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Item 7. Management’s Discussion and Analysis

2025-08-22 compared with 2024-09-20 · 279 added, 342 removed, 31 unchanged (95% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 our

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, management.

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, particularly in the sections titled “Risk Factors” and “Special

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 our 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, 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, particularly in the sections titled “Risk Factors” and “ Special

Note Regarding Forward-Looking Statements.

periods presented on or prior to October 16, 2022 represent the operations of CleanCore, TetraClean and Food Safety, our predecessors

companies, and all references to “predecessor” refer to the combined financial position and results of operations of CleanCore,

TetraClean and Food Safety on and before such date.

References to “successor” refer to the financial position and results

of operations of our company subsequent to October 16, 2022.

specialize in the development and production of cleaning products that produce pure aqueous ozone for professional, industrial, or home

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.

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.

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.

Development Proposal

August 20, 2024, we entered into a product development proposal with E-Business International Incorporation, pursuant to which Business

International Incorporation, an engineering company, will look for more efficient ways to assemble some of our units, and will then take

over assembly of certain products using overseas facilities.

September 10, 2024, we entered into a sole distributorship agreement with Consensus B.V., pursuant to which Consensus B.V.

sole distributor of our products in the European Union, United Kingdom, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

The agreement is for a term of five years and may be terminated by either party upon not less than four months’ notice;

that either party may terminate the agreement immediately upon a substantial breach of the agreement, as more particularly described

in the agreement.

Factors Affecting Our Financial Performance

operating results are primarily affected by the following factors:

ability to acquire new customers or retain existing customers;

ability to stay ahead of our value-proposition to end consumers;

ability to continue innovating our technology to meet consumer demand;

demand and competition;

conditions and our market position.

Growth Company

qualify as an “emerging growth company” under 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:

an auditor report on our internal controls over financial reporting pursuant to Section 404(b)

of the Sarbanes-Oxley Act;

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);

certain executive compensation matters to stockholder advisory votes, such as “say-on-pay”

We specialize in the development and production

of cleaning products that produce pure aqueous ozone for professional, industrial, or home use.

We have a patented nanobubble technology

using aqueous ozone that we believe is highly effective in cleaning, sanitizing, and deodorizing surfaces and high-touch areas.

We offer products and solutions that are marketed

for janitorial and sanitation, ice machine cleaning, laundry, and industrial industries.

Our products are used in many types of environments

including retail establishments, distribution centers, factories, warehouses, restaurants, schools and universities, airports, healthcare,

food service, and commercial buildings such as offices, malls, and stores.

Our mission is to become a leader in creating

safe, clean spaces that are free from any chemical residue or skin irritants.

We are currently expanding our distributor network, improving

our production processes, and proving the effectiveness of our products in restaurants, airports, and hotels.

Principal Factors Affecting 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;

● market conditions and our market position.

Emerging Growth Company

We qualify as an “emerging growth company”

under the JOBS Act.

As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

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;

● 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

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.

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 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.

will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our

initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.235 billion or more,

(iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur

if the market value of our 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.

of Operations

following table sets forth key components of our results of operations for the period from July 1, 2022 to October 16, 2022 (Predecessor),

from October 17, 2022 to June 30, 2023 (Successor), and for the year ended June 30, 2024 (Successor).

June 30, 2023

(Predecessor)

Cost of sales

Operating expenses:

General and administrative

Advertising expense

Depreciation and amortization expense

Loss from operations

Interest expense

$ (2,281,742 )

$ (5,023,207 )

believe that reviewing our operating results for the year ended June 30, 2023, by combining the results of the successor period (October

17, 2022 to June 30, 2023) and the predecessor period (July 1, 2022 to October 16, 2022) is more useful in discussing our overall operating

performance compared to the results of the year ended June 30, 2024 (successor).

We do not see any potential risks associated with utilizing

this combined presentation.

Following are the combined results for

the years ended June 30, 2024 and 2023, both in dollars and as a percentage of our revenues.

June 30, 2024

Combined Year ended

June 30, 2023

(Predecessor)

● 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 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 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.

Results of Operations

The following table sets forth key components

of our results of operations for the years ended June 30, 2025 and 2024, both in dollars and as a percentage of revenue.

Years Ended June 30,

Cost of sales

4 unchanged sentences

Loss from operations

Interest expense

$ (2,281,742 )

Interest expense, net

Foreign exchange gain

$ (6,742,275 )

$ (2,281,742 )

We generate revenue from sales of our cleaning products.

