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: March 31, 2000
Commission file no. 000-30317
Cartis, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Florida 65-0737412
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 Royal Poinciana Way, PMB 155, Palm Beach, FL 33480
------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (230) 211-6825
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None None
----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value
-----------------------------------
(Title of class)
Copies of Communications Sent to: Mintmire & Associates
265 Sunrise Avenue, Suite 204,
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
Yes X No
-- ---
As of March 31, 2000, there are 13,437,019 shares of voting stock of
the registrant issued and outstanding and 142,980 yet to be issued pursuant to
recent subscriptions.
<PAGE>
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets..................................................F-2
Consolidated Statements of Operations and Comprehensive Income (Loss)........F-3
Consolidated Statements of Stockholders' Equity..............................F-4
Consolidated Statements of Cash Flows........................................F-5
Notes to Consolidated Financial Statements...................................F-6
F-1
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Balance Sheets
June 30, 1999 March 31, 2000
------------------------- ------------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 0 $ 38,356
Accounts receivable 70,698 126,173
VAT tax receivable 18,824 4,386
Inventory 0 367,607
Prepaid expenses 618 309
------------------------- ------------------------
Total current assets 90,140 536,831
------------------------- ------------------------
PROPERTY AND EQUIPMENT
Furniture and fixtures 18,557 17,463
Automobiles 15,581 14,411
Leasehold improvements 106,254 98,275
Less accumulated depreciation (12,623) (22,467)
------------------------- ------------------------
Net property and equipment 127,769 107,682
------------------------- ------------------------
OTHER ASSETS
Deposits 3,779 3,495
------------------------- ------------------------
Total other assets 3,779 3,495
------------------------- ------------------------
Total Assets $221,688 $ 648,008
========================= ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 57 $ 0
Accounts payable 2,734 201,250
Accounts payable - related party 75,103 251,883
Accrued Expenses
Trade 9,118 4,379
Payroll and payroll taxes 9,561 14,480
Deferred revenue 30,389 0
Current portion of long-term debt 4,509 5,077
------------------------- ------------------------
Total current liabilities 131,471 477,069
LONG-TERM DEBT
Note payable 4,702 133
------------------------- ------------------------
Total long-term debt 4,702 133
------------------------- ------------------------
Total Liabilities 136,173 477,202
------------------------- ------------------------
Minority interest in consolidated subsidiary 467 0
------------------------- ------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, authorized
10,000,000 shares; 0 issued and outstanding shares 0 0
Common stock, $0.0001 par value, authorized
50,000,000 shares; 9,350,000 and 13,437,019
issued and outstanding shares 935 1,344
Additional paid-in capital 302,675 597,228
Accumulated comprehensive income (loss) (11,332) (49,860)
Deficit (207,230) (377,906)
------------------------- ------------------------
Total stockholders' equity 85,048 170,806
------------------------- ------------------------
Total Liabilities and Stockholders' Equity $ 221,688 $ 648,008
========================= ========================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
Nine Months Ended March 31,
2000 1999
--------------------- ----------------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUES
Sales $ 248,983 $ 1,454,247
Cost of sales (117,256) (1,401,867)
--------------------- ----------------------
Gross Profit 131,727 52,380
OPERATING EXPENSES
Salaries 66,486 24,858
Depreciation 13,421 9,216
General and administrative 221,781 269,083
Research and development, net of reimbursements 0 (66,647)
--------------------- ----------------------
Total operating expenses 301,688 236,510
--------------------- ----------------------
Loss from operations (169,961) (184,130)
--------------------- ----------------------
OTHER INCOME AND EXPENSE
Interest income 882 0
Interest expense (1,595) (2,742)
--------------------- ----------------------
Total other income and expense (713) (2,742)
--------------------- ----------------------
Income before minority interest (170,674) (186,872)
Minority interest share of income 0 (269)
--------------------- ----------------------
Net loss (170,674) (187,141)
Other comprehensive income (loss):
Foreign currency translation gain (loss) (38,528) 22,604
--------------------- ----------------------
Comprehensive loss $ (209,202) $ (164,537)
