CleanCore Solutions, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. CLEANCORE SOLUTIONS, INC. UNAUDITED CONDENSED FINANCIAL STATEMENTS Page Condensed Balance Sheets as of March 31, 2024 and June 30, 2023 (Successor) (Unaudited) 2 Condensed Statement of Operations for the Three Months Ended March 31, 2024 and 2023 (Successor), for the Nine Months Ended March 31, 2024 (Successor), for the Period from October 17, 2022 to March 31, 2023 (Successor) and for the Period from July 1, 2022 to October 16, 2022 (Predecessor) (Unaudited) 3 Condensed Statement of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (Successor), for the Nine Months Ended March 31, 2024 (Successor), for the Period from October 17, 2022 to March 31, 2023 (Successor) and for the Period from July 1, 2022 to October 16, 2022 (Predecessor) (Unaudited) 4 Condensed Statement of Cash Flows for the Nine Months Ended March 31, 2024, for the Period from October 17, 2022 to March 31, 2023 (Successor) and for the Period from July 1, 2022 to October 16, 2022 (Predecessor) (Unaudited) 5 Notes to Condensed Financial Statements (Unaudited) 6 1 CLEANCORE SOLUTIONS, INC. CONDENSED BALANCE SHEETS (UNAUDITED) March 31, 2024 June 30, 2023 Assets Current assets: Cash $ 56,082 $ 393,194 Accounts receivable, net 296,054 233,560 Inventory, net 775,685 672,116 Deferred offering costs 773,749 302,755 Prepaid expenses and other current assets 40,890 135,666 Total current assets 1,942,460 1,737,291 Property and equipment, net 2,946 1,197 Right of use assets 556,107 466,661 Intangibles 1,525,422 1,640,919 Goodwill 2,237,910 2,237,910 Other assets 9,440 9,440 Total assets $ 6,274,285 $ 6,093,418 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 1,601,224 $ 644,627 Lease liability - current 128,749 87,985 Note payable 3,225,000 2,994,750 Due to related parties 271,316 221,302 Total current liabilities 5,226,289 3,948,664 Lease liability – non current 452,564 398,540 Total liabilities 5,678,853 4,347,204 Commitments and contingencies (Note 12) - Stockholders’ Equity Series Seed Preferred Stock, $ 0.0001 par value, 4,000,000 shares authorized; 1,000,000 and 4,000,000 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively 100 400 Class A Common Stock; $ 0.0001 par value, 50,000,000 shares authorized; 150,000 and 660,000 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively 15 66 Class B Common Stock; $ 0.0001 par value, 250,000,000 shares authorized; 5,305,940 and 1,795,940 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively 531 180 Additional paid-in capital 6,920,756 6,768,775 Accumulated deficit ( 6,325,970 ) ( 5,023,207 ) Total stockholders’ equity 595,432 1,746,214 Total liabilities and stockholders’ equity $ 6,274,285 $ 6,093,418 The accompanying notes are an integral part of these condensed unaudited financial statements. 2 CLEANCORE SOLUTIONS, INC. CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended March 31, Nine Months Ended March 31, 2023 2024 (Successor) 2023 (Successor) Nine Months Ended March 31, 2024 (Successor) October 17, 2022 to March 31, 2023 (Successor) July 1, 2022 to October 16, 2022 (Predecessor) Revenue $ 313,920 $ 621,406 $ 898,010 $ 1,470,175 $ 502,990 Cost of Sales 173,184 368,528 457,495 999,556 351,740 Gross profit 140,736 252,878 440,515 470,619 151,250 Operating expenses: General and administrative 559,398 502,446 1,466,594 4,853,405 334,812 Advertising expense 17,737 2,210 43,191 12,814 4,621 Depreciation expense 178 - 388 - 6,143 Loss from operations ( 436,577 ) ( 251,778 ) ( 1,069,658 ) ( 4,395,600 ) ( 194,326 ) Interest expense 84,093 71,979 233,105 113,493 125,738 Net loss $ ( 520,670 ) $ ( 323,757 ) $ ( 1,302,763 ) $ ( 4,509,093 ) $ ( 320,064 ) Net loss per share of Class A and Class B stock, basic and diluted $ ( 0.11 ) $ ( 0.13 ) $ ( 0.34 ) $ ( 2.03 ) Weighted average shares used in computing net loss per Class A share, basic and diluted 231,319 1,000,000 341,788 1,000,000 Weighted average shares used in computing net loss per Class B share, basic and diluted 4,405,940 1,438,699 3,451,743 1,221,028 The accompanying notes are an integral part of these condensed unaudited financial statements. 3 CLEANCORE SOLUTIONS, INC. CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) For the Three and Nine Months Ended March 31, 2024 Series Seed Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit) Balance at June 30, 2023 4,000,000 $ 400 660,000 $ 66 1,795,940 $ 180 $ 6,768,775 $ ( 5,023,207 ) $ 1,746,214 Conversion of class A common stock into class B common stock - - ( 1,310,000 ) ( 131 ) 1,310,000 131 - - - Conversion of series seed preferred stock into class A common stock ( 1,000,000 ) ( 100 ) 1,000,000 100 - - - - - Stock based compensation – 2022 Equity Incentive Plan - - - - - - 63,960 - 63,960 Net loss for the period - - - - - - - ( 437,294 ) ( 437,294 ) Balance at September 30, 2023 3,000,000 $ 300 350,000 $ 35 3,105,940 $ 311 $ 6,832,735 $ ( 5,460,501 ) $ 1,372,880 Stock based compensation – 2022 Equity Incentive Plan - - - - - - 44,012 - 44,012 Net loss for the period - - - - - - - ( 344,799 ) ( 344,799 ) Balance at December 31, 2023 3,000,000 $ 300 350,000 $ 35 3,105,940 $ 311 $ 6,876,747 $ ( 5,805,300 ) $ 1,072,093 Conversion of class A common stock into class B common stock - - ( 2,200,000 ) ( 220 ) 2,200,000 220 - - - Conversion of series seed preferred stock into class A common stock ( 2,000,000 ) ( 200 ) 2,000,000 200 - - - - - Stock based compensation – 2022 Equity Incentive Plan - - - - - - 44,009 - 44,009 Net loss for the period - - - - - - - ( 520,670 ) ( 520,670 ) Balance at March 31, 2024 1,000,000 $ 100 150,000 $ 15 5,305,940 $ 531 $ 6,920,756 $ ( 6,325,970 ) $ 595,432 For the Three and Nine Months Ended March 31, 2023 Series Seed Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Members Capital Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Amount Deficit Equity (Deficit) Predecessor Balance at June 30, 2022 - $ - - $ - - $ - $ - $ 2,215,916 $ ( 8,224,933 ) $ ( 6,009,017 ) Imputed interest - - - - - - - 125,728 - 125,728 Net loss for the period - - - - - - - - ( 320,064 ) ( 320,064 ) Balance at October 16, 2022 - - - - - - - $ 2,341,644 $ ( 8,544,997 ) $ ( 6,203,353 ) Successor Balance at October 17, 2022 - $ - - $ - - $ - $ - $ - $ - $ - Issuance of series seed preferred stock 4,000,000 400 - - - - 999,600 - - 1,000,000 Issuance of class A common stock - - 1,000,000 100 - - - - - 100 Issuance of class B common stock - - - - 660,921 66 1,152,156 - - 1,152,222 Issuance of class B common stock upon exercise of warrants - - - - 777,778 78 497,700 - - 497,778 Warrants issued to consultants for services - - - - - - 857,889 - - 857,889 Stock based compensation – officers - - - - - - 3,082,000 - - 3,082,000 Net loss for the period - - - - - - - - ( 4,185,336 ) ( 4,185,336 ) Balance at December 31, 2022 4,000,000 $ 400 1,000,000 $ 100 1,438,699 $ 144 $ 6,589,345 $ - $ ( 4,185,336 ) $ 2,404,653 Stock based compensation – 2022 Equity Incentive Plan - - - - - - 57,553 - - 57,553 Net loss for the period - - - - - - - - ( 323,757 ) ( 323,757 ) Balance at March 31, 2023 4,000,000 $ 400 1,000,000 $ 100 1,438,699 $ 144 $ 6,646,898 $ - $ ( 4,509,093 ) $ 2,138,449 The accompanying notes are an integral part of these unaudited condensed financial statements. 