**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 September 30, 2007





**o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      transition period from ______________ to ______________





*Commission
      File Number 0-52305*


_______________________________________________





**Carter
      Acquisition Corp. I**


(Exact
      name of registrant as specified in its charter)


______________________________________________




Delaware
            
            83-0465055(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)








c/o
                Carter Securities LLC767
                Third Avenue, 27thFloorNew
                York, NY
            
            10017(Address
                of principal executive offices)
            
            (zip
                code)





Registrant’s
      telephone number, including area code:


(212)
      989-6899





_____________________________________________





Securities
      registered under Section 12(b) of the Exchange Act:





None.





Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock, $0.0001 par value per share


-----------------------------------------


(Title
      of
      Class)











Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days. Yes x    No
o.





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B (§229.405 of this chapter) contained herein, 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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes x   No o.





The
      issuer’s revenues for fiscal year end September 30, 2007 were $0.





As
      of
      November 12, 2007, there were 4,000,000 shares of common stock, par value $.0001
      per share, outstanding, none of which were held by non-affiliates.





Transitional
      Small Business Disclosure Format (check one): Yes o No x




**DOCUMENTS
      INCORPORATED BY REFERENCE:**





**None**




**FORWARD-LOOKING
      STATEMENTS**





Certain
      statements made in this Annual Report on Form 10-KSB are “forward-looking
      statements” (within the meaning of the Private Securities Litigation Reform Act
      of 1995) regarding the plans and objectives of management for future operations.
      Such statements involve known and unknown risks, uncertainties and other factors
      that may cause actual results, performance or achievements of Carter Acquisition
      Corp. I (the “Company”) to be materially different from any future results,
      performance or achievements expressed or implied by such forward-looking
      statements. The forward-looking statements included herein are based on current
      expectations that involve numerous risks and uncertainties. The Company's plans
      and objectives are based, in part, on assumptions involving the continued
      expansion of business. Assumptions relating to the foregoing involve judgments
      with respect to, among other things, future economic, competitive and market
      conditions and future business decisions, all of which are difficult or
      impossible to predict accurately and many of which are beyond the control of
      the
      Company. Although the Company believes its assumptions underlying the
      forward-looking statements are reasonable, any of the assumptions could prove
      inaccurate and, therefore, there can be no assurance the forward-looking
      statements included in this Report will prove to be accurate. In light of the
      significant uncertainties inherent in the forward-looking statements included
      herein particularly in view of the current state of our operations, the
      inclusion of such information should not be regarded as a statement by us or
      any
      other person that our objectives and plans will be achieved. Factors that could
      cause actual results to differ materially from those expressed or implied by
      such forward-looking statements include, but are not limited to, the factors
      set
      forth herein under the headings “Business,” “Plan of Operation” and “Risk
      Factors”. We undertake no obligation to revise or update publicly any
      forward-looking statements for any reason.





-2-




**PART
      I**





**Item
      1. Description of Business.**





**Introduction**





Carter
      Acquisition Corp. I (“we”, “us”, “our”, “Carter” or the “Company”) was
      incorporated in the State of Delaware on September 11, 2006 and maintains its
      principal executive offices at c/o Carter Securities LLC, 767 Third Avenue,
      27 th Floor,
      New York, NY 10017. Since inception, the Company has been engaged in
      organizational efforts and obtaining initial financing. The Company was formed
      as a vehicle to pursue a business combination through the acquisition of, or
      merger with, an operating business. The Company filed a registration statement
      on Form 10-SB with the U.S. Securities and Exchange Commission (the “SEC”) on
      November 8, 2006, and since its effectiveness, the Company has focused its
      efforts to identify a possible business combination.





The
      Company, based on proposed business activities, is a “blank check” company. The
      SEC defines those companies as "any development stage company that is issuing
      a
      penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”), and that has no specific business
      plan or purpose, or has indicated that its business plan is to merge with an
      unidentified company or companies." Many states have enacted statutes, rules
      and
      regulations limiting the sale of securities of "blank check" companies in their
      respective jurisdictions. The Company is also a “shell company,” defined in Rule
      12b-2 under the Exchange Act as a company with no or nominal assets (other
      than
      cash) and no or nominal operations. Management does not intend to undertake
      any
      efforts to cause a market to develop in our securities, either debt or equity,
      until we have successfully concluded a business combination. The Company intends
      to comply with the periodic reporting requirements of the Exchange Act for
      so
      long as we are subject to those requirements.





The
      Company was organized as a vehicle to investigate and, if such investigation
      warrants, acquire a target company or business seeking the perceived advantages
      of being a publicly held corporation. The Company’s principal business objective
      for the next 12 months and beyond such time will be to achieve long-term growth
      potential through a combination with an operating business. The Company will
      not
      restrict its potential candidate target companies to any specific business,
      industry or geographical location and, thus, may acquire any type of
      business.





**Merger
      with Perio-Imaging Inc.**





On
      July
      18, 2007, the Company entered into a letter of intent (the “Letter of Intent”)
      with Perio-Imaging Inc., a Delaware corporation (“Perio”), pursuant to which the
      Company and Perio intend to combine. Since entering the Letter of Intent, the
      Company and Perio have been engaged in advance negotiations with regard to
      such
      contemplated business combination.





Carter
      intends to enter into an Agreement and Plan of Merger and Reorganization (the
      “Merger Agreement”) with Perio and Perio-Imaging Acquisition Corp., a Delaware
      corporation and wholly-owned subsidiary of Carter (“MergerSub”). The Merger
      Agreement will set forth the terms and conditions of the business combination
      (the “Merger”) of Perio and Carter and the exchange by the Perio securities
      holders (the “Perio Securities Holders”) of their interests in Perio for shares
      of common stock, par value $.0001 per share of Carter (the “Carter Common
      Stock”), options to purchase shares of Carter Common Stock (the “Carter
      Options”) and warrants to purchase shares of Carter Common Stock (the “Carter
      Warrants”). It is anticipated that the execution of the Merger Agreement by the
      parties and the closing of the Merger will occur on or around November 15,
      2007
      (the “Merger Closing”); however, there can be no assurances that the Merger
      Closing will ever occur.




Pursuant
      to the terms of the Merger Agreement, MergerSub would merge with and into Perio
      with Perio continuing as the surviving corporation (the “Surviving Corporation”)
      in the Merger as a wholly-owned subsidiary of Carter. In connection with the
      proposed Merger, (i) holders of shares of common stock, par value $0.001 per
      share of Perio (the “Perio Common Stock”) would exchange an aggregate of
      9,697,300 shares of Perio Common Stock for 9,697,300 shares of Carter Common
      Stock; (ii) holders of options to purchase an aggregate of


-3-


820,000
      shares of Perio Common Stock would exchange such options for Carter Options
      to
      purchase 820,000 shares of Carter Common Stock; and (iii) holders of warrants
      to
      purchase an aggregate of 350,650 shares of Perio Common Stock would exchange
      such warrants for Carter Warrants to purchase 350,650 shares of Carter Common
      Stock.





In
      addition, $ 620,000
      under the 2006 Bridge Note and the 2007(A) Bridge Notes, and $449,500 under
      the
      2007(B) Bridge Notes (as those terms are defined herein), or an **** aggregate
      principal amount of **** up
      to
      $1,069,500, shall be exchanged for (i) up to $826,666 in principal amount of
      Carter Notes, Carter Warrants, and Incentive Shares, reflecting a 25% purchase
      discount under the terms of the 2006 Bridge Note and the 2007(A) Bridge Notes,
      and (ii) $449,500 in principal amount of Carter Notes, Carter Warrants, and
      Incentive Shares under the terms of the 2007(B) Bridge Notes, provided however,
      that $826,666 in principal amount under the 2006 Bridge Note and the 2007(A)
      Bridge Notes shall be exclusive of the Offering, and the $449,500 in principal
      amount under the 2007(B) Bridge Notes shall be included in the Offering (the
      “Bridge Notes Exchange”). Any accrued and unpaid interest on the Bridge Notes
      shall be paid in cash at the closing which, as of September 30, 2007, totals
      approximately $45,769. The Secured
      Promissory Note in the principal amount of $250,000 between Perio and Alpha
      Capital Anstalt, dated December 7, 2006 is
      referred to as **** the
      “ 2006
      Bridge Note ”, the
      Short-Term Loan Agreements between Perio and various individuals in the
      aggregate principal amount of $370,000 dated between April and June 2007 are
      referred to as the “2007(A) Bridge Notes”, and the Short-Term Loan Agreements
      between the Company and various individuals in the aggregate principal amount
      of
      $449,500 dated between July and October 2007 are referred to as the “2007(B)
      Bridge Notes.” Collectively, the “2006 Bridge Note”, the “2007(A) Bridge Notes”
and the “2007(B) Bridge Notes” are sometimes referred
      to hereafter as the “ Bridge
      Notes.” The 2006 Bridge Note and the 2007(B) Bridge Notes, by their terms,
      are required
      to be exchanged in the Bridge Notes Exchange ,
      whereas
      the holders of the 2007(A) Bridge Note are not required to exchange **** their **** notes
      in
      the Bridge Note Exchange. ****  The
      exchange of the 2007(B) Bridge Notes and the issuance of Carter Notes, Carter
      Warrants and Incentive Shares in connection therewith shall be counted towards
      the Minimum Offering Amount (as defined in the section entitled “The Financing
      Transaction” below).





In
      addition, a portion of the 4,000,000 shares of Carter Common Stock currently
      issued and outstanding and owned by John C. Lipman, the founder of Carter (the
      “Founder”), would be redeemed by Carter upon the Merger Closing so that
      immediately thereafter, the Founder will own 759,000 shares of Carter Common
      Stock, resulting in his ownership of approximately 4.99% of the issued and
      outstanding shares of Carter Common Stock, on a partially-diluted basis, after
      giving effect to the conversion of Carter Notes for shares of Carter Common
      Stock (including the exchange of all of the Bridge Notes in the Bridge Notes
      Exchange). In the event that Carter does not close on the Maximum Offering
      Amount (defined hereafter) at the initial closing of the Offering and all of
      the
      holders of the 2007(A) Bridge Notes do not elect to exchange their 2007(A)
      Bridge Notes in the Bridge Notes Exchange, a portion of such 759,000 shares
      would be held in escrow until the completion of the Offering whereupon such
      shares would be released to the Founder and/or Carter, as necessary to maintain
      the Founder's 4.99% ownership, on such partially-diluted basis, based on any
      additional Carter Notes issued after the initial closing of the
      Offering.




