U.S. federal statutory tax amount to the Company’s effective tax amount is as follows: Schedule of effective income tax rate October 31, 2024 October 31, 2023 Tax at federal statutory rate $ ( 989,000 ) $ ( 1,467,000 ) State taxes, net of federal benefit ( 61,000 ) ( 349,000 ) Permanent differences 2,000 - Stock-based compensation 1,002,000 834,000 Other ( 171,000 ) 248,000 Total income tax expense (benefit) ( 217,000 ) ( 734,000 ) Change in valuation allowance 217,000 734,000 Income tax provision $ - $ - The Company had a federal net operating loss carryover of $ 17,416,000 as of October 31, 2024, of which 98% is available to offset future taxable income indefinitely. The Company had state net operating loss carryovers of $ 10,546,000 of which $ 7,173,000 , carryover indefinitely and the balance expires in varying amounts through 2041. 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 $ 2,644,000 $ 1,637,000 Net operating loss carryforward-Federal 3,657,000 3,611,000 Net operating loss carryforward-State 542,000 618,000 Other - - Total deferred tax assets: 6,843,000 5,866,000 Deferred Tax Liabilities: Property and equipment 310,000 310,000 Total deferred tax liabilities: 310,000 310,000 Valuation Allowance ( 6,533,000 ) ( 5,556,000 ) 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. I R S Penalties As of October 31, 2023, the Company had accrued $ 86,000 of accrued tax penalties and interest on the balance sheet in connection with penalties and interest assessed by the Internal Revenue Service (“IRS”) for delinquent income tax returns for the periods since inception through the tax year ended October 31, 2016 that were not filed until December 2017 (“Delinquent Filed Returns”). The Company filed a “Request for Collection Due Process Equivalent Hearing” (“Request”) in September 2021 seeking an abatement of the penalties and interest. A hearing was held on June 28, 2022 and during February 2024, the IRS notified the Company that the Company’s appeal for full abatement of penalties and interest ($ 92,000 as of February 2024) associated with the Delinquent Filed Returns was granted. The Company recorded the abatement as other income for the year ended October 31, 2024. NOTE 12 – CAPITAL STOCK Preferred Stock The Company is authorized to issue 10,000,000 shares of $ 0.001 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 100 shares, $ 0.001 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 250,000 shares of common stock (“Shares”) and warrants to purchase an additional 83,333 Shares (the “Warrants”) (see Note 13). In connection with the Financing, the Company agreed to provide the Investor certain piggy-back registration rights under the Securities Act of 1933, as amended (“Securities Act”) with respect to the Shares purchased and the Shares underlying the Warrants purchased. The proceeds are being used for working capital purposes. F- 21 Issuances of Common Stock – Stock Based Compensation: On December 1, 2022, the Company granted 750 shares of common stock to an employee as provided for in the employment agreement valued at $ 6.00 per share, the closing price of the common stock of the Company on the grant date. The Company recorded $ 4,500 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 25,000 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 $ 100,000 based on the closing price of the common stock of the Company on the date of the agreement of $ 4.00 per share. The Company recorded $ 100,000 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 125,000 and 62,500 shares of Zeo common stock to Jerry Glauser and Leatham Stern or their nominees, respectively (“Stock Grants”), both members of the Board, valued at $ 2.00 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 $ 375,000 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 $ 20,000 of legal fees payable due to the legal firm for 20,000 shares of newly issued common stock valued at $ 20,000 , representing a 20% discount to the closing price of the common stock of the Company on the date the arrangement was agreed to by both the Company and the legal firm. The shares were issued to the legal firm in April 2024. 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 $ 10,000,000 equity line of credit facility (“ELOC”), on December 2, 2022, the Company submitted a put request to Tysadco to purchase 22,282 registered shares at a purchase price of $4.49, for a total of $100,000 (“Put Request”). On December 5, 2022, Tysadco funded the Put Request and the Company issued 22,282 shares to Tysadco. The proceeds from the share sale were used for working capital and general corporate purposes. 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 1,250,000 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 1,250,000 shares to 2,500,000 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 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. As of October 31, 2023, a total of 1,111,250 Awards (net of 676,500 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 499,216 $ - $ - Non-vested Shares Granted - $ - $ - Vested ( 169,983 ) $ - $ - Expired/Forfeited ( 229,233 ) $ - $ - Non-vested Shares at October 31, 2023 100,000 $ - $ - Non-vested Shares Granted 185,000 $ 331,000 $ 1.79 Vested - $ ( 74,000 ) $ - Expired/Forfeited ( 100,000 ) $ - $ - Non-vested Shares at October 31, 2024 185,000 $ 257,000 $ 1.79 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 $ 15,000 for the first 6 months, provided however, that the last 2 monthly retainers