UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSBA
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED NOVEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-9015
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
(Exact name of Registrant as specified in charter)
COLORADO 84-0768695
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
Address of principal executive offices, including Zip Code:
12407 South Memorial Drive, Bixby, OK 74008
Issuer's telephone number, including area code: (918) 369-5950
Former Address: 57 West 200 South, Suite 310, Salt Lake City, Utah
84101
Indicate by check whether the Issuer (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. (1)
Yes [X] No [ ] (2) Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At November 30, 2000, there
were 9,685,753 shares of the Registrant's Common Stock outstanding.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
With the exception of the May 31, 2000 Balance Sheet, the financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. The May 31,
2000 Balance Sheet was audited and was included along with all required footnote
disclosures in the May 31, 2000 Form 10-K. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
However, in the opinion of management, all adjustments necessary to present
fairly the financial position and results of operations for the periods
presented have been made.
These financial statements should be read in conjunction with the accompanying
notes, and with the historical financial information of the Company.
INTERNATIONAL CAVITATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
NOVEMBER 30, 2000 AND MAY 31, 2000
November 30, 2000 May 31, 2000
(Unaudited)
----------------- ------------
ASSETS
Current assets:
Accounts receivable, net of allowance
for bad debts of $65,002 and $ 0
respectively at November 30 and
May 31, 2000 $570,001 $240,710
Accounts receivable - affiliate 100,044 -
Prepayments and other 3,033 11,728
-------- --------
Total current assets 673,078 252,438
-------- --------
Equipment and patents at cost
Equipment 178,517 178,006
Patents 260,627 260,627
-------- --------
439,144 438,633
Less accumulated depreciation
and amortization (169,137) (148,443)
-------- --------
270,007 290,190
-------- --------
Deposits and other 5,400 7,900
-------- --------
$948,485 $550,528
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 37,622 $ 162
Accounts payable 329,313 185,278
Payables to related parties 37,323 48,937
Accrued liabilities 44,456 38,365
Notes payable to affiliates 43,500 -
Notes payable 542,660 87,500
Company's share of liabilities
in excess of assets -
AquaTerra Joint Venture 17,674 -
------------ ----------
Total current liabilities 1,052,548 360,242
------------ ----------
DEFERRED REVENUES 101,445 265,000
------------ ----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
50,000,000 shares authorized,
and 9,687,753 and 9,685,753
shares issued and outstanding
at November 30,and May 31,
2000 respectively 9,688 9,686
Additional paid-in capital 1,488,744 1,488,550
Retained earnings (deficit) (1,703,940) (1,572,950)
----------- ----------
(205,508) (74,714)
------------ ----------
$ 948,485 $ 550,528
============ ==========
- See accompanying notes to consolidated condensed financial statements -
INTERNATIONAL CAVITATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS PERIODS ENDED November 30, 2000 AND 1999
For the Three Months For the Six Months
Ended November 30, Ended November 30,
-------------------- -------------------
2000 1999 2000 1999
---------- --------- ---------- -----------
REVENUES $ 418,993 $ 84,939 $ 774,027 $275,593
COSTS ASSOCIATED WITH REVENUES 138,004 56,107 400,036 86,819
---------- --------- ---------- -----------
GROSS PROFIT (LOSS) 280,989 28,832 373,991 188,774
---------- --------- ---------- -----------
EXPENSES:
General & administrative 245,308 437,293 384,259 678,307
Depreciation and
amortization 10,347 10,010 20,694 19,998
---------- --------- ---------- -----------
255,655 447,303 404,953 698,305
---------- --------- ---------- -----------
INCOME (LOSS) FROM OPERATIONS 25,334 (418,471) (30,962) (509,531)
OTHER INCOME (EXPENSE):
Interest expense (49,965) (2,275) (100,028) (4,534)
---------- --------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ( 24,631) (420,746) (130,990) (514,065)
INCOME TAX EXPENSE - - - -
---------- --------- ---------- -----------
NET INCOME (LOSS) $ ( 24,631) $(420,746) $(130,990) $ (514,065)
========== ========= ========== ===========
BASIC EARNINGS(LOSS) PER SHARE $ - $ (.04) $ (.01) $ (.05)
