OTC: CVAT

Desmet Belgium Group (previously
Desmet Ballestra) Agreement

Desmet, together with its
affiliates, is a global engineering and equipment supply firm engaged in the development, design and supply of process equipment for oils
and fats processing facilities including vegetable oil refining, biofuel, oleo chemical, seed crushing, surfactant and detergent markets.
Desmet supplies these markets with services based on the latest globally sourced technologies. Desmet has relationships with major refiners
globally. A significant portion of global vegetable oil refineries include major refiners such as Archer Daniels Midland Company, Cargill,
Inc. and Bunge Limited. Desmet has more than 40 sales representatives selling in North America, South America, Europe, and Asia. Since
its founding in 1946, Desmet reports that it has built a global network that includes 1,300 employees, 17 global and 8 representative
offices, and more than 6,000 lines in a variety of applications. Desmet operates a separate division for each of the above markets and
the Desmet Oils & Fats division has supplied small and large plants to approximately 1,900 oil millers in 150 countries, covering
over 6,300 process sections.

On May 14, 2012, we signed
a global R&D, Marketing and Technology License Agreement with Desmet Ballestra Group s.a. (Desmet), a Belgian company
that is actively marketing the NANO Neutralization® System, the key component of which is our Nano Reactor® to
soybean and other vegetable oil refiners. The Agreement provided Desmet (licensee) a limited, exclusive license and right to develop,
design and supply our NANO Neutralization® System which incorporates Nano Reactor® devices on
a global basis tools and fats and oleo chemical applications. The agreement expired in May 2015.

On January 22, 2016, Desmet
and the Company executed a new three year License Agreement with essentially the same terms with the May 2012 agreement that was effective
August 1, 2015. As part of the agreement, Desmet provided, under certain conditions, limited monthly advance payments of $50,000 to be
applied against gross profit share from future sales. The agreement expired in August 2018.

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On October 1, 2018, Desmet
and the Company executed a new three year License Agreement with essentially the same terms with the January 2016 agreement. As part
of the agreement, Desmet provided us under certain conditions, limited monthly advances of $50,000 through October 1, 2021, to be applied
against gross profit share from future sales. The agreement expired in October 2021.

On October 1, 2021, Desmet
and the Company executed a new three-year License Agreement with essentially the same terms with the October 2018 agreement. As part of
the agreement, Desmet provided the Company monthly advances of $40,000 through November 1, 2024, that was applied as payment from reactor
sales, however, the Company was no longer entitled to gross profit share from future sales. This agreement was terminated and replaced
in February 2024.

On February 15, 2024,
Desmet and the Company terminated the October 2021 agreement and executed a new but similar three-year agreement (“February 2024
agreement”). As part of the February 2024 Agreement, Desmet will provide the Company monthly advances of $25,000 through February
2027, subject to limitations, that will be applied as payment from future reactor sales. In addition, Desmet also waived reimbursement
right for the outstanding advances made pursuant to the October 2021 agreement in the aggregate and up to $498,000.

In October 2024, we entered into a Patent Assignment
and License Back Agreement with Desmet to assign certain patents, intellectual property rights and trademarks related to vegetable oil
refining to Desmet, as consideration for the patent assignments, Desmet paid the Company $880,000 in cash. This transaction provided capital
for continuous operations and business development of our company. This agreement effectively superseded the February 2024 agreement with
Desmet including the termination of the monthly advances of $25,000.

Key points of the October 2024 Agreement included:

·
Reserved License: we retained a worldwide, exclusive, transferable, and royalty-free license to practice and use the Assigned Patents in the fields of water and wastewater processing, recovery, recycling, and purification (including oilfield wastewater), as well as the manufacture, distillation, brewing, enhancement, sale, and marketing of alcoholic beverages (the “Licensed Fields”).

·
Grant-Back License: we received a worldwide, exclusive, transferable, and royalty-free license to practice and use the Assigned Patents and associated technical information, consistent with the scope of the Reserved License.

·
Trademark Usage: we retained exclusive rights to use the “Nano Reactor®” mark for our businesses, systems, and products related to the Licensed Fields.

Under both the Reserved License and the Grant-Back
License, the Company will have a worldwide, exclusive, transferable, and royalty-free license and right to design, build, use, export,
improve, sell, and market Nano Reactor® devices, as well as Nano Reactor® systems and products that incorporate or utilize Nano
Reactor® devices, limited to uses and applications within one or more of the Licensed Fields.

