SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: November 30, 1999
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________
Commission File Number: 0-9015
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
(Exact name of Small Business Issuer as specified in charter)
___COLORADO 84-0768695____________________ (State or
other jurisdiction of (IRS Employer Identification Number)
incorporation)
12407 South Memorial Drive
Bixby, OK 74008
---------------
(Address of principal executive offices)
(918) 369-5950
--------------
(Issuer's telephone number, including area code)
Former Address: 57 West 200 South, Suite 310, Salt Lake City, Utah 84101
Indicate by check whether the Issuer (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
At November 30, 1999, there were 9,588,237 shares of the Registrant's Common
Stock outstanding.
<PAGE>
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
(November 30, 1999 and May 31, 1999)
Consolidated Condensed Unaudited Statements of Operations (Three
months ended November 30, 1999 and 1998) (Six months ended
November 30, 1999 and 1998)
Consolidated Condensed Unaudited Statements of Stockholders'
Equity (November 30, 1999 and May 31, 1999)
Consolidated Condensed Unaudited Statements of Cash Flows
(Six months ended November 30, 1999 and 1998)
Notes to Unaudited Condensed Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
These financial statements should be read in conjunction with the accompanying
notes, and with the historical financial information of the Company.
<PAGE>
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
NOVEMBER 30, 1999 AND MAY 31, 1999
<TABLE>
<CAPTION>
November 30, 1999 May 31, 1999
(Unaudited)
----------------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash $ 74,714 $ 6,942
Accounts receivable 533,316 153,069
Advances to affiliates - 3,521
Prepaid expenses 81,695 -
Employee advances 856 -
--------- --------
Total current assets 690,580 163,532
--------- --------
Equipment and patents at cost
Equipment, net of accumulated
depreciation 68,000 70,889
Patents, net of accumulated
amortization 249,129 255,351
---------- --------
317,129 326,240
---------- --------
$1,007,709 $489,772
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 96,160 $ 31,890
Accounts payable - affiliate 90 -
Accumulated interest payable 15,511 -
Notes payable - related party 87,500 92,764
---------- --------
Total current liabilities 199,261 124,654
---------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
50,000,000 shares
authorized, 9,588,237 and
9,520,138 shares
issued and outstanding at
November 30, 1999 and May 31,
1999, respectively 9,588 9,520
Additional paid-in capital 1,414,346 1,137,019
Retained earnings (deficit) (615,486) (781,421)
---------- ----------
808,448 365,118
---------- ----------
$1,007,709 $489,772
========== ==========
</TABLE>
- See accompanying notes to consolidated condensed financial statements -
<PAGE>
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended November 30, Ended November 30,
-------------------- --------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 564,939 $ - $ 955,593 $ -
COSTS ASSOCIATED WITH REVENUES 56,107 - 86,819 -
----------- --------- ---------- ---------
GROSS PROFIT (LOSS) 508,832 - 868,774 -
--------- -------- --------- --------
EXPENSES:
General & administrative 437,293 51,563 678,307 57,801
Depreciation and
amortization 10,010 507 19,998 1,014
--------- -------- --------- --------
447,303 52,070 698,305 58,815
--------- -------- --------- --------
INCOME (LOSS) FROM OPERATIONS 61,529 (52,070) 170,469 (58,815)
--------- -------- --------- --------
OTHER INCOME (EXPENSE):
Interest expense (2,275) 200 (4,534) 516
--------- -------- --------- --------
(2,275) 200 (4,534) 516
--------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES 59,254 (51,870) 165,935 (58,299)
INCOME TAX EXPENSE - - - -
--------- -------- --------- --------
NET INCOME (LOSS) $ 59,254 $(51,870) $ 165,935 $(58,299)
========= ======== ========= ========
BASIC EARNINGS(LOSS) PER SHARE $ .01 $ (.01) $ .02 $ (.02)
========= ======== ========= ========
DILUTED EARNINGS (LOSS) PER SHARE $ .01 $ (.01) $ .02 $ (.02)
========= ======== ========= ========
AVERAGE WEIGHTED SHARES
OUTSTANDING 9,584,381 6,426,375 9,560,779 3,551,375
========= ========= ========= =========
</TABLE>
- See accompanying notes to consolidated condensed financial statements -
<PAGE>
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED NOVEMBER 30, 1999 AND THE YEAR ENDED MAY 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
--------------- Paid-In Accumulated
Shares Amount Capital (Deficit)
------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1998 676,375 $ 676 $ 524,550 $(543,917)
Issuance of stock for 5,750,000
shares of Ion Collider
Technologies, Inc. on
September 30, 1998 8,625,000 8,625 275,499 -
Issuance of stock for payable 43,038 43 18,647 -
Issuance of stock for cash 125,725 126 470,866 -
Issuance in connection with
acquisition of Big Blue, Inc. 50,000 50 (152,543) -
Net loss - - - (237,504)