Concurrent
      with the closing of the Merger, the Company shall grant options to purchase
      an
      aggregate of 650,000 shares of Carter Common Stock, at an exercise price of
      $1.50 per share, which options shall include cashless exercise provisions,
      and
      shall be distributed equally to Barry J. Berman and Frederick C. Lane, M.D.,
      consisting of 450,000 shares as compensation for $450,000 in
      combined accrued and unpaid salaries (excluding expenses and advances) as
      of December 31, 2006 and 200,000 shares as consideration for their agreement
      to
      the redemption of 50,000 shares of Carter Common Stock from each of them in
      connection with the Company's distribution of the Incentive Shares (the
“Management Options”). The Management Options shall be granted and vest
      immediately upon the closing of the Merger, for which there is no assurance
      will
      occur, and shall not be exercisable for a period of one (1) year from the grant
      date in accordance with the Lockup Agreement (as defined below).





-4-




**The
      Financing Transaction**




Concurrent
      with and as a condition to the Merger Closing, Carter intends to consummate
      the
      initial closing of a private placement offering of securities of Carter
      consisting of: (i) $6,000,000 in aggregate principal amount of Senior Secured
      8%
      Convertible Promissory Notes (the “Carter Notes”); (ii) 100,000 shares of Carter
      Common Stock issued pro-rata to investors in the Offering (the “Investors”) and
      persons participating in the Bridge Notes Exchange (the “Incentive Shares”); and
      (iii) Carter Warrants exercisable at $1.80 per share to purchase shares of
      Carter Common Stock equal to the number of shares of Common Stock issuable
      upon
      conversion of the Carter Notes (collectively, the “Securities”), to raise up to
      $6,000,000 (the “Maximum Offering Amount”), of which a minimum amount of
      $2,500,000 (the “Minimum Offering Amount”) must be closed concurrent with the
      Merger (the “Offering”). The Securities will not have been registered under
      the Securities Act of 1933, as amended (the “Securities Act”) when issued and
      holders will not be able to offer or sell the Securities in the United States
      absent registration or an applicable exemption from the registration
      requirements. Notwithstanding the fact that the holders of the Bridge Notes
      who
      exchange their Bridge Notes in the Bridge Notes Exchange will receive the same
      type of securities issued to Investors, the Bridge Notes Exchange will be
      separate and apart from the Offering and will not count towards the Minimum
      Offering Amount or the Maximum Offering Amount, except the exchange of 2007
      (B)
      Bridge Notes which will count towards the Minimum Offering Amount. In the event
      that the Minimum Offering Amount is raised in the Offering, Investors would
      be
      able to convert their Carter Notes into an aggregate of 1,666,666 shares of
      Carter Common Stock and would be issued Carter Warrants to purchase an aggregate
      of 1,666,666 shares of Carter Common Stock at an exercise price of $1.80 per
      share. If the Maximum Offering Amount is raised in the Offering, Investors
      would
      be able to convert their Carter Notes into an aggregate of 4,000,000 shares
      of
      Carter Common Stock and would be issued Carter Warrants to purchase an aggregate
      of 4,000,000 shares of Carter Common Stock at an exercise price of $1.80 per
      share. The aforementioned
      amounts include those shares of Carter Common Stock underlying the Carter Notes
      and Carter Warrants received in exchange for the 2007(B) Bridge
      Notes) .





In
      addition to normal anti-dilution adjustments, the number of shares of Carter
      Common Stock issuable upon conversion of the Carter Notes will be increased
      as a
      result of the reduction of the conversion price of the Carter Notes to $1.00
      per
      share and reduction of the exercise price of the Carter Warrants to $1.20 per
      share, in the event that Carter does not achieve an aggregate of at least
      $10,000,000 in gross revenues during the first four (4) full calendar quarters
      after the final closing of the Offering. In such event, the number of shares
      of
      Carter Common Stock issuable for each dollar of principal amount converted
      would
      be increased from one share to 1.5 shares, with the aggregate number of shares
      of Carter Common Stock issuable upon conversion of the Carter Notes thereafter
      being 2,500,000 shares at the Minimum Offering Amount (3,326,666 shares assuming
      the conversion of all Carter Notes issued in connection with the Bridge Notes
      Exchange) and 6,000,000 shares at the Maximum Offering Amount (6,826,666 shares
      assuming the conversion of all Carter Notes issued in connection with the Bridge
      Notes Exchange) (the “Revenue Conversion Adjustment”).




**Bridge
      Notes Exchange**




Provided
      the Offering is consummated, the holder of the 2006 Bridge Note would be
      required to exchange the 2006 Bridge Note in the Bridge Notes Exchange, the
      holders of the 2007(A) Bridge Notes would have the right to exchange their
      2007(A) Bridge Notes in the Bridge Notes Exchange and the holders of the 2007(B)
      Bridge Notes would be required to exchange the 2007(B) Bridge Notes in the
      Bridge Notes Exchange. If all of the Bridge Notes are exchanged in the Bridge
      Notes Exchange, the Company would be required to issue to the holders of the
      Bridge Notes (i) Carter Notes which could be converted into an aggregate of
      850,777 shares of Carter Common Stock; (ii) Carter Warrants to purchase an
      aggregate of 850,777 shares of Carter Common Stock at an exercise price of
      $1.80
      per share and, solely with respect to the holder of the 2006 Bridge Note,
      additional Carter Warrant to purchase an aggregate of 111,111 shares of Carter
      Common Stock, at an exercise price of $1.50 per share; and (iii) a pro rata
      portion of the Incentive Shares along with the Investors. The conversion rate
      applicable to the Carter Notes issued in the Bridge Notes Exchange also shall
      be
      subject to the Revenue Conversion Adjustment.


-5-


In
      the
      event that any of the holders of 2007 (A) Bridge
      Notes do not elect to exchange their 2007 (A) Bridge
      Notes in the Bridge Notes Exchange, such holders, assuming they have agreed
      to
      be issued Carter Warrants in lieu of warrants of Perio, would be issued Carter
      Warrants to purchase one share of Carter Common Stock for each $4.00 of
      principal amount outstanding under the 2007 (A) Bridge
      Notes. If all such holders do not participate in the Bridge Notes Exchange,
      the
      Company would be required to issue to such holders Carter Warrants to purchase
      an aggregate of 92,500 shares of Carter Common Stock, at an exercise price
      of
      $1.50 per share. The 2007 (A) Bridge
      Notes held by such persons would continue to represent an aggregate outstanding
      principal amount of $370,000 payable by Perio to the holders, along with accrued
      and unpaid interest, which at September 30, 2007 was approximately $ 20,794. All
      extensions to the maturity dates of the 2007 (A)  Bridge
      Notes provided by Perio to the holders thereof have expired on or before
      September 30, 2007. As a result, Perio is currently in default under the terms
      of the 2007 (A)  Bridge
      Notes and the holders currently have the right to request payment of the entire
      outstanding principal amount of $370,000 and all accrued and unpaid
      interest.




**Securities
      Issued and Outstanding after the Merger and the Offering**




Assuming
      the sale of the Maximum Offering Amount at the initial closing of the Offering
      and the election of the holders of all of the 2007 (A) Bridge
      Notes to exchange their 2007 (A) Bridge
      Notes in the Bridge Notes Exchange, immediately after the Merger Closing and
      the
      initial closing of the Offering there would be outstanding (i) 10,656,300 **** shares
      of
      Carter Common Stock (which includes 200,000 shares issued to Mahony Associates,
      Inc. for consulting services in connection with the Offering); (ii) Carter
      Notes
      in a principal amount of $6,826,666 which could be converted into 4,551,111
      shares of Carter Common Stock ( which assumes the
      exchange of all 2006, 2007(A), and 2007(B) Bridge Notes in the Bridge Notes
      Exchange ) ,
      (iii)
      Carter Options to purchase up to 1,470,000 shares of Carter Common Stock (which
      includes Management Options to purchase 650,000 shares of Carter Common Stock);
      and (iv) Carter Warrants to purchase up to 5,412,872 shares of Carter Common
      Stock (which includes (A) Carter Warrants to purchase 350,650 Shares of Common
      Stock exchanged in the Merger; (B) Carter Warrants issued to the Investors
      in
      the Offering to purchase an aggregate of up to 4,000,000 shares of Carter Common
      Stock at an exercise price of $1.80 per share (which
      shall include those shares of Carter Common Stock underlying Carter Warrants
      received in exchange for the 2007(B) Bridge Notes) ;
      (C)
      Carter Warrants issued to holders of Bridge Notes, pursuant to the Bridge Notes
      Exchange to purchase up to 662,222 shares of Carter Common Stock (which
      includes: (i) Warrants to purchase 111,111 shares at an exercise price of $1.50
      per share; and (ii) Warrants to purchase 551,111 shares at an exercise price
      of
      $1.80 per share); and (D) Carter Warrants issued to the placement agent in
      the
      Offering to purchase up to 400,000 shares of Carter Common Stock at an exercise
      price of $1.80 per share (the “Placement Agent Warrants”).





**Change
      of Control**




Pursuant
      to the terms of the Merger, and provided such Merger is consummated, of which
      there can be no assurance, a change of control of Carter will occur as a result
      of Carter’s redemption of shares of Carter Common Stock from the Founder so that
      his interest in Carter will be reduced from 100% of the issued and outstanding
      shares of Carter Common Stock to less than five (5%) percent of the issued
      and
      outstanding shares of Carter Common Stock following the Merger Closing and
      after
      giving effect to the conversion of all Carter Notes issued in the Offering
      and
      the exchange of all of the Bridge Notes in the Bridge Notes
      Exchange.