========== ========= ========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ - $ (.04) $ (.01) $ (.05)
========== ========= ========== ===========
AVERAGE WEIGHTED SHARES
OUTSTANDING 9,687,753 9,584,381 9,687,753 9,560,779
========== ========= ========== ==========
- See accompanying notes to consolidated condensed financial statements -
INTERNATIONAL CAVITATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED NOVEMBER 30, 2000 AND THE YEAR ENDED MAY 31, 2000
Common Stock Additional
--------------- Paid-In Accumulated
Shares Amount Capital (Deficit)
------- ------ ---------- -----------
Balance, May 31, 1999 9,520,138 $9,520 $1,137,019 $ (781,421)
Issued for cash 83,516 84 236,219
Issued in accordance with
stock option plan 36,000 36 35,964
Issued in exchange for debt 11,099 11 44,383
Issued in exchange for services 35,000 35 34,965
Net loss (791,529)
---------- ------ --------- ----------
Balance, May 31, 2000 9,685,753 $9,686 $1,488,550 $(1,572,950)
Issuance of stock for cash 2,000 2 196
Net income (loss) (130,990)
---------- ------ --------- ----------
Balance, November 30, 2000 9,687,753 $9,688 $1,488,746 $(1,703,940)
========== ====== ========== ==========
- See accompanying notes to consolidated condensed financial statements -
INTERNATIONAL CAVITATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2000 AND 1999
For the Six Months Ended November 30,
2000 1999
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(130,990) $(514,065)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities -
Depreciation and amortization 20,692 19,998
Recognition of pro rata share of
AquaTerra Joint Venture
liabilities in excess of assets 17,674 -
Changes in operating assets -
(Increase)decrease in accounts
receivable (429,335) 20,723
Decrease in prepayments 8,695 -
Decrease in deposits and other 2,500 -
Changes in operating liabilities -
Increase in accounts payable
and accrued expenses 138,512 79,871
Increase (decrease) in deferred
Income (163,555) 200,000
--------- ---------
Net cash provided by (used in)
operating activities (535,807) (193,473)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (511) (9,147)
Patent costs - (1,739)
--------- ---------
Net cash used in
investing activities (511) (10,886)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing 643,265 -
Proceeds from sale of common stock 198 277,395
Loan principal payments (144,605) (5,264)
--------- ---------
Net cash provided by
financing activities 498,858 272,131
--------- ---------
NET INCREASE (DECREASE) IN CASH (37,460) 67,772
CASH, BEGINNING OF THE YEAR (162) 6,942
--------- ---------
CASH, END OF THE YEAR (37,622) $ 74,714
========= =========
SUPPLEMENTAL INFORMATION
Interest paid $ 100,028 $ -
========= =========
- See accompanying notes to consolidated condensed financial statements -
INTERNATIONAL CAVITATION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 2000 and 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements as of
November 30, 2000 and for the three and six month periods then ended and the
three month and six month periods ended November 30, 1999 have been prepared in
accordance with instructions to Form 10QSB and, accordingly, do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. Also included is the May 31, 2000,
balance sheet which has previously been reported on in the Company's Form 10KSB
for the fiscal year ended May 31, 2000. In the opinion of management, all
adjustments considered necessary for fair presentation have been included. The
results for the three month period are not necessarily indicative of results for
the full year. For further information see Management's Discussion and Analysis
of Financial Condition and Operating Results.
NOTE 2. GOING CONCERN
The Company's consolidated financial statements are prepared in accordance with
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the liquidation of liabilities in the
normal course of business. However, the Company and its subsidiaries do not have
sufficient cash to continue operations. Therefore the Company's ability to
continue as a going concern is dependent upon its ability to develop a market
for its technology and to obtain adequate financing in the interim to cover its
operating expenses. All of these factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments related to the recoverability and classification of
recorded assets, or the amount and classification of liabilities that might be
necessary in the event the Company cannot continue in existence. Management is
in the process of attempting to raise additional capital and believes that there
is a substantial market for the Company's technology.
