U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File No.: 000-30317
Cartis, Inc.
--------------------------------------------
(Name of small business registrant 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)
Registrant's telephone number (230) 234-1899
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange
on which registered
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>
Check whether the registrant (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
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State registrant's revenues for its most recent fiscal year. $441,700
Of the 11,053,250 shares of voting stock of the registrant issued and
outstanding as of October 2, 2000, 5,043,750 shares are held by non-affiliates.
The aggregate market value of the voting stock held by non-affiliates as of
October 2, 2000 is $36,567,187.50.
PART I
Item 1. Description of Business
(a) Business Development
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) 234-1899 and its facsimile number is (230) 234-1897.
The Company is filing this Form 10-KSB in compliance with the
effectiveness of its filing on Form 10-SB. The Company will file periodic
reports in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act".)
Originally, the Company was formed to acquire a master license for the
United States from Eggspectations, Inc., which company operates a chain of theme
restaurants serving egg products in and around Montreal, Canada. The Company
never acquired such license and has since changed the focus of its business. In
October 1998, the Company entered into an agreement with CEFCA s.a.r.l., a
French company ("CEFCA") and Cartis International, Ltd., a Mauritius company
("CIL") to acquire one hundred percent (100%) of CEFCA and eighty percent (80%)
of CIL in exchange for
2
<PAGE>
shares of the Company (the "Acquisition Agreement"). In February 2000, the
Company entered into an agreement with Herve Gallion and Cyril Heitzler for the
purchase of the remaining twenty percent (20%) of the issued and outstanding
Common Stock of CIL, such that CIL became a wholly-owned subsidiary of the
Company. Since October 1998, the Company has been engaged in the business of
developing water treatment systems.
Currently, CEFCA creates the CARTIS product utilizing reactors owned by
Advanced Technologies Development Company Limited ("ATD"), which refine silver
and charcoal obtained from numerous independent third parties. This finished
CARTIS product is then shipped with parts obtained from Phase D (Tianjin)
Mechanical Industries Co. Ltd. f/k/a FAS ("Phase D") to Tedeco, where filtration
units are assembled. Versatech and Cartis France are expected to be the
Company's two (2) main distributors. The Company has no formal contracts with
Phase D, Tedeco, Versatech nor with Cartis France for these operations and
operates on an as needed invoice basis.
It is the Company's intention to (i) to market its Portable Water
System ("PWS 300") product; (ii) to research and further develop its new
products; and (iii) to continue to improve the Cartis Process.
The Company relied upon Section 4(2) of the Securities Act of 1933, as
amended (the "Act) and Rule 506 of Regulation D promulgated thereunder ("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) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
prospective investment, or the issuer reasonably believes immediately prior to
making any sale that such purchaser comes 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 (the "506 Exemption").
In July 1999, the Company sold 10,000 shares of its Common Stock to two
(2) investors for a total of $35,000. For such offering, the Company relied upon
the 506 Exemption. No state exemption was required, as both investors are
foreign residents. See Part III, Item 12. "Certain Relationships and Related
Transactions."
In August 1999, CIL entered into an employment agreement with Cyril
Heitzler to be the Executive Vice-President of CIL. As compensation, Mr.
Heitzler receives wages of 15,000FF per month and also a company car and housing
allowance of 4,300FF per month. See Part I, Item 1. "Description of Business -
(b) Business of Registrant - Employees and Consultants"; Part III, Item 10.
"Executive Compensation - Employee Contracts and Agreements"; Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part III,
Item 12. "Certain
3
<PAGE>
Relationships and Related Transactions".
In August 1999, the Company sold 51,089 shares of its Common Stock to two
(2) investors for a total of $178,811. For such offering, the Company relied
upon the 506 Exemption . No state exemption was required, as both investors are
foreign residents. See Part III, Item 12. "Certain Relationships and Related
Transactions."
In September 1999, the Company sold 20,744 shares of its Common Stock to
one (1) investor for a total of $64,306. For such offering, the Company relied
upon the 506 Exemption. No state exemption was required, as the investor is a
French resident. See Part III, Item 12. "Certain Relationships and Related
Transactions."
In November 1999, the Company sold 5,186 shares of its Common Stock to one
(1) investor for a total of $16,076. For such offering, the Company relied upon
the 506 Exemption. No state exemption was required, as the investor is a French
resident. See Part III, Item 12. "Certain Relationships and Related
Transactions."
In January 2000, the Company along with Reception Services With
Professionals - A.S.A.P., LLC, a French corporation ("ASAP") formed Cartis
France, SAS ("Cartis France") for the purpose of distributing the Company's
products in France. The Company owns forty-nine percent (49%) of the issued and
outstanding stock of Cartis France. ASAP owns the remaining fifty-one percent
(51%). Cartis France began operations in January 2000.
In February 2000, Herve Gallion 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. See Part I, Item 1. "Description of Business - (b) Business of Registrant
- General"; Part I, Item 1. "Description of Business - (b) Business of
Registrant - Patents, Copyrights and Trademarks"; Part I, Item 1. "Description
of Business - (b) Business of Issuer - Employees and Consultants"; Part III,
Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management"; and
Part III, Item 12. "Certain Relationships and Related Transactions."
In February 2000, the Company purchased the machinery and equipment
necessary to manufacture the Company's products from 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 the 506 Exemption and no state exemption, as ATD is a
foreign corporation. See Part I, Item 1. "Description of Business - (b) Business
of Issuer - Employees and Consultants"; Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions."
4
<PAGE>
In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The Company issued
500,000 shares of its Common Stock to each person. For such offering, the
Company relied upon the 506 Exemption and no state exemption, as Mr. Gallion and
Mr. Heitzler are both foreign residents. See Part I, Item 1. "Description of
Business - (b) Business of Registrant - General"; Part I, Item 1. "Description
of Business - (b) Business of Issuer - Employees and Consultants"; Part I, Item
6. "Management's Discussion and Analysis or Plan of Operation - Results of
Operations - Full Fiscal Years - June 30, 2000 and June 30, 1999 - Stockholders'
Equity"; Part III, Item 10. "Executive Compensation - Employee Contracts and
Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions."
Since April 2000, the Company sold 516,231 shares of its Common Stock for a
total of $924,053 to twenty-eight (28) investors. Patrick Martin, a current
director of the Company, purchased 9,500 shares for $16,980. For such offering,
the Company relied on the 506 Exemption. No state exemption was required, as all
purchasers were foreign residents. See Part I, Item 1. "Description of Business
- (b) Business of Issuer - Employees and Consultants"; Part III, Item 10.
"Executive Compensation - Employee Contracts and Agreements"; Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part III,
Item 12. "Certain Relationships and Related Transactions."
In June 2000, the Company and ATD agreed to rescind the machinery and
equipment purchase conducted in February 2000 ab initio. 3,000,000 shares of the
Company's Common Stock issued to ATD in connection with the purchase have been
cancelled. The Company intends to enter into a lease/purchase agreement with ATD
for the previously purchased reactors used to make the CARTIS product. See Part
I, Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; Part III, Item 10. "Executive Compensation - Employee Contracts
and Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial
Owners and Management"; and Part III, Item 12. "Certain Relationships and
Related Transactions."
In July 2000, the Company issued 100,000 shares of its restricted Common
Stock to Serigne Dioum, an employee, for services rendered on behalf of the
Company. For such offering, the Company relied upon the 506 Exemption. No state
exemption was required as Mr. Dioum is a French resident. See Part I, Item 1.
"Description of Business - (b) Business of Issuer - Employees and Consultants";
Part III, Item 10. "Executive Compensation - Employee Contracts and Agreements";
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions."
See (b) "Business of Registrant" immediately below for a description of the
Company's business.
5
<PAGE>
(b) Business of Registrant
Background of the Industry
The foregoing discussion of legislation surrounding drinking water and
contaminants thereto, as well as the water filtration industry, is applicable to
the Company's business only as it pertains to the Company as a provider of
products which purify water for the purposes described herein. The Company is
not engaged in "remediation activities" in any setting not specifically
described herein. Use of the CARTIS process in any product or setting for which
it was not designed, which use has not been tested and approved by the Company,
is not recommended.
The Federal Safe Drinking Water Act of 1984 established the U.S.
Environmental Protection Agency ("EPA") as the agency responsible for setting
standards for drinking water and monitoring the public utilities. As of May
1992, the EPA has established Federally enforceable standards for eighty-nine
(89) contaminants that may be found in drinking water.
The standards established by the EPA set up a Maximum Contaminant Level
("MCL"), which represents the maximum level at which the contaminant can be
found in your drinking water and still be considered "safe" to consume. The MCL
standard fluctuates based upon the EPA's determination of how much of a certain
contaminate is safe, which determination is based partially on changing
technology. Therefore, water which is considered "safe" today, may not be
considered "safe" tomorrow, when new standards may be established.
Additionally, in August 1996, President Clinton signed the Safe Drinking
Water Act ("SWDA") Amendments of 1996. The SWDA Amendments require that
consumers receive more information about the quality of their drinking water
supplies and about the measures being instituted to protect them. The amendments
also provide new opportunities for public involvement and provide an increased
emphasis on protecting the sources of local drinking water. However, activists
have charged that new U.S. rules on safe drinking water do not go far enough,
and leave pregnant women, infants and the elderly at risk.
