Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Cavitation Technologies, Inc. | ||
Entity Central Index Key | 0001376793 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Public Float | $ 4,405,100 | ||
Entity Common Stock, Shares Outstanding | 196,997,906 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity File Number | 000-53239 | ||
Entity Incorporation State Country Code | NV |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2019 | Jun. 30, 2018 |
Current assets | ||
Cash | $ 649,000 | $ 945,000 |
Accounts receivable | 240,000 | 0 |
Inventory | 57,000 | 34,000 |
Total current assets | 946,000 | 979,000 |
Property and equipment, net | 65,000 | 90,000 |
Other assets | 10,000 | 10,000 |
Total assets | 1,021,000 | 1,079,000 |
Current liabilities: | ||
Accounts payable and accrued expenses | 187,000 | 307,000 |
Accrued payroll and payroll taxes | 892,000 | 889,000 |
Related party payable | 1,000 | 1,000 |
Advances from distributor | 760,000 | 427,000 |
Total current liabilities | 1,840,000 | 1,624,000 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2019 and 2018, respectively | 0 | 0 |
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 196,997,906 shares issued and outstanding as of June 30, 2019 and 2018, respectively | 197,000 | 197,000 |
Additional paid-in capital | 23,090,000 | 22,641,000 |
Accumulated deficit | (24,106,000) | (23,383,000) |
Total stockholders' deficit | (819,000) | (545,000) |
Total liabilities and stockholders' deficit | $ 1,021,000 | $ 1,079,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Jun. 30, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred Stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common Stock, shares issued | 196,997,906 | 196,997,906 |
Common Stock, shares outstanding | 196,997,906 | 196,997,906 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 1,090,000 | $ 1,303,000 |
Cost of revenue | (69,000) | (122,000) |
Gross profit | 1,021,000 | 1,181,000 |
General and administrative expenses | 1,719,000 | 1,507,000 |
Research and development expenses | 25,000 | 25,000 |
Total operating expenses | 1,744,000 | 1,532,000 |
Loss from operations | (723,000) | (351,000) |
Gain on settlement of accrued payroll | 0 | 101,000 |
Net Loss | $ (723,000) | $ (250,000) |
Net loss per share, Basic and Diluted | $ 0 | $ 0 |
Weighted average shares outstanding, Basic and Diluted | 196,997,906 | 197,148,043 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Jun. 30, 2017 | 196,797,906 | |||
Beginning balance, value at Jun. 30, 2017 | $ 197,000 | $ 22,625,000 | $ (23,133,000) | $ (311,000) |
Common stock issued for services, shares | 400,000 | |||
Common stock issued for services, value | 16,000 | 16,000 | ||
Cancellation of common stock issued to Director, shares | (200,000) | |||
Net loss | (250,000) | (250,000) | ||
Ending balance, shares at Jun. 30, 2018 | 196,997,906 | |||
Ending balance, value at Jun. 30, 2018 | $ 197,000 | 22,641,000 | (23,383,000) | (545,000) |
Fair value of warrants granted for services | 115,000 | 115,000 | ||
Fair value of amended warrants | 334,000 | 334,000 | ||
Net loss | (723,000) | (723,000) | ||
Ending balance, shares at Jun. 30, 2019 | 196,997,906 | |||
Ending balance, value at Jun. 30, 2019 | $ 197,000 | $ 23,090,000 | $ (24,106,000) | $ (819,000) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating activities: | ||
Net loss | $ (723,000) | $ (250,000) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 41,000 | 51,000 |
Fair value of common stock issued for services | 0 | 16,000 |
Fair value of vested warrants - stock compensation expense | 449,000 | 0 |
Gain on settlement of debt | 0 | (101,000) |
Effect of changes in: | ||
Accounts receivable | (240,000) | 85,000 |
Inventory | (23,000) | 109,000 |
Other assets | 0 | 2,000 |
Accounts payable and accrued expenses | (120,000) | 61,000 |
Accrued payroll and payroll taxes due to officers | 3,000 | (4,000) |
Advances from distributor | 333,000 | 427,000 |
Net cash provided by (used in) operating activities | (280,000) | 396,000 |
Investing activities: | ||
Purchase of property and equipment | (16,000) | 0 |
Net cash used in investing activities | (16,000) | 0 |
Net increase (decrease) in cash and cash equivalents | (296,000) | 396,000 |
Cash, beginning of period | 945,000 | 549,000 |
Cash, end of period | 649,000 | 945,000 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 0 | 0 |
Cash paid for income taxes | $ 2,000 | $ 2,000 |
1. Organization and Summary of
1. Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | Note 1 – Organization and Summary of Significant Accounting Policies Cavitation Technologies, Inc. (referred to herein, unless otherwise indicated, as “the Company,” “CTi,” “we,” “us,” and “our”) is a Nevada corporation originally incorporated under the name Bio Energy, Inc. CTi has developed, patented, and commercialized proprietary technology that may be used in liquid processing applications. CTi’s patented Nano Reactor® Nano Neutralization® System We have commercialized our CTi Nano Neutralization® System we have four US and one international patented systems, as well as twelve US approved patents for various processes, and have filed another seven US and international patents to employ our proprietary technology in applications including vegetable and oil refining, waste water treatment, algae oil extraction, and alcoholic beverage enhancement. Going Concern The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern. During the year ended June 30, 2019, the Company incurred a net loss of $723,000 had a working capital deficit of $894,000. The Company has also been dependent on certain aspects of its funding from technology and license agreements with its distributors, Desmet Ballestra (Desmet) and GEA Westfalia (GEA). These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern. Management’s plan is to generate income from operations by continuing to license its technology globally. Currently, we have a R&D Marketing and Technology License agreement with Desmet that was signed in October 2018, in which Desmet provides advances to the Company of $50,000 through October 2021 to be applied to future gross profit revenues. In addition, we have a R&D, Marketing and Technology License Agreement with GEA signed in January 2017, in which, GEA provides advances to the Company of $25,000 per month through January 2020 to be applied to future sales. At June 30, 2018, advances from Desmet and GEA totaled $427,000. During the year ended June 30, 2019, the Company received advances of $850,000, of which, $517,000 was recorded as revenues. As of June 30, 2019, advances from Desmet and GEA totaled $760,000. 