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Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

  

FORM 10-Q

  

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

Commission File Number: 000-53239

 

 

Cavitation Technologies, Inc.
(Exact name of Registrant as Specified in its Charter)

 

Nevada 20-4907818
(State or Other Jurisdiction of Incorporation or Organization)  (I.R.S. Employer Identification Number)

 

10019 CANOGA AVENUE, CHATSWORTH, CALIFORNIA 91311
(Address, including Zip Code, of Principal Executive Offices)

 

(818) 718-0905
(Registrant's Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol Name of each exchange on which registered
     

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated Filer ☒ Small reporting company ☒
    Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒

 

As of October 31, 2023, the issuer had 284,289,740 shares of common stock outstanding.

 

   

 

 

TABLE OF CONTENTS

 

      Page
       
PART I.   FINANCIAL INFORMATION 3
       
Item 1.   Condensed Consolidated Financial Statements (unaudited) 3
       
    Condensed Consolidated Balance Sheets 3
       
    Condensed Consolidated Statements of Operations 4
       
    Condensed Consolidated Statement of Stockholders' Deficit 5
       
    Condensed Consolidated Statements of Cash Flows 6
       
    Notes to Condensed Consolidated Financial Statements 7
       
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations 15
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 18
       
Item 4.   Controls and Procedures 18
       
PART II   OTHER INFORMATION 19
       
Item 1.   Legal Proceedings 19
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 19
       
Item 3.   Defaults Upon Senior Securities 19
       
Item 4.   Mine Safety Disclosure 19
       
Item 5.   Other Information 19
       
Item 6.   Exhibits 20
       
Signatures 21
   
Certifications  

 

 

 

 2 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Condensed Consolidated Financial Statements.

 

CAVITATION TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

         
   September 30,   June 30, 
   2023   2023 
   (unaudited)     
ASSETS          
           
Current assets:          
Cash and cash equivalents  $140,000   $18,000 
Total current assets   140,000    18,000 
           
Property and equipment, net   1,000    1,000 
Equity method investment   1,000    1,000 
Operating lease right of use asset, net   95,000    113,000 
Other assets   10,000    10,000 
Total assets  $247,000   $143,000 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current liabilities:          
Accounts payable and accrued expenses  $144,000   $120,000 
Accrued payroll and payroll taxes due to officers   326,000    280,000 
Note payable   5,000    5,000 
Operating lease liability, current portion   68,000    68,000 
Advances from distributor   695,000    391,000 
Total current liabilities   1,238,000    864,000 
           
Note payable, non-current   145,000    145,000 
Operating lease liability, non-current portion   34,000    53,000 
Total liabilities   1,417,000    1,062,000 
           
Commitments and contingencies   –    – 
           
Stockholders' deficit:          
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively   –    – 
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 284,289,740 shares issued and outstanding as of September 30, 2023 and June 30, 2023   284,000    284,000 
Additional paid-in capital   26,083,000    26,083,000 
Accumulated deficit   (27,537,000)   (27,286,000)
Total stockholders' deficit   (1,170,000)   (919,000)
Total liabilities and stockholders' deficit  $247,000   $143,000 

 

 

See accompanying notes to the condensed consolidated financial statements

 

 

 

 3 

 

 

CAVITATION TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

AS OF SEPTEMBER 30, 2023 AND 2022

 

         
   For the Three Months Ended 
   September 30, 
   2023   2022 
   (unaudited)   (unaudited) 
         
Revenue  $–   $244,000 
Revenue from joint venture   –    17,000 
Total revenue   –    261,000 
           
Cost of revenue   –    (50,000)
Gross profit   –    211,000 
           
General and administrative expenses   214,000    265,000 
Research and development expenses   36,000    – 
Total operating expenses   250,000    265,000 
           
Loss from operations   (250,000)   (54,000)
           
Other expense:          
Loss from equity method investment   –    (18,000)
Interest expense   (1,000)   (1,000)
           
Net Loss  $(251,000)  $(73,000)
           
Net Loss per share, Basic and diluted  $(0.00)  $(0.00)
           
Weighted average shares outstanding, Basic and diluted   284,289,740    276,698,831 

 

 

See accompanying notes to the condensed consolidated financial statements

 

 

 

 4 

 

 

CAVITATION TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited)
AS OF SEPTEMBER 30, 2023 AND 2022

 

                     
   Three Months Ended September 30, 2023 (unaudited) 
   Common Stock  

Additional

Paid-in

   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
Balance at June 30, 2023   284,289,740   $284,000   $26,083,000   $(27,286,000)  $(919,000)
Net loss   –    –    –    (251,000)   (251,000)
Balance at September 30, 2023   284,289,740   $284,000   $26,083,000   $(27,537,000)  $(1,170,000)

 

 

   Three Months Ended September 30, 2022 (unaudited) 
   Common Stock  

Additional

Paid-in

   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
Balance at June 30, 2022   276,698,831   $277,000   $26,005,000   $(25,246,000)  $1,036,000 
Net loss   –    –    –    (73,000)   (73,000)
Balance at September 30, 2022   272,701,844   $272,000   $25,810,000   $(25,319,000)  $963,000 

 

 

See accompanying notes to the condensed consolidated financial statements

 

 

 

 5 

 

 

CAVITATION TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

         
   Three Months Ended September 30, 
   2023   2022 
         
Net loss  $(251,000)  $(73,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Gain on forgiveness of note payable   –    18,000 
Effect of changes in:          
Accounts receivable   –    (17,000)
Operating lease right of use asset   18,000    17,000 
Accounts payable and accrued expenses   24,000    4,000 
Accrued payroll and payroll taxes due to officers   46,000    – 
Advances from distributor   304,000    (44,000)
Operating lease liability   (19,000)   (17,000)
Prepaid expenses   –    38,000 
Net cash provided by (used in) operating activities   122,000    (74,000)
           