Under the 1996 Safe Drinking Water Act, the EPA issued rules which compel
water companies to publish annual reports to their customers, informing them of
the pollutants contained in their drinking water. However, only federally
regulated contaminants need be disclosed in such reports. Contaminants, which
remain unregulated to date, need not be disclosed to consumers in these reports,
leaving consumers unaware of certain contaminants present in their drinking
water.
Doctors, both through the use of activist organizations and alone, have
expressed the importance of informing the public of all contaminants present in
drinking water. Doctors have opined that water pollution can be lethal to
"at-risk" groups such as pregnant women and HIV-AIDS sufferers, and are
suspected to cause spontaneous abortions in some women.
Problems with drinking water can also occur after water leaves a treatment
and storage facility, while en route to a consumer's home or business.
Contaminants such as lead, Trihalomethanes and Asbestos are often leaked into
the water supply after the treated water leaves the plant. Lead is known to
leach into drinking water from plumbing in the consumer's
6
<PAGE>
establishment or residence as well as form the municipal distribution system.
Even end users with copper plumbing can be at risk due to lead solder used to
connect copper pipes. Trihalomethanes are a byproduct produced by chlorine
treatment which is known to be a carcinogen.
Common Water Quality Problems include:
Aesthetics: Otherwise harmless contaminants like chlorine, sulfur, iron and
manganese cause taste, color, and odor problems.
Water Hardness: Hard water contains excessive levels of the minerals calcium and
magnesium, a condition found in eighty-five percent (85%) of the United States.
Hard water shortens the life of household plumbing and water-using appliances,
makes cleaning and laundering tasks more difficult and gradually decreases the
efficiency of water heaters.
Lead: Used extensively in plumbing materials (pipes and lead-based solder) until
the late 1980's, lead can leach into water supplies. Low levels of lead have
been linked to learning disabilities in young children and high levels can cause
hypertension in adults.
Biological Pathogens: Waterborne organisms can cause disease in humans. They
include cysts like Cryptosporidium and Giardia; bacteria like typhus, fecal
coliform and cholera; and viruses like influenza. These organisms typically
cause unpleasant intestinal disorders and can pose a significant threat to the
immune-impaired.
Nitrates: Nitrogen compounds are sometimes found in ground and surface water in
rural areas, often as a result of nitrogen-based fertilizer runoff. Excess
nitrate levels can interfere with the oxygen-carrying capacity of blood,
especially in babies, and have been linked to high incidences of miscarriages.
Heavy Metals: Metals like mercury, zinc, copper, and cadmium usually enter the
water supply as industrial waste and, inexcessive concentrations, can cause
physiological damage to humans, including damage to the central nervous system.
Radium/Radon: Naturally occurring radioactive elements such as radium and radon
have bben linked to cancer in humans. Radon is found in gaseous form, and is
absorbed through drinking, as well as through inhalation during washing or
showering.
VOC's: High concentrations of volatile organic compounds ("VOC's"), such as the
petroleum distillate benzene and the industrial degreasing compound
trichloroethylene have been linked to organ damage and cancer in humans.
THM's: Trihalomethanes ("THM's") are by-products produced when chlorine reacts
with organic compounds in water. THM's are primarily absorbed through
inhalation, and have been linked to bladder and rectal cancer.
Asbestos: Asbestos is a fibrous mineral that contaminates water naturally or
through its past use in concrete water pipes. Asbestos has been linked to lung
and other forms of cancer.
7
<PAGE>
Arsenic: Both a natural and manufacturing-induced ground water contaminant,
arsenic is linked to various cancers and may damage the circulatory and central
nervous systems.
Sediments: Solid particulates in water can settle out over time. The presence of
sediments in water is typically an aesthetic concern.
Low/High pH: pH refers to "potential hydrogen," and is a measure of acidity or
alkalinity on a 14- point scale (zero through six is acidic; seven is neutral;
and eight through 14 are alkaline). Extreme measures of acidity in water can be
corrosive, whereas high alkalinity can be the source of aesthetic problems.
It follows that, to some extent, water treatment has been left to the end
consumer. Common methods of treatment include: (i) bottled water; and (ii)
filtration systems.
Bottled Water
It is management's opinion that many brands of bottled water contain
bacteria or other chemicals exceeding the industry's own guidelines or the most
stringent state purity standards. If this is true, bottled water, in certain
instances, may be worse for the consumer than standard tap water.
It is management's opinion that legislation should be enacted which would
impose stricter labeling requirements on the bottled water industry. Further,
that legislation should set standards for bacterial and chemical contamination
which parallels those standards set for tap water. Prior to the enactment of
such legislation, the bottled water industry will continue to be essentially
unregulated.
It is estimated by management that Americans drink billions of gallons of
bottled water annually and that consumption will continue to increase.
Filtration Systems
Carbon Filters
Perhaps the most widely used item for improving drinking water quality in
the home is the replaceable cartridge type filter. The filter element usually
contains a wound fabric or layers of paper-like material which screens out
turbidity and particulates from the water stream. Some replacement elements also
contain a layer of fine activated carbon laminated on paper to perform some
taste and odor removal function. Other cartridges are made with solid porous
activated carbon elements which offer the dual function of sediment removal as
well as adsorption of excess chlorine. These small filter units are usually
reasonably priced, however they lack many of the removal capabilities of more
sophisticated units and therefore only eliminate some of the contaminates found
in tap water, and can even cause additional contaminates if not properly
maintained. In fact, carbon can act as a harbor for non-pathogenic organic
species.
8
<PAGE>
Distillers
A second product line to provide better water quality is the small
distiller, which produces limited quantities of de-mineralized water. This
equipment, like its larger commercial model, removes bacteria from the water and
most impurities producing what is commonly accepted as "safe, mineral-free
water". Distilled water however, is prone to new bacteria contamination and void
of useful minerals. Home distillers are of various designs, ranging from
counter-top single-batch versions to centrally located tanks for multiple home
uses. Automatic home distillers coupled with a storage water reservoir are
commonly used in North American homes. The daily supply of distilled water is
from three (3) to twelve (12) gallons per day. Based on the earth's solar
evaporation technology, today's state-of-the-art domestic distillers use recent
designs and materials to reach greater efficiency levels. The process involves
boiling water in a chamber to produce steam. Dissolved solids and unwanted
liquids with higher boiling points than water ideally remain behind in the
chamber while unwanted liquids that boil at lower temperatures than water are
discharged as vapors before the boiling point of water is reached. The cooled
steam condenses into mineral-free water that collects in a tank. Power
consumption of these systems is high and varies from three (3) to five (5)
kilowatt-hours of electricity per gallon of distilled water produced.
Reverse Osmosis
A French scientist originally discovered the process of osmosis in 1748 who
observed that water would diffuse spontaneously through a pig bladder membrane
into a parallel chamber of alcohol. Osmosis and reverse osmosis ("RO"), for the
next 200 years was not much more than a laboratory topic because natural
membranes were scarce and unreliable. In the mid-1950's, the work of Dr. S.
Sourirajan at UCLA and others advanced the RO technology to the point where
artificial membranes could be manufactured. During this era, considerable work
was done on behalf of the U.S. Office of Saline Water to perfect methods of
water desalination. The movement of water from soils into plant roots is an
example of osmosis at work in nature. When a semi-permeable membrane, like a
living cell wall, separates two solutions with different solid concentrations,
the pure water will flow from the least concentrated solution through the
membrane and into the solution containing the higher solids concentration. The
flow will stop when the osmotic pressure on both sides of the membrane
equalizes. This is the natural process by which water is exchanged and supplied
within living matter.
General
In 1993, prior to the Company's acquisition of CEFCA and CIL, the Company's
two (2) principals Herve Gallion and Cyril Heitzler joined forces to develop a
new technology of water treatment based on the theory of ionization of active
carbon by pure silver. This process of water purification was highly reliable
scientifically, but not economically feasible on an industrial basis due to the
high production costs involved. At that time, a liter of this product would have
cost hundreds of thousands of dollars.
The technological breakthroughs necessary to manufacture the CARTIS
cartridge at competitive prices was accomplished in cooperation with G.R.E.M.I,
which is a research division
9
<PAGE>
of the French National Center for Scientific Research ("CNRS"), a government
organization specializing in ionization technology by "cold plasma
radio-frequency".
Today, after nearly seven (7) years of research and development entailing
large investments in R&D and in machinery and scientific equipment, the CARTIS
filtration process was born. Hundreds of Potable Water Systems have already been
produced, sold and installed over the past three (3) years in Mauritius, the
area of the world which was chosen to launch the product commercially.
The CARTIS process, which was awarded a prize by the National Agency for
the Research Valoring ("A.N.V.A.R"), a French government organization, has one
(1) international patent registered in 1997. The name CARTIS has also been
trademarked.
In October 1998, the Company entered into an agreement with CEFCA and CIL
to acquire one hundred percent (100%) of the issued and outstanding shares of
CEFCA as well as eighty percent (80%) of the issued and outstanding shares of
CIL in exchange for shares of the Company. In connection with this agreement,
the Company issued 900,000, 2,300,000 and 1,800,000 shares of its Common Stock
to Herve Gallion, Cator Holding, Ltd. and Aquartis, Ltd. respectively in
connection with the Acquisition Agreement. Herve Gallion currently serves as the
Company's President and Chairman, as the principal owner and manager of Cator
Holding, Ltd. as the owner and manager of Aquartis, Ltd. and as the Executive
Manager of CIL. Cyril Heitzel, the Company's current Secretary, Treasurer and
Director, also serves as the Managing Director of CEFCA and as the Managing
Director of CIL. Steve Olivier, who currently serves as a Director of the
Company, also serves as the Chief Financial Officer and as a Director of CIL.