--------- ------ ---------- ----------
Balance, May 31, 1999 9,520,138 $9,520 $1,137,019 $(781,421)
Issuance of stock for cash 30,000 30 124,970 -
Issuance of stock due to exercise
of stock option plan 27,000 27 107,973 -
Issuance of stock for payable 11,099 11 44,384 -
Net loss 165,935
--------- ------ ---------- -----------
Balance, November 30, 1999 9,588,237 $9,588 $1,414,346 $ (615,486)
========= ====== ========== ==========
</TABLE>
- See accompanying notes to consolidated condensed financial statements -
<PAGE>
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
For the Six Months Ended November 30,
1999 1998
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 165,935 $ (58,298)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities -
Depreciation and amortization 19,998 1,014
Changes in operating assets -
Decrease in accounts receivable (380,247) -
Decrease in advances to subsidiaries (78,174) -
Increase in employee advances (856) -
Changes in operating liabilities -
Increase (decrease) in accounts
payable and accrued expenses 64,360 (18,691)
Increase in accrued interest
payable 15,511 -
---------------- ----------------
Net cash provided by
(used in) operating
activities (193,473) (75,975)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase option deposit - (327,970)
Purchase of equipment (9,147) (34,124)
Patent costs (1,739) -
---------------- ----------------
Net cash used in
investing activities (10,886) (362,094)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of)
borrowing from related parties (5,264) 173,500
Proceeds from sale of common stock 277,395 302,816
Loan principal payments - -
---------------- ----------------
Net cash provided by
financing activities 272,131 476,316
---------------- ----------------
NET INCREASE IN CASH 67,772 38,247
CASH, BEGINNING OF THE YEAR 6,942 -
---------------- ----------------
CASH, END OF THE PERIOD $ 74,714 $ 38,247
================ ================
</TABLE>
- See accompanying notes to consolidated condensed financial statements -
<PAGE>
INTERNATIONAL CAVITATION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 1999 and 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements should be
read in conjunction with the Company's financial statements for the twelve
months ended May 31, 1999 contained in the Company's Annual Report on Form
10-KSB. The financial statements included herein as of November 30, 1999 and
1998 and for the six months then ended have been prepared by the Company,
without an audit, pursuant to generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments considered necessary for fair presentation have
been included. The results for the six month period are not necessarily
indicative of results for the full year. The May 31, 1998 condensed balance
sheet data was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles. For
further information see Management's Discussion and Analysis of Financial
Condition and Operating Results.
NOTE 2 - SIGNIFICANT EVENTS
Organization
- ------------
International Cavitation Technologies, Inc. (the "Company") was incorporated as
Yellow Gold Of Cripple Creek, Inc. (Yellow Gold) under the laws of the State of
Colorado on August 24, 1936. The Company was involved in various mining
activities over the years, none of which proved successful. During the year
1953, the Company discontinued all operations and had no significant revenues
from any activity prior to September 1998 and was classified as a development
stage company. For the period during the development stage of the Company from
August 1953 through August 31, 1998, the Company had accumulated losses of
$543,917.
On December 2, 1998, the shareholders voted to change the Company's name to
International Cavitation Technologies, Inc. from Yellow Gold Of Cripple Creek,
Inc.
Acquisition of Ion Collider Technologies, Ltd.
- ----------------------------------------------
On September 30, 1998, the Company acquired all of the outstanding common stock
and common stock purchase warrants of Ion Collider Technologies, Ltd. ("ICT"), a
Colorado corporation, in a business combination accounted for as a pooling of
interests. ICT became a wholly owned subsidiary of the Company through the
exchange for 8,625,000 shares of its common stock and 3,000,000 common stock
purchase warrants, after taking into account the one-for-four reverse stock
split described in Note 5 below. Each warrant is exercisable to purchase one
share of the Company's common stock for $1.17 per share anytime until June 1,
2008. The accompanying financial statements for fiscal year ending May 31, 1999
are based on the assumption that the companies were combined for the full year,
and financial statements of prior years have been restated to give effect to the
combination.
<PAGE>
ICT owns four patents and one pending patent related to the use of ion collider
technology to separate particles from liquid, enhance the recovery of crude oil,
increase the amount of hydrocarbons recoverable from underground reservoirs,
clarify water, and other applications to be developed.