Our revenue decreased by $836,383, or 34.26%, to $1,604,973 for the year ended

June 30, 2024 from $2,441,356 for the year ended June 30, 2023.

This reduction in revenue was primarily due to the fact that our previous

largest customer decided to make its own units instead of ordering from us commencing at the start of calendar year 2023.

this customer declined by 96% during the fiscal year, which represented over 80% of total revenue decline.

The remaining decline is the

result of management’s strategy of shifting focus to selling at higher margins direct to end users instead of selling through regional

distribution groups at lower margins.

We generate revenue from

sales of our cleaning products.

Our revenue increased by $467,861, or 29.15%, to $2,072,834 for the year ended June 30, 2025 from $1,604,973

for the year ended June 30, 2024.

The increase is primarily driven by sales to a new customer, KBS, as described above.

As of June 30,

2025, we recognized $876,568 in revenue from KBS under an approximately $1.4 million purchase order issued by KBS.

Cost of sales .

Our cost of sales

consists of raw materials, components and labor.

Our cost of sales decreased by $901,980, or 52.71%, to $809,161 for the year ended June

30, 2024 from $1,711,141 for the year ended June 30, 2023.

As a percentage of revenue, cost of sales decreased from 70.09% for the year

ended June 30, 2023 to 50.42% for the year ended June 30, 2024.

This decrease was primarily due to our strategy of selling direct to end

users instead of selling via regional distribution groups.

consists of raw materials, components, labor, demo expenses and warranty reserves.

Our cost of sales increased by $277,208, or 34.26%,

to $1,086,369 for the year ended June 30, 2025 from $809,161 for the year ended June 30, 2024.

As a percentage of revenue, cost of sales

increased from 50.42% for the year ended June 30, 2024 to 52.41% for the year ended June 30, 2025.

The increase is the result of higher

year-over-year revenue and an increase in indirect costs such as demo expense, R&D, and warranty reserve.

Gross profit .

As a result of the

foregoing, our gross profit increased by $65,597, or 8.98%, to $795,812 for the year ended June 30, 2024 from $730,215 for the year ended

June 30, 2023.

As a percentage of revenue, gross profit increased from 29.91% for the year ended June 30, 2023 to 49.58% for the year

foregoing, our gross profit increased by $190,653, or 23.96%, to $986,465 for the year ended June 30, 2025 from $795,812 for the year

ended June 30, 2024.

As a percentage of revenue, gross profit decreased from 49.58% for the year ended June 30, 2024 to 47.59% for the

year ended June 30, 2025.

General and administrative expenses .

general and administrative expenses consist primarily of personnel expenses, including employee salaries and bonuses plus related payroll

taxes, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations.

Our general and administrative expenses decreased by $3,174,016, or 56.22%, to $2,471,480 for the year ended June 30, 2024 from $5,645,496

for the year ended June 30, 2023.

As a percentage of revenue, our general and administrative expenses decreased from 231.24% for the year

ended June 30, 2023 to 153.99% for the year ended June 30, 2024.

This decrease was primarily due to a reduction in stock option expense.

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 $4,609,819, or 186.52%, to $7,081,299 for the

year ended June 30, 2025 from $2,471,480 for the year ended June 30, 2024.

As a percentage of revenue, our general and administrative

expenses increased from 153.99% for the year ended June 30, 2024 to 341.62% for the year ended June 30, 2025.

This increase was primarily

due to increases of $2,532,272 in non-cash stock compensation expense, $351,071 in payroll and benefits related to an increase in headcount,

$1,022,152 in professional and consulting fees, $261,250 of intangibles impairment, and $223,376 in director and officer insurance.

increase in professional fees and director and officer insurance is directly related to our listing on NYSE American in April 2024, as

fiscal 2025 includes a full year of such fees.

Advertising expenses .

advertising expenses consist of vendor trade shows and various trade publications.

Our advertising expenses increased by $96,442, or 492.93%,

Our advertising

expenses consist of vendor trade shows and various trade publications.

Our advertising expenses decreased by $23,409, or 20.18%,

to $92,598 for the year ended June 30, 2025 from $116,007 for the year ended June 30, 2024.

As a percentage of revenue, our advertising

expenses increased from 0.80% for the year ended June 30, 2023 to 7.23% for the year ended June 30, 2024.

Such an increase was primarily

due to an increase in trade show sponsorship expenses.

and amortization expense .

