ZONE 10-K & 10-Q changes, risk factors and insider trading
Zone Frontier Inc. · NYSE · Specialty Cleaning, Polishing And Sanitation Preparations · CIK 1956741 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Relating to our AI Critical Infrastructure Business”
New heading “Our AI Critical Infrastructure Business is at an early stage and subject to significant risks, and we may be unable to implement it successfully.”
New heading “We have limited operating history in the AI critical infrastructure or data center industry, and there can be no assurance that we will be able to successfully operate our data center campuses or consummate additional transactions related to our AI Critical Infrastructure Business.”
New heading “The AI Critical Infrastructure Business requires specialized technical, operational, commercial and financial expertise that we may be unable to attract, retain or develop, and our current management team and personnel have limited or no experience in this business.”
New heading “Our management team must manage the demands of operating multiple distinct businesses during our strategic transition, which may strain our limited resources and impair our ability to execute any of our business strategies effectively.”
New heading “Demand for AI-related or high-performance computing infrastructure may not grow as expected, may be satisfied by competitors, or may prove to be temporary, and our anticipated AI Critical Infrastructure Business may not succeed.”
New heading “We may be unable to secure adequate power supply, which is critical to data center operations, and power costs and availability may adversely affect our anticipated AI Critical Infrastructure Business.”
New heading “The AI critical infrastructure and data center industry is subject to extensive regulation, and changes in law or regulation could materially adversely affect our anticipated business.”
New heading “If we are unable to enter into additional profitable leases, hosting agreements, colocation arrangements or other monetization structures, or if our existing arrangements do not perform as expected, the AI Critical Infrastructure Business may fail.”
New heading “Technology in the AI critical infrastructure industry evolves rapidly, and our anticipated investments could become obsolete or less competitive.”
New heading “Our anticipated AI Critical Infrastructure Business may be affected by export controls, tariffs, sanctions and trade restrictions that could limit our ability to acquire necessary equipment or serve certain customers.”
New heading “Our disclosures regarding our anticipated AI Critical Infrastructure Business necessarily involve substantial estimates and assumptions and may become inaccurate or incomplete as circumstances evolve.”
New heading “We may need to build entirely new systems, financial reporting, disclosure, accounting, operational and internal control systems to support the anticipated AI Critical Infrastructure Business, which will be costly, time-consuming and may not be successful.”
New heading “Public company costs may consume a disproportionate amount of our limited resources, reducing capital available for the AI Critical Infrastructure Business.”
New heading “The transition from our current business lines to the AI Critical Infrastructure Business could expose us to stockholder litigation, regulatory scrutiny and reputational harm.”
New heading “We may fail to transition successfully from a cleaning products and digital asset treasury company to a computing infrastructure company.”
New heading “The anticipated AI Critical Infrastructure Business may never generate meaningful revenue, achieve profitability or produce positive cash flow.”
New heading “We will face intense competition from larger, more experienced and significantly better-capitalized companies, and we may be unable to compete effectively.”
New heading “We have significantly fewer resources than many of the companies with which we would compete, which could materially impair our ability to execute our business plan.”
New heading “Our ability to execute the anticipated AI Critical Infrastructure Business will depend on our ability to obtain substantial capital, and such capital may not be available on acceptable terms or at all.”
New heading “The market price of our common stock may not reflect the fundamental value or prospects of the anticipated AI Critical Infrastructure Business, and any increase in our stock price following announcement of such business may not be sustained.”
New heading “Counterparties to our leases, hosting agreements, colocation arrangements or other transactions may default, terminate early, fail to renew or otherwise not perform as expected.”
New heading “Transactions with external parties through SPVs and other investment structures expose us to heightened risks of default, disagreement, bankruptcy and personnel changes that could impair our investments and operations.”
New heading “Our anticipated AI Critical Infrastructure Business may be exposed to residual value risk and remarketing risk with respect to data center facilities and equipment.”
New heading “Our anticipated business model depends on assumptions regarding customer demand, pricing, utilization, residual values and monetization opportunities that may prove incorrect.”
New heading “Investors may have difficulty evaluating our future prospects because we will be a company with a limited operating history in a new business and no historical information relevant to that business.”
New heading “The proposed change in our corporate name, identity and strategic direction may create confusion, reduce credibility and harm our ability to establish the anticipated new business.”
New heading “If the anticipated AI Critical Infrastructure Business is unsuccessful, we may be unable to continue as a going concern.”
New heading “Stockholders may not realize the benefits they expect from our proposed strategic transition and may lose all or a substantial portion of their investment.”
New heading “We may be exposed to tax risks associated with asset acquisitions, leasing structures, hosting arrangements and other monetization arrangements.”
New heading “The data center project contemplated by our letter of intent requires capital commitments that substantially exceed our current financial resources, and we may be unable to secure adequate capital resources through debt or equity to fund our obligations under the proposed transaction.”
New heading “Our initial AI critical infrastructure strategy will likely be concentrated in a limited number of projects, and we will be dependent on our development and operating partners, which exposes us to significant concentration, execution and counterparty risks.”
New heading “Our anticipated AI Critical Infrastructure Business may be conducted through special purpose vehicles and joint venture structures, which expose us to governance, counterparty and structural risks that could materially impair our investments.”
Removed heading “We may face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues.”
Removed heading “If we do not build brand awareness and brand loyalty, our business may suffer.”
Removed heading “If we are unable to maintain, train and build an effective international sales and marketing infrastructure, we will not be able to commercialize and grow our brand successfully.”
Removed heading “Increased prices for raw materials could increase our cost of sales and decrease demand for our products, which could adversely affect our revenue or profitability.”
Removed heading “Interruptions in deliveries of raw materials could adversely affect our revenue or profitability.”
Removed heading “We depend on third-party delivery services, for both inbound and outbound shipping, to deliver our products to our distribution centers and subsequently to our customers on a timely and consistent basis, and any deterioration in our relationship with any one of these third parties or increases in the fees that they charge could harm our reputation and adversely affect our business and financial condition.”
Removed heading “If commodity prices such as fuel, plastic and steel increase, our margins may be negatively impacted.”
Removed heading “Business interruptions in our facilities may affect the distribution of our products and/or the stability of our computer systems, which may affect our business.”
Removed heading “Quality problems with, and product liability claims in connection with, our aqueous ozone machines could lead to recalls or safety alerts, harm to our reputation, or adverse verdicts or costly settlements, and could have a material adverse effect on our business, financial condition, and results of operations.”
Removed heading “We may receive a significant number of warranty claims or our aqueous ozone products may require significant amounts of service after sale.”
Removed heading “If we are unable to protect our intellectual property rights, our reputation and brand could be impaired, and we could lose customers.”
Removed heading “Assertions by third parties of infringement, misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.”
Removed heading “Legislation or government regulations may be adopted which may affect our products and liability.”
Removed heading “We are subject to, and must remain in compliance with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of our products. Some of our customers also require that it complies with their own unique requirements relating to these matters.”
Removed heading “Economic, political and other risks associated with our international operations could adversely affect our revenues and international growth prospects.”
Removed heading “Our international operations require us to comply with anti-corruption laws and regulations of the U.S. government and various international jurisdictions in which we do business.”
Removed heading “The impact of geopolitical conflicts may adversely affect our business and results of operations.”
Removed heading “The structure of our common stock has the effect of concentrating voting control with a single stockholder, which will limit or preclude your ability to influence corporate matters. It may also limit the price and liquidity of our class B common stock due to its ineligibility for inclusion in certain stock market indices.”
Removed heading “We are a controlled company and a smaller reporting company under the rules of NYSE American and as a result, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public stockholders.”
Largest changes
“Our anticipated AI Critical Infrastructure Business may be affected by export controls, tariffs, sanctions and trade restrictions that could limit our ability to acquire necessary equipment or serve certain customers.”see in full comparison
“Transactions with external parties through SPVs and other investment structures expose us to heightened risks of default, disagreement, bankruptcy and personnel changes that could impair our investments and operations.”see in full comparison
“The acquisition and deployment of computing infrastructure, including GPUs, servers, networking equipment and related components, may be subject to export controls, tariffs, sanctions, trade restrictions and other governmental regulations that could limit our ability to procure necessary equipment, increase our costs, restrict our customer base or otherwise adversely affect our anticipated business. …”see in full comparison
“In addition, countries across the globe are instituting sanctions and other penalties against Russia and are becoming more wary of China. While we do not have operations in, and do not obtain products from, Russia or Ukraine, the retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business.”see in full comparison
“We produce and sell products that contain ozone, and which may be subject to government regulation in the locations where we develop, manufacture, and assemble our products, as well as the locations where we sell our products. …”see in full comparison
“If the anticipated AI Critical Infrastructure Business is unsuccessful, we may be unable to continue as a going concern.”see in full comparison
Full comparison: every changed paragraph (177)
We
have generated losses since inception and have
relied on cash on-hand, sales of securities, proceeds from our initial public offering,
external bank lines of credit, and issuance of
third-party and related party debt to support our operations. For the year ended June
30, 2025,2026, we generated an operating loss of
$6,386,341 $57,978,720 and a net loss of $6,742,275.$174,160,864. The revenue and income potential of our business
and market are unproven. This makes an evaluation
of our company and its prospects difficult and highly speculative. There can be no assurances
that we will be able to developconstruct products
orour servicesdata centers on a timely and cost effective basis, that we will be able to generate any increase
in revenues, that we will have adequate financing
or resources to continue operating our business and to provide productsservices to customers,
that we will earn a profit, that we can raise sufficient
capital to support operations by attaining profitability, or that we can satisfy
future liabilities.
We
will be dependent upon the raising of additional
capital through equity and/or debt financing in order to implement our business plan
and generate sufficient revenue in excess of costs.
If we raise additional capital through the issuance of equity securities or securities
convertible into equity, stockholders will experience
dilution, and such securities may have rights, preferences or privileges senior
to those of the holders of common stock. If we raise additional
funds by issuing debt, we may be subject to limitations on its operations,
through debt covenants or other restrictions. There is no assurance
that we will be successful with future financing ventures, and the
inability to secure such financing may have a material adverse effect
on our financial condition. The accompanying consolidated financial
statements have been prepared on a going concern basis under which
our company is expected to be able to realize its assets and satisfy
its liabilities in the normal course of business and do not include
any adjustments to the amounts and classifications of assets and liabilities
that might be necessary should we be unable to continue as
a going concern. If we are unable tocannot continue as a going concern, our stockholders
would could potentiallylikely lose most or all of their investment
in our company.
We
require substantial working capital to fund
our business development plans,plans. and we expect to experience significant negative cash flow from operations. Depending upon the sales volume
generated by our business during that time, we alsoWe anticipate the possibility of having to raise additional funds
in order to achieve
our plans and accomplish our immediate and longer-term business strategy. These additional funds likely will be raised through the
issuance issuance
of our securities in debt and/or equity financings. If we are unable to raise these additional funds on terms acceptable to us,
we will
be required to limit our expenditures for continuing our product development activities and expanding our sales and marketing operations,
reduce our work force,activities, or find alternatives to fund our business
on terms that are not as favorable to us. Any such actions would impair
our product development and expansion plans, reduce potential
revenues, increase operating losses, and adversely affect the value of our
company.