4 CLEANCORE SOLUTIONS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended March 31, 2023 Nine Months Ended March 31, 2024 (Successor) October 17, 2022 to March 31, 2023 (Successor) July 1, 2022 to October 16, 2022 (Predecessor) Cash flows from operating activities Net loss $ ( 1,302,763 ) $ ( 4,509,093 ) $ ( 320,064 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 115,885 72,082 6,420 Accretion of note payable discount 5,250 12,750 - Non cash interest expense 223,783 100,117 - Stock based compensation 151,981 3,997,442 - Non cash lease expense 5,342 19,373 - Imputed interest - - 125,728 Provision for bad debt and write-off of on uncollectable accounts 29,923 8,641 9,772 Changes in operating assets and liabilities: Accounts receivable ( 92,417 ) ( 455,599 ) 101,423 Inventory ( 103,569 ) 332,355 ( 157,596 ) Due from related parties, net - - 4,686 Prepaid expenses 94,776 ( 16,377 ) 4,747 Deferred revenue - - 63,701 Accounts payable and accrued liabilities 386,279 269,242 43,932 Net cash used in operating activities ( 485,530 ) ( 169,067 ) ( 117,251 ) Cash flows from investing activities Cash used in acquisition - ( 2,000,000 ) - Purchase of property and equipment ( 2,138 ) - ( 7,882 ) Net cash used in investing activities ( 2,138 ) ( 2,000,000 ) ( 7,882 ) Cash flows from financing activities Payments for deferred offering costs ( 124,458 ) ( 150,683 ) - Proceeds from issuance of series seed preferred stock - 1,000,000 - Proceeds from issuance of class A common stock - 100 - Proceeds from issuance of class B common stock - 1,650,000 - Proceeds from issuance of convertible debt notes 225,000 - - Repayments of long term debt - - ( 1,278 ) Proceeds from issuance of loans from related parties 50,014 234,566 164,917 Repayments of loans due to related parties - - ( 288,861 ) Net cash provided by (used in) financing activities 150,556 2,733,983 ( 125,222 ) Net increase (decrease) in cash ( 337,112 ) 564,916 ( 250,355 ) Cash at beginning of period 393,194 - 263,506 Cash at the end of period $ 56,082 $ 564,916 $ 13,151 Supplementary cash flow disclosure Interest paid $ 9,322 $ 13,376 $ 10 Unpaid deferred offering costs $ 346,536 $ 45,546 $ - The accompanying notes are an integral part of these unaudited condensed financial statements. 5 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 1. Organization and Business CC Acquisition Corp. was incorporated in the State of Nevada on August 23, 2022 for the sole purpose of acquiring substantially all of the assets of CleanCore Solutions, LLC, TetraClean Systems, LLC, and Food Safety Technologies, LLC, pursuant to an asset purchase agreement entered into by CC Acquisition Corp. with these three entities and their owners on October 17, 2022. On November 21, 2022, CC Acquisition Corp. changed its name to CleanCore Solutions, Inc. (“the Company” or “Successor”). Since the Company acquired substantially all of the assets of each of CleanCore Solutions, LLC, TetraClean Systems, LLC, and Food Safety Technologies, LLC, the business of these three entities is now operated by the Company, with no subsidiaries. The combined results of CleanCore Solutions, LLC, TetraClean Systems, LLC and Food Safety Technologies, LLC presented in these financial statements represent the predecessor entity of the Company (“Predecessor”). The Company specializes in the development and manufacturing of cleaning products that produce pure aqueous ozone products for professional, industrial, or home use. The Company has a patented nanobubble technology using aqueous ozone that it believes is highly effective in cleaning, sanitizing, and deodorizing surfaces and high-touch areas. The Company offers products and solutions that are marketed for janitorial and sanitation, ice machine cleaning, laundry, and industrial industries. Its 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. The headquarters, principal address and records of the Company are located at 5920 South 118th Circle, Suite 2, Omaha, Nebraska. Liquidity and Going Concern The Company has incurred losses and negative cash flows from operations. From acquisition through March 31, 2024, the Company has financed its operations primarily through investor funding. As of March 31, 2024, the Company had cash of $ 56,082 , a net loss for the nine-month period ended of $ 1,302,763 and cash used in operating activities of $ 485,530 . In accordance with Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements - Going Concern , management is required to perform a two-step analysis over the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date the condensed financial statements are issued. If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt. As noted above, the Company was formed in August 2022 and completed the acquisition in October 2022. Since the acquisition, the Company has invested in further developing the Company’s products, hiring key personnel, and engaging third party experts such as accountants and underwriters in connection with the Company’s initial public offering described below. On April 25, 2024, the Company entered into an underwriting agreement with Boustead Securities, LLC, as the representative of the several underwriters named on Schedule 1 thereto, relating to the Company’s initial public offering of class B common stock. Under the underwriting agreement, the Company agreed to sell 1,250,000 shares of class B common stock to the underwriters, at a purchase price per share of $ 3.72 (the offering price to the public of $ 4.00 per share minus the underwriters’ 7 % discount), and also agreed to grant to the underwriters a 45-day option to purchase up to 187,500 additional shares of class B common stock, at a purchase price of $ 3.72 . On April 30, 2024, the closing of the initial public offering was completed. The Company sold 1,250,000 shares of class B common stock for total gross proceeds of $ 5,000,000 . After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $ 4,239,500 . 