Current liabilities: | | | |
Accounts payable | $ 341,891 | | $ 368,332 |
Wages payable | 350,367 | | 155,484 |
Accrued liabilities | 150,781 | | 24,281 |
Customer deposits | 55,700 | | 40,700 |
Accounts and notes payable to shareholder | 136,616 | | 136,616 |
Current portion of long-term debt | 14,861 | | 11,145 |
Notes payable to stockholders | 128,500 | | 66,000 |
Payable to former subsidiary | 31,808 | | 31,808 |
Total current liabilities | 1,210,524 | | 834,366 |
| | | |
Long-term debt | 30,310 | | 34,026 |
| | | |
Commitments and contingencies | - | | - |
| | | |
Stockholders' equity (Deficit): | | | |
Preferred stock, $.0001 par value, 20,000,000 shares | | | |
authorized; none issued and outstanding | - | | - |
Common stock, $.0001 par value, 80,000,000 shares | | | |
authorized; 9,344,731 and 8,114,932 | | | |
shares issued and outstanding | 934 | | 811 |
Additional paid-in capital | 5,713,995 | | 5,191,915 |
Accumulated deficit from previous operating activities | (3,523,977) | | (3,523,977) |
Deficit accumulated during the development stage | (3,404,056) | | (2,511,225) |
Total stockholders' equity (Deficit) | (1,213,104) | | (842,476) |
| $ 27,730 | | $ 25,916 |
| | | |
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CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC. |
(Formerly FarWest Group, Inc.) |
NOTES TO FINANCIAL STATEMENTS |
September 30, 2001 |
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Note 1 - Future Operations |
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The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's significant operating losses and its working capital deficit and stockholders' deficit raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
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The following is a summary of management's plan to raise capital and generate additional operating funds. |
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The Company was funded initially through investment by the principal shareholder. Since 1998 funding has been through private investments including strategic alliances. |
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Business opportunities for the next twelve months include international CDT systems sales to governments, major multi-national industrial corporations and U.S. pilot sales. Several opportunities are being discussed including: governments, humanitarian trust funds, industrial joint ventures, market sectors and geographic distribution agreements. |
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The Company recognizes the financial investment required to support the potential business opportunities, which are being discussed. There is no guarantee that the Company can complete the funding necessary to develop the manufacturing and engineering structure to manufacture and install the potential CDT orders. The company is currently discussing financing options which include: a corporate partnership for manufacturing; joint ventures with an international investment group, an investment alliance with a major U.S. engineering and construction company, and an investment/distribution agreement with a leading Pacific Rim water system company. Management believes that there is a probability of obtaining the required financing for the next twelve months through one of the above. |
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The Company is dependent upon the proceeds of private placements and strategic alliances of the Company's securities to implement its business plan and to finance its working capital requirements. Should the Company's plans or its assumptions change or prove to be inaccurate or offering proceeds are insufficient to fund the Company's operations, the Company would be required to seek additional financing sooner than anticipated. Management is confident it will be able to continue raising funds in the balance of 2001 through private placements and investment/distribution agreements. |
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There can be no assurances given that the Company will be successful in generating sufficient revenues from its planned activities or in raising sufficient capital to allow it to continue as a going concern which contemplates increased operating expenses, acquisition of assets and the disposition of liabilities in the normal course of business. These factors can affect the ability of the Company to implement its general business plan including the completion of the required manufacturing facilities and continued proprietary CDT product improvements. |
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Note 2 - Summary of Significant Accounting Policies and Practices |
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(a) Description of Business |
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Capacitive Deionization Technology Systems, Inc. (Formerly FarWest Group, Inc.) (the "Company" or "CDT Systems, Inc.") was organized under the laws of the state of Nevada in July 1996 to serve as a water technology company. |
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In January 1997, the Company entered into a manufacturing and marketing license agreement with Lawrence Livermore National Laboratories ("Lawrence Livermore") whereby the Company obtained the rights to Lawrence Livermore's patented Capacitive Deionization Technology ("CDT"). The company has the rights to develop and manufacture a carbon aerogel CDT product for commercial use in the desalination, filtration and purification of water. The manufacturing and marketing license is effective for the life of the patents (up to 17 years). To maintain the license the Company must make contracted annual royalty payments to Lawrence Livermore beginning at $25,000 per year, then becoming a percentage of revenue. The Company has completed development of its first release CDT unit and has commenced in-house prototype manufacture and construction of demonstration and pilot water treatment plants for clients. |
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(b) Net Loss per Weighted Average Share |
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Net loss per weighted average share is calculated using the weighted average number of shares of common stock outstanding. |
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(c) Basis of Presentation |
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The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulations S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2000 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. |
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(d) Stock-Based Compensation |