We may face significant challenges in obtaining market acceptance
of our products, which could adversely affect our potential sales and revenues.
We do not yet have an established market or customer
base for our products. Acceptance of our products in the marketplace by both potential users and potential purchasers, including hospitals,
schools, universities, commercial facilities, transportation systems and other healthcare and non-healthcare providers, is uncertain,
and failure to achieve sufficient market acceptance will significantly limit our ability to generate revenue and be profitable. Market
acceptance will require substantial marketing efforts and the expenditure of significant funds by us to inform hospitals, schools, universities,
commercial facilities, transportation systems, residential spaces and other health care and non-healthcare providers of the benefits of
using our products. We may encounter significant clinical and market resistance to our products, and our products may never achieve market
acceptance. We may not be able to build key relationships with physicians, education administrators, and government agencies. Product
orders may be cancelled or customers that are beginning to use our products may cease their use of our products and customers expected
to begin using our products may not do so.
Factors that may affect our ability to achieve
acceptance of our products in the marketplace include, but are not limited, to whether:
Acceptance of our products in the marketplace
is also uncertain, and our failure to achieve sufficient market acceptance and any inability to sell such products at competitive prices
will limit our ability to generate revenue and be profitable. Our products and technologies may not achieve expected reliability, performance,
and endurance standards. Our products and technologies may also not achieve market acceptance, including among hospitals, or may not be
deemed suitable for other commercial applications.
If we do not build brand awareness and brand
loyalty, our business may suffer.
Due in part to the substantial resources available
to many of our competitors providing aqueous ozone technology, our opportunity to achieve and maintain a significant market share may
be limited. The importance of brand recognition will increase as competition in our market increases. Successfully promoting and positioning
of our brand will depend largely on the effectiveness of our marketing efforts, our ability to offer reliable and desirable products at
competitive rates, and customer perceptions of the value of our products. If our planned marketing efforts are ineffective or if customer
perceptions change regarding the effectiveness of our cleaning machines and products, we may need to increase our financial commitment
to creating and maintaining brand awareness and loyalty among customers, which could divert financial and management resources from other
aspects of our business or cause our operating expenses to increase disproportionately to our revenues. This would cause our business
and operating results to suffer.
If we are unable to maintain, train and
build an effective international sales and marketing infrastructure, we will not be able to commercialize and grow our brand successfully.
As we grow, we may not be able to secure sales
personnel or organizations that are adequate in number or expertise to successfully market and sell our brand and products on a global
scale. We presently rely on individual independent sales representatives and an in-house sales team to market and sell our products. If
we are unable to expand our sales and marketing capability, train our sales force effectively or provide any other capabilities necessary
to commercialize our brand internationally, we will need to contract with third parties to market and sell our brand, which will be an
additional expense. If we are unable to establish and maintain compliant and adequate sales and marketing capabilities, we may not be
able to increase our revenue, may generate increased expenses, and may not continue to be profitable.
The market for data centers is a rapidly changing market, characterized by changing technologies, high capital needs, the introduction of new competitors, evolving industry standards, and changing and diverse regulatory environments. Our inability to anticipate these changes and adapt our business and offerings could undermine our business strategy and impact our expected revenue growth and profitability over the next several years.
The market for cleaning products is a rapidly
changing market, characterized by changing technologies, intense price competition, the introduction of new competitors and brand name
cleaning products, evolving industry standards, changing and diverse regulatory environments, frequent new service announcements, and
changing user demands and behaviors. Our inability to anticipate these changes and adapt our business, platform, and offerings could undermine
our business strategy. Our business strategy and projections, including those related to our revenue growth and profitability, rely on
a number of assumptions about the market for cleaning products, including the size and projected growth of the cleaning product markets
over the next several years. Some or all of these assumptions may be incorrect. Our growth strategy is dependent, in part, on our
ability to timely and effectively launch new products and services, the development of which is uncertain, complex, and costly. In addition,
we may be unable successfully and efficiently to address advancements in distribution technology, marketing and pricing strategies and
content breadth and availability in certain or all of these markets, which could materially and adversely affect our growth prospects
and results of operations.
The limited history of some of the markets in
which we operate makes it difficult to effectively assess our future prospects, and our business and prospects should be considered in
light of the risks and difficulties we may encounter in these evolving markets. We cannot accurately predict whether our products and
services will achieve significant acceptance by potential users in significantly larger numbers or at the same or higher price points
than at present. Our historic growth rates should therefore not be relied upon as an indication of future growth, financial condition,
or results of operations.
OurWe
expect one major customerscustomer to account for a significant
portion ofall our revenue and the loss of any majorthat customer could have a material adverse effect on our results
of operations.
For the year ended June 30, 2026, two customers accounted for 27% and 16% of revenue, and two customers that accounted for 18% and 16% of all accounts receivable at June 30, 2026. For the year ended June 30, 2025, two customers accounted for 42% and 17% of revenue, and one customer accounted for 47% of all accounts receivable at June 30, 2025.
For the AI Critical Infrastructure segment, our flagship Minnesota data center has already been fully leased out to one customer on a ten-year term, with two ten-year renewal period options. Our results of operations and ability to service our debt obligations would also be impacted negatively to the extent that this customer is unable to make payments to us or does not make timely payments on outstanding accounts receivable.
For the year ended June 30, 2025, two customers, KBS and Prolink, Inc., accounted for 42% and 17% of revenue, respectively, and one customer,
KBS, accounted for 47% of all accounts receivable as of June 30, 2025. For the year ended June 30, 2024, one customer, Pro-Link, Inc.,
accounted for 14% of revenue, and two customers, Consensus Group and Tharaldson Hospitality, each accounted for 28% of all accounts receivable
as of June 30, 2024. We do not have a long-term contract with any of these customers mentioned (the memorandum of understanding with KBS
is not binding and does not require the purchase of specific quantities of products) and primarily sell products to customers under individual
purchase orders placed by them under their standard terms and conditions of sale. Our results of operations and ability to service our
debt obligations would also be impacted negatively to the extent that any major customer is unable to make payments to us or does not
make timely payments on outstanding accounts receivable.
We have historically depended
depend on a limited
number of third parties to supply key equipment, raw materialsmaterials, and labor to us to build our data centers, and the
failure to obtain a sufficient supply of these raw materialsinputs in a timely
fashion and at reasonable costs could significantly delay our delivery
of products.services. These inputs could also increase in price, reducing the expected profitability.
Equipment used to build and operate data centers can be highly customized, expensive, require long lead times, and available from a small number of vendors, for which there can be high demand. Failure to secure critical equipment could result in delays or inability to generate revenue.
Since our company’s inception, we have historically
purchased certain key raw materials and components, such as chassis, generators, vacuum switches, and head sockets and other components
from a limited number of suppliers, and we have a single vendor for a major component of two of our main products. For the years ended
June 30, 2025 and 2024, this vendor accounted for approximately 11% and 30%, respectively, of our total purchases. We purchased raw materials
on the basis of purchase orders. In the absence of firm and long-term contracts, we may not be able to obtain a sufficient supply
of these raw materials from our existing suppliers or alternates in a timely fashion or at a reasonable cost. Although we have not experienced
any supply chain disruptions in the past, we cannot guarantee that we will not experience any disruptions in the future. If we fail to
secure a sufficient supply of key raw materials in a timely fashion, it will result in a significant delay in our delivery of products.
Furthermore, failure to obtain a sufficient supply of these raw materials at a reasonable cost could also harm our revenue and gross profit
margins.
Increased
prices for raw materials could increase our cost of sales and decrease demand for our products, which could
adversely affect our revenue or profitability.
Our profitability is affected by the prices of
the raw materials used in the manufacturing and sale of our products. These prices may fluctuate based on a number of factors beyond our
control, including, among others, changes in supply and demand, general economic conditions, labor costs, competition, import duties,
currency exchange rates and, in some cases, government regulation. Increased prices could adversely affect our profitability or revenues.
We do not have long-term supply contracts for raw materials. Significant increases in the prices of raw materials could adversely
affect our profit margins, especially if we are not able to recover these costs by increasing the prices we charge our customers for our
products.
For the AI Critical Infrastructure business, all our suppliers are domestic and we are not aware of any material exposure to raw materials, components, or finished goods that could be subject to tariffs.
We are closely monitoring these developments and evaluating strategies to mitigate potential impacts.
The majority of the components
used to assemble our units are sourced from domestic suppliers, who may, in turn, obtain raw materials from overseas vendors. We also
purchase a small number of components from China. In the event we determine to pass on increased costs to our customers, our customers
may reduce their orders from us, which could negatively affect our business, profitability and operating results. We are closely monitoring
these developments and evaluating strategies to mitigate potential impacts.
Interruptions in deliveries of raw materials
could adversely affect our revenue or profitability.
Our dependency upon regular deliveries from particular
suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate
suppliers could be made. If any of our suppliers were unable to deliver raw materials to us for an extended period of time, as the result
of financial difficulties, catastrophic events affecting their facilities or other factors beyond our control, or if we were unable to
negotiate acceptable terms for the supply of raw materials with these or alternative suppliers, our business could suffer. We may not
be able to find acceptable alternatives, and any such alternatives could result in increased costs for us. Even if acceptable alternatives
are found, the process of locating and securing such alternatives might be disruptive to our business. Extended unavailability of necessary
raw materials could cause us to cease producing or selling one or more of our products for a period of time.
We depend on third-party delivery services,
for both inbound and outbound shipping, to deliver our products to our distribution centers and subsequently to our customers on a timely
and consistent basis, and any deterioration in our relationship with any one of these third parties or increases in the fees that they
charge could harm our reputation and adversely affect our business and financial condition.
We rely on third parties for the shipment of our
products, both inbound and outbound shipping logistics, and we cannot be sure that these relationships will continue on terms favorable
to us, or at all. Shipping costs have increased from time to time, and may continue to increase, and we may not be able to pass these
costs directly to our customers.
Any increased shipping costs could harm our business,
prospects, financial condition and results of operations by increasing our costs of doing business and reducing gross margins which could
negatively affect our operating results. In addition, we utilize a variety of shipping methods for both inbound and outbound logistics.
For inbound logistics, we rely on trucking and ocean carriers and any increases in fees that they charge could adversely affect our business
and financial condition. For outbound logistics, we rely on “Less-than-Truckload” and parcel freight based upon the product
and quantities being shipped and customer delivery requirements. These outbound freight costs have increased on a year-over-year basis
and may continue to increase in the future. We also ship a number of oversized products which may trigger additional shipping costs by
third-party delivery services. Any increases in fees or any increased use of “Less-than-Truckload” shipping would increase
our shipping costs which could negatively affect our operating results.
