Capacitive Deionization Technology Systems 10QSB 2003 Q3 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10 - QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2003

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, 2003 was 15,953,051.

Capacitive Deionization Technology Systems, Inc.

Index

Part I Financial Information

	Item 1	Financial Statements

		Balance Sheets as of September 30, 2003 and
		December 31, 2002

		Statements of Operations for the three and nine
		months ended September 30, 2003 and 2002 and Cumulative Amounts Through September 30, 2003

		Statements of Cash Flows for the nine
		months ended September 30, 2003 and 2002 and Cumulative Amounts Through September 30, 2003

		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

	Item 6	Exhibits and Reports on Form 8-K

Signature Page

Certifications

Part I Financial Information

Item 1 Financial Statements

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

(A Development Stage Entity)

BALANCE SHEETS

Assets

	September 30,	December 31,
	2003	2002
Current assets:	(Unaudited)	(Audited)
Cash	300	$ 729
Inventory	-	10,500
Cash	300	11,229

Furniture and equipment	25,294	25,294
Less accumulated depreciation	(20,815)	(17,065)
Total furniture and equipment	4,479	8,229
	4,779	$ 19,458

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
Accounts payable	$ 469,799	$ 435,374
Wages payable	819,350	738,249
Accrued liabilities	221,475	205,108
Customer deposits	78,700	93,700
Severance payable to shareholder	154,000	154,000
Current portion of long-term debt	396,671	90,671
Notes payable to outside stockholders	79,000	60,000
Payable to former subsidiary	31,808	31,808
Total current liabilities	2,250,803	1,808,910

Long-term debt	35,000	188,000

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; 15,447,004 and 12,979,304
shares issued and outstanding	1,544	1,297
Additional paid-in capital	7,728,737	7,235,282
Note receivable issued for stock	(45,500)	(61,250)
Accumulated deficit from previous operating activities	(3,523,977)	(3,523,977)
Deficit accumulated during the development stage	(6,441,828)	(5,628,804)
Total stockholders' equity (Deficit)	(2,281,024)	(1,977,452)
	$ 4,779	$ 19,458

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, 2003 and 2002

And Cumulative Operations as a Development Stage Entity
(January 1, 2000 Through September 30, 2003)

(Unaudited)

					Cumulative
	Three Months Ended		Six Months Ended		Through
	September 30,		September 30,		September 30,
	2003	2002	2003	2002	2003
Revenues	$ 15,000	$ -	$ 15,000	$ -	$ 15,000

Operating expenses:
Cost of Sales	10,935	-	10,935	-	10,935
Common stock and options issued for services --
General and administrative	35,373	80,175	129,961	304,755	1,807,785
Common stock and options issued for services --
Research and development	17,959	24,700	46,506	60,200	293,364
Other research and development	194,387	153,910	399,474	387,371	2,606,391
Other general and administrative (excluding
amounts applicable to stock and options issued for services each period)	64,568	41,213	185,339	165,402	1,496,596
	323,222	299,998	772,215	917,728	6,215,071

Loss from operations	(308,222)	(299,998)	(757,215)	(917,728)	(6,200,071)

Other income (expense):
Interest expense	(29,368)	(1,823)	(55,809)	(22,948)	(241,757)
Total other expense	(29,368)	(1,823)	(55,809)	(22,948)	(241,757)
Net loss	$ (337,590)	$ (301,821)	$ (813,024)	$ (940,676)	$(6,441,828)

Basic and diluted loss per common share	$ (0.02)	$ (0.03)	$ (0.03)	$ (0.08)

Weighted average common shares outstanding	15,173,404	11,736,993	14,166,093	11,166,233

See accompanying notes to financial statements.

CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(A Development Stage Entity)

Six Months Ended September 30, 2003 and 2002

And Cumulative Operations as a Development Stage Entity
(January 1, 2000 Through September 30, 2003)

(Unaudited)

			Cumulative
			Through
	2003	2002	September 30, 2003
Cash flows from operating activities:
Net loss	$ (813,024)	$ (940,676)	$(6,441,828)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation	3,750	3,393	17,087
Writedown of note receivable	15,750	-	129,500
Shares issued for services	167,702	364,955	1,603,344
Options and warrants issued for services	14,620	-	503,660
Changes in operating assets and liabilities:
Inventory	10,500	(10,500)	-
Accounts payable and accrued liabilities	313,393	416,497	1,904,687
Net cash used in operating activities	(287,309)	(166,331)	(2,283,550)

Cash flows from investing activities:
Purchase of furniture and equipment	-	-	(14,169)

Cash flows from financing activities:
Sale of common shares	133,880	154,000	1,888,592
Net advances from shareholder	-	-	(96,388)
Net payments on long-term debt	-	-	(17,894)
Payments to former subsidiary	-	-	161,500
Additions to convertible debt and notes payable	153,000	13,000	(85,192)
Proceeds (payments) - notes payable to stockholders	-	(2,000)	58,000
Net cash provided by financing activities	286,880	165,000	1,908,618

Net increase (decrease) in cash and cash equivalents	(429)	(1,331)	(389,101)

Cash at beginning of period	729	1,668	389,401

Cash at end of period	$ 300	$ 337	$ 300

Supplemental disclosure:
Total interest paid	$ -	$ -	$ -

Non-cash transactions:

During 2003, the Company issued 710,000 common shares for $177,500 in accrued salaries.