We incurred depreciation and amortization expense of $155,059, or 9.66% of revenue, for

the year ended June 30, 2024, as compared to $115,564, or 4.73% of revenue, for the year ended June 30, 2023.

We incurred interest expense of $335,008, or 20.87% of revenue, for the year ended June 30, 2024, as compared

to $292,861, or 12.00% of revenue, for the year ended June 30, 2023.

As a result of the cumulative effect of the factors described above, we had a net loss of $2,281,742 for the

year ended June 30, 2024, as compared to $5,343,271 for the year ended June 30, 2023, a decrease of $3,061,529, or 57.30%.

and Capital Resources

company has incurred losses and negative cash flows from operations.

From acquisition through June 30, 2024, we have financed our operations

primarily through private investor funding and an initial public offering.

expenses decreased from 7.23% for the year ended June 30, 2024 to 4.47% for the year ended June 30, 2025.

Such a decrease was primarily

due to a decrease in trade shows attended in fiscal 2025.

Depreciation and amortization expense .

incurred depreciation and amortization expense of $198,909, or 9.60% of revenue, for the year ended June 30, 2025, as compared to $155,059,

or 9.66% of revenue, for the year ended June 30, 2024.

The increase is due to amortization expense associated with additional intangibles

acquired with the asset acquisition of Sanzonate in April 2025.

Interest expense, net .

incurred interest expense, net, of $356,054, or 17.18% of revenue, for the year ended June 30, 2025, as compared to $335,008, or 20.87%

of revenue, for the year ended June 30, 2024.

The increase is primarily due to an increase in note payables.

of the cumulative effect of the factors described above, we had a net loss of $6,742,275 for the year ended June 30, 2025, as compared

to $2,281,742 for the year ended June 30, 2024, an increase of $4,460,533, or 195.49%.

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 June 30, 2025, we have financed our operations primarily

through private investor funding and an initial public offering.

As of June 30, 2025, we had cash and cash equivalents of $1,460,997.

a net loss for the year ended June 30, 2024 of $2,281,742 and cash used in operating activities of $1,547,880.

the initial public offering described below, 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.

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.

Thes 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.

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.

following table provides detailed information about our net cash flow for the years ended June 30, 2024 and 2023.

Combined Year Ended June 30, 2023

Year Ended June 30, 2024

June 30, 2023

2022 (Predecessor)

For the year ended June 30, 2025, we had a net loss of $6,742,275 and cash used in operating activities of $2,337,659.

Management believes that currently available resources

will not be sufficient to fund our planned expenditures over the next 12 months, which raises substantial doubt about our company’s

ability to continue as a going concern for 12 months from the balance sheet date as of June 30, 2025.

We will be dependent upon the raising of additional

capital through equity and/or debt financing in order to implement our business plan and generate sufficient revenue in excess of costs.

If we raise additional capital through the issuance of equity securities or securities convertible into equity, stockholders will experience

dilution, and such securities may have rights, preferences or privileges senior to those of the holders of our class B common stock.

we raise additional funds by issuing debt, we may be subject to limitations on its operations, through debt covenants or other restrictions.

There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a

material adverse effect on our financial condition.

The accompanying consolidated financial statements do not include any adjustments

to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue as a going concern.

The accompanying consolidated financial statements

have been prepared on a going concern basis under which our company is expected to be able to realize its assets and satisfy its liabilities

in the normal course of business.

Summary of Cash Flow

The following table provides detailed information

about our net cash flow for the years ended June 30, 2025 and 2024.

Years Ended June 30,

Net cash used in operating activities

$ (2,337,659 )

$ (1,547,880 )

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

cash used in operating activities was $1,547,880 for the year ended June 30, 2024, as compared to $354,121 for the year ended June 30,

For the year ended June 30, 2024, our net loss of $2,281,741, offset by stock-based compensation of $670,958, were the primary

drivers of net cash used in operating activities.

