Executive Summary / Key Takeaways

• Zentek Ltd. is an intellectual property technology development and commercialization company focused on graphene and related nanomaterials, positioning itself at the forefront of advanced materials innovation across healthcare, energy, and industrial applications.
• The company's core technologies, including ZenGUARD™ antimicrobial coatings and ZenARMOR™ corrosion prevention, offer distinct performance advantages, validated by independent testing and strategic partnerships, forming the bedrock of its long-term growth strategy.
• Despite significant R&D investments leading to historical net losses, Zentek achieved a positive gross profit in 2025, signaling potential operational leverage as its products move towards broader commercialization.
• Key strategic initiatives, such as the Albany graphite project and new partnerships in the GCC region, underscore Zentek's efforts to expand market reach and diversify its revenue streams, though liquidity remains a critical area for investor monitoring.
• The company faces challenges including Nasdaq's minimum bid price deficiency and regulatory scrutiny for ZenGUARD™ filters, highlighting the inherent risks in commercializing novel technologies and the need for sustained capital.

The Graphene Horizon: Zentek's Strategic Foundation

Zentek Ltd., originally established in 2008 as ZEN Graphene Solutions Ltd. before its rebranding in October 2021, stands as an intellectual property technology development and commercialization company. Headquartered in Guelph, Canada, Zentek is dedicated to the research and development of graphene and related nanomaterials, aiming to unlock their transformative potential across diverse industries. The company's overarching strategy centers on leveraging its proprietary materials science to create high-performance solutions, thereby establishing a unique position within the advanced materials landscape. This foundational strength in differentiated technology is critical to its competitive stance.

The advanced materials industry is characterized by a relentless pursuit of innovation, with a growing demand for solutions that offer enhanced performance, sustainability, and cost-efficiency. Zentek's focus on graphene, a material known for its exceptional strength, conductivity, and antimicrobial properties, aligns with these broad industry trends. The company's historical journey, from its inception to its current portfolio, reflects a strategic evolution towards commercializing these cutting-edge materials.

Technological Edge: ZenGUARD™, ZenARMOR™, and Beyond

Zentek's core differentiated technology lies in its expertise in graphene and nanomaterial synthesis and application. This forms the basis for its key product lines, including ZenGUARD™ and ZenARMOR™.

ZenGUARD™ is a graphene-based antimicrobial coating designed for various applications, notably in surgical masks, HVAC filters, and personal protective equipment. This technology offers tangible benefits over conventional alternatives by providing enhanced viral filtration efficiency. Independent test results in June 2025 validated ZenGUARD™ Enhanced Air Filters as a high-performance solution for ASHRAE Standard 241 compliance, demonstrating superior viral filtration efficiency against bacteriophage MS2 compared to equivalent Minimum Efficiency Reporting Value (MERV)-rated filters without ZenGUARD™. This quantifiable performance advantage positions ZenGUARD™ as a critical component in improving air quality and infection control, potentially leading to higher adoption rates and premium pricing in a health-conscious market.

Beyond ZenGUARD™, Zentek is advancing ZenARMOR™, a nano-pigment for corrosion prevention. In April 2025, the company completed testing of ZenARMOR™ within military-grade, chromate-free aerospace paint systems as part of an Innovative Solutions Canada - Testing Stream contract. This technology aims to offer superior corrosion protection, extending the lifespan of critical assets and reducing maintenance costs. The strategic intent behind ZenARMOR™ is to capture market share in high-value industrial and defense sectors where material durability is paramount. While specific quantitative benefits like percentage improvement in corrosion resistance are not detailed, the focus on military-grade applications implies a significant performance leap over existing solutions.

Zentek's R&D initiatives extend to rapid detection point-of-care diagnostics tests, pharmaceutical products based on graphene compounds, and the development of aptamers. A preliminary update in September 2025 on an influenza countermeasure candidate, developed using Multivalent Aptamer Technology against H1N1 Seasonal Influenza, highlights the company's commitment to exploring high-impact biomedical applications. These initiatives aim to diversify Zentek's intellectual property portfolio and open new avenues for revenue generation, contributing to its long-term growth strategy by addressing unmet needs in healthcare.

