Cavitation Technologies, Inc.

Cavitation Technologies, Inc. operates in the industrial fluid processing and water treatment markets, with its patented Nano Reactor® and LPN™ systems designed to serve large, growing, global markets such as renewable fuels, water treatment, wines and spirits enhancement, algae oil extraction, water-oil emulsions and crude oil yield improvement. The fracking industry has seen significant growth over the past ten years, reaching daily water consumption volume of over 58 million barrels per day ¹. The overall market for water treatment in Canada is valued at approximately $2.51 billion ², with continuous expansion due to the demand for sustainable solutions in agriculture and industrial applications. The global cold plasma market is projected to grow from $1.5 billion in 2021 to $3.1 billion by 2027 ³, fueled by increasing demand for sustainable water solutions. The company's systems are designed to process industrial liquids at a reduced processing time, lower operating cost, improved yield while operating in an environmentally friendly manner.

The company faces competition in produced and frac water treatment applications ranging from local service providers to multi-national global corporations with considerable financial resources, engineering expertise, established and proven technologies. Management believes that LPN™ is a conceptually new technology that has not been introduced in the field of water treatment applications, and that LPN™ has demonstrated exceptional results in treating produced and frac water commercially, significantly reducing the usage of hazardous chemicals during the process while achieving desirable water quality for industrial re-use or disposal, although acceptance of the technology has been slow. The company differentiates itself through no chemical usage in water remediation, significantly reducing operational costs; integration into existing processes within 24 hours ⁴ without disrupting ongoing operations; compact systems with minimal energy consumption; and post-treatment water that can be either reused or safely disposed of. Desmet, the company's former strategic partner, is a global engineering and equipment supply firm with more than 40 sales representatives ⁵ selling in North America, South America, Europe, and Asia, and since its founding in 1946 has built a global network that includes 1,300 employees ⁶, 17 global and 8 representative offices ⁷, and more than 6,000 lines ⁸ in a variety of applications, with its Oils & Fats division having supplied small and large plants to approximately 1,900 oil millers in 150 countries ⁹, covering over 6,300 process sections ¹⁰.

Cavitation Technologies generates revenue through the sale of its Nano Reactor® and LPN™ systems, short-term rental of nano reactors, usage fees based on actual usage by the customer, and license fee revenue recognized when the company satisfies the performance obligation based on the related license agreement. Revenue from the sale of Nano Reactor® and LPN™ was recognized when products were shipped from manufacturing facilities as this was the sole performance obligation under these contracts with no continuing obligation to the customer. The company's primary customer segments include vegetable oil refiners, produced and frac water treatment operators in the Permian Basin, agricultural greenhouse operations, and the alcoholic beverage industry through its licensing arrangement with Alchemy Beverages, Inc. The company has historically sourced reactor components from various domestic and international suppliers and does not have any long-term contracts, agreements, or commitments with any supplier, believing it would take approximately 30 days ¹¹ to find a new supplier if necessary.

The company's first commercial application was the CTi Nano Neutralization® System, utilized to improve the edible vegetable oil refining process, designed to reduce refining costs, increase oil yield, and limit the number of chemical additives used in chemical refining of vegetable oils. This patented process (US Patent #7,762,715 and #8,042,989) is designed to be incorporated into new and existing soybean, rapeseed, canola and palm vegetable oil refineries. In October 2024, the company 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, and as consideration for the patent assignments, Desmet paid the company $880,000 ¹² in cash. This transaction provided capital for continuous operations and business development. 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. The company retained a worldwide, exclusive, transferable, and royalty-free license to practice and use the assigned patents in the fields of water and wastewater processing, recovery, recycling, and purification (including oilfield wastewater), as well as the manufacture, distillation, brewing, enhancement, sale, and marketing of alcoholic beverages, and retained exclusive rights to use the "Nano Reactor®" mark for its businesses, systems, and products related to the Licensed Fields.

