CleanCore Solutions, Inc. (ZONE) is a pioneering provider of advanced cleaning solutions that leverage its patented nanobubble technology to deliver highly effective, safe, and eco-friendly cleaning alternatives to traditional chemical-based products. Founded in 2022, the company has quickly established itself as a leading innovator in the cleaning industry, serving a diverse range of clients across various sectors, including janitorial and sanitation, ice machine cleaning, laundry, and industrial applications.

Company Background

The company's origins trace back to 2022, when it was established through the acquisition of three entities: CleanCore Solutions, LLC, TetraClean Systems, LLC, and Food Safety Technologies, LLC. This strategic move allowed CleanCore to consolidate its expertise and technologies, positioning it as a formidable player in the market. Since then, the company has continued to enhance its product portfolio and expand its customer base, catering to the growing demand for sustainable and effective cleaning solutions.

Innovative Technology

One of CleanCore's key strengths lies in its innovative aqueous ozone technology, which utilizes nanobubbles to produce a powerful yet safe cleaning agent. This patented approach allows the company to offer cleaning products that are highly effective in sanitizing, deodorizing, and disinfecting surfaces, while also being environmentally friendly and free from harsh chemicals. The versatility of CleanCore's solutions has enabled the company to serve a diverse range of industries, from retail establishments and distribution centers to factories, warehouses, restaurants, schools, and healthcare facilities.

Financials

The company's financial performance has shown promising signs of growth, with revenue increasing from $1.67 million in fiscal year 2021 to $2.65 million in fiscal year 2022, representing a year-over-year increase of 58.7%. However, the company has yet to achieve profitability, reporting a net loss of $541,611 in fiscal year 2022. This is partially due to the ongoing investment in research and development, as well as the costs associated with the company's expansion and growth initiatives.

For the most recent fiscal year ended June 30, 2024, CleanCore reported revenue of $2.65 million, with a net loss of $541,611. The company's operating cash flow (OCF) was negative $504,304, and free cash flow (FCF) was negative $539,337.

In the most recent quarter (Q1 FY 2025, ended September 30, 2024), CleanCore reported revenue of $364,900, representing a year-over-year growth of 12.04%. However, the net loss for the quarter increased to $856,082. The operating cash flow was negative $799,764, and free cash flow was negative $806,229.

The increase in revenue for the most recent quarter was primarily due to an expanded customer base. The larger net loss was driven by a $406,340 increase in general and administrative expenses, including $118,440 in stock-based compensation, $106,720 in external accounting fees, $74,600 in consulting fees, and a $69,200 increase in director and officer insurance.

Product Segments

CleanCore operates in four main product segments:

1. Janitorial and Sanitation: This is the company's largest segment, generating $341,360 in revenue for the three months ended September 30, 2024, an increase of 18.80% compared to the same period in the prior year. Products in this segment are used for cleaning, sanitizing, and deodorizing surfaces and high-touch areas in various environments.

2. Ice System Cleaning: This segment generated $2,140 in revenue for the three months ended September 30, 2024, a decrease of 12.30% from the prior year period. These products are specifically designed for cleaning ice machines.

3. Commercial and Residential Laundry: This segment saw significant growth, generating $4,760 in revenue for the three months ended September 30, 2024, an increase of 240.00% from the prior year period.

4. Other: This category includes revenue from sales of parts, accessories, shipping and handling, and equipment rental income. It generated $16,630 in revenue for the three months ended September 30, 2024, a decrease of 51.83% compared to the prior year period.

Liquidity

As of September 30, 2024, CleanCore had a cash position of $1.21 million. The company's debt-to-equity ratio stood at 0.1692, indicating a relatively low level of debt. CleanCore also has access to a $100,000 revolving line of credit with Arbor Bank. The current ratio of 1.6193 and quick ratio of 1.1746 suggest that the company has sufficient short-term liquidity to meet its immediate obligations.

However, management believes that the current cash position will not be sufficient to fund the company's planned expenditures over the next 12 months. To address this, the company will be dependent on raising additional capital through equity or debt financing to implement its business plan and generate sufficient revenue to cover its costs.

Recent Developments and Growth Strategy

Despite the challenges, CleanCore has continued to make progress in expanding its customer base and entering new verticals. In the first quarter of fiscal year 2025, the company reported a 12% year-over-year increase in revenue, driven by its strategic shift towards direct sales and the successful implementation of its cleaning solutions across key sectors, such as hospitality, healthcare, education, transportation, and logistics.

One notable achievement for CleanCore was the successful installation of over 200 of its cleaning systems at a large university in the western United States. This contract demonstrates the company's ability to deliver chemical-free cleaning solutions to the education sector, which is increasingly seeking sustainable and safe alternatives to traditional cleaning methods.

Furthermore, the company has recently announced a leasing and service agreement with Knight-Swift Transportation Holdings Inc. (NYSE: KNX), one of North America's largest freight transportation companies. This initial implementation of CleanCore's products across Knight-Swift's facilities is expected to drive sustainability and efficiency, while also providing a long-term recurring revenue stream for the company.

CleanCore's growth strategy also includes a focus on expanding its presence in the early education market, with the recent announcement of its partnership with Hand In Hand Montessori School in Minnesota. By offering its eco-friendly and safe cleaning solutions to preschools and daycare centers, the company is further diversifying its customer base and contributing to the well-being of young children and their learning environments.

The company is actively working on expanding its distributor network, improving production processes, and demonstrating the effectiveness of its products in various industries like restaurants, airports, and hotels.

Geographic Markets

Currently, CleanCore Solutions primarily sells its products within the United States. The company has not yet reported significant international sales or expansion plans.

Legal Proceedings

On August 20, 2024, the company's former Chief Executive Officer, Matthew Atkinson, filed a lawsuit against CleanCore in the State of Nebraska, claiming compensation, unreimbursed expenses, and accrued and unpaid vacation owed to him prior to his resignation in February 2024. The company is currently not aware of any other legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition, or operating results.

Risks and Opportunities

As CleanCore continues to navigate the evolving cleaning industry, the company faces several key risks that investors should be aware of. These include the highly competitive nature of the market, the potential for technological advancements by competitors, the ability to effectively scale its operations, and the ongoing challenge of achieving profitability and positive cash flows.

Despite these risks, CleanCore's unique value proposition, innovative technology, and diverse customer base provide a solid foundation for the company's future growth. The successful implementation of its cleaning solutions across various sectors, coupled with the potential for recurring revenue streams, suggests that CleanCore is well-positioned to capitalize on the growing demand for sustainable and effective cleaning alternatives.

Conclusion

As CleanCore Solutions, Inc. (ZONE) continues to drive innovation and expand its reach, investors will be closely monitoring the company's ability to navigate the competitive landscape, execute on its growth strategies, and ultimately achieve long-term financial sustainability. The company's progress in the coming years will be crucial in determining its ability to solidify its position as a leader in the transformative cleaning industry. With its focus on eco-friendly solutions and the increasing market demand for sustainable cleaning technologies, CleanCore has the potential to capture a significant share of the growing market, provided it can overcome its current financial challenges and successfully scale its operations.