CleanCore Solutions, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report. Use of Terms Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and “our company” refer to CleanCore Solutions, Inc., a Nevada corporation, and its wholly owned subsidiary CleanCore Global Limited, an Irish company, or CleanCore Global. Special Note Regarding Forward Looking Statements This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about: ● our goals and strategies; ● our future business development, financial condition and results of operations; ● expected changes in our revenue, costs or expenditures; ● growth of and competition trends in our industry; ● our expectations regarding demand for, and market acceptance of, our products and services; ● our expectations regarding our relationships with investors, institutional funding partners and other parties we collaborate with; ● fluctuations in general economic and business conditions in the market in which we operate; and ● relevant government policies and regulations relating to our industry. In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, or the Form 10-K, and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. 19 The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Overview 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. Recent Developments Closing of Acquisition On February 21, 2025, CleanCore Global entered into an Asset Purchase Agreement, which was amended on April 15, 2025, or the Purchase Agreement, with Sanzonate Europe Ltd., an Irish incorporated company, or the Seller, and Sanzonate Global Inc., the majority stockholder of the Seller, or the Stockholder, pursuant to which CleanCore Global agreed to acquire substantially all of the assets of the Seller used in the manufacturer and distribution of aqueous ozone products (which we refer to as the Business). On April 15, 2025, the closing of the transactions contemplated by the Purchase Agreement was completed. Pursuant the Purchase Agreement, CleanCore Global acquired all of the assets of the Seller used in the Business for an aggregate purchase price of $2,475,000, consisting of: (i) $425,000 in cash; (ii) the issuance of a promissory note in the principal amount of $800,000; and (iii) up to $1,250,000 in Earn-Out Payments (as defined below). As additional consideration, we issued to the Stockholder a five-year warrant to purchase 425,000 shares of our class B common stock at an exercise price of $1.25 per share. As noted above, a portion of the purchase price was paid by the issuance of a 10% subordinated promissory note in the principal amount of $800,000 by CleanCore Global to the Seller. The note bears interest at a rate of ten percent (10%) per annum, payable quarterly, and is due and payable on April 15, 2027. The note may be prepaid at any time without premium or penalty, is unsecured, and contains customary events of default for a loan of this type. The Seller is also entitled to receive the following payments (each is referred to below as an Earn-Out Payment) to the extent that Net Sales (as defined in the Purchase Agreement) achieve the following milestones during the five-year period beginning on the closing date and ending on the fifth anniversary of the closing date, or the Earn-Out Period; provided that an Earn-Out Payment will be calculated for each year during the Earn-Out Period. If Net Sales: ● are equal to or greater than €2,000,000, CleanCore Global shall pay $200,000 to the Seller; ● are equal to or greater than €4,000,000, CleanCore Global shall pay an additional $200,000 to the Seller; ● are equal to or greater than €6,000,000, CleanCore Global shall pay an additional $200,000 to the Seller; ● are equal to or greater than €8,000,000, CleanCore Global shall pay an additional $200,000 to the Seller; ● are equal to or greater than €10,000,000, CleanCore Global shall pay an additional $200,000 to the Seller; and ● are equal to or greater than €12,000,000, CleanCore Global shall pay an additional $250,000 to the Seller. Calculation of the annual Earn-Out Payment will be based upon cumulative Net Sales, meaning that for each year of the Earn-Out Period, the beginning balance of Net Sales will be the ending balance of Net Sales from the prior year of the Earn-Out Period. 