Zone Frontier Inc.
For the period ended Dec 31, 2024. Filed Feb 14, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 14, 2025
ZONE$3.08-14.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001213900-24-097171
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-14.
0001213900-25-013826
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 48 previous paragraphs and 62 current paragraphs.
33 unchanged; 15 reworded; 11 added; 0 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 19 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Recent Developments
Current report
On January 27, 2025, Clayton Adams, our Chief Executive Officer, entered into a note sale assignment and cancellation agreement with Travis Buchanan, our President, pursuant to which Mr. Adams sold and assigned $125,000 of the 20% original issue discount promissory note in the principal amount of $415,241.25 issued to Mr. Adams on December 24, 2024 to Mr. Buchanan for a purchase price of $100,000. Following such assignment, we issued a 20% original issue discount promissory note in the principal amount of $125,000 to Mr. Buchanan and a 20% original issue discount promissory note in the principal amount of $290,241.25 to Mr. Adams. These notes are due and payable on June 30, 2025 and accrue interest at a rate of 8% per annum; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 15% per annum. The notes may be prepaid at any time without premium or penalty, are unsecured, and contain customary events of default for loans of this type.
Current report
In January 2025, we launched a unit offering pursuant to which we are offering to accredited investors, in a private placement transaction, up to 266,667 units, at a purchase price of $7.50 per unit, for gross proceeds of up to $2,000,000; provided that we may increase the offering to 533,333 units for gross proceeds of up to $4,000,000 if there are oversubscriptions. Each unit consists of a 12% unsecured promissory note in the principal amount of $7.50 and a warrant to purchase one share of class B common stock at an exercise price equal to the last closing price prior to the closing date; provided that such exercise price shall not exceed $1.50. The closing will occur, at our discretion, on or before March 1, 2025, at which time we will issue the notes and the warrants. Until closing, all subscription funds received by us will be held in a segregated account. The notes will bear interest at a rate of twelve percent (12%) per annum, payable quarterly, and will be due on the second anniversary of the date of issuance. The notes will provide that they may be prepaid at any time without premium or penalty, will be unsecured, and will contain customary events of default for loans of this type. The warrants will have a five-year term and will be exercisable on a cashless basis if the underlying shares are not freely tradable. In January 2025, we entered into subscription agreements with two accredited investors for the purchase of an aggregate of 53,334 units for an aggregate subscription price of $400,000.
Current report
Comparison of Three Months Ended December 31, 2024 and 2023
Current report
Comparison of Six Months Ended December 31, 2024 and 2023
Current report
Revenue. Our revenue increased by $38,078, or 6.52%, to $622,168 for the six months ended December 31, 2024 from $584,090 for the six months ended December 31, 2023. The increase is primarily due to an increase in sales with our largest customer, representing an 80% increase for the comparable six month period.
Current report
Cost of sales. Our cost of sales increased by $90,345, or 31.78%, to $374,657 for the six months ended December 31, 2024 from $284,312 for the six months ended December 31, 2023. As a percentage of revenue, cost of sales increased from 48.68% for the six months ended December 31, 2023 to 60.22% for the six months ended December 31, 2024. This increase was primarily due to an increase in sales and increase in demo expenses due to a change in sales strategy of providing customers considering large orders demonstration equipment at no cost. Additionally, a business decision was made to sell $46,000 of inventory at cost to a former customer placing their first purchase order in over 9 months.
Current report
Gross profit. As a result of the foregoing, our gross profit decreased by $52,267, or 17.44%, to $247,511 for the six months ended December 31, 2024 from $299,778 for the six months ended December 31, 2023. As a percentage of revenue, gross profit decreased from 51.32% for the six months ended December 31, 2023 to 39.78% for the six months ended December 31, 2024.
Current report
General and administrative expenses.* *Our general and administrative expenses increased by $997,191, or 120.12%, to $1,827,387 for the six months ended December 31, 2024 from $830,196 for the six months ended December 31, 2023. As a percentage of revenue, our general and administrative expenses increased from 142.13% for the six months ended December 31, 2023 to 293.71% for the six months ended December 31, 2024. This increase was primarily due to $223,833 stock compensation expense, a $470,804 increase in professional and consulting fees, and a $138,304 increase in director and officer insurance.