The company's water treatment and remediation business in the Permian Basin is conducted through Enviro WaterTek LLC, owned 50% by the company and 50% by Delaware Water Company, LLC, with the company accounting for its investment under the equity method. The agreement with EW provides for sales on LPN™ plus recurring revenue stream based on processing of produced and frac water volumes and utilization, and has a fifteen-year term ¹³. The system has the capacity to treat approximately 17,000 barrels of produced water per day (BPD) ¹⁴. In June 2023, the company determined that investment in EW was impaired, and as a result, the company recorded an impairment charge of approximately $1.1 million ¹⁵. There were no transactions during fiscals 2026 and 2025 from sale of reactors and usage fee. In 2024, the company installed its first system at Hacienda Farms (B&F Greenhouse Services, Inc.) in Canada, currently undergoing trials to increase oxygen levels in the water, eliminate algae, and control bacterial growth without the use of harsh chemicals. The company has also developed Hydro Plasma, an innovative process combining cavitation and cold plasma technology to enhance water treatment efficiency, which is highly scalable from 15 to 40 GPM ¹⁶ and is patent pending. In August 2025, the company incorporated a wholly owned subsidiary, Xyra Corp, and licensed its technology to Xyra Corp. Xyra holds an exclusive license for Cavitation Technologies Inc. patented Cavitation Non-Thermal Plasma™ (CNTP) systems, developed initially for immersion cooling in crypto mining and high-density data centers.

In fiscal 2014, Roman Gordon, one of the company's shareholders and a former officer, formed Cameo USA LLC, and on June 4, 2018, Mr. Gordon contributed his 100% interest in Cameo to Cavitation Technologies, Inc. On June 29, 2018, the company sold Cameo to Alchemy Beverages Inc. and agreed to provide certain licensing rights related to its miniature low pressure nano-reactor (MLPN) to be used in developing and manufacturing of small home appliances to enhance alcoholic beverages. In consideration, ABI agreed to issue 19.9% of ABI's outstanding common shares to the company, limited to 20 million shares of ABI ¹⁷. Pursuant to the licensing agreements, ABI will have the exclusive global marketing and distribution rights of Cameo and the company's patented and patent pending technologies for the processing of alcoholic beverages, and the company will receive royalty payments ranging from 1% to 3% ¹⁸ on all net revenues for the life of the applicable patents, in addition to leasing, consulting, and manufacturing fees. Over the past several years, the company has worked closely with ABI to develop the smart home kitchen appliance Barmuze and alcoholic beverages. ABI is in the process of completing its financial audit, estimated to be completed before the end of the first quarter of fiscal 2027, engaging focus groups for Barmuze acceptance, refining marketing and distribution strategies, and securing additional capital for production. As of June 30, 2026 and the date of this report, ABI has not generated any sales under the Cameo brand, and the earliest sales and revenue for Barmuze are anticipated in the first half of 2027 ¹⁹. During fiscals 2026 and 2025, there were no sales or royalties generated pertaining to the agreement with Alchemy Beverages, Inc. The investment in ABI has no value assigned to it, which approximates its fair value.