In February 2000, Herve Gallion 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. See Part I, Item 1. "Description of Business - (b) Business of Registrant
- Patents, Copyrights and Trademarks; Part I, Item 1. "Description of Business -
(b) Business of Issuer - Employees and Consultants"; Part III, Item 10.
"Executive Compensation - Employee Contracts and Agreements"; Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part III,
Item 12. "Certain Relationships and Related Transactions."
In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The Company issued
500,000 shares of its Common Stock to each person. For such offering, the
Company relied upon the 506 Exemption and no state exemption, as Mr. Gallion and
Mr. Heitzler are both foreign residents. See Part I, Item 1. "Description of
Business - (b) Business of Registrant - General"; Part I, Item 1. "Description
of Business - (b) Business of Issuer - Employees and Consultants"; Part I, Item
6. "Management's Discussion and Analysis or Plan of Operation - Results of
Operations - Full Fiscal Years - June 30, 2000 and June 30, 1999 - Stockholders'
Equity"; Part III, Item 10. "Executive Compensation - Employee Contracts and
10
<PAGE>
Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions."
The Company's main subcontractor for spare parts assembly is located in the
people's Republic of China. Phase D is an industrial firm dealing with plastics
and electronics in China. Phase D agreed to manufacture all plastic parts of the
PWS 300. Currently, orders are placed with the issuance of irrevocable letters
of credit. Phase D designs and manufactures molds for plastic components
produced by six (6) injection molding presses with a capacity of twenty (20) to
one hundred forty (140) tons. Phase D also produces electronic circuit boards
and performs a range of fabrication and assembly operations. Phase D employs
seventy (70) people including fifteen (15) professionals and six (6)
French-speaking natives of China. The present assembly capacity of PWS CARTIS
components is 5,000 units monthly.
The CARTIS Process
The Company's primary product, the PWS 300, is easily connected to the
water supply network of a house or an apartment. Its installation is simple and
requires only one and one half hours of a plumber's work.
First, the water is filtered through a standard preliminary filter
calibrated to 5 microns, for elimination of large impurities.
Second, the water undergoes treatment by Ultra Violet light located in a
stainless steel chamber also equipped with a quartz tube. The 25 Watt U.V.
Philips lamp destroys a large amount of bacteria. This is a well-established
germicidal process. The more bacteria eliminated by the U.V. lamp, the longer
the useful life of the CARTIS cartridge.
Third, the water passes through an anti-limestone module which prevents the
deposit of limestone without eliminating calcium or magnesium, two (2) essential
minerals.
Last, the water is brought into contact with the CARTIS cartridge by a
regulator. By virtue of its active carbon compound, the cartridge eliminates
heavy metals, chlorine and the bad tastes and odors present in the water.
When water passes through the CARTIS cartridge, a physio-chemical reaction
generates an environment of active oxygen possessing high bactericidal
properties along with a remnant effect, which is the accepted characteristic of
potable water.
The PWS 300 is equipped with an electronic mechanism, which performs the
following functions:
* Lighting of the U.V lamp through detection, within 0.4 seconds of
water inflow.
* Operation of the U.V lamp (indicator)
* Switches off the U.V. lamp when water flow ceases
11
<PAGE>
The next generation PWS 300 will be equipped with a new electronic card
which is expected to perform the following functions:
* Indication of wear in the CARTIS cartridge according to a number of
cubic meters (m3) of water flow through preset during installation
(indicator + alarm).
* Triggering of a general alarm in case of any malfunction,
* As an option for untreated well water, an electric valve by remote
control to shut off the water flow in an emergency.
* Digital monitoring of water consumption.
The life span of the CARTIS cartridge is of 250 m3, corresponding to the
needs in potable water of a family of four (4) persons for a period of about two
(2) years.
The CARTIS product is unique and competitively priced. Its recommended end
user price is approximately $1,500, which compares favorably to other systems of
lesser efficiency.
The uniqueness of the CARTIS device is due to its ability to produce
adequate amounts of potable water at an economical price without the use of
harmful chemicals, while preserving the water's natural minerals, providing
shelf life (the remnant effect) and preventing limestone deposits. Competing
systems filters use cumbersome methods, such as reverse osmosis, or limited
treatment, such as U.V lamp only systems or basic filters for solid particles.
The PWS 300, currently the main CARTIS product, is the device that better
responds to the usual needs of water consumption in industrialized countries. In
such countries, the water in the supply network is of an acceptable quality, but
is far from perfect in terms of both its chemical composition and its taste. For
large requirements, the CARTIS system is equipped with optional storage tanks of
various sizes depending on need.
Future Products
The PWS 300 is the Company's main product and currently the only product in
production. However, other devices have been developed or are still in the
design stage. These future products will be launched strategically by the
Company, in the sole discretion of the Company's management team.
; SWIMMING POOL SYSTEM: THE SPS 10.
Testing sites of the Company's Swimming Pool System ("SPS 10") have
recently been introduced in Mauritius. The SPS 10 aims at replacing all water
treatment products utilized in a swimming pool. Its primary purpose is to
guarantee bathing in potable water free from chlorine, which irritates the eyes
and skin.
Inserted downstream of the traditional sand filtration system of the
swimming pool, the SPS 10 has a treatment capacity of 10 m3 per hour and
obviates the use of all customary chemical treatment products.
12
<PAGE>
The CARTIS cartridge specially designed for swimming pools is expected to
have a lifespan of approximately three (3) years for an average private pool.
All other systems presently in use necessitate the use of chlorine or its
derivatives. In addition to being irritating to the eyes and skin, they are
considerably more burdensome than the CARTIS system which requires almost no
maintenance.
* THE CARTIS WATER DISPENSER
The CARTIS cold and hot water dispenser is still in the design stage.
However, its technical specifications have already been defined. The CARTIS
dispenser, once on the market, should replace other water fountain services
currently on the market since better quality water will be provided at a
considerably lower cost directly from the available water supply.
Water contained in the water cooler is continuously pumped and circulated
through a built-in CARTIS cartridge, thereby providing quasi-permanent use. Hot
and cold water (80(degree)C and 8(degree)C respectively) is available as needed
through an electronic process (the Pelletier Effect) which does not utilize a
compressor; no CFC is involved. The device is powered by 12-volt alternative
current which is safe to use.
* HYDROPONICS: The HPS 10
Hydroponics refers to the widespread technology of vegetable production in
a controlled environment in greenhouses and above ground. Soil-free and
greenhouse cultivation techniques are expanding rapidly and the quality of water
is positively correlated to the yield. Various studies have been carried out on
the cultivation of tomatoes, flowers, and vegetables. Water carries germs, which
adhere to the vegetable during irrigation, causing a high incidence of disease
and loss.
Studies sponsored by CARTIS on soil-free cultivation of tomatoes have been
performed by Mont Desert-Alma, a subsidiary of ENL International, one of the
largest agricultural groups in the Indian Ocean rim countries. It was proven
that the destruction of bacteria after CARTIS treatment increased yield twofold.
The HPS 10 is fully developed, and will be marketed at the outset of the
initial testing period at beta sites.
* TELE-MONITORING
The next generation of PWS 300 appliances are expected to be equipped by
year-end with a system of tele-monitoring, which will provide a guarantee of
continuous performance.
The new generation PWS 300 will be connected to the telephone network. A
connection is automatically established with the maintenance contractor as soon
as the life expectancy of a cartridge expires or any malfunction occurs in the
device.
13
<PAGE>
The PW300 coupled with a tele-monitoring service contract will guarantee
the continuous supply of potable water in the home.
The tele-monitoring device is still only a prototype. It is not yet
produced for inclusion in Cartis filtration systems.
Business Strategy
Currently, the Company has no contracts in effect for the distribution of
its products. Any discussion of business strategy contained herein is contingent
upon the ability of the Company to continue as a going concern.
The Company intends to exploit its leading edge technology to replace the
need for bottled water, for water filtration systems geared to human consumption
and for pool chemical additions. The Company also intends to create a market for
greenhouse vegetable production. CARTIS is capable of providing the following
unique features:
* The CARTIS water treatment process is capable of converting virtually
any source of water supply into potable water.
* The CARTIS system removes limestone, which otherwise hardens water and
leaves damaging deposits inside pipes.
In the near future, tele-monitoring will guaranty the quality of water
supply twenty-four hours a day.
The Company has already installed CARTIS products in the following
locations:
PWS 300: Approximately 1500 end users to date. Clients include: hospitals,
high-end hotels, embassies, factory cafeterias, households, office buildings,
etc.
SPS 10: The device is currently installed in five (5) beta sites in Mauritius
and France.
Marketing and Distribution
Marketing
The Company has targeted international markets.
The Company believes that as a result of the worldwide diminishing quality
of water, the opportunities for the Company's water treatment products will
exist for years to come. In the US alone, the market for bottled water is
estimated at $4 billion annually, and the water filtration market is estimated
at $1.4 billion.