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The Company applies the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, in accounting for its stock-based compensation plans. Under Opinion 25, compensation cost is measured as the excess, if any, of the market price of the Company's stock at the date of the grant above the amount an employee must pay to acquire the stock. No compensation expense is recognized when the exercise price is equal to the market value of the stock on the day of the grant. The Financial Standards Board ("FASB") published SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) on January 1, 1996 which encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on new fair value accounting rules. Companies that choose not to adopt the new rules will continue to apply the existing rul es, but will be required to disclose pro forma net income under the new method. |
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The Company issued no options or warrants to employees during the quarters ended September 30, 2001 and 2000. |
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Item 2 Management's discussion and analysis of financial condition and results of operations. |
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Results of operations. |
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The Company did not recognize any revenue during the periods ending September 30, 2001 or 2000. The Company anticipates it will recognize revenue from the sale of CDT bricks for pilot systems during the fourth quarter of 2001. Operating expenses totaled $259,544 during the third quarter of 2001; this was a reduction of $371,284 compared to $630,828 operating expenses in the third quarter of 2000. This 59% reduction was primarily due to the delay in completing the joint venture and equity funding which were scheduled for completion in the third quarter 2001. The lack of funding also limited the research and development expenditures for the quarter resulting in a better than 67% reduction from research and development expenditures when compared to third quarter 2000. |
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During the third quarter 2001, the Company completed a private placement, which provided proceeds totaling $116,485. In addition, during the third quarter 2001, the Company issued 263,000 shares for services provided. Of this total, 133,332 were shares vested by four members of the Company's Board of Directors and 83,333 shares were vested by three members of the Company's Advisory Board. The remaining 46,668 shares were issued in settlement of accounts and notes payable. |
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Liquidity and capital resources. |
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Management recognizes the requirement for additional investment to execute the Company's business plan and complete the necessary manufacturing and research facilities. Financing transactions are currently being negotiated. These include an equity participation manufacturing joint venture, an equity investment in conjunction with a publicly financed trust fund and a long-term debt financing. There is no certainty that these fundings will be completed. |
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Information regarding and factors affecting forward-looking statements. Forward-looking statements include statements concerning plans, goals, strategies, future events or performances and underlying assumptions and other statements, which are other than statements of historical fact. Certain statements contained herein are forward-looking statements and, accordingly, involve risk and uncertainties, which could cause the actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management's examination of historical trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectations, beliefs or projections will result, or be achieved, or accomplished. |
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Item 3. Controls And Procedures |
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Within 90 days prior to the filing of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer and the Company's Chief Financial Officer. Based on that evaluation, the Company's Chairman and Chief Executive Officer, and Chief Financial Officer concluded that the Company's disclosure control and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. |
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Disclosure controls and procedures are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chairman, Chief Executive Officer and President, and the Company's Chief Financial Officer as appropriate, to allow timely decision regarding required disclosure. |
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Part II Other Information |
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Item 1 Legal |
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No changes |
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Item 2 Changes in Securities |
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During the quarter ended September 30, 2001, the Company issued 601,667 shares of common stock: 124,000 shares of common stock were issued for cash and 477,667 shares of common stock were issued for services and reduction of indebtedness. 216,665 of these shares were issued to directors. The shares issued were in reliance upon Section 4(2) of the Securities Act of 1933. |
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For the nine month period ended September 30, 2001, the Company issued 1,229,797 shares of common stock. 233,000 shares were issued for cash, 107,800 shares were issued in settlement of accounts payable, 888,997 shares were issued for services including 349,997 to four outside members of the Board of Directors and the outside members of the Company's Advisory Board. The shares issued were in reliance upon Section 4(2) of the Securities Act of 1933. |
Item 3 Defaults upon senior securities |
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The Registrant does not have any outstanding debt or securities of this nature. |
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Item 4 Submission of matters to a vote of securities holders. |
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NONE |
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Item 5 Other information. |
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NONE |
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Item 6 Exhibits and Reports on Form 8-K. |
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Exhibits |
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