10-Q: Cavitation Technologies Reports Significant Q2 Loss Amid Strategic Shift

Cavitation Technologies, Inc. reported a substantial net loss of $734,000 for the six months ended December 31, 2025, driven by a sharp decline in revenue and increased operating expenses, raising significant going concern doubts.

Summary

• Net loss for the six months ended December 31, 2025, was $734,000, a significant increase from a net income of $352,000 in the prior year.
• Revenue plummeted by 96.1% to $3,000 for the six months ended December 31, 2025, compared to $76,000 in the same period last year, primarily due to the patent assignment to Desmet Ballestra.
• Operating expenses increased by 23.5% to $726,000 for the six months, largely due to a $139,000 increase in stock compensation.
• Cash and cash equivalents decreased to $31,000 as of December 31, 2025, from $249,000 at June 30, 2025.
• The company reported a stockholders' deficit of $248,000 as of December 31, 2025, compared to equity of $69,000 at June 30, 2025.
• Substantial doubt exists about the company's ability to continue as a going concern, with current cash projected to sustain operations only through March 2026.
• Strategic focus has shifted to water/wastewater processing and alcoholic beverages using a reserved license from the Desmet patent assignment.
• A new wholly-owned subsidiary, Xyra Corp., was incorporated in August 2025 to focus on crypto technologies, including immersion cooling and an AI-driven quantum-secure remittance network.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative report due to significant financial deterioration, severe liquidity issues, and explicit going concern warnings, despite strategic pivots into new markets.

Positives

• Secured $880,000 in cash from a patent assignment to Desmet Ballestra in October 2024, providing capital for operations and business development.
• Retained a worldwide, exclusive, transferable, and royalty-free license for Nano Reactor technology in water/wastewater processing and alcoholic beverage markets.
• Established a new wholly-owned subsidiary, Xyra Corp., to capitalize on opportunities in the crypto technologies market, including immersion cooling and a quantum-secure remittance network.
• Hydro-Plasma technology, combining cavitation and cold plasma, is patent pending and shows potential for various industrial applications, with partnerships established with New Mexico State University, the University of Guadalajara, and BGNDRF.
• Successfully reconciled and reinstated the SBA EIDL loan from delinquent to good standing.

Negatives

• Net loss significantly increased to $734,000 for the six months ended December 31, 2025, from a net income of $352,000 in the prior year.
• Revenue decreased by 96.1% to $3,000 for the six months ended December 31, 2025, primarily due to the cessation of Nano Reactor sales to Desmet.
• Cash and cash equivalents declined sharply to $31,000 as of December 31, 2025, from $249,000 at June 30, 2025.
• The company has a stockholders' deficit of $248,000 as of December 31, 2025, indicating negative equity.
• General and administrative expenses increased by 26.8% to $715,000 for the six months, largely due to higher stock compensation.
• Disclosure controls and procedures were deemed not effective as of December 31, 2025.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern, with current cash projected to sustain operations only through March 2026.
• The company's ability to continue as a going concern is dependent on its ability to raise additional debt and/or equity financing, with no assurance such financing will be available or sufficient.
• There is no assurance that the company's new strategies in water treatment, agriculture, alcoholic beverages, hydro-plasma, or crypto technologies will successfully generate sufficient revenues.
• Commercial viability and market acceptance of new products and technologies (e.g., Barmuze, Hydro-Plasma, Xyra's crypto solutions) are uncertain.
• Inability to recover higher operating costs resulting from inflation or mitigate their impact could decrease revenues and gross profit.
• Global inflation, higher interest rates, trade tariffs, and geopolitical conflicts (e.g., Russia/Ukraine) could exacerbate inflationary pressures, cause supply chain disruptions, and increase operating costs.
• The ineffectiveness of disclosure controls and procedures as of December 31, 2025, poses a risk to the reliability of financial reporting.

Future Outlook

The company anticipates generating sales in the first half of fiscal 2026 from its water treatment and remediation efforts in the Permian Basin and its Hydro-Plasma technology. Trials for water remediation in agriculture at Hacienda Farms are expected to be completed in the first calendar quarter of 2026, which will determine commercial viability and revenue timeline. Sales and revenue for the Barmuze smart home kitchen appliance, developed with Alchemy Beverages, Inc., are anticipated in the second half of 2026, following the completion of ABI's financial audit before the end of the first quarter of fiscal 2026. The company also plans to obtain additional financing in early fiscal 2026.