6 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Despite the initial public offering, management believes that currently available resources will not be sufficient to fund the Company’s planned expenditures over the next 12 months. These factors, individually and collectively indicate that a material uncertainty exists that raises substantial doubt about the Company’s ability to continue as a going concern for 12 months from the date of issuance of these unaudited condensed financial statements. The Company will be dependent upon the raising of additional capital through equity and/or debt financing in order to implement its business plan and generate sufficient revenue in excess of costs. If the Company raises 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 the Company raises additional funds by issuing debt, the Company may be subject to limitations on its operations, through debt covenants or other restrictions. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. These unaudited condensed financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The accompanying unaudited condensed financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited interim financial statements as of and for the three and nine-month periods ended March 31, 2024 and 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The interim financial statements are condensed and should be read in conjunction with the Company’s latest annual audited 2023 financial statements. The results of operations for interim periods are not necessarily indicative of results to be expected for the fiscal year ending June 30, 2024 or for any other future annual or interim period. The results of the Predecessor represent the combined financial statements of the accounts of CleanCore Solutions, LLC, TetraClean Systems, LLC and Food Safety Technologies, LLC. These combined financial statements include the accompanying combined statements of operations for the period ended July 1 to October 16, 2022, combined statement of members’ equity as of June 30, 2022 and October 16, 2022, and combined statement of cash flows for the period July 1, 2022 to October 16, 2022. All intercompany balances and transactions among the combined entities have been eliminated. In the opinion of predecessor management, all adjustments considered necessary for a fair presentation have been included. Use of Estimates The preparation of the Company’s and Predecessor’s financial statements require management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure in the Company’s combined financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates. Significant estimates and assumptions made by the Company are allowance for bad debt, useful lives of fixed assets, warranty liabilities, and allowance for inventory obsolescence. Risks and Uncertainties The Company is subject to a number of risks similar to other early-stage companies including, but not limited to, profitability, the need for additional financing to achieve its business strategy, ability to obtain regulatory approval, significant competition, and dependence on key individuals. Accounts Receivable Accounts receivable is comprised of trade accounts receivables from the Company’s customers. Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company established an allowance for bad debt of accounts receivables based on a percentage assigned to aged days outstanding categories. The Predecessor established the allowance for bad debt based on various factors including credit profiles of the Company’s customers, historical payments, outstanding balances and current economic trends, and performed this analysis periodically. The Company recorded an allowance for doubtful accounts of $ 20,585 and $ 4,419 as of March 31, 2024 and June 30, 2023, respectively. 7 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Inventory Inventory consists of parts, work in progress and finished goods. The Company and its Predecessor value parts and finished goods at the lower of the actual costs or net realizable value. The Company and its Predecessor value work in progress at cost. The Company and Predecessor periodically review inventory for obsolete and potentially impaired items. As of March 31, 2024 and June 30, 2023, the Company had an allowance for inventory obsolescence of $ 19,235 and $ 14,940 , respectively. Leases The Company accounts for leases in accordance with Accounting Standards Codification (ASC) Topic 842 (Topic 842), Leases . Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The lease liability is measured as the present value of the unpaid lease payments, and the right-of-use asset value is derived from the calculation of the lease liability. Operating leases are included in right-of-use assets, current lease liabilities, and noncurrent lease liabilities in the balance sheet. Lease payments include fixed and in-substance fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and probable amounts the lessee will owe under a residual value guarantee. Variable lease payments are recognized as lease expenses as incurred, and generally relate to variable payments made based on the level of services provided by the landlords of our leases. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term within general and administrative expenses in the statement of operations. The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments because the Company does not have the information necessary to determine the rate implicit in the lease. The Company’s lease term includes any option to extend the lease when it is reasonably certain to be exercised based on consideration of all relevant factors. Leases with an initial term of 12 months or less are not recorded on the balance sheets and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Business Combinations Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill. All assets, liabilities and contingent liabilities acquired or assumed in a business combination are recorded at their fair values at the date of acquisition. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Estimates of fair value are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from those estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the Company’s statements of operations. Intangible Assets Intangible assets primarily consist of existing technology, customer relationships, and trademarks obtained as a result of the acquisition on October 17, 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. The Company’s trademarks are deemed to have an indefinite life. The estimated useful life of the acquired technology is 15 years while the estimated useful life of the customer relationships is 5 years. 