In addition, if our relationships with these third
parties are terminated or impaired, or if these third parties are unable to deliver products for us, whether due to labor shortage, slow
down or stoppage, deteriorating financial or business condition, responses to terrorist attacks or for any other reason, we would be required
to use alternative carriers for the shipment of products to our customers. Changing carriers could have a negative effect on our business
and operating results due to reduced visibility of order status and package tracking and delays in order processing and product delivery,
and we may be unable to engage alternative carriers on a timely basis, upon terms favorable to us, or at all.
We
rely on utility inputs from a variety of sources to power our data centers. If our fulfillment operations are interrupted
for any significant
period of time or are not sufficient to accommodate increasedour demand,facilities, our sales could decline, and our reputation
could be harmed.
Our data centers receive power from grid providers, renewable sources, and backup generators. If we do not successfully provide adequate power capabilities, our sales could decline. Our data centers also require significant water resources. If we are not able to source adequate water for use in our data centers, that could impact compute capacity and our sales could decline.
Our success depends on our ability to successfully
receive and fulfill orders and to promptly deliver our products to our customers. Most of the orders for our products are filled from
our inventory in our distribution centers, where all our inventory management, packaging, labeling and product return processes are performed.
Increased demand and other considerations may require us to expand our distribution centers or transfer our fulfillment operations to
larger or other facilities in the future. If we do not successfully expand our fulfillment capabilities in response to increases in demand,
our sales could decline.
In
addition, our distributiondata centers and computer systems are susceptible
to damage or interruption from weather, human error, pandemics, fire,
flood, power loss, telecommunications failures, hackings, terrorist attacks, acts of
war, break-ins, earthquakes and similar events. We do not currently
maintain back-up power systems atbut ourthey fulfillmentmay centers.not be sufficient, depending on the duration of interruption. We
do not presently have
a formal disaster recovery plan and our business interruption insurance may be insufficient to compensate us for
losses that may occur
in the event operations at our fulfillmentdata centercenters are interrupted. In addition, alternative arrangements may not
be available, or if they are
available, may increase the cost of fulfillment. Any interruptions in our fulfillment operations for any
significant period of time, including interruptions
resulting from the expansion of our existing facilities or the transfer of operations
to a new facility, could damage our reputation and
brand and substantially harm our business and results of operations.
If commodity prices such as fuel, plastic
and steel increase, our margins may be negatively impacted.
Our third-party delivery services have increased
fuel surcharges from time to time, and such increases negatively impact our margins, as we are generally unable to pass all of these costs
directly to consumers. Increasing prices of the raw materials for the products we sell may impact the availability, the quality and the
price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. We cannot ensure
that we can recover all the increased costs through price increases, and our suppliers may not continue to provide the consistent quality
of raw materials as they may substitute lower cost materials to maintain pricing levels, all of which may have a negative impact on our
business and results of operations.
Business interruptions in our facilities
may affect the distribution of our products and/or the stability of our computer systems, which may affect our business.
Weather, terrorist activities, war or other disasters,
or the threat of them, may result in the closure of one or more of our facilities, or may adversely affect our ability to timely provide
products to our customers, resulting in lost sales or a potential loss of customer loyalty. Most of our raw materials are imported from
other countries and these goods could become difficult or impossible to bring into the United States, and we may not be able to obtain
such raw materials from other sources at similar prices. Such a disruption in revenue could potentially have a negative impact on our
results of operations, financial condition and cash flows.
We rely extensively on our computer systems to
manage inventory, process transactions and timely provide products to our customers. Our systems are subject to damage or interruption
from power outages, telecommunications failures, computer viruses, security breaches or other catastrophic events. If our systems are
damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories
or process customer transactions. Such a disruption of our systems could negatively impact revenue and potentially have a negative impact
on our results of operations, financial condition and cash flows.
It
is essential to our business strategy that
our technology and network infrastructure remain secure and is perceived by our customers to
be secure. Despite security measures, however,
any network infrastructure may be vulnerable to cyber-attacks. Information security risks
have significantly increased in recent years
in part due to the proliferation of new technologies and the increased sophistication and
activities of organized crime, hackers, terrorists
and other external parties, including foreign private parties and state actors. We
may face cyber-attacks that attempt to penetrate
our network security, including our data centers, to sabotage or otherwise disable
our website, misappropriate our or our customers’
proprietary information, which may include personally identifiable information,
or cause interruptions of our internal systems and services.
If successful, any of these attacks could negatively affect our reputation,
damage our network infrastructure and our ability to sell
our products,services, harm our relationship with customers that are affected and expose
us to financial liability.
We
believe that our success will depend heavily
upon achievingattracting marketand acceptanceretaining of our products before our competitors introduce more advanced competing products.tenants. Current and new competitors,
however, may be able
to develop and introduce better or more desirable productsfacilities in advance of us or at a lower cost. In addition, some
of our current and
potential competitors have longer and/or more established operating histories, greater industry experience, greater
name recognition,
established customer bases, and significantly greater financial, technical, marketing, and other resources than we do.
To be competitive,
we must respond promptly and effectively to the challenges of technological change, evolving standards and regulations,
and our competitors’ innovations by continually working to improve the design of our products, enhancing our products, as well as
improving and increasing our marketing and distribution channels.innovations. Increased competition could result in a decrease in the desirability
of our products,services, a decrease in the use of our products services
by customers, loss of market share and brand recognition, and a reduction in the
projected revenues from our products.services. We cannot assure
you that we will be able to compete successfully against current and future competitors.
Competitive pressures faced by us could have
a material adverse effect on our business, operating results and financial condition.
Quality problems with, and product liability
claims in connection with, our aqueous ozone machines could lead to recalls or safety alerts, harm to our reputation, or adverse verdicts
or costly settlements, and could have a material adverse effect on our business, financial condition, and results of operations.
Quality is extremely important to us and our customers
due to the serious and costly consequences of product failure, and our business exposes us to potential product liability risks that are
inherent in the design, manufacture and marketing of cleaning devices and services. In addition, our products may be used in intensive
care settings with immunocompromised and seriously ill patients. Component failures, manufacturing defects or design flaws could result
in an unsafe condition or injury to, or death of, a patient or other user of our products. These problems could lead to the recall of,
or issuance of a safety alert relating to, our products and could result in unfavorable judicial decisions or settlements arising out
of product liability claims and lawsuits, including class actions, which could negatively affect our business, financial condition and
results of operations. In particular, a material adverse event involving one of our products could result in reduced market acceptance
and demand for all products offered under our brand and could harm our reputation and ability to market products in the future.
High quality products are critical to the success
of our business. If we fail to meet the high standards that we set for ourselves and that our customers expect, and if our products are
the subject of recalls, safety alerts or other material adverse events, our reputation could be damaged, we could lose customers and our
revenue could decline.
Any product liability claim brought against us,
with or without merit, could be costly to defend and resolve. Any of the foregoing problems, including product liability claims or product
recalls in the future, regardless of their ultimate outcome, could harm our reputation and have a material adverse effect on our business,
financial condition, and results of operations.
We may receive a significant number of warranty
claims or our aqueous ozone products may require significant amounts of service after sale.
Sales of our aqueous ozone products include a
product limited two-year warranty that covers any issues related to manufacturing defects, specifically relating to the CCS Caddy, POWER
CADDY, MINI CADDY, CCS 3.0 Fill Station, CCS 1.0 Fill Station, CCS 1000, CCS 2000L, CCS 5000 and the NuClean Pro Residential Fill Station.
If a product is provided that has a manufacturing defect, we or an authorized distributor will replace or repair the defective product
as long as a claim is submitted to us within the warranty period in writing within 30 days of the failure. This warranty does not cover
abuse, misuse of the products, service or unit modifications not authorized by us, or environmental hazards. As the possible number and
complexity of the features and functionalities of our products increase, we may experience a higher level of warranty claims. If product
returns or warranty claims are significant or exceed our expectations, we could incur unanticipated expenditures on parts and services,
which could have a material adverse effect on our operating results.
We
could be subject to litigation.litigation, including for businesses the Company no longer operates.
The Cleaning business is being marketed for sale as of September 28, 2026 and the Treasury business was exited on July 20, 2026 but the Company could still be liable for claims made related to these strategies.
Product
liability claims are common. Even though
we have not been subject to such claims in the past, we could be a named defendant in a lawsuit
alleging product liability claims including,
but not limited to, defects in the design, manufacture or labeling of our aqueous ozone products
and machines. Any litigation, regardless
of its merit or eventual outcome, could result in significant legal costs and high damage awards or settlements. Although we currently
maintain product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future
claims. Additionally, we may be unable to maintain our existing product liability insurance in the future at satisfactory rates or at
adequate amounts.
Any litigation, regardless of its merit or eventual outcome, could result in significant legal costs and high damage awards or settlements. Although we currently maintain insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. Additionally, we may be unable to maintain our existing liability insurance in the future at satisfactory rates or at adequate amounts.
If we are unable to protect our intellectual
property rights, our reputation and brand could be impaired, and we could lose customers.
We regard our patents, trademarks, trade secrets
and similar intellectual property as important to our success. We rely on patent, trademark and copyright law, and trade secret protection,
and confidentiality and/or license agreements with employees, customers, partners and others to protect our proprietary rights. We maintain
15 patents in the United States, Canada and Mexico. We cannot be certain that we have taken adequate steps to protect our proprietary
rights, especially in countries where the laws may not protect our rights as fully as in the United States. In addition, our proprietary
rights may be infringed or misappropriated, and we could be required to incur significant expenses to preserve them. We may commence litigation
to protect our intellectual property rights. The outcome of such litigation can be uncertain, and the cost of prosecuting such litigation
may have an adverse impact on our earnings. We have patent and trademark registrations for several patents and marks. However, any registrations
may not adequately cover our intellectual property or protect us against infringement by others. Effective patent, trademark, service
mark, copyright and trade secret protection may not be available in every country in which our products and services may be made available
online. We also currently own or control a number of Internet domain names and have invested time and money in the purchase of domain
names and other intellectual property, which may be impaired if we cannot protect such intellectual property. We may be unable to protect
these domain names or acquire or maintain relevant domain names in the United States and in other countries. If we are not able to protect
our patents, trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand
recognition and customer loyalty.
Assertions by third parties of infringement,
misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm
our business and operating results.
In recent years, there has been significant litigation
involving intellectual property rights. Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming,
diverts technical and management personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology,
pay damages, enter into royalty or licensing agreements, cease providing our product or take other actions to resolve the claims. These
actions, if required, may be costly or unavailable on terms acceptable to us. Any of these events could result in increases in operating
expenses, limit our product offerings or result in a loss of business.
Our
future success depends in large part upon
the continued service of the members of our executive management team and key employees, including
our Chief Executive Officer, Clayton
Adams,Tyler and our Chief Financial Officer, David Enholm.Hassen. All members of our executive management team are subject to employment agreements.
In addition,
our success also depends on our ability to attract and retain qualified technical, sales and marketing, product support,
financial and accounting, legal and other managerial
personnel. The competition for skilled personnel in the industries in which we operate
is intense. Our personnel generally may terminate
their employment at any time for any reason. We may incur significant costs to attract
and retain highly skilled personnel, and we may
lose new employees to our competitors before we realize the benefit of our investment
in recruiting them. AsIf we move into new geographies, we will need to attract and recruit skilled personnel across functional areas. If
we fail to attract new personnel
or if we suffer increases in costs or business operations interruptions as a result of a labor dispute,
or fail to retain and motivate
our current personnel, we might not be able to operate our business effectively or efficiently, serve our
users properly or maintain the
quality of our content and services.