14
<PAGE>
The rate of growth of water filtration products for human consumption exceeds
that of bottled water. Currently, the worldwide market for water filtration for
home use is estimated at more than $20 billion annually.
In management's opinion, drinking tap water is becoming increasingly
distasteful and suspect in the eyes of consumers. Opinion leaders led by
prominent members of the medical community believe that chlorine byproducts
present in water may cause certain forms of cancers, as well as arterial and
heart disease. Additionally, the dangers and frequency of lead in tap water, as
well as the presence of Cryptosporidium or Giardia, both harmful protozoa, have
made the consumer aware of the potential dangers associated with drinking tap
water. The typical target customer of the Company's products primarily seeks
clean, fresh tasting water.
In order to allow rapid expansion, the Company resorts to sub-contracting
for manufacturing and strategic alliances for sales and distribution.
The Company will market its products and services to national (for smaller
countries) or regional (for larger countries) distributors. These distributors
would be affiliates of the Company in developed countries primarily, or
non-affiliates primarily in other countries.
Distribution
The National and Regional Distributors
These distributors will carry inventory for the territory, oversee the
hiring and training of a sales force and provide support and communication with
the field.
Sales Representatives
Sales representatives will be employed by the distributor with the mission
to identify Cartis Approved Retailers as well as to provide training, support,
including logistical support, and to oversee maintenance.
Cartis Approved Retailers
The retailers will sell and assure maintenance of the CARTIS products to
the end users, possibly with the intermediary step of established water
professionals or installers.
France was chosen as the first country to implement this sales organization
concept. Cartis France is a forty night percent (49%) affiliate of Cartis
International. The French partner is ASAP, SA, a well-established distributor.
15
<PAGE>
Status of Publicly Announced New Products and Services
PWS 300: Today, after nearly seven (7) years of costly research and
development and the acquisition of a manufacturing plant and equipment, the
first units have been sold and installed in Mauritius and Madagascar.
The PWS 300 is equipped with an electronic mechanism, which performs the
following functions:
* Lighting of the U.V lamp through detection, within 0.4 seconds of
water inflow.
* Operation of the U.V lamp (indicator).
* Switching off the U.V. lamp when water flow ceases.
The next generation PWS 300 will be equipped with a new electronic card
which is expected to perform the following functions:
* Indication of wear in the CARTIS cartridge according to a number of
cubic meters (m3) of water flow-through preset during installation
(indicator + alarm).
* Triggering of a general alarm in the event of malfunction,
* As an option for untreated well water, an electric valve with remote
shut off, to cease water flow in an emergency.
* Digital monitoring of water consumption.
SPS 10: Several prototypes of the SPS 10 have recently been installed in
Beta sites in Mauritius and France. The SPS 10 aims to replace all water
treatment products utilized in a swimming pool. Its primary purpose is to
guarantee bathing in potable water, free from chlorine which can irritate the
eyes and the skin. Beta sites completion is expected by midyear 2000.
CARTIS WATER DISPENSER: The CARTIS water cooler is still in the design
stage. However, its technical specifications have already been defined. No
target date has yet been set for the market release of the product.
HPS 10: The HPS 10 is fully developed and will be marketed at the outset of
the initial testing period at beta sites.
TELE-MONITORING DEVICE: The tele-monitoring device is still only a
prototype. It is not yet produced for inclusion in Cartis filtration systems.
Competition
The Company competes with many other companies which supply water
filtration products. The "pour through" carafe type product normally kept in the
refrigerator and used in the kitchen is a competing product.
16
<PAGE>
Several companies, including Brita, Discovery Engineering, Rubbermaid and
others compete in the pitcher or carafe products market segment. However, these
competing products merely rely on active carbon filtration process, a
significantly inferior technology to Cartis' cartridge. The Company has the only
water-dispensing unit that is actually a water filtration process.
The Company also competes with the bottled water industry, such as The
Perrier Group of America, Inc. (which includes Arrowhead Mountain Spring Water,
Poland Spring, Ozark Spring Water, Zephyrhills Natural Spring Water, Deer Park,
Great Bear and Mountain Ice) and Great Brands of Europe (which includes Evian
Natural Spring Water and Dannon Natural Spring Water). The Company also competes
with numerous regional bottled water companies located in the United States and
Canada.
The Company expects that more competitors will enter the water filtration
products market, resulting in even greater competition for the Company. Many of
the companies with whom the Company currently competes, or may compete in the
future, have greater financial, technical, marketing and sales resources, as
well as greater name recognition than the Company. There can be no assurance
that the Company will have the resources required to respond effectively to
market or technological changes or to compete successfully in the future.
Sources and Availability of Raw Materials
Cartis products are manufactured from readily available components
including carbon and silver, UV lamps, plastic parts and quartz tubes. The
Company believes that all raw materials necessary to produce CARTIS products are
readily available from numerous sources.
Dependence on Major Customers
The Company will depend upon two (2) companies (Cartis France and
Versatech) for future distribution of the Company's products. Currently, there
is no agreement in place between the Company and either of these distributors,
although the Company does own forty-nine percent (49%) of the stock of Cartis
France. The loss or interruption of either of these two (2) future arrangements
would seriously impede the Company's progress.
The Company is working toward implementing its marketing and distribution
plan outlined herein, by which it hopes to establish national and regional
distributors, sales representatives and retailers of Cartis products. If such
plan is successfully set in motion, the Company will become much less dependent
upon its existing arrangements.
Patents, Copyrights and Trademarks
The Company intends to protect its original intellectual property with
patents, copyrights and/or trademarks as appropriate.
17
<PAGE>
In February 2000, Herve Gallion 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. See Part I, Item 1. "Description of Business - (b) Business of Issuer -
Employees and Consultants"; Part III, Item 10. "Executive Compensation -
Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions."
Governmental Regulation
The Federal Safe Drinking Water Act of 1984 established the EPA as the
agency responsible for setting standards for drinking water and monitoring the
public utilities. As of May 1992, the EPA had established Federally enforceable
standards for eighty-nine (89) contaminants that may be found in drinking water.
Additionally, in August 1996, President Clinton signed the SWDA Amendments
of 1996. The SWDA Amendments require that consumers receive more information
about the quality of their drinking water supplies and about the measures being
instituted to protect them. The amendments also provide new opportunities for
public involvement and provide an increased emphasis on protecting the sources
of local drinking water.
Under the 1996 SDWA, the EPA issued rules which compel water companies to
publish annual reports to their customers, informing them of the pollutants
contained in their drinking water. However, only federally regulated
contaminants need be disclosed in such reports. Contaminants which remain
unregulated to date need not be disclosed to consumers in these reports, leaving
consumers unaware of certain contaminants present in their drinking water.
Legislation has been initiated which would impose stricter labeling
requirements on the bottled water industry. Further, that proposed legislation
seeks to set standards for bacterial and chemical contamination which parallels
those standards set for tap water. Prior to the enactment of such legislation,
the bottled water industry has gone essentially unregulated.
Effect of Probable Governmental Regulation on the Business
Future enactment of governmental legislation which would impact the
Company's business is not expected. This is primarily because the Company's
products are generally used after water has already passed through a traditional
filtration system and therefore already meets tap standards set by the Federal,
state and local governments.
However, in foreign countries, the Company's products may be impacted by
legislation that applies to filtration systems. The Company expects that its
products will meet or exceed any standard imposed upon it.
18
<PAGE>
Cost of Research and Development
Most research and development on the Company primary product, the PWS 300,
was completed prior to the formation of Cartis. However, further development of
the CARTIS process and its implementation in various applications is ongoing.
For fiscal years 1999 and 1998, the Company amortized a government grant in
the amount of $23,088 and expended $49,178 of its revenues, respectively, on
research and development. These expenditures represented (1.5)% and 104.2%,
respectively, of the total revenues of the Company for such fiscal years.
For fiscal year 2000, the Company expended $0 on research and development
efforts. At the current time, none of the costs associates with research and
development are bourne directly by the customer; however there is no guarantee
that such costs will not be bourne by customers in the future and, at the
current time, the Company does not know the extent to which such costs will be
bourne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state and
Federal laws regarding environmental protection and hazardous substances
control, including the Occupational Safety and Health Act, the Environmental
Protection Act, and Toxic Substance Control Act. The Company is unaware of any
bills currently pending in Congress which could change the application of such
laws so that they would affect the Company.
Employees and Consultants
At August 31, 2000, the Company employed four (4) executives all of whom
are employed on a full-time basis. Additionally, five (5) executives are
employed by the Company's affiliate, Cartis France. 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
fulfillment needs.
In August 1999, CIL entered into an employment agreement with Cyril
Heitzler to be the Executive Vice-President of CIL. As compensation, Mr.
Heitzler receives wages of 15,000FF per month and also a company car and housing
allowance of 4,300FF per month. See Part III, Item 10. "Executive Compensation -
Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
In February 2000, Herve Gallion 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. See Part III, Item 10. "Executive Compensation - Employee Contracts and
Agreements"; Part
19
<PAGE>
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions."
In February 2000, the Company purchased the machinery and equipment
necessary to manufacture the Company's products from 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 the 506 Exemption and no state exemption, as ATD is a
foreign corporation. See Part III, Item 10. "Executive Compensation - Employee
Contracts and Agreements"; Part III, Item 11. "Security Ownership of Certain
Beneficial Owners and Management"; and Part III, Item 12. "Certain Relationships
and Related Transactions."