NOTE 3. AQUATERRA JOINT VENTURE
During July 1999, the Company entered into a joint venture agreement with
AquaTerra Technologies, LLC to perform environmental remediation of oil and
water in the state of California. The Company has a 20% interest in this joint
venture and AquaTerra Technologies, LLC has an 80% interest in the joint
venture. The Company sold and received payment from the joint venture for a
$200,000 licensing fee. The Company deferred income recognition at the time the
payment was received, pending commercial application of the licensed
technologies by the joint venture. The joint venture commenced commercial
operations and the company recognized licensing fee income of $163,555 with the
balance of $36,445 representing the Company's 20% interest in the unamortized
portion of the licensing fees on the joint ventures books remaining in deferred
income.
In accordance with joint venture accounting, the Company has accrued as a
liability on its books, its pro rata share of the joint ventures liabilities in
excess of its assets. As of November 30, 2000, the Company's pro rata share of
the joint ventures liabilities in excess of its assets was $17,674.
NOTE 4. FINANCING ARRANGEMENT WITH CARMINE FUNDING CORPORATION
During May of 2000, the company entered into an Master Accounts Receivable
Purchase Agreement. Terms of this agreement call for Carmine Funding Corporation
("Carmine") to purchase certain accounts from the Company for an agreed upon
price. These sales were made with recourse to the Company, therefore, the
underlying receivables sold and the related obligations remain on the Company's
books. As of November 30, 2000 the Company had received $433,228 in sales
proceeds of which Carmine had received payments totaling $144,695 and the
Company was obligated on $446,711 as yet uncollected receivables. This $446,711
is reflected in notes payable on the Company's books at November 30, 2000.
NOTE 5. NEW LICENSING AGREEMENTS
During the six months ended November 30, 2000, the Company entered into three
new sublicensing agreements as follows:
Scandinavian Cavitation Technologies, Inc. - This licensing agreement covers the
use of the Companies patented technology in Germany. The licensee has agreed to
pay a $300,000 licensing fee, $150,000 to be paid or before July 15, 2001, and
the remaining balance to be paid on or before July 15, 2002. The Company also is
entitled to a royalty of 12% of gross sales with a minimum royalty of $3.50 per
ton of treated soil and $.005 per gallon of treated water. The licensing fee has
not been recorded for financial reporting purposes as of August 31, 2000.
Calvin Ishmael Contractors, LLC - This licensing agreement covers the state of
Louisiana. The licensee has agreed to pay a $30,000 licensing fee on or before
July 15, 2001. The Company is also entitled to a royalty of 12% of gross sales
with a minimum royalty of $4.40 per ton of treated soil.
NUI Environmental Group, Inc. - This licensing agreement covers the remediation
of dredged materials in the New York/New Jersey area, and throughout the world
on a project by project basis. The licensee paid a $100,000 licensing fee. The
Company is also entitled to a royalty fee of 12% of gross sales or a minimum
royalty fee of $51,000 per quarter.
The company does not recognize licensing fees received as income until such time
as the licensee utilizes the licensed technology on a commercial basis. During
the three months ended November 30, 2000, the Company recognized $163,555 in
licensing fee income.
NOTE 6 - SUBSEQUENT EVENTS
BANK FINANCING - On December 12, 2000, the Company borrowed $540,000 from RAI
Funding, LLC. This loan bears interest at 4% over prime and is collateralized by
the NUI Environmental Group, Inc. contract, accounts receivable and contract
rights related to work to be performed in Jacksonville, Florida, certain
accounts receivable and contract rights related to work to be performed for the
U.S. Navy in Key West Florida, all of the Company's patents, and the personal
guarantees of two of the Company's officers. The loan matures on December 10,
2001 and is payable in monthly principal installments of $17,000 through June
11, 2001 and $50,000 per month thereafter until maturity.
In connection with this loan, the Company issued warrants to purchase 200,000
shares of common stock at $1.00 per share, subject to certain price adjustments.
The Company is obligated to register stock sufficient to make share issued
pursuant to these warrants free trading and is subject to a penalty of $500 per
day if a registration statement is not filed by January 26, 2001 as extended.