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 inventory obsolescence, assumptions used in valuing our stock options, stock warrants and common stock issued for services and valuation allowance for our deferred tax asset, among other items. Actual results could differ from these estimates. Revenue Recognition Revenues from sale of reactors and the corresponding share in gross profit is recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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. In addition, the Company recognizes revenue from its share of gross profit, as defined, to be earned from distributors. In accordance with ASC 606, the Company has determined that the gross profit to be earned from its distributor as a variable consideration that requires estimation in determining the transaction price, and as such all or a portion can be recognized using the most likely amount approach. Estimates are available from our distributor which are considered in the determination of the most likely amount. However, given the lack of control over the sale to the end customer and the lack of history of prior sales, the Company considered these as a variable revenue constraint that required consideration and as such, the amount of revenue recognized is limited to the actual amount of cash received under the contract which the Company has determined is not refundable and probable that a significant revenue reversal would not occur. Cash and Cash Equivalents The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost which approximates market value. 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 June 30, 2019, and 2018, Company had deposits in excess of federally insured limit with one bank. The Company believes that no significant concentration of credit risk exists with respect to this cash balances because of its assessment of the creditworthiness and financial viability of this financial institution. Accounts Receivable The Company evaluates the collectability of our trade accounts receivable based on a number of factors. In circumstances where it becomes aware of a specific customer’s inability to meet its financial obligations to us, a specific reserve for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount that management believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding. Accounts receivable as of June 30, 2019 were $240,000 and were subsequently collected in full in July 2019. There was no account receivable outstanding as of June 30, 2018. Inventory Inventory is stated at the lower of cost or market. Cost is determined on a specific item basis. Inventory is composed of finished goods and represents costs incurred to manufacture the Company’s Nano Reactor® Property and Equipment Property and equipment is presented at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Betterments, renewals, and extraordinary repairs that extend the life of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation applicable to retired assets are removed from the Company’s accounts, and the gain or loss on dispositions, if any, is recognized in the consolidated statements of operations. Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated useful lives. Leasehold improvements Shorter of life of asset or lease term Furniture 5-7 Years Office equipment 5 Years Lab equipment 4 Years Skid systems 4 Years Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended June 30, 2019 and 2018, the Company did not recognize any impairment for its property and equipment. Fair Value Measurement FASB Accounting Standards Codification (“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 June 30, 2019, and 2018, the carrying value of certain accounts such as accounts receivable, inventory, accounts payable, accrued expenses and accrued payroll approximates their fair value due to the short-term nature of such instruments. Share-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s common stock option and warrant grants is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options and warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. 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. Advertising Costs Advertising costs, including marketing expense, incurred in the normal course of operations are expensed as incurred. Advertising expenses amounted to $16,000 and $23,000 for the years ended June 30, 2019 and 2018 respectively and was reported as part of General and administrative expenses in the accompanying Consolidated Statements of Operations. 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 years ended June 30, 2019 and 2018 amounted to $25,000 and $25,000, respectively. Warranty Policy The Company provides a limited warranty with every set of reactors sold, typically 2 to 5 years. The Company has not experienced significant claims under its warranty policy, and management determined no accrual for warranty reserve was necessary at June 30, 2019 and 2018. Net Loss Per Share The Company’s computation of 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 are 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. The following table sets forth the computation of basic and diluted loss per common share. June 30, 2019 2018 Net loss $ (723,000 ) $ (250,000 ) Weighted average common shares – basic 196,997,906 197,148,043 Dilutive effect of outstanding stock options and warrants – – Weighted average shares – diluted $ 196,997,906 $ 197,148,043 Net loss per common share: Basic and Diluted $ (0.00 ) $ (0.00 ) There were no adjustments to net loss required for purposes of computing diluted earnings per share. At June 30, 2019 and 2018, 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. June 30, 2019 June 30, 2018 Options 11,000,000 11,378,754 Warrants 79,263,176 75,926,510 Concentrations The Company’s revenue was mainly derived from sales Nano Reactor® and Nano Neutralization® System At June 30, 2019, 100% of accounts receivable were due from Desmet. As of June 30, 2019, three vendors and/or professional consultants accounted 49%, 33% and 11%, respectively, of accounts payable. As of June 30, 2018, three vendors and/or professional consultants accounted 51%, 18% and 10%, respectively, of accounts payable. Segment As of June 30, 2019, the Company operated one reportable business segment. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to nonemployee share-based payment accounting Compensation – Stock Compensation 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. |
2. Contracts with Customers
2. Contracts with Customers | 12 Months Ended |
Jun. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Contracts with Customers | Note 2 – Contracts with Customers Desmet Ballestra Agreement In October 2018, we signed a three-year global R and D, Marketing and Technology License Agreement with Desmet for the sale and licensing of our reactors. This agreement is a continuation of an original agreement we signed with Desmet in 2012, and amended in 2016. As part of the October 2018 agreement, Desmet agreed to provide us monthly advances of $50,000 through October 1, 2022 to be applied against gross profit share from future sales. The Company recognizes revenue from sale of reactors upon shipment and acceptance by Desmet, as the Company has no further obligations to Desmet other than the reactor’s two-year standard warranty. In accordance with ASC 606, the Company recognizes the revenue from the sale of reactors at the time of shipment of the Nano reactor hardware as such shipment is deemed to be the Company’s only performance obligation and the Company has no more continuing obligation. Desmet pays for such reactors on credit terms and the amount of the sale is recorded as a receivable upon acceptance by Desmet. The Company also receives a share