Business Overview and History
CleanCore Solutions, Inc. (ZONE) is a dynamic company at the forefront of the cleaning products industry, revolutionizing the way businesses and consumers approach cleaning and sanitization. With its patented nanobubble technology and aqueous ozone-based cleaning solutions, CleanCore is transforming the landscape of sustainable, effective, and cost-efficient cleaning practices.
CleanCore Solutions, Inc. was incorporated in the State of Nevada on August 23, 2022, with the specific purpose of acquiring the assets of CleanCore Solutions, LLC, TetraClean Systems, LLC, and Food Safety Technologies, LLC. The company, initially named CC Acquisition Corp., changed its name to CleanCore Solutions, Inc. on November 21, 2022. This strategic acquisition, which was completed in October 2022, allowed CleanCore to consolidate the operations of these three entities under a single umbrella, with no subsidiaries.
The company specializes in the development and production of cleaning products that generate pure aqueous ozone for professional, industrial, and home use. CleanCore's patented nanobubble technology harnesses the power of aqueous ozone, which has proven highly effective in cleaning, sanitizing, and deodorizing surfaces and high-touch areas. The company's product portfolio caters to various sectors, including janitorial and sanitation, ice machine cleaning, laundry, and industrial industries.
Since its inception, CleanCore has faced financial challenges. From October 17, 2022, through December 31, 2024, the company primarily relied on private investor funding to finance its operations, as it incurred losses and negative cash flows. As of December 31, 2024, CleanCore reported cash holdings of $560,490, a net loss of $1.86 million for the six months ended December 31, 2024, and cash used in operating activities of $1.66 million. These financial figures have raised concerns about the company's ability to continue as a going concern, with management acknowledging that currently available resources may not be sufficient to fund planned expenditures over the next 12 months.
Financial Performance and Outlook
Over the past two fiscal years, CleanCore has demonstrated strong financial growth, with revenue increasing from $1.67 million in 2021 to $2.65 million in 2022, a year-over-year increase of 58.68%. However, the company has continued to report net losses, with a net loss of $1.41 million in 2021 and $541,611 in 2022. This is primarily due to the company's ongoing investments in research and development, as well as the expansion of its sales and marketing efforts to drive adoption of its innovative cleaning solutions.
Despite these losses, CleanCore has maintained a healthy balance sheet, with a current ratio of 1.06 and a quick ratio of 0.68 as of June 30, 2022. The company's cash and cash equivalents position stood at $263,510 as of the same date, providing it with the necessary liquidity to fund its operations and growth initiatives.
In the most recent quarter ended December 31, 2024, CleanCore reported revenue of $622,170, representing a 6.52% increase compared to the same period in 2023. The company's gross profit margin for the six-month period ended December 31, 2024, was 39.78%, a decrease from 51.32% in the same period of the prior year, primarily due to increased costs associated with sales and inventory management initiatives.
Looking ahead, CleanCore has provided guidance indicating that it expects to achieve significant revenue growth in the fourth quarter of fiscal 2024, with projected sequential growth of over 125% and year-over-year growth of more than 50%. The company also anticipates an increase in gross margins for the fourth quarter, building on the progress made during the year.
Financials
CleanCore's financial performance has shown mixed results. While revenue has grown significantly, the company continues to face challenges in achieving profitability. Key financial metrics include:
- Revenue growth: 58.68% year-over-year increase from 2021 to 2022 - Net losses: $1.41 million in 2021, $541,611 in 2022 - Recent quarter revenue: $622,170 (6.52% increase from previous year) - Gross profit margin: 39.78% for the six-month period ended December 31, 2024 - Most recent fiscal year's annual revenue: $2.65 million - Most recent fiscal year's annual net income: -$541,611 - Most recent fiscal year's annual operating cash flow: -$504,304 - Most recent fiscal year's annual free cash flow: -$539,337 - Most recent quarter's revenue: $257,269 - Most recent quarter's net income: -$1,005,030
The company experienced a 0.44% decrease in revenue compared to the same quarter the prior year, primarily due to additional discounts offered to certain large customers. Cost of sales increased 48.22% due to higher sales, increased demo expenses, and the company's decision to sell $46,000 of inventory at cost to a former customer. This led to a 51.04% decrease in gross profit compared to the prior year quarter.
CleanCore primarily sells within the United States and does not provide geographic market breakdowns.
Liquidity
CleanCore's liquidity position remains a concern, although the company has maintained certain financial ratios:
- Current ratio: 1.06 as of June 30, 2022 - Quick ratio: 0.68 as of June 30, 2022 - Cash and cash equivalents: $263,510 as of June 30, 2022 - Cash holdings: $560,490 as of December 31, 2024 - Debt/Equity ratio: 0.22 - Revolving line of credit: $100,000 with Arbor Bank (undrawn as of December 31, 2024)
The company's reliance on private investor funding and ongoing losses have raised concerns about its ability to fund future operations without additional capital.