The Company incurred $74,559 in legal fees, origination fees, and commissions
associated with obtaining this loan.
SWARTZ AGREEMENT - On December 8, 2000 the Company entered into an investment
agreement with Swartz Private Equity, LLC ("Swartz") whereby Swartz agreed to
purchase from the Company, from time to time as determined by specific formulas
in the agreement, shares of the Company's common stock and accompanying warrants
for a maximum aggregate offering amount of $20,000,000.
Amounts of shares to be purchased by Swartz on a monthly basis are the lesser of
(1) 1,500,000 shares, (2) 15% of the sum of the aggregate daily reported trading
volumes, excluding trades of 20,000 or more for the past 20 trading days (3) the
number of shares which at the purchase price equals $2,000,000 (4) or 9.9% of
the number of shares previously outstanding on a fully diluted basis. The
Company is obligated to file a registration statement by February 15, 2001 in an
effort to insure that all shares purchased under this agreement become
registered free trading shares. The Company is subject to a penalty of $500 per
day for each day after February 15, 2001 if the registration statement is not
filed.
The per share price which Swartz has agreed to pay is the lesser of (1) the
market price per share minus $.10 or (2) 91% of the market price per share.
As additional consideration, the Company agreed to issue from time to time
warrants to Swartz to purchase up to 800,000 shares of common stock. Warrants
will be issued on a monthly basis equal to 10% of the number of shares sold to
Swartz that month. The warrants will have an initial exercise price equal to the
market price on the date of issuance but would be subject to a semi-annual reset
provision.
The Company is obligated to sell Swartz a minimum of $1,000,000 shares of stock
each six month period during the term of this agreement. Failure to comply with
this provision would result in a penalty of up to $100,000 per six month period.
PROPOSED SALE OF JOINT VENTURE INTEREST - The Company is currently negotiating
the sale of its 20% joint venture interest in AquaTerra Joint Venture to a third
party. If the Company sells it's interest in this joint venture for $60,000 it
would recognize a $77,674 gain on the sale and would also recognize as licensing
fee income $36,445 in currently deferred licensing fee income resulting in
income recognition of $114,119 in total.
NOTE 7 - CONTINGENT LIABILITY
On January 24, 2001, David N. Shroff, William W. Rippetoe, and two of their
affiliated companies, Excalibur Oil Company and Universal Environmental
Technologies, Inc (the "Other Affiliated Companies") along with the Company,
entered into a Settlement Agreement with Ground Floor Capital, LC and certain of
its affiliated persons and entities (the "GFC Group") that settled a judgment
against Mr. Shroff, Mr. Rippetoe and the Other Affiliated Companies in the
amount of approximately $250,000. Pursuant to the Settlement Agreement, Messrs.
Shroff and Rippetoe and the Other Affiliated Companies agreed to pay GFC
installments of $50,000 commencing with the execution of the Settlement
Agreement and on February 15, 2001, April 15, 2001, June 15, 2001 and ending
with a final payment due September 30, 2001. As of February 15, 2001, $60,000
had been paid to the GFC Group and $40,000 was due and owing the GFC Group. The
Company is contingently liable for these payments.
As part of the Settlement Agreement, certain existing contractual arrangements
between the Company and the GFC Group were amended, including the terms of a
License Agreement granting to the GFC Group a worldwide exclusive license to use
the Company's intellectual property for air conditioning and refrigeration
industries and applications.
The Company has agreed with Messrs. Shroff and Rippetoe to lend them funds to
pay their obligations under the Settlement Agreement to the extent the Company
elects and is able to do so. While any funds are due and owning the Company by
Messrs. Shroff and Rippetoe pursuant to this agreement, each has agreed to
forego the receipt of any salary or other compensation from the Company. As of
February 15, 2001, $60,000 had be leant to Messrs. Shroff and Rippetoe as
evidenced by a Note which, together with interest at the applicable federal
rate, is due and payable at the maturity date of the Note which is February 15,
2005. The Note due the Company is subject to prepayment out of any proceeds
received by Messrs. Shroff and Rippetoe from the sale by them of any stock in
the Company, net of (1) any taxes due from such sale, (2) a monthly living
allowance in lieu of salary from the Company and (3) any application of such
proceeds to the payment of the amounts due under the Settlement Agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Prior to September of 1998, the Company was in the development stage.