in gross profit, as defined, from the sale of Desmet’s integrated neutralization system to its customer of which the reactors are an integral component. Such amount is subject to adjustment based on certain factors including costs over run. The Company has no control with regards to the sale and installation of Nano Neutralization System, between Desmet and the end customer. In accordance with ASC 606, the Company has determined that the gross profit to be earned from its distributor is variable consideration, and evaluates the amount of the potential payments and the likelihood that the payments will be received using the most likely amount approach (subject to the variable consideration constraint). Estimates are available from our distributor which are considered in the determination of the most likely amount. However, given the lack of control over the sale to the end customer and the lack of history of prior sales, the Company considered these as variable revenue constraints, and as such, the amount of revenue recognized is limited to the actual amount of cash received under the contract which the Company has determined is not refundable and probable that a significant revenue reversal would not occur. Further, Company has been able to develop an expectation of the actual collection based on its historical experience. During the year ended June 30, 2019, the Company recorded sales of $533,000 from reactor sales and $517,000 from gross profit share for a total revenue of $1,050,000 from Desmet. As of June 30, 2019, advances received from Desmet amounted to $33,000 During the year ended June 30, 2018, the Company recorded sales of $603,000 from reactor sales and $700,000 from gross profit share for a total revenue of $1,303,000. GEA Westfalia Agreement In January 2017 the Company entered into a global technology license, R&D and marketing agreement with GEA Westfalia (GEA) with respect to our patented Nano Reactor™ technology, processes and applications. Under the agreement, GEA has been granted a worldwide exclusive license to integrate our patented technology into water treatment application, milk and juice pasteurization, and certain food related processes. The license agreement between us and GEA has a three-year term and provides for the payment of $300,000 per year in advances to be applied to future license fees or share of gross profit, as defined. GEA Westfalia Separator manufactures filtration and equipment such as separators, clarifiers, decanters and membrane filtration systems. This equipment is used for the purification of suspensions, the separation of fluid mixtures with simultaneous removal of solids, extraction and concentration or removal of liquids from solids. As of June 30, 2018, advances received from GEA amounted to $427,000. During the year ended June 30, 2019, the Company received advances from GEA of $300,000. As of June 30, 2019, total advances received from GEA amounted to $727,000 Enviro Watertek, LLC Agreement In April 2019, the Company entered into a licensing and service contract agreement with Enviro Watertek, LLC (“EW”). This agreement covers the Company’s industrial treatment process for produced and frack water. The Company’s Low Pressure Nano Reactor (LPN), was specifically developed to be integrated into frack water treatment system along with proprietary chemical formulations, and has depicted measurable and quantifiable advantages over industry standard processes and equipment. The agreement with EW provides for sales on Nano Reactors® plus recurring revenue stream based on processing frack water volumes and utilization. Our agreement with EW is for a period of 15 years but can be terminated by either party every anniversary. During the year ended June 30, 2019, the Company sold Nano Reactor® system and recognized revenues of $40,000. Revenues from processing of frack water volumes and utilization will only be recognized upon collection from EW. |
3. Property and Equipment
3. Property and Equipment | 12 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 3 - Property and Equipment Property and equipment consist of the following as of June 30, 2019 and 2018: June 30, June 30, 2019 2018 Leasehold improvement $ 2,000 $ 2,000 Furniture 27,000 27,000 Office equipment 2,000 2,000 Equipment 306,000 290,000 Systems 187,000 187,000 524,000 508,000 Less: accumulated depreciation and amortization (459,000 ) (418,000 ) Property and equipment, net $ 65,000 $ 90,000 Depreciation expense for the years ended June 30, 2019 and 2018 amounted to $41,000 and $51,000, respectively and was recorded as part of General and Administrative expenses in the accompanying Consolidated Statements of Operations. |
4. Accrued Payroll and Payroll
4. Accrued Payroll and Payroll Taxes | 12 Months Ended |
Jun. 30, 2019 | |
Accrued Payroll And Payroll Taxes | |
Accrued Payroll and Payroll Taxes | Note 4 - Accrued Payroll and Payroll Taxes In prior periods, officers and former officers of the Company agreed to defer payment of their respective salaries. As of June 30, 2019, and 2018, the Company had accrued salaries and estimated payroll taxes to these officers and former officers amounting to $892,000 and $889,000 respectively. During the year ended June 30, 2018, accrued salary of $131,000 due to a former director was settled for a payment of $30,000 resulting in a gain on settlement of $101,000 (see Note 7). |
5. Stockholders' Deficit
5. Stockholders' Deficit | 12 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Deficit | Note 5 - Stockholders’ Deficit Preferred Stock On March 17, 2009, the Company filed an Amended and Restated Articles of Incorporation and created two new series of preferred stock, the first of which is designated Series A Preferred Stock and the second of which is designated as Series B Preferred Stock. The total number of shares of Common Stock which this corporation has authority to issue is 1,000,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock of which 5,000,000 shares are designated as Series A Preferred Stock, and 5,000,000 shares are designated as Series B Preferred Stock, with the rights, preferences and privileges of the Series B Preferred Stock to be designated by the Board of Directors. Each share of Common Stock and Preferred Stock has a par value of $0.001. As of June 30, 2019, and 2018, there are no shares of Series A or Series B Preferred Stock issued and outstanding. Common Stock During the year ended June 30, 2019, the Company did not issue any shares of common stock. During the year ended June 30, 2018, the Company issued 400,000 shares of common stock with fair value of $16,000 for services rendered. These shares were valued at fair value at the date of issuance. During the year ended June 30, 2018, the Company cancelled 200,000 shares of common stock issued to a member of the Company’s Board of Director in prior period. Stock Options The Company has not adopted a formal stock option plan. However, it has assumed outstanding stock options resulting from the acquisition of its wholly-owned subsidiary, Hydrodynamic Technology, Inc. In addition, the Company has made periodic non-plan grants. A summary of the stock option activity from June 30, 2019 and 