Current report
Advertising expenses.* *Our advertising expenses increased by $95,659, or 375.80%, to $121,114 for the six months ended December 31, 2024 from $25,455 for the six months ended December 31, 2023. As a percentage of revenue, our advertising expenses increased from 4.36% for the six months ended December 31, 2023 to 19.47% for the six months ended December 31, 2024. Such an increase was primarily due to a significant increase in our public relations activities.
Current report
Depreciation and amortization expense.* *We incurred depreciation and amortization expense of $79,750, or 12.82% of revenue, for the six months ended December 31, 2024, as compared to $77,208, or 13.22% of revenue, for the six months ended December 31, 2023.
Reworded paragraphs (15)
Previous wording
Revenue. We generate revenue from sales of our cleaning products. Our revenue increased by $39,216, or 12.04%, to $364,900 for the three months ended September 30, 2024 from $325,684 for the three months ended September 30, 2023. The increase is primarily due to an increased number of customers.
Current wording
Revenue. We generate revenue from sales of our cleaning products. Our revenue decreased by $1,137, or 0.44%, to $257,269 for the three months ended December 31, 2024 from $258,406 for the three months ended December 31, 2023. The decrease is primarily due additional discounts for our products that we offered to certain large customers.
Previous wording
Cost of sales. Our cost of sales consists of raw materials, components and labor. Our cost of sales increased by $26,826, or 17.58%, to $179,401 for the three months ended September 30, 2024 from $152,575 for the three months ended September 30, 2023. As a percentage of revenue, cost of sales increased from 46.85% for the three months ended September 30, 2023 to 49.16% for the three months ended September 30, 2024. This increase was primarily due to an increase in sales and increase in demo expenses due to a change in sales strategy of providing customers considering large orders demonstration equipment at no cost.
Current wording
Cost of sales. Our cost of sales consists of raw materials, components and labor. Our cost of sales increased by $63,521, or 48.22%, to $195,258 for the three months ended December 31, 2024 from $131,737 for the three months ended December 31, 2023. As a percentage of revenue, cost of sales increased from 50.98% for the three months ended December 31, 2023 to 75.90% for the three months ended December 31, 2024. This increase was primarily due to an increase in sales and increase in demo expenses due to a change in sales strategy of providing customers considering large orders demonstration equipment at no cost. Additionally, a business decision was made to sell $46,000 of inventory at cost to a former customer placing their first purchase order in over 9 months.
Previous wording
Gross profit. As a result of the foregoing, our gross profit increased by $12,390, or 7.16%, to $185,499 for the three months ended September 30, 2024 from $173,109 for the three months ended September 30, 2023. As a percentage of revenue, gross profit decreased from 53.15% for the three months ended September 30, 2023 to 50.84% for the three months ended September 30, 2024.
Current wording
Gross profit. As a result of the foregoing, our gross profit decreased by $64,658, or 51.04%, to $62,011 for the three months ended December 31, 2024 from $126,669 for the three months ended December 31, 2023. As a percentage of revenue, gross profit decreased from 49.02% for the three months ended December 31, 2023 to 24.10% for the three months ended December 31, 2024.
Previous wording
General and administrative expenses.* *Our general and administrative expenses consist primarily of personnel expenses, including employee salaries and bonuses plus related payroll taxes, stock based compensation expense, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our general and administrative expenses increased by $406,338, or 79.69%, to $916,214 for the three months ended September 30, 2024 from $509,876 for the three months ended September 30, 2023. As a percentage of revenue, our general and administrative expenses increased from 156.25% for the three months ended September 30, 2023 to 251.09% for the three months ended September 30, 2024. This increase was primarily due to $118,440 stock related compensation expense, $106,720 external accounting fees, $74,600 in consulting fees and $69,200 increase in director and officer insurance.
Current wording
General and administrative expenses.* *Our general and administrative expenses consist primarily of personnel expenses, including employee salaries and bonuses plus related payroll taxes, stock based compensation expense, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our general and administrative expenses increased by $590,851, or 184.46%, to $911,173 for the three months ended December 31, 2024 from $320,322 for the three months ended December 31, 2023. As a percentage of revenue, our general and administrative expenses increased from 123.96% for the three months ended December 31, 2023 to 354.17% for the three months ended December 31, 2024. This increase was primarily due to $149,403 stock compensation expense, $111,098 of additional wage and benefit expense related to the addition of three employees, $224,135 of additional professional fees such as accounting and legal, and a $69,101 increase in director and officer insurance.
