Cavitation Technologies Inc
For the period ended Mar 31, 2024. Filed May 15, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 15, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-14.
0001683168-24-000947
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001683168-24-003488
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 55 previous paragraphs and 68 current paragraphs.
30 unchanged; 14 reworded; 24 added; 11 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
During the three months ended March 31, 2024, the Company generated $19,000 in revenue from reactor sales pursuant to one purchase order from Desmet. In addition, due to a new Technology License Agreement entered into with our worldwide limited distributor in February 2024, the rights to previous advances made to the Company of $498,000 were waived and were recognized as licensing revenue during the current three month period.
Current report
During the three months ended March 31, 2023 we recorded $61,000 in revenue, which consisted of one purchase order in the amount of $58,000 from Desmet. In addition, the Company recognized usage fees of $3,000 during the prior period.
Current report
General and administrative expenses
Current report
General and administrative expenses was $170,000 and $273,000 for the three months ended March 31, 2024 and 2023, a decrease of $139,000 or 50.9%. The decrease is primarily due to a reduction in executive level employees resulting in a decrease in payroll expenses of $75,000 and the issue of stock based compensation in the prior period amounting to $40,000 with no similar expense if the current period.
Current report
Research and development expenses
Current report
Research and development expenses was $9,000 and $0 for the three months ended March 31, 2024 and 2023, respectively, an increase of $9,000 or 100.0% increase. The increase is due to the resumption of research and development expenditure for methods and technologies of water treatment technology.
Current report
Income (loss) from operations
Current report
Income (loss) from operations was $333,000 and $(223,000) for the three months ended March 31, 2024 and 2023, respectively, an increase of $555,000 or 248.9%. The increase is primarily due to the increase in revenue related to the waiver of the previous advances paid to the company by its distributor and a reduction in general and administrative expenses, offset by an increase in research in development expenses, all discussed in detail above.
Current report
Net income (loss) before and after income taxes
Current report
Net income (loss) after income taxes was $331,000 and $(224,000) for the three months ended March 31, 2024 and 2023, respectively, and increase of $555,000. The increase is discussed under income (loss) from operations above.
Current report
Net income (loss)
Current report
Net income (loss) was $331,000 and $(238,000) for the three months ended March 31, 2024 and 2023. The increase in income of $569,000 was due to the increase in income discussed under income (loss) from operations above and the decrease in the loss from equity method investment.
Current report
During the nine months ended March 31, 2024, the Company generated $212,000 in revenue from reactor sales. In addition, due to a new Technology License Agreement entered into with our worldwide limited distributor, the rights to previous advances made to the Company of $498,000 were waived and were recognized as revenue during the current nine month period.
Current report
During the nine months ended March 31, 2023 we recorded $381,000 in revenue, which consisted of five purchase orders in the amount of $361,000 from Desmet during the prior period. In addition, the Company recognized usage fees of $20,000 during the prior period.
Current report
During the nine months ended March 31, 2024 and 2023, our cost of revenue amounted to $41,000 and $73,000 respectively during the same period in prior year, this represented the cost of the nano reactors sold to our distributor during each period, as discussed above.
Current report
General and administrative Expenses
Current report
Research and development expenses
Current report
Research and development expenses was $45,000 and $0 for the nine months ended March 31, 2024 and 2023, respectively, an increase of $51,000 or 100.0%. The increase is due to the resumption of research and development expenditure for future product offerings.
Current report
Income (loss) from operations
Current report
Income (loss) from operations was $69,000 and $(564,000) for the nine months ended March 31, 2024 and 2023, respectively, an increase of $633,000 or 248.9%. The increase is primarily due to the increase in revenue related to the waiver of the previous advances paid to the company by its distributor and a reduction in general and administrative expenses, offset by an increase in research in development expenses, all discussed in detail above.
Current report
Net income (loss) before and after income taxes
Current report
Net income (loss) before and after income taxes was $64,000 and $(567,000) for the nine months ended March 31, 2024 and 2023, respectively, and increase in income of $631,000 or 111.3%. The increase is discussed under income (loss) from operations above.
Current report
Net income (loss)
Current report
Net income (loss) was $64,000 and $(610,000) for the nine months ended March 31, 2024 and 2023. The increase in income of $674,000 was due to the increase in income discussed under income (loss) from operations above and the decrease in the loss from equity method investment, discussed above.
