Cavitation Technologies, Inc.

Previous 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.

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 commercial sales in our fiscal 2026. 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

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 wording

In June 2018, the Company entered into an agreement to license its patented alcoholic beverage technology to Alchemy Beverages, Inc. (“ABI”). Over the past several years, we have worked closely with 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.

Previous wording

ABI is in the final stages of completing its financial audit, which is estimated to be completed before the end of the first quarter of 2025, 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 wording

ABI is in the final stages of completing its financial audit, which is estimated to be completed before the end of the first quarter of fiscal 2026, 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 fiscal 2026.

Previous wording

Testing of the technology is currently underway. Upon completion of multiple trials, if successful, sales and revenue are anticipated in the first half of 2025.

Current wording

Testing of the technology is currently underway. Upon completion of multiple trials, if successful, sales and revenue are anticipated in the first half of fiscal 2026.

Previous wording

Global inflation remains a factor in fiscals 2024 and 2025, 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 recent indications by the current U.S government to implement tariffs on significant trading partners may result in increased costs for consumers, resulting in inflationary pressure. 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.

Current wording

Global inflation remains a factor in fiscals 2024 and 2025, with interest rates in the US remaining at higher levels, although there have been some rate decreases, the current uncertainty in the global markets around the implementation of trade tariffs by the US government has resulted in a pause on rate reductions. In addition, the impact of tariffs on all imported goods into the U.S. is expected to have a significant inflationary impact on all imports. 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

Revenue was $76,000 and $192,000 for the six months ended December 31, 2024, and 2023, respectively, a decrease of $116,000 or 60.4%. The Company delivered one purchase order placed prior to the assignment of our vegetable oil refining patents to Desmet. In the prior year we delivered on two purchase orders.

Current wording

Revenue was $122,000 and $519,000 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $397,000 or 76.5%. The Company delivered one purchase order placed prior to the assignment of our vegetable oil refining patents to Desmet. The significant decrease was due to the October 2024 patent assignment and license agreement with Desmet whereby the Company assigned certain of its U.S. and non-U.S. patents, technical information and related intellectual property (the “Assigned Patents”) that for several years have been licensed to Desmet for its use on a global basis in vegetable oil, fats and oleo applications, effectively terminating the February 2024 TLA Agreement with Desmet.

Previous wording

General and administrative expenses was $346,000 and $172,000 for the three months ended December 31, 2024, and 2023, respectively, an increase of $174,000 or 101.2%. The increase is primarily due to the following:

Current wording

General and administrative expenses was $283,000 and $170,000 for the three months ended March 31, 2025 and 2024, respectively, an increase of $113,000 or 66.5%. The increase is primarily due to the following:

Previous wording

Research and development expenses was $16,000 and $0 for the three months ended December 31, 2024 and 2023, respectively, an increase of $16,000 or 100.0%. 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 wording

Research and development expenses was $42,000 and $9,000 for the three months ended March 31, 2025 and 2024, respectively, an increase of $33,000 or 366.7%. 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.

Previous wording

Net income was $352,000 for the six months ended December 31, 2024 and net loss was $267,000 for the six months ended December 31, 2023, an increase in income of $619,000. The increase in net income is primarily due to the gain on the patent assignment offset by the decrease in revenue and the increase in general and administrative expenses, as discussed above.

Current wording

Net loss was $230,000 for the three months ended March 31, 2025 and net income was $331,000 for the three months ended March 31, 2024, an increase in loss of $561,000. The increase in loss is primarily due to decrease in revenues and an increase in general and administrative and research and development expenses, all discussed in detail above.

Previous wording

Results of Operations for the Six Months Ended December 31, 2024 compared to the Six Months Ended December 31, 2023

Current wording

Results of Operations for the Nine Months Ended March 31, 2025 compared to the Nine Months Ended March 31, 2024

Previous wording

The following is a comparison of our results of operations for the six months ended December 31, 2024 and 2023.

Current wording

The following is a comparison of our results of operations for the nine months ended March 31, 2025 and 2024.

Previous wording

Revenue was $76,000 and $192,000 for the three months ended December 31, 2024, and 2023, respectively, a decrease of $116,000 or 60.4%. The Company delivered one purchase order placed prior to the assignment of our vegetable oil refining patents to Desmet. In the prior year we delivered on two purchase orders.

Current wording

Revenue was $198,000 and $711,000 for the nine months ended March 31, 2025, and 2024, respectively, a decrease of $513,000 or 72.2%. The Company delivered two purchase order placed prior to the assignment of our vegetable oil refining patents to Desmet.

Previous wording

Cost of revenue was $13,000 and $34,000 for the three months ended December 31, 2024 and 2023, respectively, a decrease of $21,000 or 61.8%. The decrease is directly related to the decrease in revenue, as discussed above.

