Capacitive Deionization Technology Systems (CDTN) 10QSB/A 2002 Q3 Quarterly report (small business) (amended)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10 - QSB/A

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2002

Capacitive Deionization Technology Systems, Inc.

(Formerly Far West Group, Inc.)

(Exact name of registrant as specified in its charter)

Nevada	86-0867960
(State of Jurisdiction)	(I.R.S. Employer
	Identification No.)

13636 Neutron Road, Dallas, Texas 75244-4410

(Address of Principal executive offices)

972-934-1586

(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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        No  X 

(2)  Yes  X   No     

The number of shares outstanding of the registrant's $.0001 par value common stock as of October 31, 2002 was 12,332,104.

This Quarterly Report on Form 10-QSB/A is intended to amend and restate Part I in its entirety and Part II relating to Exhibits of the Company's Quarterly Report for March 31, 2002 on Form 10-QSB, as amended. The financial statements have been adjusted to reflect that the Company is a development stage entity, to reflect certain adjustments made to the balance sheets from 2001, to reflect an adjustment made in the second quarter of 2002 to increase expense by $25,770 for certain options issued by the Company and to record adjustments to increase expense in the third quarter of 2002 amounting to $94,950, reflecting a writedown of inventory of $8,700 and a reinstatement of certain liabilities to consultants which had been written off amounting to $86,250. The Company is also filing two exhibits for certifications now required bySarbanes-Oxley Act of 2002.

Capacitive Deionization Technology Systems, Inc.

Index
Part I	Financial Information
	Item 1	Financial statements
		Balance Sheets as of September 30, 2002 and
		December 31, 2001
		Statements of Operations for the three and nine
		months ended September 30, 2002 and 2001 and Cumulative Amounts Through September 30, 2002
		Statements of Cash Flows for the nine
		months ended September 30, 2002 and 2001 and Cumulative Amounts Through September 30, 2002
		Notes to Financial Statements
	Item 2	Management's discussion and analysis
		of Financial Condition and Results
		of Operations
	Item 3	Controls and Procedures
Part II	Other Information
	Item 2	Changes in Securities and Use of Proceeds
	Item 6	Exhibits and Reports on Form 8-K
Signature page

Part I     Financial Information

Item 1     Financial Statements

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

(A Development Stage Entity)

BALANCE SHEETS

Assets

	September 30,	December 31,
	2002	2001
Current assets:	(Unaudited)	(Audited)
Cash	337	1,668
Inventory	10,500	-
Cash	10,837	1,668
Furniture and equipment	25,294	25,294
Less accumulated depreciation	(16,458)	(13,065)
Total furniture and equipment	8,836	12,229
	19,673	$       13,897

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
Accounts payable	$     569,965	$     495,394
Wages payable	645,360	495,367
Accrued liabilities	145,297	142,198
Customer deposits	93,700	48,200
Severance payable to shareholder	154,000	154,000
Current portion of long-term debt	26,000	23,297
Notes payable to outside stockholders	70,000	80,000
Payable to former subsidiary	31,808	31,808
Total current liabilities	1,736,130	1,470,264
Long-term debt	87,671	79,374
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; 12,132,104 and 10,075,901
shares issued and outstanding	1,214	1,007
Additional paid-in capital	7,023,847	6,176,765
Note receivable issued for stock	(175,000)	-
Accumulated deficit from previous operating activities	(3,523,977)	(3,523,977)
Deficit accumulated during the development stage	(5,130,212)	(4,189,536)
Total stockholders' equity (Deficit)	(1,804,128)	(1,535,741)
	$      19,673	$       13,897

See accompanying notes to financial statements.