Legislation or government regulations may
be adopted which may affect our products and liability.
Nanobubble technology and aqueous ozone are subject
to considerable regulatory uncertainty as the law evolves to catch up with the rapidly evolving nature of the technology itself, all of
which are beyond our control. Our products also may not achieve the requisite level of compatibility required for certification and rollout
to consumers or satisfy changing regulatory requirements which could require us to redesign, modify or update our products.
Management's Discussion & Analysis (MD&A)
New heading “Principal Factors Affecting the Financial Performance of our Cleaning Solutions Business”
New heading “Principal Factors Affecting the Financial Performance of our Cryptocurrency Treasury Operations, which the Company exited on July 20, 2026 by selling all remaining digital assets”
Largest changes
Net cash used in operating activities wassee in full comparison$2,337,659 for the year ended June 30, 2025, as compared to $1,547,880$18,157,390 for the year ended June 30,2024.2026, as compared to $2,337,659 for the year ended June 30, 2025. For the year ended June 30, 2026, our net loss of $174,160,864, offset by a change in fair value of digital assets of $116,318,363, non-cash professional fees of $26,482,428, stock-based compensation of $9,227,013, goodwill impairment of $2,237,910 and intangibles impairment of $1,748,969, were the primary drivers of net cash used in operating activities. For the year ended June 30, 2025, our net loss of $6,742,275, offset by non-cashstock basedstock-based compensation of $3,203,230, were the primary drivers of net cash used in operatingactivities. For the year ended June 30, 2024, our net loss of $2,281,741, offset by non-cash stock based compensation of $670,958, were the primary drivers of net cash used in operatingactivities.
Impairment of Goodwill. We evaluate goodwill for impairment annually, as of June 30, or more frequently when indicators of impairment exist. We consider qualitative factors including market conditions, legal factors, operating performance indicators, and competition, among others, to determine whethersee in full comparisonit is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If we conclude thatit is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative impairment test. In performing the quantitative impairment test, we compare the fair value of its reporting unit to the carrying amount including the goodwill of the reporting unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, we will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value.We performed our annual evaluation of goodwill on June 30, 2025. Based on the analysis, we did not recognize an impairment loss during the year ended June 30, 2025. Subsequent evaluations will be performed annually on June 30, per our policy.
General and administrative expenses.see in full comparisonOurIn the CleanCore segment, our general and administrative expenses consist primarily of personnel expenses, including employee salaries and bonuses plus related payroll taxes,stock basedstock-based compensation expense, professional advisor fees, bad debts, impairment expense, rent expense, insurance and other expenses incurred in connection with general operations. In the Treasury segment, our general and administrative expenses consist primarily of professional advisor fees, stock-based compensation expense, insurance expense, and employee salaries and bonuses plus related payroll taxes. In the AI Critical Infrastructure segment, our costs primary consists of legal fees. Our general and administrative expenses increased by$4,609,819,$49,411,629, or186.52%,697.78%, to$7,081,299$56,492,928 for the year ended June 30,20252026 from$2,471,480$7,081,299 for the year ended June 30,2024.2025. As a percentage of revenue, our general and administrative expenses increased from153.99% for the year ended June 30, 2024 to341.62% for the year ended June 30,2025.2025Thisto 1,658.42% for the year ended June 30, 2026. The year-over-year increasewasis primarily due to aincreasesfull year of$2,532,272Treasuryinsegmentnon-cash stock compensation expense, $351,071 in payroll and benefits related to an increase in headcount, $1,022,152 in professional and consulting fees, $261,250 of intangibles impairment, and $223,376 in director and officer insurance. The increase in professional fees and director and officer insurance is directly related to our listing on NYSE American in April 2024, as fiscal 2025 includesexpenses, a full year ofsuchIrelandfees.operations, impairment of intangibles, and increased payroll related to the new data-center focus. The most significant increases were $23,252,313 of non-cash professional fees from the Treasury segment, $14,539,737 of Treasury management related expenses, $6,023,783 in non-cash stock option expense and $1,748,969 of intangibles impairment.
“In connection with the proposed sale of the CleanCore segment, we obtained a third party valuation of the business and performed a quantitative impairment test. The test indicated that the fair value of the reporting unit was less than the carrying amount. As a result, we fully impaired our goodwill balance as of June 30, 2026. Subsequent evaluations will be performed annually on June 30, per our policy.”see in full comparison
“The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, Tyler Hassen, who was appointed on March 16, 2026, who managed the Company as three discrete segments as well as on a consolidated basis, in conjunction with the Company’s General Manager, Clayton Adams, who was the former Chief Executive Officer. The CODM uses net income (loss) to assess the profitability of the CleanCore Segment by comparing actual to budgeted results on a quarterly basis. In doing so, he focused on revenue, gross profit, and operating profit (loss) of the CleanCore Segment. …”see in full comparison
“Goodwill impairment. In connection with the proposed sale of the CleanCore segment, the Company obtained a third party valuation of the business and performed a quantitative impairment test. The test indicated that the fair value of the reporting unit was less than the carrying amount. As a result, the Company fully impaired its goodwill balance as of June 30, 2026.”see in full comparison
Full comparison: every changed paragraph (54)
Zone Frontier Inc., formerly CleanCore Solutions, Inc. (“the Company”, “we”, or “Zone”) is helping to build the critical infrastructure that powers the AI economy. We aim to meet the increasing demand for compute capacity, power, and digital infrastructure required by the world’s leading AI companies.
We specialize in providing powered land and facilities, in conjunction with our development partners, to support over one gigawatt of computer power by 2030. With campuses being developed across rural and industrial Minnesota and Texas, we expect to bring approximately 55 MW of utility power capacity and 40 MW of critical IT load online and revenue generating during the first calendar quarter of 2027.
On June 8, 2026, the Company announced a new focus on building critical AI infrastructure across the United States, led by newly hired CEO Tyler Hassen, and plans to move away from its cleaning products business and Dogecoin treasury strategy.
On July 9, 2026, the Company announced its first data center project. Located in West Texas, and with development platform provider HST Technologies, Inc., it is projected to supply an initial 200-megawatts of utility power by 2029, with potential to expand to more than 500-megawatts by 2030.
On July 20, 2026, substantially all Dogecoin assets were sold. The proceeds will be used to fund the Company’s AI strategy.
On July 29, 2026, the Company announced its second data center project, its flagship campus located in Minnesota. The site is already powered and under exclusive pre-leased occupancy with Cerebras Systems, a leading AI compute company. It is expected to generate revenue beginning in the first calendar quarter of 2027, offering 55-megawatts of utility power and 40-megawatts of critical load, once fully built out.
On June 8, 2026, the Company announced plans to sell or dispose substantially all assets of the cleaning products business, including the wholly owned Irish subsidiary, CleanCore Global Inc. The Company is in the process of selling this business unit but is not under binding contract with any party as of September 28, 2026. The segment did not meet the criteria as Held for Sale as of June 30, 2026 and is included in this Report. On August 31, 2026, the Company changed its name from CleanCore Solutions Inc. to Zone Frontier Inc.
The Treasury segment included dedicated resources assigned to execute on our digital asset strategy, unrealized gain or loss on digital assets, and other third-party costs associated with our digital assets holdings, and income tax effects generated from our Dogecoin holdings to better align with their activities and utilization.
The AI Critical Infrastructure segment includes costs related to the development of data centers. This segment has not generated any revenue as of June 30, 2026.
We specialize in the development and production
of cleaning products that produce pure aqueous ozone for professional, industrial, or home use. We have a patented nanobubble technology
using aqueous ozone that we believe is highly effective in cleaning, sanitizing, and deodorizing surfaces and high-touch areas.
We offer products and solutions that are marketed
for janitorial and sanitation, ice machine cleaning, laundry, and industrial industries. Our products are used in many types of environments
including retail establishments, distribution centers, factories, warehouses, restaurants, schools and universities, airports, healthcare,
food service, and commercial buildings such as offices, malls, and stores.
Our mission is to become a leader in creating
safe, clean spaces that are free from any chemical residue or skin irritants. We are currently expanding our distributor network, improving
our production processes, and proving the effectiveness of our products in restaurants, airports, and hotels.
Principal
Factors Affecting Ourthe Financial Performance of our AI Critical Infrastructure Business, which was announced on June 8, 2026
The operating results for our AI Critical Infrastructure operations are primarily affected by the following factors:
Principal Factors Affecting the Financial Performance of our Cleaning Solutions Business
Principal Factors Affecting the Financial Performance of our Cryptocurrency Treasury Operations, which the Company exited on July 20, 2026 by selling all remaining digital assets
The operating results for our Treasury operations were primarily affected by the following factors:
The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, Tyler Hassen, who was appointed on March 16, 2026, who managed the Company as three discrete segments as well as on a consolidated basis, in conjunction with the Company’s General Manager, Clayton Adams, who was the former Chief Executive Officer. The CODM uses net income (loss) to assess the profitability of the CleanCore Segment by comparing actual to budgeted results on a quarterly basis. In doing so, he focused on revenue, gross profit, and operating profit (loss) of the CleanCore Segment. The CODM assessed the Treasury Segment using the value of the Dogecoin and number of tokens held. The CODM assesses the AI Critical segment using actual vs. budgeted expenses and progress towards construction completion. All segments allocate personnel and budget accordingly to maximize potential profitability. The CODM also uses net income (loss) to understand the impact from income taxes and financing costs for general tax and liquidity planning purposes.
We
will remain an emerging growth company until
the earliest of (i) the last day of the fiscal year following the fifth anniversary of our
initial public offering, (ii) the last day
of the first fiscal year in which our total annual gross revenues are $1.235 billion or more,
(iii) the date that we become a “large
accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur
if the market value of our classcommon B common
stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently
completed second fiscal quarter
or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding
three year period.
The
following table sets forth key components
of our results of operations for the years ended June 30, 20252026 and 2024,2025, both in dollars and
as a percentage of our revenue.
Revenue.
All Weof generateour revenue is generated by the CleanCore segment, which generates revenue from
sales of our cleaning products. Our revenue increased
by $467,861,$1,333,600, or 29.15%,64.34%, to $3,406,434 for the year ended June 30, 2026 from $2,072,834 for the year ended June 30, 2025 from $1,604,973
for the year ended June 30, 2024.2025. The primary
increase is primarilyfrom drivenan by sales to a new customer, KBS, as described above. As of June 30,
2025, we recognized $876,568increase in revenue from KBSthe underIreland anlocation of approximately $1.4$817,000 milliondue purchaseto ordera issuedfull-year byof KBS.sales from Ireland.
