Cavitation Technologies Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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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.
Sep 30, 2024 · Filed Nov 14, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001683168-24-008046
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 68 previous paragraphs and 61 current paragraphs.
23 unchanged; 7 reworded; 30 added; 35 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 2 previous and 8 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 (30)
Current report
In October 2024, we entered into a Patent Assignment and License Back Agreement with Desmet to assign certain patents, intellectual property rights and trademarks related to vegetable oil refining to Desmet, as consideration for the patent assignments, Desmet agreed to pay the Company $880,000 in cash. This transaction will provide the necessary capital for continuous operations and business development of our company.
Current report
Key points of the Agreement included:
Current report
Under both the Reserved License and the Grant-Back License, the Company will have a worldwide, exclusive, transferable, and royalty-free license and right to design, build, use, export, improve, sell, and market Nano Reactor® devices, as well as Nano Reactor® systems and products that incorporate or utilize Nano Reactor® devices, limited to uses and applications within one or more of the Licensed Fields.
Current report
As a result of this agreement, the Company expects that Desmet will start to manufacture the Nano reactors by itself and sale of Nano reactors to Desmet by the Company will significantly be reduced in future periods. We will continue to own and operate a large portfolio of patents and intellectual property rights in applications not related to vegetable oil refining. The following are Management’s plans going forward to generate revenues and sustain the operations of the Company and its current status:
Current report
1. Water Treatment and Remediation in the Permian Basin
Current report
From 2020 to 2022, our joint venture with Enviro Watertek, LLC restarted water treatment operations in the Permian Basin. Although our technology demonstrated commercial viability (approximately 3 million barrels treated), our partner was unable to expand and attract new customers due to significant shifts in the oil & gas industry. It has taken several years to rearrange and adapt our technology to fit new customers’ operations.
Current report
Currently, we have installed our system at a major water remediation company in Texas, where it has been in place for over six months, with more testing required. We continue to pursue additional customers, primarily in the Permian Basin.
Current report
What differentiates us in the industry:
Current report
The Company anticipates that sales will be generated in the first half of fiscal 2025.
Current report
2. Water Remediation and Disinfection in Agriculture
Current report
In 2024, we installed our first system at Hacienda Farms (B&F Greenhouse Services, Inc.) in Canada. The system is currently undergoing trials to increase oxygen levels in the water, eliminate algae, and control bacterial growth, all without the use of harsh chemicals. This innovative technology is designed to improve water quality and promote healthier crop growth.
Current report
Hacienda Farms, relies heavily on water from Lake Erie, which poses significant water remediation challenges due to issues like algae and bacterial contamination. Additionally, Hacienda Farms has been dealing with high sodium levels in the water, which affect calcium absorption in plants, and fungal issues that harm root health, ultimately reducing crop yields. These water quality challenges necessitate advanced remediation solutions to ensure the sustainability and productivity of their greenhouse operations. Our technology addresses these problems by controlling microorganisms, accelerating vegetative and root growth, and increasing overall plant biomass. This not only improves crop production but also supports sustainable farming practices.
Current report
The overall market for water treatment in Canada is valued at approximately $2.51 billion, with continuous expansion due to the demand for sustainable solutions in agriculture and industrial applications.
Current report
The outcome of the trials mentioned above, which we expect to be completed within the first calendar quarter of 2025, will determine the commercial viability of our product and the timeline for any potential revenue generation.
Current report
3. Business Venture with Alchemy Beverages, Inc.
Current report
Over the past several years, we have worked closely with Alchemy Beverages, Inc. (“ABI”) to develop the smart home kitchen appliance Barmuze and alcoholic beverages. Significant work has been done on Barmuze branding, including launching a new website and creating animations throughout the year to showcase how the appliance works. ABI is actively pursuing the commercial production of Barmuze, licensing the technology to third parties, and considering the opportunity to develop its own alcohol brands, leveraging our cutting-edge technology to transform any alcohol into a smooth, top-shelf experience.
Current report
ABI is in the final stages of completing its financial audit, which is estimated to be completed on or before December 31, 2024, engaging focus groups for Barmuze acceptance, refining marketing and distribution strategies, and securing additional capital for production. The Company also plans on obtaining additional financing in early 2025.
Current report
The earliest sales and revenue for Barmuze are anticipated in the second half of 2025. Also, ABI is working on creating its own line of alcoholic beverages and licensing of the technology to other brands. For more information, www.alchemybeveragesinc.com and www.barmuze.com.