The Company's goal is to oversee the commercial implementation of its various
patented processes. It anticipates that revenues will be generated from
licensing fees, royalties from the use of this technology by third parties, and
for services rendered in the commercial application of these patented
technologies.
Subsequent to the merger mentioned above, the Company acquired Big Blue, Inc.
which was a party to an Asset Purchase Agreement entered into on September 21,
1998 between ICT and various companies and individuals which were shareholders
in the Company on the acquisition date. This agreement called for ICT to acquire
for common stock the patents mentioned above, which had certain license and
other conditions previously agreed to by the former owners of the patents, and
in the future assets of companies participating in the sale of the patents to
ICT for $220,000. Effective May 31, 1999 the Company exercised its option and
purchased Big Blue, Inc. and certain licensing agreements related to the
patents.
Joint Venture and Sub-License Agreements
- ----------------------------------------
During August of 1999, Big Blue, Inc. ("BBI") entered into a five year Joint
Venture Agreement ("Agreement") with Aqua Terra, L.L.C. ("AT"), a California
limited liability company, forming a California Joint Venture known as Aqua
Terra Technologies ("ATT"). Pursuant to the Agreement, BBI granted the joint
venture a non-exclusive sub-license agreement in the State of California to use
the Company's patent rights and technology for environmental remediation and
hydrocarbon enhancement purposes. Upon execution of the Agreement, AT
contributed $300,000 in cash to the joint venture, and the joint venture paid
BBI a one-time Sub-licensing fee of $200,000. As further consideration for the
Sub-license, ATT will pay BBI a royalty equal to 12% of net job revenues, but in
no event will the royalty be less than $3.50 per ton of soils treated, $5.00 per
ton of sludges treated and $0.005 per gallon of liquids treated, unless
otherwise agreed to in writing. BBI will be allocated 20% of the joint venture
profit or loss.
On November 29, 1999, Big Blue, the Company's wholly owned subsidiary entered
into two non exclusive licensing agreements with Hot Spot Techonologies, Inc.
("Hot Spot"). Each agreement is for a period of five years and calls for up
front licensing fees totaling $500,000 and royalty payments as detailed below:
Soil remediation - The greater of 12% of gross revenues derived from the
use of the licensed technology less direct labor, equipment rentals, and
chemicals associated with the job, or $3.50 per ton.
Water remediation - The greater of 12% of gross revenues derived from
the use of the licensed technology less direct labor, equipment rentals,
and chemicals associated with the job, or $.005 per gallon.
As additional royalty consideration, Big Blue is entitled to a fee equal to
20% of Hot Spot's annual net revenues.
<PAGE>
The $500,000 initial licensing fee is to be paid $20,000 at closing, which
monies have been collected and are included in cash at November 30, 1999, with
the balance to be paid on a monthly basis in an amount equal to 10% of gross
revenues less direct labor, equipment rentals, and chemicals associated with the
revenues. Any unpaid balance would be due on November 29, 2000. The unpaid
portion of this licensing fee would bear interest at the rate of 6% per annum.
Big Blue has the right to approve each project in advance. This agreement
restricts Hot Spot from performing services in any area covered by an exclusive
licensing agreement.
NOTE 3. ACCOUNTING POLICIES
Consolidation Policies
- ----------------------
The accompanying consolidated financial statements include the accounts of the
Company and all of its wholly owned subsidiaries, ICT and Big Blue, Inc.
Intercompany transactions and balances have been eliminated in consolidation.
Equipment and Patents
- ---------------------
The cost of the patents acquired is recorded at predecessor cost for common
shares issued in the acquisition, and the additional cash cost to purchase
certain licensing agreements related to the patents for $220,000. Amortization
is recorded over the remaining patent life of approximately sixteen years.
Equipment is depreciated over seven years.
Earnings (Loss) per Share
- -------------------------
Earnings (loss) per share computations are calculated on the weighted-average of
common shares and common share equivalents outstanding during the year. Common
stock warrants and options are considered to be common stock equivalents and are
used to calculate earnings per common and common equivalent except when they are
anti-dilutive.
Use of Estimates in Financial Statements
- ----------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and revenues and
expenses during the reporting period. In these financial statements, assets,
liabilities and earnings involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
NOTE 4 - REVERSE STOCK SPLIT
On October 6, 1997, the shareholders of the Company approved a reverse stock
split of one-for-forty shares. On December 2, 1998, the shareholders of the
Company approved a reverse stock split of one-for-four shares. The financial
statements have been adjusted to reflect these reverse stock splits.