8 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Impairment of Goodwill The Company evaluates goodwill for impairment annually, as of June 30, or more frequently when indicators of impairment exist. The Company considers 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 it’s carrying amount, including goodwill. If the Company concludes that it is more likely than not that the fair value of the reporting unit is less than it’s carrying amount, the Company performs a quantitative impairment test. In performing the quantitative impairment test, the Company compares 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, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company performed its first evaluation of goodwill on October 1, 2023. Based on the analysis, the Company did not recognize an impairment loss during the period ended March 31, 2024. Subsequent evaluations will be performed annually on June 30, per the Company’s policy. 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. The Company did not recognize impairment losses during the periods ended March 31, 2024 and 2023. Deferred Offering Costs In accordance with ASC 340-10-S99-1 and SEC Accounting Bulletin Topic 5A, specific incremental costs incurred by the Company directly attributable to a proposed offering of securities have been deferred and will be charged against the gross proceeds of the offering. These offering costs include fees paid to underwriters, attorney, accountants as well as printers and other third parties directly related to the offering. Costs such as management salaries or other general administrative expenses that are not incremental to the offering are not included in the deferred costs. As of March 31, 2024 and June 30, 2023, the Company had $ 773,749 and $ 302,755 , respectively, of deferred offering costs. Patent Costs Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses. Advertising Costs The Company reports as expense the cost of advertising and promoting its services as incurred. Such amounts are totaled $ 17,737 and $ 2,210 for the three-month periods ended March 31, 2024 and 2023, respectively, and $ 43,191 (successor), $ 12,814 (successor) and $ 4,621 (predecessor), for a total of $ 17,435 , for the nine month periods ended March 31, 2024 and 2023, respectively. Stock-based Compensation Compensation expense is recognized for all share-based payments to employees and non-employees, including stock options and warrants, in the statements of operation based on the fair value of the awards that are granted. The Company’s 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 is estimated at the date of grant using the Black-Scholes option-pricing model. 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. The Company accounts for forfeitures of stock-based awards as they occur. 9 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Revenue Recognition The Company generates revenues from sales of its products and recognizes revenue as control of its products is transferred to its customers, which is generally at the time of shipment based on the contractual terms with the Company’s customers. The Company provides customer programs and incentive offerings, including growth incentives and volume-based incentives. These customer programs and incentives are considered variable consideration. The Company includes in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to the Company’s volume-based incentives. This determination is updated every reporting period. For the periods ended March 31, 2024 and 2023, customer growth and volume-based incentives were minimal. Certain product sales include a 2-year manufacturer’s warranty that provides the customer with assurance that the product performs as intended. Such warranties are assurance-type warranties and are accounted for as contingencies under ASC 460-10. Refer to Note 7 for warranty reserve. Net Loss per Share of Common Stock Basic net loss per class A and class B common share is calculated by dividing the net loss distributed to class A and class B, respectively, by the weighted-average number of common shares of each respective class outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, warrants, and convertible debt are considered to be potentially dilutive securities. As of March 31, 2024 and 2023, there were 2,770,000 potential common stock equivalents excluded from the diluted loss per share calculations as their effect is anti-dilutive . New Accounting Pronouncements No recent accounting pronouncement or changes in accounting pronouncements have been issued or adopted that are of material significance, or have potential material significance, to the Company’s financial statements since those discussed in the Company’s fiscal year 2023 audited financial statements. 3. Disaggregated Revenue The following table disaggregates revenue by product category for the following periods ended: Three Months Ended March 31, 2024 2023 Janitorial and Sanitation $ 258,819 $ 583,805 Ice System 6,549 9,601 Commercial and Residential Laundry 6,991 3,004 Other 41,561 24,996 Total revenue $ 313,920 $ 621,406 10 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Nine Months Ended March 31, 2023 Nine Months Ended March 31, 2024 (Successor) October 17, 2022 to March 31, 2023 (Successor) July 1, 2022 to October 16, 2022 (Predecessor) Janitorial and Sanitation $ 722,206 $ 1,430,570 $ 369,089 Ice System 10,133 16,059 16,744 Commercial and Residential Laundry 9,060 3,004 6,444 Other 156,611 20,542 110,713 Total revenue $ 898,010 $ 1,470,175 $ 502,990 The “Other” category of revenue consists primarily of sales of parts, accessories, shipping and handling, and equipment rental income. 4. Accounts Receivable, net Accounts receivable, net consists of the following at: March 31, 2024 June 30, 2023 Trade accounts receivable $ 316,639 $ 237,979 Allowance for doubtful accounts ( 20,585 ) ( 4,419 ) Total accounts receivable, net $ 296,054 $ 233,560 5. Fair Value Measurements ASC Topic 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs, other than quoted prices in active markets, that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company’s financial assets are subject to fair value measurements on a recurring basis. The Company’s remaining carrying amounts reported in the consolidated balance sheets of these financial assets are a reasonable estimate of fair value due to their short-term nature. 