Removed paragraphs (11)
Previous report
During the three months ended December 31, 2023 we recorded $192,000 in revenue compared to $58,000 for the three months ended December 31, 2022. Revenues increased as the Company delivered on two purchase orders during the current period compared to only one purchase order in the prior period.
Previous report
Operating Expenses
Previous report
Operating expenses for the three months ended December 31, 2023 amounted to $172,000 compared with $332,000 for the same period in 2022, a decrease of $160,000 or 48.2%. the decrease in general and administrative expense is primarily due to decreases in salary expenses of $65,000, consulting fees of $27,000 and professional expenses of $54,000.
Previous report
Net loss
Previous report
Net loss was $16,000 and $299,000 for the three months ended December 31, 2023 and 2022. The decrease in loss of $283,000 was due to the increase in revenues and the decrease in operating expenses, as discussed above.
Previous report
During the six months ended December 31, 2023 we recorded $192,000 in revenue compared to $303,000 for the six months ended December 31, 2022. Revenues decreased since the Company received two purchase orders from Desmet during the current period compared to four purchase orders in the prior period. In addition, the Company also recognized usage fees of $0 during the current period compared to $17,000 during the prior period.
Previous report
During the six months ended December 31, 2023 and 2022, our cost of sales amounted to $34,000 and $62,000, respectively, which was the result of the revenue transactions described above.
Previous report
Operating Expenses
Previous report
Research and development (R&D) expenses for the six months ended December 31, 2023 and 2022 were $36,000 and $0, respectively. R&D expenses were incurred on a new cold plasma technology.
Previous report
Net loss
Previous report
Net loss was $267,000 and $372,000 for the six months ended December 31, 2023 and 2022. The decrease in loss of $105,000 was due to the decrease in operating expenses, as discussed above.
Reworded paragraphs (14)
Previous wording
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 had been providing monthly advances of $40,000. 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.
Current wording
We have agreements to license our technology globally through our strategic partners, Desmet Belgium Group (Desmet) and Enviro Watertek, LLC (EW) and Alchemy Beverages, Inc (ABI). Desmet had been providing monthly advances of $40,000. 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 obtain sufficient amounts necessary to meet our business needs, or that we will be able to meet our future contractual obligations.
Previous wording
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.
Current wording
Global inflation remains a factor in 2024, with interest rates in the US remaining at higher levels, although there have been some indication from the federal reserve that these rates may decrease, inflationary indicators remain above expectations, delaying any interest rate decreases. The Russia and Ukraine and now the Israeli and Hamas 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.
Previous wording
The following is a comparison of our results of operations for the six months ended December 31, 2023 and 2022.
Current wording
The following is a comparison of our operation results for the three months ended March 31, 2024 and2023.
Previous wording
During the three months ended December 31, 2023 and 2022, our cost of revenue amounted to $34,000 and $13,000 respectively during the same period in prior year, which was the result of the revenue transactions described above.
Current wording
During the three months ended March 31, 2024 and 2023, our cost of revenue amounted to $7,000 and $11,000 respectively during the same period in prior year, this represented the cost of the nano reactors sold to our distributor during each period, as discussed above.
Previous wording
For the three months ended December 31, 2023 and 2022, interest expense amounted to $2,000 and $1,000. This represents interest expense on SBA loans.
Current wording
Interest expense was $1,000 and $1,000 for the three months ended March 31, 2024 and 2023, respectively. This represents interest expense on SBA loans.
Previous wording
For the three months ended December 31, 2022, the Company recognized a loss of $11,000 to account for its 30% share in the net loss from the equity method investment. There was no similar loss recognized for the three months ended December 31, 2023 as a result of the impairment of the equity method investment in prior year.
Current wording
Loss from equity method investment was $0 and $14,000 for the three months ended March 31, 2024 and 2023, respectively, a decrease in loss of $14,000. For the three months ended March 31, 2023, the Company recognized a loss of $14,000 to account for its 30% share in the net loss from the equity method investment. There was no similar loss recognized for the three months ended March 31, 2024 as a result of the impairment of the equity method investment in prior year.