Net increase (decrease) in cash and cash equivalents   122,000    (74,000)
           
Cash and cash equivalents, beginning of period   18,000    441,000 
Cash and cash equivalents, end of period  $140,000   $367,000 
           
Supplemental disclosures of cash flow information:          
Cash paid for interest  $2,000   $– 
Cash paid for income taxes  $–   $– 

 

 

See accompanying notes to the condensed consolidated financial statements

 

 

 

 6 

 

 

CAVITATION TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three months ended September 30, 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 months ended September 30, 2023 are not indicative of the results that may be expected for the fiscal year ending June 30, 2024. 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, 2023 filed on October 3, 2023. The condensed consolidated balance sheet as of June 30, 2023 has been derived from the audited financial statements included in the Form 10-K for that year.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in accompanying consolidated financial statements, during the three months ended September 30, 2023, the Company incurred a net loss of $251,000 and had a stockholders’ deficit of $1,170,000 as of September 30, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern.

 

As of September 30, 2023, the Company has cash in the amount of $140,000. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. Currently, management’s plan is to increase revenues by continuing to license its technology globally. While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect. The Company believes it has enough cash to sustain operations through December, 2023.

 

The Company may also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital. There is no assurance that such financing will be available in the future 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.

 

 

 

 7 

 

 

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 impairment analysis for fixed assets, 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. Revenue from sale of our 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.. In addition, the Company also recognizes revenues from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer.

 

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. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available information at the time the analysis is prepared. As of September 30, 2023 and June 30, 2023, the carrying value of its equity method investments was $1,000 for both periods presented.

 

Net (Loss) Per Share

 

The Company’s computation of loss per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income per share 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 income of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income per share, the treasury stock method assumes that outstanding options and warrants were exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

 

 

 8 

 

 

There were no adjustments to net (loss) required for purposes of computing diluted earnings per share. At September 30, 2023 and September 30, 2022, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of its diluted earnings per share, as their effect would have been anti-dilutive.

        
   September 30, 2023   June 30, 2023 
Options   –    1,250,000 
Warrants   53,657,234    53,657,234 

 

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 – two vendors accounted for 22% and 30% of accounts payable and accrued expenses as of September 30, 2023, respectively. Two vendors accounted for 52% and 36% of accounts payable and accrued expenses as of June 30, 2023.

 

Revenues – during the three-month period ended September 30, 2022, 93% of revenues 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 September 30, 2023 and June 30, 2023, the fair values of cash and cash equivalents, accounts payable and accrued expenses, and accrued payroll and payroll taxes approximate their carrying values due to their short-term nature.

 

 

 

 9 

 

 

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

 

October 2021, the Company executed a three-year agreement with Desmet Ballestra (Desmet), a company located in Europe. This agreement is a continuation of the October 2018 agreement that expired also in October 2021. 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.

 

During the three months ended September 30, 2022, the Company recorded sales of $244,000 from Nano Reactor® sales from Desmet.

 

During the three months ended September 30, 2023 there were no sales from Nano Reactor to Desmet.

 

As part of the October 2021 agreement with Desmet, the Company also receives cash advances of $40,000 per month, subject to certain limitations, as advance payment for the sale of reactors. The Company initially records the advances received as “advances from distributor” a liability account, until such time revenue recognition is met. As of June 30, 2023, outstanding balance of customer advances amounted to $391,000.

 

During the three months ended September 30, 2023, advances received from Desmet amounted to $304,000.

 

As of September 30, 2023, outstanding advances from Desmet amounted to $695,000.

 

Note 3 - Investment in equity method investment

 

In April 2019, the Company and an unrelated entity, 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 in accordance with ASC 323 as the Company’s investments in Enviro, an unconsolidated entity and for which it has the ability to exercise significant influence but not control. From inception up to June 30, 2023, 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”). 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.

 

 

 

 10 

 

 

As of September 30, 2023 and June 30, 2023, the balance of the equity method investment amounted to $1,000, for both periods presented.

 

During the three months ended September 30, 2022, the Company recognized a loss of $17,000 related to the equity method investment. There was no similar transaction during the period ended September 30, 2023

 

Note 4 – Operating Lease

 

The Company leases certain warehouse and corporate office space under an 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:

        
   September 30,   September 30, 
   2023   2022 
         
Lease costs:          
Operating lease (included in general and administrative in the Company’s consolidated statement of operations)  $19,000   $19,000 
           
Other information:          
Cash paid for amounts included in the measurement of lease liabilities  $17,000   $19,000 
           
Weighted average remaining lease term – operating leases (in years)   1.3    2.3 
Average discount rate – operating leases   4%    4% 
           
The supplemental balance sheet information related to leases for the period is as follows:          
Long-term right-of-use assets  $95,000   $163,000 
           
Short-term operating lease liabilities  $68,000   $63,000 
Long-term operating lease liabilities   34,000    110,000 
Total operating lease liabilities  $102,000   $173,000 

  

 

 

 11 

 

 

Supplemental cash flow information related to the lease liabilities are as follows:

    
   Operating 
Year Ending June 30:  Lease 
2024 (remaining 9 months)  $59,000 
2025   47,000 
Total lease payments   106,000 
Less: Imputed interest/present value   (4,000)
Present value of lease liabilities  $102,000 

 

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 a June 30, 2023, total accrued payroll and payroll taxes-related parties amounted $280,000.

 

During the three months ended September 30, 2023, the Company accrued the payroll of an officer of the Company amounting to $46,000.

 

As of September 30, 2023, total accrued payroll and payroll taxes-related parties amounted to $326,000.

 

Note 6 – Notes Payable

 

In July 2020, the Company received a loan of $150,000 from the 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.

 

Pursuant to the terms of the SBA EIDL loan agreement, the Company is required to make monthly installment payments of approximately $700 starting in July 2021. However, the Company was not able to pay the required monthly installment due from July 2021 to April 2023.

