Annual Report for Fiscal Year Ending June 30, 2026 (Form 10-K)

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. Actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements.

Tender Offer

On August 14, 2026, we entered into a definitive tender offer agreement (the "Agreement") with European Guarantee Services S.à.r.l. ("Purchaser"), pursuant to which the Purchaser agreed to acquire or seek to acquire all of the outstanding shares of our common stock (the "CTI Shares") for a total purchase price of $35 million in cash (less certain indebtedness and our accrued liabilities) (the "Net Price"). Under the Agreement, the Purchaser will commence an offer to purchase the CTI Shares (the "Offer") within 10 business days after the TO has met the regulatory requirements of the SEC and will remain open during an offer period of at least 60 business days to give shareholders an opportunity to review this Agreement, the Offer and the offer documents.

Under the Agreement, the Offer will contain an Initial Offer Price per Share determined by dividing the Net Price by the total number of CTI Shares outstanding as of the date of the Agreement. However, the Initial Offer Price will be subject to adjustment and a Final Offer Price per Share will be determined based on the total number of CTI Shares outstanding as of a Record Date, a date that is 45 business days after the commencement of the Offer. The Final Offer Price will be included in an amended Offer and offer documents that will be filed with the SEC and disseminated to our shareholders. Following a determination of the Final Offer Price and dissemination of the amended Offer to our shareholders, the Purchaser will extend the offer period as may be necessary in order to give shareholders at least 30 business days to review the amended Offer, the Final Offer Price, and a final recommendation issued by the Company's board of directors before the offer period during which shareholders may tender their Shares pursuant to the amended Offer (as extended) expires.

The Agreement contains both customary and special customary representations, and warranties of the parties and sets forth, in Annex I to the Agreement, a list of the conditions (the "Offer Conditions") that must be satisfied or waived by Purchaser before the Purchaser becomes obligated to purchase Shares that are tendered pursuant to the amended Offer. These Offer Conditions may be summarized as follows:

	1.	Purchaser will have acquired shares of common stock of Alchemy Beverages Inc. ("ABI"), a private Delaware corporation in which the Company owns about 17% of the outstanding shares of common stock in ABI (the "ABI Shares"), pursuant to a separate tender offer that will be made by Purchaser for ABI Shares under a separate tender offer agreement executed between ABI and Purchaser;
	2.	Our Shareholders will have tendered a sufficient number of CTI Shares to the amended Offer that will enable Purchaser, together with any CTI Shares previously purchased by Purchaser and its affiliates or investors, to acquire at least 90% of the CTI Shares outstanding as of the Record Date;
	3.	No action has been taken by any government entity to restrain or prohibit the consummation of Purchaser's acquisition of CTI Shares tendered pursuant to the amended Offer;
	4.	No termination of the Agreement in accordance with the terms thereof will have occurred;
	5.	The representations and warranties given by us as of the date of the Agreement shall be true and correct, and we will have performed our covenants under the Agreement, in each case for any discrepancy or failure that, individually or in the aggregate, will not have a material adverse effect on the transaction;

	6.	No adverse material effect, as defined in the Agreement, will have occurred; and
	7.	The Parties will have submitted this Agreement, the offer documents and other information to the Committee on Foreign Investment in the United States ("CFIUS") for review in accordance with U.S. laws and regulations and CFIUS, upon the conclusion of the review period, or any investigation into the transaction, will have taken adverse action to block the transactions under the Agreement.

Following the expiration of the offer period (as may be extended), and subject to the satisfaction, or waiver by Purchaser, of the Offer Conditions, the Agreement provides that Purchaser will acquire, at the Final Offer Price, all of the outstanding CTI Shares that are tendered pursuant to the amended Offer (and not validly withdrawn).

Neither this Agreement nor the cash tender offer for the CTI Shares that will be made by Purchaser under the terms of the Agreement will require the prior approval of our shareholders. The proposed transaction remains subject to regulatory review and approval and has not yet been finalized or consummated.

Overview of Our Business

We are a Nevada corporation originally incorporated under the name Bio Energy, Inc. On January 29, 2007, we incorporated a wholly owned subsidiary, Hydrodynamic Technology, Inc. as a California corporation.

We have developed, patented, and commercialized proprietary technology that can be used for processing of various industrial and consumer-oriented fluids, as discussed in detail above.

During the year ended June 30, 2026, we recorded revenue of $3,000 and incurred a net loss of $1,404,000.

