Zeo ScientifiX, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under Item 1A. Risk Factors and elsewhere in this report. Results of Operations Fiscal year ended October 31, 2025 as compared to fiscal year ended October 31, 2024 Revenues . Our revenues for the year ended October 31, 2025 were $5,199,000, as compared to revenues of $4,620,000 for the year ended October 31, 2024. The increase in revenues for the year ended October 31, 2025 of $579,000 or 12.5%, was due to increases in revenues associated with its PPX™ service platform during the year ended October 31, 2025, compared with the year ended October 31, 2024, partially offset by decreases in revenues from the Company’s allogenic aesthetic biologic products sold during the year ended October 31, 2025, as compared with the year ended October 31, 2024. The revenues and percentage of overall unit sales derived from the Company’s higher concentration allogenic aesthetic biologic product offerings, lower concentration allogenic aesthetic biologic product offerings and its PPX™ service platform for the year ended October 31, 2025, as compared to the year ended October 31, 2024 are presented below: Year Ended October 31, 2025 Year Ended October 31, 2024 Change In Revenues & Percentage Of Overall Revenues Inc (Dec) In Units Sold Higher Concentration Allogenic Aesthetic Biologics $ 2,171,000 41.8 % $ 2,420,000 52.4 % $ (249,000 ) -5.4 % -33.1 % Lower Concentration Allogenic Aesthetic Biologics $ 1,394,000 26.8 % $ 1,363,000 29.5 % $ 31,000 0.7 % 34.2 % $ 3,565,000 68.6 % $ 3,783,000 81.9 % $ (218,000 ) -4.7 % PPX™ $ 1,527,000 29.4 % $ 614,000 13.3 % $ 913,000 19.8 % Other $ 107,000 2.0 % $ 223,000 4.8 % $ (116,000 ) -2.5 % Total $ 5,199,000 100.0 % $ 4,620,000 100.0 % $ 579,000 12.5 % The increase in the overall unit sales associated with its PPX™ service platform was primarily due the Company’s continued sales and marketing efforts which included engaging additional sales representatives, participation in industry related conferences, sponsoring of educational webinars and from sales of PPX™ to the Company’s existing customers. The Company attributes the net decrease in revenues from higher and lower concentration allogenic aesthetic biologic products sold during the year ended October 31, 2025, compared to the year ended October 31, 2024 due to additional product competition in the marketplace which attracted greater demand for the Company’s lower priced allogenic aesthetic biologic product offerings and lower demand for the Company’s higher priced allogenic aesthetic biologic product offerings during the year ended October 31, 2025, compared with the year ended October 31, 2024. 50 Cost of Revenues . Our cost of revenues for the year ended October 31, 2025 were $931,000, as compared to cost of revenues of $844,000 for the year ended October 31, 2024. The increase in the cost of revenues for the year ended October 31, 2025 of $87,000 or 10.3%, from the year ended October 31, 2024, was due to the increase of approximately $157,000 of cost of revenues associated with its PPX™ service platform during the year ended October 31, 2025, compared with the year ended October 31, 2024, partially offset by a decrease of approximately $70,000 in the costs of revenues for its allogenic aesthetic biologic products sold for the year ended October 31, 2025, as compared to the year ended October 31, 2024. Gross Profit . Our gross profit for the year ended October 31, 2025 was $4,268,000 (82.0% of revenues), compared to gross profit of $3,776,000 (81.7% of revenues) for the year ended October 31, 2024. The increase in gross profit during the year ended October 31, 2025 of $492,000 (13.0%) was the result of increases in the gross margins received from sales of its PPX™ service platform, partially offset from reduced gross margins received from the sale of its allogenic aesthetic biologic products. In addition, the percentage of the Company’s revenues associated with its PPX™ service platform, which has a higher cost of revenues as compared to the Company’s allogenic aesthetic biologic product offerings, increased to 29.4% of revenues for the year ended October 31, 2025, as compared with 13.3% of revenues for the year ended October 31, 2024. The percentage of the Company’s revenues associated with its allogenic aesthetic biologic product decreased to 68.6% of revenues for the year ended October 31, 2025, as compared with 81.9% of revenues for the year ended October 31, 2024. General and Administrative Expenses . General and administrative expenses for the year ended October 31, 2025 were $9,654,000, as compared to $9,095,000 for the year ended October 31, 2024, an increase of $559,000 or 6.1%. The increase in the general and administrative expenses for the year ended October 31, 2025, from the year ended October 31, 2024, was primarily the result of (a) increased stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $839,000, (b) increased laboratory related costs of approximately $179,000 increased lab expenses and (c) increased professional fees of approximately $78,000 during the year ended October 31, 2025, as compared to the year ended October 31, 2024, partially offset from (1) decreased commissions and travel costs of approximately $212,000, decreased marketing related costs of approximately $110,000, decreased administrative and office related costs of $73,000 and reduced research and development costs of approximately $63,000 during the year ended October 31, 2025, as compared to the year ended October 31, 2024. The increase in stock-based compensation costs during the year ended October 31, 2025, as compared to the year ended October 31, 2024 was principally the result of increased amortization of costs from shares and options issued to executives and advisors and options issued to employees and outside directors. The decrease in commissions during the year ended October 31, 2025, as compared to the year ended October 31, 2024 was principally the result of a larger percentage of sales that were generated from house accounts with much lower commission costs than paid to distributors and/or independent sales representatives. Other income. Other income for the year ended October 31, 2025 was $101,000, as compared to other income of $751,000 for the year ended October 31, 2024. The decrease in other income of $650,000 was principally due to (a) a reduction in non-recurring income in connection with the write-off of advances payable to an affiliate of a former executive of $221,000 resulting from the inability of the affiliate to enforce a claim to collect the advances as the period of statute of limitations had run, (b) the reduction settlements of the Amended Skincare Agreement of $168,000, (c) the reduction in settlement income from insurance claims of $89,000, (d) the reduction in commissions received from sales of Exotropin products of $26,000 and (e) reductions in income from the settlement of liabilities of approximately $156,000, partially offset from increases in other income of $10,000 during the year ended October 31, 2025, as compared to the year ended October 31, 2024. 