Current report
4. New Technologies: Hydro-Plasma
Current report
Along with improving our existing technologies, we have developed Hydoplasma, an innovative process combining cavitation and cold plasma technology to enhance our water treatment efficiency, which:
Current report
This cutting-edge technology creates reactive agents, such as hydroxyl radicals and hydrogen peroxide, that break down pollutants, bacteria, and viruses in water more effectively than traditional methods. It’s an environmentally friendly and scalable solution, with applications in water treatment, agriculture, sulfur removal from bunker fuel, and more.
Current report
The global cold plasma market is projected to grow from $1.5 billion in 2021 to $3.1 billion by 2027, fueled by increasing demand for sustainable water solutions. Our technology has the potential to revolutionize water treatment on a global scale. To accelerate this development, we have established partnerships with New Mexico State University, the University of Guadalajara, and the Brackish Groundwater National Desalination Research Facility (BGNDRF), NM, to collaborate on water remediation programs.
Current report
Testing of the technology is currently underway. Upon a completion of multiple trials, if successful, sales and revenue are anticipated in the first half of 2025.
Current report
During the three months ended September 30, 2024 and 2023, we recorded no revenues. Although the Company has orders for nano reactors from Desmet, none were shipped during the current period. No usage fees were recognized during the current period.
Current report
During the three months ended September 30, 2024 and 2023, we recorded no cost of sales as no orders were shipped during the periods considered.
Current report
Operating Expenses
Current report
Operating expenses were $218,000 and $214,000 for the three months ended September 30, 2024 and 2023, respectively, an increase of $4,000 or 1.9%.the increase in general and administrative expense are as follows:
Current report
Research and development (R&D) expenses was $8,000 and $36,000 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $28,000 or 77.8%. During the prior year, 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. The research and development expenditure is dependent on progress made on the development.
Current report
As of September 30, 2024, the Company has cash in the amount of $2,000. 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 March 2025.
Current report
Net cash used in operating activities was $179,000 for the three months ended September 30, 2024 and net cash generated by operating activities was $122,000 for the three months ended September 30, 2023. Changes in our cash flows was due to changes in operating assets and liabilities as well as advances from Desmet. During the period ended September 30, 2023, the Company received advances from Desmet of $304,000 compared to none during the period ended September 30, 2024.
Removed paragraphs (35)
Previous 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.
Previous 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.
Previous report
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 report
General and administrative expenses
Previous 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.
Previous 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.
Previous report
Income (loss) from operations
Previous 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.
Previous report
Net income (loss) before and after income taxes
Previous 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.
Previous report
Loss from equity method investment
Previous report
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 report
Net income (loss)
Previous 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.
Previous report
Revenue
Previous 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.
Previous 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.
Previous report
Cost of Revenue
Previous 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.
Previous report
General and administrative Expenses
Previous report
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 report
Research and development expenses
Previous 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.
Previous report
Income (loss) from operations
Previous 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.
Previous report
Interest expense
Previous report
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 report
Net income (loss) before and after income taxes
Previous 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.
Previous report
Loss from equity method investment
Previous report
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 report
Net income (loss)
Previous 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.
Previous report
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 report
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..
Reworded paragraphs (7)
Previous wording
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.
Current wording
We were engaged in manufacturing our Nano-Reactors, which are designed to help refine vegetable oils, biodiesel transesterification and treatment of produced and frack water.
Previous wording
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 2024. 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.
Current wording
In prior 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 2025. 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.
Previous 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.
Current wording
In order to develop these markets 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
The following is a comparison of our operation results for the three months ended March 31, 2024 and2023.
Current wording
The following is a comparison of our operation results for the three months ended September 30, 2024 and 2023.
Previous 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.
Current wording
Interest expense was $1,000 and $1,000 for the three months ended September 30, 2024 and 2023, respectively. Interest expense relates to interest incurred on the SBA loan.
Previous 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.
Current wording
The accompanying condensed 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 condensed consolidated financial statements, during the three months ended September 30, 2024, the Company incurred a net loss of $227,000 and had a stockholders’ deficit of $27,074,000 as of September 30, 2024. 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, 2024, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern.
Previous wording
We may also attempt to raise additional debt and/or equity financing to fund operations and provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company's needs, that the Company will be able to achieve profitable operations or that the Company will be able to meet its future contractual obligations. Should management fail to obtain such financing, the Company may curtail its operations.
Current wording
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We had agreements to license our technology globally through our strategic partners, Desmet Belgium Group (Desmet) and Enviro Watertek, LLC (EW) and Alchemy Beverages, Inc (ABI).
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Results of Operations for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023
Previous report — wording carried elsewhere
The following is a comparison of our operating results for the nine months ended March 31, 2024 and 2023.
Previous report — wording carried elsewhere
The Company generates revenues from the sale of theNano Reactor® to customers/distributor as well as share in gross profit from the sale of such reactors by our distributors to their customers. Additionally, the Company generates revenues from its equity method investment.