11 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 6. Inventory Inventory consists of the following at: March 31, 2024 June 30, 2023 Parts $ 525,093 $ 551,264 Finished goods 269,827 135,792 Inventory reserve ( 19,235 ) ( 14,940 ) Total inventory, net $ 775,685 $ 672,116 The Company values inventory at the balance sheet date using the weighted average method. The Company adjusted the inventory reserve to $ 19,235 for the period ended March 31, 2024, from $ 14,940 for the year ended June 30, 2023. 7. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following at: March 31, 2024 June 30, 2023 Accounts payable $ 722,734 $ 266,511 Accrued interest 376,467 152,684 Accrued payroll and related expenses 313,910 68,026 Warranty reserve 112,559 156,333 Other accrued expenses 75,554 1,073 Total accounts payable and other accrued expenses $ 1,601,224 $ 644,627 8. Debt In connection with the acquisition of the Predecessor on October 17, 2022, the Company issued a promissory note in the principal amount of $ 3,000,000 to the seller, Burlington Capital, LLC (“Burlington”), which bears interest at 7 % per annum and matures on October 17, 2023. On September 13, 2023, the parties signed an extension agreement, pursuant to which the interest rate was increased to 10 % per annum and the maturity date was extended to the earlier of (a) the closing of a firm commitment initial public offering and concurrent listing on a national securities exchange or (b) December 17, 2023. On December 17, 2023, the parties signed a second extension agreement, pursuant to which the maturity date was extended to the earlier of (a) the closing of a firm commitment initial public offering and concurrent listing on a national securities exchange or (b) April 4, 2024. As of March 31, 2024, the Company recorded accrued interest related to the note in the amount of $ 355,726 . On January 30, 2024, the Company issued three 10 % original issue discount convertible promissory notes to three separate accredited investors in the principal amounts of $ 27,778 , $ 111,111 , and $ 111,111 . The purchase prices of the notes were $ 25,000 , $ 100,000 and $100, 000 , respectively. These notes accrue with simple interest on the outstanding principal amount at the rate of 12 % per annum and the interest shall commence on the date of issuance and continue to accrue until paid in full or until the note is converted. The principal amounts and all accrued and unpaid interest automatically convert into class B common stock upon the closing of the Company’s initial public offering. The notes contain customary beneficial ownership limitations. Unless earlier converted into class B common stock, all unpaid interest and principal is due and payable on December 31, 2024, which date may be extended at the election of the Company by up to two additional 90-day periods. As of March 31, 2024, the Company recorded accrued interest related to the notes in the amount of $ 4,545 . 9. Related Party Transactions The following due to related party balances were outstanding at: March 31, 2024 June 30, 2023 Due to founder – credit card $ 62,416 $ 12,402 Due to founders 208,900 208,900 Total due to related parties $ 271,316 $ 221,302 12 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 As of March 31, 2024, the Company had a short term amount due to Clayton Adams, one of its founders, in the amount of $ 62,416 for operational expenses paid by a credit card in the founder’s name. The Company has a verbal agreement with Mr. Adams to pay the credit card charges directly to the issuing financial institution as they become due and is current on these payments. On October 4, 2022, the Company issued a promissory note to each of Matthew Atkinson, the Company’s Chief Executive Officer, and Clayton Adams, the Company’s President at such time, in the principal amount of $ 104,450 each, for a total of $ 208,900 . These notes bear interest at a rate of 5 % per annum beginning on the 30th day after issuance and are due on the 60th day following written demand from the holder. The Company has recorded this as a short-term note payable on the balance sheet, due to the demand terms of the agreement, and recorded related accrued interest of $ 15,567 as of March 31, 2024. As of March 31, 2024, the holders have not provided written demand to the Company. On March 26, 2024, the Company entered into a loan agreement with Clayton Adams, a significant stockholder, pursuant to which the Company issued a revolving credit note to Mr. Adams in the principal amount of up to $ 500,000 . Pursuant to the loan agreement and note, Mr. Adams agreed to provide advances to the Company upon request during the period commencing on the effective date of the registration statement of which this prospectus forms a part and continuing until the second anniversary of such date, which is referred to as the maturity date. This note accrues simple interest on the outstanding principal amount at the rate of 8 % per annum, with all principal and interest due on the maturity date; provided that upon an event of default (as defined in the note), such rate shall increase to 13 %. The Company may prepay the note at any time without penalty or premium. The note is unsecured and contains customary events of default for a loan of this type. As of March 31, 2024, no advances have been made and the principal amount of this note is $ 0 . 10. Stockholders’ Equity The Company’s authorized capital stock currently consists of 350,000,000 shares, consisting of (i) 300,000,000 shares of common stock, par value $ 0.0001 per share, of which 50,000,000 shares are designated class A common stock and 250,000,000 shares are designated as class B common stock; and (ii) 50,000,000 shares of “blank check” preferred stock, par value $ 0.0001 per share, of which 4,000,000 are designated as series seed preferred stock. Series Seed Preferred Stock Below is a summary of the terms of the series seed preferred stock. Ranking . The series seed preferred stock ranks, as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, senior to the common stock. Liquidation Rights . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any deemed liquidation event (as defined in the certificate of designation), before any payment shall be made to the holders of common stock by reason of their ownership thereof, the holders of shares of series seed preferred stock shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) $ 0.25 per share, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of series seed preferred stock been converted into class A common stock immediately prior to such liquidation, dissolution or winding up or deemed liquidation event. Dividends . All dividends shall be declared pro rata on the common stock and series seed preferred stock on a pari passu basis according to the number of shares of common stock held by such holders. For this purpose, each holder of shares of series seed preferred stock is to be treated as holding the greatest whole number of shares of common stock then issuable upon conversion of all shares of series seed preferred stock held by such holder. Voting Rights . The holders of series seed preferred stock shall have the right to one vote for each share of class A common stock into which such series seed preferred stock could then be converted, and with respect to such vote, the holders shall have full voting rights and powers equal to the voting rights and powers of the holders of class A common stock, and shall be entitled to vote together with holders of class A common stock with respect to any question upon which holders of class A common stock have the right to vote. 13 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Conversion Rights . Each share of series seed preferred stock shall be convertible at the option of the holder thereof into such number of shares of class A common stock as is determined by dividing $ 0.25 per share by the conversion price in effect at the time of conversion. The conversion price is initially $ 0.25 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination, recapitalization, or merger or consolidation). In addition, all outstanding shares of series seed preferred stock shall automatically be converted into shares of common A common stock upon (a) the closing of the sale of shares of class A common stock to the public in a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (or a qualified offering statement under Regulation A of the Securities Act, as amended), (b) the date that the Company or a successor to the Company becomes an issuer with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and is subject to the periodic and current reporting requirements of Section 13 or 15(d) of the Exchange Act or is required to file reports under Regulation A of the Securities Act of 1933, as amended, or (c) the date and time, or the occurrence of an event, specified by vote or written consent of holders of at least a majority of the outstanding shares of series seed preferred stock at the time of such vote or consent, voting as a single class on an as-converted basis. On September 16, 2022, the Company issued an aggregate of 2,000,000 shares of series seed preferred stock at a purchase price of $ 0.25 per share. On September 30, 2022, the Company issued 2,000,000 shares of series seed preferred stock at a purchase price of $ 0.25 per share. On July 16, 2023, 1,000,000 shares of series seed preferred stock were converted into 1,000,000 shares of class A common stock. On February 5, 2024, 750,000 shares of series seed preferred stock were converted into 750,000 shares of class A common stock. On February 7, 2024, 1,250,000 shares of series seed preferred stock were converted into 1,250,000 shares of class A common stock. As of March 31, 2024, 1,000,000 shares of series seed preferred stock were issued and outstanding. Common Stock The Company has two classes of authorized common stock — class A common stock and class B common stock. The rights of the holders of the class A common stock and class B common stock are identical, except with respect to voting and conversion. Each share of class A common stock is entitled to ten votes per share and is convertible into one share of class B common stock. Each share of class B common stock is entitled to one vote per share. As of March 31, 2024, all of the outstanding class A common stock was held by one of the Company’s founders . On August 26, 2022, the Company issued an aggregate of 1,000,000 shares of class A common stock at a purchase price of $ 0.0001 per share. On October 14, 2022, the Company issued an aggregate of 603,450 shares of class B common stock at a purchase price of $ 1.74 per share. On November 29, 2022, the Company issued 57,471 shares of class B common stock at a purchase price of $ 1.74 per share. On November 29, 2022, the Company issued 777,778 shares of class B common stock upon the exercise of a warrant for an aggregate exercise price of $ 500,000 . On April 1, 2023, the Company issued 17,241 shares of class B common stock to a professional firm in exchange for services at $ 1.74 per share. Accordingly, stock compensation expense in the amount of $ 29,999 was recorded by the Company. On June 1, 2023, an aggregate of 340,000 shares of class A common stock were converted into an aggregate of 340,000 shares of class B common stock. 14 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 On July 16, 2023, the Company issued 1,000,000 shares of class A common stock upon the conversion of 1,000,000 shares of series seed preferred stock. On July 17, 2023, the Company issued 940,000 shares of class B common stock upon the conversion of 940,000 shares of class A common stock. On July 24, 2023, the Company issued 370,000 shares of class B common stock upon the conversion of 370,000 shares of class A common stock. On February 5, 2024, the Company issued 750,000 shares of class A common stock upon the conversion of 750,000 shares of series seed preferred stock, which were immediately converted into 750,000 shares of class B common stock upon issuance. On February 6, 2024, the Company issued 200,000 shares of class B common stock upon the conversion of 200,000 shares of class A common stock. On February 7, 2024, the Company issued 1,250,000 shares of class A common stock upon the conversion of 1,250,000 shares of series seed preferred stock, which were immediately converted into 1,250,000 shares of class B common stock upon issuance. As of March 31, 2024, there were 150,000 shares of class A common stock and 5,305,940 shares of class B common stock issued and outstanding 2022 Equity Incentive Plan On September 16, 2022, the Company’s board of directors adopted the Company’s 2022 Equity Incentive Plan, which was adopted by stockholders on November 18, 2022, which reserved a total of 1,736,819 shares of the Company’s class B common stock for issuance. On January 3, 2024, the Company adopted an amendment to the 2022 Equity Incentive Plan (as amended, the “2022 Plan”) , which was adopted by stockholders on January 4, 2024, which increased the total shares of class B common stock available for grant to 