Cost
of sales. Our cost of sales
consists of raw materials, components, labor, demo expenses and warranty reserves. Our cost of
sales increased by $277,208,$1,032,118, or 34.26%,
95.01%, to $2,118,487 for the year ended June 30, 2026 from $1,086,369 for the year ended June 30, 2025 from $809,161 for the year ended June 30, 2024. 2025.
As a percentage of revenue, cost of sales
increased from 50.42% for the year ended June 30, 2024 to 52.41% for the year ended June 30, 2025.2025 to 62.19% for the year ended June 30,
2026. The increase is the result of higher
year-over-year revenuerevenue, and an increase in indirect costssales suchcosts, primarily inventory reserve.
Inventory reserve expense increased by approximately $414,000 as demothe expense,company R&D,has andshifted warrantysome unit production overseas resulting in a
one-time increase in the reserve.
Gross
profit. As a result of the
foregoing, our gross profit increased by $190,653,$301,482, or 23.96%,30.56%, to $1,287,947 for the year ended June
30, 2026 from $986,465 for the year ended June 30, 2025 from $795,812 for the year
ended June 30, 2024.2025. As a percentage of revenue, gross profit decreased from 49.58%47.59% for the year ended
June 30, 2025 to 37.81% for the year ended June 30, 20242026. The decrease is primarily attributed to 47.59%the forincreased theindirect inventory reserve
yearexpense endedof June 30, 2025.$414,000.
General
and administrative expenses. Our
In the CleanCore segment, our general and administrative expenses consist primarily of personnel
expenses, including employee salaries and bonuses plus related payroll
taxes, stock basedstock-based compensation expense, professional advisor fees,
bad debts, impairment expense, rent expense, insurance and other expenses incurred in
connection with general operations. In the Treasury
segment, our general and administrative expenses consist primarily of professional advisor fees, stock-based compensation expense, insurance
expense, and employee salaries and bonuses plus related payroll taxes. In the AI Critical Infrastructure segment, our costs primary consists
of legal fees. Our general and administrative expenses increased by $4,609,819,$49,411,629, or 186.52%,697.78%, to $7,081,299$56,492,928 for the
year ended June 30, 2025
2026 from $2,471,480$7,081,299 for the year ended June 30, 2024.2025. As a percentage of revenue, our general and administrative
expenses increased from 153.99% for the year ended June 30, 2024 to
341.62% for the year ended June 30, 2025.2025 Thisto 1,658.42% for the year ended June 30, 2026. The year-over-year increase wasis primarily
due to
a increasesfull year of $2,532,272Treasury insegment non-cash stock compensation expense, $351,071 in payroll and benefits related to an increase in headcount,
$1,022,152 in professional and consulting fees, $261,250 of intangibles impairment, and $223,376 in director and officer insurance. The
increase in professional fees and director and officer insurance is directly related to our listing on NYSE American in April 2024, as
fiscal 2025 includesexpenses, a full year of suchIreland fees.operations, impairment of intangibles, and increased payroll related
to the new data-center focus. The most significant increases were $23,252,313 of non-cash professional fees from the Treasury segment,
$14,539,737 of Treasury management related expenses, $6,023,783 in non-cash stock option expense and $1,748,969 of intangibles impairment.
Advertising
expenses. OurIn the CleanCore segment, advertising
expenses consist of vendor trade shows and various trade publications. Our
advertising expenses increased by $183,633, or 198.31%, to $276,231 for the year ended June 30, 2026 from $92,598 for the year ended June
30, 2025. As a percentage of revenue, our advertising expenses decreasedincreased byfrom $23,409, or 20.18%,
to $92,5984.47% for the year ended June 30, 2025 fromto $116,0078.11% for the
year ended June 30, 2024.2026. AsSuch aan percentageincrease ofwas revenue,primarily ourdue advertisingto increased expenses related to crypto marketing, offset by lower marketing
expenses decreased from 7.23% for the yearCleanCore ended June 30, 2024 to 4.47% for the year ended June 30, 2025. Such a decrease was primarily
due to a decrease in trade shows attended in fiscal 2025.segment.
Depreciation
and amortization expense. Depreciation and amortization expense.expense, We
incurred depreciation and amortization expenseall of which is generated by the CleanCore segment,
was $259,598, or 7.62% of revenue, for the year ended June 30, 2026, as compared to $198,909, or 9.60% of revenue, for the year ended
June 30, 2025, as compared to $155,059,
or 9.66% of revenue, for the year ended June 30, 2024.2025. The increase is due to amortization expense associated with additional intangibles
acquired with the asset acquisition
of Sanzonate in April 2025.
Goodwill impairment. In connection with the proposed sale of the CleanCore segment, the Company obtained a third party valuation of the business and performed a quantitative impairment test. The test indicated that the fair value of the reporting unit was less than the carrying amount. As a result, the Company fully impaired its goodwill balance as of June 30, 2026.
Total Other income (expense), net. We had $116,182,144 in Total other expense, net, or (3,410.67)% of revenue, for the year ended June 30, 2026, as compared to $355,934 Other expense, net, or 17.17% of revenue, for the year ended June 30, 2025. Total other expense, net, for the year ended June 30, 2026 consisted of a change in fair value of digital assets held of $(116,318,363), interest income, net, of $140,365, and a foreign exchange loss of $4,146, while other expense, net, for the year ended June 30, 2025, consisted entirely of interest expense. The increase in change in fair value of digital assets is driven by the adoption of our digital asset treasury and a decrease in fair value of Dogecoin, and the increase in interest income is driven by cash from pre-funded warrants and issuance of ATM in the bank earning interest.
Interest expense, net. We
incurred interest expense, net, of $356,054, or 17.18% of revenue, for the year ended June 30, 2025, as compared to $335,008, or 20.87%
of revenue, for the year ended June 30, 2024. The increase is primarily due to an increase in note payables.
Net
loss. As a result
of the cumulative effect of the factors described above, we had a net loss of $174,160,864 for
the year ended June 30, 2026, as compared to $6,742,275 for the year ended June 30, 2025, as compared
to $2,281,742 for the year ended June 30, 2024, an increase in loss of $4,460,533,$167,418,589, or 195.49%.2,483.12%.
Our
company has incurred losses and negative cash
flows from operations. From October 17, 2022 (the date of the acquisition) through June
30, 2025,2026, we have financed our operations primarily
through private investor funding and an initial public offering.funding. As of June 30, 2025,2026, we had cash and cash equivalents
of $1,460,997.
$15,435,213. For the year ended June 30, 2025,2026, we had a net loss of $6,742,275$174,160,864 and cash used in operating activities of $2,337,659.$18,157,390.
ManagementDespite
our recent offerings described below, management believes that currently available resources
will not be sufficient to fund our planned
capital expenditures over the next 12 months,months. whichThese factors, individually and collectively, indicate that a material uncertainty exists
that raises substantial doubt about our company’s
ability to continue as a going concern for 12 months from the balance sheet date as of Juneissuance
of 30,the 2025.accompanying consolidated financial statements.
We
will be dependent upon the raising of additional
capital through equity and/or debt financing in order to implement our business plan
and generate sufficient revenue in excess of costs.
If we raise additional capital through the issuance of equity securities or securities
convertible into equity, stockholders will experience
dilution, and such securities may have rights, preferences or privileges senior
to those of the holders of our class B common stock. If
we raise additional funds by issuing debt, we may be subject to limitations on its operations,
through debt covenants or other restrictions.
There is no assurance that we will be successful with future financing ventures, and the
inability to secure such financing may have a
material adverse effect on our financial condition. The accompanying consolidated financial
statements do not include any adjustments
to the amounts and classifications of assets and liabilities that might be necessary should
we be unable to continue as a going concern.
Net
cash used in operating activities was $2,337,659
for the year ended June 30, 2025, as compared to $1,547,880$18,157,390 for the year ended June 30, 2024.2026, as compared to $2,337,659 for the year ended June
30, 2025. For the year ended June 30, 2026, our net loss of $174,160,864, offset by a change in fair value of digital assets of $116,318,363,
non-cash professional fees of $26,482,428, stock-based compensation of $9,227,013, goodwill impairment of $2,237,910 and intangibles impairment
of $1,748,969, were the primary drivers of net cash used in operating activities. For the year ended June 30, 2025, our net
loss of $6,742,275,
offset by non-cash stock basedstock-based compensation of $3,203,230, were the primary drivers of net cash used in operating
activities. For the year ended June 30, 2024, our net loss of $2,281,741, offset by non-cash stock based compensation of $670,958, were
the primary drivers of net cash used in operating activities.
Net
cash used in investing activities was $614,181
for the year ended June 30, 2025, as compared to $10,438$130,274,845 for the year ended June 30, 2024.2026, as compared to $614,181 for the year ended June 30,
2025. The net cash used in investing activities for the year ended June 30, 2026 consisted of net purchases of digital assets of $148,605,650
and purchases of property and equipment of $37,555, offset by the sale of digital assets of $18,368,360, while the net cash used investing
activities for the year ended June 30, 2025 consisted of $581,792 cash used in the acquisition of the assets of Sanzonate and purchases
of property and
equipment of $32,389, while the net cash used investing activities for the year ended June 30, 2024 consisted entirely of purchases of
property and equipment.$32,389.
Net
cash provided by financing activities was
$2,374,967 $162,383,965 for the year ended June 30, 2025,2026, as compared to $3,181,735$2,374,967 for the year ended
June 30, 2025. Net cash provided by financing activities for the year ended June 30, 2024.2026 Netconsisted of proceeds from the private placement
described below of $137,907,255, proceeds from the Sales Agreement described below of $27,270,267, and proceeds from the exercise of warrants
of $370,288, offset by repayments of notes payable of $660,000, payments for deferred offering costs of $1,078,967, funds provided for
a note receivable of $1,000,000 and repayments of related party loans of $425,241, while net cash provided by financing
activities for
the year ended June 30, 2025 consisted of proceeds from the issuance of promissory notes and warrants of $1,510,000, proceeds
from the
issuance of original issue discount notes of $500,000, proceeds from the exercise of warrants of $403,171 and proceeds from related party
party loans of $332,193, offset by payments of notes payable of $316,920 and payments for deferred offering costs of $53,477, while net
cash provided by financing activities for the year ended June 30, 2024 consisted of proceeds from the issuance of class B common stock
pursuant to the initial public offering of $4,233,875 (net of offering costs) and proceeds from the issuance of convertible notes of $225,000,
offset by payments for deferred offering costs of $587,573, repayments of notes of $480,667 and repayments of related party loans of $208,900.$53,477.
On August 29, 2025, we entered into an amended and restated sales agreement, or the Prior Sales Agreement, with Maxim Group LLC and Curvature Securities LLC, or the Prior Sales Agents, pursuant to which we could, from time to time, in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, issue and sell through or to the Prior Sales Agents up to a maximum aggregate amount of $1,150,000,000 of shares of common stock. During the year ended June 30, 2026, we issued an aggregate of 10,915,474 shares of common stock under the Prior Sales Agreement for gross proceeds of $28,111,924 and net proceeds of approximately $27,270,267. In May 2026, the Prior Sales Agreement was terminated, and the Company entered into a new sales agreement with Cantor Fitzgerald & Co., and Curvature Securities LLC, or the Sales Agents, pursuant to which we may offer and sell shares of common stock from time to time through the Sales Agents, acting as agent for up to $750,000,000 of shares of common stock.
