NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Nine months ended March 31, 2023 and 2022
Note 1 - Organization and Summary of Significant Accounting Policies
Cavitation Technologies, Inc. (referred to herein,
unless otherwise indicated, as “the Company,” “CTi,” “we,” “us,” and “our”)
is a Nevada corporation originally incorporated under the name Bio Energy, Inc. CTi has developed, patented, and commercialized proprietary
technology that may be used in liquid processing applications.
Basis of Presentation
The accompanying condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United
States of America (“U.S.”) and with instructions to Form 10-Q pursuant to the rules and regulations of Securities and Exchange
Act of 1934, as amended (the “Exchange Act”) and Article 8-03 of Regulation S-X under the Exchange Act. Accordingly, these
condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, we have included all adjustments considered necessary (consisting of normal recurring adjustments)
for a fair presentation. Operating results for the three and nine months ended March 31, 2023 are not indicative of the results that may
be expected for the fiscal year ending June 30, 2023. You should read these unaudited condensed consolidated financial statements in conjunction
with the audited financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended June
30, 2022 filed on October 13, 2022. The condensed consolidated balance sheet as of June 30, 2022 has been derived from the audited financial
statements included in the Form 10-K for that year.
Going Concern
The accompanying condensed consolidated financial
statements have been prepared in conformity with generally accepted accounting principles which contemplates continuation of the Company
as a going concern. During the nine months ended March 31, 2023, the Company incurred a loss of $(610,000), used cash in operations of
$(131,000) and at March 31, 2023, the Company had a working capital deficit of $(557,000). These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern. In addition, our independent registered public accounting firm, in their
report on our audited financial statements for the fiscal year ended June 30, 2022, raised substantial doubt about the Company’s
ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include adjustments that might
be necessary if the Company is unable to continue as a going concern.
As of March, 31 2023 we had cash and cash equivalents
on hand of $310,000 and are not generating sufficient funds to cover operations. In addition to the cash on hand, management believes
we may require additional funds to continue to operate our business. Management's plan is to generate income from operations by continuing
to license our technology globally through our strategic partners, including the extension or renewal of our existing global R and D,
Marketing and Technology License Agreement with Desmet Ballestra Group (Desmet), agreement with Alchemy Beverages, Inc (ABI), and agreement
with Enviro Watertek, LLC (EWT).
We may also attempt to raise additional debt and/or
equity financing to fund operations and provide additional working capital. However, there is no assurance that such financing will be
consummated or obtained in sufficient amounts necessary to meet the Company's needs, that the Company will be able to achieve profitable
operations or that the Company will be able to meet its future contractual obligations. Should management fail to obtain such financing,
the Company may curtail its operations.
Covid-19
During the nine months ended March 31, 2023, the
Company believes the COVID-19 pandemic did not materially impact its operating results due to the nature of the Company’s business
and its operations. The Company has not observed any impairments of its assets or a significant change in the fair value of its assets
due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results
of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.
As of March 31, 2023, the Company has been following
the recommendations of local health authorities to minimize exposure risk for its employees, including the temporary closure of its corporate
office and having employees work remotely. Most vendors have transitioned to electronic submission of invoices and payments.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement
date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in reserve for inventory
obsolescence, impairment analysis for property and equipment, accrual of potential liabilities, deferred tax assets and valuing our stock
options, warrants, and common stock issued for services, among other items. Actual results could differ from these estimates.
Revenue Recognition
The Company follows the guidance of Accounting
Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”).
Revenue from the sale of the Company’s Nano
Reactors is recognized when products are shipped from our manufacturing facilities as this is our sole performance obligation under these
contracts and we have no continuing obligation to the customer.
Revenue from the Company’s share of gross
profit to be earned from distributors, as defined, which the Company treats as variable consideration, is recognized using the most likely
amount method. Estimates are available from our distributor which are considered in the determination of the most likely amount.
Revenue from usage fees is recognized by the Company
based on actual usage by the customer.
The Company provides a limited warranty with every
set of reactors sold, typically 2 to 5 years. The Company has not experienced significant claims under its warranty policy, and management
determined no accrual for warranty reserve was necessary at March 31, 2023 or June 30, 2022.