Also
      pursuant to the terms of the Merger, and provided such Merger is consummated,
      of
      which there can be no assurance, the sole director of Carter, John C. Lipman,
      will resign, effective upon the Merger Closing, and Barry J. Berman and
      Frederick C. Lane, M.D., who are currently board members of Perio **** would
      thereafter be elected to the Board of Directors of Carter and comprise the
      entire Board of Directors of Carter. Since Mr. Lipman’s resignation and the
      election of Mr. Berman and Dr. Lane constitutes a change in the majority of
      the
      members on the Company’s Board of Directors and in accordance with Section 14(f)
      of the Exchange Act and Rule 14f-1 promulgated thereunder, on October 4, 2007
      the Company filed an information statement on Schedule 14f-1 with the SEC and
      delivered a copy of such information statement to the sole stockholder of the
      Company.




-6-


Following
      the consummation of the Merger, of which there can be no assurance, and the
      initial closing of the Offering, Carter's only business operations shall be
      those conducted by Perio. Carter will cease being a shell company and Perio
      will
      become our wholly-owned subsidiary.




**Registration
      of Shares of Carter Common Stock**




Following
      the Offering, Carter would be required to register for resale (i) the 100,000
      Incentive Shares of Carter Common Stock to be distributed to Investors and
      the
      holders of Bridge Notes who exchange their Bridge Notes in the Bridge Notes
      Exchange; (ii) all of the shares of Carter Common Stock underlying the Carter
      Notes and Carter Warrants issued to Investors and the holders of Bridge Notes
      who exchange their Bridge Notes in the Bridge Notes Exchange; (iii) all of
      the shares of Carter Common Stock underlying the Placement
      Agent Warrants; (iv) all of the Founder's shares of Carter Common
      Stock (the “Post-Merger Founder's Shares”); (v) all of the shares of Carter
      Common Stock issued in the Merger; and (vi) all of the shares of Carter Common
      Stock underlying Carter Options and Carter Warrants issued in connection with
      the Merger (collectively, the “Registrable Securities”). Under the terms of
      certain registration rights agreements which would be entered into by Carter
      with the Investors, the Founder and the Perio Securities Holders, a registration
      statement would be required to be filed within 45 days after the initial closing
      of the Offering and declared effective by 180 days after such initial closing
      (the “Initial Registration Statement”). All of the Registrable Securities shall
      be permitted to be included in the Initial Registration Statement, subject
      to certain reductions in the priorities agreed to between the holders of
      the Registrable Securities, in the event that the SEC notifies the Company
      that
      all of the Registrable Securities may not be included due to restrictions
      imposed by Rule 415 of the Securities Act.




In
      addition to being included the Initial Registration Statement, all of the
      Registrable Securities will be entitled to “piggyback” registration rights in
      the event that the Company files additional registration statements in the
      future. Further, the Investors and the Founder each shall have a one time
“demand” registration right, within two years after the closing of the
      Offering.





If
      Carter
      fails to cause the Initial Registration Statement to be filed within 45 days
      after the initial closing of the Offering or fails to have the Initial
      Registration Statement declared effective on or before 180 days after the
      initial closing of the Offering, Carter would be required to pay the Investors
      liquidated damages equal to 2% of the sum of (i) aggregate principal amount
      of
      the Notes and (ii) the attributed value of $1.50 per Incentive Share for each
      Incentive Share, per month until such failure is cured, subject to a cap of
      18%
      (Carter would be required to pay the aforementioned liquidated damages to the
      Founder solely where Carter fails to cause such registration statement to be
      filed on or before the time period specified above). In addition, if Carter
      (i)
      does not respond to all SEC comment letters in connection with any applicable
      registration statement within 15 days after the date of the SEC comment letter
      or (ii) does not cause all of the Founder's shares of Carter Common Stock to
      be
      registered for resale no later than 60 days after the date that the Investors
      shares of Carter Common Stock are registered for resale (an additional 125
      days
      in the event of a Rule 415 registration limitation), Carter would also be
      required to issue to the Founder additional shares of Carter Common Stock in
      an
      amount equal to 1.5% per month of the value of the Founder's shares of Carter
      Common Stock on the date of the Merger Closing, subject to a cap of 15% of
      the
      value of the Founder's shares.





**Restrictions
      on Sales of Shares of Carter Common Stock**




In
      accordance with the Offering, Barry J. Berman and Frederick C. Lane would enter
      into Lock-up Agreements, pursuant to which they would agree not to sell any
      Carter Common Stock until 270 days after the effective date of the applicable
      registration statement, as well as agree not to exercise the Management Options
      for a period of one (1) year from the grant date. The Founder also would agree
      only to sell: (1) up to 25% of his shares of Carter Common Stock immediately
      after they have been registered for resale pursuant to an effective registration
      statement; (2) an additional 25% after the sale of the first 25%; and (3) the
      remainder of such shares would become transferable on a date that is one year
      after the date of the Merger Closing.


-7-




**Change
      of Corporate Name**




Subject
      to compliance with applicable federal securities laws, as soon as practicable
      following the Merger, if consummated, Carter will change its name to
“Perio-Imaging Holdings Inc.” or a similar name and procure a trading
      symbol which bears a close resemblance to its new name.





**Competition**





In
      the
      event that the Merger or any similar transaction contemplated under the terms
      of
      the Letter of Intent is not consummated, the Company will continue to seek
      a
      potential business combination with a private company. The Company faces vast
      competition from other shell companies with the same objectives. The Company
      is
      in a highly competitive market for a small number of business opportunities
      which could reduce the likelihood of consummating a successful business
      combination. A large number of established and well-financed entities, including
      small public companies and venture capital firms, are active in mergers and
      acquisitions of companies that may be desirable target candidates for us. Nearly
      all these entities have significantly greater financial resources, technical
      expertise and managerial capabilities than we do; consequently, we will be
      at a
      competitive disadvantage in identifying possible business opportunities and
      successfully completing a business combination. These competitive factors may
      reduce the likelihood of our identifying and consummating a successful business
      combination.





**Employees**





We
      have
      no employees other than our sole officer who devotes only a limited amount
      of
      time to our business.





**Risk
      Factors**




**You
      should carefully review and consider the following risks as well as all other
      information contained in this Annual Report on Form 10-KSB, including our
      financial statements and the notes to those statements. The following risks
      and
      uncertainties are not the only ones facing us. Additional risks and
      uncertainties of which we are currently unaware or which we believe are not
      material also could materially adversely affect our business, financial
      condition, results of operations, or cash flows. To the extent any of the
      information contained in this annual report constitutes forward-looking
      information, the risk factors set forth below are cautionary statements
      identifying important factors that could cause our actual results
      for various financial reporting periods to differ materially from those
      expressed in any forward-looking statements made by or on our behalf and could
      materially adversely effect our financial condition, results of operations
      or
      cash flows.**





***There
      may be conflicts of interest as a result of our management being involved with
      other blank check shell companies.***





Conflicts
      of interest create the risk that management may have an incentive to act
      adversely to the interests of the Company. Our management is currently involved
      with other blank check shell companies, and in the pursuit of business
      combinations, conflicts with such other blank check shell companies with which
      it is, and may in the future become, affiliated, may arise. If we and the other
      blank check shell companies that our management is affiliated with desire to
      take advantage of the same opportunity, then those members of management that
      are affiliated with both companies would abstain from voting upon the
      opportunity. In the event of identical officers and directors, the officers
      and
      directors will arbitrarily determine the company that will be entitled to
      proceed with the proposed transaction.





Further,
      Carter Securities LLC, a registered broker-dealer, is acting as placement agent
      for the Offering. John C. Lipman, our sole officer and director, as well as
      our
      sole stockholder, is currently the Chairman and sole owner of Carter Securities
      LLC. We cannot assure you that conflicts of interest among us, Carter Securities
      LLC and our sole stockholder will not develop.


-8-




***We
      have a limited operating history.***





We
      have a
      limited operating history and no revenues or earnings from operations since
      inception. We have no significant assets or financial resources. We will, in
      all
      likelihood, sustain operating expenses without corresponding revenues, at least
      until the consummation of the Merger or other business combination. This may
      result in our incurring a net operating loss that will increase unless we
      consummate a business combination with a profitable business. We cannot assure
      you that we can identify a suitable business opportunity and consummate a
      business combination, or that any such business will be profitable at the time
      of its acquisition by us or ever.





***We
      have incurred and may continue to incur losses.***





Since
      September 11, 2006 (inception) through September 30, 2007, we have incurred
      a
      net loss of $59,028. We expect that we will incur losses at least until we
      complete the Merger or other business combination and perhaps after such a
      combination as well. There can be no assurance that we will complete the Merger
      or other business combination or that we will ever be profitable.





***We
      face a number of risks associated with potential
      acquisitions.***





We
      intend
      to use reasonable efforts to complete the Merger or other business combination
      with an operating business. Such combination will be accompanied by risks
      commonly encountered in acquisitions, including, but not limited to,
      difficulties in integrating the operations, technologies, products and personnel
      of the acquired companies and insufficient revenues to offset increased expenses
      associated with acquisitions. Failure to manage and successfully integrate
      acquisitions we make could harm our business, our strategy and our operating
      results in a material way.




***There
      is competition for those private companies suitable for a merger transaction
      of
      the type contemplated by management.***





The
      Company is in a highly competitive market for a small number of business
      opportunities which could reduce the likelihood of consummating a successful
      business combination. We are, and will continue to be, an insignificant
      participant in the business of seeking mergers with, joint ventures with and
      acquisitions of small private and public entities. A large number of established
      and well-financed entities, including small public companies and venture capital
      firms, are active in mergers and acquisitions of companies that may be desirable
      target candidates for us. Nearly all these entities have significantly greater
      financial resources, technical expertise and managerial capabilities than we
      do;
      consequently, we will be at a competitive disadvantage in identifying possible
      business opportunities and successfully completing a business combination.
      These
      competitive factors may reduce the likelihood of our identifying and
      consummating a successful business combination.