On September 5, 2025, we completed an offering of pre-funded warrants to purchase an aggregate of 175,000,420 shares of common stock for aggregate gross proceeds of $175,000,420, of which $148,650,530 was paid in cash and $26,349,890 was paid in cryptocurrency. After deducting placement agent fees, reimbursed expenses, and other offering expenses from the total gross proceeds, including both cash and cryptocurrency gross proceeds, we received net proceeds of approximately $164,257,145. Of this amount, approximately $1,075,000 was used to pay off outstanding indebtedness and $4,400,000 was to be used for working capital and general corporate purposes, with the balance of the net proceeds used to acquire Dogecoin. The Company sold its Dogecoin holdings on July 20, 2026 and allocated the cash proceeds to the AI Critical Infrastructure. As of June 30, 2026, none of our cash is classified as restricted.
Pursuant to the terms of the Asset Management Agreement, we agreed to pay the Asset Manager and 21Shares a monthly fee in arrears computed at an annual rate as follows: (i) 2% in the aggregate on amounts up to and including $1,000,000,000 in Treasury Account value, with 1.75% paid to the Asset Manager and 0.25% paid to 21Shares; (ii) 1.75% in the aggregate on amounts above $1,000,000,000 up to and including $1,500,000,000 in Treasury Account value, with 1.5% paid to the Asset Manager and 0.25% paid to 21Shares; and (iii) 1.5% in the aggregate on amounts above $1,500,000,000 in Treasury Account value, with 1.25% paid to the Asset Manager and 0.25% paid to 21Shares. Such payments may be made, in the sole discretion of the Asset Manager or 21Shares, in shares of common stock, cash, or Dogecoin and shall be pro-rated for partial periods. These agreements were terminated on February 27, 2026.
On November 17, 2025, we entered into a strategic advisor agreement with Dogecoin Ventures LLC (which, for the avoidance of doubt, is not related to the Asset Manager), pursuant to which we engaged Dogecoin Ventures LLC to provide certain advisory services relating to our digital asset treasury business in exchange for, among other things, a monthly advisory fee of $83,333. This agreement was terminated on February 27, 2026.
Our
other principal commitments consist mostly of obligations
under the loans described in NotesNote 11 and 1220 to theour accompanyingaudited consolidated financial statements.
We also havehad a non-cancellable operating
lease commitment for our office facility expiring in 2028 as described in Note 1620 to the accompanying audited
consolidated financial statements.
Other than the foregoing, as of June 30, 2025, we did not have other long-term debt obligations, capital (finance) lease obligations,
operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.
Other than the foregoing, at June 30, 2026, we did not have other long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.
Intangible
Assets. Intangible assets
primarily consistconsisted of existing technology, distributioncustomer agreements, licenses,relationships, and trademarks obtained as a
result of the acquisitionsacquisition on
October 17, 2022 and April 15, 2025.2022. Intangible assets with definite lives are amortized based on their pattern of economic
benefit over
their estimated useful lives and reviewed periodically for impairment. Our trademarks are deemed to have an indefinite life.
The estimated
useful life of the acquired technology is 15 years while the estimated useful liveslife of the distributioncustomer agreements and licensesrelationships is 5 years.
In connection with the proposed sale of the CleanCore segment, we have fully impaired our intangible assets as of June 30, 2026. See Note
12 for additional details. During the year ended June 30, 2025, as a result of the analysis, we recognized an impairment loss of $261,250
on our customer relationship intangible asset.
Impairment
of Long-Lived Assets.
Long-lived assets consist primarily of property and equipment and intangible assets. Long-lived assets
are tested for impairment when
events and circumstances indicate the assets might be impaired by first comparing the estimated future
undiscounted cash flows of the
asset or asset group to the carrying value. If the carrying value exceeds the estimated future undiscounted
cash flows, an impairment
loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset
group. As a result of the
analysis, we recognized an impairment loss of $261,250 in general and administrative expenses on our customer relationship intangible
asset during the year ended June 30, 2025. No other long-lived assets were determined to be impaired for the years ended June 30, 2025
and 2024. Subsequent evaluations will be performed annually on June 30, per our policy.
In connection with the proposed sale of the CleanCore segment, we fully impaired our intangible assets during the year ended June 30, 2026. We compared the estimated future undiscounted cash flows of property and equipment noting that the undiscounted future cash flows were greater than the carrying amount. Therefore, we concluded that property and equipment is not impaired for the years ended June 30, 2026 and 2025. See Note 12 for additional details. Subsequent evaluations will be performed annually on June 30, per our policy.
Impairment
of Goodwill. We evaluate
goodwill for impairment annually, as of June 30, or more frequently when indicators of impairment
exist. We consider qualitative factors
including market conditions, legal factors, operating performance indicators, and competition,
among others, to determine whether it is
more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If we conclude that
it is more likely than not that the fair value of the reporting unit is less than its carrying amount,
including goodwill. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying
amount, we perform a quantitative impairment
test. In performing the quantitative impairment test, we compare the fair value of its reporting
unit to the carrying amount including
the goodwill of the reporting unit. If the carrying value, including goodwill, exceeds the reporting
unit’s fair value, we will
recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s
fair value. We performed our
annual evaluation of goodwill on June 30, 2025. Based on the analysis, we did not recognize an impairment loss during the year ended June
30, 2025. Subsequent evaluations will be performed annually on June 30, per our policy.
In connection with the proposed sale of the CleanCore segment, we obtained a third party valuation of the business and performed a quantitative impairment test. The test indicated that the fair value of the reporting unit was less than the carrying amount. As a result, we fully impaired our goodwill balance as of June 30, 2026. Subsequent evaluations will be performed annually on June 30, per our policy.
Digital Assets
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires in-scope crypto assets (including the Company’s dogecoin holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in the statement of operations each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard. The Company adopted this guidance effective September 2025.
The Company accounts for its digital assets, which were comprised solely of Dogecoin, as indefinite-lived intangible assets in accordance with ASC 350-60 (Intangibles – Goodwill and Other – Crypto Assets). The Company had ownership and control over its digital assets and uses well-known crypto custodians to secure it.
The Company’s digital assets were initially recorded at cost, with the cost basis determined using the weighted average cost (“WAC”) method. Upon disposal, the cost basis of the digital assets sold is determined using the WAC method.
Digital assets were measured at fair value at each reporting period. The Company determined the fair value of Dogecoin in accordance with ASC 820 (Fair Value Measurement), based on the period-end quoted (unadjusted) prices in the Company’s principal market. Changes in fair value are recognized at each reporting date within the change in fair value of digital assets line item in the statement of operations. Upon disposal, the net cash received was subtracted from the cost basis of assets sold to determine the change in fair value of digital assets for the disposed assets.
The vast majority of the Company’s assets were concentrated in its Dogecoin holdings until all Dogecoin tokens were sold on July 20, 2026. Dogecoin is a digital asset, which is a novel asset class that is subject to significant legal, commercial, regulatory and technical uncertainty. Holding Dogecoin did not generate any cash flows and involves custodial fees and other costs. Additionally, the price of Dogecoin has historically experienced significant price volatility, and a significant decrease in the price of Dogecoin adversely affected the Company’s financial condition and results of operations. The Company’s strategy of acquiring and holding Dogecoin also exposed it to counterparty risks with respect to the custody of its Dogecoin, cybersecurity risks, and other risks inherent to holding a digital asset. In particular, the Company was subject to the risk that, if its private keys with respect to its digital assets were lost or destroyed or other similar circumstances or events occur, the Company may have lost some or all of its digital assets, which could materially adversely affect the Company’s financial condition and results of operations.
Stock-based
Compensation. Compensation
expense is recognized for all share-based payments to employees and non-employees, including stock
options, restricted stock awards, and
warrants, in the statements of operation based on the fair value of the awards that are granted.
As necessary, our stock price at the
date of grant was estimated using an acceptable valuation technique such as the probability-weighted
expected return model. The fair value
of stock options and warrants are estimated at the date of grant using the Black-Scholes option-pricing
model. The fair value of restricted
stock awards is based on the fair market value of our class B common stock on the date of grant. Compensation
expense for restricted stock
awards with performance-based vesting conditions is calculated based on the number of awards that are expected
to vest during the performance
period if it is probable that the performance metrics will be achieved. Generally, measured compensation
cost, net of actual forfeitures,
is recognized on a straight-line basis over the vesting period of the related share-based compensation
award. We account for forfeitures
of stock-based awards as they occur.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
Largest changes
Net cash used in operating activities wassee in full comparison$7,187,396$14,815,558 for thesixnine months endedDecemberMarch 31,2025,2026, as compared to$1,662,330$2,234,206 for thesixnine months endedDecemberMarch 31,2024.2025. For thesixnine months endedDecemberMarch 31,2025,2026, our net loss of$117,728,052$148,531,825 and offset by a change in fair value of digital assets of$88,699,929,$107,384,528, non-cash professional fees of$14,932,750$17,997,950 and stock-based compensation of$7,841,355, were the primary drivers of net cash used in operating activities. For the six months ended December 31, 2024, our net loss of $1,861,109, offset by stock-based compensation of $331,802,$8,601,443, were the primary drivers of net cash used in operating activities. For the nine months ended March 31, 2025, our net loss of $2,670,469, offset by stock-based compensation of $561,767, were the primary drivers of net cash used in operating activities.
General and administrative expenses. Our general and administrative expenses increased bysee in full comparison$28,107,474,$38,679,476, or1,538.12%,1,350.54%, to$29,934,86141,543,474 for thesixnine months endedDecemberMarch 31,20252026 from$911,173$2,863,998 for thesixnine months endedDecemberMarch 31,2024.2025. As a percentage of revenue, our general and administrative expenses were1,516.76%1,648.20% and293.71%242.69% for thesixnine months endedDecemberMarch 31,20252026 and2024,2025, respectively. This increase was primarily due to increases of$18,662,635$27,448,388 in professional and consulting fees,7,509,878$8,040,001 in stock compensation expense,$1,245,340$2,108,425 in payroll and benefits related to an increase in headcount, and$578,342$1,017,304 in insurance. On a segmented basis, general and administrative expenses for the CleanCore and Treasury segments for thesixnine months endedDecemberMarch 31,20252026 were$21,678,560$22,898,098 and$8,256,301,$18,645,376, respectively.