Equity Method Investment
The Company accounts for investments in entities
in which the Company has significant influence over the entity’s financial and operating policies, but does not control, using the
equity method of accounting. The equity method investments are initially recorded at cost, and subsequently increased for capital contributions
and allocations of net income, and decreased for capital distributions and allocations of net loss. Equity in net income (loss) from the
equity method investment is allocated based on the Company’s economic interest. The Company assesses its investment in equity method
investments for recoverability, and if it is determined that a loss in value of the investment is other than temporary, the Company writes
down the investment to its fair value.
Management reviews the equity method investment
for impairment at least annually or whenever events or circumstances indicate a potential impairment and when circumstances indicate that
their carrying values may not be recoverable.
At March 31, 2023, management concluded that there
were no impairment indicators. If economic uncertainty increases and/or the global economy worsens, the Company's business, financial
condition and results of operations may be sufficiently impacted to result in future impairment charges in the short-term. Management
will continue to monitor the effects that macroeconomic conditions have on its business and operations, and will review impairment indicators
to the extent necessary in the upcoming months.
Loss Per Share
The Company’s computation of loss per share
(EPS) includes basic and diluted EPS. Basic EPS is calculated by dividing the Company’s net loss available to common stockholders
by the weighted average number of common shares during the period. Shares of restricted stock subject to vesting are included in basic
weighted average common shares outstanding from the time they vest. Diluted EPS reflects the potential dilution, using the treasury stock
method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the net loss of the Company. In computing diluted EPS, the treasury stock method assumes
that outstanding options and warrants are exercised, and the proceeds are used to purchase common stock at the average market price and
there were no instruments that would result in issuance of additional shares during the period.
As of March 31, 2023, the Company had 1,250,000
stock options and 53,927,834 stock warrants outstanding to purchase shares of common stock that were not included in the diluted net loss
per common share because their effect would be anti-dilutive.
Concentrations
Cash - cash is deposited in one financial institution.
The balances held at this financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”)
insurance limits of up to $250,000.
Accounts payable and accrued expenses –
three vendors accounted for 33%, 29%, and 26% of accounts payable and accrued expenses as of March 31, 2023. Three vendors
accounted for 32%, 29% and 24% of accounts payable and accrued expenses as of June 30, 2022.
Revenues – during the three and nine month
periods ended March 31, 2023 95% for both periods presented, were from Desmet. Revenue during the three and nine months periods ended
March 31, 2022 were 100% and 94% of revenues, respectively, were from Desmet.
Fair Value Measurement
FASB Accounting Standards Codification (“ASC”)
820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized
on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are
as follows:
|
· |
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
|
· |
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
|
· |
Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
On March 31, 2023 and June 30, 2022, the fair
values of cash and cash equivalents, accounts receivable, inventory and accounts payable and accrued expenses approximate their carrying
values due to their short-term nature.
Segments
The Company operates in one segment, its nano
reactor technology business. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief
operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions
about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach
to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures
about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material
operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in:
economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company
operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated
financial statements.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards
Board (the “FASB”) issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”)
to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition
of allowances for losses. ASU 2016-13 is effective for the Company beginning July 1, 2023, and early adoption is permitted. The Company
does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position,
results of operations and cash flows.
Other recent accounting pronouncements issued
by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and
Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated
financial statements.
Note 2 - Contracts with Desmet Ballestra Group
In October 2021, the Company executed a three-year
agreement with Desmet Ballestra Group (Desmet) that is a continuation of the October 2018 agreement for the sale of the Company’s
reactors. In accordance with ASC 606, the Company recognizes revenue from the sale of reactors at the time of shipment of the Nano reactor
hardware as shipment is deemed to be the Company’s only performance obligation and the Company had no more continuing obligation
other than the reactor’s two-year standard warranty. Desmet pays for such reactors on credit terms and the amount of a sale is recorded
as a receivable upon acceptance by Desmet. In addition, Desmet agreed to provide the Company monthly advances of $40,000 through October
1, 2024 to be applied against future sales of reactors.
This agreement replaced an earlier agreement which provided the Company a share of gross profit from the sale of the reactors and also
provided the Company monthly advances of $50,000 through October 1, 2021 that was applied against the Company’s gross profit share.
During the three
and nine months ended March 31, 2023, the Company recorded total revenue from Desmet of $58,000
and $361,000
from reactor sales, respectively.
During the three and
nine months ended March 31, 2022, the Company recorded total revenue from Desmet of $38,000 and $660,000 from reactor sales, respectively.
As of June 30, 2022, outstanding balance of
monthly advances received from Desmet amounted to $80,000.