2018 is as follows: Weighted- Average Weighted- Remaining Average Contractual Exercise Life Options Price (Years) Outstanding at June 30, 2017 11,685,852 $ 0.37 2.41 - Granted – – – - Forfeited – – – - Exercised – – – - Expired (307,098 ) – – Outstanding at June 30, 2018 11,378,754 $ 0.31 2.23 - Granted – – – - Forfeited – – – - Exercised – – – - Expired (378,754 ) – – Outstanding at June 30, 2019 11,000,000 $ 0.03 3.36 As of June 30, 2019, all outstanding options were fully vested and exercisable. The intrinsic value of the outstanding options as of June 30, 2019 was zero. The following table summarizes additional information concerning options outstanding and exercisable at June 30, 2019 Options Outstanding Options Exercisable Weighted Weighted Weighted Average Average Average Exercise Number Remaining Exercise Number Remaining Price of Shares Life (Years) Price of Shares Life (Years) $ 0.03 11,000,000 3.36 $ 0.03 11,000,000 3.36 11,000,000 11,000,000 Warrants A summary of the Company’s warrant activity and related information from as of June 30, 2019 and 2018 is as follows. Weighted- Average Weighted- Remaining Average Contractual Exercise Life Warrants Price (Years) Outstanding at June 30, 2017 75,926,510 $ 0.06 4.81 Granted – – – Exercised – – – Expired – – – Outstanding at June 30, 2018 75,926,510 $ 0.06 3.81 Granted 4,336,666 $ 0.03 4.49 Exercised – – – Expired (1,000,000 ) – – Outstanding at June 30, 2019 79,263,176 $ 0.07 4.45 As of June 30, 2019, all outstanding warrants were fully vested and exercisable. The intrinsic value of the outstanding warrants as of June 30, 2019 was none. The following table summarizes additional information concerning warrants outstanding and exercisable at June 30, 2019. Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Average Average Average Exercise Number Remaining Exercise Number Exercise Price of Shares Life (Years) Price of Shares Price $0.03 - $0.05 58,936,518 5.38 $ 0.04 58,936,518 $ 0.04 $0.08 - $0.12 20,326,658 3.39 $ 0.12 20,326,658 $ 0.12 79,263,176 79,263,176 During the year ended June 30, 2019, the Company granted warrants to purchase 4,336,666 shares of common stock to consultants for services rendered. The warrants are fully vested, exercisable at $0.03 per share, and will expire in five years. Total fair value of these warrants amounted to $115,000 based upon a Black-Scholes Option Pricing model. During the year ended June 30, 2019, the Company amended certain warrants granted in prior years to purchase approximately 19 million common shares in order to extend the term or life to five years. As a result of this modification, the Company recorded stock compensation expense of $334,000 to account for the incremental change in fair value of these warrants before and after the modification based upon a Black-Scholes Option Pricing model. The fair value of the warrant awards was estimated using the Black-Scholes method based on the following weighted-average assumptions: June 30, 2019 Risk-free interest rate 2.60% Contractual terms (years) 4.82 Expected volatility 138% Expected dividend yield 0% The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the award; the contractual term represents the weighted-average period of time the awards granted are expected to be outstanding giving consideration to vesting schedules, contractual terms, and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s Common Stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. |
6. Income Taxes
6. Income Taxes | 12 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6 - Income Taxes For the years ended June 30, 2019 and 2018, the Company has no provision for current income taxes due to net losses incurred. Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The components of deferred tax assets are presented below: At June 30, 2019, the Company had available Federal net operating loss (NOL) carryforwards of approximately $9.8 million that are available to reduce future taxable income. The Federal carryforward expires in 2036. The NOL is subject to statutory limitations under Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carry forwards. During the year ended June 30, 2019 and 2018, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards due to recurring operating losses. Based on their evaluation, the Company determined that the net deferred tax assets, do not meet the requirements to realize, and as such, the Company has provided a full valuation allowance against them. At June 30, 2019 and 2018, significant component of the Company’s deferred tax assets and liabilities are as follows: June 30, June 30, 2019 2018 Net Operating loss carryforwards $ 2,827,000 $ 2,607,000 Stock compensation expense 783,000 658,000 Amortization of patents 48,000 48,000 Reserve for obsolete inventory 46,000 46,000 Total net deferred tax assets 3,704,000 3,359,000 Less valuation discount (3,704,000 ) (3,359,000 ) Net deferred tax assets $ – $ – A reconciliation of the effective income tax to statutory US federal income tax is as follows: June 30, June 30, 2019 2018 Federal statutory rate (21)% (28)% State income taxes, net of Federal benefit (7)% (7)% Net operating loss/carryforward 28% 35% Income tax provision – – On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was enacted into law. The TCJ Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), that impact corporate taxation requirements, such as the reduction of the federal tax rate for corporations from 35% to 21% and changes or limitations to certain tax deductions. Accounting rules prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company classifies interest and penalties as a component of interest and other expenses. To date, there have been no interest or penalties assessed or paid. The Company measures and records uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. The following summarizes the open tax years for each major jurisdiction: Jurisdiction Open Tax Years Federal 2014 – 2018 California 2014 – 2018 The Company’s net operating loss carry forwards are subject to IRS examination until they are utilized and such tax years are closed. |
7. Commitments and Contingencie
7. Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7 – Commitments and Contingencies Lease Agreement The Company leases approximately 5,000 square feet of office and warehouse space under a non-cancellable operating lease agreement through February 1, 2019 with monthly payments of approximately $5,600 per month. In January 2019, the Company signed a new lease agreement for the Company's office. The lease started in February 2019 and will end in February 2025, or 73 months, with a monthly lease starting at $6,000 up to $7,000 over the term of the lease. Total rent expense was $65,000 and $62,000 for the years ended June 30, 2019 and 2018, respectively, and was reported as part of General and administrative expenses in the accompanying Consolidated Statements of Operations. Pursuant to ASU 2016-02 and ASC 842, the Company will record the corresponding Right of Used Asset and Liabilities of approximately $327,000 on July 1, 2019, the start of the Company’s fiscal year 2020. Below is the Company’s minimum lease commitment: Fiscal Year End June 30, 2019 2020 $ 68,000 2021 70,000 2022 72,000 2023 75,000 2024 and thereafter 132,000 Total $ 417,000 Royalty Agreements On July 1, 2008, the Company’s wholly owned subsidiary entered into Patent Assignment Agreements with two parties, its President as well as its former Chief Executive Officer (CEO) and current Technology Senior Manager, where certain devices and methods involved in the hydrodynamic cavitation processes invented by the President and former CEO/ current Technology Senior Manager have been assigned to the Company. In exchange, the Company agreed to pay a royalty of 5% of gross revenues to each of the President and former CEO/ current Technology Senior Manager for licensing of the technology and leasing of the related equipment embodying the technology. These agreements were subsequently assigned to Cavitation Technologies on May 13, 2010. The Company’s former CEO/ current Technology Senior Manager and President both waived their rights to receive royalty payments that have accrued, or that may accrue, on any gross revenue generated through June 30, 2019 and 2018. On April 30, 2008 (as amended November 22, 2010), the Company’s wholly owned subsidiary entered into an employment agreement with the Director of Chemical and Analytical Department (the “Inventor”) providing that the Inventor shall receive an amount equal to 5% of actual gross royalties received from the royalty stream in the first year in which the Company receives royalty payments from the patent which the Inventor was the legally named inventor, and 3% of actual gross royalties received by the Company resulting from the patent in each subsequent year. As of June 30, 2019, and 2018, no patents have been granted in which this person is the legally named inventor. In June 2018, the Company entered into licensing agreements with Alchemy Beverages Inc. (ABI). Pursuant to the licensing agreements, ABI has the exclusive global distribution rights for the Company’s patented and patent pending technology for the processing of alcoholic beverages. The Company has agreed to assist in the installation and maintenance of the nano reactor systems for ABI and will receive royalty payments ranging from 1% to 3% on all net revenues, as defined, of ABI for the life of the applicable patents. In addition, the Company will receive leasing, consulting, and manufacturing fees as defined. In addition, on a future transaction involving the sale of ABI, the Company will receive approximately 10% of the transaction price (with a minimum of $5 million) and in the event ABI becomes a public entity, the Company will receive approximately 10% of ABI’s shares. There was no revenue recognized during the years ended June 30, 2019 and 2018 pursuant to these agreements. As of June 30, 2019, the Company owns 19.9% of ABI. The investment in ABI has no value assigned to it, which approximates its fair value. Litigation The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies (commencing April 1, 2009), the Company records accruals for contingencies to the extent that management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. In August 2014, a former employee and former Director (Plaintiff) filed an administrative Complaint for approximately $179,000 in unpaid wages, plus penalties and interest, with the California Labor Commissioner’s Office (CLCO). In January 2016, the CLCO ruled in favor of the Company and dismissed the case. The Company had accrued approximately $134,000 for its estimated obligation to the Plaintiff. In February 2016, the Plaintiff appealed this ruling to the Los Angeles County Superior Court. In addition to defending itself, the Company also has filed a cross-complaint against the Plaintiff. In August 2017, the Plaintiff filed a notice of appeal of the trial court’s ruling granting the Company’s anti-SLAPP motion. The Court of Appeal dismissed Plaintiff’s appeal for failing to timely to designate the record on appeal. In March 2018, the Company has reached a settlement agreement with the Plaintiff, resulting in removal of all claims by both parties. As a result of this settlement, during the year ended June 30, 2018, the Company recorded a gain of $101,000 to extinguish the previously recorded accrued salary. |
1. Organization and Summary o_2
1. Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Cavitation Technologies, Inc. (referred to herein, unless otherwise indicated, as “the Company,” “CTi,” “we,” “us,” and “our”) is a Nevada corporation originally incorporated under the name Bio Energy, Inc. CTi has developed, patented, and commercialized proprietary technology that may be used in liquid processing applications. CTi’s patented Nano Reactor® Nano Neutralization® System We have commercialized our CTi Nano Neutralization® System we have four US and one international patented systems, as well as twelve US approved patents for various processes, and have filed another seven US and international patents to employ our proprietary technology in applications including vegetable and oil refining, waste water treatment, algae oil extraction, and alcoholic beverage enhancement. |
Going Concern | Going Concern The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern. During the year ended June 30, 2019, the Company incurred a net loss of $723,000 had a stockholders’ deficit of $819,000. The Company has also been dependent on certain aspects of its funding from technology and license agreements with its distributors, Desmet Ballestra (Desmet) and GEA Westfalia (GEA). These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from an inability of the Company to continue as a going concern. Management’s plan is to generate income from operations by continuing to license its technology globally. Currently, we have a R&D Marketing and Technology License agreement with Desmet that was signed in October 2018, in which Desmet provides advances to the Company of $50,000 through October 2021 to be applied to future gross profit revenues. In addition, we have a R&D, Marketing and Technology License Agreement with GEA signed in January 2017, in which, GEA provides advances to the Company of $25,000 per month through January 2020 to be applied to future sales. At June 30, 2018, advances from Desmet and GEA totaled $427,000. During the year ended June 30, 2019, the Company received advances of $850,000, of which, $$517,000 was recorded as revenues. As of June 30, 2019, advances from Desmet and GEA totaled $760,000. 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 | 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. |
Fair Value Measurement | Fair Value Measurement FASB Accounting Standards Codification (“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 June 30, 2019, and 2018, the carrying value of certain accounts such as accounts receivable, inventory, accounts payable, accrued expenses and accrued payroll approximates their fair value due to the short-term nature of such instruments. |
Use of Estimates | 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 inventory obsolescence, assumptions used in valuing our stock options, stock warrants and common stock issued for services and valuation allowance for our deferred tax asset, among other items. Actual results could differ from these estimates. |
