Cavitation Technologies, Inc.

Current report

Tender Offer

Current report

On August 14, 2026, we entered into a definitive tender offer agreement (the “Agreement”) with European Guarantee Services S.à.r.l. (“Purchaser”), pursuant to which the Purchaser agreed to acquire or seek to acquire all of the outstanding shares of our common stock (the “CTI Shares”) for a total purchase price of $35 million in cash (less certain indebtedness and our accrued liabilities) (the “Net Price”). Under the Agreement, the Purchaser will commence an offer to purchase the CTI Shares (the “Offer”) within 10 business days after the TO has met the regulatory requirements of the SEC and will remain open during an offer period of at least 60 business days to give shareholders an opportunity to review this Agreement, the Offer and the offer documents.

Current report

Under the Agreement, the Offer will contain an Initial Offer Price per Share determined by dividing the Net Price by the total number of CTI Shares outstanding as of the date of the Agreement. However, the Initial Offer Price will be subject to adjustment and a Final Offer Price per Share will be determined based on the total number of CTI Shares outstanding as of a Record Date, a date that is 45 business days after the commencement of the Offer. The Final Offer Price will be included in an amended Offer and offer documents that will be filed with the SEC and disseminated to our shareholders. Following a determination of the Final Offer Price and dissemination of the amended Offer to our shareholders, the Purchaser will extend the offer period as may be necessary in order to give shareholders at least 30 business days to review the amended Offer, the Final Offer Price, and a final recommendation issued by the Company’s board of directors before the offer period during which shareholders may tender their Shares pursuant to the amended Offer (as extended) expires.

Current report

The Agreement contains both customary and special customary representations, and warranties of the parties and sets forth, in Annex I to the Agreement, a list of the conditions (the “Offer Conditions”) that must be satisfied or waived by Purchaser before the Purchaser becomes obligated to purchase Shares that are tendered pursuant to the amended Offer. These Offer Conditions may be summarized as follows:

Current report

Following the expiration of the offer period (as may be extended), and subject to the satisfaction, or waiver by Purchaser, of the Offer Conditions, the Agreement provides that Purchaser will acquire, at the Final Offer Price, all of the outstanding CTI Shares that are tendered pursuant to the amended Offer (and not validly withdrawn).

Current report

Neither this Agreement nor the cash tender offer for the CTI Shares that will be made by Purchaser under the terms of the Agreement will require the prior approval of our shareholders. The proposed transaction remains subject to regulatory review and approval and has not yet been finalized or consummated.

Current report

Inflation

Current report

Global inflation remains a factor in fiscals 2026 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 market fluctuations. 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 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 report

In addition, the Company also recognizes revenues from short term rental of nano reactors. Rental revenue is recognized over the term of the agreement and when collectability is certain.

Current report

Derivative Financial Instruments

Current report

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Current report

Certain convertible notes have a variable priced conversion feature which qualifies as a derivative liability which is valued using a variable option pricing model using level 3 inputs. The Company’s derivative liabilities are adjusted to reflect fair value at each reporting date, with any increase or decrease in the fair value being recorded in the statement of operations.

Current report

The Company generated revenues from the sale of theNano Reactor® to customers/distributor. Additionally, the Company generates revenues from short term rental of nano reactors.

Current report

Revenue was $3,000 and $203,000 for the years ended June 30, 2026, and 2025, respectively, a decrease of $200,000 or 98.5%. Revenue for the current year represented income received for the rental of a nano reactor to one customer. In the prior year, the Company completed and delivered one purchase order placed by Desmet prior to the assignment of our vegetable oil refining patents to Desmet.

Current report

Cost of revenue was $0 and $38,000 for the years ended June 30, 2026 and 2025, respectively, a decrease of $38,000 or 100.0%. In the current year, no sales of reactors took place. In the prior year the cost of sales related to the sale of reactors to third parties.

Current report

Research and development expenses decreased by $84,000. During the current year, management scaled back research into cold plasma technology due to cash constraints. 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

Interest and other expense, net

Current report

Change in fair value of derivative liability

Current report

Change in fair value of derivative liability was $24,000 and $0 for the years ended June 30, 2026 and 2025, the increase is primarily related to the valuation of the conversion feature on the convertible notes payable issued during the current year accounted as derivative liabilities and the subsequent mark-to-market of these derivative liabilities at our reporting period end. There was no similar transaction in the prior period.