===================== ======================
Net loss per common share $ (0.02) $ (0.02)
===================== ======================
Weighted average number of common shares outstanding 10,244,682 9,350,000
===================== ======================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Stockholders' Equity
Additional Accumulated Total
Number of Common Paid-In Comprehensive Stockholders'
Shares Stock Capital Income (Loss) Deficit Equity
------------ -------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE, June 30, 1997 0 $ 0 $ 0 $ 0 $ 0 $ 0
Year Ended June 30, 1998
4th qtr. - founders stock issued for services 2,000,000 200 0 0 0 200
4th qtr. - stock issued for cash 1,000,000 100 49,900 0 0 50,000
Net loss 0 0 0 0 (3,318) (3,318)
------------ -------- ------------ -------------- ---------- ----------
BALANCE, June 30, 1998 3,000,000 300 49,900 0 (3,318) 46,882
Year Ended June 30, 1999
9/98 - stock issued for cash 3,000,000 300 149,700 0 0 150,000
11/98 - stock contributed to company (2,000,000) (200) 200 0 0 0
11/98 - reverse merger 5,000,000 500 85,410 (95) (26,143) 59,672
1/99 - stock issued for services 350,000 35 17,465 0 0 17,500
Other comprehensive income (loss) 0 0 0 (11,237) 0 (11,237)
Net loss 0 0 0 0 (177,769) (177,769)
------------ -------- ------------ -------------- ---------- ----------
BALANCE, June 30, 1999 9,350,000 935 302,675 (11,332) (207,230) 85,048
9 Mos. Ended March 31, 2000
7/99-11/99 - stock issued for cash 87,019 9 294,186 0 0 294,195
2/00 - shares issued for equipment 3,000,000 300 0 0 0 300
2/00 - shares issued for minority interest in
subsidiary 1,000,000 100 367 0 0 467
Other comprehensive income (loss) 0 0 0 (38,528) 0 (38,528)
Net loss 0 0 0 0 (170,676) (170,676)
------------ -------- ------------ -------------- ---------- ----------
BALANCE, March 31, 2000 (unaudited) 13,437,019 $ 1,344 $ 597,228 $ (49,860) $ (377,906) $ 170,806
============ ======== ============ ============== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended March 31,
2000 1999
-------------------- -------------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (170,674) $ (187,141)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation 11,563 7,223
Minority interest share of income 0 269
Stock issued for services 0 17,500
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (65,126) (72,206)
(Increase) decrease in VAT receivable 13,956 (12,871)
(Increase) decrease in inventory (393,884) (3,782)
(Increase) decrease in deposits and other assets 282 (4,155)
Increase (decrease) in accounts payable - trade 212,926 98,467
(Increase) decrease in accounts payable - related party 195,456 69
Increase (decrease) in accrued expenses (4,344) 6,199
Increase (decrease) payroll and taxes 6,040 5,318
Increase (decrease) deferred revenue 30,116 33,410
-------------------- -------------------
Net cash used by operating activities (163,689) (111,700)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment 0 (122,772)
-------------------- -------------------
Net cash used by investing activities 0 (122,772)
-------------------- -------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in cash overdraft (100,052) 4,873
Payments on automobile loan (3,546) (3,683)
Issuance of common stock for cash 294,195 219,246
-------------------- -------------------
Net cash provided by financing activities 190,597 220,436
-------------------- -------------------
Effect of exchange rates on cash 11,448 14,036
-------------------- -------------------
Net increase (decrease) in cash 38,356 0
CASH, beginning of period 0 0
-------------------- -------------------
CASH, END OF PERIOD $ 38,356 $ 0
==================== ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Payment of interest in cash $ 1,595 $ 2,742
==================== ===================
Non-Cash Financing Activities:
Fixed asset acquisition through issuance of common stock $ 300 $ 0
==================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(Information with respect to the nine months ended March 31, 2000 is unaudited)
(1) Summary of Significant Accounting Principles
The Company Cartis, Inc. is a Florida chartered corporation that conducts
business from its offices in Palm Beach, Florida, Orleans, France,
Lyon, France and Port Louis, Mauritius. The Company was incorporated
on March 5, 1997, 1997, as Cobalter, Inc., and changed its name to
Cartis, Inc. on November 18, 1998. The Company is principally
involved in the development of water treatment systems through its
French subsidiary, S.A.R.L. CEFCA ("CEFCA"), and the sale of the
systems through its Mauritius subsidiary, Cartis International. The
following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates In preparing the consolidated financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the statements of financial condition, and revenues and
expenses for the year then ended. Actual results may differ
significantly from those estimates.
