| Organization and Summary of Significant Accounting Policies | Note 1 – Organization and Summary of Significant Accounting
Policies Cavitation Technologies,
Inc. (“the Company,” “CTi,” “we,” “us,” and “our”) is a Nevada corporation
originally incorporated in January 2007 under the name Bio Energy, Inc. The Company had originally developed, patented, and commercialized
proprietary technology, which has subsequently been sold to Desmet Ballestra in the patent assignment and license back agreement disclosed
below. Patent assignment and license back
agreement On October 9, 2024, the Company has entered into
an agreement with Desmet that monetized the Company by the assignment of 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 (see Note 2). Basis of Presentation The accompanying
condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”)
as promulgated in the United States of America (“U.S.”) and with instructions to Form 10-Q pursuant to the rules and regulations
of Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and Article 8-03 of Regulation S-X under the Exchange
Act. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, we have included all adjustments considered necessary (consisting of
normal recurring adjustments) for a fair presentation. Operating results for the three and six months ended December 31, 2024 are not
indicative of the results that may be expected for the fiscal year ending June 30, 2025. You should read these unaudited condensed consolidated
financial statements in conjunction with the audited financial statements and the notes thereto included in the Company’s annual report
on Form 10-K for the year ended June 30, 2024 filed on September 30, 2024. The condensed consolidated balance sheet as of June 30, 2024
has been derived from the audited financial statements included in the Form 10-K for that year. Going Concern The accompanying
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. During the six months ended December 31, 2024, the Company incurred loss
from operations of $ 525,000 23,000 In October 2024, the Company assigned certain
of its patents used in the production of the Nano reactor to Desmet in exchange for cash of $ 880,000 eserved
Grant Back License agreement 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) T 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. Principles of Consolidation The consolidated financial statements include the
accounts of Cavitation Technologies, Inc. and its wholly owned subsidiary Hydrodynamic Technology, Inc. Intercompany transactions and
balances have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported
amounts of revenue and expenses during the reporting period. Significant estimates include estimates for reserves for valuation of our
equity method investments, assumptions used in valuing our stock options, stock warrants and common stock issued for services and valuation
allowance for our deferred tax assets, among other items. Actual results could differ from these estimates. Revenue Recognition The Company follows the guidance of Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers
(“ASC 606”). ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts,
which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract
or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it
is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
Revenue from sale of our Nano Reactors is recognized when products are shipped from our manufacturing facilities as this is our sole performance
obligation under these contracts and we have no continuing obligation to the customer. For the license fee revenue, and revenue from
assignments of its patents, revenue is recognized when the Company satisfies the performance obligation based on the related
agreements and collectability is certain. In addition, the Company also recognizes revenues
from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer and collectability is certain. Cash and Cash Equivalents The Company considers highly liquid investments
with original maturities of three months or less to be cash equivalents. At December 31, 2024 and June 30, 2024, the Company had
no The Company maintains its cash with one domestic financial
institution. From time to time, cash balances in this domestic bank may exceed federally insured limits provided by the Federal Deposit
Insurance Corporation (“FDIC”) of up to $250,000. As of December 31, 2024, Company had deposits in excess
of federally insured limit of $ 431,000 Equity Method Investment 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. Equity method investments are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss
in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount
of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available
information at the time the analysis is prepared. Based on Management’s assessment, the value of its equity method investment was
impaired as of June 30, 2023. As of December 31, 2024 and June 30, 2024, the remaining de minimis value of its investments was $ 1,000 Income Taxes The Company follows the asset and liability method
of accounting for income taxes. The Company recognizes deferred tax assets and liabilities to reflect the estimated future tax effects,
calculated at anticipated future tax rates, of future deductible or taxable amounts attributable to events that have been recognized on
a cumulative basis in the financial statements. A valuation allowance related to a deferred tax asset is recorded when it is more likely
than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects
of the changes in tax laws and rates of the date of enactment. Leases The Company accounts for its leases in accordance
with the guidance of FASB ASC 842, Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use
assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement
based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based
on the information available at lease commencement in determining the present value of unpaid lease payments. In January 2025, the Company’s lease expired
and is currently on a month-to-month basis. Fair Value Measurement FASB ASC 820-10 requires entities to disclose the
fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable
to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged
in a current transaction between willing parties. In addition to defining fair value, the standard expands
the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the
inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value
measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value
measurement in its entirety. These levels are: Level 1 - inputs are based upon unadjusted quoted
prices for identical instruments traded in active markets. Level 2 - inputs are based upon significant observable
inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated
by observable market data for substantially the full term of the assets or liabilities. Level 3 - inputs are generally unobservable and typically
reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values
are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. As of December 31, 2024, and June 30, 2024, the carrying
value of certain accounts such as inventory, accounts payable, accrued expenses and accrued payroll approximates their fair value due
to the short-term nature of such instruments. The carrying value of our note payable approximate their fair value due to interest rate
of the note. Research and Development Costs Research and development expenses relate
primarily to the development, design, testing of preproduction prototypes and models, compensation, and consulting fees, and are
expensed as incurred. Total research and development costs recorded during the six months ended December 31, 2024 and 2023 amounted
to $ 24,000 36,000 Net Income (Loss) Per Share The Company’s computation of net income (loss)
per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income available to common stockholders divided
by the weighted average common shares outstanding for the period. Diluted income per share reflects the potential dilution, using the
treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the income of the Company as if they had been converted at the beginning
of the periods presented, or issuance date, if later. In computing diluted income per share, the treasury stock method assumes that outstanding
options and warrants were exercised and the proceeds are used to purchase common stock at the average market price during the period.
Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock
during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no adjustments to net income (loss) required
for purposes of computing diluted earnings per share. At December 31, 2024 and 2023 the Company excluded the outstanding securities summarized
below, which entitle the holders thereof to acquire shares of common stock, from its calculation of its diluted earnings per share, as
their effect would have been anti-dilutive as the exercise price of these warrants were greater than the stock price of the Company common
stock.
Schedule of anti-dilutive shares
December 31, 2024 December 31, 2023
Warrants 39,541,323 30,360,574 Concentrations During the six months ended December 31, 2024 and
2023, we recorded 100 As of December 31, 2024, three vendors accounted
for 19 13 11 19 15 11 At December 31, 2024 and June 30, 2024, we had no Recent Accounting Pronouncements Other recent accounting pronouncements issued by the
FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange
Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial
statements. |