During the period ended March 31, 2023, the Company received advances in the aggregate of $724,000
and applied a total of $361,000
to the sales of reactors. As of March, 31, 2023, the outstanding balance of the advances from Desmet amounted to $443,000
which will be recognized as revenue as the reactors are shipped.
Note 3 - Investment in Equity Method Investment
In 2019, the Company and Delaware Water Company,
LLC (Delaware) formed a limited liability company called Enviro WaterTek LLC (“Enviro”). Enviro is owned 50% by the Company
and 50% by Delaware, and the Company accounts for its investment in Enviro under the equity method. From 2019 to 2021, Enviro had no operations.
In September 2021, the Company and Delaware
entered into a separate agreement under Enviro for a specific project (referred to as “Ameredev” “joint venture”). Delaware has
certain contracts in place to provide recycled water to operators of certain active oil and gas wells. Under the agreement, the
Company contributed $1.2 million that was used by Ameredev to increase the capacity of certain pipelines and water treatment
facilities operated by Delaware. Pursuant to the agreement, for each barrel of recycled water that Ameredev sells, Delaware will
receive $0.10 per barrel, and the Company will receive $0.05 per barrel (referred to as usage fees), with the balance of net income
(loss) from Ameredev being allocated 70% to Delaware and 30% to the Company. The Ameredev agreement will terminate the earlier of
three years (unless extended by unanimous agreement of the Board and Members of Ameredev) from the date of the agreement or by
unanimous agreement of the Board and Members of Ameredev.
During the three and nine months ended March
31, 2023, the Company recorded total revenues from Ameredev of $3,000
and $21,000
from usage fees.
During the three and nine months ended March 31,
2023, the Company recognized loss of $(14,000) and $(43,000), respectively, to account for the Company’s 30% share in the net loss
from the equity method investment.
During the three and nine months ended March 31,
2022, the Company recognized income of $37,000 for both periods, to account for the Company’s 30% share in the net loss
from the equity method investment.
The following table summarizes the activity of
the Company’s equity method investment:
Investment in equity method investment | |
| | |
| |
March 31, 2023 | |
Balance at beginning of period | |
$ | 1,149,000 | |
Contributions to equity method investment | |
| – | |
Equity in earnings and losses of equity method investment | |
| (43,000 | ) |
Balance at end of period | |
$ | 1,106,000 | |
A summarized balance sheet as of March 31, 2023,
for Ameredev, and a summarized statement of operations for the nine-months ended March 31, 2023, for Ameredev is presented below:
Balance Sheet:
Equity Method Investments | |
| | |
| |
Amount | |
Cash | |
$ | 36,000 | |
| |
| | |
Property and equipment | |
| 1,123,000 | |
Total assets | |
$ | 1,159,000 | |
| |
| | |
Accounts Payable | |
| 16,000 | |
Partners equity | |
$ | 1,143,000 | |
Total liabilities and equity | |
$ | 1,159,000 | |
Income Statement:
| |
Amount | |
Revenue | |
$ | 24,000 | |
Usage fees paid to Cavitation and Delaware | |
| (62,000 | ) |
Operating expenses | |
| (106,000 | ) |
Net loss | |
$ | (144,000 | ) |
Note 4 – Operating Lease
The Company leases certain warehouse and corporate
office space under operating lease agreement. We determine if an arrangement is a lease at inception. Lease assets are presented as operating
lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.
Operating lease right-of-use (“ROU”)
assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets
represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments
arising from the lease. Generally, the implicit rate of interest in lease arrangements is not readily determinable and the Company utilizes
its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a
hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments
made and excludes lease incentives.
The components of lease expense and supplemental
cash flow information related to leases for the period are as follows:
Lease cost tables | |
| | |
| |
Nine Months Ended March 31, 2023 | |
| |
| |
Lease cost | |
| | |
Operating lease cost (included in general and administrative in the Company’s unaudited condensed statement of operations) | |
$ | 57,000 | |
| |
| | |
Other information | |
| | |
Cash paid for amounts included in the measurement of lease liabilities | |
$ | 57,000 | |
Weighted average remaining lease term – operating leases (in years) | |
| 1.8 | |
Average discount rate – operating leases | |
| 4% | |
The supplemental balance sheet information related
to leases for the period is as follows:
| |
At March 31, 2023 | |
| |
| |
Operating leases | |
| | |
Long-term right-of-use assets | |
$ | 130,000 | |
| |
| | |
Short-term operating lease liabilities | |
$ | 63,000 | |
Long-term operating lease liabilities | |
| 76,000 | |
Total operating lease liabilities | |
$ | 139,000 | |
Schedule of lease liability maturities | |
| | |
Period ending Mar 31 | |
Operating Lease | |
| |
| |
2023 (remaining 6 months) | |
$ | 19,000 | |
2024 | |
| 78,000 | |
2025 | |
| 53,000 | |
Total lease payments | |
| 150,000 | |
Less: Imputed interest/present value discount | |
| (11,000 | ) |
Present value of lease liabilities | |
$ | 139,000 | |
Note 5 – Related Party Transactions
Accrued Payroll and Payroll Taxes
In prior periods, the Company accrued
salaries and estimated payroll taxes due to a former officer of the Company. As of March 31, 2023 and June 30, 2022, total accrued
payroll and payroll taxes attributable to the former officer amounted to $280,000
for both periods presented.