b) Significant acquisition In October 1998, Cartis, Inc. issued
5,000,000 shares of common stock to acquire substantially all the
issued and outstanding shares of the common stock of CEFCA, a French
company, and 80% of the issued and outstanding shares of Cartis
International ("CIL"), a Mauritius company, in a reverse merger. In
February 2000, the Company issued 1,000,000 shares of common stock to
acquire the 20% of Cartis International it did not previously own. In
January 2000, the Company and A.S.A.P., LLC formed Cartis France,
S.A., (CF). The Company owns 49% of CF and A.S.A.P. owns 51% of CF.
This Company was formed to distribute the Company's products in
France.
c) Principles of consolidation The consolidated financial statements
include the accounts of Cartis, Inc. and its wholly owned subsidiary
and majority owned subsidiary.Inter-company balances and transactions
have been eliminated.
d) Net loss per common share Basic net loss per weighted average
common share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period.
e) Property and equipment All property and equipment are recorded at
cost and depreciated over their estimated useful lives, using the
straight-line method. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from their respective
accounts, and the resulting gain or loss is included in the results
of operations. Repairs and maintenance charges which do not increase
the useful lives of the assets are charged to operations as incurred.
Depreciation expense was $13,421, $9,216, $2,193 and $12,532 for the
periods ended March 31, 2000 and 1999 and June 30, 1998 and 1999,
respectively.
f) Cash and equivalents The company considers investments with an
initial maturity of three months or less as cash equivalents.
g) Inventories Inventories are stated at the lower of cost (first-in,
first-out method) or market.
h) VAT tax receivable In France, as in many other countries, the
government charges a Value Added Tax, (VAT), that is similar in
nature to sales tax in the U.S. There are three major differences.
First is that VAT is charged at each point of sale. Second is that
there are no exemptions from the collection of VAT. Finally, each
company files a VAT return with the government monthly reflecting the
gross VAT collected and VAT paid. If the VAT paid is greater than the
amount collected, the Company receives a refund from the government
approximately five months later.
F-6
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles (Continued)
i) Revenue recognition The Company recognizes revenue when the
purchaser accepts the goods.
j) Royalties Cartis International acquired the Cartis patents and
Cartis trademark from a founder for a royalty of 5% of gross sales
relating to products and services from the use of the patent, payable
monthly beginning January 1, 2001.
k) Interim financial information The financial statements for the
nine months ended March 31, 2000 and 1999 are unaudited and include
all adjustments which in the opinion of management are necessary for
fair presentation, and such adjustments are of a normal and recurring
nature. The results for the nine months are not indicative of a full
year results.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par
value preferred stock. Rights and privileges of the preferred stock
are to be determined by the Board of Directors prior to issuance. The
Company has 9,350,000 and 9,437,019 (unaudited) shares of common
stock issued and outstanding at June 30, 1999 and December 31, 1999.
In April 1998, the Company issued 2,000,000 to its officers for
services rendered to the Company. In April 1998, the Company issued
under Regulation D Rule 540 Placement for 1,000,000 for $50,000 in
cash. In September 1998, 3,000,000 shares were issued for $150,000 in
cash. In November 1998, the 2,000,000 shares issued for services were
donated to the Company. In November 1998, the Company issued
5,000,000 shares for 4,000 of the 4,000 shares issued and outstanding
of S.A.R.L. CEFCA, a French company, and 1.6 shares of the 2 shares
issued and outstanding of Cartis International, a Mauritius company.
