Zone Frontier Sells Legacy Cleaning Products Business, Eliminating Approximately $3 Million in Annual Cash Burn While Retaining Significant Potential Upside

Future CleanCore losses will be funded by new ownership, while Zone retains a note, contingent earnouts and an equity stake.

Rhea-AI Summary

Zone Frontier (ZONE) sold its legacy cleaning products business to Sanzonate Holdings for a secured note with $3.35 million principal. The sale includes CleanCore Global and eliminates approximately $3 million in annual cash burn. Zone received a 6% note payable over 18 months, up to $2.25 million in financing-dependent earnouts and a 5% equity interest. It transferred approximately $844,000 in cash and agreed to a three-year cleaning-products non-compete.

Sanzonate is controlled by Zone director and former CEO Clayton Adams. Independent directors approved the transaction after a fairness opinion valued the business, excluding cash, at approximately $1.72 million. Zone's FY26 audit opinion expressed substantial doubt about its ability to continue as a going concern. Zone expects Minnesota campus revenue in the first half of 2027 under its agreement with Cerebras Systems (CBRS).

Positive

• Minor pointCleaning-business sale eliminates approximately $3 million in annual cash burn; new ownership funds future CleanCore losses.
• Minor pointSale consideration includes a $3.35 million secured note, above the approximately $1.72 million independent valuation excluding cash.
• Minor point. Forward-looking: it has not happened yet and may not happen.Note bears 6% annual interest, with approximately $231,750 scheduled over 18 months.
• Minor point. Forward-looking: it has not happened yet and may not happen.Earnouts offer up to $2.25 million in additional cash, contingent on Sanzonate equity financings.
• Minor pointRetained 5% Sanzonate equity interest includes tag-along rights on majority-holder sales.

4 minor points

• Minor pointPreviously announced digital-asset sale raised approximately $33 million, alongside closure of the Treasury segment.
• Minor pointMinnesota campus has an initial 10-year Cerebras colocation agreement and two potential 10-year extension options.
• Minor point. Forward-looking: it has not happened yet and may not happen.Minnesota construction is progressing; Zone expects revenue beginning in the first half of 2027.
• Minor point. Forward-looking: it has not happened yet and may not happen.Texas campus is sized to an initial 200 MW, with potential expansion beyond 500 MW.

Negative

• Minor pointFY26 audit opinion expresses substantial doubt about Zone's ability to continue as a going concern.
• Minor pointLegacy cleaning business lost $18 million in FY26; the Treasury segment lost $156 million last year.
• Minor pointClosing required approximately $844,000 in cash transferred to Sanzonate for working capital.
• Minor point. Forward-looking: it has not happened yet and may not happen.Note principal is deferred: $300,000 at six months, $850,000 at twelve months and $2,200,000 at eighteen months.
• Minor point. Forward-looking: it has not happened yet and may not happen.Earnouts require buyer financings at $10 million, $17.5 million and $25 million pre-money valuations.

2 minor points

• Minor point. Forward-looking: it has not happened yet and may not happen.Note's intellectual-property lien permits conditional early release; note and lien may be subordinated to future institutional senior debt.
• Minor pointSale imposes a three-year non-compete covering cleaning products.

News Explained

Zone expects no further losses from the sold businesses, but the sale leaves its fiscal-2026 going-concern disclosure unchanged.

At closing, Sanzonate issued Zone a $3.35 million non-convertible note, payable in principal installments of $300,000 after six months, $850,000 after twelve months and $2.2 million after eighteen months; a first-priority lien on transferred intellectual property secures it. The note and lien may be subordinate to future institutional senior debt of Sanzonate.

The company says the sale will not change its fiscal-2026 financial statements: the audit opinion expresses substantial doubt about its ability to continue, while management expects no future ongoing losses attributable to the sold businesses.