are subject to Salesco achieving a certain minimum amount in sales during the applicable month. The monthly retainers are to be repaid from commissions earned by Salesco on sales of the Company’s products that are generated through Salesco. In addition, Salesco was granted 30,000 shares of the Company’s common stock which vests over 2 years, quarterly, except the quarterly vesting period will “cliff vest” upon the Company receiving $ 300,000 in cumulative sales from customers introduced by Salesco. The agreement may be terminated by the Company upon the six-month anniversary of the agreement. The 30,000 grant of shares were valued at $2.00 per share, the closing price of the common stock of the Company on the effective date of the agreement. The Company will amortize $ 60,000 of stock-based compensation expense over the 2 -year vesting terms. The Company recorded $ 18,000 of stock-based compensation expense during the year ended October 31, 2024, respectively. 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 155,000 shares of unregistered common stock valued at ranges between $ 1.04 per share and $ 2.75 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 $ 271,000 of stock-based compensation expense over a three-year vesting period. The Company recorded a total of $ 56,000 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 $ 257,000 of unamortized compensation associated with unvested stock grants outstanding as of October 31, 2024 that will be amortized over their respective remaining service periods. 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 535,750 $ 5.73 9.74 $ - Granted 665,000 $ 2.38 5.00 $ - Exercised - $ - - $ - Expired/Forfeited ( 305,000 ) $ 6.57 8.74 $ - Outstanding at October 31, 2023 895,750 $ 2.97 5.67 $ - Granted 622,538 $ 2.52 9.42 $ - Exercised - $ - - $ - Expired/Forfeited ( 555,000 ) $ 2.53 3.74 $ - Outstanding at October 31, 2024 963,288 $ 2.94 8.07 $ - Exercisable at October 31, 2024 402,077 $ 3.53 7.49 $ - During the year ended October 31, 2023, the Board approved the granting of options to purchase 665,000 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 $ 1,580,000 . The options vest between one-year and three-year periods. The Company valued the options using a Black-Scholes option pricing model with the following assumptions: Schedule of assumptions used for the options granted Exercise prices $ 2.28 - $ 2.40 Expected dividends - Expected volatility 167 % - 168 % Risk free interest rate 3.7 % - 4.10 % Expected term of options 5.0 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 305,000 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 622,538 shares of its common stock. The options vest over various periods ranging from 6 months to 3 years, expire five to ten years from the date of grant and had an aggregate fair value of $ 1,438,000 at the date of grant. The Company valued the options using a Black-Scholes option pricing model with the following assumptions: Schedule of assumptions used Exercise prices $ 2.00 - $ 4.50 Expected dividends - Expected volatility 156 % - 159 % Risk free interest rate 4.20 % - 4.34 % Expected term of options 6.0 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 95,000 , 250,000 , and 20,000 , 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 $ 953,000 and $ 622,000 , respectively, of stock compensation costs associated with options issued. There was approximately $ 1,284,000 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 1,613,250 $ 4.11 9.60 $ 2,185,000 Granted 72,656 $ 14.49 5.00 $ - Exercised - $ - - $ - Expired/Forfeited ( 10,000 ) $ 8.00 - $ - Outstanding at October 31, 2023 1,675,906 $ 4.54 8.47 $ - Granted 883,333 $ 2.32 9.21 $ - Exercised - $ - - $ - Expired/Forfeited - $ - - $ - Outstanding at October 31, 2024 2,559,239 $ 3.77 7.97 $ - Exercisable at October 31, 2024 1,995,350 $ 4.17 7.48 $ - 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 50,000 commitment Warrant Shares exercisable for a five-year period at a price of $ 12.00 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 3.98 % , (2) term of 5 years, (3) expected stock volatility of 169 % , and (4) expected dividend rate of 0 % . All of the warrants vested immediately. The grant date fair value of the warrants issued was $ 113,000 . The Company recorded $ 113,000 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 $ 725,000 . Each Unit consists of (a) a $ 250,000 in principal amount 8 % Convertible Promissory Note due September 30, 2026 (the “Note”); and (b) 7,813 common stock purchase warrants (the “Warrants”) (an aggregate of 22,656 warrants issued), each entitling the holder to purchase one share of common stock, $ 0.001 par value (“Shares”) at an exercise price of $ 20.00 for a period of five years from the date of issuance. 