During the year ended June 30, 2026, the company recorded revenue of $3,000 ²⁰ and incurred a net loss of $1,404,000 ²¹. Revenue was $3,000 ²² and $203,000 ²³ for the years ended June 30, 2026, and 2025, respectively, a decrease of $200,000 ²⁴ or 98.5% ²⁵. Revenue for the current year represented income received for the rental of a nano reactor to one customer. Cost of revenue was $0 ²⁶ and $38,000 ²⁷ for fiscal 2026 and 2025, respectively, a decrease of $38,000 ²⁸ or 100.0% ²⁹. Gross profit was $3,000 ³⁰ and $165,000 ³¹ for fiscal 2026 and 2025, respectively, a decrease of $162,000 ³² or 98.2% ³³. General and administrative expenses were $1,380,000 ³⁴ and $1,057,000 ³⁵ for fiscal 2026 and 2025, respectively, an increase of $323,000 ³⁶ or 30.6% ³⁷. Research and development expenses were $11,000 ³⁸ and $95,000 ³⁹ for fiscal 2026 and 2025, respectively, a decrease of $84,000 ⁴⁰ or 88.4% ⁴¹. Total operating expenses were $1,391,000 ⁴² and $1,152,000 ⁴³ for fiscal 2026 and 2025, respectively, an increase of $239,000 ⁴⁴ or 20.7% ⁴⁵. Loss from operations was $1,388,000 ⁴⁶ and $987,000 ⁴⁷ for fiscal 2026 and 2025, respectively, an increase of $401,000 ⁴⁸ or 40.6% ⁴⁹. The company recognized a gain on patent assignment of $0 ⁵⁰ and $880,000 ⁵¹ for fiscal 2026 and 2025, respectively, a decrease of $880,000 ⁵² or 100.0% ⁵³. Interest and other expense, net was $40,000 ⁵⁴ and $6,000 ⁵⁵ for fiscal 2026 and 2025, respectively, an increase of $34,000 ⁵⁶ or 566.7% ⁵⁷. Change in fair value of derivative liability was $24,000 ⁵⁸ and $0 ⁵⁹ for fiscal 2026 and 2025, respectively, an increase of $24,000 ⁶⁰ or 100.0% ⁶¹. Net loss was $1,404,000 ⁶² and $113,000 ⁶³ for fiscal 2026 and 2025, respectively, an increase of $1,291,000 ⁶⁴ or 1,142.5% ⁶⁵. As of June 30, 2026, the company had a working capital deficit of $554,000 ⁶⁶ and a stockholders' deficit of $693,000 ⁶⁷, and utilized cash in operations of $755,000 ⁶⁸ during the year ended June 30, 2026.

Management's plans going forward to generate revenues and sustain operations center on five initiatives: water treatment and remediation in the Permian Basin, water remediation and disinfection in agriculture, the business venture with Alchemy Beverages, Inc., new technologies including Hydro-Plasma, and non-thermal plasma through Xyra Corp. The company anticipates that it will generate revenues from these new technologies and additional markets identified. The earliest sales and revenue for Barmuze are anticipated in the first half of 2027 . Upon completion of multiple trials for Hydro-Plasma, if successful, sales and revenue are anticipated in the first half of fiscal 2027 ⁶⁹. The company anticipates that it may need additional funding and may attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital, and should management fail to obtain such financing, it may curtail its operations.

The water treatment and remediation opportunity in the Permian Basin is pursued through Enviro WaterTek LLC, a limited liability company owned 50% by the company and 50% by Delaware Water Company, LLC, formed in April 2019. The agreement with EW provides for sales on LPN™ plus recurring revenue stream based on processing of produced and frac water volumes and utilization, and has a fifteen-year term . The system has the capacity to treat approximately 17,000 barrels of produced water per day (BPD) . The fracking industry has seen significant growth over the past ten years, reaching daily water consumption volume of over 58 million barrels per day . The company's newly designed Low Pressure Nano Reactor (LPN™) was specifically developed to be integrated into produced water treatment systems along with proprietary chemical formulations and has depicted measurable and quantifiable advantages over industry standard processes and equipment. Currently, the company has installed its system at a major water remediation company in Texas, where it has been in place for over six months ⁷⁰, with more testing required, and continues to pursue additional customers, primarily in the Permian Basin. In June 2023, the company determined that investment in EW was impaired, and as a result, recorded an impairment charge of approximately $1.1 million , and there were no transactions during fiscals 2026 and 2025 from sale of reactors and usage fee.

The agricultural water remediation opportunity is being pursued following the 2024 installation of the company's first system at Hacienda Farms (B&F Greenhouse Services, Inc.) in Canada, where the system is currently undergoing trials to increase oxygen levels in the water, eliminate algae, and control bacterial growth without the use of harsh chemicals. Hacienda Farms relies heavily on water from Lake Erie, which poses significant water remediation challenges due to issues like algae and bacterial contamination, and 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. The company's technology addresses these problems by controlling microorganisms, accelerating vegetative and root growth, and increasing overall plant biomass. 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.