The following discussion is intended to assist in an understanding of the
Company's financial position as of November 30, 2000 and its results of
operations for the three and six month periods ended November 30, 2000 and 1999.
The Consolidated Condensed Financial Statements and Notes included in this
report contain additional information and should be referred to in conjunction
with this discussion. It is presumed that the readers have read or have access
to International Cavitation Technologies, Inc.'s, 2000 annual report on
Form 10-KSB.
The financial statements for the three and six month periods ended November 30,
1999 were restated to defer the recording of licensing fees previously
recognized as income of $480,000 and $680,000 respectively. This restatement is
a result of the Company's change in accounting policies to deferred the
recognition of licensing fee income until such time as the licensee utilizes the
technology on a commercial basis.
COMPARISION OF THE THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
During the three months ended November 30, 2000, the Company reported net loss
of $(24,631) compared to a net loss of $(420,746) for the comparable period in
1999. This change is due primarily to the following factors:
Revenues. During the three months ended November 30, 2000, revenues increased by
393% from $84,939 in 1999 to $418,993 in 2000. The following factors contributed
to this increase in revenues (1) Soil remediation income increased by $336,000
from $6,664 in 1999 to $219,664 in 2000 and (2) Licensing fees income of
$163,555 was recognized in 2000. The increase in soil remediation revenues
reflects the Companies success in commercial application of its technologies.
The $163,555 in licensing fees recognized as income during the current quarter
was actually received during the fiscal year ended May 31, 2000 but was deferred
until such time as AquaTerra Technologies, LLC, the licensee, began commercial
operations utilizing the licensed technologies.
Cost Associated with Revenues. During the three months ended November 30, 2000,
the Company incurred $138,004 in costs associated with revenues as compared to
$56,107 for the comparable period in 1999. This increase is due primarily to an
increase in soil remediation activities.
General and Administrative Expenses. General and administrative expenses
decreased by 44% from $437,293 in 1999 to $245,308 during the comparable three
month period in 2000. This decrease was due primarily to management's efforts to
reduce the Company's general and administrative costs offset in part by the
recognition of $108,475 in bad debts expense during the three months ended
November 30, 2000.
Depreciation and Amortization. Depreciation and amortization increased by 3%
from $10,010 during 1999 to $10,347 during the comparable period in 2000. This
increase is due primarily to the addition of equipment subsequent to November of
1999.
Interest Expense. Interest expense went from $2,275 in 1999 to $49,965 for the
comparable three month period in 2000. This increase is due primarily to the
cost of factoring accounts receivable. No accounts receivable had been sold to
factors in 1999.
COMPARISION OF THE SIX MONTHS ENDED NOVEMBER 30, 2000 AND 1999
During the six months ended November 30, 2000, the Company reported a net loss
of $(355,697)compared to a net loss of $(514,065) for the comparable period in
1999. This change is due primarily to the following factors:
Revenues. During the six months ended November 30, 2000, revenues increased by
811% from $84,939 in 1999 to $774,027 in 2000. The following factors contributed
to this increase in revenues (1) Soil remediation income increased by 66% from
$159,844 in 1999 to $265,698 in 2000 and (2) Licensing fees income of $263,555
were recognized in 2000. The increase in soil remediation revenues reflects the
Companies success in commercial application of its technologies. $163,555 in
licensing fees recognized as income during 2000 was actual received during the
fiscal year ended May 31, 2000 but was deferred until such time as AquaTerra
Technologies, LLC, the licensee, began commercial operations utilizing the
licensed technologies. The remaining $100,000 in licensing fee revenues was
received during the current year.