***Future
      success is highly dependent on the ability of management to locate and attract
      a
      suitable acquisition.***





The
      nature of our operations is highly speculative, and there is a consequent risk
      of loss of your investment. The success of our plan of operation will depend
      to
      a great extent on the operations, financial condition and management of the
      identified business opportunity. While management intends to seek business
      combination(s) with entities having established operating histories, we cannot
      assure you that we will be successful in locating candidates meeting that
      criterion. In the event we complete a business combination, the success of
      our
      operations may be dependent upon management of the successor firm or venture
      partner firm and numerous other factors beyond our control.





***Management
      intends to devote only a limited amount of time to seeking a target company
      which may adversely impact our ability to identify a suitable acquisition
      candidate.***




While
      seeking a business combination, management anticipates devoting very limited
      time to the Company's affairs. Our sole officer has not entered into a written
      employment agreement with us and is not expected to do so in the foreseeable
      future. This limited commitment may adversely impact our ability to identify
      and
      consummate a successful business combination.


-9-




***The
      Company entered into the Letter of Intent to effect a merger with Perio;
      however, there can be no assurances that such merger is consummated.***





On
      July
      18, 2007, we entered into a Letter of Intent with Perio, and since that date,
      we
      have been engaged in advanced negotiations with Perio to consummate the Merger.
      While we anticipate closing the Merger on or about November 15, 2007, as of
      the
      date hereof, the Company and Perio have not entered into any definitive
      agreements. While we are seeking to consummate the Merger, we can provide no
      assurances that such Merger or other similar business combination will be
      consummated.





***In
      the event the Merger is not consummated, the Company will resume its efforts
      to
      locate a private company with which to merger, and there can be no assurance
      that the Company will successfully consummate a business combination.***





In
      the
      event the Merger is not consummated, we can give no assurances that we will
      successfully identify and evaluate suitable business opportunities or that
      we
      will conclude a business combination. Management has not identified any
      particular industry or specific business within an industry for evaluation.
      We
      cannot guarantee that we will be able to negotiate a business combination on
      favorable terms.





***The
      time and cost of preparing a private company to become a public reporting
      company may preclude us from entering into a merger or acquisition with the
      most
      attractive private companies.***





Target
      companies that fail to comply with SEC reporting requirements may delay or
      preclude acquisition. Sections 13 and 15(d) of the Exchange Act require
      reporting companies to provide certain information about significant
      acquisitions, including certified financial statements for the company acquired,
      covering one, two, or three years, depending on the relative size of the
      acquisition. The time and additional costs that may be incurred by some target
      entities to prepare these statements may significantly delay or essentially
      preclude consummation of an acquisition. Otherwise suitable acquisition
      prospects that do not have or are unable to obtain the required audited
      statements may be inappropriate for acquisition so long as the reporting
      requirements of the Exchange Act are applicable.





***The
      Company may be subject to further government regulation which would adversely
      affect our operations.***





Although
      we are subject to the reporting requirements under the Exchange Act, management
      believes we are not subject to regulation under the Investment Company Act
      of
      1940, as amended (the “Investment Company Act”), since we are not engaged in the
      business of investing or trading in securities. If we engage in business
      combinations which result in our holding passive investment interests in a
      number of entities, we could be subject to regulation under the Investment
      Company Act. If so, we would be required to register as an investment company
      and could be expected to incur significant registration and compliance costs.
      We
      have obtained no formal determination from the SEC as to our status under the
      Investment Company Act and, consequently, violation of the Investment Company
      Act could subject us to material adverse consequences.





***Any
      potential acquisition or merger with a foreign company may subject us to
      additional risks.***





If
      we
      enter into a business combination with a foreign company, we will be subject
      to
      risks inherent in business operations outside of the United States. These risks
      include, for example, currency fluctuations, regulatory problems, punitive
      tariffs, unstable local tax policies, trade embargoes, risks related to shipment
      of raw materials and finished goods across national borders and cultural and
      language differences. Foreign economies may differ favorably or unfavorably
      from
      the United States economy in growth of gross national product, rate of
      inflation, market development, rate of savings, and capital investment, resource
      self-sufficiency and balance of payments positions, and in other
      respects.


-10-


***The
      Company may be subject to certain tax consequences in our business, which may
      increase our cost of doing business.***





We
      may
      not be able to structure our acquisition to result in tax-free treatment for
      the
      companies or their stockholders, which could deter third parties from entering
      into certain business combinations with us or result in being taxed on
      consideration received in a transaction. Currently, a transaction may be
      structured so as to result in tax-free treatment to both companies, as
      prescribed by various federal and state tax provisions. We intend to structure
      any business combination so as to minimize the federal and state tax
      consequences to both us and the target entity; however, we cannot guarantee
      that
      the business combination will meet the statutory requirements of a tax-free
      reorganization or that the parties will obtain the intended tax-free treatment
      upon a transfer of stock or assets. A non-qualifying reorganization could result
      in the imposition of both federal and state taxes that may have an adverse
      effect on both parties to the transaction.





***Our
      business will have no revenue unless and until we merge with or acquire an
      operating business.***





We
      are a
      development stage company and have had no revenue from operations. We do not
      expect to realize any revenue unless and until we successfully merge with or
      acquire an operating business.





***Because
      we may seek to complete a business combination through a “reverse merger”,
      following such a transaction we may not be able to attract the attention of
      major brokerage firms.***





Additional
      risks may exist since we expect to assist a privately held business to become
      public through a “reverse merger.” Securities analysts of major brokerage firms
      may not provide coverage of our Company since there is no incentive to brokerage
      firms to recommend the purchase of Carter Common Stock. No assurance can be
      given that brokerage firms will want to conduct any secondary offerings on
      behalf of our post-merger company in the future.





***We
      cannot assure you that following a business combination with an operating
      business, Carter Common Stock will be listed on NASDAQ or any other securities
      exchange.***




Following
      a business combination, we may seek the listing of Carter Common
      Stock on
      NASDAQ
      or the American Stock Exchange. However, we cannot assure you that following
      such a transaction, we will be able to meet the initial listing standards of
      either of those or any other stock exchange, or that we will be able to maintain
      a listing of Carter Common
      Stock on
      either
      of those or any other stock exchange. After completing a business combination,
      until Carter Common
      Stock is
      listed
      on the NASDAQ or another stock exchange, we expect that Carter Common
      Stock would
      be
      eligible to trade on the OTC Bulletin Board, another over-the-counter quotation
      system, or on the “pink sheets,” where our stockholders may find it more
      difficult to dispose of shares or obtain accurate quotations as to the market
      value of Carter Common
      Stock .
      In
      addition, we would be subject to an SEC rule that, if it failed to meet the
      criteria set forth in such rule, imposes various practice requirements on
      broker-dealers who sell securities governed by the rule to persons other than
      established customers and accredited investors. Consequently, such rule may
      deter broker-dealers from recommending or selling Carter Common
      Stock ,
      which
      may further affect its liquidity. This would also make it more difficult for
      us
      to raise additional capital following a business combination.





***Our
      sole stockholder may have a minority interest in the Company following the
      Merger or, in the event the Merger is not consummated, some other business
      combination.***





If
      we
      consummate the Merger or if we enter into a business combination with a
      different company with a value in excess of the value of our Company and issue
      shares of Carter Common
      Stock to
      the
      stockholders of such company as consideration for merging with us, our sole
      stockholder would own less than 50% of the Company after the business
      combination. The stockholders of the acquired company would therefore be able
      to
      control the election of our Board of Directors and control our Company.


-11-




***There
      is currently no trading market for Carter Common Stock, and liquidity of shares
      of Carter Common Stock is limited.***





Shares
      of Carter Common
      Stock are
      not
      registered under the securities laws of any state or other jurisdiction, and
      accordingly there is no public trading market for Carter Common
      Stock .
      Further, no public trading market is expected to develop in the foreseeable
      future unless and until the Company completes a business combination with an
      operating business and the Company thereafter files a registration statement
      under the Securities Act. Therefore, outstanding shares of Carter Common
      Stock cannot
      be
      offered, sold, pledged or otherwise transferred unless subsequently registered
      pursuant to, or exempt from registration under, the Securities Act and any
      other
      applicable federal or state securities laws or regulations. S hares
      of
      Carter Common
      Stock cannot
      be
      sold under the exemptions from registration provided by Rule 144 under or
      Section 4(1) of the Securities Act (“Rule 144”), in accordance with the letter
      from Richard K. Wulff, Chief of the Office of Small Business Policy of the
      Securities and Exchange Commission’s Division of Corporation Finance, to Ken
      Worm of NASD Regulation, dated January 21, 2000 (the “Wulff Letter”). The Wulff
      Letter provides that certain private transfers of the shares of common stock
      also may be prohibited without registration under federal securities laws.
      The
      SEC has proposed codifying certain aspects of the Wulff Letter and adjusting
      some of its provisions. The proposed adjustments include allowing
      stockholders of a company that was formerly a shell company to be able to
      utilize the exemption from registration under Rule 144 under certain
      circumstances following such time as the company is no longer a shell company
      and certain disclosures have been completed. There is no assurance that this
      proposal will ultimately be adopted by the SEC in its current form or any other
      form.





Compliance
      with the criteria for securing exemptions under federal securities laws and
      the
      securities laws of the various states is extremely complex, especially in
      respect of those exemptions affording flexibility and the elimination of trading
      restrictions in respect of securities received in exempt transactions and
      subsequently disposed of without registration under the Securities Act or state
      securities laws.