Previous wording
Results of Operations for the Six Months Ended December 31, 2023 compared to the Six Months Ended December 31, 2022
Current wording
Results of Operations for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023
Previous wording
The following is a comparison of our results of operations for the three months ended December 31, 2023 and 2022.
Current wording
The following is a comparison of our operating results for the nine months ended March 31, 2024 and 2023.
Previous wording
Operating expenses for the six months ended December 31, 2023 amounted to $386,000 compared with $598,000 for the same period in 2022, a decrease of $212,000 or 35.8%. The decrease is primarily due to a decrease in salary expenses of $102,000, a decrease in professional fees of $56,000 and a decrease in consulting fees of $41,000.
Current wording
General and administrative expenses was $556,000 and $872,000 for the nine months ended March 31, 2024, a decrease of $308,000 or 35.3% The decrease is primarily due to a decrease in salary expenses of $177,000, a decrease in stock based compensation of $40,0000 in professional fees of 14,000, a decrease in consulting fees of $44,000 and a decrease in advertising expense of $26,000.
Previous wording
For the three months ended December 31, 2023 and 2022, interest expense amounted to $3,000 and $3,000. This represents interest expense on SBA loans.
Current wording
Interest expense was $5,000 and $3,000 for the nine months ended March 31, 2024 and 2023, respectively. This represents interest expense on SBA loans.
Previous wording
For the six months ended December 31, 2022, the Company recognized a loss of $29,000, to account for its 30% share in the net loss from the equity method investment. There was no similar loss recognized for the six months ended December 31, 2023 as a result of the impairment of the equity method investment in prior year.
Current wording
Loss from equity method investment was $0 and $43,000 for the nine months ended March 31, 2024 and 2023, respectively, a decrease in loss of $43,000. For the nine months ended March 31, 2023, the Company recognized a loss of $43,000 to account for its 30% share in the net loss from the equity method investment. There was no similar loss recognized for the nine months ended March 31, 2024 as a result of the impairment of the equity method investment in prior year.
Previous wording
During the six months ended December 31, 2023 the Company incurred a net loss of $267,000 and used cash from operations of $11,000 and had a working capital deficit of $1,117,000 as of December 31, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern.
Current wording
The Company has not been generating sufficient revenues to fund operations and has been dependent on certain of its funding and sales from a technology and marketing agreement with its distributor. As of March 31, 2024, the Company had a working capital deficit of $781,000 and stockholders’ deficit of 855,000. These conditions raises 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, has expressed substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
As of December 31, 2023 we had cash and cash equivalents on hand of $7,000 and are not generating sufficient revenues to fund operations. In addition, management believes we may require additional funds to continue to operate our business. Management's plan is to generate income from operations by continuing to license our technology globally through our strategic partners, Desmet Ballestra Group (Desmet), Enviro Watertek (EW) and Alchemy Beverages, Inc. (ABI). Pursuant to our contract with Desmet, Desmet has been providing us monthly advances of $40,000 through October 1, 2024 to be applied against future reactor sales.
Current wording
As of March 31, 2024 we had cash and cash equivalents on hand of $183,000, We have executed a new agreement with our worldwide limited distributor. Desmet, which resulted in the placement of an order for $652,000 of which $326,000 was paid as a deposit in February 2024, the balance due on completion of the order. The monthly fee from our distributor has been decreased from $40,000 to $25,000 per month after deducting any purchases made during the period of the new agreement. We are uncertain that the new agreement will generate sufficient revenues to sustain the business. In addition, management believes we may require additional funds to continue to operate our business. Management's plan is to generate income from operations by continuing to license our technology globally through our strategic partners, Desmet Belgium (previously Desmet Ballestra Group) (Desmet), Enviro Watertek (EW) and Alchemy Beverages, Inc. (ABI).
Previous wording
Net cash used in operating activities during the six months ended December 31, 2023 amounted to $11,000 compared to $98,000 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 reserves.
Current wording
Net cash generated by operating activities during the nine months ended March 31, 2024 amounted to $165,000 compared to net cash used in operating activities of $131,000 for the comparative period. Funding for the operating activities was provided primarily by the sales of our systems and the deposit of $326,000 paid by Desmet for an order of ten units in terms of the revised Technology license Agreement entered into in February 2024..