 

In May 2023, the Company was able to cure the payment delay with the SBA and started paying the monthly installment due of approximately $700. As part of the agreement, all payments will be first applied to accrued interest until the Company becomes current with the interest due. At September 30, 2023 and September 30, 2022 approximately $13,000 of accrued interest is included in accounts payable and accrued expenses.

 

As of September 30, 2023 and June 30, 2023, the outstanding loan balance amounted to $150,000, respectively.

 

 

 

 12 

 

 

Note 7 - Stockholders' Equity

 

Stock Warrants

 

A summary of the Company's warrant activity and related information for the three months ended on September 30, 2023 is as follows:

            
   Warrants  

Weighted-

Average

Exercise

Price

   Weighted-
Average
Remaining
Contractual
Life
(Years)		 
             
Outstanding at June 30, 2023   53,657,234   $0.09    1.82 
Granted   –    –    – 
Exercised   –    –    – 
Expired   –    –    – 
Outstanding at September 30, 2023 vested and exercisable   53,927,834   $0.09    1.57 

 

There was no intrinsic value of the outstanding warrants as of September 30, 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 September 30, 2023.

                                     
      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     3.04     $ 0.03     11,126,518       3.04  
  0.09     23,841,323     2.76       0.09     23,841,323       2.76  
$ 0.12     18,959,993     0.24     $ 0.12     18,959,993       0.24  
        53,927,834                   53,927,834          

 

 

 

 13 

 

 

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 September 30, 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 September 30, 2023 no patents have been granted in which this person is the legally named inventor.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 14 

 

 

ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis should be read in conjunction with our financial statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as its plans, objectives, expectations and intentions. Its actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements.

 

Overview of our Business

 

Cavitation Technologies, Inc. ("CTi"), a Nevada corporation, was originally incorporated under the name Bio Energy, Inc. We design and engineer environmentally friendly technology-based systems that are designed to serve large, growing, global markets such as vegetable oil refining, renewable fuels, water treatment, algae oil extraction, biodiesel production, water-oil emulsions and crude oil yield enhancement.  Our systems are designed to process industrial liquids at a lower cost and higher yield than conventional technology. We are a process and product development firm that has developed, patented, and commercialized proprietary technology.

 

CTi has developed, patented, and commercialized proprietary technology that can be used for processing of industrial fluids. CTi's patented Nano Reactor® is the critical components of the CTi Nano Neutralization® System which is commercially proven to reduce operating costs and increase yields in processing oils and fats. CTi has two issued patents relating to our Nano Reactor® systems and has filed several national and international patents to employ its proprietary technology in applications including, vegetable oil refining, biodiesel production, waste water treatment, algae oil extraction, and alcoholic beverage enhancement.

 

We are engaged in manufacturing our Nano-Reactors, which are designed to help refine vegetable oils, biodiesel transesterification and treatment of produced and frack water. Our near-term goal is to continue to sell our systems through our partners, Desmet Ballestra and EW.

 

During the past several years we have developed a number of new applications utilizing the core principal of our technology. Our low pressure non-reactors (LPN) can be utilized in multiple industries that process large volumes of fluids and we anticipate accelerated commercial sales in our fiscal 2020. Further, we have miniaturized our non-reactors to be utilized in various consumer oriented products, such as, processing and enhancing spirits and wines, drinking water with infusion of vitamins, minerals and cannabidiol (CBD) oil.

 

We have agreements to license our technology globally through our strategic partners, Desmet Ballestra Group (Desmet) and Enviro Watertek, LLC (EW) and Alchemy Beverages, Inc (ABI). Desmet have been providing monthly advances of $50,000. We may need additional funding, and may attempt to raise additional debt and/or equity financing to fund operations and additional working capital. However, there is no assurance that we will be successful in obtaining such financing or obtained sufficient amounts necessary to meet our business needs, or that we will be able to meet our future contractual obligations.

 

Inflation

 

Global inflation also increased during 2022 and in 2023. The Russia and Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and our customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected.

 

 

 

 15 

 

 

Results of Operations

 

Results of Operations for the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

 

The following is a comparison of our results of operations for the three months ended September 30, 2023 and 2022.

 

   For the Three Months Ended         
   September 30,         
   2023   2022   $ Change   % Change 
                 
Revenue  $–   $244,000   $(244,000)   (100)%
Revenue from related party   –    17,000    (17,000)   (100)%
Cost of revenue   –    (50,000)   50,000    (100)%
Gross profit   –    211,000    (211,000)   (100)%
                     
General and administrative expenses   214,000    265,000    (51,000)   (19)%
Research and development expenses   36,000    –    36,000    100%
Total operating expenses   250,000    265,000    (15,000)   (6)%
Loss from operations   (250,000)   (54,000)   (196,000)   363%
(Loss) Income from equity method investment   –    (18,000)   18,000    (100)%
Interest expense   (1,000)   (1,000)   –    0%
Net loss  $(251,000)  $(73,000)  $(178,000)   244%

  

Revenue

 

The Company generates revenues from the sale of the Nano Reactor® to customers/distributor. Additionally, the Company generates revenues from its equity method investment, specifically fees from usage of reactors or usage fees.

 

During the three months ended September 30, 2023 we recorded no revenues compared to $244,000 for the three months ended September 30, 2022. Revenues decreased since the Company did not ship any purchase orders for Desmet during the current period compared to three purchase orders received in prior period. In addition, the Company also recognized usage fees of $17,000 during the prior period while none during the current period.

 

Cost of Revenue

 

During the three months ended September 30, 2023 and 2022, we recorded no cost of sales compared to $50,000 during the same period in prior year, which was the result of the revenue transactions described above.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2023 amounted to $214,000 compared with $265,000 for the same period in 2022, a decrease of $51,000 or 19%. Decrease in general and administrative expense are related to salaries and professional fees.