The Hydro-Plasma technology combines cavitation and cold plasma technology to enhance water treatment efficiency, breaking down both organic and inorganic compounds, is highly scalable from 15 to 40 GPM , eliminates microorganisms and diseases, has multiple industrial applications, and is patent pending. This 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, and is an environmentally friendly and scalable solution with applications in water treatment, agriculture, sulfur removal from bunker fuel, and more. 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. To accelerate this development, the company has 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. Testing of the technology is currently underway, and upon completion of multiple trials, if successful, sales and revenue are anticipated in the first half of fiscal 2027 .

The Xyra Corp non-thermal plasma initiative was established in August 2025 when the company incorporated Xyra Corp as a wholly owned subsidiary and licensed its technology to Xyra Corp. Xyra is focused on identifying and capitalizing on opportunities in the crypto technologies market and holds an exclusive license for Cavitation Technologies Inc. patented Cavitation Non-Thermal Plasma™ (CNTP) systems, developed initially for immersion cooling in crypto mining and high-density data centers. This technology solves critical pain points such as fluid degradation, contamination, and system downtime in next-generation computing environments. Xyra launched the first AI-driven, quantum-secure remittance and tokenization network designed for the global economy, with the platform addressing the inefficiencies of today's outdated cross-border systems, tapping into multi-trillion-dollar markets while introducing the first credit card issuance linked directly to remittance flows. Xyra is building its own regulated infrastructure, obtaining and operating under Money Transmitter Licenses (MTLs) across multiple jurisdictions, with the issuance of fully asset-backed, quantum-secure stablecoins creating instant, compliant fiat-to-stablecoin rails for remittances, cross-border B2B, and tokenized settlements.

The Alchemy Beverages, Inc. business venture involves the development of the smart home kitchen appliance Barmuze and alcoholic beverages, with significant work 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 the company's cutting-edge technology to transform any alcohol into a smooth, top-shelf experience. ABI is in the process of completing its financial audit, estimated to be completed before the end of the first quarter of fiscal 2027 ⁷¹, 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. As of June 30, 2026 and the date of this report, ABI has not generated any sales under the Cameo brand, and the earliest sales and revenue for Barmuze are anticipated in the first half of 2027 . Pursuant to the licensing agreements, ABI will have the exclusive global marketing and distribution rights of Cameo and the company's patented and patent pending technologies for the processing of alcoholic beverages, and the company will receive royalty payments ranging from 1% to 3% on all net revenues for the life of the applicable patents, in addition to leasing, consulting, and manufacturing fees.

The company's cost structure is characterized by general and administrative expenses of $1,380,000 and research and development expenses of $11,000 for fiscal 2026, compared to $1,057,000 and $95,000 respectively for fiscal 2025. Total operating expenses were $1,391,000 for fiscal 2026 compared to $1,152,000 for fiscal 2025, an increase of $239,000 or 20.7% . The company has historically sourced reactor components from various domestic and international suppliers and does not have any long-term contracts, agreements, or commitments with any supplier, believing it would take approximately 30 days to find a new supplier if necessary. As of June 30, 2026, the company had two full-time employees ⁷² and had engaged several consultants and independent contractors over the past year. Members of the technical team are comprised of experienced professionals who are chemists, civil, chemical, and mechanical engineers with expertise in hydrodynamic cavitation, nano technology and water treatment.