For the year ended June 30, 2023, our net loss of $5,343,271, offset by stock-based

compensation of $4,119,321, were the primary drivers of the net cash used in operating activities.

cash used in investing activities was $10,438 for the year ended June 30, 2024, as compared to $2,009,142 for the year ended June 30,

The net cash used in investing activities for the year ended June 30, 2024 consisted entirely of purchases of property and equipment,

while the net cash used in investing activities for the year ended June 30, 2023 consisted of cash used in connection with the acquisition

of the assets of CleanCore LLC, TetraClean and Food Safety of $2,007,882 and purchases of property and equipment of $1,260.

cash provided by financing activities was $3,181,735 for the year ended June 30, 2024, as compared to $2,506,102 for the year ended June

Net cash provided by financing activities for the year ended June 30, 2024 consisted of proceeds from the issuance of class

B common stock pursuant to the initial public offering of $4,233,875 (net of offering costs), proceeds from the issuance of convertible

notes of $225,000, offset by payments for deferred offering costs of $587,573, repayment of notes of $480,667 and repayment of related

party loans of $208,900, while net cash provided by financing activities for the year ended June 30, 2023 consisted of proceeds from

the issuance of class B common stock of $1,650,000, proceeds from the issuance of series seed preferred stock of $1,000,000, proceeds

from related party loans of $373,817 and proceeds from the issuance of class A common stock of $100, offset by repayments of related

party loans of $288,861, payments for deferred operating costs of $227,676 and repayments of long term debt of $1,278.

Public Offering

April 25, 2024, we entered into an underwriting agreement with Boustead Securities, LLC, as the representative of the several underwriters

named on Schedule 1 thereto, relating to our initial public offering of class B common stock.

Under the underwriting agreement, we 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 our registration

statement on Form S-1 (File No.

333-274928) under the Securities Act.

April 30, 2024, the closing of the initial public offering was completed.

We 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, we received net proceeds of approximately $4,239,500.

April 30, 2024, we also 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.

October 14, 2022 and November 29, 2022, we issued an aggregate of 660,921 shares of class B common stock for total gross proceeds of

$1,150,000 and net proceeds of approximately $1,035,000 in a private placement transaction.

October 17, 2022, we issued a promissory note in the principal amount of $3,000,000 to Burlington, which amended by an extension agreement

dated September 13, 2023, a second extension agreement dated December 17, 2023, a third extension agreement dated April 30, 2024, and

a fourth extension agreement dated May 20, 2024.

The note bore interest at a rate of 7% per annum;

provided that such interest rate increased

to 10% per annum on September 13, 2023.

The note was due on 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.

May 31, 2024, Burlington and Walker Water LLC, or WW, entered into an allonge, assignment and agreement, or the Assignment Agreement,

pursuant to which Burlington agreed to transfer $633,840 of the note to WW.

The Assignment Agreement also provided that we would make

a payment of $900,000 to Burlington on May 31, 2024, of which $480,667 will reduce the principal amount of the note, and $419,333 will

pay outstanding interest.

On May 31, 2024, we issued an amended and restated promissory note to Burlington to reduce the outstanding

principal of the note due to Burlington’s assignment of a portion of the note to WW and due to the foregoing payment.

has a new principal amount of $2,366,160, 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 note may be prepaid at any time with no pre-payment

penalty and contains customary events of default for a note of this type.

As of June 30, 2024, the outstanding principal balance of this

note is $1,885,493 and it has accrued interest of $13,673.

to the Assignment Agreement, we also issued a new promissory note to WW in the principal amount of $633,840.

The 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 note may be prepaid at any time with no pre-payment penalty and contains customary events of default for

a note of this type.

As of June 30, 2024, the outstanding principal balance of this note is $633,840 and it has accrued interest of $4,490.

notes are unsecured and are pari passu in right of payment to any other unsecured indebtedness incurred in favor of

any third party.

Party Revolving Loan

March 26, 2024, we entered into a loan agreement with Clayton Adams, a significant stockholder at such time and our current Chief Executive

Officer, pursuant to which we 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 us upon request during the period commencing on the effective date of

the registration statement relating to our initial public offering (April 25, 2024) 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%.

We 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 June 30, 2024, no advances have been made and the principal amount of this note is $0.

principal commitments consist mostly of obligations under the loans described above.

Other than indicated above, at June 30, 2024, 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.

Sheet Arrangements

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.

Accounting Policies

following discussion relates to critical accounting policies for our company.

The preparation of financial statements in conformity with

United States generally accepted accounting principles, or U.S.

GAAP, requires our management to make assumptions, estimates and judgments

that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any.

identified certain accounting policies that are significant to the preparation of our financial statements.

These accounting policies

are important for an understanding of our financial condition and results of operation.

Critical accounting policies are those that are

most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective,

or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may

change in subsequent periods.

Certain accounting estimates are particularly sensitive because of their significance to financial statements

and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of

our financial statements:

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, we 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 our statements of operations.

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.

Cash at beginning of year

Cash at end of year

Net cash used in operating activities was $2,337,659

for the year ended June 30, 2025, as compared to $1,547,880 for the year ended June 30, 2024.