Current wording

Cost of revenue was $38,000 and $41,000 for the nine months ended March 31, 2025 and 2024, respectively, a decrease of $3,000 or 7.3%. The decrease is directly related to the decrease in revenues from reactor sales of $198,000 and $212,000 for the nine months ended March 31, 2025 and 2024, respectively.

Previous wording

General and administrative expenses was $564,000 and $386,000 for the six months ended December 31, 2024, and 2023, respectively, an increase of $178,000 or 46.1%. The increase is primarily due to the following:

Current wording

General and administrative expenses was $847,000 and $556,000 for the nine months ended March 31, 2025 and 2024, respectively, an increase of $291,000 or 52.3%. The increase is primarily due to the following:

Previous wording

Research and development expenses was $24,000 and $36,000 for the six months ended December 31, 2024 and 2023, respectively, an increase of $12,000 or 33.3%. 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 wording

Research and development expenses was $66,000 and $45,000 for the nine months ended March 31, 2025 and 2024, respectively, an increase of $21,000 or 46.7%. 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.

Previous wording

Gain on patent assignment was $880,000 for the three months ended December 31, 2024 as a result of sale and assignment of certain patents to Desmet. There was no similar transaction during the prior period.

Current wording

Gain on patent assignment was $880,000 for the nine months ended March 31, 2025 as a result of sale and assignment of certain patents to Desmet in October 2024. There was no similar transaction during the prior period.

Previous wording

Interest expense was $3,000 and $3,000 for the six months ended December 31, 2024 and 2023, interest expense is primarily related to the SBA loan.

Current wording

Interest expense was $5,000 and $5,000 for the nine months ended March 31, 2025 and 2024, interest expense is primarily related to the SBA loan.

Previous wording

Net income was $579,000 for the three months ended December 31, 2024 and net loss was $16,000 for the three months ended December 31, 2023, an increase in income of $595,000. The increase in net income is primarily due to the gain on the patent assignment offset by the decrease in revenue and the increase in general and administrative expenses, as discussed above.

Current wording

Net income was $122,000 and $64,000 for the nine months ended March 31, 2025 and 2024, respectively, an increase of $58,000 or 90.6%. The increase in net income is primarily due to the gain on the patent assignment offset by the decrease in revenue and the increase in general and administrative expenses, as discussed above.

Previous 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 six months ended December 31, 2024, the Company incurred loss from operations of $525,000. In addition, we had an stockholders’ deficit of $23,000 as of December 31, 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 the inability of the Company 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 nine months ended March 31, 2025, the Company incurred loss from operations of $753,000, used cash in operations of $624,000 and had accumulated deficit of $26,725,000 as of March 31, 2025. 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 the inability of the Company to continue as a going concern.

Previous wording

As of December 31, 2024, the Company has cash in the amount of $681,000. 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 using its Reserved Grant Back License to apply the technology to; (i)water and wastewater processing, recovery, recycling and purification (including oilfield wastewater) and; (ii) manufacture, distillation, brewing, enhancements, sale and marketing of alcoholic beverages, together the Licensed Fields. 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 and Nano Reactor® devices and systems (and products) that incorporate or utilize Nano Reactor® devices, in each case within the Licensed Fields, and to continue to use the Nano Reactor® trademark in connection with its business, systems and products within the Licensed Fields. 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 June 30, 2025.

Current wording

As of March 31, 2025, the Company has cash in the amount of $432,000. 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 using its Reserved Grant Back License to apply the technology to; (i)water and wastewater processing, recovery, recycling and purification (including oilfield wastewater) and; (ii) manufacture, distillation, brewing, enhancements, sale and marketing of alcoholic beverages, together the Licensed Fields. 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 and Nano Reactor® devices and systems (and products) that incorporate or utilize Nano Reactor® devices, in each case within the Licensed Fields, and to continue to use the Nano Reactor® trademark in connection with its business, systems and products within the Licensed Fields. 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 June 30, 2025.

Previous wording

Net cash used in operating activities was $376,000 for the six months ended December 31, 2024 and net cash used in operating activities was $11,000 for the six months ended December 31, 2023. The increase in cash used in operating activities is primarily due operating expenses and changes in working capital. In the prior year we also received net advances from Desmet amounting to $164,000 with no similar advances received in the current period.

Current wording

Net cash used in operating activities was $624,000 for the nine months ended March 31, 2025 and net cash generated by operating activities was $165,000 for the nine months ended March 31, 2024. The increase in cash used in operating activities is primarily due to cash used in operating expenses and changes in working capital.

Previous wording

Net cash provided by investing activities amounted to $880,000 as a result of the proceeds received from the assignment of patents to Desmet. There were no similar transactions in the prior period.

Current wording

Net cash provided by investing activities amounted to $880,000 as a result of the proceeds received from the October 2024 assignment of patents to Desmet. There were no similar transactions in the prior period.