As a result of this agreement, the Company expects
that Desmet will start to manufacture the Nano reactors by itself and sale of Nano reactors to Desmet by the Company will significantly
be reduced in future periods. We will continue to own and operate a large portfolio of patents and intellectual property rights
in applications not related to vegetable oil refining. The following are Management’s plans going forward to generate revenues and
sustain the operations of the Company and its current status:

1.
Water Treatment and Remediation in the Permian Basin

2.
Water Remediation and Disinfection in Agriculture

3.
Business Venture with Alchemy Beverages, Inc.

4.
New Technologies: Hydro-Plasma

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1. Water Treatment and Remediation in the Permian Basin

Enviro Watertek, LLC

In April 2019, the
Company and Delaware Water Company, LLC (Delaware) formed a limited liability company called Enviro WaterTek LLC
(“Enviro” ,“EW”). Enviro is owned 50% by the Company and 50% by Delaware, and the Company accounts for its
investment in Enviro under the equity method of accounting. From 2019 to 2024, Enviro had insignificant operations. This agreement
covers our first commercial entrance into industrial treatment of produced and frac water. Fracking industry has seen a significant
growth over the past ten years, reaching daily water consumption volume of over 58 million barrels per day. Our newly designed Low
Pressure Nano Reactor (LPN™) was specifically developed to be integrated into produced water treatment system along
with our proprietary chemical formulations, and has depicted measurable and quantifiable advantages over industry standard processes
and equipment. Our agreement with EW provides for sales on LPN™ plus recurring revenue stream based on processing of
produced and frac water volumes and utilization. Our agreement with EW has a fifteen-year term.

In March 2020, the global
pandemic of COVID-19 had a negative impact on the oil and gas industry worldwide, and has consequently impaired our ability to rapidly
accelerate LPN™ sales and recurring revenue stream. Our current operations are limited to system trials and have not
produced any meaningful revenue. The system has the capacity to treat approximately 17,000 barrels of produced water per day (BPD).

In June 2023, the Company
determined that investment in EW was impaired, and as a result, the Company recorded an impairment charge of approximately $1.1 million.
There were no transactions during fiscals 2025 and 2024, from sale of reactors and usage fee.

Currently, we have installed our system at a major
water remediation company in Texas, where it has been in place for over six months, with more testing required. We continue to pursue
additional customers, primarily in the Permian Basin.

What differentiates us in the industry:

·
No chemical usage in water remediation, significantly reducing operational costs.

·
Integration into existing processes within 24 hours, without disrupting ongoing operations.

·
Compact systems with minimal energy consumption.

·
Post-treatment water can be either reused or safely disposed of.

The Company anticipates that sales will be generated
in the first half of fiscal 2026.

2. Water Remediation and
Disinfection in Agriculture

In 2024, we installed our
first system at Hacienda Farms (B&F Greenhouse Services, Inc.) in Canada. The system is currently undergoing trials to increase oxygen
levels in the water, eliminate algae, and control bacterial growth, all without the use of harsh chemicals. This innovative technology
is designed to improve water quality and promote healthier crop growth.

Hacienda Farms, relies heavily
on water from Lake Erie, which poses significant water remediation challenges due to issues like algae and bacterial contamination. Additionally,
Hacienda Farms has been dealing with high sodium levels in the water, which affect calcium absorption in plants, and fungal issues that
harm root health, ultimately reducing crop yields. These water quality challenges necessitate advanced remediation solutions to ensure
the sustainability and productivity of their greenhouse operations. Our technology addresses these problems by controlling microorganisms,
accelerating vegetative and root growth, and increasing overall plant biomass. This not only improves crop production but also supports
sustainable farming practices.

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The overall market for water
treatment in Canada is valued at approximately $2.51 billion, with continuous expansion due to the demand for sustainable solutions in
agriculture and industrial applications.

The outcome of the trials
mentioned above, which we expect to be completed within the first calendar quarter of 2026, will determine the commercial viability of
our product and the timeline for any potential revenue generation.