Previous wording
Advertising expenses.* *Our advertising expenses consist of vendor trade shows and various trade publications. Our advertising expenses increased by $45,387, or 5,514.82%, to $46,210 for the three months ended September 30, 2024 from $823 for the three months ended September 30, 2023. As a percentage of revenue, our advertising expenses increased from 0.25% for the three months ended September 30, 2023 to 12.66% for the three months ended September 30, 2024. Such increase was primarily due to a significant increase in our public relations activities.
Current wording
Advertising expenses.* *Our advertising expenses consist of vendor trade shows and various trade publications. Our advertising expenses increased by $50,274, or 204.11%, to $74,905 for the three months ended December 31, 2024 from $24,631 for the three months ended December 31, 2023. As a percentage of revenue, our advertising expenses increased from 9.53% for the three months ended December 31, 2023 to 29.12% for the three months ended December 31, 2024. Such an increase was primarily due to a significant increase in our public relations activities.
Previous wording
Depreciation and amortization expense.* *We incurred depreciation and amortization expense of $39,823, or 10.91% of revenue, for the three months ended September 30, 2024, as compared to $38,562, or 11.84% of revenue, for the three months ended September 30, 2023.
Current wording
Depreciation and amortization expense.* *We incurred depreciation and amortization expense of $39,928, or 15.52% of revenue, for the three months ended December 31, 2024, as compared to $38,646, or 14.96% of revenue, for the three months ended December 31, 2023.
Previous wording
Interest expense, net.* *We incurred interest expense, net, of $39,334, or 10.78% of revenue, for the three months ended September 30, 2024, as compared to $61,142, or 18.77% of revenue, for the three months ended September 30, 2023. The decrease is primarily due to interest expense for the 2024 period being offset by interest income of $17,153 from an interest bearing money market account opened in the fourth quarter of fiscal 2024.
Current wording
Interest expense, net.* *We incurred interest expense, net, of $41,035, or 15.95% of revenue, for the three months ended December 31, 2024, as compared to $87,869, or 34.00% of revenue, for the three months ended December 31, 2023. The decrease is primarily due to interest expense for the 2024 period being offset by interest income of $7,256 from an interest-bearing money market account opened in the fourth quarter of fiscal 2024.
Previous wording
Net loss.* *As a result of the cumulative effect of the factors described above, we had a net loss of $856,082 for the three months ended September 30, 2024, as compared to $437,294 for the three months ended September 30, 2023, an increase in loss of $418,788, or 95.77%.
Current wording
Net loss.* *As a result of the cumulative effect of the factors described above, we had a net loss of $1,005,030 for the three months ended December 31, 2024, as compared to $344,799 for the three months ended December 31, 2023, an increase in loss of $660,231, or 191.48%.
Previous wording
Our company has incurred losses and negative cash flows from operations. From October 17, 2022 (the date of the acquisition) through September 30, 2024, we have financed our operations primarily through private investor funding and an initial public offering. As of September 30, 2024, we had cash and cash equivalents of $1,210,382, a net loss for the three months ended September 30, 2024 of $856,082 and cash used in operating activities of $799,764.
Current wording
Our company has incurred losses and negative cash flows from operations. From October 17, 2022 (the date of the acquisition) through December 31, 2024, we have financed our operations primarily through private investor funding and an initial public offering. As of December 31, 2024, we had cash and cash equivalents of $560,489, a net loss for the six months ended December 31, 2024 of $1,861,109 and cash used in operating activities of $1,662,330.
Previous wording
We will be dependent upon the raising of additional capital through equity and/or debt financing in order to implement our business plan and generate sufficient revenue in excess of costs. If we raise additional capital through the issuance of equity securities or securities convertible into equity, stockholders will experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of common stock. If we raise additional funds by issuing debt, we may be subject to limitations on its operations, through debt covenants or other restrictions. There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our financial condition. Thes accompanying financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue as a going concern.
Current wording
We will be dependent upon the raising of additional capital through equity and/or debt financing in order to implement our business plan and generate sufficient revenue in excess of costs. If we raise additional capital through the issuance of equity securities or securities convertible into equity, stockholders will experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of common stock. If we raise additional funds by issuing debt, we may be subject to limitations on its operations, through debt covenants or other restrictions. There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our financial condition. The accompanying financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue as a going concern.