Management Comments

• Management's plan is to increase revenues by using its Reserved Grant Back License to apply the technology to water and wastewater processing, recovery, recycling and purification (including oilfield wastewater) and manufacture, distillation, brewing, enhancements, sale and marketing of alcoholic beverages.
• While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect.
• The Company believes it has enough cash and access to cash to sustain operations through March, 2026.
• 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.
• Our principal executive officer and principal financial officer concluded that these disclosure controls and procedures were not effective as of December 31, 2025.

Industry Context

StockSavvy.ai notes that Cavitation Technologies is attempting to pivot its core cavitation technology into high-growth sectors like water treatment, agriculture, and the burgeoning crypto/data center immersion cooling market through its Xyra Corp. subsidiary. The global cold plasma market, which Hydro-Plasma targets, is projected to grow significantly, indicating a strategic alignment with industry trends. However, the company's financial distress and reliance on future financing highlight the significant challenges in commercializing innovative technologies, especially when competing with established players or navigating volatile new markets like crypto. The shift away from vegetable oil refining after the patent sale to Desmet Ballestra signifies a complete re-orientation of its primary revenue stream.

Comparison to Industry Standards

• The company's current financial performance, with a significant net loss and minimal revenue, falls far below industry standards for established technology companies.
• The 'going concern' warning is a critical indicator of financial instability, contrasting sharply with financially robust industry leaders.
• In the water treatment sector, companies like Xylem Inc. or Evoqua Water Technologies Corp. demonstrate consistent revenue growth and profitability, which Cavitation Technologies currently lacks.
• For crypto technologies, while the market is nascent, successful players typically demonstrate strong capital backing and rapid user adoption, which Xyra Corp. is still in the very early stages of achieving.
• The Barmuze venture in alcoholic beverages faces intense competition from established brands and requires substantial marketing and distribution capital, far exceeding the company's current resources.

Corporate Governance

Related Party Transactions

• Certain warrant holders, including the company's CEO, exercised warrants for an aggregate of 13,700,000 shares of common stock on a cashless basis on November 25, 2025, resulting in the issuance of 11,495,000 shares.

Stakeholder Impact

• Shareholders: Significant dilution from recent equity issuances (5,769,400 units, 3,300,000 shares for services, 11,495,000 shares from cashless warrant exercise) and potential future capital raises. The substantial net loss and going concern warning negatively impact shareholder value.
• Employees: Potential for curtailment of operations if financing is not secured, impacting job security.
• Creditors: The 'going concern' warning and increasing liabilities (total liabilities increased to $303,000) raise concerns about the company's ability to meet its financial obligations.
• Customers: Uncertainty regarding the long-term viability of the company could impact customer confidence and future sales, especially for new technologies still in development.

Next Steps

• Increase revenues by applying Reserved Grant Back License technology to water/wastewater processing and alcoholic beverages.
• Continue testing and pursue additional customers for water treatment and remediation in the Permian Basin, with sales anticipated in H1 fiscal 2026.
• Complete trials for water remediation and disinfection in agriculture at Hacienda Farms in Q1 calendar 2026 to determine commercial viability.
• Alchemy Beverages, Inc. (ABI) to complete its financial audit before the end of Q1 fiscal 2026, engage focus groups for Barmuze, refine marketing/distribution, and secure additional capital.
• Company plans to obtain additional financing in early fiscal 2026 for the ABI venture.
• Continue testing Hydro-Plasma technology, with sales and revenue anticipated in H1 fiscal 2026 if successful.
• Xyra Corp. to continue developing its AI-driven, quantum-secure remittance and tokenization network.
• Potentially raise additional debt and/or equity financing to fund operations and provide additional working capital.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial net loss, near-zero revenue, rapidly dwindling cash reserves, and an explicit 'going concern' warning. The ineffectiveness of disclosure controls further exacerbates concerns about financial transparency and reliability. While strategic pivots into new markets are underway, their commercial viability and revenue generation are highly uncertain and far in the future. The immediate liquidity crisis and the high risk of further dilution or operational curtailment make this a highly speculative and risky investment, warranting a strong sell recommendation for any existing holdings.

Keywords

Cavitation Technologies, CTi, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue Decline, Going Concern, Water Treatment, Hydro-Plasma, Crypto Technologies, Xyra Corp, Nano Reactor, Alcoholic Beverages, Barmuze, SEC Filing, Financial Reporting, Stockholders Deficit, Patent Assignment, Convertible Note, Warrants, Disclosure Controls