3,240,000 . Additionally, the number of shares of class B common stock available for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year during the term of the 2022 Plan by an amount equal to 5 % of the total number of shares of class B common stock issued and outstanding on December 31 of the immediately preceding calendar year. Incentive awards authorized under the 2022 Plan include, but are not limited to, nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and stock appreciation rights. If an incentive award granted under the 2022 Plan expires, terminates, is unexercised for forfeited, the surrendered shares will become available for future awards under the 2022 Plan. The Company’s employees and advisors were awarded options under the 2022 Plan. Therefore, an allocation of the share-based compensation was made to the Company. Stock Options As of March 31, 2024, the Company has issued options to purchase an aggregate of 2,000,000 shares of class A common stock at an exercise price of $ 0.25 per share. In addition, the Company issued options to purchase 770,000 shares of class B common stock at a weighted average exercise price of $ 2.21 per share under the 2022 Plan. The class A options were fully vested as of the grant date and the class B options have a graded vesting term based on continuous service during the vesting period. 15 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Warrants On October 14, 2022 and November 29, 2022, the Company issued warrants for the purchase of 42,241 and 4,022 shares of class B common stock, respectively, to a third party as part of their compensation earned. The warrants were exercisable for a period of five years at an exercise price of $ 1.74 (subject to adjustments for stock dividends, stock splits, mergers, consolidations and similar transactions). On March 6, 2024, the Company cancelled these warrants without issuing a replacement award. As the warrants were already vested, previously recognized compensation cost was not reversed. On October 17, 2022, the Company issued a warrant for the purchase of 777,778 shares of class B common stock for an aggregate exercise price of $ 500,000 to Burlington. On November 29, 2022, Burlington exercised this warrant in full. Stock-based Compensation Stock options are granted at the fair market value of the underlying common stock on the date of grant. The Company recognizes compensation expense for these awards using the straight-line recognition method over the vesting period. The fair value of stock options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions: Risk-free interest rate 3.71 % Dividend yield 0.0 % Expected volatility 53.05 % Expected life of awards 4.8 years The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the awards. The determination of expected volatility is based on historical volatility of an appropriate industry sector index. The weighted average expected term was estimated for options using the average of the vesting term and contractual term of the awards. The weighted-average fair value of total awards granted during the period ended March 31, 2024 was $ 1.34 . The information presented in the following table represents the awards granted and outstanding during the period: Warrants Stock Options Weighted Average Remaining Life (years) Weighted Average Exercise Price Beginning balance - - - $ - Granted 824,041 - 0.44 0.69 Granted - 2,770,000 4.77 0.51 Cancelled - - - - Forfeited - - - - Exercised ( 777,778 ) - - 0.61 Outstanding, June 30, 2023 ( 2,125,152 shares exercisable) 46,263 2,770,000 5.01 $ 0.59 Granted - - - - Cancelled ( 46,263 ) - ( 0.24 ) ( 0.08 ) Forfeited - - - - Outstanding, March 31, 2024 ( 2,463,889 shares exercisable) - 2,770,000 4.77 $ 0.51 The intrinsic value and total cash received of awards exercised for the period ending June 30, 2023 was $ 855,556 and $ 500,000 , respectively. No cash awards were exercised during the nine-month period ended March 31, 2024. Total stock compensation expense recognized during the nine-month period ended March 31, 2024 consists of $ 151,978 related to stock options. In addition, $ 42,835 of warrants issued to underwriters were recorded as an offset to equity as of March 31, 2024. As of March 31, 2024, total unrecognized stock compensation expense was $ 187,973 with the weighted average period over which it is expected to be recognized of 3.25 years. 16 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 11. Net loss per share The following tables set forth the computation of basic and dilutive net loss per share of common stock: Three Months Ended March 31, 2024 2023 Basic and diluted net loss per share Class A Class B Class A Class B Numerator Allocation of undistributed loss $ ( 25,972 ) $ ( 494,698 ) $ ( 132,758 ) $ ( 190,999 ) Denominator Weighted average number of shares used in per share computation 231,319 4,405,940 1,000,000 1,438,699 Basic and diluted net loss per share $ ( 0.11 ) $ ( 0.11 ) $ ( 0.13 ) $ ( 0.13 ) Nine Months Ended March 31, 2024 Basic and diluted net loss per share Class A Class B Numerator Allocation of undistributed loss $ ( 117,376 ) $ ( 1,185,387 ) Denominator Weighted average number of shares used in per share computation 341,788 3,451,743 Basic and diluted net loss per share $ ( 0.34 ) $ ( 0.34 ) Period from October 17, 2022 to March 31, 2023 Basic and diluted net loss per share Class A Class B Numerator Allocation of undistributed loss $ ( 2,030,183 ) $ ( 2,478,911 ) Denominator Weighted average number of shares used in per share computation 1,000,000 1,221,028 Basic and diluted net loss per share $ ( 2.03 ) $ ( 2.03 ) 12. Commitments and Contingencies Legal Proceedings From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. The Company is currently not aware of any such legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results. Retirement Plans The Successor does not maintain a defined contribution plan or any other type of retirement plan for its employees. For the period July 1, 2022 through October 16, 2022, the Predecessor maintained a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. Matching contributions to the 401(k) plan are made for certain eligible employees to meet the non- discrimination provisions of the plan. During this period, the Predecessor made a contribution of $ 1,512 . 