CleanCore Solutions, Inc.(ZONE) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed financial statements for December 31, 2024, show decreased assets and equity, widened net losses, and negative operating cash flow, raising substantial doubt about the company's going concern Condensed Balance Sheets As of December 31, 2024, total assets decreased to $6.13 million from $7.48 million, primarily due to reduced cash, while liabilities increased and stockholders' equity fell sharply Condensed Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Dec 31, 2024 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $560,489 | $2,016,611 | ($1,456,122) | | Total current assets | $1,992,368 | $3,211,588 | ($1,219,220) | | Total assets | $6,127,218 | $7,481,251 | ($1,354,033) | | Total current liabilities | $1,874,044 | $1,505,506 | $368,538 | | Total liabilities | $3,920,070 | $3,744,794 | $175,276 | | Total stockholders' equity | $2,207,148 | $3,736,457 | ($1,529,309) | Condensed Statements of Operations For the three months ended December 31, 2024, revenue was flat, but net loss widened significantly to $1.0 million, and for the six-month period, net loss more than doubled to $1.86 million due to increased operating expenses Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2024 | Six Months Ended Dec 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $257,269 | $258,406 | $622,168 | $584,090 | | Gross profit | $62,011 | $126,669 | $247,511 | $299,778 | | Loss from operations | ($963,995) | ($256,930) | ($1,780,740) | ($633,081) | | Net loss | ($1,005,030) | ($344,799) | ($1,861,109) | ($782,093) | | Net loss per share | ($0.12) | ($0.10) | ($0.23) | ($0.23) | Condensed Statements of Cash Flows For the six months ended December 31, 2024, net cash used in operating activities dramatically increased to $1.66 million, leading to a $1.46 million decrease in cash and cash equivalents Cash Flow Summary for Six Months Ended December 31 (Unaudited) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,662,330) | ($234,156) | | Net cash used in investing activities | ($9,065) | ($1,015) | | Net cash provided by (used in) financing activities | $215,273 | ($113,318) | | Net decrease in cash | ($1,456,122) | ($348,489) | | Cash at end of period | $560,489 | $44,705 | Notes to Condensed Financial Statements The notes detail the company's aqueous ozone cleaning products business and disclose management's substantial doubt about the company's ability to continue as a going concern due to recurring losses and insufficient resources, with a new unit offering launched in January 2025 to raise capital - The company specializes in developing and producing cleaning products using a patented nanobubble technology with aqueous ozone for various industries[24][25] - Management has concluded that a material uncertainty exists that raises substantial doubt about the Company's ability to continue as a going concern for the next 12 months, as available resources are not sufficient to fund planned expenditures[28][29] - The company is dependent on raising additional capital through equity or debt financing to implement its business plan. There is no assurance of success in these financing ventures[30] - In January 2025, the company launched a private placement unit offering to accredited investors to raise up to $2 million (with a potential increase to $4 million), with each unit consisting of a 12% promissory note and a warrant[101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes increased net loss to higher operating costs, particularly general and administrative expenses, reiterating significant liquidity challenges and the company's dependence on raising additional capital to fund operations Results of Operations For the three months ended December 31, 2024, revenue was flat while net loss increased by 191.48% to $1.0 million, driven by a 184.46% surge in G&A expenses, and for the six-month period, net loss increased 137.97% to $1.86 million due to surging G&A and advertising costs Comparison of Three Months Ended December 31, 2024 and 2023 | Metric | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $257,269 | $258,406 | (0.44)% | | Gross Profit | $62,011 | $126,669 | (51.04)% | | General & administrative expenses | $911,173 | $320,322 | 184.46% | | Net Loss | ($1,005,030) | ($344,799) | 191.48% | Comparison of Six Months Ended December 31, 2024 and 2023 | Metric | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $622,168 | $584,090 | 6.52% | | Gross Profit | $247,511 | $299,778 | (17.44)% | | General & administrative expenses | $1,827,387 | $830,196 | 120.12% | | Net Loss | ($1,861,109) | ($782,093) | 137.97% | - The increase in G&A expenses for the six-month period was primarily due to a $223,833 increase in stock compensation expense, a $470,804 increase in professional and consulting fees, and a $138,304 increase in director and officer insurance[132] Liquidity and Capital Resources The company faces significant liquidity constraints with cash of $560,489 and $1.66 million used in operations for the six months, raising substantial doubt about its going concern ability and dependence on additional capital - As of December 31, 2024, the company had cash and cash equivalents of $560,489, a net loss of $1,861,109 for the six-month period, and used $1,662,330 in cash from operating activities[137] - Management believes that currently available resources are insufficient to fund planned expenditures over the next 12 months, which raises substantial doubt about the company's ability to continue as a going concern[138] - The company's ability to continue operations is dependent on raising additional capital, but there is no assurance of success in future financing ventures[139] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this item is not applicable - Not applicable[150] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting, with remedial measures underway - The company's principal executive and financial officers concluded that disclosure controls and procedures were not effective as of the end of the period[151] - Material weaknesses were identified related to: 1. Lack of sufficient trained professionals to design and execute a formal risk assessment process and accounting controls, and to maintain segregation of duties. 2. Lack of sufficient professionals with U.S. GAAP expertise to account for complex transactions and review valuation reports[151][152] - The company is planning remedial measures, including formalizing processes, strengthening reviews, and hiring additional qualified accounting and finance personnel[153] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is involved in a lawsuit filed by its former CEO, Matthew Atkinson, on August 20, 2024, alleging unpaid compensation and seeking damages totaling $131,594.85 plus penalties and legal fees - On August 20, 2024, former CEO Matthew Atkinson filed a lawsuit against the company[160] - The lawsuit claims unpaid compensation, expenses, and vacation totaling $131,594.85, and seeks additional penalties and legal fees[160] - The company has accrued approximately $108,000 for a legal claim[93] Item 1A. Risk Factors The company has indicated that this item is not applicable for this quarterly report - Not applicable[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended December 31, 2024, the company did not sell any unregistered equity securities not previously disclosed on a Form 8-K or repurchase any common stock - No unregistered equity securities were sold during the quarter that were not previously disclosed on a Form 8-K[162] - The company did not repurchase any of its common stock during the three months ended December 31, 2024[163] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[164] Item 4. Mine Safety Disclosures The company has indicated that this item is not applicable - Not applicable[165] Item 5. Other Information The company reported no other information for this period - None[166] Item 6. Exhibits This section lists the exhibits filed with the report, including articles of incorporation, bylaws, warrant agreements, promissory notes, and officer certifications