<PAGE>
NOTE 5 - NON-QUALIFIED STOCK OPTION PLAN
During the fiscal year ended May 31, 1998, the Company adopted a Non-Qualified
Stock Option Plan to provide the Company with ongoing legal and professional
expertise in its regulatory filing requirements and ongoing negotiations for
viable business and merger opportunities. The Company set aside 125,000 shares
(after taking into consideration the reverse stock split taken on December 2,
1998) for such a plan. The price of the options are to be determined by the
Board of Directors and are set to expire in five years.
During the fiscal year ended May 31, 1998, 50,000 shares were optioned and
exercised at $.05 per share for services rendered.
During the quarter ending February 28, 1999, 8,000 shares were optioned and
exercised at $.01 per share for cash.
During the quarter ending November 30, 1999, 27,000 shares were optioned and
exercised at $0.01 per share for cash. This stock was recorded on the books at
its estimated fair value of $108,000. This stock was issued for professional
services to be rendered over the twelve months ended September 7, 2001. As of
November 30, 1999, $81,695 of the excess of fair value over the issue price was
treated as a prepaid expense.
NOTE 6 - LEASE COMMITMENTS
Big Blue is leasing three automobiles and these vehicles are under
non-cancelable operating leases having remaining terms in excess of one year as
of August 31, 1999. Rentals for each of the next five years and in the aggregate
are:
Fiscal year ended May 31,
2000 8,615
2001 13,848
2002 7,529
2003 7,530
2004 -
--------
Total future minimum
rental payments $ 37,522
========
<PAGE>
NOTE 7 - NOTES PAYABLE
The following notes are all due prior to May 31, 2000:
November 30, May 31,
1999 1999
------------ --------
6% Note payable to G.C. Broach
payable by Big Blue and secured by
equipment due September 10, 1999 $ - $ 5,264
10% Note due by Company to Market Media 50,000 50,000
This note has a call to be paid
should the Company obtain financing
of $250,000.
10% Note payable to McKinley Capital
originally due 60 days from September 1,
1998 but extended for another ten months.
This note has a call to be paid
should ICT obtain financing of $250,000 37,500 37,500
-------- --------
$ 87,500 $ 92,764
======== ========
NOTE 8 - INDEPENDENT APPRAISAL
On October 13, 1999, the Company obtained an appraisal from an independent
certified public accounting firm accredited in business valuations by the
American Institute of Certified Public Accountants on the estimated fair value
of the Company. In their opinion, the Company, through the use of its patented
technologies, had a fair market value in excess of $10,000,000 as of October 13,
1999.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Prior to September of 1998, the Company was in the development stage.
The following discussion is intended to assist in an understanding of the
Company's financial position as of November 30, 1999 and its results of
operations for the six months ended November 30, 1999 and 1998. The Consolidated
Condensed Financial Statements and Notes included in this report contain
additional information and should be referred to in conjunction with this
discussion. It is presumed that the readers have read or have access to the
Company's annual report on Form 10-KSB for the fiscal year ended May 31, 1999.
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
During the three months ended November 30, 1999, the Company reported net income
of $59,254. The Company had reported net loss of $51,870 during the comparable
period in 1998. This increase is due primarily to the following factors:
Revenues. During the three months ended November 30, 1999, the Company generated
$564,939 in revenues, $500,000 of which was licensing fee income, $2,352 of
which was land remediation fee income, $26,572 of which was consulting fee
income, and $36,015 of which was chemical sales in the Aqua Terra joint venture.
The licensing fee was earned in conjunction with its joint venture agreement
with Hot Spot Technologies, Inc..
No revenues were earned during the corresponding period in 1998.
Cost Associated with Revenues. During the three months ended November 30, 1999,
the Company incurred $56,106 in costs associated with its land remediation
revenues. No costs associated with revenues were incurred during the comparable
period in 1998.
General and Administrative Expenses. The Company incurred general and
administrative expenses totaling $437,293 during the three months ended November
30, 1999. The Company incurred general and administrative expenses totaling
$51,563 during the comparable period in 1998. This increase is a result of
expanded operating activities during 1999.
Depreciation and Amortization. Depreciation and amortization totaled $10,010 for
the three months period ended November 30, 1999. Depreciation and amortization
expense totaled $507 during the comparable period of 1998. The increase in
depreciation is primarily due to the amortization of patent costs in 1999.
Interest Expense. The Company incurred $2,275 in interest expense during the
three-month period ended November 30, 1999. The Company incurred no interest
expense and earned $200 in interest income during the comparable period in 1998.