General and administrative expenses. In the CleanCore segment, our general and administrative expenses consist primarily of personnel expenses, including employee salaries and bonuses plus related payroll taxes, stock based compensation expense, professional advisorsee in full comparisonadvisorfees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. In the Treasury segment, our general and administrative expenses consist primary of professional advisor fees, stock based compensation expense, insurance expense,expense,and employee salaries and bonuses plus related payroll taxes. Our general and administrative expenses increased by$20,417,153,$10,640,683, or2,240.75%,1,098.94%, to$21,328,326$11,608,947 for the three months endedDecemberMarch 31,20252026 from$911,173$968,264 for the three months endedDecemberMarch 31,2024.2025. As a percentage of revenue, our general and administrative expenses were1,995.44%2,135.20% and354.17%173.55% for the three months endedDecemberMarch 31,20252026 and2024,2025, respectively. This increase was primarily due to increases of$12,836,619$8,785,753 in professional and consulting fees,$6,524,502 in stock compensation expense, $560,341$863,085 in payroll and benefits related to an increase in headcount, $530,123 in stock compensation expense, , and$439,276$438,962 in insurance. On a segmented basis, general and administrative expenses for the CleanCore and Treasury segments for the three months endedDecemberMarch 31,20252026 were$17,942,659$1,770,116 and$3,385,667,$10,389,075, respectively.
Net cash provided by financing activities wassee in full comparison$161,721,570$160,721,570 for thesixnine months endedDecemberMarch 31,2025,2026, as compared to$215,273$1,015,273 for thesixnine months endedDecemberMarch 31,2024.2025. Net cash provided by financing activities for thesixnine months endedDecemberMarch 31,20252026 consisted of proceeds from the private placement described below of $137,907,255, proceeds from the Sales Agreement described below of $25,608,235 and proceeds from the exercise of warrants of $370,288, offset by repayments of notes payable of $660,000, payments for deferred offering costs of $1,078,967, funds$1,078,967provided for a note receivable of $1,000,000 and repayments of related party loans of $425,241. Net cash provided by financing activities for thesixnine months endedDecemberMarch 31,20242025 consisted of proceeds from a related party loan of $332,193, an advance on subscription of$300,000$1,000,000,and proceeds from the issuance of related party notes of $232,193,offset by payments of notes payable of $316,920.
Advertising expenses. In the CleanCore segment, advertising expenses consist of vendor trade shows and various trade publications. In the Treasury segment, advertising expense is driven by crypto marketing expenses. Our advertising expensessee in full comparisondecreasedincreased by$21,004,$81,432, or28.04%,412.46%, to$53,901$101,175 for the three months ended March 31, 2026 from $19,743 for the three months endedDecemberMarch 31,2025 from $74,905 for the three months ended December 31, 2024.2025. Suchaandecreaseincrease was primarily due to the timing and strategy of outbound sales activity. As a percentage of revenue, our advertising expenses were5.04%18.61% and29.12%3.54% for the three months endedDecemberMarch 31,20252026 and2024,2026, respectively. On a segmented basis, advertising expenses for the CleanCore and Treasury segments for the three months endedDecemberMarch 31, 2025 were$20,883$68,175 and$33,018,$33,000, respectively.
Cost of sales. Our cost of sales increased bysee in full comparison$335,357,$1,052,611, or89.51%,169.38%, to$710,014$1,674,052 for thesixnine months endedDecemberMarch 31,20252026 from$195,258$621,441 for thesixnine months endedDecemberMarch 31,2024.2025. As a percentage of revenue, cost of sales was35.98%66.42% and60.22%52.66% for thesixnine months endedDecemberMarch 31,20252026 and2024,2025, respectively. Thedecreaseincrease is the result ofbetterhigherefficienciessales,drivenoffset byscale,increasedcostinventoryoptimization, and technological improvements.reserves.
Full comparison: every changed paragraph (32)
On September 5, 2025, we adopted a digital asset treasury strategy focused on Dogecoin. Pursuant to an asset management agreement that we entered into with Dogecoin Ventures, Inc., or the Asset Manager, and 21Shares US LLC, or 21Shares, on September 5, 2025, or the Asset Management Agreement, we established a multiyear advisory and asset-management program with the Asset Manager (which is a wholly-owned subsidiary of House of Doge Inc., the commercial arm of the Dogecoin Foundation) and 21Shares to manage our treasury assets, which include available cash or digital assets placed in our account to be utilized for such purpose, or the Treasury Account, as well as all investments thereof, proceeds of, income on and additions or accretions to the same, including all assets which are or were in the Treasury Account, but which are deployed in decentralized finance or similar blockchain transactions from time to time in accordance with the investment strategy described in the Asset Management Agreement (which we refer to as the Treasury Assets). As of February 27, 2026, all asset management agreements have been terminated but the Company maintains a portfolio of Dogecoin. See Note 11 for more information.
Our
The Company’s chief operating decision maker, or CODM,maker
(“CODM”) is ourthe Company’s Chief Executive Officer, Tyler Hassen, who was appointed on March 16, 2026, who manages our companythe
Company as two discrete segments as well as
on a consolidated basis.basis, in conjunction with the Company’s General Manager, who is the
former Chief Executive Officer, Clayton Adams. The CODM uses net income (loss) to assess the profitability of the CleanCore segmentSegment by
comparing actual to
budgeted results on a quarterly basis. In doing so, he focuses on revenue, gross profit, and operating profit (loss)
of the CleanCore
segment. Segment. The CODM, in conjunction with our Chief Investment Officer,CODM assesses the Treasury segmentSegment using the value of the Dogecoin and
number of tokens held. Both segments
allocate personnel and budget accordingly to maximize potential profitability. The CODM also uses
net income (loss) to understand the
impact from income taxes and financing costs for general tax and liquidity planning purposes.
Comparison
of Three Months Ended DecemberMarch 31, 20252026 and 20242025
The
following table sets forth key components
of our results of operations for the three months ended DecemberMarch 31, 20252026 and 2024,2025, both in
dollars and as a percentage of our revenue.
Revenue.
All of our revenue is generated
by the CleanCore segment, which generates revenue from sales of our cleaning products. Our revenue increased
decreased by $811,582,$14,221, or 315.46%,2.55%, to $1,068,851
$543,694 for the three months ended DecemberMarch 31, 20252026 from $257,269$557,915 for the three months ended December
March 31, 2024.2025. The increasedecrease is primarily
due to lower sales from a new customer, which generated revenue of $508,992 in the threeUS, monthsoffset endedby December
31,the 2025.addition of the Global entity.
Cost
of sales. Our cost of sales
consists of raw materials, components, labor, demo expenses and warranty reserves. Our cost of sales
increased by $146,193,$716,170, or 74.87%, 290.20%,
to $341,451$962,953 for the three months ended DecemberMarch 31, 20252026 from $195,258$246,783 for the three months ended December
March 31, 2024.2025. As a percentage of revenue,
cost of sales was 31.95%177.11% and 75.90%44.23% for the three months ended DecemberMarch 31, 20252026 and 2024,2026, respectively.
The decreaseincrease is the result of betterrevaluating
our efficienciesinventory drivenreserves byto scale,reflect cost optimization,slow-moving and technologicaloutdated improvements.product.
Gross
profit. As a result of the
foregoing, our gross profit increaseddecreased by $665,389,$730,391 or 1,073.02%,(234.75)%, to $727,400a forloss theof three months
ended December 31, 2025 from $62,011$419,259 for the three months ended DecemberMarch 31, 2024.2026 from a
profit of $311,132 for the three months ended March 31, 2025. As a percentage of revenue, gross profit was 68.05%
(77.11)% and 24.10%55.77% for the
three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively.
General
and administrative
expenses. In the CleanCore segment, our general and administrative expenses consist primarily
of personnel
expenses, including employee salaries and bonuses plus related payroll taxes, stock based compensation expense, professional advisor
advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. In the Treasury segment,
our general and administrative expenses consist primary of professional advisor fees, stock based compensation expense, insurance
expense, expense,
and employee salaries and bonuses plus related payroll taxes. Our general and administrative expenses increased by $20,417,153,
$10,640,683, or 2,240.75%,
1,098.94%, to $21,328,326$11,608,947 for the three months ended DecemberMarch 31, 20252026 from $911,173$968,264 for the three months ended December March
31, 2024.2025. As a percentage
of revenue, our general and administrative expenses were 1,995.44%2,135.20% and 354.17%173.55% for the three months ended December
March 31, 20252026 and 2024,
2025, respectively. This increase was primarily due to increases of $12,836,619$8,785,753 in professional and consulting
fees, $6,524,502 in stock compensation
expense, $560,341$863,085 in payroll and benefits related to an increase in headcount, $530,123 in stock compensation expense, , and $439,276
$438,962 in insurance. On a segmented basis, general
and administrative expenses for the CleanCore and Treasury segments for the
three months ended DecemberMarch 31, 20252026 were $17,942,659$1,770,116 and
$3,385,667, $10,389,075, respectively.
Advertising
expenses. In
the CleanCore segment, advertising expenses consist of vendor trade shows and various trade publications.
In the Treasury segment, advertising
expense is driven by crypto marketing expenses. Our advertising expenses decreasedincreased by $21,004,$81,432, or
28.04%, 412.46%, to $53,901$101,175 for the three months
ended March 31, 2026 from $19,743 for the three months ended DecemberMarch 31, 2025 from $74,905 for the three months ended December 31, 2024.2025. Such aan decrease
increase was primarily due to the timing and strategy
of outbound sales activity. As a percentage of revenue, our advertising expenses were 5.04%
18.61% and 29.12%3.54% for the three months ended December March
31, 20252026 and 2024,2026, respectively. On a segmented basis, advertising expenses for the CleanCore
and Treasury segments for the three months
ended DecemberMarch 31, 2025 were $20,883$68,175 and $33,018,$33,000, respectively.
Depreciation
and amortization expense. Depreciation
and amortization expense, all of which is generated by the CleanCore segment,
increased by $23,133,$21,652, or 57.94%,54.23%, to $63,061$61,580 for the three
months ended DecemberMarch 31, 20252026 from $39,928 for the three months ended December
March 31, 2024.2025. As a percentage of revenue, depreciation and amortization
expense was 5.90%11.33% and 15.52%7.16% for the three months ended December
March 31, 20252026 and 2024,2025, respectively. The increase in expense is due to amortization
expense associated with additional intangibles acquired
with the asset acquisition of Sanzonate in April 2025.
Total
other income (expense). We had $83,642,464$18,612,814 in total
other expense, net, for the three months ended DecemberMarch 31, 2025,2026, as compared
to $41,035$92,551 for the three months ended DecemberMarch 31, 2024.2025. Other
expense, net, for the three months ended DecemberMarch 31, 20252026 consisted of
a changedecrease in fair value of digital assets held of $83,703,185 and$18,684,134, a
foreign exchange loss of $2,015,$1,202, offset by interest income, net, of $62,736,
$72,522, while other expense, net, for the three months ended December March
31, 20242025 consisted entirely of interest expense. The increase in change
in fair value of digital assets is driven by the adoption of our
digital asset treasury strategy and a decrease in the fair value of
Dogecoin.
Net
loss. As a result
of the cumulative effect of the factors described above, we had a net loss of $104,360,352 for
the three months ended December 31, 2025, as compared to $1,005,030$30,803,775 for the three months ended DecemberMarch 31, 2024,2026, as
compared to a net loss of $809,354 for the three months ended March 31, 2025, an increase of $103,355,322,
$29,994,421, or 10,283.80%.3,705.97%.