Current report

Net loss was $1,404,000 and $113,000 for the years ended June 30, 2026 and 2025, respectively, an increase in loss of $1,291,000. The increase in net loss is primarily due to the decrease in revenue, the increase in operating expenses, the prior year gain on the patent assignment, the increase in interest expense, offset by the mark-to-market derivative liability movement, as discussed above.

Current report

Our cash balance at June 30, 2026 and 2025 was $17,000 and $249,000, respectively, a decrease of $232,000, primarily due to the decrease in revenue and the cash used in operating activities of $755,000 not being fully offset by the proceeds of financing operations of $523,000.

Current report

We generated cash of $523,000 in financing activities, primarily from the issuance of common stock units, and the issuance of notes payable, notes payable – related parties and convertible notes payable during the current fiscal year.

Previous report

Inflation and potential recession

Previous report

We are, and our suppliers have experienced significant broad-based inflation of manufacturing and distribution costs as well as transportation challenges, partially as a result of the pandemic and there is uncertainty over the impact that recently implemented tariffs on various countries will have on the cost of our products or components used in our products. Although we do not believe that inflation has had a material effect on our business, financial condition or results of operations, it may in the future. We are monitoring cost structures and evaluating to what extent any such costs can be passed on to customers, taking into account the overall impact of increasing inflation and interest rate pressures on consumers. We expect input cost inflation to continue at least throughout 2026. If we are unable to successfully manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely affected. Additionally, there have been various economic indicators that the United States economy may be entering a recession in upcoming quarters. An economic recession could potentially impact the general business environment and the capital markets, which may have a material negative impact on our financial results.

Previous report

Leases

Previous report

The Company accounts for leases under guidance of Accounting Standards Codification (“ASC”) 842, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its office lease as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.

Previous report

Equity Method Investment

Previous report

The Company accounts for investments in entities in which the Company has significant influence over the entity’s financial and operating policies, but does not control, using the equity method of accounting. The equity method investments are initially recorded at cost, and subsequently increased for capital contributions and allocations of net income, and decreased for capital distributions and allocations of net loss. Equity in net income (loss) from the equity method investment is allocated based on the Company’s economic interest. The Company assesses its investment in equity method investments for recoverability, and if it is determined that a loss in value of the investment is other than temporary, the Company writes down the investment to its fair value. Based on Management’s assessment, the value of its equity method investment was impaired as of June 30, 2023 and as such, recorded an impairment charge of $1,112,000. As of June 30, 2025 and 2024, the remaining value of its investments amounted to a de minimus amount of $1,000, respectively.

Previous report

During the year ended June 30, 2025, revenue decreased by $1,160,000, as a result of the decrease in reactors purchased by Desmet, prior to the assignment of the patents to Desmet, which resulted in a decrease in revenues from reactor sales from $865,000 to $198,000 and a fee of $5,000 from the use of a reactor by a new customer. In addition, the Company also recognized $498,000 of license fee in 2024 pursuant to the termination of the October 2021 agreement with Desmet. There was no similar license fee revenue in fiscal 2025.

Previous report

During the year ended June 30, 2025 and 2024, cost of sales was $38,000 and $156,000, respectively, a decrease of $118,000 or 76.0%. The decrease is directly attributable to the cost of the production of reactors which corresponds to the decrease in reactors revenues. In addition, in the prior year, the Company recognized license fee revenue of $498,000, with no associated cost of sales. After taking these items into account the cost of sales movement is in line with normal margins earned.

Previous report

Research and development expenses increased by $34,000. During the current year, as in the prior year, management continued investing in research into cold plasma technology to be applied to new markets.

Previous report

Interest and other income (expense) increased by $7,000, this is primarily due to interest on the SBA loan. In the prior year an adjustment was made to the accrued interest on the SBA loan after reconciling to the balance reflected by the SBA noteholder.

Previous report

Our net loss in fiscal 2025 was $113,000 and our net income in fiscal 2024 was $439,000, an increase in loss of $552,000 due primarily to a decrease in revenue, an increase in general and administrative expenses and research and development costs, offset by the gain realized on the patent assignment, discussed above.

Previous report

Our cash balance at June 30, 2025 and 2024 was $249,000 and $179,000, respectively, an increase of $70,000, primarily due to the proceeds realized on the assignment of patents to Desmet during October 2024.

Previous report

We generated cash of $880,000 from the assignment of our patents to Desmet.

Previous report

We utilized cash in financing activities of $4,000 for the year ended June 30, 2025, for the installment payment of notes payable.