10-Q: CleanCore Solutions Reports Increased Revenue but Widening Losses in Q3 2025

CleanCore Solutions saw revenue increase by 77.73% for the three months ended March 31, 2025, but net losses also widened due to increased operating expenses.

Summary

• CleanCore Solutions, Inc. reported its financial results for the quarter ended March 31, 2025.
• Revenue increased by 77.73% to $557,915 for the quarter, driven by increased sales to a distributor in India.
• Cost of sales increased by 42.50% to $246,783, but decreased as a percentage of revenue due to the sale of higher margin units.
• Gross profit increased by 121.07% to $311,132, with gross profit margin improving to 55.77%.
• General and administrative expenses increased significantly by 85.88% to $968,264, due to higher stock compensation, wage and benefit expenses, professional fees, and director and officer insurance related to the NYSE American listing.
• Advertising expenses increased slightly by 11.31% to $19,743.
• The company reported a net loss of $809,354 for the quarter, compared to a net loss of $520,670 in the same period last year.
• For the nine months ended March 31, 2025, revenue increased by 31.41% to $1,180,083, while the net loss increased by 104.99% to $2,670,469.
• The company is facing liquidity challenges and has a 'going concern' warning, indicating substantial doubt about its ability to continue operating for the next 12 months without raising additional capital.
• CleanCore Global acquired Sanzonate Europe Ltd. on April 15, 2025, for $2,475,000, including cash, a promissory note, and potential earn-out payments.
• The company completed a private placement on April 16, 2025, raising $1,010,000 through promissory notes and warrants.
• Promissory notes issued to related parties were amended on May 2, 2025.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue is increasing, the widening losses and 'going concern' warning raise significant concerns about the company's financial stability. The recent acquisition and private placement provide some positive momentum, but the overall sentiment is cautiously negative.

Positives

• Revenue increased significantly for both the quarter and the nine-month period.
• Gross profit margin improved for the quarter ended March 31, 2025.
• The acquisition of Sanzonate Europe Ltd. expands the company's business.
• The private placement provides additional capital to fund operations.

Negatives

• Net losses widened significantly for both the quarter and the nine-month period.
• General and administrative expenses increased substantially.
• The company has a 'going concern' warning, indicating significant financial uncertainty.
• The company is dependent on raising additional capital to continue operations.

Risks

• The company's ability to continue as a going concern is uncertain.
• The company is dependent on raising additional capital, which may not be available or may dilute existing shareholders.
• Increased operating expenses are negatively impacting profitability.
• The company faces risks related to acquiring and integrating Sanzonate Europe Ltd.
• Material weaknesses in internal control over financial reporting could affect the accuracy and timeliness of financial reporting.

Future Outlook

The company will be dependent upon the raising of additional capital through equity and/or debt financing in order to implement its business plan and generate sufficient revenue in excess of costs.

Management Comments

• Management believes that currently available resources will not be sufficient to fund the Company's planned expenditures over the next 12 months.
• Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Industry Context

The company operates in the cleaning products industry, which is experiencing increased demand for environmentally friendly and sustainable solutions. The acquisition of Sanzonate Europe Ltd. suggests an effort to expand into the European market and leverage aqueous ozone technology.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific market segments CleanCore targets and the size of its competitors.
• However, companies like Ecolab and Diversey are major players in the commercial cleaning solutions market.
• These companies have significantly larger revenue bases and more established distribution networks.
• CleanCore's focus on aqueous ozone and nanobubble technology could provide a competitive advantage if the technology proves to be more effective or cost-efficient than traditional cleaning methods.
• The company's financial performance, particularly its increasing losses and liquidity concerns, lags behind industry leaders.

Legal Proceedings

• Matthew Atkinson, the company's former Chief Executive Officer, filed a lawsuit against the company claiming compensation, unreimbursed expenses, and accrued and unpaid vacation owed to him prior to his resignation in February 2024.

Related Party Transactions

• As of March 31, 2025 and June 30, 2024, the Company had a short-term amount due to Clayton Adams, its Chief Executive Officer and founder, in the amount of $45,025 and $91,119, respectively, for operational expenses paid by a credit card in his name.
• On October 17, 2022, the Company entered into a consulting agreement with Birddog Capital, LLC (Birddog), a limited liability company owned by Clayton Adams, a significant security holder at such time and the Company's current Chief Executive Officer, pursuant to which the Company engaged Birddog to provide management services to the Company.
• On July 27, 2023, the Company agreed to purchase approximately $105,000 worth of inventory from Nebraska C. Ozone, LLC, a related party business owned by Lisa Roskens, a significant stockholder and the principal officer of Burlington, due to an open purchase order that the Company's predecessor had with an inventory vendor that was not included in the liabilities assumed from the predecessor per the terms of the acquisition purchase agreement.
• On December 24, 2024, the Company issued a 20% original issue discount promissory note in the principal amount of $415,241 to Clayton Adams, the Company's Chief Executive Officer.
• On January 27, 2025, Mr. Adams entered into a note sale assignment and cancellation agreement with Travis Buchanan, the Company's President, pursuant to which Mr. Adams sold and assigned $125,000 of the note to Mr. Buchanan for a purchase price of $100,000.

Stakeholder Impact

• Shareholders face the risk of dilution if the company raises additional capital through equity offerings.
• Employees face uncertainty due to the company's financial instability.
• Customers may be concerned about the company's ability to continue providing products and services.
• Creditors face increased risk of non-payment due to the company's liquidity challenges.

Next Steps

• The company needs to secure additional financing to continue operations.
• The company needs to improve its profitability by controlling operating expenses.
• The company needs to successfully integrate Sanzonate Europe Ltd.
• The company needs to remediate the material weaknesses in its internal control over financial reporting.

Key Dates

Keywords

financial results, revenue, net loss, going concern, acquisition, private placement, CleanCore Solutions, Sanzonate Europe, liquidity, operating expenses