The "so what" for investors is clear: Zentek's technological differentiators provide a competitive moat, enabling the company to command premium pricing and secure strategic partnerships. These innovations are central to its market positioning, offering solutions that are qualitatively superior in performance, which can translate into improved financial performance through higher average selling prices and potentially better margins as commercialization scales.

Financial Performance and Operational Trajectory

Zentek's financial performance reflects a company in the early stages of commercializing advanced technologies, characterized by significant investment in R&D and a gradual path to profitability. For the fiscal year ended March 31, 2025, the company reported total revenue of $872,495. This represents a substantial increase from $29,816 in 2024 and $72,855 in 2023, indicating nascent but growing commercial traction. Crucially, Zentek achieved a positive gross profit of $192,485 in 2025, a notable improvement from negative gross profits in previous years, such as -$301,264 in 2024 and -$780,481 in 2023. This shift to positive gross profit suggests increasing operational efficiency and the potential for improved margins as sales volumes grow.

Despite this progress, operating income remained negative at -$9.60 million in 2025, though it improved from -$14.65 million in 2023. Net income from continuing operations also showed an improving trend, with losses decreasing from -$31.69 million in 2022 to -$10.04 million in 2025. These figures underscore the ongoing investment required for an intellectual property development company, particularly in research and development, which stood at $465,653 in 2025. While the company is still incurring losses, the trend towards reduced net losses and positive gross profit is a critical indicator of its operational trajectory.

From a liquidity perspective, Zentek faces challenges. Cash and cash equivalents have significantly decreased, falling from $26.68 million in 2022 to $121,481 in 2025. Working capital also saw a substantial decline, from $29.65 million in 2022 to $882,892 in 2025. The company has consistently generated negative free cash flow and operating cash flow, with -$6.47 million in free cash flow and -$6.28 million in operating cash flow in 2025. This ongoing cash burn necessitates careful management of capital resources. In a strategic move to support long-term business goals, Zentek announced the sale of its corporate office and laboratory space in Guelph, Ontario, in April 2025, which could provide a liquidity injection. The current ratio of 1.62 and quick ratio of 1.17 in 2025 indicate some short-term liquidity, but the overall trend in cash reserves warrants close monitoring by investors.

Competitive Landscape and Strategic Positioning

Zentek operates within a competitive landscape that includes both direct and indirect players in advanced materials, energy infrastructure, and related technologies. While its focus on graphene-based nanomaterials carves out a specialized niche, its potential applications intersect with broader industries dominated by larger entities.

Compared to companies like MYR Group (MYRG), a leader in electrical construction and transmission services, Zentek's offerings in graphene-based materials could enhance infrastructure resilience or energy efficiency. However, MYR Group's strength lies in large-scale operational execution and a robust project pipeline, contrasting with Zentek's innovation-driven, niche approach. Zentek's technological differentiation, such as qualitatively stronger durability or enhanced antimicrobial properties in coatings, provides a unique value proposition in advanced material integration. While MYR Group benefits from stable cash flow from established projects, Zentek's R&D-intensive model suggests a focus on long-term growth opportunities in emerging sectors.

Against utility giants like Duke Energy (DUK), which focuses on grid modernization and energy infrastructure, Zentek's graphene products could offer enhanced durability or efficiency for grid components. Duke Energy's market dominance, regulatory expertise, and financial stability provide a significant advantage in scale and resources. Zentek's value proposition lies in providing cutting-edge solutions for grid modernization, such as advanced coatings, but it lags in market reach and cash flow stability compared to Duke's extensive infrastructure.

Similarly, NextEra Energy (NEE), a leader in renewable energy and digital technologies, operates at a much larger scale. While Zentek's nanomaterials could find applications in advanced sensors or materials for renewables, its strategy is more R&D-oriented in materials science. NextEra's market positioning as a dominant player in renewables could overshadow Zentek's niche focus. Zentek's technological edge in nanomaterials enables applications that could enhance NextEra's operations, but it trails in overall growth trajectory and financial metrics like revenue scale and profitability.