Note 6 – Notes Payable
In July 2020, the Company received a loan of
$150,000
from the Small Business Association (SBA) under its Economic Injury Disaster Loan (EIDL) assistance program. The EIDL loan is
payable over 30 years, bears interest at a rate of 3.75%
per annum and secured by all tangible and intangible property of the Company. As of March 31, 2023 and June 30, 2022, the
outstanding balance of the note payable amounted to $150,000.
The Company did not make the required installment
payments as of March 31, 2023 on a timely basis to the SBA. In May 2023, a payment was made in the amount of $2,924 to bring the outstanding
balance current.
Note 7 - Stockholders' Equity
Common Stock
Shares issued for cash
During the period ended March 31, 2022, the
Company sold 12,071,785
shares of common stock and warrants to purchase 12,071,785
shares of common stock in a private placement for $0.065 per unit, for net proceeds of $785,000.
The warrants have an exercise price of $0.09 per share, were fully vested upon issuance, and have a term of five years.
Shares issued upon exercise of options
and warrants
During the period ended March 31, 2022, the
Company issued 6,181,818
shares of common stock upon the cashless exercise of stock options exercisable into 8,500,000
shares of common stock. As a result of the exercise the Company also recognized stock compensation of $9,000 to account the
fair value of 86,128 additional shares of common stock issued to the option holders.
During the period ended March 31, 2022, the
Company issued 33,864,262 shares of common stock upon the cashless exercise of warrants exercisable into 50,110,000 shares of common
stock. As a result of the exercise, the Company also recognized stock compensation of $77,000 to account the fair value of
543,447 additional shares of common stock issued to the warrant holders.
Shares issued for services
On February 9, 2023, the Company granted a total
of two million shares of our common stock with a fair value of $40,000
to two individuals who provided us with advisory services.
In March 2022, the Company issued
500,000 shares to a consultant for services for a total fair value of $25,000. The fair value was based on the closing
price of the Company’s common stock on the date the shares were granted.
Shares issued for the settlement of liabilities
In January 2022 and March 2022, the Company
issued a total of 7,106,960 shares of its common stock with a fair value of $521,000 to settle in full two promissory
notes aggregating $355,000, and recorded a loss on settlement of the liabilities of $166,000.
In January 2022, the Company issued
4,080,000 shares of common stock with a fair value of $409,000 to settle accounts payable of $204,000 and recorded a
loss on settlement of the liability of $205,000.
Stock Options
The Company has not adopted a formal stock option
plan. However, it has assumed outstanding stock options resulting from the acquisition of its wholly-owned subsidiary, Hydrodynamic Technology,
Inc. In addition, the Company has made periodic non- plan grants. A summary of the stock option activity during the nine months ended
March 31, 2023 is as follows:
Stock Option activity | |
| | | |
| | | |
| | |
| |
| | |
| | |
Weighted- | |
| |
| | |
| | |
Average | |
| |
| | |
Weighted- | | |
Remaining | |
| |
| | |
Average | | |
Contractual | |
| |
| | |
Exercise | | |
Life | |
| |
Options | | |
Price | | |
(Years) | |
| |
| | |
| | |
| |
Outstanding at June 30, 2022 | |
| 1,250,000 | | |
$ | 0.03 | | |
| 0.87 | |
- Granted | |
| – | | |
| – | | |
| – | |
- Forfeited | |
| – | | |
| – | | |
| – | |
- Exercised | |
| – | | |
| – | | |
| – | |
- Expired | |
| – | | |
| – | | |
| – | |
Outstanding at March 31, 2023 vested and exercisable | |
| 1,250,000 | | |
$ | 0.03 | | |
| 0.12 | |
There was no intrinsic value of the outstanding
options as of March 31, 2023 as the exercise price of these options were greater than the market price. The following table summarizes
additional information concerning options outstanding and exercisable at March 31, 2023.