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

(A Development Stage Entity)

STATEMENTS OF OPERATIONS

Three and Six Months Ended September 30, 2002 and 2001

And Cumulative Operations as a Development Stage Entity (January 1, 2000 Through September 30, 2002)

(Unaudited)

	Three Months Ended		Six Months Ended		Cumulative
	September 30,		September 30,		Through
	2002	2000	2002	2000	September 30, 2002
Revenues	$         -	$         -	$         -	$         -	$         -
Operating expenses:
Common stock and options issued for services --
General and administrative	80,175	68,600	304,755	233,787	1,602,194
Common stock and options issued for services --
Research and development	24,700	21,800	60,200	58,533	219,483
Other research and development	153,910	51,332	387,371	330,016	2,210,639
Other general and administrative (excluding
amounts applicable to stock and options        issued for services each period)	41,213	117,812	165,402	245,388	950,557
	299,998	259,544	917,728	867,724	4,982,873
Loss from operations	(299,998)	(259,544)	(917,728)	(867,724)	(4,982,873)
Other income (expense):
Interest expense	(1,823)	(14,439)	(22,948)	(25,107)	(147,339)
Total other expense	(1,823)	(14,439)	(22,948)	(25,107)	(147,339)
Net loss	$  (301,821)	$  (273,983)	$  (940,676)	$  (892,831)	$(5,130,212)
Basic and diluted loss per common share	$        (0.03)	$        (0.03)	$        (0.08)	$        (0.10)
Weighted average common shares outstanding	11,736,993	9,064,620	11,166,233	8,706,790

See accompanying notes to financial statements.

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(A Development Stage Entity)

Six Months Ended September 30, 2002 and 2001

And Cumulative Operations as a Development Stage Entity (January 1, 2000 Through September 30, 2002)

(Unaudited)

			Cumulative
			Through
	2002	2001	September 30, 2002
Cash flows from operating activities:
Net loss	$  (940,676)	$  (892,831)	$(5,130,212)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation	3,393	2,397	12,730
Shares issued for services	364,955	292,318	1,358,407
Stock options issued as compensation	-	-	463,270
Changes in operating assets and liabilities:
Accounts receivable	-	4,030	-
Inventory	(10,500)	(12,792)	(10,500)
Accounts payable and accrued liabilities	416,497	409,342	1,443,127
Net cash used in operating activities	(166,331)	(197,536)	(1,863,178)
Cash flows from investing activities:
Purchase of furniture and equipment	-	-	(14,169)
Cash flows from financing activities:
Net advances from shareholder	-	-	(96,388)
Payments to former subsidiary	-	-	(238,192)
Sale of common shares	154,000	116,485	1,668,257
Additions/payments on long-term debt	13,000	-	(4,894)
Proceeds from (payments) on notes payable to          stockholders	(2,000)	76,500	159,500
Net cash provided by financing activities	165,000	192,985	1,488,283
Net increase (decrease) in cash and cash equivalents	(1,331)	(4,551)	(389,064)
Cash at beginning of period	1,668	4,877	389,401
Cash at end of period	$            337	$            326	$           337
Supplemental disclosure:
Total interest paid	$           -	$           -	$       45,343

Non-cash transactions:

During 2001, the Company issued $79,400 of common stock for accounts payable,
       $20,000 for prepaid expense and $14,000 for notes payable.

During 2002, the Company issued 361,334 shares of common stock for $143,334 of
       accounts payable and $10,000 of notes payable.

During 2002, the Company issued 350,000 shares of common stock for a $175,000 note
       receivable.

See accompanying notes to financial statements.

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

(Formerly FarWest Group, Inc.)

NOTES TO FINANCIAL STATEMENTS

September 30, 2002

Note 1 - Future Operations

     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.   The following is a summary of management's plan to raise capital and generate additional operating funds.

     The Company was funded initially through investment by the principal shareholder. Since 1998 funding has been through private investments including strategic alliances.

     Business opportunities for the next twelve months include international CDT system's 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.

     The Company recognizes the extent of the financial investment necessary to support current business activities. There is no guarantee that the Company can complete the above-referenced financing; however, the Company is negotiating the following additional options:

      *     Additional strategic investment alliances.

      *     Potential financing of manufacturing and infrastructure in North Texas with a
             government entity.

      *     Equity and convertible debt transaction with international groups, as well as,
             with a leading U.S. financial institution.

      *     An industry specific joint venture.

      *     A joint venture with industry and government partners to accelerate pilot
             systems for the Powder River CBME (Gas) Wastewater Remediation Project
             and government agencies.

     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 2002 through private placements and investment/distribution agreements.