In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The Company issued
500,000 shares of its Common Stock to each person. For such offering, the
Company relied upon the 506 Exemption and no state exemption, as Mr. Gallion and
Mr. Heitzler are both foreign residents. See Part I, Item 6. "Management's
Discussion and Analysis or Plan of Operation - Results of Operations - Full
Fiscal Years - June 30, 2000 and June 30, 1999 - Stockholders' Equity"; Part
III, Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions."
Since April 2000, the Company sold 516,231 shares of its Common Stock for a
total of $924,053 to twenty-eight (28) investors. Patrick Martin, a current
director of the Company, purchased 9,500 shares for $16,980. For such offering,
the Company relied on the 506 Exemption. No state exemption was required, as all
purchasers were foreign residents. See Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions."
In June 2000, the Company and ATD agreed to rescind the machinery and
equipment purchase conducted in February 2000 ab initio. 3,000,000 shares of the
Company's Common Stock issued to ATD in connection with the purchase have been
cancelled. The Company intends to enter into a lease/purchase agreement with ATD
for the previously purchased reactors used to make the CARTIS product. See Part
III, Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions."
In July 2000, the Company issued 100,000 shares of its restricted Common
Stock to Serigne Dioum, an employee, for services rendered on behalf of the
Company. For such offering, the Company relied upon the 506 Exemption. No state
exemption was required as Mr. Dioum is a French resident. See Part III, Item 10.
"Executive Compensation - Employee Contracts and Agreements"; Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part III,
Item 12. "Certain Relationships and Related Transactions."
20
<PAGE>
Item 2. Description of Property
Its executive offices are presently located at Cartis Center, 277 Royal
Poinciana Way, PMB 155, Palm Beach, Florida, 33480. Its telephone number is
(230) 234-1899 and its facsimile number is (230) 234-1897.
CEFCA, one (1) of the Company's wholly-owned subsidiaries, leases
approximately 4,382 square meters from Jacques Cottet as space for the
manufacturing of CARTIS product. The lease is for a term of nine (9) years
commencing July 16, 1998 and ending July 15, 2007. The Company pays monthly rent
in the amount of 12,000 French Francs plus taxes.
The Company owns no real property and its personal property consists of
furniture and fixtures, an automobile and leasehold improvements with an
original cost of $131,000 through June 30, 2000.
The Company currently employs its capital reserves in a checking account.
Activity is monitored on a monthly basis.
Item 3. Legal Proceedings
No legal proceedings have been initiated either by or against the Company
to date.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise from the Company's inception to the
close of the 2000 fiscal year ended June 30, 2000, covered by this report.
Item 5. Market for Common Equity and Related Stockholder Matters.
a) Market Information.
The Common Stock of the Company currently is quoted on the Pink Sheets and
has been since the Company submitted an exemption application with NASD on
September 30, 1999. Between October 9, 1998 and September 30, 1999, the Company
traded on the OTC Bulletin Board. Initially, it traded under the symbol "CBLT"
until its name change January 28, 1999. At that time, its trading symbol changed
to "CART". The high and low bid information for each quarter since October 1998
to the present are as follows:
21
<PAGE>
<TABLE>
<S> <C> <C>
Quarter High Bid Low Bid
------------------------ -------- -------
Oct. 1 - Dec. 31 1998 0.15 0.13
Jan. 1 - March 31 1999 3.25 0.97
April 1 - June 30 1999 5.00 3.25
July 1 - Sep. 30 1999 5.50 1.50
Oct. 1 - Dec. 31 1999 4.00 1.63
Jan. 1 - March 31 2000 4.38 1.13
April 1 - June 30 2000 7.00 5.00
July 1 - Sept. 30 2000 7.08 6.86
</TABLE>
Please note that over-the-counter market quotations have been provided
herein. The quotations reflect inter-dealer prices, without retail markup,
mark-down or commission and may not represent actual transactions.
(b) Holders.
As of September 22, 2000 the Company had eighty (80) shareholders of record
of its 11,053,250 outstanding shares of Common Stock, 7,053,250 of which are
restricted Rule 144 shares and 4,000,000 of which are free-trading. As of the
date hereof, the Company has outstanding options to purchase no shares of Common
Stock. Of the Rule 144 shares, 5,000,000 shares have been held by affiliates of
the Company for more than one (1) year.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
Originally, the Company was formed to acquire a master license for the
United States from Eggspectations, Inc., which company operates a chain of theme
restaurants serving egg products in and around Montreal, Canada. The Company
never acquired such license and has since changed the focus of its business. In
October 1998, the Company entered into the Acquisition Agreement. In February
2000, the Company entered into an agreement with Herve Gallion and Cyril
Heitzler for the purchase of the remaining twenty percent (20%) of the issued
and outstanding Common Stock of CIL, such that CIL became a wholly-owned
subsidiary of the Company. Since October 1998, the Company has been engaged in
the business of developing water treatment systems.
Currently, CEFCA creates the CARTIS product utilizing reactors owned by
ATD, which refine silver and charcoal obtained from numerous independent third
parties. This finished CARTIS product is then shipped with parts obtained from
Phase D to Tedeco, where filtration units are assembled. Versatech and Cartis
France are expected to be the Company's two (2) main distributors.
22
<PAGE>
The Company has no formal contracts with Phase D, Tedeco, Versatech nor with
Cartis France for these operations and operates on an as needed invoice basis.
It is the Company's intention to (i) to market its PWS 300 product; (ii) to
research and further develop its new products; and (iii) to continue to improve
the Cartis Process.
The Company was still in the development stage until October 1998 when the
Acquisition Agreement took place between CEFCA, CIL and the Company. The Company
has only recently begun selling its product in Mauritius and the surrounding
areas. From the date of the Acquisition Agreement in October 1998 through June
30, 2000, the Company generated revenues approximately $1,990,500. Since
inception (March 3, 1997 through June 30, 2000, the Company has generated
cumulative losses of approximately $493,000. Due to the Company's limited
operating history and limited resources, among other factors, there can be no
assurance that profitability or significant revenues on a quarterly or annual
basis will occur in the future.
The Company is considering entering into formal contracts with two (2)
distributors (Cartis France Versatech).
Since entering into negotiations with its first two (2) distributors, the
Company has begun to make preparations for a period of growth, which may require
it to significantly increase the scale of its operations. This increase will
include the hiring of additional personnel in all functional areas and will
result in significantly higher operating expenses. The increase in operating
expenses is expected to be matched by a concurrent increase in revenues.
However, the Company's net loss may continue even if revenues increase and
operating expenses may still continue to increase. Expansion of the Company's
operations may cause a significant strain on the Company's management, financial
and other resources. The Company's ability to manage recent and any possible
future growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations.
Results of Operations - Full Fiscal Years - June 30, 2000 and June 30, 1999
Revenues
Revenues for the twelve (12) month period ended June 30, 2000 were $441,700
and for the twelve month period ended June 30, 1999 were $1,548,800.
23
<PAGE>
Operating Expenses
Operating Expenses for the twelve (12) months period ended June 30, 2000
were $485,500 versus $399,000 for the twelve (12) months period ended June
30, 1999. Net loss was $285,400 and $177,800 respectively.
Assets and Liabilities
Assets were $1,057,200 as of June 30, 2000, and $235,300 as of June 30,
1999. As of June 30, 2000, assets consisted primarily of cash, inventory,
accounts receivable and fixed assets with a net book value of $1,022,000. As of
June 30, 1999, assets consisted primarily of fixed assets. Liabilities were
$227,500 and $149,800_ as of June 30, 2000 and June 30, 1999 respectively. As of
June 30, 2000, liabilities consisted primarily of accounts payable and accrued
expenses.
Stockholders' Equity
Stockholders' equity was $829,700 as of June 30, 2000 and $85,000 as of
June 30, 1999. The Company had 11,045,803 and 9,350,000 shares of Common Stock
issued and outstanding at June 30, 2000 and 1999, respectively.
In October 1998, the Company entered into an agreement with CEFCA and CIL
to acquire one hundred percent (100%) of the issued and outstanding shares of
CEFCA as well as eighty percent (80%) of the issued and outstanding shares of
CIL in exchange for shares of the Company. In connection with this agreement,
the Company issued 900,000, 2,300,000 and 1,800,000 shares of its Common Stock
to Herve Gallion, Cator Holding, Ltd. and Aquartis, Ltd. respectively in
connection with the Acquisition Agreement. Herve Gallion currently serves as the
Company's President and Chairman, as the principal owner and manager of Cator
Holding, Ltd. as the owner and manager of Aquartis, Ltd. and as the Executive
Manager of CIL. Cyril Heitzel, the Company's current Secretary, Treasurer and
Director, also serves as the Managing Director of CEFCA and as the Managing
Director of CIL. Steve Olivier, who currently serves as a Director of the
Company, also serves as the Chief Financial Officer and as a Director of CIL.
In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The Company issued
500,000 shares of its Common Stock to each person. For such offering, the
Company relied upon the 506 Exemption and no state exemption, as Mr. Gallion and
Mr. Heitzler are both foreign residents. See Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions."
24
<PAGE>
Financial Condition, Liquidity and Capital Resources
At June 30, 2000 the Company had cash of $293,100 as compared to
$13,600 at June 30, 1999.