 

 

 

 16 

 

 

Research and development (R&D) expenses for the three months ended September 30, 2023 and 2022 were $36,000 and $0, respectively. During the three months ended September 30, 2023, the Company began another R&D project consisting of the design and manufacture of an experimental installation for plasma activation of water by generating a plasma discharge in a water stream.

 

Other income (expense)

 

Other income (expense) for the three months ended September 30, 2023 amounted to $(1,000) of interest expense. For the three months ended September 30, 2022 other income (expense) amounted to $(1,000) of interest expense and loss from equity method investment of $(18,000).

 

Liquidity and Capital Resource

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in accompanying consolidated financial statements, during the three months ended September 30, 2023, the Company incurred a net loss of $251,000 and had a stockholders’ deficit of $1,170,000 as of September 30, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern.

 

As of September 30, 2023, the Company has cash in the amount of $140,000. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. Currently, management’s plan is to increase revenues by continuing to license its technology globally. While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect. The Company believes it has enough cash to sustain operations through December, 2023.

 

The Company may also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital. There is no assurance that such financing will be available in the future 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.

 

Cash Flow

 

Net cash provided by operating activities during the three months ended September 30, 2023 amounted to $122,000 compared to net cash used in operating activities of $74,000 for the same period in fiscal 2022. Funding for the operating activities was provided primarily by sales of our systems to Desmet, advances from distributor and cash reserve.

 

Critical Accounting Policies

 

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 for allowance for impairment analysis for property and equipment, accrual of potential liabilities, valuation allowance for deferred tax assets, and assumption in valuing our stock options, warrants, and common stock issued for services, among other items. Actual results could differ from these estimates.

 

 

 17 

 

 

Revenue Recognition

 

The Company follows the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. Revenue from sale of our 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. In addition, the Company also recognizes revenues from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer.

 

Recently Issued Accounting Standards

 

See Note 1 of the Condensed Consolidated Financial Statements for a discussion of recently issued accounting standards.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable for smaller reporting companies.

 

ITEM 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

In accordance with rule 13a-15(a), CTi management must maintain disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934, or the Exchange Act, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

In accordance with Rule 13a-15(b) and (c), management must also evaluate the effectiveness of these disclosure control and procedures at the end of each fiscal year. As of September 30, 2023 the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that these disclosure controls and procedures were not effective as of September 30, 2023.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in internal control over financial reporting during the first quarter of fiscal 2023 that have materially affected or are reasonably likely to materially affect the company's internal control over financial reporting.

 

 

 

 18 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We know of no material, existing or pending legal proceeding against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

None

 

Item 5. Other Information.

 

None

 

 

 

 

 

 

 

 

 

 

 19 

 

 

Item 6. Exhibits, Financial Statement Schedules.

 

      Incorporated by Reference
Exhibit   Filed        
Number Exhibit Description Herewith Form Pd. Ending Exhibit Filing Date
             
3(i)(a) Articles of Incorporation - original name of Bioenergy, Inc.   SB-2 N/A 3.1 October 19, 2006
3(i)(b) Articles of Incorporation - Amended and Restated   10-Q December 31, 2008 3-1 February 17, 2009
3(i)(c) Articles of Incorporation - Amended and Restated   10-Q June 30, 2009 3-1 May 14, 2009
3(i)(d) Articles of Incorporation - Amended; increase in authorized shares   8-K N/A N/A October 29, 2009
3(i)(e) Articles of Incorporation - Certificate of Amendment; forward split   10-Q December 31, 2009 3-1 November 16, 2009
10.1 Patent Assignment Agreement between the Company and Roman Gordon dated July 1, 2008   8-K June 30, 2009 10.1 May 18, 2010
10.2 Patent Assignment Agreement between the Company and Igor Gorodnitsky dated July 1, 2008   8-K June 30, 2009 10.2 May 18, 2010
10.3 Assignment of Patent Assignment Agreement between the Company and Roman Gordon   8-K June 30, 2009 10.3 May 18, 2010
10.4 Assignment of Patent Assignment Agreement between the Company and Igor Gorodnitsky   8-K June 30, 2009 10.4 May 18, 2010
10.5 Employment Agreement between the Company and Roman Gordon date March 17, 2008   10K/A June 30, 2009 10.3 October 20, 2011
10.6 Employment Agreement between the Company and Igor Gorodnitsky dated March 17, 2008   10K/A June 30, 2009 10.4 October 20, 2011
10.7 Employment and Confidentiality and Invention Assignment Agreement between the Company and Varvara Grichko dated April 30, 2008   10-Q December 31, 2010 10.3 February 11, 2011
10.8 Board of Director Agreement - James Fuller   10-Q December 31, 2011 10.12 October 20, 2011
10.9 Technology and License Agreement with Desmet Ballestra dated 14 May 2012   10-K June 30, 2012 10.1 October 15, 2012
10.10 Short Term Loan Agreement - CEO   10-K June 30, 2012 10.11 October 15, 2012
10.11 Loan Agreement - Desmet Ballestra - Oct. 26, 2010          
14.1 Code of Business Conduct and Ethics*   10-K June 30, 2011 14.1 September 28, 2011
31.1 Certificate of Principal Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 X        
31.2 Certificate of Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 X        
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X        
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X        
             
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) X        
101.SCH Inline XBRL Taxonomy Extension Schema Document X        
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X        
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X        
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X        
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X        
104 Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101)          

 

* In accordance with Regulation S-K 406 of the Securities Act of 1934, we undertake to provide to any person without charge, upon request, a copy of our “Code of Business Conduct and Ethics”. A copy may be requested by sending an email to info@cavitationtechnologies.com.