Comparison
of SixNine Months Ended DecemberMarch 31, 20252026 and 20242025
The
following table sets forth key components
of our results of operations for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, both in dollars
and as a percentage of our revenue.
Revenue.
Our revenue increased by $1,351,440,
$1,340,457, or 217.21%,113.59%, to $1,973,608$2,520,540 for the sixnine months ended DecemberMarch 31, 20252026 from $257,269$1,180,083 for the sixnine months
ended DecemberMarch 31, 2024. 2025.
The increase is primarily due to sales from a new customer, which generated revenue of $863,334$872,214 in the sixnine months
ended DecemberMarch 31, 2025.2026.
Cost
of sales. Our cost of sales
increased by $335,357,$1,052,611, or 89.51%,169.38%, to $710,014$1,674,052 for the sixnine months ended DecemberMarch 31, 20252026 from $195,258
$621,441 for the sixnine months ended December March
31, 2024.2025. As a percentage of revenue, cost of sales was 35.98%66.42% and 60.22%52.66% for the sixnine months ended
December March 31, 20252026 and 2024,2025, respectively.
The decreaseincrease is the result of betterhigher efficienciessales, drivenoffset by scale,increased costinventory optimization, and technological
improvements.reserves.
Gross
profit. As a result of the
foregoing, our gross profit increased by $1,016,083,$287,846, or 410.52%,51.53%, to $1,263,594$846,488 for the six months
ended December 31, 2025 from $247,511 for the sixnine months ended DecemberMarch 31, 2024.2026 from $558,642 for the
nine months ended March 31, 2025. As a percentage of revenue, gross profit was 64.02%
33.58% and 39.78%47.34% for the sixnine months ended DecemberMarch 31, 2025 2026
and 2024,2025, respectively.
General
and administrative expenses. Our
general and administrative expenses increased by $28,107,474,$38,679,476, or 1,538.12%,1,350.54%, to $29,934,861
41,543,474 for the sixnine months ended DecemberMarch 31, 20252026 from $911,173
$2,863,998 for the sixnine months ended DecemberMarch 31, 2024.2025. As a percentage of revenue, our
general and administrative expenses were 1,516.76% 1,648.20%
and 293.71%242.69% for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. This
increase was primarily due to increases of $18,662,635 $27,448,388
in professional and consulting fees, 7,509,878$8,040,001 in stock compensation expense,
$1,245,340 $2,108,425 in payroll and benefits related to an increase
in headcount, and $578,342$1,017,304 in insurance. On a segmented basis, general and
administrative expenses for the CleanCore and Treasury segments
for the sixnine months ended DecemberMarch 31, 20252026 were $21,678,560$22,898,098 and $8,256,301,
$18,645,376, respectively.
Advertising
expenses. Our
advertising expenses increased by $4,316,$154,090, or 3.56%,212.49%, to $125,430$226,605 for the sixnine months ended DecemberMarch 31,
2025 2026 from $74,905$72,515 for the six nine
months ended DecemberMarch 31, 2024.2025. Such an increase was primarily due to increased expenses related to crypto
marketing, offset by lower marketing
expenses for the CleanCore segment. As a percentage of revenue, our advertising expenses were 6.36%
8.99% and 19.47%6.14% for the sixnine months ended December
March 31, 20252026 and 2024,2025, respectively. On a segmented basis, advertising expenses for the CleanCore
and Treasury segments for the six nine
months ended DecemberMarch 31, 20252026 were $61,912$130,087 and $63,518,$96,518, respectively.
Depreciation
and amortization expense. Depreciation
and amortization expense, all of which is generated by the CleanCore segment,
increased by $56,839,$80,258, or 71.27%,67.06%, to $136,589$199,936 for the sixnine
months ended March 31, 2026 from $119,678 for the nine months ended DecemberMarch 31, 2025 from $39,928 for the six months ended December
31, 2024.2025. As a percentage of revenue, depreciation and amortization
expense was 6.92%7.93% and 12.82%10.14% for the sixnine months ended DecemberMarch 31,
2025 2026 and 2024,2025, respectively. The increase is due to amortization expense
associated with additional intangibles acquired with the asset
acquisition of Sanzonate in April 2025.
Total
other income (expense). We
had $88,794,765$107,408,298 in total other expense, net, for the sixnine months ended DecemberMarch 31, 2025,2026, as compared
to $41,035$172,920 for the sixnine months ended December
March 31, 2024.2025. Other expense, net, for the sixnine months ended DecemberMarch 31, 20252026 consisted of a
change in fair value of digital assets held
of $88,699,929,$107,384,528, interest expense, net, of $91,594,$21,380, and a foreign exchange loss of $3,242,$2,390, while
other expense, net, for the sixnine months
ended DecemberMarch 31, 20242025 consisted entirely of interest expense. The increase in change in fair
value of digital assets is driven by the adoption
of our digital asset treasury strategy and a decrease in the fair value of Dogecoin.
Net
loss. As a result
of the cumulative effect of the factors described above, we had a net loss of $117,728,051$148,531,825 for
the sixnine months ended DecemberMarch 31, 2026, as
compared to a net loss of $2,670,469 for the nine months ended March 31, 2025, as compared to $1,861,109 for the six months ended December 31, 2024, an increase in loss of $115,866,942,
$145,861,356, or 6,225.69%.5,462,01%.
Our
company has incurred losses and negative cash
flows from operations. From October 17, 2022 (the date of the acquisition) through December
March 31, 2025,2026, we have financed our operations primarily
through investor funding. As of DecemberMarch 31, 2025,2026, we had cash and cash equivalents
of $7,403,390,$17,053,301, a net loss for the sixnine months ended December
March 31, 20252026 of $117,728,051$148,531,825 and cash used in operating activities of $7,167,396.$14,815,558.
The
following table provides detailed information
about our net cash flow for the sixnine months ended DecemberMarch 31, 20252026 and 2024.2025.
Net
cash used in operating activities was $7,187,396 $14,815,558
for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to $1,662,330$2,234,206 for the sixnine months
ended DecemberMarch 31, 2024.2025. For the sixnine months ended December
March 31, 2025,2026, our net loss of $117,728,052$148,531,825 and offset by a change in fair value
of digital assets of $88,699,929,$107,384,528, non-cash professional
fees of $14,932,750$17,997,950 and stock-based compensation of $7,841,355, were the primary
drivers of net cash used in operating activities. For the six months ended December 31, 2024, our net loss of $1,861,109, offset by stock-based
compensation of $331,802,$8,601,443, were the primary drivers of net cash used in operating activities. For
the nine months ended March 31, 2025, our net loss of $2,670,469, offset by stock-based compensation of $561,767, were the primary drivers
of net cash used in operating activities.
Net
cash used in investing activities was $148,622,724 $130,277,992
for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to $9,065$18,857 for the sixnine months
ended DecemberMarch 31, 2024.2025. The net cash used in investing
activities for the sixnine months ended DecemberMarch 31, 20252026 consisted of net purchases
of digital assets of $148,605,650 and purchases of property
and equipment of $17,074,$40,702, offset by the sale of digital assets of $18,368,360, while the net cash used in investing activities
for the six
nine months ended DecemberMarch 31, 20242025 consisted entirely of purchases of property and equipment.
Net
cash provided by financing activities
was $161,721,570$160,721,570 for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to $215,273$1,015,273 for the six
nine months ended DecemberMarch 31, 2024.2025. Net
cash provided by financing activities for the sixnine months ended DecemberMarch 31, 20252026 consisted of proceeds
from the private placement
described below of $137,907,255, proceeds from the Sales Agreement described below of $25,608,235 and proceeds
from the exercise of
warrants of $370,288, offset by repayments of notes payable of $660,000, payments for deferred offering costs of $1,078,967, funds
$1,078,967provided for a note receivable of $1,000,000 and repayments of related party loans of $425,241. Net cash provided by financing
activities for the sixnine months ended December
March 31, 20242025 consisted of proceeds from a related party loan of $332,193, an advance on
subscription of $300,000$1,000,000, and proceeds from the issuance of related party notes of $232,193,
offset by payments of notes payable of $316,920.
On
August 29, 2025, we entered into an amended
and restated sales agreement, or the Sales Agreement, with Maxim Group LLC and Curvature
Securities LLC, or the Sales Agents, pursuant
to which we may, from time to time, in transactions that are deemed to be “at the
market offerings” as defined in Rule 415
under the Securities Act of 1933, as amended, issue and sell through or to the Sales Agents
up to a maximum aggregate amount of $1,150,000,000 of
shares of common stock. During the sixnine months ended DecemberMarch 31, 2025,
2026, we issued an aggregate of 8,579,273 shares of common stock under
the Sales Agreement for gross proceeds of $26,399,778 and net proceeds
of approximately $25,608,235.
Pursuant to the terms of the Asset Management Agreement, we agreed to pay the Asset Manager and 21Shares a monthly fee in arrears computed at an annual rate as follows: (i) 2% in the aggregate on amounts up to and including $1,000,000,000 in Treasury Account value, with 1.75% paid to the Asset Manager and 0.25% paid to 21Shares; (ii) 1.75% in the aggregate on amounts above $1,000,000,000 up to and including $1,500,000,000 in Treasury Account value, with 1.5% paid to the Asset Manager and 0.25% paid to 21Shares; and (iii) 1.5% in the aggregate on amounts above $1,500,000,000 in Treasury Account value, with 1.25% paid to the Asset Manager and 0.25% paid to 21Shares. Such payments may be made, in the sole discretion of the Asset Manager or 21Shares, in shares of common stock, cash, or Dogecoin and shall be pro-rated for partial periods. These agreements were terminated on February 27, 2026.
On November 17, 2025, we entered into a strategic advisor agreement with Dogecoin Ventures LLC (which, for the avoidance of doubt, is not related to the Asset Manager), pursuant to which we engaged Dogecoin Ventures LLC to provide certain advisory services relating to our digital asset treasury business in exchange for, among other things, a monthly advisory fee of $83,333. This agreement was terminated on February 27, 2026.
Other
than the foregoing, at DecemberMarch 31, 2025,2026, we
did not have other long-term debt obligations, capital (finance) lease obligations, operating
lease obligations, purchase obligations
or other long-term liabilities reflected on our statements of financial position.
For
a description of the accounting policies that,
in management’s opinion, involve the most significant application of judgment or
involve complex estimation and which could, if
different judgment or estimates were made, materially affect our reported financial position,
results of operations, or cash flows, see
Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting
Policies” in the Form 10-K and Part I, Item 72 “Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Critical Accounting Policies” in the Form 10-K and Part I, Item 2 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Quarterly
Report on Form 10-Q for the quarter ended September March
30, 2025.2026.
ZONE insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-12 | Hassen Tyler Lewis |
Grant/award | 2,000,000 | $0.25 | $500.0K |
| 2026-07-01 | Enholm David James |
Option exercise | 40,000 | — | — |
| 2026-06-30 | Frei Peter Thomas |
Grant/award | 200,000 | — | — |
Well-known investors holding ZONE (13F)
None of the 59 investors we track reported a position in their latest 13F.