Cost Associated with Revenues. During the six months ended November 30, 2000,
the Company incurred $400,036 in costs associated with revenues as compared to
$86,819 for the comparable period in 1999. This increase is due primarily to an
increase in soil remediation activities. Included in 2000 is $140,722 in costs
associated with two projects in which the Company generated no revenues. These
projects were undertaken on a contingency fee basis based on soil samples
provided by customers. These soil samples proved to not be representative of the
soil to be remediated and contained significant amounts of types of pollutants
not easily removed by the Company's patented technologies. The Company was
progressing on remediation solutions for these types of contaminates but ceased
operations due to lack of sufficient funds for research and development.
General and Administrative Expenses. General and administrative expenses
decreased by 43% from $678,307 in 1999 to $384,259 during the comparable six
month period in 2000. This decrease was due primarily to management's efforts to
reduce the Company's general and administrative costs offset in part by the
recognition of bad debts expense of $108,475 during the six months ended
November 30, 2000.
Depreciation and Amortization. Depreciation and amortization increased by 3%
from $19,998 during 1999 to $20,694 during the comparable period in 2000. This
increase is due primarily to the addition of equipment subsequent to November of
1999.
Interest Expense. Interest expense went from $4,534 in 1999 to $100,028 for the
comparable six month period in 2000. This increase is due primarily to the cost
of factoring accounts receivable. No accounts receivable had been sold to
factors in 1999.
LIQUIDITY AND CAPITAL RESOURCES
This form 10-Q includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All
statements, other than statements of historical facts, included in this Form
10-Q that address activities, events or developments that International
Cavitation Technologies, Inc. (the "Company"), a Colorado corporation formerly
named "Yellow Gold Of Crippled Creek, Inc.", expects or anticipates will or may
occur in the future, including such things as estimated future net expenditures
(including the amount and the nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Company's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate to the circumstances. However,
whether actual results and developments will conform with the Company's
expectations and predictions is subject to a number of risks and uncertainties;
general economic, market or business conditions; the opportunities (or lack
thereof) that may be presented to and pursued by the Company; competitive
actions by other companies; changes in laws or regulations; and other factors,
many of which are beyond the control of the Company. Consequently, all of the
forward-looking statements made in this Form 10-Q are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized, or even if realized,
that they will have the expected consequences to or effects on the Company or
its business or operations.
At November 30, 2000 the Company had a working capital deficit of $(379,470) and
a deficit net worth of $(205,508) compared with a $(107,804) working capital
deficit and negative net worth of $(74,714) at May 31, 2000. The Company and its
subsidiaries had a cash overdraft of $37,621 at November 30, 2000. The Company's
ability to continue as a going concern is dependent upon its ability to develop
a market for its technology and to obtain adequate financing in the interim to
cover its operating expenses. All of these factors raise substantial doubt about
the Company's ability to continue as a going concern.
The Company's survival is dependent on the Company's ability to continue to sell
licensing agreements, to enter into profitable soil and water remediation
contracts, and to earn royalties from the use of its patented technologies.
Subsequent to November 30, 2000 the Company was able to obtain a working capital
loan in the amount of $540,000. Proceeds from this loan will be used to pay past
due accounts payable and to fund current operations.
Management is currently negotiating terms on certain licensing agreements which,
management believes will provide cash for current operations. Also management
anticipates earning royalty fees from certain licensees within a short period of
time.
The Company's working capital requirements will depend upon numerous factors,
including: progress of the Company's licensing agreements; the licensee's
ability to generate additional projects utilizing the Company's technology; the
licensee's ability to generate net income from these projects; timing and cost
of obtaining regulatory approvals; and collaborative arrangements with other
organizations.
Net cash used in operating activities for the six months ended November 30, 2000
was $(535,807) as compared to $(193,473) net cash used in operations for the six
months ended November 30, 1999. This use of cash in operations is due part to a
$429,335 increase in accounts receivable offset in part by a $163,555 increase
in accounts payable.
Investing Activities
Net cash used in investing activities was $(511) for the six months ended
November 30, 2000 as compared to $(10,806) for the comparable period in 1999.
Financing Activities
Net cash flow provided by financing activities was $498,858 for the six months
ended November 30, 2000 as compared to $272,131 for the comparable period in
1999. This increase is attributable primarily to increase borrowing .
PART II OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
International Cavitation Technologies, Inc.
Date: March 1, 2001 /s/ David Shroff, Chairman