20 No later than forth-five (45) days following each anniversary of the closing date during the Earn-Out Period, CleanCore Global shall prepare and deliver to the Seller a written statement, or an Earn-Out Statement, setting forth in reasonable detail its determination of unaudited Net Sales within the annual Earn-Out Period and its determination of whether there is a resulting Earn-Out Payment due. To the extent the Seller is entitled to an Earn-Out Payment, the applicable Earn-Out Payment(s) shall be paid on the date that is five (5) business days after the date on which the Earn-Out Statement becomes final and binding on the parties, following resolution of any objections to the Earn-Out Statement pursuant to the terms of the Purchase Agreement. The Purchase Agreement contains customary representations, warranties and covenants, including a covenant that the Seller and the Stockholder will not compete with the Business for a period of three (3) years following closing. The Purchase Agreement also contains mutual indemnification for breaches of representations or warranties and failure to perform covenants or obligations contained in the Purchase Agreement. The Seller and the Stockholder also indemnified CleanCore Global for (i) any Excluded Liability (as defined in the Purchase Agreement) and (ii) any liability of the Seller which is not an Assumed Liability (as defined in the Purchase Agreement) and which is imposed upon CleanCore Global under any bulk transfer law of any jurisdiction or under any common law doctrine of de facto merger or successor liability so long as such liability arises out of the ownership, use or operation of the assets of the Seller, or the operation or conduct of the Business prior to the closing. CleanCore Global also indemnified the Seller and the Stockholder for (i) any Assumed Liability and (ii) any liability (other than any Excluded Liability) asserted by a third party against any of the Seller or the Stockholder which arises out of the ownership of the Purchased Assets (as defined in the Purchase Agreement) after the closing or the operation by CleanCore Global of the business conducted with the Purchased Assets after the closing. In the case of the indemnification provided with respect to breaches of certain non-fundamental representations and warranties, the party will only become liable for indemnified losses if the amount exceeds an aggregate of $30,000. Notwithstanding the foregoing, this threshold limitation shall not apply to claims by CleanCore Global for breaches by the Seller or the Stockholder of certain fundamental representations. In addition, CleanCore Global’s aggregate remedy with respect to any and all indemnifiable losses shall in no event exceed, (i) with respect to claims related to breach of the fundamental representations, the final purchase price, or (ii) with respect to all other claims, 50% of the final purchase price. If, after providing the Seller with a written claim that specifically identifies the basis for indemnification and any relevant facts forming the basis for such claim, resolution of the claim between the parties and the Seller fails to indemnify CleanCore Global within thirty (30) days following the resolution of the claim, CleanCore Global shall have the right to recoup all or any part of any indemnifiable losses it may suffer by notifying the Stockholder that CleanCore Global is reducing the Earn-Out Payments by the amount of such indemnifiable losses. Private Placement On April 16, 2025, we entered into subscription agreements with several accredited investors for the purchase of (i) promissory notes in the aggregate principal amount of $1,010,000 and (ii) five-year warrants to purchase an aggregate of 134,666 shares of our class B common stock at an exercise price of $1.06 per share for an aggregate purchase price of $1,010,000. The notes bear interest at a rate of twelve percent (12%) per annum, payable quarterly, and are due and payable on April 16, 2027. The notes may be prepaid at any time without premium or penalty, are unsecured, and contain customary events of default for a loan of this type. Amendments to Promissory Notes On May 2, 2025, the promissory note in the principal amount of $316,920 issued to Gary Hollst on December 24, 2024 was amended and restated in its entirety and we issued to Mr. Hollst an amended and restated promissory note in the principal amount of $342,154.57. This note is due and payable on May 31, 2026 and accrues interest at a rate of 8.5% per annum; provided that upon an event of default (as defined in the note), interest shall accrue at a rate of 10% per annum. The note may be prepaid at any time without premium or penalty, is unsecured, and contains customary events of default for a loan of this type. The note may be converted at the holder’s option at any time into shares of our class B common stock at a conversion price of $1.12 (subject to standard adjustments for stock splits, stock dividends, reclassifications and similar transactions). On May 2, 2025, we and Clayton Adams, our Chief Executive Officer, entered into a note amendment agreement, pursuant to which the maturity date of the 20% original issue discount promissory note issued to Mr. Adams on January 27, 2025 was changed to require repayment with sixty (60) days of written demand from Mr. Adams. 