10-K: CleanCore Solutions Reports Widened Losses, Going Concern Warning

CleanCore Solutions, Inc. reported a significant increase in net loss and negative cash flow for fiscal year 2025, prompting a going concern opinion from its auditors, despite revenue growth and strategic acquisitions.

Summary

• CleanCore Solutions, Inc. specializes in patented nanobubble aqueous ozone cleaning products for professional, industrial, and home use, aiming to be a leader in chemical-free cleaning.
• The company reported a net loss of $6,742,275 for the fiscal year ended June 30, 2025, a substantial increase from $2,281,742 in the prior year.
• Revenue increased by 29.15% to $2,072,834 in fiscal 2025, primarily driven by sales to a new customer, KBS.
• Operating expenses, particularly general and administrative, surged by 186.52% to $7,081,299, largely due to non-cash stock compensation, professional fees, and director/officer insurance related to its NYSE American listing.
• The company's auditors issued a going concern opinion, citing accumulated deficits, negative cash flows from operations, and insufficient resources to fund planned expenditures for the next 12 months.
• CleanCore Global Limited, a wholly-owned subsidiary, was established in Ireland in January 2025, followed by the acquisition of Sanzonate Europe Ltd.'s assets in April 2025 for $2,475,000 to expand into the European Union.
• A three-year memorandum of understanding was signed with Kellermeyer Bergensons Services, LLC (KBS), a national building service management company, resulting in initial purchase orders totaling $1.63 million.
• Material weaknesses in internal control over financial reporting were identified, including a lack of sufficient trained professionals for risk assessment, formal accounting policies, and expertise in complex transactions.
• The company holds 15 patents for its nanobubble technology across the United States, Canada, and Mexico, which are considered a key competitive strength.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the significant increase in net loss, negative cash flow from operations, and the auditor's going concern opinion. While revenue growth and strategic acquisitions are positive, the underlying financial health and internal control weaknesses present substantial risks and uncertainties for the company's future viability.

Positives

• Revenue increased by 29.15% to $2,072,834 for the year ended June 30, 2025, indicating market acceptance and growth in product sales.
• Secured a significant three-year memorandum of understanding with Kellermeyer Bergensons Services, LLC (KBS), a major national building service management company, leading to initial purchase orders of $1.63 million.
• Successfully acquired the assets of Sanzonate Europe Ltd. in Ireland, establishing CleanCore Global to expand distribution and market presence in the European Union.
• Possesses 15 patents for its nanobubble aqueous ozone technology, providing a strong competitive advantage in the chemical-free cleaning market.
• Products are environmentally conscious, reducing packaging waste and water consumption, aligning with growing market demand for sustainable solutions.
• The aqueous ozone solution has been proven effective in eliminating germs, viruses, bacteria, allergens, and molds, performing better than bleach in some studies.

Negatives

• Net loss significantly increased by 195.49% to $6,742,275 for the year ended June 30, 2025, compared to $2,281,742 in the prior year.
• Auditors issued a going concern opinion, expressing substantial doubt about the company's ability to continue operations for the next 12 months due to accumulated deficits and negative cash flows.
• Cash used in operating activities increased to $2,337,659 in fiscal 2025 from $1,547,880 in fiscal 2024.
• General and administrative expenses surged by 186.52% to $7,081,299, disproportionately impacting profitability relative to revenue growth.
• Identified material weaknesses in internal control over financial reporting, indicating deficiencies in financial processes and expertise.
• Dependence on a limited number of major customers (KBS and Prolink, Inc. accounted for 42% and 17% of revenue, respectively, in fiscal 2025) and non-binding agreements pose revenue concentration risk.
• Reliance on a single vendor for a major component of two main products creates supply chain vulnerability, accounting for 11% of total purchases in fiscal 2025.