The company's capital allocation priorities include funding operations and providing additional working capital, with management indicating it may attempt to raise additional debt and/or equity financing. During the fiscal years ended June 30, 2026 and 2025, the company spent $11,000 and $95,000 , respectively, on research and development activities. The company has neither declared nor paid any dividends on its Common Stock in the preceding two fiscal years ⁷³ and currently intends to retain future earnings, if any, to fund ongoing operations and finance the growth and development of its business, and therefore does not anticipate declaring or paying cash dividends on its Common Stock for the foreseeable future. As of June 30, 2026, the company had a working capital deficit of $554,000 and a stockholders' deficit of $693,000 , and utilized cash in operations of $755,000 during the year ended June 30, 2026. The company's corporate headquarters is located in Chatsworth, California, in an approximately 5,000 square foot facility ⁷⁴, with monthly rent payments approximating $7,000 ⁷⁵ on a month-to-month basis following the end of the lease agreement in January 2025.

Cavitation Technologies faces material risks specific to its business model and current situation. The company generated revenue of only $3,000 in fiscal 2026 and incurred a net loss of $1,404,000 , with a working capital deficit of $554,000 and a stockholders' deficit of $693,000 as of June 30, 2026, and utilized cash in operations of $755,000 during the year. Management states that it may need additional funding and may attempt to raise additional debt and/or equity financing, and that should management fail to obtain such financing, it may curtail its operations. The company's historical revenue was substantially dependent on sales of reactors to Desmet, and following the October 2024 Patent Assignment and License Back 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. The company has generated no revenue pertaining to its licensing agreement with Enviro WaterTek, LLC in fiscals 2026 and 2025, and in June 2023 determined that its investment in EW was impaired, recording an impairment charge of approximately $1.1 million . The company has also generated no sales or royalties pertaining to its agreement with Alchemy Beverages, Inc. during fiscals 2026 and 2025, and the investment in ABI has no value assigned to it. The company had two full-time employees as of June 30, 2026, and does not have any long-term contracts, agreements, or commitments with any supplier, believing it would take approximately 30 days to find a new supplier if necessary. The proposed tender offer by European Guarantee Services S.à.r.l. for a total purchase price of $35 million ⁷⁶ in cash (less certain indebtedness and accrued liabilities) remains subject to regulatory review and approval and has not yet been finalized or consummated.

Management's message to shareholders emphasizes the company's transition from its historical vegetable oil refining business to new commercial applications in water treatment, agriculture, alcoholic beverages, and non-thermal plasma technologies, following the October 2024 assignment of patents relating to vegetable oil refining to Desmet Belgium for gross proceeds of $880,000 . The company retained a worldwide, exclusive, transferable, and royalty-free license to practice and use the assigned patents in the fields of water and wastewater processing, recovery, recycling, and purification (including oilfield wastewater), as well as the manufacture, distillation, brewing, enhancement, sale, and marketing of alcoholic beverages, and retained exclusive rights to use the "Nano Reactor®" mark for its businesses, systems, and products related to the Licensed Fields. Management's stated plans going forward to generate revenues and sustain operations center on five initiatives: water treatment and remediation in the Permian Basin, water remediation and disinfection in agriculture, the business venture with Alchemy Beverages, Inc., new technologies including Hydro-Plasma, and non-thermal plasma through Xyra Corp. The company anticipates that it will generate revenues from these new technologies and additional markets identified, with the earliest sales and revenue for Barmuze anticipated in the first half of 2027 and, upon completion of multiple trials for Hydro-Plasma, if successful, sales and revenue anticipated in the first half of fiscal 2027 . Management acknowledges that during the year ended June 30, 2026, the company generated a net loss of $1,404,000 and utilized cash in operations of $755,000 , and that as of June 30, 2026, the company had a working capital deficit of $554,000 and a stockholders' deficit of $693,000 . Management states that it may need additional funding and may attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital, and that should management fail to obtain such financing, it may curtail its operations. The company's strategic priorities for the period ahead are the commercialization of its water treatment technologies in the Permian Basin and agriculture, the development and launch of the Barmuze appliance and alcoholic beverages through Alchemy Beverages, Inc., and the build-out of the Xyra Corp non-thermal plasma and quantum-secure remittance platform.