51 Other expense for the year ended October 31, 2025 was $236,000, as compared to other expense of $137,000 for the year ended October 31, 2024. The increase in other expense of $99,000 during the year ended October 31, 2025, compared to the year ended October 31, 2024, was principally the result of increased interest costs associated with amortization of loan discounts on Notes payable, increased inducement costs associated with the conversion of Notes payable of $136,000 and increased costs of $2,000 associated with changes in the fair value in the obligation to repurchase shares during the year ended October 31, 2025 as compared to the year ended October 31, 2024, partially offset from reduced reserves against the carrying value of the Company’s investments in equity securities of $45,000 during the year ended October 31, 2025 as compared to the year ended October 31, 2024. Liquidity and Capital Resources Cash and Cash Equivalents The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented: For the Fiscal Year Ended October 31, 2025 2024 Cash, beginning of year $ 657,000 $ 1,756,000 Net cash used in operating activities (718,000 ) (1,450,000 ) Net cash used in investing activities (23,000 ) (45,000 ) Net cash provided by financing activities 305,000 396,000 Cash, end of year $ 221,000 $ 657,000 During the year ended October 31, 2025, the Company used cash in operating activities of $718,000, compared to $1,450,000 for the year ended October 31, 2024, a decrease in cash used of $732,000. The decrease in cash used was primarily the result of an increase in gross profit of $492,000, increases in cash provided from changes in operating assets and liabilities of $389,000 for the year ended October 31, 2025 compared to the year ended October 31, 2024, partially offset from the reduction in general and administrative expenses and other income (expense) after adjusting for non-cash related activities of $147,000 for the year ended October 31, 2025 compared to the year ended October 31, 2024. The increase in cash provided from changes in operating assets and liabilities was due to decreases in accounts receivable, increases in accounts payable and accrued expenses and accrued liabilities, partially offset by decreases in deferred revenues and increases in inventories during the year ended October 31, 2025 as compared to the year ended October 31, 2024. During the year ended October 31, 2025, the Company had cash used in investing activities of $45,000 compared to $23,000 for the year ended October 31, 2024, a decrease in cash used in investing activities of $22,000. The decrease in cash used by investing activities was primarily due to the decrease in investments from non-marketable securities of $45,000, partially offset from the increase in payments made in connection with the Company’s purchase of laboratory equipment of $23,000 during the year ended October 31, 2025 as compared to the year ended October 31, 2024. During the year ended October 31, 2025, the Company had cash provided by financing activities of $305,000 compared to cash provided by financing activities of $396,000 for the year ended October 31, 2024. The decrease in cash provided by financing activities of $91,000 was due to a decrease in proceeds from the sale of equity securities of $200,000 and increases in payments on finance leases of $22,000, partially offset from the increase in proceeds received from the exercise of warrants of $50,000 and a decrease in the amounts paid for shares repurchased in connection with litigation of $80,000 during the year ended October 31, 2025, as compared to the year ended October 31, 2024. 52 Capital Resources The Company has historically relied on the sale of debt or equity securities, the restructuring of debt obligations and/or the issuance and/or exchange of equity securities to meet the shortfall in cash to fund its operations. During the fiscal year ended October 31, 2025 and through the date of this Annual Report, the Company completed the following private sales of its securities: In November 2025, the Company commenced a private offering of up to 20 units (“Nov 25 Units”) at a purchase price of $250,000 per Nov 25 Unit for an aggregate purchase price of $5,000,000 (“Offering”). Each Nov 25 Unit consists of (a) 62,500 shares of common stock, $0.001 par value of the Company and (b) warrants to purchase 62,500 shares of common stock of the Company at an exercise price of $4.00 until November 30, 2030. The warrants may be exercised on a cashless basis. The Offering is being made on a “best efforts” basis pursuant to the exemption from registration afforded by Rule 506(b) of Regulation D under the Securities Act of 1933, as amended (“Securities Act”) for an initial period ending December 31, 2025, which was extended by the Company for period to be determined at the Company’s sole discretion (“Offering Period”). No minimum number of Nov 25 Units need be subscribed for in order for the Company to close on the sale of any of the Nov 25 Units offered. The Company may hold one or more closings of sales of the Nov 25 Units from time to time during the Offering Period. During November 2025 thru January 2026, the Company sold 4.8 Nov 25 Units to 7 investors for an aggregate purchase price of $1,200,000 and issued 300,000 shares of common stock and 300,000 warrants to purchase shares of common stock. The proceeds from the sale of the Nov 25 Units are being used for working capital purposes. Going Concern Consideration The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company incurred net losses of $5,521,000 for the year ended October 31, 2025 and used $718,000 of cash from operating activities during that period. In addition, the Company had an accumulated deficit and a stockholders’ deficit of $67,734,000 and $1,423,000, respectively, at October 31, 2025. The Company had a working capital deficit of $1,915,000 at October 31, 2025. 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”). Notwithstanding the above, certain states, including Florida (SB 1768) have approved legislation that permits the use and sale of products that would otherwise be restricted under current FDA regulations. 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. 53 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, 2025, based on the factors described above, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements. Off-Balance Sheet Arrangements Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of October 31, 2025 and through the date of this report, we had no such arrangements. Recently Issued Financial Accounting Standards 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. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on its financial statement disclosures. 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. 54