Risks

• Early-stage company with limited operating history and unproven revenue/income potential, making future prospects difficult to evaluate.
• Incurred losses since inception and may not be able to manage the business profitably, requiring additional financing.
• Auditors issued a going concern opinion, raising substantial doubt about the ability to continue as a going concern.
• Requires additional financing (equity/debt) to fund business development, which could lead to stockholder dilution or operational limitations through debt covenants.
• Inability to accurately predict future revenues or profitability in the rapidly evolving market for aqueous ozone technology.
• Significant challenges in obtaining market acceptance of products, potentially limiting revenue generation and profitability.
• Failure to build brand awareness and loyalty due to substantial resources of competitors.
• Inability to properly manage anticipated growth, straining management, operational, and financial resources.
• Failure to maintain, train, and build an effective international sales and marketing infrastructure.
• Major customers account for a significant portion of revenue, and the loss of any major customer could materially adversely affect results of operations.
• Dependence on a limited number of third-party suppliers for key raw materials, with potential for delays or increased costs.
• Increased prices for raw materials could negatively impact cost of sales and decrease demand for products.
• Changes to U.S. trade policy, tariffs, and import/export regulations may adversely affect operating results, especially with Asian-based suppliers.
• Interruptions in deliveries of raw materials or third-party delivery services could adversely affect revenue or profitability.
• Business interruptions in facilities (e.g., from natural disasters, power loss) or computer systems (e.g., cyberattacks) could harm operations and reputation.
• Significant competition from traditional cleaning companies and other aqueous ozone providers, potentially leading to price reductions or loss of market share.
• Quality problems with products could lead to recalls, harm to reputation, product liability claims, or significant warranty claims.
• Inability to protect intellectual property rights could impair reputation and brand, and lead to costly litigation.
• Loss of key personnel or inability to attract and retain additional qualified personnel could affect business growth.
• Failure to comply with privacy laws and regulations and adequately protect customer data could harm business and reputation.
• Growing regulatory and compliance requirements in various areas (e.g., EPA, FDA, OSHA, FIFRA) can be costly and time-consuming.
• Economic, political, and other risks associated with international operations (e.g., currency exchange rates, geopolitical conflicts, trade relations) could adversely affect revenues and growth.
• Material weaknesses in internal control over financial reporting could lead to inaccurate financial reporting and fraud.
• Inability to maintain NYSE American listing could impair stock liquidity and value.
• Market price of stock may be highly volatile due to speculative nature, lack of profits, and concentrated voting control.
• Future issuances of common stock or convertible securities could cause dilution and decline in stock price.
• Dual-class share structure concentrates voting control with a single stockholder (CEO Clayton Adams holds ~66% voting power), limiting other stockholders' influence.
• Anti-takeover provisions in charter documents and Nevada law could make company acquisition more difficult.

Future Outlook

The company aims to become a leader in creating safe, clean spaces free from chemical residue. Its growth strategies include targeting key industries (building service management, hospitality, education, venue), expanding marketing efforts, creating partnerships through exclusive licensing and a direct sales model, and expanding distribution to the European Union following the Sanzonate acquisition. Research and development efforts are ongoing for specific product applications and consumer-focused products, with exploration into healthcare, food service, and commercial cleaning industries.

Management Comments

• Management believes that currently available resources may not be sufficient to fund planned expenditures over the next 12 months, indicating a need for additional capital.
• Management is primarily responsible for assessing, monitoring, and managing cybersecurity risks, ensuring industry-standard measures are functioning, overseeing compliance, remediating known risks, and leading employee training.
• Management is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques, and implements processes for regular monitoring of information systems.

Industry Context

CleanCore Solutions operates in the highly competitive janitorial services industry, which is rapidly evolving towards green cleaning solutions. The company's patented nanobubble aqueous ozone technology positions it uniquely against traditional chemical cleaning giants like Proctor and Gamble and Unilever, who lack similar ozone technology. It also competes with other aqueous ozone providers such as Tennant Company, Tersano Inc., Enozo Technologies Inc., and O3 Waterworks. The market trend favors chemical-free, environmentally conscious, and cost-effective cleaning solutions, which CleanCore's products aim to address by reducing chemical use, labor costs, and water consumption. The expansion into the European Union through the Sanzonate acquisition aligns with global demand for sustainable cleaning innovations.

Comparison to Industry Standards

• The company's revenue growth of 29.15% is positive, but its significant net loss of $6.74 million and negative cash flow from operations of $2.34 million indicate it is underperforming compared to established, profitable industry leaders like Proctor & Gamble or Unilever, which typically demonstrate consistent profitability and strong cash generation.
• The going concern opinion from auditors is a critical indicator of financial instability, a stark contrast to the robust financial health expected of industry benchmarks.
• While the company's patented nanobubble technology offers a competitive edge, its ability to convert this innovation into sustained profitability and positive cash flow remains a challenge, unlike more mature companies that have successfully scaled their proprietary technologies.
• The identified material weaknesses in internal controls suggest a need for significant operational improvements to meet the standards of larger, more established public companies in the cleaning or technology sectors.