Revenue Recognition | Revenue Recognition Revenues from sale of reactors and the corresponding share in gross profit is recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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. In addition, the Company recognizes revenue from its share of gross profit, as defined, to be earned from distributors. In accordance with ASC 606, the Company has determined that the gross profit to be earned from its distributor as a variable consideration that requires estimation in determining the transaction price, and as such all or a portion can be recognized using the most likely amount approach. Estimates are available from our distributor which are considered in the determination of the most likely amount. However, given the lack of control over the sale to the end customer and the lack of history of prior sales, the Company considered these as a variable revenue constraint that required consideration and as such, the amount of revenue recognized is limited to the actual amount of cash received under the contract which the Company has determined is not refundable and probable that a significant revenue reversal would not occur. |
Cash | Cash and Cash Equivalents The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost which approximates market value. 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 June 30, 2019, and 2018, Company had deposits in excess of federally insured limit with one bank. The Company believes that no significant concentration of credit risk exists with respect to this cash balances because of its assessment of the creditworthiness and financial viability of this financial institution. |
Accounts Receivable | Accounts Receivable The Company evaluates the collectability of our trade accounts receivable based on a number of factors. In circumstances where it becomes aware of a specific customer’s inability to meet its financial obligations to us, a specific reserve for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount that management believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding. Accounts receivable as of June 30, 2019 were $240,000 and were subsequently collected in full in July 2019. There was no account receivable outstanding as of June 30, 2018. |
Inventory | Inventory Inventory is stated at the lower of cost or market. Cost is determined on a specific item basis. Inventory is composed of finished goods and represents costs incurred to manufacture the Company’s Nano Reactor® |
Property and Equipment | Property and Equipment Property and equipment is presented at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Betterments, renewals, and extraordinary repairs that extend the life of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation applicable to retired assets are removed from the Company’s accounts, and the gain or loss on dispositions, if any, is recognized in the consolidated statements of operations. Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated useful lives. Leasehold improvements Shorter of life of asset or lease term Furniture 5-7 Years Office equipment 5 Years Lab equipment 4 Years Skid systems 4 Years Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended June 30, 2019 and 2018, the Company did not recognize any impairment for its property and equipment. |
Share-Based Compensation | Share-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s common stock option and warrant grants is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options and warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. |
Income Taxes | 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. |
Advertising Costs | Advertising Costs Advertising costs, including marketing expense, incurred in the normal course of operations are expensed as incurred. Advertising expenses amounted to $16,000 and $23,000 for the years ended June 30, 2019 and 2018 respectively and was reported as part of General and administrative expenses in the accompanying Consolidated Statements of Operations. |
Research and Development Costs | 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 years ended June 30, 2019 and 2018 amounted to $25,000 and $25,000, respectively. |
Warranty Policy | Warranty Policy The Company provides a limited warranty with every set of reactors sold, typically 2 to 5 years. The Company has not experienced significant claims under its warranty policy, and management determined no accrual for warranty reserve was necessary at June 30, 2019 and 2018. |
Net Loss Per Share | Net Loss Per Share The Company’s computation of 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 are 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. The following table sets forth the computation of basic and diluted loss per common share. June 30, 2019 2018 Net loss $ (723,000 ) $ (250,000 ) Weighted average common shares – basic 196,997,906 197,148,043 Dilutive effect of outstanding stock options and warrants – – Weighted average shares – diluted $ 196,997,906 $ 197,148,043 Net loss per common share: Basic and Diluted $ (0.00 ) $ (0.00 ) There were no adjustments to net loss required for purposes of computing diluted earnings per share. At June 30, 2019 and 2018, 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. June 30, 2019 June 30, 2018 Options 11,000,000 11,378,754 Warrants 79,263,176 75,926,510 |
Concentrations | Concentrations The Company’s revenue was mainly derived from sales Nano Reactor® and Nano Neutralization® System At June 30, 2019, 100% of accounts receivable were due from Desmet. As of June 30, 2019, three vendors and/or professional consultants accounted 49%, 33% and 11%, respectively, of accounts payable. As of June 30, 2013, three vendors and/or professional consultants 51%, 18% and 10%, respectively, of accounts payable. |
Segment | Segment As of June 30, 2019, the Company operated one reportable business segment. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to nonemployee share-based payment accounting Compensation – Stock Compensation 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. |
1. Organization and Summary o_3
1. Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Property and equipment useful life | Leasehold improvements Shorter of life of asset or lease term Furniture 5-7 Years Office equipment 5 Years Lab equipment 4 Years Skid systems 4 Years |
Basic and diluted loss per common share | June 30, 2019 2018 Net loss $ (723,000 ) $ (250,000 ) Weighted average common shares – basic 196,997,906 197,148,043 Dilutive effect of outstanding stock options and warrants – – Weighted average shares – diluted $ 196,997,906 $ 197,148,043 Net loss per common share: Basic and Diluted $ (0.00 ) $ (0.00 ) |
Outstanding securities Anti-dilutive | June 30, 2019 June 30, 2018 Options 11,000,000 11,378,754 Warrants 79,263,176 75,926,510 |
3. Property and Equipment (Tabl
3. Property and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule Property and Equipment | June 30, June 30, 2019 2018 Leasehold improvement $ 2,000 $ 2,000 Furniture 27,000 27,000 Office equipment 2,000 2,000 Equipment 306,000 290,000 Systems 187,000 187,000 524,000 508,000 Less: accumulated depreciation and amortization (459,000 ) (418,000 ) Property and equipment, net $ 65,000 $ 90,000 |
