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Form 10-Q for CAVITATION TECHNOLOGIES, INC. 16-Nov-2009 Quarterly Report ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our financial statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as its plans, objectives, expectations and intentions. Its actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements. Overview Hydrodynamic Technology, Inc. dba Cavitation Technologies, Inc (Company) was incorporated January 29, 2007, in California. We are a development stage enterprise that designs and engineers NANO technology based systems that use our patents pending, multi-stage, continuous flow-through, hydrodynamic cavitation reactors. We are a "GreenTech" company whose goal is to monetize our patent pending technologies that we feel have unique, useful, and environmentally friendly commercial applications in markets such as vegetable oil refining, renewable fuels, water recycling and desalination, alcoholic beverage enhancement, water-oil emulsions, and crude oil yield enhancement. Research and development has led to products which include the Green D De-gumming System, a vegetable oil refining system, and the Bioforce 9000 NANO Reactor Skid System which performs the transesterification process during the production of biodiesel. We believe the application of our technology can dramatically reduce operating costs and improve yields in comparison to competitive solutions. Our headquarters and only office is in Chatsworth, California. We have no significant operating history and from January 29, 2007 (date of inception) through September 30, 2009, we generated net losses aggregating $8,402,194. Management's plan is to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company's needs, 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 success depends in part on our ability to obtain patents, maintain trade secrets, and operate without infringing on the proprietary rights of others both in the United States and other countries. We have seven patent applications pending in the US along with three PCT applications. We intend to apply for new patents on a regular basis. Our patents pending apply to potential commercial applications in markets such as vegetable oil processing, renewable fuels production, water recycling and desalination, water-oil emulsions, crude oil yield enhancement, water-oil emulsions, blending systems, alcoholic beverage enhancement, and algae processing. There can be no assurances that patents issued to the Company will not be challenged, invalidated, or circumvented, or that the rights granted hereunder will provide proprietary protection or competitive advantage to the Company. We are a public company with stock traded on the Over the Counter Bulletin Board with ticker symbol CVAT. Our stock is also traded on the Stuttgart Stock Exchange with symbol WTC. Our only location is our headquarters in Chatsworth, California. We have four employees and have engaged approximately 40 consultants and independent contractors over the past two years. Results of Operations The following is a comparison of the results of operations for the Company for the three months ended September 30, 2009 and 2008. Three Months Ended September 30, 2009 2008 $ Change % Change General and administrative expenses $ 3,077,874 $ 348,946 $ 2,728,928 782 % Research and development expenses 62,965 129,875 (66,910 ) -52 % Total operating expenses 3,140,839 478,821 2,662,018 556 % Loss from operations (3,140,839 ) (478,821 ) (2,662,018 ) 556 % Interest expense (83,582 ) (9,637 ) (73,945 ) 767 % Loss before income taxes (3,224,421 ) ( 488,458 ) (2,735,963 ) 560 % Income tax expense - - - 0.0 % Net loss $ (3,224,421 ) $ (488,458 ) $ (2,735,963) 560 % Revenues We had no revenue for the three months ended September 30, 2009 or 2008. For the three month period ended September 30, 2009, we recorded Deferred Income of $7,480 as a deposit for a potential future sale/lease/license. We expect to be able to achieve revenue during the fiscal year ending June 30, 2010. General and Administrative Expenses Our general and administrative expenses increased $2,728,928 for the three months ended September 30, 2009. This is attributable largely to the issuance of 5,700,000 common shares (pre-split) distributed as incentive and valued at $4,560,000 (of which $2,587,871 is expensed in this quarter) to consultants, service providers and other key personnel who contributed to the success of the Company. We had no such expenses in 2008. The other two major expenses in the first quarter of fiscal 2010 were consulting fees of $296,022 and professional fees of $125,981 for legal, audit, and accounting. This compares with no consulting fees and $56,186 in professional fees in the first quarter of fiscal 2009. Research and Development R&D declined from $129,875 to $62,965 as we focused more resources on advertising and marketing our existing products and fewer resources on developing potential commercial products. Nevertheless, we did continue to conduct R&D on our NANO Technology for potential commercial applications in markets such as vegetable oil refining, water recycling and desalination, alcoholic beverage enhancement, crude oil yield enhancement, and water-diesel emulsion. Interest Expense Interest expense increased 767% to $83,582 with $63,601 attributable to amortization of discount on convertible debt. This amount arose as we converted the debt into restricted common shares at a 25% discount to the market price. Interest charges on our bank loan amounted to $17,556 as the bank line of credit converted to a 1-year loan with equal monthly payments of $7,396 starting August 1, 2009. Interest charges of $9,637 for the first quarter in fiscal 2009 were attributable to our bank line of credit. Liquidity and Capital Resources Cash As of September 30, 2009, we had cash of $7,029 compared to $5,038 at June 30, 2009. Working Capital As of September 30, 2009 total current liabilities, excluding the aforementioned bank loan, were $796,224, compared to $608,615 at June 30, 2009. This increase is attributable largely to Common Stock Subscription Deposit of $289,684 which represents deposits from individuals to be converted to common stock. The Common Stock Subscription Deposit of $289,684 partially off-sets the $180,000 convertible debt converted into shares as discussed above. Accrued salary for the president of the company increased to $249,955 from $202,590. Accounts payable increased to $172,378 from $109,311. Convertible Notes Payable On August 17, 2009, $180,000 in convertible notes payable plus $10,803 in accrued interest were converted into 374,125 shares of restricted common stock (pre-3 for 1 split). Immediately prior to the conversion, the Company changed the conversion rate to be equal to 75% of the average closing price of the Company's stock for the 10 days immediately preceding the conversion request. This 25% discount from the market price amounted to $63,601 and was recognized as Interest Expense in the Consolidated Statement of Operations. Bank Line of Credit At September 30, 2009, we had borrowings of $627,876 from the National Bank of California versus $636,917 on June 30, 2009 on a line of credit from the same bank. On August 1, 2009, the previous revolving line of credit was replaced by a one-year variable rate loan which matures August 1, 2010. This loan bears interest at Prime + 2.75% with equal monthly installments of $7,396 beginning September 1, 2009. A final payment of $599,322 is due August 1, 2010. This loan is secured by personal guarantees of the Company's principals and assets. Common Stock In addition to the 374,125 shares (pre-split) mentioned above, under Convertible Notes Payable, we also issued 5,700,000 common shares (pre-split) distributed as incentive and valued at $4,560,000 (of which $2,587,8721, is expensed in the current quarter) to consultants, service providers and others. We also issued 279,337 common shares (pre-split) valued at $217,411 for services rendered. Cash Flow Net Cash Used in Operating Activities amounted to $237,632 in the first quarter of fiscal 2010 compared with $235,071 for the same 3-month period in fiscal 2009. It is our intent to raise additional debt and/or equity financing to fund operations. In addition, we expect to fund our operations from revenue generated in fiscal 2010. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company's needs, or that the Company will be able to meet its future contractual obligations. Should we fail to obtain such financing, the company may curtail its operations. |
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| aus der Diskussion: | CAVITATION TECH NEWS THREAD |
| Autor (Datum des Eintrages): | araichanna (16.11.09 17:44:36) |
| Beitrag: | 37 von 82 (ID:38396515) |
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