3. Business Venture with Alchemy Beverages, Inc.

In fiscal 2014, Roman Gordon,
one of our shareholders and a former officer, formed a company, Cameo USA LLC (Cameo). Since its formation, Cameo has had no revenue,
no operations, and has had no assets or liabilities. On June 4, 2018, Mr. Gordon contributed his 100% interest in Cameo to Cavitation
Technologies, Inc. As Mr. Gordon had no reasonable and objectively supportable basis in the valuation of his investment in Cameo, there
was no value assigned to the contribution of Cameo.

On June 29, 2018, we agreed
to license Cameo to Alchemy Beverages Inc. (“ABI”). In addition, we have agreed to provide certain licensing rights related
to our miniature low pressure nano-reactor (MLPN) to be used in developing and manufacturing of small home appliances to enhance alcoholic
beverages. In consideration for these ABI has agreed to issue 19.9% of ABI’s outstanding common shares to us (limited to 20 million
shares of ABI). ABI is a private company and in the business of producing and selling alcoholic beverages, equipment, and home appliances.
Prior to this agreement, ABI was independent of CTI and had no relation to us nor to our management.

Pursuant to the licensing
agreements, ABI will have the exclusive global marketing and distribution rights of Cameo and our patented and patent pending technologies
for the processing of alcoholic beverages. We have agreed to assist in the installation and maintenance of the MLPN to ABI and will receive
royalty payments ranging from 1% to 3% on all net revenues, as defined in our license agreement for the life of the applicable patents.
In addition, we will receive leasing, consulting, and manufacturing fees as defined in the licensing agreement.

Over the past several years, we have worked closely
with ABI to develop the smart home kitchen appliance Barmuze and alcoholic beverages. Significant work has been done on Barmuze branding,
including launching a new website and creating animations throughout the year to showcase how the appliance works. ABI is actively pursuing
the commercial production of Barmuze, licensing the technology to third parties, and considering the opportunity to develop its own alcohol
brands, leveraging our cutting-edge technology to transform any alcohol into a smooth, top-shelf experience.

ABI is in the process of
completing its financial audit, which is estimated to be completed before the end of the first quarter of fiscal 2026, engaging focus
groups for Barmuze acceptance, refining marketing and distribution strategies, and securing additional capital for production. The Company
also plans on obtaining additional financing in early fiscal 2026

As of June 30, 2025 and the date of this report, ABI
has not generated any sales under Cameo brand. The earliest sales and revenue for Barmuze are anticipated in the second half of 2026.
Also, ABI is working on creating its own line of alcoholic beverages and licensing of the technology to other brands. For more information,
www.alchemybeveragesinc.com and www.barmuze.com.

During fiscals 2025 and 2024,
there were no sales or royalties generated pertaining to our agreement with Alchemy Beverages, Inc. The investment in ABI has no value
assigned to it, which approximates its fair value.

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4. New Technologies: Hydro-Plasma

Along with improving our existing technologies, we
have developed Hydroplasma, an innovative process combining cavitation and cold plasma technology to enhance our water treatment efficiency,
which:

·
Breaks down both organic and inorganic compounds.

·
Is highly scalable – from 15 to 40 GPM.

·
Eliminates microorganisms and diseases.

·
Has multiple industrial applications.

·
The technology is patent pending.

This cutting-edge technology creates reactive agents,
such as hydroxyl radicals and hydrogen peroxide, that break down pollutants, bacteria, and viruses in water more effectively than traditional
methods. It’s an environmentally friendly and scalable solution, with applications in water treatment, agriculture, sulfur removal
from bunker fuel, and more.

The global cold plasma market is projected to
grow from $1.5 billion in 2021 to $3.1 billion by 2027, fueled by increasing demand for sustainable water solutions. Our technology has
the potential to revolutionize water treatment on a global scale. To accelerate this development, we have established partnerships with
New Mexico State University, the University of Guadalajara, and the Brackish Groundwater National Desalination Research Facility (BGNDRF),
NM, to collaborate on water remediation programs.

In order to develop these markets we may need additional
funding, and may attempt to raise additional debt and/or equity financing to fund operations and additional working capital. However,
there is no assurance that we will be successful in obtaining such financing or obtain sufficient amounts necessary to meet our business
needs, or that we will be able to meet our future contractual obligations.

Testing of the technology is currently underway. Upon
completion of multiple trials, if successful, sales and revenue are anticipated in the first half of fiscal 2026.