In January 1999, the company issued 350,000 shares to third parties
for services rendered. From July 1999 through December 1999, the
Company issued 87,019 (unaudited) shares for cash.
In February 2000, the Company issued 1,000,000 shares for the 20% of
Cartis International it previously did not own. In February 2000, the
Company issued 3,000,000 shares to purchase certain fixed assets from
a related party. Until such time as this related party is able to
fully document the historical cost of this equipment, the Company has
elected to value the transaction based on the par value of the stock
issued, or $300.
(3) Income Taxes Deferred income taxes (benefits) are provided for
certain income and expenses which are recognized in different periods
for tax and financial reporting purposes. The Company had net
operating loss carry- forwards for income tax purposes of
approximately $378,000, which expire $29,000 on June 30, 2018,
$178,000 on June 30, 2019 and $171,000 on June 30, 2020.
The amount recorded as a deferred tax asset, cumulative as of June
30, 1999 and March 31, 2000, is approximately $67,000 and $126,000,
respectively, which represents the amount of tax benefits of the loss
carry-forwards. The Company has established a valuation allowance for
this deferred tax asset of $67,000 and $124,000, as the Company has
no history of profitable operations.
F-7
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(3) Income Taxes (Continued) The significant components net deferred tax asset
are:
June 30, 1999 March 31, 2000
----------------------- -----------------------
(unaudited)
Net operating losses $ 67,000 $ 126,000
Valuation allowance (67,000) (126,000)
----------------------- -----------------------
Net deferred tax asset $ 0 $ 0
======================= =======================
(4) Going Concern As shown in the accompanying consolidated financial
statements, the Company incurred net losses totaling $177,000 for the
year ended June 30, 1999 and $171,000 for the nine months ended March
31, 2000 and reflects positive working capital of approximately
$60,000 as of March 31, 2000, (unaudited). This working capital
includes approximately $368,000 of inventory. The Company also has
had only one customer historically, see Note 8. These conditions
raise substantial doubt as to the ability of the Company to continue
as a going concern. The ability of the Company to continue as a going
concern is dependent upon increasing sales and obtaining additional
capital and financing. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company is currently negotiating
with several parties for an infusion of capital.
(5) Related Party Transactions In October 1998, the Company's subsidiary,
CEFCA, received an exclusive license from its current president and
chairman to manufacture CARTIS products, in both France and in a
country of its choice. In exchange for such rights, the Company
agreed to pay royalties in the amount of 3% of gross sales and
services, payable monthly. The term of the license is 20 years. The
patent was assigned to the Company in February 2000. (See Note 10.)
In October 1998, the Company entered into a five-year exclusive
service and supply contract with Advanced Technology Development,
Ltd., ("ATD"), a company primarily owned and managed by the Company's
president, whereby ATD will be the exclusive supplier of machinery
and production supplies necessary to manufacture the CARTIS product.
The contract was canceled in February 2000 (see Note 10).
In October 1998, ATD entered into an exclusive distribution agreement
with Cartis International whereby ATD will provide Cartis
International with all Cartis products necessary to the commercial
needs of Cartis International, based on an agreed upon price. In
addition, the Company's subsidiary, Cartis International, received an
exclusive right to use the brand name CARTIS and to sell CARTIS
products worldwide. The term of these contracts was for a period of
three years. These contracts were canceled in February 2000. Cartis
International owed ATD $75,105 as of June 30, 1999 and $336,378 as of
December 31, 1999 for products received.
The Company received advances from shareholders during November 1999
in the amount of $15,334. These advances are non interest bearing and
are due on demand.