Key Figures

Promissory note principal: $3.35 million Note interest rate: 6% annually Potential earnout: Up to $2.25 million +5 more

Promissory note principal

$3.35 million

Sale consideration; payable in installments over 18 months

Note interest rate

6% annually

Interest on the secured promissory note

Potential earnout

Up to $2.25 million

Contingent on buyer equity financings at specified pre-money valuations

Retained equity interest

5%

Membership interest in Sanzonate received at closing

Cash transferred

$844,000

Transferred to Sanzonate for working capital needs

Annual cash burn eliminated

$3 million per year

Legacy cleaning products business

FY26 legacy business loss

$18 million

Legacy cleaning products business

Independent business valuation

$1.72 million

Fairness opinion valuation, excluding cash

Key Terms

secured promissory note, first-priority lien, tag-along rights, related party transaction, +1 more

5 terms

secured promissory note financial

"Sanzonate issued Zone a $3.35 million non-convertible promissory note"

A secured promissory note is a written promise to repay borrowed money that is backed by specific assets pledged as collateral; if the borrower fails to pay, the lender can seize those assets to recover losses. Investors care because the collateral reduces the lender’s risk and can make the loan safer and more likely to be repaid, similar to a pawnshop loan where an item lowers the lender’s exposure if the borrower defaults.

first-priority lien financial

"The note is secured by a first-priority lien on the intellectual property"

A first-priority lien is a legal claim that gives one lender or creditor the top spot to seize and sell specified assets if a borrower fails to pay. For investors, it matters because being first in line usually means a higher chance of recovering money after a default, lowering risk compared with holders who are behind in the queue — like a person cutting to the front of a checkout line for payment from the same pile of goods.

tag-along rights financial

"Zone has tag-along rights on sales by Sanzonate's majority holders."

Tag-along rights are a shareholder protection that lets minority investors join a sale when majority or controlling shareholders sell their stake, requiring the buyer to offer the same price and terms to those smaller holders. This matters to investors because it preserves the chance to exit on equal footing and prevents being left with less attractive ownership after a change of control—think of it like being allowed to ‘tag along’ and accept the same offer as the main seller.

related party transaction financial

"the transaction was reviewed and negotiated as a related party transaction"

A related party transaction is any deal or transfer of value between a company and people or entities with close ties to it — such as executives, major owners, family members, or affiliated businesses. Investors watch these transactions because they can favor insiders over outside shareholders, skirt fair market pricing, or hide risks; like selling your car to a relative at a friendly price, they require clear disclosure and scrutiny to judge impact on value.

going concern financial

"expressing substantial doubt about the Company's ability to continue as a going concern."

Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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• Completes Zone's transformation into a pure-play AI infrastructure developer
• Ends approximately $3 million annual cash burn and preserves capital for AI infrastructure platform
• $3.35 million secured promissory note at 6% interest, significantly above an independent valuation of the business
• Up to $2.25 million in additional cash earnout payments tied to the buyer's future equity financings
• 5% equity interest in the buyer at closing with tag-along rights

HOUSTON, Oct. 8, 2026 /PRNewswire/ -- Zone Frontier Inc. (NYSE AMERICAN: ZONE) (the "Company" or "Zone Frontier") today announced the sale of its legacy aqueous ozone cleaning products business, including its wholly owned subsidiary CleanCore Global Limited, to Sanzonate Holdings LLC ("Sanzonate"), an entity controlled by Clayton Adams, the Company's former Chief Executive Officer and current board member. 

This legacy business consumed approximately $3 million of cash per year, lost $18 million in FY26, and required management time and attention that Zone is now directing entirely toward power-enabled compute campuses for AI customers across rural and industrial America. Additionally, the Company previously announced in July the sale of all remaining digital assets for approximately $33 million, and closure of its Treasury segment, which lost $156 million last year. With these sales, Zone stops funding those losses, keeps the vast majority of the cash it had previously set aside for the business, and retains several ways to benefit if the business succeeds under new ownership.