Zentek's competitive advantages, or moats, primarily stem from its proprietary graphene technology and its focus on niche applications. This technology offers superior material performance, which can lead to stronger customer loyalty and recurring revenue in specialized markets. For instance, in energy-related uses, this might result in better operational outcomes for partners, fostering superior margins through premium pricing. This technological edge allows Zentek to differentiate itself against the operational scale of MYR Group by offering materials that qualitatively improve infrastructure efficiency, potentially enhancing Zentek's market share in innovative projects. Against Duke Energy, its resilient materials could exploit regulatory weaknesses by providing advanced solutions, leading to increased revenue opportunities.

However, Zentek's smaller scale and R&D intensity are key vulnerabilities. This can lead to higher costs and uneven cash flow, potentially eroding market share in competitive bidding scenarios. This exposes Zentek to threats from MYR Group's project execution strengths, making it harder to compete in large contracts, or from NextEra's scale, which could pressure Zentek's pricing power and profitability. Barriers to entry in the nanomaterials industry, such as high R&D requirements and regulatory hurdles, do help Zentek defend its position by limiting new entrants, supporting its innovation-focused strategy.

Recent strategic partnerships, such as the April 2025 agreement with Filtration Solutions Industrial Co. to manufacture and distribute ZenGUARD™ Enhanced Air Filters across the Gulf Cooperation Council (GCC) region, demonstrate Zentek's proactive approach to expanding its market footprint and leveraging its technological advantages through collaboration. A purchase order from Dexterra Group Inc. for ZenGUARD™ Enhanced Air Filters for the Forensic Services and Coroner's Complex in Toronto further validates market acceptance. The award of a $500,000 Critical Minerals Innovation Fund Grant to its subsidiary, Albany Graphite Corp., for its purification and anode development project, also highlights government support for its critical minerals initiatives.

Risks and Outlook

Zentek faces several pertinent risks that could impact its investment thesis. A significant concern is the Nasdaq notification received in August 2025 regarding a minimum bid price deficiency, as its common shares traded below US $1.00 for 31 consecutive business days. This poses a delisting risk if not remedied. Furthermore, regulatory scrutiny, such as Health Canada's review of ZenGUARD™ Enhanced Air Filters' classification, introduces uncertainty and potential delays in commercialization. These regulatory hurdles are common for novel technologies and require substantial resources to navigate.

Leadership changes also present a risk. The resignation of CEO Greg Fenton in September 2025 to lead a U.S.-based venture, following the board's decision not to extend his contract, could lead to transitional challenges and impact strategic continuity.

Despite these risks, Zentek's outlook is tied to the successful commercialization of its innovative graphene-based products and the continued development of its intellectual property. While specific quantitative guidance figures are not available, the strategic partnerships and grant awards indicate a forward momentum. The company's focus on high-performance materials for critical applications in healthcare and industrial sectors suggests a long-term growth trajectory, assuming it can overcome its liquidity challenges and regulatory hurdles. The Albany graphite project also represents a significant long-term asset in the critical minerals space.

Conclusion

Zentek Ltd. represents a compelling, albeit high-risk, investment opportunity at the intersection of advanced materials science and critical industry needs. The company's core investment thesis is firmly rooted in its proprietary graphene and nanomaterial technologies, which offer demonstrably superior performance characteristics in applications like antimicrobial coatings and corrosion prevention. These technological differentiators are crucial for establishing a competitive moat and driving future revenue growth.

While Zentek's financial performance currently reflects its stage as an R&D-intensive company with ongoing net losses and significant cash burn, the recent achievement of a positive gross profit in 2025 signals an important step towards operational viability. Strategic partnerships and government grants underscore the market's recognition of its innovative potential. However, investors must closely monitor liquidity, the Nasdaq bid price compliance, and regulatory developments for its key products. Zentek's ability to translate its technological leadership into sustained commercial success and navigate the competitive landscape, particularly against larger, more established players in adjacent industries, will be paramount to realizing its long-term value.