Management Changes

Corporate Governance

Legal Proceedings

• Settled a lawsuit with former Chief Executive Officer Matthew Atkinson, who had alleged claims arising from his employment and separation. The settlement involved issuing 200,000 shares of Class B common stock to James T. Coyle Legacy Trust and included mutual releases of claims.
• Settled compensation claims with Boustead Securities, LLC, involving an initial cash payment, issuance of warrants, and future payments/warrants contingent on capital raising transactions.

Related Party Transactions

• As of June 30, 2025, owed $41,895 to CEO Clayton Adams for operational expenses paid by his credit card.
• Entered into a consulting agreement with Birddog Capital, LLC (owned by CEO Clayton Adams) for management services, with a monthly fee of $22,000. An amendment deferred a $175,000 payment and granted 500,000 restricted stock units to Clayton Adams.
• Agreed to purchase approximately $105,000 worth of inventory from Nebraska C. Ozone, LLC, a related party business owned by Lisa Roskens (significant stockholder of Burlington Capital, LLC), with an outstanding payable balance of $105,000 and accrued interest of $9,843 as of June 30, 2025.
• Issued a revolving credit note up to $500,000 to CEO Clayton Adams on March 26, 2024, with 8% interest, though no advances have been made as of June 30, 2025.
• Issued a promissory note of $316,920 to Gary Hollst (Chief Revenue Officer) on December 24, 2024, which was later amended and converted into 307,701 shares of Class B common stock on June 2, 2025.
• Issued a 20% original issue discount promissory note of $290,241 to CEO Clayton Adams and $125,000 to President Travis Buchanan, both accruing 8% interest and due upon 60 days written demand.
• ACME People Company, owned by President Travis Buchanan, participated in a private placement, receiving a $10,000 unsecured promissory note and a warrant for 1,333 shares.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing capital raises and stock-based compensation, as well as potential loss of investment due to the going concern warning and increased net losses.
• Employees may experience uncertainty due to the company's financial challenges, but the expansion into the EU and focus on growth strategies could offer new opportunities.
• Customers may benefit from the company's patented technology and expanded product offerings, but the company's financial instability could raise concerns about long-term product support and supply.
• Creditors face increased risk due to the company's accumulated deficits, negative cash flows, and reliance on future financing to meet obligations.
• Regulatory bodies (SEC, EPA, FDA, OSHA) will continue to monitor the company's compliance, especially given the identified internal control weaknesses and the nature of its products.

Next Steps

• Implement remedial measures to address identified material weaknesses in internal control over financial reporting, including formalizing processes, strengthening supervisory reviews, and hiring qualified accounting/finance personnel.
• Secure additional capital through equity and/or debt financing to fund business development plans and address the going concern issue.
• Expand the distribution network in the European Union through CleanCore Global, leveraging the acquired Sanzonate operations.
• Continue to expand marketing efforts and create partnerships to grow the client base in target industries (healthcare, education, food service, commercial buildings).
• Evolve the business model into a hybrid of traditional distributors and a direct sales model.
• Continue research and development into specific product applications and consumer-focused products.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial increase in net loss, negative cash flow from operations, and a going concern opinion from its auditors. While revenue growth and strategic acquisitions are present, they are overshadowed by the company's inability to achieve profitability and its reliance on continuous external financing, which will likely lead to further shareholder dilution. The identified material weaknesses in internal controls add another layer of operational risk. The concentrated voting power with the CEO also presents governance concerns. Given these significant red flags, the stock represents a high-risk investment with a strong likelihood of further value erosion.

Keywords

Aqueous Ozone, Nanobubble Technology, Cleaning Products, Sanitizing Solutions, Chemical-Free Cleaning, SEC Filing, 10-K, Financial Performance, Going Concern, NYSE American, Corporate Governance, Risk Factors, Environmental Cleaning, Industrial Cleaning, Janitorial Services, Patented Technology, CleanCore Solutions