This increase in interest expense is a result of borrowing incurred subsequent
to August 31, 1998.
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998
During the six months ended November 30, 1999, the Company reported net income
of $165,935. The Company had reported net loss of $58,299 during the comparable
period in 1998. This increase is due primarily to the following factors:
Revenues. During the six months ended November 30, 1999, the Company generated
$955,593 in revenues, $700,000 of which was licensing fee income, $157,272 of
which was land remediation fee income, $62,306 of which was consulting fee
income, and $36,015 of which was chemical sales in the Aqua Terra joint venture.
The licensing fee was earned in conjunction with its joint venture agreements
with Aqua Terra, L.L.C. and Hot Spot Technologies, Inc.. No revenues were earned
during the corresponding period in 1998.
Cost Associated with Revenues. During the six months ended November 30, 1999,
the Company incurred $86,818 in costs associated with its land remediation
revenues. No costs associated with revenues were incurred during the comparable
period in 1998.
General and Administrative Expenses. The Company incurred general and
administrative expenses totaling $678,307 during the six months ended November
30, 1999. The Company incurred general and administrative expenses totaling
$57,801 during the comparable period in 1998. This increase is a result of
expanded operating activities during 1999.
Depreciation and Amortization. Depreciation and amortization totaled $19,998 for
the six months period ended November 30, 1999. Depreciation and amortization
expense totaled $1,014 during the comparable period of 1998. This increase was
due primarily to the amortization of patent costs in 1999.
Interest Expense. The Company incurred $4,534 in interest expense during the
six-month period ended November 30, 1999. The Company incurred no interest
expense and earned $516 in interest income during the comparable period in 1998.
This increase in interest expense is a result of borrowing incurred subsequent
to August 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
This form 10-QSB includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All
statements, other than statements of historical facts, included in this Form
10-QSB that address activities, events or developments the Company expects or
anticipates will or may occur in the future, including such things as estimated
future net expenditures (including the amount and the nature thereof), business
strategy and measures to implement strategy, competitive strengths, goals,
expansion and growth of the Company's business and operations, plans, references
to future success, references to intentions as to future matters and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate to the
circumstances. However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a number of risks
and uncertainties; general economic, market or business conditions; the
opportunities (or lack thereof) that may be presented to and pursued by the
Company; competitive actions by other companies; changes in laws or regulations;
<PAGE>
and other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized, or
even if realized, that they will have the expected consequences to or effects on
the Company or its business or operations.
The Company became profitable during the six months ended November 30, 1999, and
anticipates that it will continue to be profitable for the remainder of the
fiscal year ending May 31, 2000. Continued profitability is dependent on the
Company's ability to continue to sell licensing agreements and to earn royalties
from the use of its patented technologies. As of November 30, 1999, the Company
anticipates that its current resources will be sufficient to finance the
Company's currently anticipated needs for operating and capital expenditures.
The Company's working capital requirements will depend upon numerous factors,
including: progress of the Company's licensing agreements; the licensee's
ability to generate additional projects utilizing the Company's technology; the
licensee's ability to generate net income from these projects; timing and cost
of obtaining regulatory approvals; and collaborative arrangements with other
organizations.
Net cash used in operating activities for the six months ended November 30, 1999
was $193,473. Net cash used in operating activities for the comparable period
of 1998 was $75,975.
Investing Activities
Net cash used in investing activities was $10,886 for the six months ended
November 30, 1999, as compared to $362,094 during the same period in 1998.
Financing Activities
Net cash flow provided by financing activities was $272,131 for the six months
ended November 30, 1999 as compared to $476,316 during the same period in 1998.
PART II OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended November 30, 1999, the Company sold 27,000 shares of
its common stock pursuant to its non qualified stock option plan. This
transaction was valued at $108,000 for financial reporting purposes. This sale
was exempt from registration pursuant to Section 4 (2) of the Securities and
Exchange Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
International Cavitation Technologies, Inc.
Date: November 30, 1999 /s/ Dave Shroff, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> NOV-30-1999
<CASH> 74,714
<SECURITIES> 0
<RECEIVABLES> 615,867
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 690,580
<PP&E> 317,129
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,007,709
<CURRENT-LIABILITIES> 111,761
<BONDS> 0
0
0
<COMMON> 9,588
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,007,709
<SALES> 564,939
<TOTAL-REVENUES> 564,939
<CGS> 56,107
<TOTAL-COSTS> 56,107
<OTHER-EXPENSES> 437,293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,275
<INCOME-PRETAX> 59,254
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,254
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