17 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Leases The Company has a non-cancellable operating lease commitment for its office facility expiring in 2028. Rent expense totaled $ 90,307 for the nine months ended March 31, 2024. The following table discloses the lease cost, discount rate, and remaining lease term for operating leases as of March 31, 2024: March 31, 2024 Operating lease cost $ 90,307 Remaining lease term 3.9 years Discount rate 6.56 % The discount rate was determined using the Company’s external debt and was adjusted for collateralization, term and lease amount. The following table discloses the undiscounted cash flows on an annual basis and a reconciliation of the undiscounted cash flows of operating lease liabilities recognized in the balance sheet as of March 31, 2024: Year Ending June 30, Amount 2024 (remainder) $ 40,450 2025 163,147 2026 167,226 2027 171,407 2028 116,160 Total undiscounted cash flows 658,390 Less amount representing interest ( 77,077 ) Present value of lease liabilities 581,313 Less current portion ( 128,749 ) Noncurrent lease liabilities $ 452,564 13. Subsequent Events The Company has evaluated events subsequent to March 31, 2024, to assess the need for potential recognition or disclosure. Such events were evaluated through June 10, 2024, the date these condensed financial statements were available to be issued. The following were noted: Initial Public Offering On April 25, 2024, the Company entered into an underwriting agreement with Boustead Securities, LLC, as the representative (the “Representative”) of the several underwriters named on Schedule 1 thereto (the “Underwriters”), relating to the Company’s initial public offering of class B common stock. Under the Underwriting Agreement, the Company agreed to sell 1,250,000 shares of class B common stock to the Underwriters, at a purchase price per share of $ 3.72 (the offering price to the public of $ 4.00 per share of class B common stock minus the Underwriters’ discount), and also agreed to grant to the Underwriters a 45-day option to purchase up to 187,500 additional shares of class B common stock, at a purchase price of $ 3.72 , pursuant to the Company’s registration statement on Form S-1 (File No. 333-274928) under the Securities Act of 1933, as amended. On April 30, 2024, the closing of the initial public offering was completed. The Company sold 1,250,000 shares of class B common stock for total gross proceeds of $ 5,000,000 . After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $ 4,239,500 . On April 30, 2024, pursuant to the Underwriting Agreement, the Company issued a class B common stock purchase warrant to the Representative for the purchase of 87,500 shares of class B common stock at an exercise price of $ 5.00 , subject to adjustments. The warrant will be exercisable at any time and from time to time, in whole or in part, during the period commencing on April 30, 2024 and ending on April 25, 2029 and may be exercised on a cashless basis under certain circumstances. 18 CLEANCORE SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2024 AND 2023 Stock Conversions On April 30, 2024, the Company issued 1,000,000 shares of class A common stock upon the conversion of 1,000,000 shares of series seed preferred stock. On May 15, 2024, the Company issued 880,000 shares of class B common stock upon the conversion of 880,000 shares of class A common stock. Conversion of Convertible Notes On May 2, 2024, the Company issued an aggregate of 257,479 shares of class B common stock upon the conversion of the 10 % original issue discount convertible promissory notes issued on January 30, 2024 (see Note 8), which included principal of $ 250,000 and accrued interest of $ 7,479 . Equity Awards On April 30, 2024, the Company granted a restricted stock award under the 2022 Plan for 100,000 shares of class B common stock, of which 15,000 shares vested on the date of grant, 21,250 shares will vest quarterly commencing on July 1, 2024 and the remaining 75,000 shares will vest upon the achievement of certain metrics. On April 30, 2024, the Company granted a restricted stock unit under the 2022 Plan for 1,300,000 shares of class B common stock, of which 87,500 shares vested and were issued on the date of grant, 37,500 shares will vest each quarter for seven quarters commencing on June 1, 2024, and the remaining shares will vest upon the achievement of certain metrics. On April 30, 2024, the Company granted options under the 2022 Plan to the Company’s three independent directors, each for the purchase of 150,000 shares of class B common stock at an exercise price of $ 4.00 per share, with 15,000 shares underlying each option vesting on the date of grant and the remaining shares vesting monthly commencing on May 25, 2024. On April 30, 2024, the Company granted an option under the 2022 Plan for the purchase of 75,000 shares of class B common stock at an exercise price of $ 4.00 per share, which vested in full on the date of grant. Debt Repayment On May 29, 2024, the Company repaid the two promissory notes issued on October 4, 2022 in full (see Note 9). Debt Extension and Amendment On April 30, 2024, the Company and Burlington entered into an extension agreement which extended the maturity date of the promissory note issued on October 17, 2022 (the “Original Note”) to May 9, 2024 (see Note 8). On May 31, 2024, Burlington and Walker Water LLC (“WW”) entered into an allonge, assignment and agreement (the “Assignment Agreement”), pursuant to which Burlington agreed to transfer $ 633,840.00 of the Original Note to WW. The Assignment Agreement also provided that the Company would make a payment of $ 900,000 on May 31, 2024 to Burlington to reduce the principal amount of the Original Note. In conjunction with the Assignment Agreement, the Company issued an amended and restated promissory note to Burlington (the “Amended Note”). The Amended Note has a new principal amount of $ 3,196,881 , accrues interest at 8.5 % per annum from October 17, 2022 (the date of the Original Note), which shall increase to 10 % upon an event of default, and requires quarterly payments in the amount of $ 100,000 over the course of the next two and a half years, with a final payment of $ 1,396,881 due on April 1, 2027. The Amended Note may be prepaid at any time with no pre-payment penalty and contains customary events of default for a note of this type. Pursuant to the Assignment Agreement, the Company also issued a promissory note to WW in the principal amount of $ 633,840 (the “New Note”). The New Note accrues interest at 8.5 % per annum from October 17, 2022 (the date of the Original Note), which shall increase to 10 % upon an event of default, and is due on December 31, 2024. The New Note may be prepaid at any time with no pre-payment penalty and contains customary events of default for a note of this type. 19