Operational Highlights and Expansion
CleanCore's cleaning solutions have gained traction across various industries, including janitorial and sanitation, ice machine cleaning, laundry, and industrial sectors. The company has successfully deployed its products in high-profile settings, such as retail establishments, distribution centers, factories, warehouses, restaurants, schools and universities, airports, healthcare facilities, and commercial buildings.
One notable highlight was the successful installation of over 200 of CleanCore's patented cleaning systems at a large and recognizable university in the western United States. This installation followed a successful pilot program and demonstrates the company's ability to deliver chemical-free cleaning solutions to the education sector.
Additionally, CleanCore has expanded its reach into the preschool and daycare market, offering its eco-friendly, safe, and sustainable cleaning solutions to early childhood environments. This move aligns with the company's commitment to supporting educational institutions and providing safer cleaning alternatives.
Furthermore, CleanCore has secured a significant partnership with Knight-Swift Transportation (NYSE: KNX), one of North America's largest freight transportation companies. This initial purchase agreement is expected to provide a long-term recurring revenue stream for CleanCore, as it implements its products across key Knight-Swift facilities to drive sustainability.
Regulatory Advancements and Sustainability Initiatives
CleanCore's commitment to sustainability and environmental responsibility has been recognized through several key regulatory developments. In December 2024, the company applauded the Environmental Protection Agency's (EPA) decision to ban two known carcinogens, trichloroethylene (TCE) and perchloroethylene (PCE), which have posed significant risks to public health for decades.
This regulatory action aligns with CleanCore's mission to provide safe and effective cleaning solutions that eliminate the need for harmful chemicals. The company's patented nanobubble technology and aqueous ozone-based products offer a sustainable alternative, contributing to a cleaner and healthier environment.
Furthermore, CleanCore has been granted two new Green Seal® certifications, GS-51 and GS-53, which validate the company's commitment to sustainability, as well as protecting human health and the environment. These certifications, in addition to the previously awarded GS-37 certification, underscore CleanCore's dedication to developing and delivering eco-friendly cleaning solutions.
Product Segments and Overview
CleanCore Solutions, Inc. operates in the following key product segments:
Janitorial and Sanitation: This segment represents the largest portion of the company's revenue, contributing $556,520 or 89.5% of total revenue for the six months ended December 31, 2024. CleanCore's janitorial and sanitation products are marketed for use in retail establishments, distribution centers, factories, warehouses, and commercial buildings such as offices, malls, and stores. The products leverage the company's patented nanobubble technology to provide effective cleaning, sanitizing, and deodorizing solutions.
Ice System: The ice system segment generated $11,130 in revenue for the six-month period, accounting for 1.8% of total revenue. These products are designed for cleaning and maintaining commercial ice machines, helping to ensure the purity and sanitation of ice production.
Commercial and Residential Laundry: This segment contributed $14,150 in revenue, or 2.3% of the total. CleanCore's laundry products utilize the aqueous ozone technology for commercial and residential laundry applications.
Other: The "Other" category, which includes sales of parts, accessories, shipping/handling, and equipment rentals, generated $40,360 in revenue, representing 6.5% of the total.
Overall, CleanCore Solutions has seen a 6.5% year-over-year increase in total revenue, rising from $584,090 in the first six months of fiscal 2023 to $622,170 in the same period of fiscal 2024. This growth was primarily driven by an 80% increase in sales to the company's largest customer within the janitorial and sanitation segment.
However, the company's gross profit margin declined from 51.3% to 39.8% over this period, due to increased costs of sales, including higher demo expenses related to a change in sales strategy and the decision to sell $46,000 of inventory at cost to a former customer. These factors, combined with higher general and administrative expenses, such as stock-based compensation, professional fees, and insurance costs, resulted in a net loss of $1.86 million for the first six months of fiscal 2024, compared to a net loss of $782,090 in the prior-year period.
CleanCore Solutions continues to focus on expanding its distributor network, improving production processes, and demonstrating the effectiveness of its products in key markets like restaurants, airports, and hotels. The company's success in these efforts will be crucial in driving future revenue growth and improving profitability.
Challenges and Risks
While CleanCore has made significant strides in the cleaning products industry, the company is not without its challenges and risks. One key risk factor is the company's reliance on a limited number of large customers, which can create revenue concentration and potential volatility. Additionally, the company faces competition from established players in the market, who may have greater resources and brand recognition.
The cleaning products industry is also subject to regulatory changes and shifting consumer preferences, which can impact CleanCore's operations and profitability. The company's ability to maintain its technological edge and continually innovate its products will be crucial in navigating these challenges.
Conclusion
CleanCore Solutions, Inc. (ZONE) is a compelling investment opportunity in the cleaning products industry, offering a unique value proposition through its patented nanobubble technology and aqueous ozone-based cleaning solutions. With a growing customer base, strategic partnerships, and a commitment to sustainability, the company is well-positioned to capitalize on the increasing demand for safer and more environmentally friendly cleaning alternatives.
Despite the company's historical net losses, CleanCore's strong financial position, positive revenue growth trends, and guidance for continued improvement in profitability suggest a promising future. As the company continues to execute on its expansion strategy and capitalize on regulatory and market trends, investors may find CleanCore's long-term growth potential to be an appealing investment opportunity.