 

 

 

 20 

 

 

SIGNATURES

 

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED

 

SIGNATURE   TITLE   DATE
         
         
/s/ N. Voloshin   President; Member of Board of Directors   November 1, 2023
N. Voloshin   (Principal Executive Officer)    
         
/s/ N. Voloshin   Chief Financial Officer   November 1, 2023
N. Voloshin   (Principal Financial Officer)    
         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 21 

 

Exhibit 31.1

 

Certification

 

I, N. Voloshin, certify that:

 

1. I have reviewed this quarterly report for the period ending September 30, 2023 on Form 10-Q of Cavitation Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: November 1, 2023 /s/ N. VOLOSHIN
  Name: N. Voloshin
  Title: Chief Executive Officer

 

Exhibit 31.2

 

Certification

 

I, N. Voloshin, certify that:

 

1. I have reviewed this quarterly report for the period ending September 30, 2023 on Form 10-Q of Cavitation Technologies, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: November 1, 2023 /s/ N. VOLOSHIN
  Name: N. Voloshin
  Title: Chief Financial Officer

 

Exhibit 32.1

 

CERTIFICATION

 

I, N. Voloshin, Chief Executive Officer of Cavitation Technologies, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

 

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 1, 2023 /s/ N. VOLOSHIN
  Name: N. Voloshin
  Title: Chief Executive Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

 

CERTIFICATION

 

I, N. Voloshin, Principal Financial Officer of Cavitation Technologies, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

 

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 1, 2023 /s/ N. VOLOSHIN
  Name: N. Voloshin
  Title: Principal Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

v3.23.3
Cover - shares
 3 Months Ended
Sep. 30, 2023
Oct. 31, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --06-30  
Entity File Number 000-53239  
Entity Registrant Name Cavitation Technologies, Inc.  
Entity Central Index Key 0001376793  
Entity Tax Identification Number 20-4907818  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 10019 CANOGA AVENUE  
Entity Address, City or Town CHATSWORTH  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 91311  
City Area Code (818)  
Local Phone Number 718-0905  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   284,289,740
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Sep. 30, 2023
Jun. 30, 2023
Current assets:    
Cash and cash equivalents $ 140,000 $ 18,000
Total current assets 140,000 18,000
Property and equipment, net 1,000 1,000
Equity method investment 1,000 1,000
Operating lease right of use asset, net 95,000 113,000
Other assets 10,000 10,000
Total assets 247,000 143,000
Current liabilities:    
Accounts payable and accrued expenses 144,000 120,000
Accrued payroll and payroll taxes due to officers 326,000 280,000
Note payable 5,000 5,000
Operating lease liability, current portion 68,000 68,000
Advances from distributor 695,000 391,000
Total current liabilities 1,238,000 864,000
Note payable, non-current 145,000 145,000
Operating lease liability, non-current portion 34,000 53,000
Total liabilities 1,417,000 1,062,000
Commitments and contingencies
Stockholders' deficit:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively 0 0
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 284,289,740 shares issued and outstanding as of September 30, 2023 and June 30, 2023 284,000 284,000
Additional paid-in capital 26,083,000 26,083,000
Accumulated deficit (27,537,000) (27,286,000)
Total stockholders' deficit (1,170,000) (919,000)
Total liabilities and stockholders' deficit $ 247,000 $ 143,000
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2023
Jun. 30, 2023
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 1,000,000,000 1,000,000,000
Common stock, shares issued 284,289,740 284,289,740
Common stock, shares outstanding 284,289,740 284,289,740
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
 3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Total revenue $ 0 $ 261,000
Cost of revenue 0 (50,000)
Gross profit 0 211,000
General and administrative expenses 214,000 265,000
Research and development expenses 36,000 0
Total operating expenses 250,000 265,000
Loss from operations (250,000) (54,000)
Other expense:    
Loss from equity method investment 0 (18,000)
Interest expense (1,000) (1,000)
Net Loss (251,000) (73,000)
Revenue From Customers [Member]    
Total revenue 0 244,000
Revenue From Joint Venture [Member]    
Total revenue $ 0 $ 17,000
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - $ / shares
 3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Income Statement [Abstract]    
Net Loss per share, Basic $ (0.00) $ (0.00)
Net Loss per share, Diluted $ (0.00) $ (0.00)
Weighted average shares outstanding, Basic 284,289,740 276,698,831
Weighted average shares outstanding, Diluted 284,289,740 276,698,831
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Jun. 30, 2022 $ 277,000 $ 26,005,000 $ (25,246,000) $ 1,036,000
Balance at beginning, shares at Jun. 30, 2022 276,698,831      
Net loss (73,000) (73,000)
Ending balance, value at Sep. 30, 2022 $ 272,000 25,810,000 (25,319,000) 963,000
Balance at ending, shares at Sep. 30, 2022 272,701,844      
Beginning balance, value at Jun. 30, 2023 $ 284,000 26,083,000 (27,286,000) (919,000)
Balance at beginning, shares at Jun. 30, 2023 284,289,740      
Net loss (251,000) (251,000)
Ending balance, value at Sep. 30, 2023 $ 284,000 $ 26,083,000 $ (27,537,000) $ (1,170,000)
Balance at ending, shares at Sep. 30, 2023 284,289,740      
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Statement of Cash Flows [Abstract]      
Net loss $ (251,000) $ (73,000)  
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Gain on forgiveness of note payable 0 18,000  
Effect of changes in:      
Accounts receivable 0 (17,000)  
Operating lease right of use asset 18,000 17,000  
Accounts payable and accrued expenses 24,000 4,000  
Accrued payroll and payroll taxes due to officers 46,000 0 $ 46,000
Advances from distributor 304,000 (44,000)  
Operating lease liability (19,000) (17,000)  
Prepaid expenses 0 38,000  
Net cash provided by (used in) operating activities 122,000 (74,000)  
Net increase (decrease) in cash and cash equivalents 122,000 (74,000)  
Cash and cash equivalents, beginning of period 18,000 441,000  
Cash and cash equivalents, end of period 140,000 367,000 $ 140,000
Supplemental disclosures of cash flow information:      
Cash paid for interest 2,000 0  
Cash paid for income taxes $ 0 $ 0  
v3.23.3
Organization and Summary of Significant Accounting Policies
 3 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Summary of Significant Accounting Policies

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 months ended September 30, 2023 are not indicative of the results that may be expected for the fiscal year ending June 30, 2024. 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, 2023 filed on October 3, 2023. The condensed consolidated balance sheet as of June 30, 2023 has been derived from the audited financial statements included in the Form 10-K for that year.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in accompanying consolidated financial statements, during the three months ended September 30, 2023, the Company incurred a net loss of $251,000 and had a stockholders’ deficit of $1,170,000 as of September 30, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern.