21 On May 2, 2025, we and Travis Buchanan, our President, entered into a note amendment agreement, pursuant to which the maturity date the 20% original issue discount promissory note issued to Mr. Buchanan on January 27, 2025 was changed to require repayment with sixty (60) days of written demand from Mr. Buchanan. Principal Factors Affecting Our Financial Performance Our operating results are primarily affected by the following factors: ● our ability to acquire new customers or retain existing customers; ● our ability to stay ahead of our value-proposition to end consumers; ● our ability to continue innovating our technology to meet consumer demand; ● industry demand and competition; and ● market conditions and our market position. Emerging Growth Company We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to: ● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; ● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); ● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and ● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. 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 Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our class 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. 22 Results of Operations Comparison of Three Months Ended March 31, 2025 and 2024 The following table sets forth key components of our results of operations for the three months ended March 31, 2025 and 2024, both in dollars and as a percentage of our revenue. Three Months Ended March 31, 2025 2024 Amount % of Revenue Amount % of Revenue Revenue $ 557,915 100.00 % $ 313,920 100.00 % Cost of sales 246,783 44.23 % 173,184 55.17 % Gross profit 311,132 55.77 % 140,736 44.83 % Operating expenses: General and administrative 968,264 173.55 % 520,899 165.93 % Advertising expense 19,743 3.54 % 17,737 5.65 % Depreciation and amortization expense 39,928 7.16 % 38,677 12.32 % Loss from operations (716,803 ) (128.48 )% (436,577 ) (139.07 )% Interest expense, net 92,551 16.59 % 84,093 26.79 % Net loss $ (809,354 ) (145.07 )% $ (520,670 ) (165.86 )% Revenue . We generate revenue from sales of our cleaning products. Our revenue increased by $243,995, or 77.73%, to $557,915 for the three months ended March 31, 2025 from $313,920 for the three months ended March 31, 2024. The increase is primarily due to an increase of sales to our distributor in India. Cost of sales . Our cost of sales consists of raw materials, components and labor. Our cost of sales increased by $73,599, or 42.50%, to $246,783 for the three months ended March 31, 2025 from $173,184 for the three months ended March 31, 2024. As a percentage of revenue, cost of sales decreased from 55.17% for the three months ended March 31, 2024 to 44.23% for the three months ended March 31, 2025. This decrease as a percentage of revenue was primarily due to the sale of higher margin units. Gross profit . As a result of the foregoing, our gross profit increased by $170,396, or 121.07%, to $311,132 for the three months ended March 31, 2025 from $140,736 for the three months ended March 31, 2024. As a percentage of revenue, gross profit increased from 44.83% for the three months ended March 31, 2024 to 55.77% for the three months ended March 31, 2025. General and administrative expenses . 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 fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our general and administrative expenses increased by $447,365, or 85.88%, to $968,264 for the three months ended March 31, 2025 from $520,899 for the three months ended March 31, 2024. As a percentage of revenue, our general and administrative expenses increased from 165.93% for the three months ended March 31, 2024 to 173.55% for the three months ended March 31, 2025. This increase was primarily due to a $185,956 increase in stock compensation expense, $54,197 of additional wage and benefit expense related to the addition of 4 employees, $46,249 of additional professional fees such as accounting and legal, and a $66,161 increase in director and officer insurance. This increase in professional fees and director and office insurance is related to our listing on NYSE American in the 2025 period. Advertising expenses . Our advertising expenses consist of vendor trade shows and various trade publications. Our advertising expenses increased by $2,006, or 11.31%, to $19,743 for the three months ended March 31, 2025 from $17,737 for the three months ended March 31, 2024. As a percentage of revenue, our advertising expenses decreased from 