***There
      are issues impacting liquidity of our securities with respect to the SEC’s
      review of a future resale registration statement.***





Since
      shares of Carter Common
      Stock issued
      prior to a business combination or reverse merger cannot currently, nor will
      they for a considerable period of time after we complete a business combination,
      be available to be offered, sold, pledged or otherwise transferred without
      being
      registered pursuant to the Securities Act, we will likely file a resale
      registration statement on Form SB-2 or Form S-1, or some other available form,
      to register for resale such shares of Carter Common
      Stock .
      We
      cannot control this future registration process in all respects as some matters
      are outside our control. Even if we are successful in causing the effectiveness
      of the resale registration statement, there can be no assurances that the
      occurrence of subsequent events may not preclude our ability to maintain the
      effectiveness of the registration statement. Any of the foregoing items could
      have adverse effects on the liquidity of our shares of Carter Common
      Stock .





In
      addition, the SEC has recently disclosed that it has developed internal informal
      guidelines concerning the use of a resale registration statement to register
      the
      securities issued to certain investors in private investment in public equity
      (PIPE) transactions, where the issuer has a market capitalization of less than
      $75 million and, in general, does not qualify to file a Registration Statement
      on Form S-3 to register its securities. The SEC has taken the position that
      these smaller issuers may not be able to rely on Rule 415 under the Securities
      Act (“Rule 415”), which generally permits the offer and sale of securities on a
      continued or delayed basis over a period of time, but instead would require
      that
      the issuer offer and sell such securities in a direct or "primary" public
      offering, at a fixed price, if the facts and circumstances are such that the
      SEC
      believes the investors seeking to have their shares registered are underwriters
      and/or affiliates of the issuer. It appears that the SEC in most cases will
      permit a registration for resale of up to one third of the total number of
      shares of common stock then currently owned by persons who are not affiliates
      of
      such issuer and, in some cases, a larger percentage depending on the facts
      and
      circumstances. Staff members also have indicated that an issuer in most cases
      will have to wait until the later of six months after effectiveness of the
      first
      registration or such time as substantially all securities registered in the
      first registration are sold before filing a subsequent registration on behalf
      of
      the same investors. Since, following a reverse merger or business combination,
      we may have little or no tradable shares of Carter Common
      Stock ,
      it is
      unclear as to how many, if any, shares of Carter Common
      Stockthe
      SEC
      will permit us to register for resale, but SEC staff members have indicated
      a
      willingness to consider a higher percentage in connection with registrations
      following reverse mergers with shell companies such as the Company. The SEC
      may
      require as a condition to the declaration of effectiveness of a resale
      registration statement that we reduce or “cut back” the number of shares of
      common stock to be registered in such registration statement. The result of
      the
      foregoing is that a stockholder’s liquidity in CarterCommon
      Stockmay
      be
      adversely affected in the event the SEC requires a cut back of the securities
      as
      a condition to allow the Company to rely on Rule 415 with respect to a resale
      registration statement, or, if the SEC requires us to file a primary
      registration statement.


-12-




***We
      have never paid dividends on Carter Common Stock.***





We
      have
      never paid dividends on Carter Common
      Stock and
      do
      not presently intend to pay any dividends in the foreseeable future. We
      anticipate that any funds available for payment of dividends will be re-invested
      into the Company to further its business strategy.





***The
      Company intends to issue more shares in a merger or acquisition, which will
      result in substantial dilution.***





Our
      Certificate of Incorporation authorizes the issuance of a maximum of
      75,000,000 shares of Carter Common
      Stock and
      a
      maximum of 10,000,000 shares of preferred stock, par value $.0001 per share
      (the
“Carter Preferred Stock”). The Merger or any other merger or acquisition
      effected by us may result in the issuance of additional securities without
      stockholder approval and the substantial dilution in the percentage of Carter
      Common Stock held by our then existing stockholders. Moreover, the Carter Common
      Stock issued in any such merger or acquisition transaction may be valued on
      an
      arbitrary or non-arm’s-length basis by our management, resulting in an
      additional reduction in the percentage of Carter Common Stock held by our
      current stockholder. Our Board of Directors has the power to issue any or all
      of
      such authorized but unissued shares without stockholder approval. To
      the
      extent that additional shares of Carter Common
      Stock or Carter Preferred
      Stock are issued in connection with a business combination or otherwise,
      dilution to the interests of our stockholder will occur and the rights of the
      holder of Carter Common
      Stock might be materially and adversely affected.





***Our
      sole stockholder may engage in a transaction to cause the Company to repurchase
      his shares of Carter Common Stock.***





In
      order
      to provide an interest in the Company to a third party, our sole stockholder
      may
      choose to cause the Company to sell Company securities to third parties, with
      the proceeds of such sale being utilized by the Company to repurchase his shares
      of Carter Common Stock. As a result of such transaction, our management,
      stockholder(s) and Board of Directors may change.





***Our
      Board of Directors has the power to issue shares of Carter Preferred Stock
      with
      certain rights without stockholder approval.***





Our
      Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
      of Carter Preferred Stock with designations, rights and preferences determined
      from time to time by its Board of Directors. Accordingly, our Board of Directors
      is empowered, without stockholder approval, to issue Carter Preferred Stock
      with
      dividend, liquidation, conversion, voting, or other rights which could adversely
      affect the voting power or other rights of the holders of the Carter Common
      Stock .
      In the
      event of issuance, the Carter Preferred Stock could be utilized, under certain
      circumstances, as a method of discouraging, delaying or preventing a change
      in
      control of the Company. Although we have no present intention to issue any
      shares of our authorized Carter Preferred Stock, there can be no assurance
      that
      we will not do so in the future.





***Control
      by John C. Lipman.***





Our
      sole
      stockholder is John C. Lipman, who is also our sole officer and director. John
      C. Lipman currently owns all of the issued and outstanding capital stock of
      the
      Company. Consequently, this stockholder controls the operations of the Company
      and will
      have
      the ability to control all matters submitted to stockholders for approval,
      including:


-13-




·
            Election
                of the board of directors;





·
            Removal
                of any directors;





·
            Amendment
                of the Company’s certificate of incorporation or bylaws;
                and





·
            Adoption
                of measures that could delay or prevent a change in control or impede
                a merger, takeover or other business
                combination.





This
      stockholder will thus have complete control over our management and affairs.
      Accordingly, this ownership may have the effect of impeding a merger,
      consolidation, takeover or other business consolidation, or discouraging a
      potential acquirer from making a tender offer for Carter Common
      Stock .




**Item
      2. Description of Property.**





The
      Company neither rents nor owns any properties. The Company utilizes the office
      space and equipment of its sole officer and director at no cost. Management
      estimates such amounts to be immaterial. The Company currently has no policy
      with respect to investments or interests in real estate, real estate mortgages
      or securities of, or interests in, persons primarily engaged in real estate
      activities .




**Item
      3. Legal Proceedings.**





Presently,
      there are not any material pending legal proceedings to which the Company is
      a
      party or as to which any of its property is subject, and no such proceedings
      are
      known to the Company to be threatened or contemplated against it.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





None.




**PART
      II**





**Item
      5. Market for Common Equity, Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities.**





**Common
      Stock**





Our
      Certificate of Incorporation authorizes the issuance of up to 75,000,000 shares
      of Carter Common Stock. The Carter Common Stock is not listed on a
      publicly-traded market. As of November 12, 2007, there was one holder of record
      of Carter Common Stock.





**Preferred
      Stock**





Our
      Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
      of Carter Preferred Stock. The Company has not yet issued any of the Carter
      Preferred Stock.




**Dividend
      Policy**





The
      Company has not declared or paid any cash dividends on Carter Common Stock
      and
      does not intend to declare or pay any cash dividend in the foreseeable future.
      The payment of dividends, if any, is within the discretion of the Board of
      Directors and will depend on the Company’s earnings, if any, its capital
      requirements and financial condition and such other factors as the Board of
      Directors may consider.


-14-




**Securities
      Authorized for Issuance Under Equity Compensation Plans**





None.





**Recent
      Sales of Unregistered Securities**





The
      Company did not sell any equity securities that were not registered under the
      Securities Act during the period covered by this Annual Report.





On
      September 11, 2006, the Company issued 4,000,000 shares of Carter Common Stock
      to John C. Lipman, our President, Secretary and sole director, for an aggregate
      purchase price equal to $25,000. The Company sold these shares of Carter Common
      Stock under the exemption from registration provided by Section 4(2) of the
      Securities Act.





No
      securities have been issued for services. Neither the Company nor any person
      acting on its behalf offered or sold the securities by means of any form of
      general solicitation or general advertising. No services were performed by
      any
      purchaser as consideration for the shares issued.





**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation.**





**Plan
      of Operation**





The
      Company has not realized any revenues from operations since inception, and
      its
      plan of operation for the next twelve months is to locate a suitable acquisition
      or merger candidate and consummate a business combination. The Company may
      need
      additional cash advances from its stockholder or loans from other parties to
      pay
      for operating expenses until the Company consummates the Merger or some other
      business combination with a privately-held company. Although it is currently
      anticipated that the Company can satisfy its cash requirements with additional
      cash advances or loans from other parties, if needed, for at least the next
      twelve months, the Company can provide no assurance that it can continue to
      satisfy its cash requirements for such period.





Since
      our
      formation on September 11, 2006, our purpose has been to effect a business
      combination with an operating business which we believe has significant growth
      potential. We are currently considered to be a “blank check” company in as much
      as we have no specific business plans, no operations, revenues or employees.
      We
      are currently in advanced negotiations with Perio to consummate the Merger;
      however, there can be no assurance that we will consummate the Merger or a
      similar transaction. The implementation of our business objectives is wholly
      contingent upon a business combination and/or the successful sale of securities
      in the company.




As
      a
      result of our limited resources, we expect to effect only a single business
      combination. Accordingly, the prospects for our success will be entirely
      dependent upon the future performance of a single business. Unlike certain
      entities that have the resources to consummate several business combinations
      or
      entities operating in multiple industries or multiple segments of a single
      industry, we will not have the resources to diversify our operations or benefit
      from the possible spreading of risks or offsetting of losses. A target business
      may be dependent upon the development or market acceptance of a single or
      limited number of products, processes or services, in which case there will
      be
      an even higher risk that the target business will not prove to be commercially
      viable.