 

As of September 30, 2023, the Company has cash in the amount of $140,000. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. Currently, management’s plan is to increase revenues by continuing to license its technology globally. While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect. The Company believes it has enough cash to sustain operations through December, 2023.

 

The Company may also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital. There is no assurance that such financing will be available in the future 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.

 

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 impairment analysis for fixed assets, 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. Revenue from sale of our 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.. In addition, the Company also recognizes revenues from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer.

 

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. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available information at the time the analysis is prepared. As of September 30, 2023 and June 30, 2023, the carrying value of its equity method investments was $1,000 for both periods presented.

 

Net (Loss) Per Share

 

The Company’s computation of loss per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income per share 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 income of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income per share, the treasury stock method assumes that outstanding options and warrants were exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

There were no adjustments to net (loss) required for purposes of computing diluted earnings per share. At September 30, 2023 and September 30, 2022, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of its diluted earnings per share, as their effect would have been anti-dilutive.

        
   September 30, 2023   June 30, 2023 
Options   –    1,250,000 
Warrants   53,657,234    53,657,234 

 

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 – two vendors accounted for 22% and 30% of accounts payable and accrued expenses as of September 30, 2023, respectively. Two vendors accounted for 52% and 36% of accounts payable and accrued expenses as of June 30, 2023.

 

Revenues – during the three-month period ended September 30, 2022, 93% of revenues 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 September 30, 2023 and June 30, 2023, the fair values of cash and cash equivalents, accounts payable and accrued expenses, and accrued payroll and payroll taxes approximate their carrying values due to their short-term nature.

 

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.

 
v3.23.3
Contracts with Desmet Ballestra Group
 3 Months Ended
Sep. 30, 2023
Contracts With Desmet Ballestra Group  
Contracts with Desmet Ballestra Group

Note 2 - Contracts with Desmet Ballestra Group

 

October 2021, the Company executed a three-year agreement with Desmet Ballestra (Desmet), a company located in Europe. This agreement is a continuation of the October 2018 agreement that expired also in October 2021. 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.

 

During the three months ended September 30, 2022, the Company recorded sales of $244,000 from Nano Reactor® sales from Desmet.

 

During the three months ended September 30, 2023 there were no sales from Nano Reactor to Desmet.

 

As part of the October 2021 agreement with Desmet, the Company also receives cash advances of $40,000 per month, subject to certain limitations, as advance payment for the sale of reactors. The Company initially records the advances received as “advances from distributor” a liability account, until such time revenue recognition is met. As of June 30, 2023, outstanding balance of customer advances amounted to $391,000.

 

During the three months ended September 30, 2023, advances received from Desmet amounted to $304,000.

 

As of September 30, 2023, outstanding advances from Desmet amounted to $695,000.

 
v3.23.3
Investment in equity method investment
 3 Months Ended
Sep. 30, 2023
Equity Method Investments and Joint Ventures [Abstract]  
Investment in equity method investment

Note 3 - Investment in equity method investment

 

In April 2019, the Company and an unrelated entity, 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 in accordance with ASC 323 as the Company’s investments in Enviro, an unconsolidated entity and for which it has the ability to exercise significant influence but not control. From inception up to June 30, 2023, 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”). 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.

 

As of September 30, 2023 and June 30, 2023, the balance of the equity method investment amounted to $1,000, for both periods presented.

 

During the three months ended September 30, 2022, the Company recognized a loss of $17,000 related to the equity method investment. There was no similar transaction during the period ended September 30, 2023

 
v3.23.3
Operating Lease
 3 Months Ended
Sep. 30, 2023
Operating Lease  
Operating Lease

Note 4 – Operating Lease

 

The Company leases certain warehouse and corporate office space under an 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:

        
   September 30,   September 30, 
   2023   2022 
         
Lease costs:          
Operating lease (included in general and administrative in the Company’s consolidated statement of operations)  $19,000   $19,000 
           
Other information:          
Cash paid for amounts included in the measurement of lease liabilities  $17,000   $19,000 
           
Weighted average remaining lease term – operating leases (in years)   1.3    2.3 
Average discount rate – operating leases   4%    4% 
           
The supplemental balance sheet information related to leases for the period is as follows:          
Long-term right-of-use assets  $95,000   $163,000 
           
Short-term operating lease liabilities  $68,000   $63,000 
Long-term operating lease liabilities   34,000    110,000 
Total operating lease liabilities  $102,000   $173,000 

  

Supplemental cash flow information related to the lease liabilities are as follows:

    
   Operating 
Year Ending June 30:  Lease 
2024 (remaining 9 months)  $59,000 
2025   47,000 
Total lease payments   106,000 
Less: Imputed interest/present value   (4,000)
Present value of lease liabilities  $102,000 

 
v3.23.3
Related Party Transactions
 3 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

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 a June 30, 2023, total accrued payroll and payroll taxes-related parties amounted $280,000.

 

During the three months ended September 30, 2023, the Company accrued the payroll of an officer of the Company amounting to $46,000.

 

As of September 30, 2023, total accrued payroll and payroll taxes-related parties amounted to $326,000.

 
v3.23.3
Notes Payable
 3 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable

Note 6 – Notes Payable

 

In July 2020, the Company received a loan of $150,000 from the 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.