5.65% for the three months ended March 31, 2024 to 3.54% for the three months ended March 31, 2025. The increase in advertising expenses was primarily due to an increase in product marketing materials. Depreciation and amortization expense . We incurred depreciation and amortization expense of $39,928, or 7.16% of revenue, for the three months ended March 31, 2025, as compared to $38,677, or 12.32% of revenue, for the three months ended March 31, 2024. Interest expense, net . We incurred interest expense, net, of $92,551, or 16.59% of revenue, for the three months ended March 31, 2025, as compared to $84,093, or 26.79% of revenue, for the three months ended March 31, 2024. The increase is primarily due to an increase in the note payable balance. Net loss . As a result of the cumulative effect of the factors described above, we had a net loss of $809,354 for the three months ended March 31, 2025, as compared to $520,670 for the three months ended March 31, 2024, an increased loss of $288,684, or 55.44%. 23 Comparison of Nine Months Ended March 31, 2025 and 2024 The following table sets forth key components of our results of operations for the nine months ended March 31, 2025 and 2024, both in dollars and as a percentage of our revenue. Nine Months Ended March 31, 2025 2024 Amount % of Revenue Amount % of Revenue Revenue $ 1,180,083 100.00 % $ 898,010 100.00 % Cost of sales 621,441 52.66 % 457,495 50.95 % Gross profit 558,642 47.34 % 440,515 49.05 % Operating expenses: General and administrative 2,863,998 242.69 % 1,351,097 150.45 % Advertising expense 72,515 6.14 % 43,191 4.81 % Depreciation and amortization expense 119,678 10.14 % 115,885 12.90 % Loss from operations (2,497,549 ) (211.64 )% (1,069,658 ) (119.11 )% Interest expense, net 172,920 14.65 % 233,105 25.96 % Net loss $ (2,670,469 ) (226.30 )% $ (1,302,763 ) (145.07 )% Revenue . Our revenue increased by $282,073, or 31.41%, to $1,180,083 for the nine months ended March 31, 2025 from $898,010 for the nine months ended March 31, 2024. The increase is primarily due to an increase in sales with our largest customer, representing an 171% increase over the prior period. Cost of sales . Our cost of sales increased by $163,946, or 35.84%, to $621,441 for the nine months ended March 31, 2025 from $457,495 for the nine months ended March 31, 2024. As a percentage of revenue, cost of sales increased from 50.95% for the nine months ended March 31, 2024 to 52.66% for the nine months ended March 31, 2025. This increase was due to an increase in sales and increase in demo expenses due to a change in sales strategy of providing customers considering large orders demonstration equipment at no cost. Additionally, a business decision was made to sell $46,000 of inventory at cost to a former customer placing their first purchase order in over 9 months. Gross profit . As a result of the foregoing, our gross profit decreased by $118,127, or 26.82%, to $558,642 for the nine months ended March 31, 2025 from $440,515 for the nine months ended March 31, 2024. As a percentage of revenue, gross profit decreased from 49.05% for the nine months ended March 31, 2024 to 47.34% for the nine months ended March 31, 2025. General and administrative expenses . Our general and administrative expenses increased by $1,512,901, or 111.98%, to $2,863,998 for the nine months ended March 31, 2025 from $1,351,097 for the nine months ended March 31, 2024. As a percentage of revenue, our general and administrative expenses increased from 150.45% for the nine months ended March 31, 2024 to 242.69% for the nine months ended March 31, 2025. This increase was primarily due to $409,786 stock compensation expense, an increase of $108,479 in payroll and benefits related to an increase in headcount, a $547,553 increase in professional and consulting fees, and a $204,465 increase 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 the 2025 period. Advertising expenses . Our advertising expenses increased by $29,324, or 67.89%, to $72,515 for the nine months ended March 31, 2025 from $43,191 for the nine months ended March 31, 2024. As a percentage of revenue, our advertising expenses increased from 4.81% for the nine months ended March 31, 2024 to 6.14% for the nine months ended March 31, 2025. Such an increase was primarily due to an increase in our marketing materials, including product videos and flyers. Depreciation and amortization expense . We incurred depreciation and amortization expense of $119,678, or 10.14% of revenue, for the nine months ended March 31, 2025, as compared to $115,885, or 12.90% of revenue, for the nine months ended March 31, 2024. Interest expense, net . We incurred interest expense, net, of $172,920, or 14.65% of revenue, for the nine months ended March 31, 2025, as compared to $233,105, or 25.96% of revenue, for the nine months ended March 31, 2024. The decrease is primarily due to interest expense for the 2024 period being offset by interest income of $29,921 from an interest-bearing money market account opened in May 2024. 