Our
      sole
      officer is only required to devote a very limited portion of his time to our
      affairs on a part-time or as-needed basis. We expect to use outside consultants,
      advisors, attorneys and accountants as necessary, none of which will be hired
      on
      a retainer basis. We do not anticipate hiring any full-time employees so long
      as
      we are seeking and evaluating business opportunities.


-15-




We
      expect
      our present management to play no managerial role in the Company following
      the
      Merger or other business combination. Although we intend to scrutinize closely
      the management of a prospective target business in connection with our
      evaluation of a business combination with a target business, our assessment
      of
      management may be incorrect. We cannot assure you that we will consummate the
      Merger, or, in the event the Merger is not consummated, find another suitable
      business with which to combine.





**Results
      of Operations**





The
      Company has not conducted any active operations since inception, except for
      its
      efforts to locate a suitable acquisition or merger transaction and consummate
      the Merger. No revenue has been generated by the Company during such period,
      and
      it is unlikely the Company will have any revenues unless it is able to
      consummate the Merger or, in the event the Merger is not consummated, to effect
      an acquisition of or merger with another operating company, both of which there
      can be no assurance.





**Off-Balance
      Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a
      current or future effect on the Company’s financial condition, changes in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures or capital resources that is material to investors. ****





-16-




**Item
      7. Financial Statements.**




CARTER
      ACQUISITION CORP. I AND SUBSIDIARY


(A
      Development Stage Company)


September
      30, 2007





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      TABLE
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PageConsolidated
                Financial Statements:Report
                of Independent Registered Public Accounting Firm
            18Balance
                Sheet as of September 30, 2007
            19Statements
                of Operations for the Period from September 11, 2006
                (Inception)Through September 30, 2006, the Year Ended September 30,
                2007 andthe Period from September 11, 2006 (Inception) through
                September 30, 2007
            20Statements
                of Changes in Stockholders’ Equity for the Period from September 11, 2006
                (Inception) through September 30, 2007
            21Statements
                of Cash Flows for the Period from September 11, 2006
                (Inception)Through September 30, 2006, the Year Ended September 30,
                2007 andthe Period from September 11, 2006 (Inception) through
                September 30, 2007
            22Notes
                to Consolidated Financial Statements
            23








-17-




**Report
      of Independent Registered Public Accounting Firm**




To
      the
      Board of Directors


Carter
      Acquisition Corp. I




We
      have
      audited the accompanying consolidated balance sheet of Carter Acquisition Corp. I (a
      development stage company) (“the Company”) as of September 30, 2007, and the
      related consolidated statements of operations, stockholder’s equity, and cash
      flows for the year then ended and the period September 11, 2006 (inception)
      through September 30, 2006, and the cumulative period September 11, 2006
      (inception) through September 30, 2007 and the related statements of
      operations, stockholders' equity and cash flows for the period September
      11, 2006 (inception) to September 30, 2006. The Company’s management is
      responsible for these financial statements. Our responsibility is to express
      an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing auditing procedures
      that are appropriate in the circumstances, but not for the purpose of expressing
      an opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Carter Acquisition
      Corp. I
      as of
      September 30, 2007 and the consolidated results of its operations and its cash
      flows for the year ended September 30, 2007, the period September 11, 2006
      (inception) through September 30, 2006, and the cumulative period September
      11,
      2006 (inception) through September 30, 2007, in conformity with accounting
      principles generally accepted in the United States of America.





As
      discussed in Note 3, certain conditions indicate there is substantial doubt
      about the Company's ability to continue as a going concern. The accompanying
      financial statements do not include any adjustments to the financial statements
      that might be necessary should the Company be unable to continue as a going
      concern.











/s/
      Raich
      Ende Malter & Co. LLP





**RAICH
      ENDE MALTER & CO. LLP**


New
      York,
      New York


November
      9, 2007





-18-




**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Consolidated
      Balance Sheet**


**September
      30, 2007**




**Assets**Current
                Assets:Cash
            
            $
            81Prepaid
                expenses
            
            
            1,875Total
                Current Assets
            
            $
            1,956**Liabilities
                and Stockholder's Equity**Current
                Liabilities:Accrued
                expenses
            
            $
            24Stockholder's
                Equity:Preferred
                stock - $.0001 par value - 10,000,000 sharesauthorized;
                -0- shares issued and outstanding
            
            
            —Common
                stock - $.0001 par value - 75,000,000 sharesauthorized;
                4,000,000 shares issued and outstanding
            
            
            400Additional
                paid-in capital
            
            
            60,560(Deficit)
                accumulated during the development stage
            
            
            (59,028
            )Total
                Stockholder’s Equity
            
            
            1,932Total
                Liabilities and Stockholder’s Equity
            
            $
            1,956


*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


-19-


**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Operations**




**Period
                from**
            
            
            
            **Period
                from****September
                11, 2006**
            
            **For
                the**
            
            **September
                11, 2006****(Inception)**
            
            **Year**
            
            **(Inception)****Through**
            
            **Ended**
            
            **Through****September
                30,**
              **2006**
            
            **September
                30,**
              **2007**
            
            **September
                30,**
              **2007**Net
                Sales
            
            $
            —
            
            $
            —
            
            $
            —Cost
                of Sales
            
            
            —
            
            
            —
            
            
            —Gross
                Profit
            
            
            —
            
            
            —
            
            
            —General
                and Administrative Expenses
            
            
            (4,623
            )
            
            (54,405
            )
            
            (59,028
            )Net
                (Loss)
            
            $
            (4,623
            )
            $
            (54,405
            )
            $
            (59,028
            )Basic
                and Diluted (Loss) Per Share
            
            $
            (0.00
            )
            $
            (0.01
            )Weighted
                Average Number of Common Shares Outstanding
            
            
            4,000,000
            
            
            4,000,000


*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




-20-




**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Changes in Stockholder’s Equity**


**For
      the Period September 11, 2006 (Inception) through September 30,
      2007**




(Deficit)AccumulatedPreferred
                Stock
            
            Common
                Stock
            
            Additional
            
            During
                  thePaid-in
            
            Development
            
            Stockholder’sShares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Stage
            
            EquityBalance,
                September 11, 2006
            
            
            —
            
            $
            —
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Issuance
                of Common Stock -September 11, 2006
            
            
            —
            
            
            —
            
            
            4,000,000
            
            
            400
            
            
            24,600
            
            
            —
            
            
            25,000Net
                (Loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (4,623
            )
            
            (4,623
            )Balance,
                September 30, 2006
            
            
            —
            
            
            —
            
            
            4,000,000
            
            
            400
            
            
            24,600
            
            
            (4,623
            )
            
            20,377Additional
                contribution of capital by sole stockholder
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            35,960
            
            
            —
            
            
            35,960Net
                (loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (54,405
            )
            
            (54,405
            )Balance,
                September 30, 2007
            
            
            —
            
            $
            —
            
            
            4,000,000
            
            $
            400
            
            $
            60,560
            
            $
            (59,028
            )
            $
            1,932


*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




-21-




**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Cash Flows**




**Period
                from**
            
            
            
            **Period
                from****September
                11, 2006**
            
            **For
                the**
            
            **September
                11, 2006****(Inception)**
            
            **Year**
            
            **(Inception)****Through**
            
            **Ended**
            
            **Through****September
                30,**
              **2006**
            
            **September
                30,**
              **2007**
            
            **September
                30,**
              **2007****Cash
                Flows from Operating Activities**Net
                (Loss)
            
            $
            (4,623
            )
            $
            (54,405
            )
            $
            (59,028
            )Adjustments
                to reconcile net (loss) to net cash used in operating activities:(Increase)
                Decrease in prepaid expenses
            
            
            (9,000
            )
            
            7,125
            
            
            (1,875
            )Increase
                (Decrease) in accrued expenses
            
            
            500
            
            
            (476
            )
            
            24**Net
                Cash Used In Operating Activities**
            
            
            (13,123
            )
            
            (47,756
            )
            
            (60,879
            )**Cash
                Flows from Financing Activities**Proceeds
                from issuance of stock and additional contributions to
                capital
            
            
            25,000
            
            
            35,960
            
            
            60,960Net
                increase (decrease) in cash
            
            
            11,877
            
            
            (11,796
            )
            
            81Cash,
                beginning of period
            
            
            -
            
            
            11,877
            
            
            —Cash,
                end of period
            
            $
            11,877
            
            $
            81
            
            $
            81


*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


-22-




**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**September
      30, 2007**




**Note
      1 - Development Stage Company** **:**





Carter
      Acquisition Corp. I, a development stage company (“Carter”), was incorporated in
      the State of Delaware on September 11, 2006. Carter is looking to acquire
      an existing company or acquire the technology to begin operations. Perio-Imaging
      AcquisitionCorp.
      ("MergerSub")wasincorporatedonSeptember19,2007inanticipationof
      a
      potential merger (see Note 7). The MergerSub is aninactive
      wholly-ownedsubsidiary
      of Carter.





**Note
      2 - Summary of Significant Accounting Policies** **:**





The
      accompanying financial statements are prepared in accordance with accounting
      principles generally accepted in the United States. Significant accounting
      policies follow:




Principles of
        Consolidation: The
        financial statements for the period from September 11, 2006 (inception)
        through September 30, 2006 include the
        accounts of Carter. The consolidated financial
        statements for the year ended September 30, 2007 and for the period from
        September 11,
        2006
        (inception) through September 30, 2007
        include the accounts of Carter, and the accounts of MergerSub from the date
        of
        its incorporation (collectively
        the "Company"). All significant intercompany transactions and balances have
        been
        eliminated.


Fiscal
      Year End :
      The
      Company’s fiscal year ends on September 30.





Use
      of
      Estimates :
      The
      preparation of the financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities at the date of the balance
      sheet
      and reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





Cash
      and Cash Equivalents :
      For
      purposes of the statement of cash flows, the Company considers highly liquid
      financial instruments purchased with a maturity of three months or less to
      be
      cash equivalents.