For the year ended June 30, 2025, our net

loss of $6,742,275, offset by non-cash stock based compensation of $3,203,230, were the primary drivers of net cash used in operating

For the year ended June 30, 2024, our net loss of $2,281,741, offset by non-cash stock based compensation of $670,958, were

the primary drivers of net cash used in operating activities.

Net cash used in investing activities was $614,181

for the year ended June 30, 2025, as compared to $10,438 for the year ended June 30, 2024.

The net cash used in investing activities for

the year ended June 30, 2025 consisted of $581,792 cash used in the acquisition of the assets of Sanzonate and purchases of property and

equipment of $32,389, while the net cash used investing activities for the year ended June 30, 2024 consisted entirely of purchases of

property and equipment.

Net cash provided by financing activities was

$2,374,967 for the year ended June 30, 2025, as compared to $3,181,735 for the year ended June 30, 2024.

Net cash provided by financing

activities for the year ended June 30, 2025 consisted of proceeds from the issuance of promissory notes and warrants of $1,510,000, proceeds

from the issuance of original issue discount notes of $500,000, proceeds from the exercise of warrants of $403,171 and proceeds from related

party loans of $332,193, offset by payments of notes payable of $316,920 and payments for deferred offering costs of $53,477, while net

cash provided by financing activities for the year ended June 30, 2024 consisted of proceeds from the issuance of class B common stock

pursuant to the initial public offering of $4,233,875 (net of offering costs) and proceeds from the issuance of convertible notes of $225,000,

offset by payments for deferred offering costs of $587,573, repayments of notes of $480,667 and repayments of related party loans of $208,900.

Please see Notes 11 and 12 to the accompanying

consolidated financial statements 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 11 and 12 to the accompanying consolidated financial statements.

We also have a non-cancellable operating

lease commitment for our office facility expiring in 2028 as described in Note 16 to the accompanying consolidated financial statements.

Other than the foregoing, as of June 30, 2025, we did not have other long-term debt obligations, capital (finance) lease obligations,

operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.

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

The following discussion relates to critical accounting

policies for our company.

The preparation of financial statements in conformity with United States generally accepted accounting principles,

or GAAP, requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto,

and related disclosures of commitments and contingencies, if any.

We have identified certain accounting policies that are significant

to the preparation of our financial statements.

These accounting policies are important for an understanding of our financial condition

and results of operation.

Critical accounting policies are those that are most important to the portrayal of our financial condition and

results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make

estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Certain accounting estimates

are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting

the estimate may differ significantly from management’s current judgments.

We believe the following critical accounting policies

involve the most significant estimates and judgments used in the preparation of our financial statements:

Revenue Recognition .

revenues from sales of our products and recognize revenue as control of the products is transferred to customers, which is generally at

the time of shipment based on the contractual terms with our customers.

We provide customer programs and incentive offerings, including

growth incentives and volume-based incentives.

These customer programs and incentives are considered variable consideration.

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 our volume-based incentives.

This determination

is updated every reporting period.

For the years ended June 30, 2025 and 2024, 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

Such warranties are assurance-type warranties and are accounted for as contingencies under ASC 460-10.

Asset Acquisitions .

of assets that do not meet the definition of a business are accounted for using the cost accumulation and allocation model.

The cost accumulation

and allocation model requires us to measure the assets acquired based on their cost, which is then allocated to the assets on a relative

fair value basis.

The cost of the assets includes direct acquisition-related costs such as fees paid to external advisors, attorneys,

and accountants.

When the cost of the acquired assets is greater than the fair value of the group, the excess cost is allocated to the

nonfinancial assets acquired.

Contingent consideration included in an asset acquisition is first assessed as to whether it qualifies as

a derivative instrument.

If it does, we would measure the contingent consideration at fair value with changes in fair value reported in

If the contingent consideration is not a derivative instrument, we will recognize the contingent consideration when it is probable

and estimable and subsequent changes are recorded as adjustments to the carrying amount of the assets acquired.

Determining the fair value

of assets acquired, for purposes of allocating cost based on their relative fair values, 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.

Intangible Assets .

Intangible assets

primarily consist of existing technology, distribution agreements, licenses, and trademarks obtained as a result of the acquisitions on

October 17, 2022 and April 15, 2025.

Intangible assets with definite lives are amortized based on their pattern of economic benefit over

their estimated useful lives and reviewed periodically for impairment.