24 Net loss . As a result of the cumulative effect of the factors described above, we had a net loss of $2,670,469 for the nine months ended March 31, 2025, as compared to $1,302,763 for the nine months ended March 31, 2024, a loss increase of $1,367,706, or 104.99%. Liquidity and Capital Resources Our company has incurred losses and negative cash flows from operations. From October 17, 2022 (the date of the acquisition) through March 31, 2025, we have financed our operations primarily through private investor funding and an initial public offering. As of March 31, 2025, we had cash and cash equivalents of $796,843, a net loss for the nine months ended March 31, 2025 of $2,670,469 and cash used in operating activities of $2,234,206. Despite our initial public offering, management believes that currently available resources will not be sufficient to fund our planned expenditures over the next 12 months. These 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 date of issuance of the accompanying 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 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 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. The accompanying 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. Summary of Cash Flow The following table provides detailed information about our net cash flow for the nine months ended March 31, 2025 and 2024. Nine Months Ended March 31, 2025 2024 Net cash used in operating activities $ (2,234,206 ) $ (485,530 ) Net cash used in investing activities (18,857 ) (2,138 ) Net cash provided by financing activities 1,015,273 150,556 Net decrease in cash (1,237,790 ) (337,112 ) Cash at beginning of period 2,016,611 393,194 Cash at end of period $ 778,821 $ 56,082 Net cash used in operating activities was $2,234,206 for the nine months ended March 31, 2025, as compared to $485,530 for the nine months ended March 31, 2024. For the nine months ended March 31, 2025, our net loss of $2,670,469 and increase in accounts receivable of $191,509 and prepaid expenses of $150,982, offset by non-cash stock-based compensation of $561,767, depreciation and amortization of $119,678 and non-cash interest expense of $195,380, were the primary drivers of net cash used in operating activities. For the nine months ended March 31, 2024, our net loss of $1,302,763 and an increase in inventory of $103,569, offset by an increase in accounts payable and accrued liabilities of $386,279, a non-cash interest expense of $223,783, stock-based compensation of $151,981, and depreciation and amortization of $115,885, were the primary drivers of net cash used in operating activities. Net cash used in investing activities was $18,857 for the nine months ended March 31, 2025, as compared to $2,138 for the nine months ended March 31, 2024. The net cash used in investing activities for both periods consisted entirely of purchases of property and equipment. Net cash provided by financing activities was $1,015,273 for the nine months ended March 31, 2025, as compared to $150,556 for the nine months ended March 31, 2024. Net cash provided by financing activities for the nine months ended March 31, 2025 consisted of proceeds from an advance on subscription of $1,000,000 and proceeds from the issuance of related party notes of $332,193, offset by payments of notes payable of $316,920, while net cash provided by financing activities for the nine months ended March 31, 2024 consisted of proceeds from the issuance of convertible notes of $225,000 and proceeds from related party loans of $50,014, offset by payments for deferred offering costs of $124,458. 25 Debt Please see Notes 10 and 11 to our unaudited condensed consolidated financial statements above for a description of the terms of our outstanding debt. Contractual Obligations Our principal commitments consist mostly of obligations under the loans described in Notes 10 and 11 to our unaudited condensed consolidated financial statements above. We also have a non-cancellable operating lease commitment for our office facility expiring in 2028 as described in Note 14 to the unaudited condensed consolidated financial statements above. Other than the foregoing, at March 31, 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. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies and Estimates The preparation of our unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.