    There can be no assurances 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. The Company continues to enhance the CDT Technology licensed from Lawrence Livermore National Laboratory in parallel with making significant reductions in the manufacturing costs of the technology. The Company requires that a confidentiality agreement be executed prior to providing technological information to prospective clients and investors. The Company recognizes the risk of a prospect ive client or investor violating the confidentiality agreement and knowingly disclosing the Company's proprietary information including trade secrets. The Company continues to monitor all such relationships and vigorously enforces such agreements. The Company is aware of potential violation of an existing confidentiality agreement and is evaluating its enforcement action.

Note 2 - Summary of Significant Accounting Policies and Practices

     (a) Description of Business

     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.

     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 completed plans and is negotiating financing to construct a volume production manufacturing facility in North Texas for its CDT bricks.

     (b) Net Loss per Weighted Average Share

     Net loss per weighted average share is calculated using the weighted average number of shares of common stock outstanding.

     (c) Basis of Presentation

     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, 2001 included in the Company's Annual Report on Form 10-KSB to be filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements to be 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, hav e been made. Operating results for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

     (d) Stock-Based Compensation

     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 cont inue to apply the existing rules, but will be required to disclose pro forma net income under the new method.

     The Company issued no options or warrants to employees during the periods ended September 30, 2002 and 2001.

Item 2 Management's discussion and analysis of financial condition and results of operations.

     Results of operations.

     Operating expenses for the nine months ended September 30, 2002 were $917,728 compared to $867,724 the nine months ended September 30, 2001. Research and development expenses for the third quarter 2002 increased 145% compared to the third quarter 2001; this increase was a result of accelerated developmental testing with strategic alliance partners.

     During the third quarter 2002 private placements of 894,584 shares of the Company's rule 144 common stock were completed. Of this total 170,000 shares were issued for cash, 333,334 shares were issued for conversion of officer's salary, 68,200 shares were issued to settle accounts and notes payable and penalties, 86,500 shares were issued for research and development and 236,550 shares were issued for professional services including 45,000 shares to members of the Company's Advisory Board.

     During the second quarter 2002, a private placement of 310,000 shares of the Company's Rule 144 common stock was completed. This total included 18,000 shares issued for cash; 37,000 shares issued for research and development consulting; 20,000 shares issued to settle an account payable; 15,000 shares issued for legal services; 40,000 shares issued for accounts payable interest and penalties and 180,000 shares issued for professional services.

     During the first quarter 2002, a private placement of 555,000 shares of the Company's Rule 144 common stock was completed providing the Company $102,500 in cash and a note receivable of $175,000. The Company issued 100,000 shares to settle accounts payable totaling approximately $50,000. Further, the Company issued 196,619 shares for services provided.

     Liquidity and capital resources.

     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 equity participation in manufacturing joint ventures, government entity and ethnic group debt and grant financing and a long-term debt financing. There is no certainty that these fundings will be completed.

     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.

Item 3.     Controls And Procedures

     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.

     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.

Part II Other Information

Item 2. Changes in Securities and Use of Proceeds

During the third quarter 2002 private placements of 894,584 shares of the Company's rule 144 common stock were completed. Of this total 170,000 shares were issued for cash, 333,334 shares were issued for conversion of officer's salary, 68,200 shares were issued to settle accounts and notes payable and penalties, 86,500 shares were issued for research and development and 236,550 shares were issued for professional services including 45,000 shares to members of the Company's Advisory Board.

     During the second quarter 2002, a private placement of 310,000 shares of the Company's Rule 144 common stock was completed. This total included 18,000 shares issued for cash; 37,000 shares issued for research and development consulting; 20,000 shares issued to settle an account payable; 15,000 shares issued for legal services; 40,000 shares issued for accounts payable interest and penalties and 180,000 shares issued for professional services.

     During the first quarter 2002, a private placement of 555,000 shares of the Company's Rule 144 common stock was completed providing the Company $102,500 in cash and a note receivable of $175,000. The Company issued 100,000 shares to settle accounts payable totaling approximately $50,000. Further, the Company issued 196,619 shares for services provided.

Item 6  Exhibits and Reports on Form 8-K.

Exhibits

31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

     Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.

Capacitive Deionization Technology Systems, Inc.

  /s/ Dallas Talley                                  

Dallas Talley

Chairman of the Board,

Chief Executive Officer

Dated: November 13, 2003

  /s/ Phil Marshall                                

Phil Marshall

Chief Financial Officer

Dated: November 13, 2003