5. Stockholders' Deficit (Table
5. Stockholders' Deficit (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stock Option activity table | Weighted- Average Weighted- Remaining Average Contractual Exercise Life Options Price (Years) Outstanding at June 30, 2017 11,685,852 $ 0.37 2.41 - Granted – – – - Forfeited – – – - Exercised – – – - Expired (307,098 ) – – Outstanding at June 30, 2018 11,378,754 $ 0.31 2.23 - Granted – – – - Forfeited – – – - Exercised – – – - Expired (378,754 ) – – Outstanding at June 30, 2019 11,000,000 $ 0.03 3.36 |
Schedule of options outstanding and exercisable | Options Outstanding Options Exercisable Weighted Weighted Weighted Average Average Average Exercise Number Remaining Exercise Number Remaining Price of Shares Life (Years) Price of Shares Life (Years) $ 0.03 11,000,000 3.36 $ 0.03 11,000,000 3.36 11,000,000 11,000,000 |
Schedule of warrant activity | Weighted- Average Weighted- Remaining Average Contractual Exercise Life Warrants Price (Years) Outstanding at June 30, 2017 75,926,510 $ 0.06 4.81 Granted – – – Exercised – – – Expired – – – Outstanding at June 30, 2018 75,926,510 $ 0.06 3.81 Granted 4,336,666 $ 0.03 4.49 Exercised – – – Expired (1,000,000 ) – – Outstanding at June 30, 2019 79,263,176 $ 0.07 4.45 |
Schedule of warrants outstanding and exercisable | Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Average Average Average Exercise Number Remaining Exercise Number Exercise Price of Shares Life (Years) Price of Shares Price $0.03 - $0.05 58,936,518 5.38 $ 0.04 58,936,518 $ 0.04 $0.08 - $0.12 20,326,658 3.39 $ 0.12 20,326,658 $ 0.12 79,263,176 79,263,176 |
Assumptions | June 30, 2019 Risk-free interest rate 2.60% Contractual terms (years) 4.82 Expected volatility 138% Expected dividend yield 0% |
6. Income Taxes (Tables)
6. Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets | June 30, June 30, 2019 2018 Net Operating loss carryforwards $ 2,827,000 $ 2,607,000 Stock compensation expense 783,000 658,000 Amortization of patents 48,000 48,000 Reserve for obsolete inventory 46,000 46,000 Total net deferred tax assets 3,704,000 3,359,000 Less valuation discount (3,704,000 ) (3,359,000 ) Net deferred tax assets $ – $ – |
Income Tax Provision | June 30, June 30, 2019 2018 Federal statutory rate (21)% (28)% State income taxes, net of Federal benefit (7)% (7)% Net operating loss/carryforward 28% 35% Income tax provision – – |
Open Tax Years | Jurisdiction Open Tax Years Federal 2014 – 2018 California 2014 – 2018 |
7. Commitments and Contingenc_2
7. Commitments and Contingencies (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum lease commitment | Fiscal Year End June 30, 2019 2020 $ 68,000 2021 70,000 2022 72,000 2023 75,000 2024 and thereafter 132,000 Total $ 417,000 |
1. Organization and Summary o_4
1. Organization and Summary of Significant Accounting Policies (Details- Property and Equipment) | 12 Months Ended |
Jun. 30, 2019 | |
Leasehold improvements | |
Property and equipment useful life | Shorter of life of asset or lease term |
Furniture | |
Property and equipment useful life | 5-7 years |
Office Equipment [Member] | |
Property and equipment useful life | 5 Years |
Lab Equipment [Member] | |
Property and equipment useful life | 4 Years |
Skid Systems[Member] | |
Property and equipment useful life | 4 Years |
1. Organization and Summary o_5
1. Organization and Summary of Significant Accounting Policies (Details- Net Loss Per Share) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Accounting Policies [Abstract] | ||
Net loss | $ (723,000) | $ (250,000) |
Weighted average common shares basic | 196,997,906 | 197,148,043 |
Dilutive effect of outstanding stock options and warrants | $ 0 | $ 0 |
Weighted average shares- diluted | 196,997,906 | 197,148,043 |
Net loss per common share basic and diluted | $ 0 | $ 0 |
1. Organization and Summary o_6
1. Organization and Summary of Significant Accounting Policies (Details - Antidilutive shares) - shares | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Options [Member] | ||
Antidilutive shares | 11,000,000 | 11,378,754 |
Warrants [Member] | ||
Antidilutive shares | 79,263,176 | 75,926,510 |
1. Organization and Summary o_7
1. Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net loss | $ (723,000) | $ (250,000) | |
Working capital | (894,000) | ||
Stockholders deficit | (819,000) | (545,000) | $ (311,000) |
Advances from distributors | 760,000 | 427,000 | |
Accounts receivable | 240,000 | 0 | |
Inventory obsolescence | 0 | 0 | |
Impairment of property and equipment | 0 | 0 | |
Advertising expense | 16,000 | 23,000 | |
Research and development expense | 25,000 | 25,000 | |
Warranty reserve | $ 0 | $ 0 | |
Sales Revenue Net [Member] | One Customer [Member] | |||
Concentration risk percentage | 96.00% | 100.00% | |
Accounts Receivable [Member] | One Customer [Member] | |||
Concentration risk percentage | 100.00% | ||
Accounts Payable [Member] | One Vendor [Member] | |||
Concentration risk percentage | 45.90% | 51.00% | |
Accounts Payable [Member] | Another Vendor [Member] | |||
Concentration risk percentage | 33.00% | 18.00% | |
Accounts Payable [Member] | Another Vendor [Member] | |||
Concentration risk percentage | 11.00% | 10.00% | |
Desmet and GEA [Member] | |||
Advances from distributors | $ 427,000 | $ 760,000 | |
Proceeds from advances | 850,000 | ||
Deferred revenue recognized during period | $ 517,000 |
2. Contracts with Customers (De
2. Contracts with Customers (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues | $ 1,090,000 | $ 1,303,000 |
Advances from distributors | 760,000 | 427,000 |
Desmet Ballestra [Member] | ||
Revenues | 1,050,000 | 1,303,000 |
Advances from distributors | 33,000 | |
GEA Westfalia [Member] | ||
Advances from distributors | 727,000 | 427,000 |
Proceeds from advances | 300,000 | |
Reactor Sales [Member] | ||
Revenues | 700,000 | |
Reactor Sales [Member] | Desmet Ballestra [Member] | ||
Revenues | 533,000 | |
Reactor Sales [Member] | Enviro Watertek [Member] | ||
Revenues | 40,000 | |
Gross Profit Share [Member] | ||
Revenues | $ 603,000 | |
Gross Profit Share [Member] | Desmet Ballestra [Member] | ||
Revenues | $ 517,000 |
3. Property and Equipment (Deta
3. Property and Equipment (Details) - USD ($) | Jun. 30, 2019 | Jun. 30, 2018 |
Property and Equipment | $ 524,000 | $ 508,000 |
Less: Accumulated depreciation and amortization | (459,000) | (418,000) |
Property and equipment, net | 65,000 | 90,000 |
Leasehold Improvements [Member] | ||
Property and Equipment | 2,000 | 2,000 |
Furniture [Member] | ||
Property and Equipment | 27,000 | 27,000 |
Office Equipment [Member] | ||
Property and Equipment | 2,000 | 2,000 |
Equipment [Member] | ||
Property and Equipment | 306,000 | 290,000 |
Systems [Member] | ||
Property and Equipment | $ 187,000 | $ 187,000 |
3. Property and Equipment (De_2
3. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 41,000 | $ 51,000 |
4. Accrued Payroll and Payrol_2
4. Accrued Payroll and Payroll Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Accrued salaries | $ 892,000 | $ 889,000 |
Gain on settlement of accrued payroll | $ 0 | 101,000 |