The Company is in theprocess of raising additional capital through private
and/or public sales of securities in the future but has no definite commitments
at this time which are not reported herein.
Forward-Looking Statements
This Form 10-KSB 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-KSB 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), demand
for the Company's products and services, 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-KSB 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.
Item 7. Financial Statements
The Company's financial statements have been audited to the extent
indicated in their reports by Durland & Company, CPAs, P.A. and have been
prepared in accordance with generally accepted accounting principles and
pursuant to Regulation S-B as promulgated by the Securities and Exchange
Commission and are included herein, on Page F-1 hereof in response to Part F/S
of this Form 10-KSB.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets..................................................F-3
Consolidated Statements of Operations and Comprehensive Loss.................F-4
Consolidated Statements of Stockholders' Equity..............................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to Consolidated Financial Statements...................................F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Cartis, Inc.
West Palm Beach, Florida
We have audited the accompanying consolidated balance sheet of Cartis, Inc.,
(the "Company") as of June 30, 2000 and the related consolidated statements of
operations and comprehensive loss, stockholders' equity and cash flows for the
two years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 2000 and the results of their operations and their cash flows for the
two years then ended, in conformity with generally accepted accounting
principles.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
September 7, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Balance Sheets
Year Ended June 30,
2000 1999
---------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 293,133 $ 13,590
Accounts receivable 58,276 70,698
Accounts receivable - related party 249,833 0
VAT tax receivable 3,771 18,824
Inventory 320,092 0
Prepaid expenses 28,007 618
---------------- -------------
Total current assets 953,112 103,730
---------------- -------------
PROPERTY AND EQUIPMENT
Furniture and fixtures 17,168 18,557
Automobiles 15,229 15,581
Leasehold improvements 98,304 106,254
Less accumulated depreciation (30,086) (12,623)
---------------- -------------
Net property and equipment 100,615 127,769
---------------- -------------
OTHER ASSETS
Investment in Cartis France 0 0
Deposits 3,496 3,779
---------------- -------------
Total other assets 3,496 3,779
---------------- -------------
Total Assets $ 1,057,223 $ 235,278
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 0 $ 13,647
Accounts payable 85,608 2,734
Accounts payable - related party 77,140 75,103
Accrued Expenses
Trade 48,840 9,118
Payroll and payroll taxes 11,820 9,561
Customer deposits 0 30,389
Current portion of long-term debt 4,088 4,509
---------------- -------------
Total current liabilities 227,496 145,061
---------------- -------------
LONG-TERM DEBT
Note payable 0 4,702
---------------- -------------
Total long-term debt 0 4,702
---------------- -------------
Total Liabilities 227,496 149,763
---------------- -------------
Minority interest in consolidated subsidiary 0 467
---------------- -------------
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; 11,045,803 and 9,350,000
issued and outstanding shares 1,105 935
Additional paid-in capital 1,641,181 302,675
Stock subscriptions receivable (332,894) 0
Accumulated comprehensive income (loss) 12,994 (11,332)
Deficit (492,659) (207,230)
---------------- -------------
Total stockholders' equity 829,727 85,048
---------------- -------------
Total Liabilities and Stockholders' Equity $ 1,057,223 $ 235,278
================ =============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
Year Ended June 30,
2000 1999
-------------- ----------------
<S> <C> <C>
REVENUES
Sales $ 191,821 $ 1,548,799
Sales - related party 249,873 0
-------------- ----------------
Total revenues 441,694 1,548,799
Cost of sales (232,351) (1,387,321)
-------------- ----------------
Gross Profit 209,343 161,478
OPERATING EXPENSES
Salaries 96,260 34,710
Depreciation 19,252 12,532
General and administrative 369,943 314,869
Loss of equity-method investee 9,794 0
Research and development, net of reimbursements 0 (23,088)
-------------- ----------------
Total operating expenses 495,249 339,023
-------------- ----------------
Loss from operations (285,906) (177,545)
-------------- ----------------
OTHER INCOME AND EXPENSE
Interest income 2,435 4,170
Interest expense (1,958) (3,927)
-------------- ----------------
Total other income and expense 477 243
-------------- ----------------
Income before minority interest (285,429) (177,302)
Minority interest share of income 0 (467)
-------------- ----------------
Net loss (285,429) (177,769)
Other comprehensive income (loss):
Foreign currency translation gain (loss) 24,326 (11,337)
-------------- ----------------
Comprehensive loss $ (261,103) $ (189,106)
============== ================
Net loss per common share $ (0.03) $ (.10)
============== ================
Weighted average number of common shares outstanding 9,893,125 3,109,563
============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Stockholders' Equity
Accum.
Additional Stock Comp. Total
Number of Common Paid-In Subs. Income Stockholders'
Shares Stock Capital Receivable (Loss) Deficit Equity
---------- ---------- ------------ ----------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE, June 30, 1997 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Year Ended June 30, 1998
4th qtr.
-founders stock issued for service 2,000,000 200 0 0 0 0 200
4th qtr.
-stock issued for cash 1,000,000 100 49,900 0 0 0 50,000
Net loss 0 0 0 0 0 (3,318) (3,318)
---------- ---------- ------------ ----------- -------- --------- -----------
BALANCE, June 30, 1998 3,000,000 300 49,900 0 0 (3,318) 46,882
Year Ended June 30, 1999
9/98 - stock issued for cash 3,000,000 300 149,700 0 0 0 150,000
11/98 - stock contributed to company (2,000,000) (200) 200 0 0 0 0
11/98 - reverse merger 5,000,000 500 85,410 0 (95) (26,143) 59,672
1/99 - stock issued for services 350,000 35 17,465 0 0 0 17,500
Other comprehensive income (loss) 0 0 0 0 (11,237) 0 (11,237)
Net loss 0 0 0 0 0 (177,769) (177,769)
---------- ---------- ------------ ----------- -------- --------- -----------
BALANCE, June 30, 1999 9,350,000 935 302,675 0 (11,332) (207,230) 85,048
Year Ended June 30, 2000
7/99-11/99 - stock issued for cash 87,019 9 294,186 0 0 0 294,195
2/00 - stock issued for minority
interest in subsidiary 1,000,000 100 367 0 0 0 467
3/00-6/00 - stock issued for cash 608,784 61 1,043,953 (332,894) 0 0 711,120
Other comprehensive income (loss) 0 0 0 0 24,326 0 24,326
Net loss 0 0 0 0 0 (285,429) (285,429)
---------- ---------- ------------ ----------- -------- --------- -----------
ENDING BALANCE, June 30, 2000 11,045,803 $ 1,105 $ 1,641,181 $ (332,894) $ 12,994 $(492,659) $ 829,727
========== ========== ============ =========== ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Cartis, Inc.
Consolidated Statements of Cash Flows
Year Ended June 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (285,429) $ (177,769)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation 19,252 11,480
Minority interest share of income 0 467
Stock issued for services 0 17,500
Loss of equity-method investee 9,794 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 7,462 (76,920)
(Increase) decrease in accounts receivable - related parties (261,300) 20,366
(Increase) decrease in VAT receivable 14,271 (6,515)
(Increase) decrease in inventory (334,784) 0
(Increase) decrease in prepaid expenses (27,547) 0
(Increase) decrease in deposits and other assets 0 (4,784)
Increase (decrease) in accounts payable - trade 86,892 (34,097)
Increase (decrease) in accounts payable - related party 8,006 81,715
Increase (decrease) in accrued expenses 41,435 9,921
Increase (decrease) payroll and taxes 3,111 8,111
Increase (decrease) deferred revenue (29,406) 33,064
------------ ------------
Net cash used by operating activities (748,243) (117,461)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Investment in Cartis France (9,794) 0
Purchase of property and equipment (851) (121,498)
------------ ------------
Net cash used by investing activities (10,645) (121,498)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in cash overdraft (12,243) (8,369)
Payments on automobile loan (4,638) (4,901)
Issuance of common stock for cash 1,005,315 218,528
------------ ------------
Net cash provided by financing activities 988,434 205,258
------------ ------------
Effect of exchange rates on cash 49,997 47,291
------------ ------------
Net increase (decrease) in cash 279,543 13,590
CASH, beginning of period 13,590 0
------------ ------------
CASH, end of period $ 293,133 $ 13,590
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Payment of interest in cash $ 1,958 $ 3,927
============ ============
Non-Cash Financing Activities:
Acquisition of minority interest in subsidiary $ 467 $ 0
============ ============
Acquisition of cash via reverse merger $ 0 $ 32,467
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
TheCompany Cartis, Inc. is a Florida chartered corporation that conducts
business from its offices in Palm Beach, Florida; Orleans and Lyon,
France and Mauritius. The Company was incorporated on March 5, 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,
accounted for as a reorganization of CEFCA and Cartis International. 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. 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.
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. Diluted earnings
per share has not been presented, as it would be anti-dilutive, as a
result of the Company continuing to report losses.
e) Property and equipment All property and equipment are recorded at
cost and depreciated over their estimated useful lives, generally
three, five or seven years, 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 $19,252 and
$12,532 for the years ended June 30, 2000 and 1999, respectively.
f) Cash and equivalents The company considers investments with an
initial maturity of three months or less as cash equivalents.