The consideration is well above the independent value of the business. A fairness opinion delivered to the Company's Board of Directors by Newbridge Securities Corporation valued the legacy business, excluding cash, at approximately $1.72 million. The $3.35 million face amount of the note significantly exceeds that valuation. If all earnout milestones are achieved, total potential cash payments to Zone would be approximately $5.6 million, before counting the retained equity.

Component	Amount	Status
Secured promissory note (principal)	$3,350,000	Scheduled over 18 months
Interest on note (6%)	~$231,750	Scheduled over 18 months
Earnout payments	Up to $2,250,000	Contingent on buyer financings at $10M, $17.5M and $25M pre-money valuations
Equity in Sanzonate	5% at closing	Tag-along rights
Cash transferred to Sanzonate with the business	~($844,000)	Paid at closing for working capital needs
Annual cash burn eliminated	~$3M per year	Ongoing corporate costs materially reduce immediately after closing

"The CleanCore business has promising technology, but the business does not fit our core strategy anymore. This sale eliminates an ongoing cash drain that pulled management and Board attention away from our core AI infrastructure strategy. This transaction completes our transition into critical AI infrastructure as Zone Frontier," said Tyler Hassen, Chief Executive Officer of Zone Frontier. "We also receive a secured note with a face value significantly greater than the independent valuation of the business, and an equity stake in a team that is helping to shape the future of chemical free cleaning. If Sanzonate succeeds, our shareholders share in that success. Meanwhile, our capital and our focus are fully on building AI infrastructure."

Transaction Terms

• Secured promissory note. Sanzonate issued Zone a $3.35 million non-convertible promissory note bearing 6% annual interest, payable in installments of $300,000 at six months, $850,000 at twelve months and $2,200,000 at eighteen months, plus accrued interest.
• Security interest. The note is secured by a first-priority lien on the intellectual property transferred in the transaction. The lien remains in place until the note is repaid and may be released earlier only if Sanzonate raises at least $3.0 million in new capital, has made its first $300,000 principal payment, and is not in default under the note or behind on any earnout payment. The note and lien may be subordinate to future institutional senior debt of Sanzonate.
• Earnout payments. Zone is entitled to up to $2.25 million in additional cash payments if Sanzonate completes equity financings at specified pre-money valuations: $500,000 at $10 million or more, an additional $750,000 at $17.5 million, and a further $1.0 million at $25 million.     
• Retained equity. Zone received a 5% membership interest in Sanzonate at closing. Zone has tag-along rights on sales by Sanzonate's majority holders.
• Other terms. Zone transferred approximately $844,000 of cash to Sanzonate with the business and agreed to a three-year non-compete covering cleaning products.
• Ongoing CleanCore operating losses. Any future losses by the CleanCore business will be funded by new ownership.

The transaction was approved by the Company's independent directors following receipt of a fairness opinion from Newbridge Securities Corporation. Because Mr. Adams is a current member of the Company's Board of Directors and controls Sanzonate, the transaction was reviewed and negotiated as a related party transaction, but at arm's length terms. Mr. Adams recused himself from all Board deliberations and did not participate in the evaluation of the transaction or any negotiations on behalf of the Company. Additional information will be included in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission ("SEC").

NYSE American Section 610(b) Notice

As required by Section 610(b) of the NYSE American Company Guide, the Company announces that the audit opinion of TAAD, LLP on the consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended June 30, 2026, filed with the SEC on September 28, 2026, includes an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern. For fiscal year 2026, the legacy cleaning products business and Treasury segment were the primary sources of the Company's operating losses and cash used in operations. Following the sale of such assets, which was announced today, the Company expects no future ongoing losses attributable to such businesses. This announcement does not reflect any change to the Company's financial statements or Form 10-K. Management's plans are described in Note 1 to the consolidated financial statements.