 

Pursuant to the terms of the SBA EIDL loan agreement, the Company is required to make monthly installment payments of approximately $700 starting in July 2021. However, the Company was not able to pay the required monthly installment due from July 2021 to April 2023.

 

In May 2023, the Company was able to cure the payment delay with the SBA and started paying the monthly installment due of approximately $700. As part of the agreement, all payments will be first applied to accrued interest until the Company becomes current with the interest due. At September 30, 2023 and September 30, 2022 approximately $13,000 of accrued interest is included in accounts payable and accrued expenses.

 

As of September 30, 2023 and June 30, 2023, the outstanding loan balance amounted to $150,000, respectively.

 
v3.23.3
Stockholders' Equity
 3 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Stockholders' Equity

Note 7 - Stockholders' Equity

 

Stock Warrants

 

A summary of the Company's warrant activity and related information for the three months ended on September 30, 2023 is as follows:

            
   Warrants  

Weighted-

Average

Exercise

Price

   Weighted-
Average
Remaining
Contractual
Life
(Years)		 
             
Outstanding at June 30, 2023   53,657,234   $0.09    1.82 
Granted   –    –    – 
Exercised   –    –    – 
Expired   –    –    – 
Outstanding at September 30, 2023 vested and exercisable   53,927,834   $0.09    1.57 

 

There was no intrinsic value of the outstanding warrants as of September 30, 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 September 30, 2023.

                                     
      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     3.04     $ 0.03     11,126,518       3.04  
  0.09     23,841,323     2.76       0.09     23,841,323       2.76  
$ 0.12     18,959,993     0.24     $ 0.12     18,959,993       0.24  
        53,927,834                   53,927,834          

 
v3.23.3
Commitments and Contingencies
 3 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

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 September 30, 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 September 30, 2023 no patents have been granted in which this person is the legally named inventor.

 
v3.23.3
Organization and Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

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 months ended September 30, 2023 are not indicative of the results that may be expected for the fiscal year ending June 30, 2024. 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, 2023 filed on October 3, 2023. The condensed consolidated balance sheet as of June 30, 2023 has been derived from the audited financial statements included in the Form 10-K for that year.

 
Going Concern

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in accompanying consolidated financial statements, during the three months ended September 30, 2023, the Company incurred a net loss of $251,000 and had a stockholders’ deficit of $1,170,000 as of September 30, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern.

 

As of September 30, 2023, the Company has cash in the amount of $140,000. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. Currently, management’s plan is to increase revenues by continuing to license its technology globally. While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect. The Company believes it has enough cash to sustain operations through December, 2023.

 

The Company may also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital. There is no assurance that such financing will be available in the future 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.

 
Use of Estimates

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 impairment analysis for fixed assets, 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

Revenue Recognition

 

The Company follows the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. Revenue from sale of our 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.. In addition, the Company also recognizes revenues from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer.

 
Equity Method Investment

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. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available information at the time the analysis is prepared. As of September 30, 2023 and June 30, 2023, the carrying value of its equity method investments was $1,000 for both periods presented.

 
Net (Loss) Per Share

Net (Loss) Per Share

 

The Company’s computation of loss per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income per share 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 income of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income per share, the treasury stock method assumes that outstanding options and warrants were exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

There were no adjustments to net (loss) required for purposes of computing diluted earnings per share. At September 30, 2023 and September 30, 2022, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of its diluted earnings per share, as their effect would have been anti-dilutive.

        
   September 30, 2023   June 30, 2023 
Options   –    1,250,000 
Warrants   53,657,234    53,657,234 

 
Concentrations

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 – two vendors accounted for 22% and 30% of accounts payable and accrued expenses as of September 30, 2023, respectively. Two vendors accounted for 52% and 36% of accounts payable and accrued expenses as of June 30, 2023.

 

Revenues – during the three-month period ended September 30, 2022, 93% of revenues were from Desmet.

 
Fair Value Measurement

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 September 30, 2023 and June 30, 2023, the fair values of cash and cash equivalents, accounts payable and accrued expenses, and accrued payroll and payroll taxes approximate their carrying values due to their short-term nature.

 
Recent Accounting Pronouncements

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.

 
v3.23.3
Organization and Summary of Significant Accounting Policies (Tables)
 3 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of antidilutive shares
        
   September 30, 2023   June 30, 2023 
Options   –    1,250,000 
Warrants   53,657,234    53,657,234 
v3.23.3
Operating Lease (Tables)
 3 Months Ended
Sep. 30, 2023
Operating Lease  
Schedule of lease expense
        
   September 30,   September 30, 
   2023   2022 
         
Lease costs:          
Operating lease (included in general and administrative in the Company’s consolidated statement of operations)  $19,000   $19,000 
           
Other information:          
Cash paid for amounts included in the measurement of lease liabilities  $17,000   $19,000 
           
Weighted average remaining lease term – operating leases (in years)   1.3    2.3 
Average discount rate – operating leases   4%    4% 
           
The supplemental balance sheet information related to leases for the period is as follows:          
Long-term right-of-use assets  $95,000   $163,000 
           
Short-term operating lease liabilities  $68,000   $63,000 
Long-term operating lease liabilities   34,000    110,000 
Total operating lease liabilities  $102,000   $173,000 
Schedule of lease liabilities maturities
    
   Operating 
Year Ending June 30:  Lease 
2024 (remaining 9 months)  $59,000 
2025   47,000 
Total lease payments   106,000 
Less: Imputed interest/present value   (4,000)
Present value of lease liabilities  $102,000 
v3.23.3
Stockholders' Equity (Tables)
 3 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Schedule of warrant activity
            
   Warrants  

Weighted-

Average

Exercise

Price

   Weighted-
Average
Remaining
Contractual
Life
(Years)		 
             