Income
      Taxes :
      The
      Company utilizes the liability method of accounting for income taxes. Under
      the
      liability method, deferred tax assets and liabilities are determined based
      on
      the differences between financial reporting basis and tax basis of the assets
      and liabilities and are measured using enacted tax rates that will be in effect
      when the differences are expected to reverse. An allowance against deferred
      tax
      assets is recognized, when it is more likely than not, that such tax benefits
      will not be realized.





Loss
      per Common Share :
      Basic
      loss per share is calculated using the weighted-average number of common shares
      outstanding during each period. Diluted loss per share includes potentially
      dilutive securities such as outstanding options and warrants, using various
      methods such as the treasury stock or modified treasury stock method in the
      determination of dilutive shares outstanding during each period. The Company
      does not have any potentially dilutive instruments.





Fair
      Value of Financial Instruments :
      The
      carrying value of current assets and liabilities approximate fair value due
      to
      their short term nature.





-23-





**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**September
      30, 2007**




**Note
      2 - Summary of Significant Accounting Policies (Cont’d)** **:**





New
      Accounting Pronouncements :




In
        June
        2006, the Financial Accounting Standards Board issued FIN 48, Accounting
        for Uncertainty
        in Income Taxes, which will be effective for the Company's year commencing
        October 1, 2007. The Company has not yet determined what the effect will be,
        if
        any, on its financial statements.
  In
        September 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 157 (“FAS 157”), Fair Value Measurements,
        which defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (“GAAP”), and expands disclosures about
        fair value measurements. FAS 157 applies under other accounting pronouncements
        that require or permit fair value measurements. Prior to FAS 157, there were
        different definitions of fair value and limited guidance for applying those
        definitions in GAAP. Moreover, that guidance was dispersed among the many
        accounting pronouncements that require fair value measurements. Differences
        in
        that guidance created inconsistencies that added to the complexity in applying
        GAAP. The changes to current practice resulting from the application of FAS
        157
        relate to the definition of fair value, the methods used to measure fair
        value,
        and the expanded disclosures about fair value measurements. FAS 157 is effective
        for financial statements issued for fiscal years beginning after November
        15,
        2007, and interim periods within those fiscal years. The Company does not
        expect
        the adoption of FAS 157 to have an effect on its financial
        statements.





In
      February 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 159 (“FAS 159”), The Fair Value Option for
      Financial Assets and Financial Liabilities, which permits entities to choose
      to
      measure many financial instruments and certain other items at fair value which
      are not currently required to be measured at fair value. FAS 159 is effective
      for financial statements issued for fiscal years beginning after November 15,
      2007, and interim periods within those fiscal years. The Company does not expect
      the adoption of FAS 159 to have an effect on its financial
      statements.




Management
      does not believe that any other recently
      issued, but not yet effective accountingpronouncements,
      if adopted, would have a material effect on theaccompanying
      financial statements.




**Note
      3 - Going Concern** **:**





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern, which contemplates the recoverability of
      assets and the satisfaction of liabilities in the normal course of
      business.





The
      Company has had no revenue and has incurred accumulated net losses from
      September 11, 2006 (inception) through the period ended September 30, 2007
      of
      $59,028. In addition, the Company’s development activities since inception have
      been financially sustained through equity financing.





The
      ability of the company to continue as a going concern is dependent upon its
      ability to find a suitable acquisition/merger candidate, raise additional
      capital from the sale of common stock, receive additional paid-in capital from
      its shareholder and, ultimately, the achievement of significant operating
      revenues. The accompanying financial statements do not include any adjustments
      that might be required should the Company be unable to recover the value of
      its
      assets or satisfy its liabilities.





**Note
      4 - Equity Securities** **:**





Holders
      of shares of common stock shall be entitled to cast one vote for each common
      share held at all stockholders’ meetings for all purposes, including the
      election of directors. The common stock does not have cumulative voting
      rights.





-24-




**Carter
      Acquisition Corp. I and Subsidiary**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**September
      30, 2007**




**Note
      4 - Equity Securities (Cont’d)** **:**





The
      preferred stock of the Company shall be issued by the Board of Directors of
      the
      Company in one or more classes or one or more series within any class and such
      classes or series shall have such voting powers, full or limited, or no voting
      powers, and such designations, preferences, limitations or restrictions as
      the
      Board of Directors of the Company may determine, from time to time.





No
      holder
      of shares of stock of any class shall be entitled as a matter of right to
      subscribe for or purchase or receive any part of any new or additional issue
      of
      shares of stock of any class, or of securities convertible into shares of stock
      of any class, whether now hereafter authorized or whether issued for money,
      for
      consideration other than money, or by way of dividend.





**Note
      5 - Income Taxes** **:**





No
      current provision or benefit for federal income taxes has been recorded for
      the
      year ended September 30, 2007 or for any period from inception through September
      30, 2007 as the Company has no taxable income or loss.





The
      Company has, resulting from deferred start-up costs, approximately $10,000
      and
      $1,000 in gross deferred tax assets at September 30, 2007 and 2006,
      respectively. A valuation allowance has been recorded to fully offset these
      deferred tax assets because the future realization of the related tax benefits
      is uncertain.





The
      difference between the statutory federal income tax rate of 34% and the
      effective tax rate of 0% is due to the capitalization of the Company’s start-up
      costs for tax purposes.





**Note
      6 - Related Party Transactions** **:**





The
      Company utilizes the office space and equipment of its sole stockholder at
      no
      cost. Management estimates such amounts to be immaterial.





**Note
      7 - Letter of Intent:**




On
        July
        18, 2007, the Company entered into a letter of intent (the “Letter of Intent”)
        with Perio-Imaging, Inc., a Delaware corporation (“Perio”), pursuant to which
        the Company and Perio intend to combine. Since entering the Letter of Intent,
        the Company and Perio have been engaged in advance negotiations with regard
        to
        such contemplated business combination.
 
 -25-
 **Carter
          Acquisition Corp. I and Subsidiary**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **September
          30, 2007**
  Note
          7 - Letter of Intent
          (Cont’d):
 Carter
        intends to enter into an Agreement and Plan of Merger and Reorganization
        (the
“Merger Agreement”) with Perio and the MergerSub. The Merger Agreement will set
        forth the terms and conditions of the business combination (the “Merger”) of
        Perio and Carter and the exchange by the Perio securities holders (the “Perio
        Securities Holders”) of their interests in Perio for shares of common stock, par
        value $.0001 per share of Carter (the “Carter Common Stock”), options to
        purchase shares of Carter Common Stock (the “Carter Options”) and warrants to
        purchase shares of Carter Common Stock (the “Carter Warrants”).
  Pursuant
        to the terms of the Merger Agreement, MergerSub would merge with and into
        Perio
        with Perio continuing as the surviving corporation (the “Surviving Corporation”)
        in the Merger as a wholly-owned subsidiary of Carter. In connection with
        the
        proposed Merger, (i) holders of shares of common stock, par value $0.001
        per
        share of Perio (the “Perio Common Stock”) would exchange an aggregate of
        9,697,300 shares of Perio Common Stock for 9,697,300 shares of Carter Common
        Stock; (ii) holders of options to purchase an aggregate of 820,000 shares
        of
        Perio Common Stock would exchange such options for Carter Options to purchase
        820,000 shares of Carter Common Stock; and (iii) holders of warrants to purchase
        an aggregate of 350,650 shares of Perio Common Stock would exchange such
        warrants for Carter Warrants to purchase 350,650 shares of Carter Common
        Stock.
 
 In
        addition, $ 620,000
        under the 2006 Bridge Note and the 2007(A) Bridge Notes, and $449,500 under
        the
        2007(B) Bridge Notes (as those terms are defined herein), or an **** aggregate
        principal amount of **** up
        to
        $1,069,500, shall be exchanged for (i) up to $826,666 in principal amount
        of
        Carter Notes, Carter Warrants, and Incentive Shares, reflecting a 25% purchase
        discount under the terms of the 2006 Bridge Note and the 2007(A) Bridge Notes,
        and (ii) $449,500 in principal amount of Carter Notes, Carter Warrants, and
        Incentive Shares under the terms of the 2007(B) Bridge Notes, provided however,
        that $826,666 in principal amount under the 2006 Bridge Note and the 2007(A)
        Bridge Notes shall be exclusive of the Offering, and the $449,500 in principal
        amount under the 2007(B) Bridge Notes shall be included in the Offering (the
        “Bridge Notes Exchange”). Any accrued and unpaid interest on the Bridge Notes
        shall be paid in cash at the closing which, as of September 30, 2007, totals
        approximately $45,769. The Secured
        Promissory Note in the principal amount of $250,000 between Perio and Alpha
        Capital Anstalt, dated December 7, 2006 is
        referred to as **** the
        “ 2006
        Bridge Note ”, the
        Short-Term Loan Agreements between Perio and various individuals in the
        aggregate principal amount of $370,000 dated between April and June 2007 are
        referred to as the “2007(A) Bridge Notes”, and the Short-Term Loan Agreements
        between the Company and various individuals in the aggregate principal amount
        of
        $449,500 dated between July and October 2007 are referred to as the “2007(B)
        Bridge Notes.” Collectively, the “2006 Bridge Note”, the “2007(A) Bridge Notes”
and the “2007(B) Bridge Notes” are sometimes referred
        to hereafter as the “ Bridge
        Notes.” The 2006 Bridge Note and the 2007(B) Bridge Notes, by their terms,
        are required
        to be exchanged in the Bridge Notes Exchange ,
        whereas
        the holders of the 2007(A) Bridge Note are not required to exchange **** their **** notes
        in
        the Bridge Note Exchange. ****  The
        exchange of the 2007(B) Bridge Notes and the issuance of Carter Notes, Carter
        Warrants and Incentive Shares in connection therewith shall be counted towards
        the Minimum Offering Amount.
 