Inflation

Global inflation remains a factor in fiscals 2026 and 2025, with interest rates in the US remaining at higher levels, although there have been some rate decreases, the current uncertainty in the global markets around the implementation of trade tariffs by the US government has resulted in market fluctuations. In addition, the impact of tariffs on all imported goods into the U.S. is expected to have a significant inflationary impact on all imports. The Russia and Ukraine and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we and our customers we service are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected.

Management's Plan of Operation

In October 2024, we assigned our patents relating to vegetable oil refining to Desmet Belgium for gross proceeds of $880,000, however, 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, and additionally 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
	5.	Non thermal plasma (Xyra Corp.)

During the year ended June 30, 2026, we generated a net loss of $1,404,000 and utilized cash in our operations of $755,000. As of June 30, 2026, we have a working capital deficit of $554,000 and a stockholders' deficit of $693,000.

Management plans to generate revenues in future from the commercial applications of the new technologies discussed above.

Previously we generated revenues from licensing fees and from the sale of reactors from our previous agreements with Desmet Belgium (previously Desmet Ballestra).

During the year ended June 30, 2026, we recognized revenues from demonstration of reactors of $3,000. These funds are not sufficient to fund operational expenses on monthly basis. We anticipate that we will generate revenues from the new technologies and additional markets identified above.

There was no revenue produced from our agreements with Enviro WaterTek, LLC and Alchemy Beverages, Inc.

We anticipate that we may need additional funding, and we may attempt to raise additional debt and/or equity financing to fund 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 our needs, or that we will be able to meet our future contractual obligations. Should management fail to obtain such financing, we may curtail its operations.

Critical Accounting Policies and Revenue Recognition

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. The accounting policies and estimates described below are those we consider most critical in preparing its consolidated financial statements. The following is a review of the accounting policies and estimates that include significant judgments made by management using information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used instead.

Note 1 of the accompanying consolidated financial statements includes a summary of significant accounting policies, estimates, and methods used in the preparation of our financial statements. Accounting estimates are an integral part of the preparation of financial statements and are based on judgments by management using its knowledge and experience about the past and current events and assumptions regarding future events, all of which we consider to be reasonable. These judgments and estimates reflect the effects of matters that are inherently uncertain and that affect the carrying value of our assets and liabilities, the disclosure of contingent liabilities and reported amounts of expenses during the reporting period.

Revenue Recognition

The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

Revenue from sale of our Nano Reactor® and LPN™ was recognized when products were shipped from our manufacturing facilities as this was our sole performance obligation under these contracts and we had no continuing obligation to the customer.

For the license fee revenue, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement.

The Company also recognizes revenues from usage fees of certain reactors. Usage fees are recognized based on actual usage by the customer.

In addition, the Company also recognizes revenues from short term rental of nano reactors. Rental revenue is recognized over the term of the agreement and when collectability is certain.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Certain convertible notes have a variable priced conversion feature which qualifies as a derivative liability which is valued using a variable option pricing model using level 3 inputs. The Company's derivative liabilities are adjusted to reflect fair value at each reporting date, with any increase or decrease in the fair value being recorded in the statement of operations.

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.

Recent Accounting Pronouncements

See Note 1 of the financial statements for discussion of recent accounting pronouncements.

Results of Operations

Below is a summary comparing fiscal 2026 and fiscal 2025.

		For the Years Ended
		June 30,
		2026				2025				$ Change				% Change
Revenue		$	3,000			$	203,000			$	(200,000	)			(98.5	)
Cost of revenue			-				(38,000	)			38,000				100.0
Gross profit			3,000				165,000				(162,000	)			(98.2	)
General and administrative expenses			1,380,000				1,057,000				323,000				30.6
Research and development expenses			11,000				95,000				(84,000	)			(88.4	)
Total operating expenses			1,391,000				1,152,000				239,000				20.7
Loss from operations			(1,388,000	)			(987,000	)			(401,000	)			40.6
Gain on patent assignment			-				880,000				(880,000	)			(100.0	)
Interest and other expense, net			(40,000	)			(6,000	)			(34,000	)			(566.7	)
Change in fair value of derivative liability			24,000				-				24,000				100.0
Net loss		$	(1,404,000	)		$	(113,000	)		$	(1,291,000	)			(1,142.5	)

Revenue

The Company generated revenues from the sale of the Nano Reactor® to customers/distributor. Additionally, the Company generates revenues from short term rental of nano reactors.