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 83,333 shares of common stock. The warrant is exercisable for $ 2.00 per share (the closing price of the Company’s common stock on the date of grant was $1.66), until the tenth anniversary date of the date of issuance. The exercise price and number of shares issuable upon exercise of the warrant are subject to adjustment to give effect to stock splits, stock dividends and other recapitalization events and the sale of shares at a purchase price less than the exercise price then in effect. F- 25 On July 11, 2024, the Company granted warrants to purchase 350,000 shares of common stock to each of two consultants and then principal shareholders to the Company (“Consultants”). The Warrants vest in equal monthly installments over an eighteen (18) month period from the date of grant. Once vested, the Warrants 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). The Consultants, who are the controlling stockholders of the Company, were also accorded piggy-back registration rights under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock issuable upon exercise of the warrants. The Company valued the warrants on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 4.20 % , (2) term of 10 years, (3) expected stock volatility of 159 % , and (4) expected dividend rate of 0 % . The grant date fair value of the warrants granted to each of the Consultants was $823,000 (total $ 1,645,000 ). The Company will amortize $1,645,000 of stock-based compensation expense over the vesting period of 18 months. 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 100,000 shares of unregistered common stock. The Company valued the warrants on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 3.96 % , (2) term of 3 years, (3) expected stock volatility of 147 % , and (4) expected dividend rate of 0 % . The grant date fair value of the warrants granted was $ 185,000 . The Company will amortize $ 185,000 of stock-based compensation expense over the term of the consulting agreement. During the year ended October 31, 2024 and 2023, the Company amortized $ 2,450,000 and $ 2,134,000 , respectively, of stock compensation costs associated with warrants issued. There was approximately $ 3,005,000 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 $ 167,000 (“Minimum Purchase”) and mutually agreed upon minimal annual amounts thereafter. In June 2023, the Supplier informed the Company that there were delays in the Supplier’s development of the Products, including the timing of providing a purchase order for the Minimum Purchase of the Company’s Ingredient. During September 2023, the Company and the Supplier agreed to enter into an Amendment and Restatement of the Skincare Agreement (“Amended Skincare Agreement”). Under the terms of the Amended Skincare Agreement, the products to be provided by the Company was modified to include both the Ingredient and a topical moisturizer (“Moisturizer”) supplied by 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 $ 403,000 of the Combined Product by September 30, 2023 (“Initial Purchase Order”) and a total of $ 648,000 of the Combined Product during the first year of the Amended Skincare Agreement. During November 2023, the Supplier paid the Company $ 403,000 in connection with the Initial Purchase Order. Pursuant to Sales Agreement with Exotropin, 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”). 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 $ 168,000 of other income during the year ended October 31, 2024 in connection with the net settlement amount associated with the Amended Skincare Agreement. 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 $ 243,000 . During July 2024, the Company received an advance payment of $500,000 in connection with a distribution agreement entered into between the Company and an affiliate of the Investor (see Note 11) which was to be applied against future invoices for product inventory to be delivered over time which amount was recorded as deferred revenue. As of October 31, 2024, $135,000 of product inventory was invoiced and delivered reducing the deferred revenue amount to $ 365,000 . 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 $ 608,000 $ 399,000 Sales To Customers Not Yet Delivered 276,000 98,000 Total Deferred Revenue $ 884,000 $ 497,000 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 124,000 shares) in exchange for a payment by the Company of $ 500,000 (“Purchase Price”). In addition, the Company agreed to release Mr. Pepock and Ms. Yourke from their non-compete restrictions upon transfer of the shares to the Company. Effective October 13, 2022, the parties executed a Confidential Settlement Agreement and Mutual General Release memorializing the terms of the Settlement. Under the terms of the Settlement, the Company agreed to repurchase 124,000 shares of common stock for $ 500,000 . On January 31, 2023, 124,000 shares were transferred to the Company and the Company paid the Purchase Price. The shares received by the Company were immediately cancelled and returned to the Company’s treasury of authorized and unissued shares on February 3, 2023. 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 682,161 and 481,831 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 237,602 shares of ZEO common stock held by the consultants in exchange for a payment of $ 80,000 and the parties exchanged mutual releases. The shares were returned to the Company in October 2024 and were redeposited back into the Company’s treasury of authorized and unissued shares. 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 $ 150,000 in connection with the non-renewal of the Plaintiff’s employment agreement with the Company. Plaintiff 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. 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) $ 221,000 $ - Gain, net of obligations in connection with termination of supply agreement (see Note 14) 168,000 - Resolution and settlement of long outstanding payables 176,000 - Commissions on sales of Exotropin products 87,000 - Proceeds from insurance claim 89,000 - Other 10,000 ( 10,000 ) Total $ 751,000 $ ( 10,000 ) 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.