 In
        addition, a portion of the 4,000,000 shares of Carter Common Stock currently
        issued and outstanding and owned by the sole shareholder of the Company,
        would
        be redeemed by Carter upon the Merger Closing so that immediately thereafter,
        the sole shareholder will own 759,000 shares of Carter Common Stock, resulting
        in his ownership of approximately 4.99% of the issued and outstanding shares
        of
        Carter Common Stock, on a partially-diluted basis, after giving effect to
        the
        conversion of Carter Notes for shares of Carter Common Stock.
 
 Concurrent
        with the closing of the Merger, the Company shall grant options to purchase
        an
        aggregate of 650,000 shares of Carter Common Stock, at an exercise price
        of
        $1.50 per share, which options shall include cashless exercise provisions,
        and
        shall be distributed equally to the sellers of Perio, consisting of 450,000
        shares as compensation for $450,000 in combined accrued and unpaid salaries
        (excluding expenses and advances) as of December 31, 2006 and 200,000 shares
        as
        consideration for their agreement to the redemption of 50,000 shares of Carter
        Common Stock from each of them in connection with the Company's distribution
        of
        the Incentive Shares (the “Management Options”). The Management Options shall be
        granted and vest immediately upon the closing of the Merger, for which there
        is
        no assurance will occur, and shall not be exercisable for a period of one
        (1)
        year from the grant date in accordance with the Lockup Agreement.
 
 As
        of
        November 9, 2007, the parties have not entered into the Merger Agreement.
        There
        can be no assurance that the companies will successfully enter into a Merger
        Agreement or conclude this transaction.





-26-




**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





None.




**Item
      8A. Controls and Procedures.**





Evaluation
      of Disclosure Controls and Procedures.




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports filed pursuant to the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods specified in the SEC’s rules, regulations and related forms, and that
      such information is accumulated and communicated to our principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.





As
      of
      September 30, 2007, we carried out an evaluation, under the supervision and
      with
      the participation of our principal executive officer and our principal financial
      officer of the effectiveness of the design and operation of our disclosure
      controls and procedures. Based on this evaluation, our principal executive
      officer and our principal financial officer concluded that our disclosure
      controls and procedures were effective as of the end of the period covered
      by
      this report.





Changes
      in Internal Controls.




There
      have been no changes in our internal controls over financial reporting during
      the period covered by this report that has materially affected or is reasonably
      likely to materially affect our internal controls. This
      annual report does not include a report of management's assessment regarding
      internal control over financial reporting or an attestation report of the
      company's registered public accounting firm due to a transition period
      established by rules of the SEC for newly public companies.





**Item
      8B. Other Information.**





None.




**PART
      III**





**Item
      9. Directors and Executive Officers of the Company.**





(a)
            Identification
                of Directors and Executive Officers. The following table sets forth
                certain information regarding the Company’s directors and executive
                officers for the fiscal year ended September 30,
                2007:





**Name**
            
            **Age**
            
            **Position**
            
            **Term**John
                C. Lipman
            
            30
            
            President,
                Secretary and Director
            
            September
                11, 2006 thru Present





The
      Company’s officers and directors are elected annually for a one year term or
      until their respective successors are duly elected and qualified or until their
      earlier resignation or removal.





**John
      C. Lipman.** Mr.
      Lipman has served as the Company’s President, Secretary and sole director since
      September 11, 2006. He currently serves as the Chairman of Carter Securities
      LLC, an FINRA member firm he founded in 2005. From 2000 to 2005, Mr. Lipman
      was
      President and Chief Executive Officer of Lipman Capital Group Inc., a financial
      advisory and investor relations firm he founded in New York City that
      represented public emerging growth companies in the high technology and
      healthcare industries. Mr. Lipman is also managing and sole member of Carter
      Management Group LLC, a private holding company. Mr. Lipman also serves as
      President, Secretary and sole director of Carter Acquisition Corp. II and Carter
      Acquisition Corp. III, both of which are publicly-reporting, non-trading, blank
      check shell companies. Mr. Lipman graduated and received his Bachelor of Arts
      from Rollins College in Winter Park, FL in 1999.


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(b)
            Significant
                Employees.





As
      of the
      date hereof, the Company has no employees except for the President.




(c)
            Family
                Relationships.





None.




(d)
            Involvement
                in Certain Legal Proceedings.




There
      have been no events under any bankruptcy act, no criminal proceedings and no
      judgments, injunctions, orders or decrees material to the evaluation of the
      ability and integrity of any director, executive officer, promoter or control
      person of Company during the past five years.




**Compliance
      with Section 16(a) of the Exchange Act**




Section 16(a)
      of the Exchange Act requires the Company’s directors and officers, and persons
      who beneficially own more than 10% of a registered class of the Company’s equity
      securities, to file reports of beneficial ownership and changes in beneficial
      ownership of the Company’s securities with the SEC on Forms 3, 4 and 5.
      Officers, directors and greater than 10% stockholders are required by SEC
      regulation to furnish the Company with copies of all Section 16(a) forms
      they file.




Based
      solely on the Company’s review of the copies of the forms received by it during
      the fiscal year ended September 30, 2007 and written representations that no
      other reports were required, the Company believes that the no persons who,
      at
      any time during such fiscal year, was a director, officer or beneficial owner
      of
      more than 10% of Carter Common Stock failed to comply with all
      Section 16(a) filing requirements during such fiscal year.





**Code
      of Ethics**





We
      have
      not adopted a Code of Business Conduct and Ethics that applies to our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions because there is only one
      person involved in the management of the Company.





**Nominating
      Committee**





We
      have
      not adopted any procedures by which security holders may recommend nominees
      to
      our Board of Directors.





**Audit
      Committee**





The
      Board
      of Directors acts as the audit committee. The Company does not have a qualified
      financial expert at this time because it has not been able to hire a qualified
      candidate. Further, the Company believes that it has inadequate financial
      resources at this time to hire such an expert. The Company intends to continue
      to search for a qualified individual for hire.





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**Item
      10. Executive Compensation.**





The
      following table sets forth the cash compensation paid by the Company to its
      President (the sole executive officer of the Company) for services rendered
      during the fiscal year ended September 30, 2007.





Name
                and Position
            
            Year
            
            Total
                CompensationJohn
                C. Lipman, President, Secretary and Director
            
            2007
            
            None





**Director
      Compensation**





We
      do not
      currently pay any cash fees to our sole director.





**Employment
      Agreements**





The
      Company is not a party to any employment agreements.





**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following tables set forth certain information as of November 12, 2007,
      regarding (i) each person known by the Company to be the beneficial owner of
      more than 5% of the outstanding shares of Carter Common Stock, (ii) each
      director, nominee and executive officer of the Company and (iii) all officers
      and directors as a group.





Name
                and Address
            
            Amount
                and Nature of Beneficial Ownership
            
            Percentage
                of ClassJohn
                C. Lipman (1)
              c/o
                Carter Securities LLC
              767
                Third Avenue, 27thFloor
              New
                York, NY 10017
            
            4,000,000
            
            100%All
                Directors and Officers as a Group
              (1
                individual)
            
            4,000,000
            
            100%





(1)
            Mr.
                Lipman is President, Secretary and sole director of the
                Company.




**Item
      12. Certain Relationships and Related Transactions.**





The
      Company utilizes the office space and equipment of its sole officer and director
      at no cost. Management estimates such costs to be immaterial.





Except
      as
      otherwise indicated herein, there have been no related party transactions,
      or
      any other transactions or relationships required to be disclosed pursuant to
      Item 404 of Regulation S-B.





-29-




**Item
      13. Exhibits.**





Index
      to
      Exhibits




Exhibit
            Description  *3.1
            Certificate
                of Incorporation, as filed with the Delaware Secretary of State on
                September 11, 2006.





*3.2
            By-laws.





21.1
            List
                of all subsidiaries of the Company.





31.1
            Certification
                of the Company’s Principal Executive Officer and Principal Financial
                Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
                with
                respect to the registrant’s Annual Report on Form 10-KSB for the year
                ended September 30, 2007.




32.1
            Certification
                of the Company’s Principal Executive Officer and Principal Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section
                906 of the Sarbanes Oxley Act of 2002.





*
            Filed
                as an exhibit to the Company’s Registration Statement on Form 10-SB, as
                filed with the Securities and Exchange Commission on November 8,
                2006, and
                incorporated herein by this
                reference.





**Item
      14. Principal Accountant Fees and Services**





Raich
      Ende Malter & Co LLP (“Raich Ende”) is the Company’s independent registered
      public accounting firm.





**Audit
      Fees**





The
      aggregate fees billed by Raich Ende for professional services rendered for
      the
      audit of our annual financial statements and review of financial statements
      included in our quarterly reports on Form 10-QSB or services that are normally
      provided in connection with statutory and regulatory filings were $17,000 for
      the fiscal year ended September 30, 2007 and $6,500 for the period from
      September 11, 2006 (Date of Inception) to September 30, 2006.





**Audit-Related
      Fees**





There
      were no fees billed by Raich Ende for assurance and related services that
      are
      reasonably related
      to the performance of the audit or review of the Company’s financial statements
      for the fiscal year ended September 30, 2007 and for the period from September
      11, 2006 (Date of Inception) to September 30, 2006.





**Tax
      Fees**





There
      were no fees billed by Raich Ende for professional services for tax compliance,
      tax advice, and tax planning for the fiscal year ended September 30, 2007
      and **** for
      the
      period from September 11, 2006 (Date of Inception) to September 30, 2006.





**All
      Other Fees**





There
      were no fees billed by Raich Ende for other products and services for the fiscal
      year ended September 30, 2007 and for the period from September 11, 2006 (Date
      of Inception) to September 30, 2006.


-30-


**Audit
      Committee’s Pre-Approval Process**





The
      Board
      of Directors acts as the audit committee of the Company, and accordingly, all
      services are approved by the sole member of the Board of Directors.











-31-




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant has caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.






**CARTER
      ACQUISITION CORP. I**


Dated:
      November 12, 2007




By: /s/
      John
      C. Lipman


Name:
      John C. Lipman


Title:
      President, Secretary and Director








-32-