Previous wording
Net cash used in operating activities was $799,764 for the three months ended September 30, 2024, as compared to $308,335 for the three months ended September 30, 2023. For the three months ended September 30, 2024, our net loss of $856,082 and a decrease in prepaid expenses of $142,084, offset by an increase in non-cash stock based compensation expense of $182,400, were the primary drivers of net cash used in operating activities. For the three months ended September 30, 2023, our net loss of $437,294, a decrease in accounts payable and accrued liabilities of $144,224, a decrease in inventory of $77,026, and a decrease in accounts receivable of $66,233, offset by a non-cash interest expense of $208,248, an increase in prepaid expenses of $93,550 and stock based compensation of $63,960, were the primary drivers of the net cash used in operating activities.
Current wording
Net cash used in operating activities was $1,662,330 for the six months ended December 31, 2024, as compared to $234,156 for the six months ended December 31, 2023. For the six months ended December 31, 2024, our net loss of $1,861,109, offset by stock-based compensation of $331,802, were the primary drivers of net cash used in operating activities. For the six months ended December 31, 2023, our net loss of $782,093, offset by a non-cash interest expense of $141,211 and stock-based compensation of $107,972, were the primary drivers of net cash used in operating activities.
Previous wording
Net cash used in investing activities was $6,465 for the three months ended September 30, 2024, as compared to $1,015 for the nine months ended September 30, 2023. The net cash used in investing activities for both periods consisted entirely of purchases of property and equipment.
Current wording
Net cash used in investing activities was $9,065 for the six months ended December 31, 2024, as compared to $1,015 for the nine months ended December 31, 2023. The net cash used in investing activities for both periods consisted entirely of purchases of property and equipment.
Previous wording
Net cash used in financing activities was $0 for the three months ended September 30, 2024, as compared to $19,726 for the three months ended September 30, 2023. Net cash used in financing activities for the three months ended September 30, 2023 consisted ofpayments for deferred offering costs of $13,523 and repayment of related party loans of $6,203.
Current wording
Net cash provided by financing activities was 215,273 for the six months ended December 31, 2024, as compared to net cash used in financing activities of $113,318 for the six months ended December 31, 2023. Net cash provided by financing activities for the six months ended December 31, 2024 consisted of proceeds from an advance on subscription of $300,000 and proceeds from the issuance of related party notes of $232,193, offset by payments of notes payable of $316,920, , while net cash used in financing activities for the six months ended December 31, 2023 consisted of payments for deferred offering costs of $124,824, offset by proceeds from the issuance of loans from related parties of $11,506.
Previous wording
Please see Note 9 to our unaudited condensed financial statements above for a description of the terms of our outstanding debt.
Current wording
Please see Notes 10 and 11 to our unaudited condensed financial statements above for a description of the terms of our outstanding debt.
Previous wording
Our principal commitments consist mostly of obligations under the loans described in Note 9 to our unaudited condensed financial statements above. We also have a non-cancellable operating lease commitment for our office facility expiring in 2028 as described in Note 13 to the unaudited condensed financial statements above. Other than the foregoing, at September 30, 2024, we did not have other long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.
Current wording
Our principal commitments consist mostly of obligations under the loans described in Notes 10 and 11 to our unaudited condensed financial statements above. We also have a non-cancellable operating lease commitment for our office facility expiring in 2028 as described in Note 14 to the unaudited condensed financial statements above. Other than the foregoing, at December 31, 2024, we did not have other long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The following table sets forth key components of our results of operations for the six months ended December 31, 2024 and 2023, both in dollars and as a percentage of our revenue.
Current report — wording carried from elsewhere
Interest expense, net.* *We incurred interest expense, net, of $80,369, or 12.92% of revenue, for the six months ended December 31, 2024, as compared to $149,012, or 25.51% of revenue, for the six months ended December 31, 2023. The decrease is primarily due to interest expense for the 2024 period being offset by interest income of $24,409 from an interest-bearing money market account opened in the fourth quarter of fiscal 2024.
Current report — wording carried from elsewhere
Net loss.* *As a result of the cumulative effect of the factors described above, we had a net loss of $1,861,109 for the six months ended December 31, 2024, as compared to $782,093 for the six months ended December 31, 2023, an increase in loss of $1,079,016, or 137.97%.