F-7
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles (Continued)
g) Inventories Inventories are stated at the lower of cost (first-in,
first-out method) or market. Inventories consist principally of:
June 30, 2000 June 30, 1999
-------------- ---------------
Completed units $ 320,092 $ 0
Activated charcoal 0 0
-------------- ---------------
$ 320,092 $ 0
============== ===============
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.
i) Revenue recognition The Company recognizes revenue upon shipment of
finished goods to the distributor or upon receipt of finished goods by
the distributor, based on the terms of the purchase by or contract with
the distributor. The Company has yet to experience any returns;
however, if and when any returns occur, the Company intends to account
for them in accordance with the agreement in place with such specific
distributor, (i.e. shipping replacement goods or providing a credit for
such returned goods).
j) Research and development Research and development expenses are
expensed in the period incurred. Government grants, when received, are
applied to reduce research and development expenses.
k) Stock compensation for services rendered The Company has issued
shares of common stock in exchange for services rendered. The cost of
the services are valued at fair market value of the services rendered,
according to generally accepted accounting principles, and have been
charged to operations.
l) 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.
(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 13,437,019 shares of common stock issued and
outstanding at June 30, 1999 and March 31, 2000.
In April 1998, the Company issued 2,000,000 shares of founders' common
stock to its officers for services rendered to the Company, valued at
$200. In April 1998, the Company issued to third parties under
Regulation D Rule 540 Placement for 1,000,000 shares of common stock
for $50,000 in cash. In September 1998, 3,000,000 shares of common
stock were issued to third parties for $150,000 in cash. In November
1998, the 2,000,000 shares of common stock issued for services were
donated to the Company and were accounted for
F-8
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(2) Stockholders' Equity (Continued) as contributed capital. In November
1998, the Company issued 5,000,000 shares of common stock 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 of common stock to third parties for services
rendered, valued at $17,500. From July 1999 through December 1999, the
Company issued 87,019 shares of common stock to third parties for
$294,195 in cash.
In February 2000, the Company issued 1,000,000 shares for the 20% of
Cartis International it previously did not own. From March 2000 through
June 2000, the Company issued 608,784 shares of common stock to third
parties for $711,120 in cash and $332,894 in subscriptions receivable.
(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 $492,700,
which expire $29,000 on June 30, 2018, $178,000 on June 30, 2019 and
$285,700 on June 30, 2020.
The amount recorded as a deferred tax asset, cumulative as of June 30,
2000 and 1999, is approximately $164,200 and $67,000, 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 $126,000, as the Company has no history of
profitable operations.
The significant components net deferred tax asset are:
June 30, 2000 June 30, 1999
-------------- -------------
Net operating losses $ 164,200 $ 67,000
Valuation allowance (164,200) (67,000)
-------------- -------------
Net deferred tax asset $ 0 $ 0
============== =============
(4) Foreign Currency Transaction and Translation Gains (Losses) The
principal operating entities of the Company are its subsidiaries,
CEFCA, which is located in France, and Cartis International, which is
located in Mauritius. The functional currency of the subsidiaries, as
well as on a consolidated basis, is the French Franc, (FF). On a
consolidated basis the Company's reporting currency is the US Dollar.
The Company translated the income statement items using the average
exchange rate for the period and balance sheet items using the end of
period exchange rate, except for equity items, which are translated at
historical rates, in accordance with SFAS 52.
(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).
F-9
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(5) Related Party Transactions (Continued) 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 $56,897 as of June 30, 2000 and
$75,105 as of June 30, 1999 for products received.
In January 2000, the Company and A.S.A.P. LLC formed Cartis France. The
Company acquired its 49% ownership of Cartis France in exchange for
$9,800 in cash. Cartis France was established as the master distributor
for the Company's products in France. Cartis France has purchased
approximately 400 units from the Company, totaling approximately
$249,900. One officer of the Company has expended approximately 30% of
his time assisting Cartis France. He receives no remuneration from
Cartis France. Cartis France has independent management from the
Company.
(6) Short-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 $4,100 in
2001.
(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:
2001 $ 24,724
2002 24,724
2003 23,186
2004 22,674
2005 22,674
Thereafter 49,126
---------------
$ 167,108
===============
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 through fiscal 1999 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 has two master
distributors. One is a third party with rights to Africa and the Indian
Ocean. The other is Cartis France as the master distributor for France.
(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
was applied to reduce research and development expenses.
F-10
<PAGE>
Cartis, Inc.
Notes to Consolidated Financial Statements
(10) Subsequent Events In April 2000, the Company began efforts to raise up
to $2,500,000 of additional capital via a Regulation D Rule 506 private
placement. As of June 30, 2000, the Company had received $711,120 in
cash and subscriptions for an additional $332,900. The Company received
the subscriptions receivable after June 30, 2000. The Company is
currently negotiating for the additional $1,456,000.
F-11
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
25
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
(a) Set forth below are the names, ages, positions, with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
----------- --- ------------------------
Herve Gallion 56 President, Chairman
Cyril Heitzler 32 Secretary, Treasurer and Director
Patrick Martin 46 Director
Steve Olivier 37 Director
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
Family Relationships
There are no family relationships between or among the executive officers
and directors of the Company.
Business Experience
HERVE GALLION. Mr. Gallion, age 56 is the founder of Cartis, Inc., where he
currently serves as Chief Executive Officer and President since November 17,
1998. Prior to that date, from 1992 to 1998, Mr. Gallion was a private
entrepreneur dedicated to research and development of the technology that
preceded the creation of Cartis, Inc. Mr. Gallion has managed companies over the
past thirty (30) years. Prior to Cartis, Inc., from 1966 to 1992, Mr. Gallion
was founder and manager of an auto parts distribution company, registered under
his name, founder and manager of SCAME S.A., a manufacturer and distributor of
fertilizers, owner and manager of SIF, s.c.p., a professional training company.
Mr. Gallion attended the La Salle School in Lyon, France, until June 1962.
CYRIL HEITZLER. Mr. Heitzler, age 32 is the co-founder of Cartis, Inc., where he
currently serves as General Manager of CIL, the wholly owned manufacturing
subsidiary of Cartis, Inc., since January 8, 1999. Mr. Heitzler is also a
Director of Cartis, Inc. and has been since November 17, 1998. From 1997 until
January 8, 1999, Mr. Heitzler was the General Manager of CEFCA. From 1995 until
1997, Mr. Heitzler was the Technical Vice-President of TEDECO Ltd. (Mauritius),
an assembly plant of water products. In June 1989, Mr. Heitzler graduated from
Lycee La Mache in Lyon, France with a professional degree in Mechanics. In June
1990, he graduated from Lycee St. Joseph in Nancy, France with a Baccalaureate.
In June 1991, Mr. Heitzler graduated from the Frederique Fays Institute,
Villeurbanne, France with a professional degree in Production.
26
<PAGE>
PATRICK MARTIN. Mr. Martin, age 46 is the Chairman and CEO of Cartis France
since January 14, 2000 and a Director of Cartis, Inc. since November 17, 1998.
Since June 1990, Mr. Martin is the General Manager of SORENA, s.a.r.l, a company
that specializes in gas and water distribution. Since September 14, 1988, he is
the General Manager of ASAP s.a.r.l., a holding company. Since December 4, 1997,
Mr. Martin is the General Manager of HBP Associes, a company that specializes in
the distribution of telephone and computer services. Since December 31, 1984,
Mr. Martin is the General Manager of M.B.Associes, a company that specializes in
gas and water distribution equipment . Mr. Martin attended high school in Lyon,
France.
STEVE OLIVIER. Mr. Steve Olivier, age 41, is the Chief Administrative and
Financial Officer of CIL, a wholly-owned subsidiary of Cartis, Inc. since
January 1, 1999. Mr. Olivier has been a Director of Cartis, Inc. since February
10, 1999. From June 1997 until he joined Cartis, Mr. Olivier was the Chief
Administrative and Financial Officer of TEDECO, Ltd. (Mauritius), an assembly
plant of water products. From January 1996 to June 1997, Mr. Olivier was an
accountant at TOPIKO Ltd. (Mauritius). From June 1985 until December 1995, he
was an accountant at SCOTT & Co, Ltd. (Mauritius). In December 1987, Mr. Olivier
completed Advance Accounting Practice, Quantitative Analysis, Management
Accounting and System Analysis & Design in the Level 2 of the Chartered
Association of Certified Accountants (AACA). In December 1984, he completed the
level 1 of the Association of International Accountants. Mr. Olivier completed
his high school education at St. Mary's College (Mauritius) in June 1976.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
No Director, Officer, Beneficial Owner of more than ten percent (10%) of
any class of equity securities of the Company failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year or prior fiscal years.
27
<PAGE>
Item 10. Executive Compensation
<TABLE>
<CAPTION>
Annual LT
Annual Comp Annual Comp LT
Name and Comp Bonus Comp Rest Comp LTIP All Other
Post Year Salary ($) Other Stock Options Payouts (1)
-------------- ---- --------- ------ ------ ----- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Herve 1997 180,000FF $0 91,200FF
Gallion, 1998 180,000FF $0 91,200FF
President and 1999 180,000FF $0 91,200FF
Chairman
Cyril 1997 180,000FF $0 86,400FF
Heitzler, 1998 180,000FF $0 86,400FF
Secretary, 1999 180,000FF $0 86,400FF
Treasurer and
Director
Patrick 1997 $0 $0 $0
Martin, 1998 $0 $0 $0
Director 1999 $0 $0 $0
Steve Olivier, 1997 0
Director 1998 0
1999 40,000
Mauritian
Roupees
</TABLE>
(3) All other compensation includes: automobile expenses and living expenses as
well as the reimbursement for expenses.