(6) Long-Term Debt In 1999, S.A.R.L. CEFCA purchased an automobile
through a bank loan. The loan bears approximately 6.6% interest, with
monthly payments in the amount of approximately $440 per month. Under
the loan agreement, the Company is obligated to pay approximately
$4,800 and $4,400 in 2000 and 2001, respectively.
F-8
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(7) Commitments In September 1998, S.A.R.L. CEFCA entered into two
operating leases, one for its office space and the other for a
security service. The office lease expires 2017 and the security
lease expires 2003. Minimum lease payments are as follows:
2000 $ 24,724
2001 24,724
2002 24,724
2003 23,186
2004 22,674
Thereafter 71,800
-----------------------
$ 191,832
=======================
In August 1999, the Company entered into an employment agreement with
its general manager, who is also a stockholder. This contract carries
no termination clause and pays him approximately $27,000 in salary
and $8,000 in living expenses per year. In January 1999, the Company
entered into an employment agreement with its part-time CFO. This
agreement carries no termination clause and pays him approximately
$4,000 per year.
(8) Concentration of Customers and Suppliers The Company's source of
revenue to date has been one customer under a marketing agreement
with Cartis International. This customer purchased a portion of its
contractual minimum required in 1998 and 1999. It subsequently
unilaterally canceled the agreement due to its inability to complete
its obligations under the agreement. The Company is currently seeking
another party to act as a distributor or, alternatively, seeking
funding to allow the Company to market the product to end users
itself.
(9) Government Grants The Company has received a government grant for
research and development. The grant was in the total amount of
$46,427 and was received in the fiscal years ending June 30, 1998 and
1999 and is applied to reduce research and development expenses.
(10) Subsequent Events In April 2000, the Company began efforts to raise
additional capital via a Regulation D Rule 506 private placement. The
Company has raised $256,000 in cash and has received subscriptions
for an additional $358,000.
F-9
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations.
General
The Company's Form 10SB becomes effective on June 11, 2000. Although
not technically a reporting company under the Securities and Exchange Act of
1934, as amended, until such time, the Company is voluntarily filing this Form
10QSB so that current financial information is available to the public and so
that there is no gap between the reports in its Form 10SB and its report on Form
10KSB due for filing on September 28, 2000.
In February 2000, Herve Gallion, the Company's current President and
Chairman, assigned the worldwide patents and trademarks on the Company's
products to the Company. An assignment of these rights has yet to be recorded at
the Swiss Institute of Industrial Property. Under the terms of the agreement,
Herve Gallion is to receive a royalty of five percent (5%) of gross sales and
services, payable monthly beginning January 1, 2001.
In February 2000, the Company purchased the machinery and equipment
necessary to manufacture the Company's products from Advanced Technologies
Development Company Limited ("ATD"). Herve Gallion is an officer, director and
also the beneficial owner of ATD. For such products, the Company issued
3,000,000 shares of its Common Stock to ATD. For such offering, the Company
relied upon Section 4(2) of the Act and no state exemption, as ATD is a foreign
corporation.
In February 2000, the Company purchased the remaining 20% of the
issued and outstanding common shares of Cartis International, Ltd., a Mauritius
company ("CIL"). As a result, CIL became a wholly owned subsidiary of the
Company. The remaining shares were owned by Herve Gallion and Cyril Heitzler,
each owning 10%. The Company issued 500,000 shares of its Common Stock to each
person. For such offering, the Company relied upon Section 4(2) of the Act and
no state exemption, as Mr. Gallion and Mr. Heitzler are both foreign residents.
In April and May 2000, the Company sold 142,980 shares of its Common
Stock for a total of $255,935 to twelve (12) investors. Patrick Martin, a
current director of the Company, purchased 9,486 shares for $16,980.
Additionally, subscriptions to purchase shares have been received from nine (9)
more investors, although the funds have yet to be received by the Company.
Because the funds have yet to be received and the subscriptions will be paid for
in French Franks, the currency conversion cannot yet be made and the number of
shares subscribed for determined. For such offering, the Company relied on
Section 4(2) of the Act and Rule 506. No state exemption was required, as all
purchasers were foreign residents.