Schedule of options outstanding and exercisable | | |
| | |
| | |
| | |
| | |
| |
| | |
Options Outstanding | | |
Options Exercisable | |
Exercise Price | | |
Number of Shares | | |
Weighted- Average Remaining Life (Years) | | |
Weighted- Average Exercise Price | | |
Number of Shares | | |
Weighted- Average Remaining Life (Years) | |
| | |
| | |
| | |
| | |
| | |
| |
$ | 0.03 | | |
| 1,250,000 | | |
| 0.12 | | |
$ | 0.03 | | |
| 1,250,000 | | |
| 0.12 | |
Stock Warrants
A summary of the Company's warrant activity and
related information for the three months ended on March 31, 2023 is as follows:
Schedule of warrant activity | |
| | | |
| | | |
| | |
Warrants | |
| | |
Weighted- Average Exercise Price | | |
Weighted- Average Remaining Contractual Life (Years) | |
| |
| | |
| | |
| |
Outstanding at June 30, 2022 | |
| 61,427,834 | | |
$ | 0.09 | | |
| 2.81 | |
Granted | |
| – | | |
$ | – | | |
| – | |
Exercised | |
| – | | |
$ | – | | |
| – | |
Expired | |
| (7,500,000 | ) | |
$ | 0.05 | | |
| – | |
Outstanding at March 31, 2023 vested and exercisable | |
| 53,927,834 | | |
$ | 0.09 | | |
| 2.41 | |
There was no intrinsic value of the outstanding
warrants as of March 31, 2023, as the exercise price of these warrants were greater than the market price. The following table summarizes
additional information concerning warrants outstanding and exercisable at March 31, 2023.
Schedule of warrants outstanding and exercisable | | |
| | |
| | |
| | |
| | |
| |
| | |
Warrants Outstanding | | |
Warrants Exercisable | |
| | |
| | |
Weighted | | |
Weighted | | |
| | |
Weighted | |
| | |
| | |
Average | | |
Average | | |
| | |
Average | |
Exercise | | |
Number | | |
Remaining | | |
Exercise | | |
Number | | |
Remaining | |
Price | | |
of Shares | | |
Life (Years) | | |
Price | | |
of Shares | | |
Life (Years) | |
| | |
| | |
| | |
| | |
| | |
| |
$ | 0.03 - 0.05 | | |
| 11,126,518 | | |
| 3.71 | | |
$ | 0.03 | | |
| 11,126,518 | | |
| 3.71 | |
$ | 0.09 | | |
| 23,841,323 | | |
| 3.26 | | |
$ | 0.09 | | |
| 23,841,323 | | |
| 3.26 | |
$ | 0.12 | | |
| 18,959,993 | | |
| 0.74 | | |
$ | 0.12 | | |
| 18,959,993 | | |
| 0.74 | |
| | | |
| 53,927,834 | | |
| | | |
| | | |
| 53,927,834 | | |
| | |
Note 8 - Commitments and Contingencies
Royalty Agreements
On July 1, 2008, the Company entered into
Patent Assignment Agreements with two parties, our President and Technology Development Supervisor, where certain devices and
methods involved in the hydrodynamic cavitation processes invented by the President and the Technology Development Supervisor have
been assigned to the Subsidiary. In exchange, the Subsidiary agreed to pay a royalty of 5% of gross revenues to each of the
President and Technology Development Supervisor for licensing of the technology and leasing of the related equipment embodying the
technology. These agreements were subsequently assumed by Cavitation Technologies on May 13, 2010 from its subsidiary. The Company's
President and Technology Development Supervisor both waived their rights to receive royalty payments that have accrued, or that may
accrue, on any gross revenue generated through March 31, 2023.
On April 30, 2008 and as amended on November 22,
2010, our wholly owned subsidiary entered into an employment agreement with our former Director of Chemical and Analytical Department
(the "Inventor") to receive an amount equal to 5% of actual gross royalties received from the royalty stream in the first year
in which the Company receives royalty payments from the patent which the Inventor was the legally named inventor, and 3% of actual gross
royalties received by the Company resulting from the patent in each subsequent year. As of March 31, 2023 no patents have been granted
in which this person is the legally named inventor.