Zone Frontier's AI Infrastructure Portfolio    

Zone's AI infrastructure portfolio includes its Minnesota data center campus, with an initial 10-year Colocation Services Agreement with Cerebras Systems, Inc. (NASDAQ: CBRS) and two 10-year potential extension options. This campus is making material construction progress and the Company expects to generate revenue beginning in the first half of 2027, consistent with previous guidance. Project finance discussions are also progressing concurrently, consistent with previous guidance.

Zone's portfolio also includes its Texas campus, sized to an initial 200 MW with potential to expand beyond 500 MW, as part of Zone's active and growing pipeline of AI infrastructure projects to support the rapidly increasing demand for compute power.

For more information, visit www.zonefrontier.com.

About Zone Frontier Inc.
Zone Frontier Inc. (NYSE AMERICAN: ZONE) is helping to build the critical infrastructure that powers the AI economy. Through a growing pipeline of projects, the Company aims to help meet the increasing demand for compute capacity, power, and digital infrastructure required by the world's leading AI companies.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements regarding the expected benefits of the sale of the legacy cleaning products business, expected cash savings, the receipt of payments under the promissory note, the achievement of earnout milestones, the value of the Company's equity interest in Sanzonate, the Company's ability to continue as a going concern and management's plans to address it, the Company's business strategy and pipeline of projects, and the Company's transition to an AI infrastructure business. Forward-looking statements are generally identified by words such as "anticipates," "believes," "expects," "intends," "plans," "may," "will," "could," "should," "estimates," "projects," "potential," "focused on," "aims," and similar expressions. These forward-looking statements are based on management's current expectations and assumptions as of the date of this press release and are subject to significant risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied. Such risks and uncertainties include, but are not limited to: Sanzonate's ability to make payments under the promissory note, which depends on its operating results and ability to raise capital; the possibility that Sanzonate does not complete financings at the valuations required to trigger earnout payments or additional equity; the release of the Company's security interest in specified circumstances and the subordination of the note to future senior debt; the value and liquidity of a minority interest in a private company; liabilities retained by the Company under the purchase agreement; the substantial doubt about the Company's ability to continue as a going concern; the Company's ability to raise additional capital on acceptable terms or at all; the highly speculative and uncertain nature of the Company's AI critical infrastructure business; the Company's lack of operating history in the data center or computing infrastructure industry; the Company's ability to obtain project-level debt financing on acceptable terms or at all; and general economic, financial, capital market and industry conditions.

For a more complete discussion of risks and uncertainties, please refer to the Company's filings with the SEC, including the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. All forward-looking statements are qualified in their entirety by this cautionary statement.

 

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SOURCE Zone Frontier Inc. (NYSE AMERICAN: ZONE)

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What did Zone Frontier receive for selling its cleaning products business?

Zone received a $3.35 million secured promissory note, up to $2.25 million in contingent cash earnouts and a 5% membership interest in Sanzonate. The non-convertible note bears 6% annual interest and is payable over 18 months. Zone also transferred approximately $844,000 in cash with the business.

What triggers Zone Frontier's Sanzonate earnout payments?

Sanzonate equity financings at specified pre-money valuations trigger the earnouts: $500,000 at $10 million or more, an additional $750,000 at $17.5 million and a further $1.0 million at $25 million. Pre-money valuation means the business value before the new investment.

When can the security lien on Zone Frontier's sale note be released?

The first-priority lien on transferred intellectual property remains until repayment unless Sanzonate meets the early-release conditions. It must raise at least $3.0 million in new capital, make its first $300,000 principal payment and be neither in default on the note nor behind on earnouts. The note and lien may be subordinate to future institutional senior debt.

How was Zone Frontier's related-party sale to Sanzonate reviewed?

Zone's independent directors approved the transaction after receiving a fairness opinion from Newbridge Securities. Clayton Adams, who controls Sanzonate and sits on Zone's board, recused himself from all board deliberations and did not participate in evaluating the transaction or negotiating on Zone's behalf.