The Company relied upon Section 4(2) of the Act and Rule 506 for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) the issuance of
the shares did not involve a public offering, (ii) there were no more than
thirty-five (35) investors (excluding "accredited investors"), (iii) each
investor who was not an accredited investor either alone or with his purchaser
representative(s) had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, or the issuer reasonably believed immediately prior to
-1-
<PAGE>
making any sale that such purchaser came within this description, (iv) the
offers and sales were made in compliance with Rules 501 and 502, (v) the
securities were subject to Rule 144 limitations on resale and (vi) each of the
parties was a sophisticated purchaser and had full access to the information on
the Company necessary to make an informed investment decision by virtue of the
due diligence conducted by the purchaser or available to the purchaser prior to
the transaction.
Discussion and Analysis
Cartis, Inc. (the "Company" or "Cartis") is incorporated in the State
of Florida. The Company was originally incorporated as Cobalter, Inc. on March
3, 1997 ("Cobalter"). The Company subsequently changed its name to Cartis, Inc
in January 1999. The Company is currently quoted on the National Quotations
Bureau's "Pink Sheets" under the symbol "CART" and has been since October 1999,
when it filed a 15c2-11 exemption request form due to phase-in implementation of
NASD Rule 6530 (the Eligibility Rule). The Company was quoted on the OTC
Bulletin Board under the symbol "CART" until October 1999, but was originally
quoted under the symbol "CBLT". Its executive offices are presently located at
277 Royal Poinciana Way, PMB 155, Palm Beach, FL 33480. Its telephone number is
(230) 211-6825 and its facsimile number is (230) 210-2445.
The Company is principally involved in the development of water
treatment systems. Current activities include: (i) marketing its Portable Water
System ("PWS 300") product; (ii) researching and further developing its new
products; and (iii) continuing to improve the Cartis Process.
Inventory consists mainly of filtration system parts to be used in
the assembly of PWS 300 units to be sold to customers. Once assembly is
complete, the respective part costs are charged to inventory. Inventory is
valued at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
Equipment consists mainly of the machinery acquired from Advanced
Technologies Development Company Limited ("ATD") in February 2000 in exchange
for 3,000,000 shares of the Company's Common Stock and other equipment purchased
by the Company for cash. Herve Gallion, the Company's current President and
Chairman, is an officer, director and also a beneficial owner of ATD.
While the Company is emerging from its development stage, it is
acquiring the necessary operating assets and is beginning its proposed business.
There is no assurance that any benefit will result from such activities. The
Company will receive limited operating revenues and will continue to incur
expenses during its development, possibly in excess of revenue.
The ability of the Company to continue as a going concern is
dependent upon increasing sales and obtaining additional capital and financing.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. The Company is
currently seeking financing to allow it to continue its planned operations.
-2-
<PAGE>
Results of Operations - For the Three Months Ending March 31, 1999
and March 31, 2000
Financial Condition, Capital Resources and Liquidity
For the 3rd quarter ended March 31, 1999 and 2000 the Company
recorded revenues of $1,454,000 and $249,000 respectively. For the third quarter
ended March 31, 1999 and 2000 the Company had salary expenses of $25,000 and
$66,000. This increase of $41,000 was due to an increase in the number of
personnel employed by the Company.
For the 3rd quarter ended March 31, 1999 and 2000, the Company had on
a consolidated unaudited basis total operating expenses of $237,000 and $302,000
of which $41,000 is attributable to an increase in salaries and $67,000 is
attributable to a decrease in research and development reimbursement.
Net Losses
For the 3rd quarter ended March 31, 1999, 2000, the Company reported
a net loss from operations of $187,000 and $171,000 respectively.
The ability of the Company to continue as a going concern is
dependent upon increasing sales and obtaining additional capital and financing.
The Company is currently seeking financing to allow it to continue its planned
operations.