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

During 2002, the Company issued 120,000 common shares for accounts payable of $60,000.

See accompanying notes to financial statements.

.CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
September 30, 2003


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 establishment of an international (Joint Venture) subsidiary, international CDT systems sales to governments, major multi-national industrial corporations and U.S. pilot sales. Several opportunities are being discussed including: humanitarian trust funds, Iraq rehabilitation, industrial joint ventures and geographic distribution agreements.

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

1. A significant equity investment including establishment of a majority-owned international subsidiary.
2. A matching CDT R&D Grant from an international government
3. Bridge financing to implement the State of Texas and Red River Agreements.
4. Additional strategic investment alliances.
5. Expansion of current strategic and investment alliances.
6. Incentive financing from the State of Texas.

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 2003 through private placements, investment/distribution agreements and product sales.

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.

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.

During the first quarter of 2003 the Company completed an Incentive Agreement with the State of Texas Economic Development Commission. The Incentive Program includes approximately five million dollars of incentives based on the Company employing a specified number of employees at its North Texas manufacturing facility, and making budgeted capital equipment investments and engineering development expenditures.

The Company received a Letter of Intent from the Red River Redevelopment Authority (Texarkana area) whereby Red River will provide approximately two million dollars in incentive financing plus assistance in financing the construction of the Company's 200,000 square foot manufacturing facility at Red River.


(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, 2002 which will be 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 ad justments, have been made. Operating results for the nine months ended September 30, 2003 are not indicative of the results that may be expected for the year ending December 31, 2003.

(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, 2003 and 2002.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations.

To date the Company has recognized only $15,000 in revenue for a pilot system delivered to Japan. Operating expenses for the nine months ended September 30, 2003 were $772,215 compared to $917,728 for the first nine months of 2002, a reduction of approximately 16%. Operating expenses for the third quarter of 2003 were $323,221 compared to $299,998 for the third quarter 2002. Research and development for the nine month period was $445,980 compared to $447,571 for the same period in 2002.

During the third quarter of 2003, a private placement of 799,700 shares was completed. This transaction provided $77,540 cash to the Company for 594,800 shares issued. In addition, 5,004 shares were issued for accounts payable penalties, 70,000 shares were issued for engineering, research and development and 129,896 shares were issued for legal and professional services.

During the second quarter of 2003, a private placement of 554,100 shares was completed. This transaction provided $31,339 cash to the Company for 191,000 shares issued. In addition, 15,000 shares were issued for accounts payable penalties, 136,000 shares were issued for engineering, research and development, 212,400 shares were issued for legal and professional services and 16,000 shares were issued for interest expense.

During the first quarter 2003, a private placement of 262,600 shares of the Company's rule 144 common stock was completed. The private placement provided the Company $25,000 in cash; 20,000 shares were issued for engineering services, 120,600 shares were issued for professional services; and 15,000 shares were issued for services provided by an Advisory Board member.

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 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.

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

During the third quarter of 2003, a private placement of 799,700 shares was completed. This transaction provided $77,540 cash to the Company for 594,800 shares issued. In addition, 5,004 shares were issued for accounts payable penalties, 70,000 shares were issued for engineering, research and development and 129,896 shares were issued for legal and professional services.

During the second quarter of 2003, a private placement of 1,405,400 shares was completed. This transaction provided $31,339 cash to the Company for 191,000 shares issued. In addition, 140,000 shares were issued for accounts payable penalties, 136,000 shares were issued for engineering, research and development, 212,400 shares were issued for legal and professional services and 16,000 shares were issued for interest expense. An additional 710,000 shares were issued for accrued salaries.

During the first quarter 2003, a private placement of 262,600 shares of the Company's rule 144 common stock was completed. The private placement provided the Company $25,000 in cash (107,000 shares); 20,000 shares were issued for engineering services, 120,600 shares were issued for professional services; and 15,000 shares were issued for services provided by an Advisory Board member.

Item 6 - Exhibits and Reports on Form 8-K.

(a) Exhibit List

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

(b)	Reports on Form 8-K -

	None

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this 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

EXHIBIT INDEX
Exhibit No.	Description
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

Capacitive Deionization Technology Systems (CDTN) Inactive 10QSB2003 Q3 Quarterly report (small business)