Revenue was $3,000 and $203,000 for the years ended June 30, 2026, and 2025, respectively, a decrease of $200,000 or 98.5%. Revenue for the current year represented income received for the rental of a nano reactor to one customer. In the prior year, the Company completed and delivered one purchase order placed by Desmet prior to the assignment of our vegetable oil refining patents to Desmet.

Cost of Sales

Cost of revenue was $0 and $38,000 for the years ended June 30, 2026 and 2025, respectively, a decrease of $38,000 or 100.0%. In the current year, no sales of reactors took place. In the prior year the cost of sales related to the sale of reactors to third parties.

General and administrative expenses

General and administrative expenses increased by $323,000 or 30.6%. The increase is primarily attributable to the following:

	·	Stock based compensation increased by $193,000. In the current year common stock was awarded to various consultants who aided in the development of new products and markets and for assistance in the tender offer process, discussed above. In the prior year common stock purchase warrants granted to certain of the Company's employees and consultants and common stock issued to consultants for services rendered,
	·	Consulting fees increased by $34,000, primarily due to an increase in payments to consultants assisting with the development of new products for the new markets, as discussed above.
	·	Travel expenses increased by $26,000 due to an increase in travel by our officer during the current year to promote new products and related to the tender offer currently in progress.
	·	Rent expense, net increased by $7,000 due to an increase in the monthly rental rate after the expiration of our term lease, which now operates on a month-to-month basis.
	·	Salary expenses increased by $22,000 due to salary earned by our executive officer from our subsidiary, Xyra Corp.
	·	Professional fees increased by $3,000 due to an increase in legal fees related to the tender offer and an increase in audit fees , offset by a decrease in patent attorney fees.
	·	Other operating expenses increased by $38,000. These expenses consist of numerous individually insignificant expenses.

Research and development expenses

Research and development expenses decreased by $84,000. During the current year, management scaled back research into cold plasma technology due to cash constraints. During the prior year, the Company began another R&D project consisting of the design and manufacture of an experimental installation for plasma activation of water by generating a plasma discharge in a water stream. The research and development expenditure is dependent on progress made on the development.

Gain on patent assignment

Gain on patent assignment was $880,000 for the year ended June 30, 2025 as a result of sale and assignment of certain patents to Desmet in October 2024. There was no similar transaction during the current period.

Interest and other expense, net

Interest and other income (expense), net increased by $34,000. The increase was due to interest accrued on the bridge note, note payable, convertible notes payable and notes payable to related parties, all issued during the current fiscal year and the amortization of debt discount related to the bridge note and convertible note payable. The proceeds received from these notes was used to fund operations during the current fiscal year.

Change in fair value of derivative liability

Change in fair value of derivative liability was $24,000 and $0 for the years ended June 30, 2026 and 2025, the increase is primarily related to the valuation of the conversion feature on the convertible notes payable issued during the current year accounted as derivative liabilities and the subsequent mark-to-market of these derivative liabilities at our reporting period end. There was no similar transaction in the prior period.

Net Loss

Net loss was $1,404,000 and $113,000 for the years ended June 30, 2026 and 2025, respectively, an increase in loss of $1,291,000. The increase in net loss is primarily due to the decrease in revenue, the increase in operating expenses, the prior year gain on the patent assignment, the increase in interest expense, offset by the mark-to-market derivative liability movement, as discussed above.

Liquidity and Capital Resources

Our cash balance at June 30, 2026 and 2025 was $17,000 and $249,000, respectively, a decrease of $232,000, primarily due to the decrease in revenue and the cash used in operating activities of $755,000 not being fully offset by the proceeds of financing operations of $523,000.

We utilized cash of $755,000 to fund operating activities, due to a reduction in revenues and the increase in operating expenses discussed above.

We generated cash of $523,000 in financing activities, primarily from the issuance of common stock units, and the issuance of notes payable, notes payable - related parties and convertible notes payable during the current fiscal year.

Going concern

During the year ended June 30, 2026, the Company incurred net loss of $1,404,000 and used cash in operations of $755,000 and as of June 30, 2026, we had an accumulated deficit of $28,364,000. The Company has had a history of operating losses. These factors, among others, raise substantial doubt about our ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company's independent registered public accounting firm, in its report on our June 30, 2026 financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. The Company's financial statements do not include any adjustments that might result from the outcome of this uncertainty to continue as a going concern. The Company does not believe it has enough cash and access to cash to sustain operations through June, 2027.

Management's plan is to generate income from the application of new technologies as discussed above.

We 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 our needs, that we will be able to achieve profitable operations or that we will be able to meet our future contractual obligations. Should management fail to obtain such financing, the Company may curtail its operations.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.