Former Director [Member] | ||
Accrued salary settled | 131,000 | |
Payment for settlement of debt | 30,000 | |
Gain on settlement of accrued payroll | $ 101,000 |
5. Stockholders' Deficit (Detai
5. Stockholders' Deficit (Details - Option activity) - Options [Member] - $ / shares | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Options | ||
Options outstanding, beginning balance | 11,378,754 | 11,685,852 |
Options granted | 0 | 0 |
Options forfeited | 0 | 0 |
Options exercised | 0 | 0 |
Options expired | (378,754) | (307,098) |
Options outstanding, ending balance | 11,000,000 | 11,378,754 |
Options exercisable | 11,000,000 | 11,378,754 |
Weighted Average Exercise Price | ||
Weighted average exercise price, options outstanding, beginning price | $ 0.31 | $ 0.37 |
Weighted average exercise price, options granted | ||
Weighted average exercise price, options forfeited | ||
Weighted average exercise price, options exercised | ||
Weighted average exercise price, options expired | ||
Weighted average exercise price, options outstanding, ending price | 0.03 | $ 0.31 |
Weighted average exercise price, options exercisable | $ 0.03 | |
Weighted Average Remaining Contractual Life (Years) | ||
Weighted average remaining contractual life, options outstanding | 2 years 4 months 28 days | |
Weighted average remaining contractual life, options exercisable | 3 years 4 months 10 days |
5. Stockholders' Deficit (Det_2
5. Stockholders' Deficit (Details - Options by exercise price) - $ / shares | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
$0.03 Exercise Price [Member] | |||
Weighted average remaining life options outstanding | 3 years 4 months 9 days | ||
Weighted average exercise price options outstanding | $ 0.03 | ||
Weighted average remaining life options exercisable | 3 years 4 months 9 days | ||
Options [Member] | |||
Number of shares outstanding | 11,000,000 | 11,378,754 | 11,685,852 |
Weighted average remaining life options outstanding | 2 years 4 months 28 days | ||
Weighted average exercise price options outstanding | $ 0.03 | $ 0.31 | $ 0.37 |
Number of shares exercisable | 11,000,000 | 11,378,754 |
5. Stockholders' Deficit (Det_3
5. Stockholders' Deficit (Details - Warrant activity) - Warrants [Member] - $ / shares | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Warrants | ||
Warrants outstanding, beginning balance | 75,926,510 | 75,926,510 |
Warrants granted | 4,336,666 | 0 |
Warrants exercised | 0 | |
Warrants expired | (1,000,000) | 0 |
Warrants outstanding, ending balance | 79,263,176 | 75,926,510 |
Weighted Average Exercise Price | ||
Weighted average exercise price, warrants outstanding, beginning price | $ 0.06 | $ 0.06 |
Weighted average exercise price, warrants granted | 0.03 | |
Weighted average exercise price, warrants outstanding, ending price | $ 0.07 | $ 0.06 |
Weighted Average Remaining Contractual Life | ||
Weighted average remaining contractual life | 3 years 9 months 22 days | 4 years 9 months 22 days |
Weighted average remaing contractual life, warrants granted | 4 years 5 months 26 days | |
Weighted average remaining contractual life, warrants exercisable | 4 years 5 months 12 days |
5. Stockholders' Deficit (Det_4
5. Stockholders' Deficit (Details - Warrants by exercise price) - $ / shares | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
$0.03-$0.05 [Member] | |||
Number of warrant shares outstanding | 58,936,518 | ||
Weighted average remaining life warrants outstanding | 5 years 4 months 17 days | ||
Weighted average exercise price warrants outstanding | $ 0.04 | ||
Number of warrant shares exercisable | 59,936,518 | ||
Weighted average exercise price warrants exercisable | $ 0.04 | ||
$0.08 - $0.12 [Member] | |||
Number of warrant shares outstanding | 20,326,658 | ||
Weighted average remaining life warrants outstanding | 3 years 4 months 20 days | ||
Weighted average exercise price warrants outstanding | $ 0.12 | ||
Number of warrant shares exercisable | 20,326,658 | ||
Weighted average exercise price warrants exercisable | $ 0.12 | ||
Warrants [Member] | |||
Number of warrant shares outstanding | 79,263,176 | 75,926,510 | 75,926,510 |
Weighted average remaining life warrants outstanding | 3 years 9 months 22 days | 4 years 9 months 22 days | |
Weighted average exercise price warrants outstanding | $ 0.07 | $ 0.06 | $ 0.06 |
Number of warrant shares exercisable | 79,263,176 |
5. Stockholders' Deficit (Det_5
5. Stockholders' Deficit (Details - Assumptions) - Warrants [Member] | 12 Months Ended |
Jun. 30, 2019 | |
Risk free interest rate | 2.60% |
Expected term (years) | 4 years 9 months 25 days |
Expected volatility | 138.00% |
Expected dividend yield | 0.00% |
5. Stockholders' Deficit (Det_6
5. Stockholders' Deficit (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Shares issued new, shares | 0 | ||
Common stock issued for services, value | $ 16,000 | ||
Options [Member] | |||
Intrinsic value of options outstanding | $ 0 | ||
Warrants [Member] | |||
Intrinsic value of warrants | $ 0 | ||
Warrant exercisable price per share | $ 0.07 | $ 0.06 | $ 0.06 |
Change in fair value of warrants | $ 334,000 | ||
Board of Director [Member] | |||
Cancellation of common stock issued to Director, shares | 200,000 | ||
Consultants [Member] | Warrants [Member] | |||
Warrants granted to purchase common stock | 4,336,667 | ||
Warrant exercisable price per share | $ 0.03 | ||
Warrant term | 5 years | ||
Fair value of warrants issued | $ 115,000 | ||
Stock Issued for Services [Member] | |||
Common stock issued for services, shares | 400,000 | ||
Common stock issued for services, value | $ 16,000 |
6. Income Taxes (Details- Defer
6. Income Taxes (Details- Deferred Tax Assets and Liabilities) - USD ($) | Jun. 30, 2019 | Jun. 30, 2018 |
Income Tax Disclosure [Abstract] | ||
Net Operating loss carryforwards | $ 2,827,000 | $ 2,607,000 |
Stock compensation expense | 783,000 | 658,000 |
Amortization of patents | 48,000 | 48,000 |
Reserve for obsolete inventory | 46,000 | 46,000 |
Gross deferred tax assets | 3,704,000 | 3,359,000 |
Less valuation discounts | (3,704,000) | (3,359,000) |
Net deferred tax assets | $ 0 | $ 0 |
6. Income Taxes (Details- Tax R
6. Income Taxes (Details- Tax Reconciliation) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | (21.00%) | (28.00%) |
State income taxes, net of Federal benefit | (7.00%) | (7.00%) |
Net operating loss/carryforward | 28.00% | 35.00% |
Income tax provision | 0.00% | 0.00% |
6. Income Taxes (Details Narrat
6. Income Taxes (Details Narrative) | 12 Months Ended |
Jun. 30, 2019USD ($) | |
Income Tax Disclosure [Abstract] | |
Net operating loss | $ 9,800,000 |
Operating loss expiration date | Dec. 31, 2036 |
7. Commitments and Contingenc_3
7. Commitments and Contingencies (Details- Minimum Lease Commitment) | Jun. 30, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 68,000 |
2021 | 70,000 |
2022 | 72,000 |
2023 | 75,000 |
2024 and thereafter | 132,000 |
Total | $ 417,000 |
7. Commitments and Contingenc_4
7. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating lease expense | $ 65,000 | $ 62,000 |
Revenues | $ 1,090,000 | $ 1,303,000 |
Alchemy Beverages [Member] | ||
Equity ownership percentage | 19.90% | |
Revenues | $ 0 |