Employees
At March 30, 2000, the Company employed two (2) persons. None of
these employees are represented by a labor union for purposes of collective
bargaining. The Company considers its relations with its employees to be
excellent. The Company plans to employ additional personnel as needed upon
product rollout to accommodate its needs.
Research and Development Plans
The Company believes that research and development is an important
factor in its future growth. The water filtration industry is closely linked to
technological advances, which produce more efficient, economical and better ways
to filter water. Therefore, the Company must continually invest in ongoing
research to appeal to the public and to effectively compete with other companies
in the industry. No assurance can be made that the Company will have sufficient
funds to compete. Additionally, due to the rapid advance rate at which
technology advances, the Company's equipment and inventory may be outdated
quickly, preventing or impeding the Company from realizing its full potential
profits.
Impact of the Year 2000 Issue
The Company did not experience any material impact to its operations
as a result of the Year 2000 calendar change. The Company does not anticipate
any material disruption in its operations as a result of any failure by the
Company to be in compliance.
-3-
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Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
expansion and growth of the Company's business and operations, and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
The Company assumes no obligations to update any such forward-looking
statements.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or
to which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending March 31, 2000,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
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Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are
incorporated herein by reference, as follows:
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Exhibit No. Description
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3.(i).1 (1) Articles of Incorporation of Cobalter, Inc. dated March 5, 1997.
3.(i).2 (1) Articles of Amendment to Articles of Incorporation changing Company's name to
Cartis, Inc. dated January 27, 1999.
3.(ii).1 (1) Bylaws of Cobalter, Inc. dated April 1, 1997.
4.1 * Offering Memorandum dated March 10, 2000
10.1 (1) Lease between CEFCA s.a.r.l. and Jacques Cottet dated July 16, 1998 in French.
10.2 (1) Lease between CEFCA s.a.r.l. and Jacques Cottet dated July 16, 1998 translated into
English.
10.3 (1) Acquisition Agreement between the Company, CEFCA s.a.r.l. and Cartis
International, Ltd. dated October 29, 1998.
10.4 (1) Acquisition Contract for the CARTIS Patent and CARTIS Trademark between the
Company and Herve Gallion dated February 19, 2000 in French.
10.5 (1) Acquisition Contract for the CARTIS Patent and CARTIS
Trademark between the Company and Herve Gallion dated
February 19, 2000 translated into English.
10.6 (1) Purchase Contract of Equipment CARTIS and the Production Rights of CARTIS
Process between the Company and Advanced Technologies Development Company
Limited dated February 21, 2000 in French.
10.7 (1) Purchase Contract of Equipment CARTIS and the Production Rights of CARTIS
Process between the Company and Advanced Technologies Development Company
Limited dated February 21, 2000 translated into English.
10.8 (1) Agreement of Sale of Cartis International, Ltd. Shares to Cartis, Inc. between the
Company, Herve Gallion and Cyril Heitzler dated February 18, 2000 in French.
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<S> <C> <C> <C> <C> <C> <C>
10.9 (1) Agreement of Sale of Cartis International, Ltd. Shares to Cartis, Inc. between the
Company, Herve Gallion and Cyril Heitzler dated February 18, 2000 translated into
English.
10.10 (1) Employment Contract between Steve Olivier and Cartis International, Ltd. dated
January 1, 1999 in French.
10.11 (1) Employment Contract between Steve Olivier and Cartis International, Ltd. dated
January 1, 1999 translated into English.
10.12 (1) Employment Contract between Cyril Heitzler and Cartis International, Ltd. dated
January 8, 1999 in French.
10.13 (1) Employment Contract between Cyril Heitzler and Cartis International, Ltd. dated
January 8, 1999 translated into English.
27.1 * Financial Data Sheet.
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(1) Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended March 31,
2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Cartis, Inc.
(Registrant)
Date: June 12, 2000 By: /s/ Herve Gallion
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Herve Gallion
President & Chairman
By: /s/ Cyril Heitzler
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Cyril Heitzler
Secretary, Treasurer and Director
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