Customers Dependence

Prior to entering into the
Patent Assignment and License Back Agreement, we sold our industrial capacity Nano Reactor® and Nano Neutralization®
System through our strategic partner Desmet and most of our revenue for the fiscal years ended June 30, 2025 and 2024, was derived
from sales of reactors to Desmet. We have generated no revenue pertaining to our licensing agreement with EW in our fiscals 2025 and 2024.

Sources and availability
of raw materials and the names of principal suppliers

We have historically sourced
reactor components from various domestic and international suppliers. We do not have any long-term contracts, agreements, or commitments
with any supplier. We believe it would take approximately 30 days to find a new supplier, if necessary.

Competition

Our competitors in produced
and frac water treatment application range from local service providers to multi-national global corporations with considerable financial
resources, engineering expertise, established and proven technologies. We believe that LPN™ is a conceptually new technology
that has not been introduced in the field of water treatment applications. LPN™ has demonstrated exceptional results
in treating produced and frac water commercially, significantly reducing the usage of hazards chemicals during the process, meanwhile,
achieving desirable water quality for industrial re-use or disposal, although, the acceptance of the technology has been slow.

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Patents

As
of June 30, 2025, our portfolio of patents included 16 issued patents in the United States and 11 issued patents internationally.
Our patents cover multiple process and applications of our technology in vegetable oil refining, production of biodiesel, treatment of
process and industrial water, upgrade of hydrocarbons and enhancing of alcoholic beverages. In October 2024, we assigned our patents
relating to vegetable oil refining to Desmet for a cash consideration of $880,000.

We retained a worldwide, exclusive, transferable,
and royalty-free license to practice and use the Assigned Patents in the fields of water and wastewater processing, recovery, recycling,
and purification (including oilfield wastewater), as well as the manufacture, distillation, brewing, enhancement, sale, and marketing
of alcoholic beverages (the “Licensed Fields”). We also received a worldwide, exclusive, transferable, and royalty-free license
to practice and use the Assigned Patents and associated technical information, consistent with the scope of the Reserved License, in addition,
we retained exclusive rights to use the “Nano Reactor®” mark for our businesses, systems, and products related to the
Licensed Fields.

We continuously develop new
technologies and applications, as we have filed patent applications for Low Pressure Nano-Reactors LPN™. LPN™
is a highly efficient homogenizer and emulsifier that can be utilized in multiple fluids processing applications.

Royalty Agreements

On July 1, 2008, our wholly
owned subsidiary entered into Patent Assignment Agreements with two parties, our former President as well as former Chief Executive Officer
(CEO) who currently serves as our Technology Senior Manager, where certain devices and methods involved in our hydrodynamic cavitation
processes invented by the former President and former CEO/current Technology Senior Manager have been assigned to the subsidiary. In exchange,
that subsidiary agreed to pay a royalty of 5% of gross revenues to each of the former 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
assumed by us on May 13, 2010, from our subsidiary. Our former CEO/current Technology Senior Manager and former President both waived
their rights to receive royalty payments that have accrued, or that may accrue, on any gross revenue generated through June 30, 2025.

On April 30, 2008 and as
amended on November 22, 2010, our wholly owned subsidiary entered into an employment agreement with its former Director of Chemical and
Analytical Department (the “Inventor”) to pay, in the first year, an amount equal to 5% of actual gross revenue received by
us on any patent for which the Inventor was a legally named inventor, and, in each subsequent year, 3% of actual gross revenue received
by us on any such patent. Since entering into that employment agreement, and during the term of this employment agreement, we have not
recognized any revenue on any patents for which the Inventor was a legally named inventor.

Governmental Approval
and Regulations and Environmental Compliance

Due to the nature of our
products, we have incurred no costs with respect to environmental compliance with federal, state, and local laws. To our knowledge, our
products do not require governmental approval, and we do not foresee that governmental regulations will have a material impact on our
business.

Employees

As of June 30, 2025, we had
three full-time employees and had engaged several consultants and independent contractors over the past year. Members of our technical
team are comprised of experienced professionals who are chemists, civil, chemical, and mechanical engineers with expertise in hydrodynamic
cavitation, nano technology and water treatment. These individuals hold degrees in Civil, Chemical, and Mechanical Engineering.

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Research and Development Expenditures

During the fiscal years ended
June 30, 2025 and 2024, we spent $95,000 and $61,000, respectively, on research and development activities.