Outstanding at June 30, 2023   53,657,234   $0.09    1.82 
Granted   –    –    – 
Exercised   –    –    – 
Expired   –    –    – 
Outstanding at September 30, 2023 vested and exercisable   53,927,834   $0.09    1.57 
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     3.04     $ 0.03     11,126,518       3.04  
  0.09     23,841,323     2.76       0.09     23,841,323       2.76  
$ 0.12     18,959,993     0.24     $ 0.12     18,959,993       0.24  
        53,927,834                   53,927,834          
v3.23.3
Organization and Summary of Significant Accounting Policies (Details) - shares
 3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Equity Option [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive shares 0 1,250,000
Warrant [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive shares 53,657,234 53,657,234
v3.23.3
Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 3 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Product Information [Line Items]        
Net loss $ 251,000 $ 73,000    
Stockholders' deficit 1,170,000 $ (963,000) $ 919,000 $ (1,036,000)
Cash 140,000   18,000  
Equity method investment $ 1,000   $ 1,000  
One Vendor [Member] | Accounts Payable [Member] | Product Concentration Risk [Member]        
Product Information [Line Items]        
Concentration risk percentage 22.00%   52.00%  
Two Vendors [Member] | Accounts Payable [Member] | Product Concentration Risk [Member]        
Product Information [Line Items]        
Concentration risk percentage 30.00%   36.00%  
Desmet [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]        
Product Information [Line Items]        
Concentration risk percentage   93.00%    
v3.23.3
Contracts with Desmet Ballestra Group (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended
Oct. 30, 2021
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Periodic payment $ 40,000      
Customer advances   $ 695,000   $ 391,000
Desmet [Member]        
Advances received   304,000    
Desmet [Member] | Nano Reactor Sales [Member]        
Revenue from Contract with Customer, Including Assessed Tax   $ 0 $ 244,000  
v3.23.3
Investment in equity method investment (Details Narrative) - USD ($)
 3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Schedule of Equity Method Investments [Line Items]      
Equity method investment $ 1,000   $ 1,000
Loss from equity method investment 0 $ (18,000)  
Ameredev [Member]      
Schedule of Equity Method Investments [Line Items]      
Loss from equity method investment $ 0 $ 17,000  
v3.23.3
Operating Lease (Details - Lease Cost) - USD ($)
 3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Operating Lease      
Operating lease cost $ 19,000 $ 19,000  
Cash paid for amounts included in the measurement of lease liabilities $ 17,000 $ 19,000  
Weighted average remaining lease term - operating leases (in years) 1 year 3 months 18 days 2 years 3 months 18 days  
Average discount rate - operating leases 4.00% 4.00%  
Long-term right-of-use assets $ 95,000 $ 163,000 $ 113,000
Short-term operating lease liabilities 68,000 63,000 68,000
Long-term operating lease liabilities 34,000 110,000 $ 53,000
Total operating lease liabilities $ 102,000 $ 173,000  
v3.23.3
Operating Lease (Details - Operating Lease Minimum payments) - USD ($)
Sep. 30, 2023
Sep. 30, 2022
Operating Lease    
2024 (remaining 9 months) $ 59,000  
2025 47,000  
Total lease payments 106,000  
Less: Imputed interest/present value (4,000)  
Present value of lease liabilities $ 102,000 $ 173,000
v3.23.3
Related Party Transactions (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Jun. 30, 2023
Related Party Transactions [Abstract]        
Employee-related liabilities $ 326,000   $ 326,000 $ 280,000
Accrued payroll $ 46,000 $ 0 $ 46,000  
v3.23.3
Notes Payable (Details Narrative) - USD ($)
 1 Months Ended
Jul. 31, 2020
Sep. 30, 2023
Jun. 30, 2023
Sep. 30, 2022
Debt Instrument [Line Items]        
Notes Payable     $ 150,000  
EIDL Loan [Member]        
Debt Instrument [Line Items]        
Proceeds from Loans $ 150,000      
Debt Instrument, Interest Rate, Stated Percentage 3.75%      
Interest Payable   $ 13,000   $ 13,000
v3.23.3
Stockholders' Equity (Details - Warrant activity) - Warrant [Member]
 3 Months Ended
Sep. 30, 2023
$ / shares
shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Warrants outstanding, beginning balance | shares 53,657,234
Weighted average exercise price, warrants outstanding, beginning price | $ / shares $ 0.09
Weighted average remaining contractual life 1 year 9 months 25 days
Warrants granted | shares 0
Weighted average exercise price, granted | $ / shares $ 0
Warrants exercised | shares 0
Weighted average exercise price, exercised | $ / shares $ 0
Warrants expired | shares 0
Weighted average exercise price, expired | $ / shares $ 0
Warrants vested and exercisable | shares 53,927,834
Weighted average exercise price, vested and exercisable | $ / shares $ 0.09
Weighted average remaining contractual life, exercisable and vested 1 year 6 months 25 days
v3.23.3
Stockholders' Equity (Details - Warrants by exercise price) - shares
 3 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Warrant [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of warrant shares outstanding 53,927,834 53,657,234
Weighted average remaining life warrants outstanding 1 year 9 months 25 days  
Number of warrant shares exercisable 53,927,834  
$0.03-$0.05 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of warrant shares outstanding 11,126,518  
Weighted average remaining life warrants outstanding 3 years 14 days  
Number of warrant shares exercisable 11,126,518  
Weighted average remaining life warrants exercisable 3 years 14 days  
$0.09 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of warrant shares outstanding 23,841,323  
Weighted average remaining life warrants outstanding 2 years 9 months 3 days  
Number of warrant shares exercisable 23,841,323  
Weighted average remaining life warrants exercisable 2 years 9 months 3 days  
$0.12 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of warrant shares outstanding 18,959,993  
Weighted average remaining life warrants outstanding 2 months 26 days  
Number of warrant shares exercisable 18,959,993  
Weighted average remaining life warrants exercisable 2 months 26 days  
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