(2) In August 1999, CIL entered into an employment agreement with Cyril
Heitzler to be the Executive Vice-President of CIL. As compensation, Mr.
Heitzler receives wages of 15,000FF per month and also a company car and
housing allowance of 4,300FF per month. See Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item
12. "Certain Relationships and Related Transactions".
(3) In February 2000, Herve Gallion 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. See Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions."
(4) In February 2000, the Company purchased the machinery and equipment
necessary to manufacture the Company's products from 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 the 506 Exemption and no state
exemption, as ATD is a foreign corporation. See Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part
III, Item 12. "Certain Relationships and Related Transactions."
(5) In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The
Company issued 500,000 shares of its Common Stock to each person. For such
offering, the Company relied upon the 506 Exemption and no state exemption,
as Mr. Gallion and Mr. Heitzler are both foreign residents. See Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions."
<PAGE>
(6) Since April 2000, the Company sold 516,231 shares of its Common Stock for a
total of $924,053 to twenty-eight (28) investors. Patrick Martin, a current
director of the Company, purchased 9,500 shares for $16,980. For such
offering, the Company relied on the 506 Exemption. No state exemption was
required, as all purchasers were foreign residents. See Part III, Item 11.
"Security Ownership of Certain Beneficial Owners and Management"; and Part
III, Item 12. "Certain Relationships and Related Transactions."
(7) In June 2000, the Company and ATD agreed to rescind the machinery and
equipment purchase conducted in February 2000 ab initio. 3,000,000 shares
of the Company's Common Stock issued to ATD in connection with the purchase
have been cancelled. The Company intends to enter into a lease/purchase
agreement with ATD for the previously purchased reactors used to make the
CARTIS product. See Part III, Item 11. "Security Ownership of Certain
Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions."
(8) In July 2000, the Company issued 100,000 shares of its restricted Common
Stock to Serigne Dioum, an employee, for services rendered on behalf of the
Company. For such offering, the Company relied upon the 506 Exemption. No
state exemption was required as Mr. Dioum is a French resident. See Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions."
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of September 22, 2000,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner (1) Class
--------------------------- -------- -------------------- ------
<S> <C> <C> <C>
Herve Gallion Common 5,500,000 49.8%
Cyril Heitzler Common 500,000 4.5%
Patrick Martin Common 9,500 0.1%
Steve Olivier N/A 0 0.0%
All Executive Officers and
Directors as a Group
[four (4) persons] Common 6,009,500 54.4%
----------
</TABLE>
<PAGE>
(1) The address for each of the above is c/o Cartis, Inc., 277 Royal Poinciana
Way, PMB 155, Palm Beach, FL 33480.
(2) In August 1999, CIL entered into an employment agreement with Cyril
Heitzler to be the Executive Vice-President of CIL. As compensation, Mr.
Heitzler receives wages of 15,000FF per month and also a company car and
housing allowance of 4,300FF per month. See Part III, Item 12. "Certain
Relationships and Related Transactions".
(3) In February 2000, Herve Gallion 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. See Part III, Item 12. "Certain Relationships
and Related Transactions."
(4) In February 2000, the Company purchased the machinery and equipment
necessary to manufacture the Company's products from 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 the 506 Exemption and no state
exemption, as ATD is a foreign corporation. See Part III, Item 12. "Certain
Relationships and Related Transactions."
(5) In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The
Company issued 500,000 shares of its Common Stock to each person. For such
offering, the Company relied upon the 506 Exemption and no state exemption,
as Mr. Gallion and Mr. Heitzler are both foreign residents. See Part III,
Item 12. "Certain Relationships and Related Transactions."
(6) Since April 2000, the Company sold 516,231 shares of its Common Stock for a
total of $924,053 to twenty-eight (28) investors. Patrick Martin, a current
director of the Company, purchased 9,500 shares for $16,980. For such
offering, the Company relied on the 506 Exemption. No state exemption was
required, as all purchasers were foreign residents. See Part III, Item 12.
"Certain Relationships and Related Transactions."
(7) In June 2000, the Company and ATD agreed to rescind the machinery and
equipment purchase conducted in February 2000 ab initio. 3,000,000 shares
of the Company's Common Stock issued to ATD in connection with the purchase
have been cancelled. The Company intends to enter into a lease/purchase
agreement with ATD for the previously
<PAGE>
purchased reactors used to make the CARTIS product. See Part III, Item 12.
"Certain Relationships and Related Transactions."
(8) In July 2000, the Company issued 100,000 shares of its restricted Common
Stock to Serigne Dioum, an employee, for services rendered on behalf of the
Company. For such offering, the Company relied upon the 506 Exemption. No
state exemption was required as Mr. Dioum is a French resident. See Part
III, Item 12. "Certain Relationships and Related Transactions."
There are no arrangements which may result in the change of control of the
Company.
Item 12. Certain Relationships and Related Transactions
In July 1999, the Company sold 10,000 shares of its Common Stock to two (2)
investors for a total of $35,000. For such offering, the Company relied upon
Section 4(2) of the Act and Rule 506. No state exemption was required, as both
investors are foreign residents.
In August 1999, CIL entered into an employment agreement with Cyril
Heitzler to be the Executive Vice-President of CIL. As compensation, Mr.
Heitzler receives wages of 15,000FF per month and also a company car and housing
allowance of 4,300FF per month.
In August 1999, the Company sold 51,089 shares of its Common Stock to two
(2) investors for a total of $178,811. For such offering, the Company relied
upon the 506 Exemption . No state exemption was required, as both investors are
foreign residents.
In September 1999, the Company sold 20,744 shares of its Common Stock to
one (1) investor for a total of $64,306. For such offering, the Company relied
upon the 506 Exemption. No state exemption was required, as the investor is a
French resident.
In November 1999, the Company sold 5,186 shares of its Common Stock to one
(1) investor for a total of $16,076. For such offering, the Company relied upon
the 506 Exemption. No state exemption was required, as the investor is a French
resident.
In February 2000, Herve Gallion 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 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 the 506 Exemption and no state exemption, as ATD is a
foreign corporation.
<PAGE>
In February 2000, the Company purchased the remaining twenty percent (20%)
of the issued and outstanding common shares of 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 ten percent (10%). The Company issued
500,000 shares of its Common Stock to each person. For such offering, the
Company relied upon the 506 Exemption and no state exemption, as Mr. Gallion and
Mr. Heitzler are both foreign residents.
Since April 2000, the Company sold 516,231 shares of its Common Stock for a
total of $924,053 to twenty-eight (28) investors. Patrick Martin, a current
director of the Company, purchased 9,500 shares for $16,980. For such offering,
the Company relied on the 506 Exemption. No state exemption was required, as all
purchasers were foreign residents.
In June 2000, the Company and ATD agreed to rescind the machinery and
equipment purchase conducted in February 2000 ab initio. 3,000,000 shares of the
Company's Common Stock issued to ATD in connection with the purchase have been
cancelled. The Company intends to enter into a lease/purchase agreement with ATD
for the previously purchased reactors used to make the CARTIS product.
In July 2000, the Company issued 100,000 shares of its restricted Common
Stock to Serigne Dioum, an employee, for services rendered on behalf of the
Company. For such offering, the Company relied upon the 506 Exemption. No state
exemption was required as Mr. Dioum is a French resident.
Item 13. 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:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
------------ ---------------------
<S> <C>
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 (2) 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 Cartis
International, Ltd. and Herve Gallion dated February 19, 2000 in French.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.5 (1) Acquisition Contract for the CARTIS Patent and CARTIS Trademark between Cartis
International, Ltd. 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.
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.
10.14 (3) Recision and Cancellation Agreement between the Company and Advanced
Technologies Development Company Limited dated June 30, 2000.
27.1 * Financial Data Sheet.
-------------------------------
</TABLE>
(1) Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB.
(2) Incorporated herein by reference to the Company's quarterly report on Form
10QSB for the period ending March 31, 2000.
(3) Incorporated herein by reference to the Company's first amended
Registration Statement on Form 10-SB.
(* Filed herewith)
(b) No Reports on Form 8-K were filed during the last fiscal year ended
June 30, 2000, covered by this Annual Report on Form 10-KSB.
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) 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: October 13, 2000 By: /s/ Herve Gallion
---------------------------------------
Herve Gallion, President and Chairman
By: /s/ Cyril Heitzler
---------------------------------------
Cyril Heitzer, Secretary, Treasurer and Director
By:/s/ Patrick Martin
---------------------------------------
Patrick Martin, Director
By:/s/ Steve Olivier
---------------------------------------
Steve Olivier, Director
Pursuant to the requirements of the Exchange Act, this report has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Herve Gallion President and Chairman October 13, 2000
-----------------------------
Herve Gallion
/s/ Cyril Heitzler Secretary, Treasurer October 13, 2000
----------------------------- and Director
Cyril Heitzler
/s/ Patrick Martin Director October 13, 2000
-----------------------------
Patrick Martin
/s/ Steve Olivier Director October 13, 2000
-----------------------------
Steve OlivierB