Our trademarks are deemed to have an indefinite life.

estimated useful life of the acquired technology is 15 years while the estimated useful life of the customer relationships is 5 years.

of Goodwill .

We evaluate goodwill for impairment annually, as of June 30, or more frequently when indicators of impairment exist.

We consider qualitative factors including market conditions, legal factors, operating performance indicators, and competition, among

others, to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including

If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount,

we perform a quantitative impairment test.

In performing the quantitative impairment test, we compare the fair value of its reporting

unit to the carrying amount including the goodwill of the reporting unit.

If the carrying value, including goodwill, exceeds the reporting

unit’s fair value, we will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s

We performed our annual evaluation of goodwill on June 30, 2024.

Based on the analysis, we did not recognize an impairment

loss during the year ended June 30, 2024.

The estimated

useful life of the acquired technology is 15 years while the estimated useful lives of the distribution agreements and licenses is 5 years.

Impairment of Long-Lived Assets .

Long-lived assets consist primarily of property and equipment and intangible assets.

Long-lived assets are tested for impairment when

events and circumstances indicate the assets might be impaired by first comparing the estimated future undiscounted cash flows of the

asset or asset group to the carrying value.

If the carrying value exceeds the estimated future undiscounted cash flows, an impairment

loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group.

As a result of the

analysis, we recognized an impairment loss of $261,250 in general and administrative expenses on our customer relationship intangible

asset during the year ended June 30, 2025.

No other long-lived assets were determined to be impaired for the years ended June 30, 2025

Subsequent evaluations will be performed annually on June 30, per our policy.

Compensation .

Compensation expense is recognized for all share-based payments to employees and nonemployees, including stock

options, restricted stock awards, and warrants, in the statements of operation based on the fair value of the awards that are granted.

As necessary, our stock price at the date of grant was estimated using an acceptable valuation technique such as the probability-weighted

expected return model.

The fair value of stock options and warrants are estimated at the date of grant using the Black-Scholes option-pricing

The fair value of restricted stock awards is based on the fair market value of our class B common stock on the date of grant.

Compensation expense for restricted stock awards with performance-based vesting conditions is calculated based on the number of awards

that are expected to vest during the performance period if it is probable that the performance metrics will be achieved.

Generally, measured

compensation cost, net of actual forfeitures, is recognized on a straight-line basis over the vesting period of the related share-based

compensation award.

We account for forfeitures of stock-based awards as they occur.

Recognition .

We generate revenues from sales of our products and recognize revenue as control of the products is transferred

to customers, which is generally at the time of shipment based on the contractual terms with our customers.

We provide customer programs

and incentive offerings, including growth incentives and volume-based incentives.

These customer programs and incentives are considered

variable consideration.

We include 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 our

volume-based incentives.

This determination is updated every reporting period.

For the years ended June 30, 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.

Impairment of Goodwill .

goodwill for impairment annually, as of June 30, or more frequently when indicators of impairment exist.

We consider qualitative factors

including market conditions, legal factors, operating performance indicators, and competition, among others, to determine whether it is

more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

If we conclude that

it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative impairment

In performing the quantitative impairment test, we compare the fair value of its reporting unit to the carrying amount including

the goodwill of the reporting unit.

If the carrying value, including goodwill, exceeds the reporting unit’s fair value, we will

recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value.

We performed our

annual evaluation of goodwill on June 30, 2025.

Based on the analysis, we did not recognize an impairment loss during the year ended June

Subsequent evaluations will be performed annually on June 30, per our policy.

Stock-based Compensation .

expense is recognized for all share-based payments to employees and non-employees, including stock options, restricted stock awards, and

warrants, in the statements of operation based on the fair value of the awards that are granted.

As necessary, our stock price at the

date of grant was estimated using an acceptable valuation technique such as the probability-weighted expected return model.

The fair value

of stock options and warrants are estimated at the date of grant using the Black-Scholes option-pricing model.

The fair value of restricted

stock awards is based on the fair market value of our class B common stock on the date of grant.

Compensation expense for restricted stock

awards with performance-based vesting conditions is calculated based on the number of awards that are expected to vest during the performance

period if it is probable that the performance metrics will be achieved.

Generally, measured compensation cost, net of actual forfeitures,

is recognized on a straight-line basis over the vesting period of the related share-based compensation award.

We account for forfeitures

of stock-based awards as they occur.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

full text of our audited consolidated financial statements begins on page F-1 of this annual report.

The full text of our audited consolidated financial statements begins

on page F-1 of this annual report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis