As filed with the Securities and Exchange Commission on August 7, 1996
Registration No. 333-7841
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment # 1)
DESERT NATIVE DESIGNS, INC.
(Name of small business issuer in its charter)
Nevada (State or other jurisdiction of incorporation or organization)
5996 (Primary Standard Industrial Classification Code Number)
13-3859938 (I.R.S. Employer Identification Number)
1393 Luckspring Drive, Salt Lake City, Utah 84106 (801) 466-8928
(Address & telephone no. of principal executive offices & place of business)
Jody St. Clair (801) 466-8928
1393 Luckspring Drive, Salt Lake City, Utah 84106
(Name, telephone number and address of agent for service)
Copies to:
Thomas G. Kimble, Van L. Butler
THOMAS G. KIMBLE & ASSOCIATES (801) 531-0066
311 South State Street, #440, Salt Lake City, Utah 84111
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
_______________________________________________________________________________
CALCULATION OF REGISTRATION FEE
(previously submitted)
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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DESERT NATIVE DESIGNS, INC.
1,000,000 Shares of Common Stock
Desert Native Designs, Inc. (the "Company"), is registering, for sale to
the holders of Series A and Series B Warrants (collectively the "Warrants"),
1,000,000 shares of its $.001 par value common stock, (the "Common Stock" or
the "Shares") which are issuable upon exercise of the Warrants, at prices of
$.25 per share for the Shares underlying the Series A Warrants and $.35 per
share for the Shares underlying the Series B Warrants. The Warrants are being
distributed as a dividend with respect to the Common Stock of the Company to
shareholders of record as of the date hereof. Each Warrant entitles the holder
thereof to purchase one Share of Common Stock at any time during the period
commencing on the date hereof and ending June 30, 1998. Each series of the
Warrants is callable and can be redeemed by the Company for $.01 per Warrant on
30 days notice at any time after the date of this Prospectus if the closing bid
price of the Common Stock equals or exceeds the exercise price of that series
of the Warrants for 20 consecutive trading days.
There is presently no active public market for any securities of the
Company. Neither the Warrants nor the Common Stock of the Company are listed
on an exchange or quoted on the NASDAQ system and there can be no assurance
that markets will develop in the future or, if markets should develop, that
they will continue.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE
PURCHASED BY PERSONS WHO CANNOT AFFORD TO RISK THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS." on page __.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Commissions & Proceeds to
Public(1) Discounts(1)(2) Company (2)
Per Share (Series A) $.25 $.00 $.25
Per Share (Series B) $.35 $.00 $.35
Total Maximum $ 300,000 $.00 $ 300,000
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(1) The Shares are being offered by the Company only to the holders of
outstanding Warrants, and will be sold by the Company without any
discounts or other commissions. The offering price is payable in cash
upon exercise of the Warrants. No minimum number of Warrants must be
exercised, and no assurance exists that any Warrants will be exercised.
The Company will retain any proceeds from Warrant exercises, regardless of
the number exercised. See "Plan of Distribution."
(2) Proceeds to the Company are shown before deducting offering expenses
payable by the Company estimated at $15,000, for legal and accounting fees
and printing costs.
The date of this Prospectus is , 1996
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AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities registered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement. For further information regarding both the
Company and the securities registered hereby, reference is made to the
Registration Statement, including all exhibits and schedules thereto, which may
be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies may be obtained from the Washington, D.C. office upon request
and payment of the prescribed fee.
As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(The "Exchange Act") and, in accordance therewith, will file reports and other
information with the Commission. Reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act will be available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 75 Park Place, New York, New York
10007; Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
Copies of the Company's Annual, Quarterly and other Reports which will be
filed by the Company with the Commission commencing with the Quarterly Report
for the first quarter ended after the date of this Prospectus (due 45 days
after the end of such quarter) will also be available upon request, without
charge, by writing Desert Native Designs, Inc., 1393 Luckspring Drive, Salt
Lake City, Utah 84106.
UNTIL [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES
COMMISSION OR OTHER STATE REGULATORY AUTHORITY, AND NO SUCH REGULATORY
AUTHORITY HAS PASSED UPON THE TERMS OF THIS OFFERING OR APPROVED THE MERITS
THEREOF. INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THIS OFFERING IN EVALUATING THE MERITS AND RISKS OF THE OFFERING AND
MAKING AN INVESTMENT DECISION.
THIS PROSPECTUS SHOULD BE READ IN ITS ENTIRETY BY ANY PROSPECTIVE INVESTOR
PRIOR TO HIS OR HER INVESTMENT.
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PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
appearing elsewhere in the Prospectus.
The Company
Desert Native Designs, Inc. (the "Company") was incorporated under the
laws of the State of Nevada on July 20, 1995. The Company is a small start up
company that only recently commenced active business operations and is
considered a development stage company. The proposed business and purpose of
the Company's formation is to engage in the business of producing and marketing
crafts.
The mailing address of the Company's principal executive offices is 1393
Luckspring Drive, Salt Lake City, Utah 84106. The telephone number is (801)
466-8928.
The Offering
Securities offered
1,000,000 Shares of Common Stock, issuable upon exercise of Series A and B
Warrants. See "Description of Securities".
Offering Prices
$.25 per share as to the Shares issuable upon exercise of Series A Warrants and
$.35 per share as to the Shares issuable upon exercise of Series B Warrants.
Plan of Distribution
The Shares are offered and will be sold by the Company, without any discounts
or other commissions, to the holders of the Warrants upon the exercise thereof.
See "Plan of Distribution."
Use of Proceeds
The Company could potentially receive gross proceeds of as much as $300,000
from sale of the 1,000,000 Shares of Common Stock issuable upon exercise of the
Series A and B Warrants, if and to the extent such Warrants are exercised. Any
such proceeds will be used generally to provide additional working capital but
have not been specifically allocated, inasmuch as there is no assurance any of
the Warrants will be exercised.
Transfer Agent
Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake
City, Utah 84117, (801) 272-9294, serves as transfer agent and registrar for
the Company's outstanding securities.
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Securities Outstanding
The Company is authorized to issue up to 50,000,000 shares of Common Stock and
presently has 1,000,000 shares of Common Stock issued and outstanding. The
Company has reserved from its authorized capital 1,000,000 shares of Common
Stock for issuance upon exercise of the Warrants. If all Warrants are
exercised, 2,000,000 shares of Common Stock will then be issued and
outstanding. In addition, the Company is authorized to issue up to 5,000,000
shares of Preferred Stock in one or more series with such rights and
preferences as the Board of Directors may designate. The Board of Directors
has not designated any such series and no preferred shares are presently issued
and outstanding.
Warrants
Each Warrant entitles the holder to purchase one share of Common Stock at
exercise prices of $.25 per share for the Series A Warrants and $.35 per share
for the Series B Warrants, subject to adjustment in certain events, during the
period commencing on the date of this Prospectus and ending June 30, 1998.
Each series of the Warrants is callable and can be redeemed by the Company for
$.01 per Warrant on 30 days notice at any time after the date of this
Prospectus if the closing bid price of the Common Stock equals or exceeds the
exercise price of that series of the Warrants for 20 consecutive trading days.
See "Description of Securities - Series A and B Warrants."
Risk Factors
The Company is a start up company with a very limited operating history;
consequently, an investment in the Company is highly speculative. In seeking
to operate its business, the Company could incur substantial losses and require
additional funding for which it has no commitments. No person should invest in
the Company who cannot afford to risk loss of the entire investment. See "Risk
Factors."
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RISK FACTORS
Purchase of the securities registered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors before investing.
Risks Inherent in a New Start Up Company
No Operating History. The Company was only recently incorporated, has no
significant assets, no extensive history of operations and is considered to be
a development stage enterprise. There is absolutely no assurance that the
Company will be able to successfully develop and expand its business or that it
will ever operate profitably. See "Management's Plan of Operation," "Business"
and financial statements.
Limited Capital/Need for Additional Capital. The Company presently has no
significant operating capital and is substantially dependent upon exercise of
the Warrants and receipt of proceeds therefrom to provide additional capital to
develop and expand its business. Even if all Warrants are exercised, the
amount of capital available to the Company will still be extremely limited.
The Company has no arrangements for additional cash funding other than any
proceeds that may be received from exercise of the Warrants, and there is no
assurance any Warrants will be exercised. In the event that any proceeds from
Warrant exercise are not sufficient, the Company may need to seek additional
financing from commercial lenders or other sources, for which it presently has
no commitments or arrangements.
Dependence Upon Management. The Company will be substantially dependent
in the conduct of its proposed business upon the knowledge and experience of
the individual who comprises current management of the Company; Jody St. Clair,
the President. As compared to many other public companies, the Company does
not have a depth of managerial and technical personnel. Accordingly, there is
a greater likelihood that loss of the services of this person would have a
material adverse impact upon the Company. There are no employment agreements
with or key man life insurance on management and no commitments nor assurance
with respect to the amount of time devoted by management to the Company. See
"Management - Executive Compensation."
Conflicts of Interest. There are and may in the future be certain
transactions between the Company and officers, directors and other affilates
which may present conflicts of interest. Management will attempt in such
transactions to deal fairly with the Company on competitive terms in the market
the same as with unrelated parties, and resolve any conflicts that may arise in
favor of the Company, but there is no assurance of this, even though the
failure to do so could result in fiduciary liability to management. See
"Certain Transactions"
Limited Liability of Management. The Company has adopted provisions to
its Articles of Incorporation and Bylaws which limit the liability of Officers
and Directors and provides for indemnification by the Company of Officers and
Directors to the full extent permitted by Nevada law, which provides that
officers and directors shall have no personal liability to a Company or its
stockholders for monetary damages for breach of fiduciary duties as directors,
except for a breach of their duty of loyalty, acts or omissions not in good
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faith or which involve intentional misconduct or knowing violation of law,
unlawful payment of dividends or unlawful stock purchases or redemptions, or
any transaction from which a director derives an improper personal benefit.
Such provisions substantially limit the shareholders' ability to hold officers
and directors liable for breaches of fiduciary duty, and may require the
Company to indemnify its officers and directors. See "Certain Transactions -
Conflicts of Interest".
No Dividends. The Company does not currently intend to pay cash dividends
on its Common Stock and does not anticipate paying such dividends at any time
in the foreseeable future. At present, the Company will follow a policy of
retaining all of its earnings, if any, to finance development and expansion of
its business. See "Dividend Policy."
Governmental Regulation. To the extent the Company's products involve the
use of feathers, furs, hides, skins or other parts of animals, the Company must
comply with all the legal requirements of various state and local, federal and
international laws, regulations, treaties and conventions relating to the
protection of wildlife and other animals. Any failure to do so that violates
any applicable legal requirements could result in criminal as well as civil
liability to the Company, with substantial fines and monetary penalties.
Competitive, Specialized Market. The Company will operate in a highly
competitive environment. The market for the Company's products is very
specialized and limited and is composed of a relatively small number of
practitioners of shamanistic arts, private collectors, and other interested
buyers. Most of the Company's competitors will have greater technical
expertise, financial resources and marketing capabilities than the Company.
There is no assurance the Company will overcome competitive disadvantages it
will face as a small, start up company with extremely limited capital.
New Product Risks. Although management believes a market exists for the
Company's products, no marketing survey has been performed with respect to the
products. The Company's business involves new products with no established
market share or demand, and there is no assurance such products will be
favorably received by consumers. The Company has been unable as yet to sell
its products on a wholesale basis to retail merchants, which leaves consignment
as the only method available for placement with retail merchants. Until demand
becomes more established, management believes this will continue to be the
case, and the Company is unable, with its limited capital, to effect a wide
distribution of products on a consignment basis. The Company's business will
be subject to all the risks associated with introduction of new products. See
"Business - Marketing"
Going Concern Qualification. The accompanying financial statements of the
Company have been prepared in conformity with generally accepted accounting
principles which contemplate continuation of the Company as a going concern.
However, the Company is newly formed, has incurred losses since its inception
and has not yet been successful in establishing profitable operations. These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. In this regard, management is proposing to raise any
necessary additional funds not provided by its planned operations through loans
and/or through additional sales of its common stock in this offering. There is
no assurance that the Company will be successful in raising this additional
capital or acheiving profitable operations. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties. Accordingly, the report of the independent accountants on the
financial statements is qualified in this regard. See "Financial Statements"
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Risks Related to the Offering
No Assurance of Warrant Exercise and No Escrow of Funds. There is no
assurance that any proceeds will be received from exercise of Warrants in this
offering. Proceeds may be insufficient to defray offering expenses. There is
no minimum number of Warrants that must be exercised and no escrow of funds
received upon exercise. Any proceeds received will immediately be retained by
the Company to be used in its business. The amount of capital currently
available to the Company is limited. In the event that any proceeds from this
offering and the Company's existing capital are not sufficient to enable the
Company to develop and expand its business and generate a profit, the Company
may need to seek additional financing from commercial lenders or other sources,
for which it presently has no commitments or arrangements. This creates an
increased risk to persons who do exercise their Warrants, because there is no
assurance that additional Warrants will be exercised or that the Company will
receive any further funding.
Current Prospectus and Registration Required for Exercise. Warrantholders
will only be able to exercise such securities to acquire the underlying Common
Stock if a current propectus relating to the Common Stock is then in effect and
such exercise is qualified or exempt from qualification under applicable
securities laws of the states in which such holders of the Warrants reside.
Although the Company intends to use its best efforts to update this prospectus
as necessary to maintain a current prospectus and federal and state
registration/qualification for such exercise, there is no assurance that the
Company will be able to do so at such time as such persons may wish to exercise
such securities. Whether a current prospectus is in effect or not, each Series
of the Warrants is redeemable for nominal consideration at any time after the
bid price equals or exceeds the exercise price of that Series of the Warrants
for 20 consecutive trading days. If redeemed at a time when no current
prospectus is in effect, warrantholders would have no opportunity to exercise
the Warrants, but would be compelled to accept the nominal redemption price.
The value of the Warrants may be greatly diminished if the ability to exercise
such securities is not maintained.
Shares Eligible for Future Sale. All but 50,000 of the shares of Common
Stock presently outstanding are restricted or control securities which are not
presently, but may in the future be sold, pursuant to Rule 144, into any public
market that may develop for the Common Stock. Future sales by current
shareholders could depress the market prices of the Common Stock in any such
market. See "Shares Eligible for Future Sale".
Arbitrary Determination of Offering Price. The exercise prices of the
Warrants was arbitrarily determined by management of the Company and were set
at levels substantially in excess of prices recently paid for securities of the
same class, namely, the presently outstanding shares of common stock. The
prices bear no relationship to the Company's assets, book value, net worth or
other economic or recognized criteria of value. In no event should the
exercise prices be regarded as an indicator of any future market price of the
Company's securities.
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No Assurance of a Liquid Public Market for Securities. There is no active
public market for any securities of the Company. The Common Stock is not
listed or approved for listing on an exchange or quoted on the NASDAQ system
and there is no assurance any market will develop, or if a market does develop,
that it will continue. There can also be no assurance as to the depth or
liquidity of any market for the securities of the Company or the prices at
which holders may be able to sell the securities. As a result, an investment
in the underlying Shares of Common Stock may be totally illiquid and investors
may not be able to liquidate their investment readily or at all when they need
or desire to sell. See "Plan of Distribution."
Volatility of Market Prices. In the event a public market does develop
for the Common Stock of the Company, market prices will be influenced by many
factors, and will be subject to significant fluctuation in response to
variations in operating results of the Company and other factors such as
investor perceptions of the Company, supply and demand, interest rates, general
economic conditions and those specific to the industry, international political
conditions, developments with regard to the Company's activities, future
financial condition and management. See "Plan of Distribution."
Potential Issuance of Additional Common and Preferred Stock. The Company
is authorized to issue up to 50,000,000 shares of Common Stock, of which only
2,000,000 shares at most will be issued and outstanding even if all Series A
and B Warrants are exercised. The Board of Directors of the Company has the
ability, without seeking shareholder approval, to issue additional shares of
Common Stock in the future for such consideration as the Board of Directors may
consider sufficient. The issuance of additional Common Stock in the future
will reduce the proportionate ownership and voting power of the Shares of
Common Stock issuable upon exercise of the Series A and B Warrants. The
Company is also authorized to issue up to 5,000,000 shares of preferred stock,
the rights and preferences of which may be designated in series by the Board of
Directors. Such designations may be made without shareholder approval. The
Board of Directors has not designated any series or issued any shares of
preferred stock. The designation and issuance of series of preferred stock in
the future would create additional securities which would have dividend and
liquidation preferences over the Common Stock of the Company. See "Description
of Securities."
Potential Anti-Takeover Measures. Certain provisions in the articles of
incorporation or bylaws of the Company, such as the authorization to issue
additional common or preferred stock and designate the rights and preferences
of the preferred stock without further approval of shareholders, could be used
as anti-takeover measures. Though not adopted specifically for such purpose,
provisions such as these could result in the Company being less attractive to
anyone who might consider a takeover attempt, and result in shareholders
receiving less than they otherwise might in the event of a takeover attempt.
Applicability of Low Priced Stock Risk Disclosure Requirements. The
common stock of the Company is considered a low priced security under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
participating in transactions in low priced securities must first deliver a
risk disclosure document which describes the risks associated with such stocks,
the broker-dealer's duties, the customer's rights and remedies, and certain
market and other information, and make a suitability determination approving
the customer for low priced stock transactions based on the customer's
financial situation, investment experience and objectives. Broker-dealers must
also disclose these restrictions in writing and provide monthly account
statements to the customer, and obtain specific written consent of the
customer. With these restrictions, the likely effect of designation as a low
priced stock is to decrease the willingness of broker-dealers to make a market
for the stock, to decrease the liquidity of the stock and increase the
transaction cost of sales and purchases of such stocks compared to other
securities.
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DILUTION
Dilution is the difference between the Warrant exercise prices of $.25 per
share for the Common Stock underlying the Series A Warrants, and $.35 per share
for the Common Stock underlying the Series B Warrants, and the net tangible
book value per share of the Common Stock immediately after its purchase. The
Company's net tangible book value per share is calculated by subtracting the
Company's total liabilities from its total assets less any intangible assets,
and then dividing by the number of shares outstanding. Prior to the exercise
of any Warrants, the Company has 1,000,000 shares of Common Stock outstanding.
The net tangible book value at March 31, 1996, based on the unaudited
interim financial statements of the Company, was $4,600 or approximately $.005
per common share. If all Series A Warrants were exercised (of which there is
no assurance), upon the exercise thereof, but prior to exercise of any Series B
Warrants, the Company would then have 1,500,000 Shares of Common Stock
outstanding. The estimated pro forma net tangible book value of the Company
(giving effect to receipt of the estimated net proceeds from such exercise and
issuance of the underlying Shares of Common Stock, but not taking into
consideration any other changes in the net tangible book value of the Company
subsequent to March 31, 1996), would then be $114,600 and approximately $.08
per share. This would result in dilution to persons exercising Series A
Warrants of $.17 per share, or 68% of the exercise price of $.25 per share.
Net tangible book value per share would increase to the benefit of present
stockholders from $.005 prior to the offering to $.08 after the offering, or an
increase of $.075 per share attributable to the exercise of the Series A
Warrants.
If, in addition, all the Series B Warrants were exercised, the Company
would then have 2,000,000 Shares of Common Stock outstanding (assuming no other
changes). The pro forma net tangible book value of the Company, would then be
$289,600 or approximately $.145 per share. This would result in dilution to
persons exercising Series B Warrants of $.205 per share, or 58.6% from the
exercise price of $.35 per share. Net tangible book value per share would
increase from $.08 prior to the exercise of Series B Warrants to $.145
afterwards, or an increase of $.065 per share attributable to the exercise of
the Series B Warrants.
The following table sets forth the estimated net tangible book value
("NTBV") per share after exercise of each Series of the Warrants and the
dilution to persons purchasing the underlying Shares of Common Stock.
Exercise of all Warrants of: Series A only Series B also
Warrant exercise price/share $.25 $.35
NTBV/share prior to exercise $.005 $.08
Increase attributable to exercise .075 .065
----- -----
Pro forma NTBV/share after exercise .08 .145
----- -----
Dilution $.17 $.205
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If less than all the Warrants of either Series are exercised, dilution to
the exercising Warrantholders of such Series will be greater than the amount
shown. The fewer Warrants exercised, the greater dilution will be.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares of Common
Stock underlying the Warrants at the exercise prices of $.25 per Share for
Series A Warrants and $.35 per Share for Series B Warrants will vary depending
upon the total number of Warrants exercised. If all Warrants are exercised (of
which there is absolutely no assurance, nor any assurance that any Warrants
will be exercised), the Company would receive gross proceeds of $125,000 from
Series A Warrants and $175,000 from Series B Warrants, or aggregate gross
proceeds of as much as $300,000. Regardless of the number of Warrants
exercised, the Company expects to incur offering expenses estimated at $15,000
for legal, accounting, printing and other costs in connection with the
offering. Inasmuch as there is no assurance that all or any minimum amount of
the Warrants will be exercised, proceeds have not been specifically allocated
and any proceeds that are received will be immediately available to the Company
to provide additional working capital to be used for general corporate
purposes. The exact uses will depend on the amounts received and the timing of
receipt. Management's general intent is to use whatever additional funds may
be generated from Warrant exercise to finance further development and expansion
of the Company's business.
MANAGEMENT'S PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes associated with them contained
elsewhere in this prospectus.
Plan of Operations.
The Company is a small start up company which was only recently
incorporated on July 20, 1995. The Company only recently commenced planned
principal operations but has not generated significant revenues therefrom and
is still considered a development stage company. The Company has no
significant assets or operating capital. To date, activities have been limited
to organizational matters, limited operations and the preparation and filing of
the registration statement of which this prospectus is a part.
The Company was formed to engage in the business of producing and
marketing drums, rattles and other specialty crafts related to the shamanistic
practices of Native Americans. Management's plan of operation for the next
twelve months is to use any funds raised from exercise of the Warrants, of
which there is no assurance, to finance development and expansion of the
Company's business. If and to the extent Warrants are exercised, the Company
will use a portion of the net proceeds to purchase supplies of raw materials to
be used in the production of finished goods inventory, inasmuch as the Company
needs to have an inventory of finished goods available to place on consignment
with retail merchants as samples of its products. A portion of the proceeds
will also be used to purchase advertising space in trade and specialty
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magazines that management believes will provide a much wider exposure of the
Company's products but will also be directed toward a targeted market of people
more likely to be interested in the kinds of products marketed by the Company.
As part of its promotional efforts, the Company also intends to purchase and
set up informational advertising on the Internet to take advantage of this new
technology. Any remaining proceeds will be used to provide working capital for
the operation of the Company's proposed business and other general corporate
purposes. The Company is substantially dependent upon exercise of the Warrants
and receipt of the proceeds therefrom, of which there is no assurance, for the
ability to develop and expand its business operations.
BUSINESS
History of the Company
Desert Native Designs, Inc. (the "Company") was recently incorporated
under the laws of the State of Nevada on July 20, 1995. The Company only
recently commenced business operations and is still considered a development
stage company. In connection with the organization of the Company, the
founders of the Company contributed $9,500 cash to initially capitalize the
Company in exchange for 950,000 shares of Common Stock. The Company
subsequently raised an additional $10,000 by offering and selling an additional
50,000 shares of common stock. The Company has no significant assets, and is
substantially dependent upon exercise of the outstanding Series A and B
Warrants, and receipt of the proceeds therefrom, of which there is no
assurance, for the ability to develop and expand its business operations.
Business of the Company
The purpose of the Company's formation is to engage in the business of
producing or otherwise acquiring and marketing drums, rattles and similar
products which are designed in the style of Native American (i.e. American
Indian) artifacts and items of antiquity.
For approximately the past 3 years, the President of the Company has been
making and selling drums, rattles and other products which are made to look
similar to native artifacts or native designs of similar products. The
products are hand made and, in the opinion of management, are unique because of
their design and high quality.
In the opinion and experience of management there has been recently
developing interest in Native American crafts relating to the artifacts used by
ancient shamans. A shaman is a religious or ritual specialist, man or woman,
believed capable of communicating directly with spirit powers, often while in
ecstatic states. Shamans and shamanistic religion were first identified among
the peoples of Siberia and continue to be associated mainly with Siberian and
American Indian peoples, although closely related phenomena exist in other
parts of Asia and in Oceania; the word "shaman" is derived from a word meaning
"one who knows" in the tungus lanquage which is spoken in parts of Siberia.
The term "medicine man" is frequently used as a synonym for shaman with
reference to American Indian cultures. Eskimo shamans are called angakoks.
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The shaman may be grouped with the healer or diviner but is distinguished
from that general class by the specific nature of his or her religious
experience and practices. Shamanic power is said to come directly from a
supernatural force: a spirit (sometimes associated with a particular animal)
takes possession of the shaman during an ecstasy or trance and gives the shaman
powers of healing and knowing, often after transporting him or her to a spirit
world. Sometimes the ecstatic state may be induced by hallucinogens.
The shaman's function is to regulate relations between the spirits and the
community in order to ensure the community's well-being. Shamans concern
themselves with such matters as locating and attracting game or fish,
controlling the weather, detecting broken taboos that bring misfortune,
expelling harmful spirits, and especially with curing the sick and guiding the
souls of the dead to the spirit world. Because of special powers, shamans may
gain considerable political influence in their communities.
A shaman is said to be chosen by the spirits, selected from among persons
of an excitable temperament who are given to daydreaming and visionary
experience. Sometimes a shaman is marked for the vocation by repeated
illnesses or mental disturbance. The person believed chosen for this calling
must undergo an initiatory ordeal, which includes an ecstatic temporary loss of
consciousness that symbolizes death and resurrection. Among the most common
characteristics of the initiatory ordeal are the supposed dismemberment of the
subject's body, the removal of his or her flesh, and the substitution of new
flesh. In many cultures the candidate is believed to receive during this
ordeal a mystical light that enables him or her to discover the secret places
to which lost souls have been taken. The recovery of souls whose loss or theft
has caused misfortune is a major method of shamanic curing.
There are currently in existence treatment centers which explore the world
of "shamanism" and attempt to discover the values and therapeutic benefits of
the ancient shamans. These centers use drums and rattles produced to imitate
native artifacts believed to have been used by Native American Indians in the
past. These shamans, particularly of the desert Southwest cultures are
believed to have used drums and rattles as musical instruments in the practice
of their ancient arts. Traditional native-American music tended to be highly
rhythmic and monophonic and was usually played and sung for either religious
ritual or social occasions. Indian musical instruments included drums,
rattles, clappers, and sticks and other percussive devices, along with flutes,
whistles, and shell trumpets.
The President of the Company is devoting her efforts on behalf of the
Company to produce drums and rattles and other crafts designed to replicate
native artifacts and designs.
Marketing
The Company's products will be marketed for their religious and ceremonial
significance and also as artwork, souvenirs, novelties, furniture accent pieces
and specialty items. The market for these products is expected to be persons
with a historical or other interest in native designs and crafts as well as
Native Americans who practice these arts and other persons exploring the
ancient practices of Native American Indian shamans. In addition, the products
are expected to be purchased by tourists and others as souvenirs and as accent
items used for interior design in homes and offices.
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Initially the products are expected to be marketed in Southern Utah and
surrounding areas. It is estimated that approximately 8 million people visit
the Grand Canyon each year, with an additional 5.3 million visitors to the
national parks of Southern Utah. Management of the Company believe that the
proposed products of the Company will be of a higher quality and desirability
than typical inexpensive tourist crafts and trinkets sold in gift shops.
However, no marketing survey has been performed with respect to the products.
The Company has placed samples of its products on consignment with several area
merchants.
Management has been making contact with businesses which sell crafts,
native design products and tourist items, and attempting to sell the Company's
products on a wholesale basis to such businesses, but has yet been unable to do
so. Alternatively the Company will place products on consignment with such
merchants. Management's experience has been that retail merchants are
unwilling to purchase products themselves on a wholesale basis, which leaves
consignment as the only method presently available to the Company for placement
of its products with retail merchants. Until the Company's products become
more widely known and demand becomes more established, management believes this
will continue to be the case.
In addition, the Company will also market its products by advertising in
specialty catalogues and magazines. This is another method which management
believes, because of the specialized nature of the market, will be particularly
effective in bringing the Company's products to the attention of potential
purchasers who have an interest in preserving shamanistic practices and items
associated therewith. During the next fiscal year, management anticipates the
Company may spend as much as $7,500 approximately, on such advertising.
Because the products are expected to be priced at the high end of the
market with regard to crafts generally (similar products will vary in price but
generally are expected to have a retail price range of $50 - $200 for rattles
and $300 - $2500 for drums depending on size and quality), the Company is
unable, with its limited capital, to effect a very wide distribution of
products on a consignment basis.
Instead of using all of its available working capital to place goods on
consignment, management intends to use a portion of its working capital to
purchase advertisements in specialty magazines and catalogues such as the
Shaman's Drum magazine and New Age Magazine. Management believes that with the
same amount of capital that would be required to place several of its products
on consignment with local merchants, the Company can place advertisements in
such magazines that will expose the Company's products on a regional or
national basis to tens of thousands or hundreds of thousands of subscribers and
readers of such magazines. Furthermore, management believes that the
subscribers and readers of such specialty magazines are the type of persons who
will potentially be most interested in the Company's products. The Company is
presently in the process of having printed advertisements produced with
pictorial representations of the Company's products, and management intends to
purchase advertising space in one or more such magazines as soon as sufficient
working capital is available from the exercise of the Warrants or any other
source. Management also intends to acquire a home page location on the
Internet where the Company can advertise its products. Such electronic
advertising has the additional advantages of constant update capability and
international exposure. Management believes that the Company's location would
be visited most frequently by persons with specialized interests related to the
Company's products.
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Products
In addition to drums and rattles, the Company produces and sells a number
of different products, relating to shamanism and shamanistic practices. These
products will generally be handmade by the President, or in some instances
acquired from Native American or other craftsmen. A brief description of these
products, their features and the significance thereof include the following:
Earth Mother Drum - is made of handcrafted cedarwood with a Danish oil
finish which brings out the natural beauty of the wood. The rawhide used is
elkskin which is chosen for it's deep heartbeat like tone. The 16 sided frame
honors all directions of the compass and the elkskin represents nobility and
the maternal nature of the earth.
Handheld Drums - are created to be lightweight and durable. These drums
are used in healing work of all types by shamans of most cultures. They are
also 16 sided and made of cedarwood and elkskin.
Table Drums - are elegantly handcrafted drums which have a dual purpose.
The 17 inch to 19 inch height makes them ideal for sit down drumming while the
glass tops make them useable as coffee and end tables. Like all drums of the
Company, these are made of handcrafted cedarwood and elkskin. Majestic eagles
which represent wisdom and inner vision are sandblasted on the glass to add a
finishing touch.
Dream Catchers - are hung above the bed or in front of a window. The
dream catcher is believed to sift out all the negative energy and bless the
home with peace and harmony.
Medicine Pouch Necklace - is made with genuine soft deer or buckskin
leather and includes a sageleaf which is believed to cleanse and purify
anything placed in the pouch.
Power Rattle - is decorated with buckskin, feathers and glass beads.
Power rattles are often used as meditative tools by shamans in many differenct
cultures. The sound is intended to soothe and quiet the mind and take one's
mind beyond the mundane to create a more peaceful state of being.
Natural Crystal Necklace - Crystals have long been used by many cultures
for various purposes and are believed to hold or clear energy and protect the
wearer from negative energy.
Flutes - the replicas of flutes used by Native Americans which are sold by
the Company are produced from cedarwood or aspen. The exquisite woodworking is
finished with a unique handcarved volume control designed specifically to
create melodic tones to soothe the ear and encourage quiet contemplation.
Cedar Flute Box - is an elegantly finished showpiece for one or two flutes
with handcarved feathers and brass hinges and plush velvet interior.
Sand paintings - these original paintings have elaborate designs which are
produced by a Navajo Tribe in Arizona and are used in healing ceremonies and as
good luck symbols. The paintings depict spirit guides and guardians.
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In addition, the Company sells various other products including egg
rattles, ceramic items, feather wands, walking sticks, smudge sticks, aroma
pots, aroma necklaces, and candles.
Competition
Management believes that competition for the products will come from
typical tourist gift products and other native crafts including craft products
actually produced by Native American Indians. The Company's principal method
of competition is expected to be based on the high quality of the products,
artistic design and similarity in looks and use to ancient native artifacts.
Supplies
The raw materials used in the proposed products are readily available from
more than one supplier and the Company does not anticipate any difficulty in
obtaining the raw materials (principally wood and leather) in sufficient
quantities and on a timely basis so as to allow it to conduct its business.
Governmental Regulation
To the extent that the Company's products involve the use of feathers,
furs, hides, skins or other parts of animals, the Company must comply with all
the legal requirements of various state and local, federal and international
laws, regulations, treaties and conventions relating to the protection of
wildlife and other animals. These legal requirements generally prohibit,
restrict or otherwise govern and regulate the sale or other use or taking of
live or dead animals or animal parts of certain species that are deemed to be
in need of such protection.
The principal laws potentially applicable to the Company's operations
include the Convention on International Trade in Endangered Species of Wild
Fauna and Flora (CITES), a multinational treaty agreement between approximately
120 nations including the U.S. Additional U.S. domestic laws include the
Endangered Species Act, the Eagle Protection Act, the Lacey Act, the Migratory
Bird Treaty Act and the Wild Bird Conservation Act. In addition, numerous
state laws also prohibit or regulate any taking or other use of protected
species of wildlife within their borders.
The Company's policy will be to strictly avoid use of any feathers, skins
or other animal parts from those species of birds or other animals where such
use is prohibited. This includes all species designated as endangered or
threatened, including eagles and other birds of prey. Instead, the Company
will only use feathers, skins and other animal parts from those species and
only under circumstances where such use is permitted or is not regulated. Any
failure to do so that violates any applicable legal requirements could result
in criminal as well as civil liability to the Company, with substantial fines
and monetary penalties.
Physical Facilities and Employees
The Company, for the time being, uses the home office facilities of Jody
St. Clair, its President, in Salt Lake City, Utah, on a rent free basis as its
place of business for producing the crafts. Management does not intend to seek
other office arrangements unless and until the Company's business requires more
extensive facilities, which is not anticipated in the foreseeable future.
Initially, the only employee of the Company will be its President.
MANAGEMENT
Executive Officers, Directors and Significant Employees
The following table sets forth the sole director and executive officer of
the Company, her age, and all offices and positions with the Company. A
director is elected for a period of one year and thereafter serves until his or
her successor is duly elected by the stockholders and qualifies. Officers and
other employees serve at the will of the Board of Directors.
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Name of Director Age Term Served Positions With Company
Jody St. Clair 33 Since inception President, Secretary-Treasurer &
Director
This individual will serve as management of the Company. A brief
description of her background and business experience is as follows:
Jody St. Clair serves as President, Secretary/Treasurer and Director of
the Company. Ms. St. Clair has experience in business management, public
relations and administration. Her unique craft designs are currently featured
at Green Valley Resort, St. George, Utah where they are used in the Shaman
Program, and at Ancient Futures Art Gallery, a Salt Lake City, Utah artist
co-op. Her drum designs and rattles have been sold privately across the
country.
There are no arrangements or understandings regarding the length of time a
director of the Company is to serve in such a capacity. The director holds no
directorships in any other company subject to the reporting requirements of the
Securities Exchange Act of 1934.
Executive Compensation
The Company was only recently incorporated and commenced planned
operations. The Company has no written employment agreements or key man life
insurance with respect to its sole executive officer, Jody St. Clair.
Commencing with April, 1996, the Company agreed to compensate her for services
involved in designing, producing and marketing the craft products on the basis
that she will receive commissions in an amount equal to 50% of total net sales
of the Company less the cost of the goods sold before any overhead allocations,
with a guaranteed minimum of $1,200 per month up through July, 1996. After
July, she will be on a straight commission basis and will not receive any
guaranteed minimum salary or wage.
It is anticipated this arrangement for compensation will continue for the
foreseeable future. Any officer/director will be entitled to reimbursement of
any out of pocket expenses reasonably and actually incurred on behalf of the
Company.
CERTAIN TRANSACTIONS
General
The Company has had no transactions with its principal shareholders or
management except the sale of its common stock to its founding shareholders at
$.01 per share. In connection with the organization of the Company, its
founding shareholders paid an aggregate of $9,500 cash ($1,000 from Ms. St.
Clair and $8,500 from Mr. Dixon) to purchase 950,000 shares of Common Stock of
the Company at a price of $.01 per share. See "Principal Shareholders."
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The Company then commenced a public offering of 50,000 shares of Common
Stock at $.20 per share, pursuant to which it raised an additional $10,000 in
gross proceeds.
The Company has entered and it is contemplated that the Company may enter
into certain transactions with officers, directors or affiliates of the Company
which, even though they may involve conflicts of interest in that they are not
arms' length transactions, are believed to be fair and equitable transactions
in the best interest of the Company. These transactions include the following:
The Company has agreed to compensate Jody St. Clair for her services
involved in designing, producing and marketing the craft products on the basis
that she will receive commissions in an amount equal to 50% of total net sales
of the Company less the cost of the goods sold before any overhead allocations,
with a guaranteed minimum of $1,200 per month up through July, 1996. After
July, she will be on a straight commission basis and will not receive any
guaranteed minimum salary or wage.
The Company presently has no office or production facilities but uses as
its principal place of business where the crafts are produced and kept the
facilities of Ms. St. Clair on a rent free basis, until such time as the
business operations of the Company may require more extensive facilities and
the Company has the financial ability to rent commercial space. There is
presently no formal written agreement for the use of such facilities, and no
assurance that such facilities will be available to the Company on such a basis
for any specific length of time. The Company will not be required to pay rent
for the use of such facilities, but will pay for or reimburse Ms. St. Clair for
any additional out of pocket costs incurred for storage, repairs or
maintenance, including the cost of insurance, if additional insurance is
required over and above the amount customarily maintained by Ms. St. Clair.
The Company has no formal written employment agreement or other contracts
with its President, and there is no assurance that the services and facilities
to be provided by Ms. St. Clair will be available for any specific length of
time in the future. It is anticipated that the present arrangement for
compensation will continue for the foreseeable future. The terms of any formal
written employment agreement with Ms. St. Clair would be determined if and when
such arrangements are entered into.
An affiliated entity owned by a principal shareholder of the Company, Lynn
Dixon, has made advances to the Company totalling $16,500. These advances will
be repaid from proceeds of Warrant exercise. See "Principal Shareholders"
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Conflicts of Interest
Other than as described herein the Company is not expected to have
significant further dealings with affiliates. However, if there are such
dealings the parties will attempt to deal on terms competitive in the market
and on the same terms that either party would deal with a third person.
Presently no officer, director or other affiliate of the Company has any
transactions which they contemplate entering into with the Company, aside from
the matters described herein.
Management will attempt to resolve any conflicts of interest that may
arise in favor of the Company. Failure to do so could result in fiduciary
liability to management.
Indemnification and Limitation of Liability of Management
The General Corporation Law of Nevada permits provisions in the articles,
by-laws or resolutions approved by shareholders which limit liability of
directors for breach of fiduciary duty to certain specified circumstances,
namely, breaches of their duties of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law, acts
involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. The Company's by-laws indemnify its Officers and Directors
to the full extent permitted by Nevada law. The by-laws with these exceptions
eliminate any personal liability of a Director to the Company or its
shareholders for monetary damages for the breach of a Director's fiduciary duty
and therefore a Director cannot be held liable for damages to the Company or
its shareholders for gross negligence or lack of due care in carrying out his
fiduciary duties as a Director. The Company's Articles provide for
indemnification to the full extent permitted under law which includes all
liability, damages and costs or expenses arising from or in connection with
service for, employment by, or other affiliation with the Company to the
maximum extent and under all circumstances permitted by law. Nevada law
permits indemnification if a director or officer acts in good faith in a manner
reasonably believed to be in, or not opposed to, the best interest's of the
corporation. A director or officer must be indemnified as to any matter in
which he successfully defends himself. Indemnification is prohibited as to any
matter in which the director or officer is adjudged liable to the corporation.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock with respect to each
director of the Company, each beneficial owner of more than five percent (5%)
of said securities, and all directors and executive officers of the Company as
a group:
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Title of Amount and Nature of Percent % After
Name and Address Class Beneficial Ownership of Class Offering
Jody St. Clair Common 200,000 shares 20% 10%
8574 Wasatch Blvd.
SLC, UT 84121
Lynn Dixon (1) Common 1,651,400 shares 90% 82.7%
311 S. State, #460
SLC, UT 84111
All officers & directors Common 200,000 shares 20% 10%
as a group (1 person)
(1) The shares are owned of record by Elvena, Inc., a private New York
corporation solely owned by Mr. Dixon.
One half of the amount shown for each person represents Shares underlying
the Warrants issued to such person. Current amounts and percentages are
calculated assuming, alternatively for each person, exercise of all Warrants
issued to that person (but not exercise of Warrants issued to other persons).
The Company currently has a total of 1,000,000 shares outstanding, however no
other shareholder owns 5% or more of the Company's common stock except as
described above. The foregoing amounts include all shares these persons are
deemed to beneficially own regardless of the form of ownership. See "Certain
Transactions."
WARRANT DISTRIBUTION
The Board of Directors of the Company has declared a warrant distribution
of Common Stock Purchase Warrants to all stockholders of the Company who are
stockholders of record as of the date of this prospectus ("Warrant Record
Date"). The Warrants are being distributed on a 1 for 1 basis and comprise in
the aggregate 500,000 Series A Warrants and 500,000 Series B Warrants, each of
which will be exercisable for one (1) share of Common Stock of the Company.
The Warrants will be exercisable at a price of $.25 per share as to the Series
A Warrants and $.35 per share as to the Series B Warrants, at any time after
the date of this prospectus but in no event after June 30, 1998. See
"Description of Securities".
The Warrants contain standard anti-dilution provisions and the exercise
price of the Warrants may be adjusted downward at any time in the sole
discretion of the Company's Board of Directors. Only stockholders of the
Company who were shareholders of record as of the Warrant Record Date are
entitled to the distribution of the Warrants, which distribution is made to
stockholders without monetary consideration.
Each Series of the Warrants is redeemable by the Company, in whole or in
part, at a price of $.01 per Warrant, at any time after the date hereof, upon
thirty (30) days written notice, in the event the Closing bid price of the
Company's common stock exceeds or equals the exercise price of that Series for
20 consecutive trading days.
The Warrants will not be exercisable by, and may not be distributed to,
shareholders residing in states where the distribution or exercise is
prohibited without registration in said states and where the Company is unable
to meet the registration requirements of said state. The Warrants will be
deemed to be "restricted securities" in a manner similar to the definition of
that term used in Rule 144 and will only be transferable, prior to exercise,
upon a showing to the satisfaction of the Company that the transfer is exempt
from the registration provisions of the Securities Act of 1933. The Warrants
will be stamped with a restrictive legend.
DESCRIPTION OF SECURITIES
The following statements are qualified in their entirety by reference to
the detailed provisions of the Company's Articles of Incorporation and Bylaws,
copies of which will be furnished to an investor upon written request therefor.
The securities being registered pursuant to the registration statement of which
this prospectus is a part are Shares of Common Stock, all of the same class and
entitled to the same rights and privileges as all other shares of Common Stock.
The Shares of Common Stock are issuable upon the exercise of the Series A and B
Warrants which are being distributed as a dividend with respect to the Common
Stock to existing stockholders of record as of the date hereof.
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Common Stock
The Company is presently authorized to issue 50,000,000 shares of $.001
par value Common Stock. The holders of common stock, including the Shares
offered hereby, are entitled to equal dividends and distributions, per share,
with respect to the common stock when, as and if declared by the Board of
Directors from funds legally available therefor. No holder of any shares of
common stock has a pre-emptive right to subscribe for any securities of the
Company nor are any common shares subject to redemption or convertible into
other securities of the Company. Upon liquidation, dissolution or winding up
of the Company, and after payment of creditors and preferred stockholders, if
any, the assets will be divided pro-rata on a share-for-share basis among the
holders of the shares of common stock. All shares of common stock now
outstanding are fully paid, validly issued and non-assessable. Each share of
common stock is entitled to one vote with respect to the election of any
director or any other matter upon which shareholders are required or permitted
to vote. Holders of the Company's common stock do not have cumulative voting
rights, so that the holders of more than 50% of the combined shares voting for
the election of directors may elect all of the directors, if they choose to do
so and, in that event, the holders of the remaining shares will not be able to
elect any members to the Board of Directors. The Company's bylaws provide that
a quorum at any meeting of stockholders is one third of the shares outstanding
and entitled to vote. Nevada law requires a majority of the voting power
present at a meeting to take action, or permits action to be taken by written
consent without a meeting if stockholders holding a majority of the voting
power consent. The bylaws also permit action by written consent if the same
percentage as would be required at a meeting (i.e. a majority) of all the
shareholders entitled to vote, consent in writing.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance of the 1,000,000
Shares of Common Stock underlying the Series A and B Warrants, upon exercise of
such Warrants. The Shares of Common Stock will be, when issued in accordance
with the terms of the offering, fully paid and non-assessable.
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Preferred Stock
The Company is also presently authorized to issue 5,000,000 shares of
$.001 par value Preferred Stock. Under the Company's Articles of
Incorporation, as amended, the Board of Directors has the power, without
further action by the holders of the Common Stock, to designate the relative
rights and preferences of the preferred stock, and issue the preferred stock in
such one or more series as designated by the Board of Directors. The
designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or
other preferences, any of which may be dilutive of the interest of the holders
of the Common Stock or the Preferred Stock of any other series. The issuance
of Preferred Stock may have the effect of delaying or preventing a change in
control of the Company without further shareholder action and may adversely
effect the rights and powers, including voting rights, of the holders of Common
Stock. In certain circumstances, the issuance of preferred stock could depress
the market price of the Common Stock. The Board of Directors effects a
designation of each series of Preferred Stock by filing with the Nevada
Secretary of State a Certificate of Designation defining the rights and
preferences of each such series. Documents so filed are matters of public
record and may be examined in accordance with procedures of the Nevada
Secretary of State, or copies thereof may be obtained from the Company.
Series A and Series B Warrants
Each Warrant represents the right to purchase one share of Common Stock at
an initial exercise price of $.25 per share for the Series A Warrants and $.35
per share for the Series B Warrants. The Warrants contain anti-dilution
provisions with respect to the occurrence of certain events. The exercise price
and the number of shares issuable upon exercise of the Warrants are subject to
adjustment to the extent that such events occur after the issuance of the
Warrants. Such events include the issuance of Common Stock as a dividend on
shares of Common Stock, subdivisions or combinations of the Common Stock or
similar events. Except as stated in the preceding sentence, the Warrants do
not contain provisions protecting against dilution resulting from the sale of
additional shares of Common Stock for less than the exercise price of the
Warrants or the current market price of the Company's securities. The
anti-dilution provisions do not apply in the event of a merger or acquisition.
The Warrants are exercisable during the period commencing upon the date
hereof and ending June 30, 1998. Holders of Warrants may exercise their
Warrants for the purchase of shares of Common Stock only if a current
prospectus relating to the underlying Shares of Common Stock is then in effect
and only if such Shares are qualified for sale, or deemed to be exempt from
qualification, under applicable state securities law. The Company will use its
best efforts to maintain a current prospectus relating to such shares of Common
Stock at all times when the market price of the Common Stock exceeds the
exercise price of the Warrants until the expiration date of the Warrants,
although there can be no assurance that the Company will be able to do so.
Whether a current prospectus is in effect or not, each Series of the
outstanding Warrants will be redeemable, in whole or in part, at the option of
the Company, upon not fewer than 30 days notice, at a redemption price equal to
$.01 per Warrant, if at any time the closing bid price for the Common Stock
equals or exceeds the exercise price of that Series for 20 consecutive trading
days. Although the Company would not normally do so, in the event it calls for
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redemption of the Warrants at a time when a current prospectus is not in
effect, warrantholders would have no opportunity to exercise their warrants,
and would be compelled to accept the nominal redemption price of $.01 per
warrant. If the Company should call for redemption of the Warrants when a
current prospectus is in effect, warrantholders will have a minimum of 30 days
in which to decide whether to exercise their warrants, after which they will
have to accept the redemption price. Any warrant holder who does not exercise
his Warrants prior to the Redemption Date, as set forth on the Company's Notice
of Redemption, will forfeit his right to purchase the Shares of Common Stock
underlying such Warrants, and after such Redemption Date any outstanding
Warrants referred to in such Notice will become void and be canceled. If the
Company does not redeem such Warrants, such warrants will expire at the
conclusion of the exercise period unless extended by the Company. The Company
may at any time, and from time to time, extend the exercise period of the
Warrants provided that written notice of such extension is given to the warrant
holders prior to the expiration date thereof. Also, the Company may, at any
time, reduce the exercise price thereof by written notification to the holders
thereof. The Company does not presently contemplate any extensions of the
exercise period or reduction in the exercise price of the Warrants.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance on exercise of the
Warrants. During the period in which a Warrant is exercisable, the Warrants
may be exercised by surrendering to the Company, a Warrant certificate
evidencing the Warrants to be exercised, duly endorsed for exercise, with the
exercise form included therein duly completed and executed, and paying to the
Company the exercise price per share and any applicable taxes or governmental
charges, in cash or check payable to the Company. Stock certificates will be
issued as soon thereafter as practicable. The shares of Common Stock issuable
on exercise of the Warrant will be, when issued in accordance with the
Warrants, fully paid and non-assessable.
For the life of the Warrants the holders thereof have the opportunity to
profit from a rise in the market for the Company's Common Stock, with a
resulting dilution in the interest of all other shareholders. So long as the
Warrants are outstanding, the terms on which the Company could obtain
additional capital may be adversely affected. The holders of such Warrants
might be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital by a new offering of
securities on terms more favorable than those provided for by such Warrants.
Except as described above, the holders of the Warrants have no rights as
stockholders of the Company until they exercise their Warrants. In the event
of liquidation, dissolution or winding-up of the Company, warrant holders will
not be entitled to participate in the assets of the Company. Warrant holders
have no voting, preemptive, liquidation or other rights of a stockholder of a
Company, and no dividends may be declared on the Warrants.
Transfer Agent
Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt
Lake City, Utah 84117, (801) 272-9294, serves as transfer agent and registrar
for the Company's outstanding securities.
PAGE 22
<PAGE>
Dividend Policy
The Company has not previously paid any cash dividends on Common Stock and
does not anticipate or contemplate paying dividends on Common Stock in the
foreseeable future. It is the present intention of management to utilize all
available funds for the development of the Company's business. The only
restrictions that limit the ability to pay dividends on common equity or that
are likely to do so in the future, are those restrictions imposed by law.
Under Nevada corporate law, no dividends or other distributions may be made
which would render the Company insolvent or reduce assets to less than the sum
of its liabilities plus the amount needed to satisfy outstanding liquidation
preferences.
SHARES ELIGIBLE FOR FUTURE SALE
All but 50,000 shares of the Common Stock currently outstanding are
"restricted securities" as that term is defined under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"), or are "control
securities" in that such shares were issued and sold by the Company without
registration, in reliance upon Section 4(2) of the Act as private transactions
not involving a public offering, and/or are securities held by affiliates.
Although such restricted and affiliate securities are not presently traded in
any public market which may develop for the Common Stock, such securities may
in the future be publicly sold into any such market, if such a market should
develop, in accordance with the provisions of Rule 144. In general, under Rule
144 as currently in effect, a person (or group of persons whose share are
aggregated), including affiliates of the Company, can sell within any
three-month period, a number of shares of restricted securities that does not
exceed
the greater of 1% of the total number of outstanding shares of the same class,
or (if the Stock becomes quoted on NASDAQ or a stock exchange), the reported
average weekly trading volume during the four calendar weeks preceding the
sale; provided, that at least two years have elapsed since the restricted
securities being sold were acquired from the Company or any affiliate of the
Company, and provided further that certain other conditions are also satisfied.
If at least three years have elapsed since the restricted securities were
acquired from the Company or an affiliate of the Company, a person who has not
been an affiliate of the Company for at least three months is entitled to sell
such restricted shares under Rule 144 without regard to any limitations on the
amount.
PLAN OF DISTRIBUTION
This Prospectus and the registration statement of which it is part relate
to the offer and sale of 1,000,000 shares of Common Stock of the Company
underlying Warrants. The securities registered hereby include 500,000 shares
of Common Stock issuable upon the exercise of the Series A Warrants at an
exercise price of $.25 per share, and 500,000 shares of Common Stock issuable
upon the exercise of the Series B Warrants, at an exercise price of $.35 per
share. The Warrants are being distributed as a dividend with respect to the
Common Stock of the Company to shareholders of record as of the date of this
prospectus. The Warrants are exerciseable until June 30, 1998.
PAGE 23
<PAGE>
The offering will be managed by the Company without an underwriter, and
the Shares will be offered and sold by the Company, without any discount, sales
commissions or other compensation being paid to anyone in connection with the
offering. In connection therewith, the Company will pay the costs of
preparing, mailing and distributing this Prospectus to the holders of the
Warrants. Brokers, nominees, fiduciaries and other custodians will be
requested to forward copies of this Prospectus to the beneficial owners of
securities held of record by them, and such custodians will be reimbursed for
their expenses.
There is no assurance that all or any of the Shares will be sold, nor any
requirement, or escrow provisions to assure that, any minimum amount of
Warrants will be exercised. All funds received upon the exercise of any
Warrants will be immediately available to the Company for its use.
Exercise Procedures
The Warrants may be exercised in whole or in part by presentation of the
Warrant Certificate, with the Purchase Form on the reverse side thereof filled
out and signed at the bottom thereof, together with payment of the Exercise
Price and any applicable taxes at the principal office of Interwest Stock
Transfer Co., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117.
Payment of the Exercise Price shall be made in lawful money of the United
States of America in cash or by cashier's or certified check payable to the
order of "Desert Native Design, Inc., Warrant Exercise Account."
All holders of warrants will be given an independent right to exercise
their purchase rights. If, as and when properly completed and duly executed
notices of exercise are received by the Transfer Agent and/or Warrant Agent,
together with the Certificates being surrendered and full payment of the
Exercise Price in cleared funds, the checks or other funds will be delivered to
the Company and the Transfer Agent and/or Warrant Agent will promptly issue
certificates for the underlying Common Stock. It is presently estimated that
certificates for the shares of Common Stock will be available for delivery in
Salt Lake City, Utah at the close of business on the tenth business day after
the receipt of all required documents and funds.
LEGAL MATTERS
To the knowledge of management, there is no material litigation pending or
threatened against the Company. The validity of the issuance of the Shares
offered hereby will be passed upon for the Company by Thomas G. Kimble &
Associates, Salt Lake City, Utah.
EXPERTS
The consolidated financial statements of Desert Native Designs, Inc. as of
December 31, 1995, included herein have been examined by Pritchett, Siler &
Hardy P.C. independent certified public accountants, as indicated in their
report with respect thereto, and are included herein in reliance on such report
given upon the authority of that firm as experts in accounting and auditing.
PAGE 24
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND
MARCH 31, 1996 [UNAUDITED]
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
CONTENTS
PAGE
_ Independent Auditors' Report 1
_ Balance Sheets, December 31, 1995
and March 31, 1996 (Unaudited) 2
_ Statements of Operations, from inception
on July 20, 1995 through December 31, 1995,
for the three months ended March 31, 1996
(Unaudited) and from inception on July 20, 1995
through March 31, 1996 (Unaudited). 3
_ Statement of Stockholders' Equity (Deficit),
from inception on July 20, 1995 through
December 31, 1995, and through March 31,
1996 (Unaudited) 4
_ Statements of Cash Flows, from inception
on July 20, 1995 through December 31, 1995,
for the three months ended March 31, 1996 (Unaudited)
and from inception on July 20, 1995 through
March 31, 1996 (Unaudited). 5
_ Notes to Financial Statements 6 - 8
<PAGE>
PRITCHETT, SILER & HARDY, P.C.
430 East 400 South
Salt Lake City, Utah 84111
(801) 328-2727
INDEPENDENT AUDITORS' REPORT
Board of Directors
DESERT NATIVE DESIGNS, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Desert Native
Designs, Inc. [a development stage company] at December 31, 1995,
and the related statements of operations, stockholders' equity
and cash flows from inception on July 20, 1995 through December
31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements audited by us present
fairly, in all material respects, the financial position of
Desert Native Designs, Inc. as of December 31, 1995, and the
results of its operations and its cash flows for the period from
inception through December 31, 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in
Note 7 to the financial statements, the Company is newly formed
and has not yet been successful in establishing profitable
operations, raising substantial doubt about its ability to
continue as a going concern. Management's plans in regards to
these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from
the outcome of these uncertainties.
The accompanying financial statements of Desert Native Designs,
Inc. as of March 31, 1996 and the related periods then ended were
not audited by us, and accordingly, we do not express an opinion
on them.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
March 12, 1996
PAGE 1
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
BALANCE SHEETS
ASSETS
March 31,
1996 December 31,
(Unaudited) 1995
____________ ____________
CURRENT ASSETS:
Cash in bank $ 2,849 $ 3,120
Inventory 4,368 3,885
____________ ____________
Total Current Assets 7,217 7,005
PROPERTY AND EQUIPMENT, net 5,382 2,390
ORGANIZATION COSTS, net 414 437
____________ ____________
$ 13,014 $ 9,832
____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ -
Loans payable - related party 8,000 -
____________ ____________
Total Current Liabilities 8,000 -
____________ ____________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,000,000 shares issued and
outstanding 1,000 1,000
Capital in excess of par value 11,285 11,285
Deficit accumulated during the
development stage (7,271) (2,453)
____________ ____________
Total Stockholders' Equity 5,014 9,832
____________ ____________
$ 13,014 $ 9,832
____________ ____________
The accompanying notes are an integral part of this financial
statement.
PAGE 2
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From Inception on
on July 20, 1995 Through
Three Months__________________________
Ended March 31, March 31,
1996 December 31, 1996
(Unaudited) 1995 (Unaudited)
_____________ _________________________
REVENUE:
Sales $ - $ - $ -
_____________ _________________________
EXPENSES:
Advertising 3,551 1,519 5,070
Operating expenses 1,110 699 1,809
General and administrative 157 279 436
_____________ _________________________
Total expenses 4,818 2,497 7,315
_____________ _________________________
OPERATING INCOME (LOSS) (4,818) (2,497) (7,315)
OTHER INCOME (EXPENSE):
Interest income - 44 44
_____________ _________________________
LOSS BEFORE INCOME TAXES (4,818) (2,453) (7,271)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
_____________ _________________________
NET LOSS $ (4,818) $ (2,453) $ (7,271)
_____________ _________________________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.01)
_____________ _________________________
The accompanying notes are an integral part of this financial
statement.
PAGE 3
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON JULY 20, 1995
THROUGH DECEMBER 31, 1995 AND MARCH 31, 1996 [UNAUDITED]
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
______________ ____________ Excess of Development
Shares Amount Shares Amount Par Value Stage
______ ______ ______ ______ __________ __________
BALANCE, July 20, 1995 - $ - - $ - $ - $ -
Issuance of 950,000 shares
common stock for cash,
October 4, 1995 at $.01 per
share - - 950,000 950 8,550 -
Issuance of 50,000 shares
common stock for cash,
October 31, 1995 at $.20
per share, net of offering costs
of $7,215 - - 50,000 50 2,735 -
Net loss for the period
ended December 31, 1995 - - - - - (2,453)
__________________________________________________
BALANCE, December 31, 1995 - - 1,000,000 1,000 11,285 (2,453)
Net loss for the period
ended March 31, 1996
(Unaudited) - - - - - (4,818)
___________________________________________________
BALANCE, March 31, 1996
(Unaudited) - $ - 1,000,000 $1,000 $11,285 $(7,271)
___________________________________________________
The accompanying notes are an integral part of this financial
statement.
PAGE 4
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
From Inception on
on July 20, 1995 Through
Three Months ___________________________
Ended March 31, March 31,
1996 December 31, 1996
(Unaudited) 1995 (Unaudited)
___________ _____________ ___________
Cash Flows to Operating
Activities:
Net loss $ (4,818) $ (2,453) $(7,271)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 163 63 226
Changes in assets and liabilities:
Inventory (484) (3,885) (4,369)
________ _________ __________
Net Cash Flows to Operating
Activities (5,139) (6,275) (11,414)
________ _________ __________
Cash Flows to Investing Activities:
Purchase of property and equipment (3,132) (2,430) (5,562)
Payment of organization costs - (460) (460)
________ ____________ ___________
Net Cash to Investing Activities (3,132) (2,890) (6,022)
________ ____________ ___________
Cash Flows from Financing
Activities:
Proceeds from shareholder loans 8,000 - 8,000
Proceeds from common stock issuance - 19,500 19,500
Payments for stock offering costs - (7,215) (7,215)
__________ ____________ __________
Net Cash from Financing
Activities 8,000 12,285 20,285
__________ ____________ _________
Net Increase (Decrease) in Cash (271) 3,120 2,849
Cash at Beginning of Period 3,120 - -
__________ _____________ __________
Cash at End of Period $ 2,849 $ 3,120 $ 2,849
__________ ____________ __________
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental schedule of Noncash Investing and Financing
Activities:
For the period ended December 31, 1995:
None
The accompanying notes are an integral part of this financial
statement.
PAGE 5
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the
State of Nevada on July 20, 1995. The Company is planning to
engage in the business of producing and marketing crafts but to
date has not had any sales. The Company is considered a
development stage company as defined in SFAS No. 7. The Company
has, at the present time, not paid any dividends and any
dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Organization Costs - The Company is amortizing its organization
costs, which reflect amounts expended to organize the Company,
over sixty [60] months using the straight line method.
Inventory - Inventory is carried at the lower of cost or market.
Depreciation Methods - The Company is depreciating its property
and equipment, which consists primarily of tools and a computer,
using the straight line method over the estimated useful lives of
the related assets of 5 years.
Income Taxes - The Company accounts for its income taxes in
accordance with statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" which requires the liability
approach for the effect of income taxes.
Loss Per Share - The computation of loss per share is based on
the weighted average number of shares outstanding during the
period presented.
Statement of Cash Flows - For purposes of the statement of cash
flows, the Company considers all highly liquid debt investments
purchased with a maturity of three months or less to be cash
equivalents.
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, at cost,
less accumulated depreciation:
March 31,
1996 December 31,
(Unaudited) 1995
___________ ___________
Equipment and tools $ 2,794 $ 2,430
Computer equipment 2,768 -
___________ ___________
5,562 2,430
Less Accumulated depreciation (180) (40)
___________ ___________
$ 5,382 $ 2,390
___________ ___________
Depreciation expense for the periods ended December 31, 1995 and
March 31, 1996 (unaudited) was $40 and $140.
PAGE 6
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INVENTORY
Inventory consists primarily of raw materials which will be used
to construct native american crafts for retail sales. The
Company has some work in process but has not had any sales of any
inventory as of December 31, 1995 and March 31, 1996 (unaudited).
NOTE 4 - CAPITAL STOCK
Common Stock - During October, 1995, in connection with its
organization, the Company issued 950,000 shares of its previously
authorized, but unissued common stock. Total proceeds from the
sale of stock amounted to $9,500.
Public Offering - During October, 1995 the Company issued 50,000
shares of common stock pursuant to a public offering, for cash at
$.20 per share.
Preferred Stock - The Company has authorized 5,000,000 shares of
preferred stock, $.001 par value, with such rights, preferences
and designations and to be issued in such series as determined by
the Board of Directors. No shares are issued and outstanding at
December 31, 1995.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes". FASB 109 requires the Company to provide a
net deferred tax asset/liability equal to the expected future tax
benefit/expense of temporary reporting differences between book
and tax and any available operating loss or tax credit
carryforwards. At December 31, 1995, the Company has available
unused operating loss carryforwards of approximately $2,000,
which may be applied against future taxable income and which
expire in 2010. The amount of and ultimate realization of the
benefits from the operating loss carryforwards for income tax
purposes is dependent, in part, upon the tax laws in effect, the
future earning of the Company, and other future events, the
effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards
the Company has established a valuation allowance equal to the
tax effect of the loss carryforwards and, therefore, no deferred
tax asset has been recognized for the loss carryforwards. The
change in the valuation allowance is equal to the tax effect of
the current period's net loss.
NOTE 6 - RELATED PARTY TRANSACTIONS
Management Compensation - As of December 31, 1995, the Company
has not paid any compensation to its officers and directors.
However, the Company has agreed to pay its president 25% of the
sales price of all crafts sold as compensation for the efforts of
the president on behalf of the corporation to design, produce and
market the crafts. During the three months ending March 31, 1996
(unaudited) an officer of the Company received a salary of $600
which has been included as an operating expense.
PAGE 7
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY TRANSACTIONS [Continued]
The Company maintains an address and phone number at a business
office of one of its principal shareholders, in New York, on a
rent free basis as its principal executive office.
The Company, for the time being, will have the use of the home
office facilities of its president, in Salt Lake City, Utah, on a
rent free basis as its place of business for producing the
crafts. The Company will, however, reimburse its president for
any additional out-of-pocket costs related to the use of the home
office. Management does not intend to seek other office
arrangements unless and until the Company's business requires
more extensive facilities, which is not anticipated in the
foreseeable future.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which
contemplate continuation of the Company as a going concern.
However, the Company is newly formed, has incurred losses since
its inception and has not yet been successful in establishing
profitable operations. These factors raise substantial doubt
about the ability of the Company to continue as a going concern.
In this regard, management is proposing to raise any necessary
additional funds not provided by its planned operations through
loans and/or through additional sales of its common stock. There
is no assurance that the Company will be successful in raising
this additional capital or achieving profitable operations. The
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
NOTE 8 - SUBSEQUENT EVENTS
Shareholder Loan - On March 11, 1996, an entity which is a
shareholder of the Company, or individuals related thereto, made
a loan to the Company. The amount advanced was $8,000.
Shareholder Loan (unaudited) - During April, 1996, an entity
which is a shareholder of the Company, or individuals related
thereto, made an additional loan to the Company. The amount
advanced was $8,500 .
Warrant distribution (unaudited) - The Company is proposing to
make a warrant distribution of Common Stock Purchase Warrants to
all stockholders of the Company. The Warrants will be
distributed on a one for one basis and comprise in the aggregate
500,000 Series A Warrants and 500,000 Series B Warrants, each of
which will be exercisable for one share of common stock. The
Series A warrants will have an exercise price of $.25 per share
and the Series B will have an exercise price of $.35 per share.
The exercise period is proposed to end on June 30, 1998. In
connection with the proposed warrant distribution, the Company is
proposing to file a registration statement with the Securities
and Exchange Commission on Form SB-2 to register the 1,000,000
shares of common stock which are issuable upon exercise of the
warrants.
NOTE 9 - UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1996 have been
made.
PAGE 8
<PAGE>
- ---------------------------------------------
[OUTSIDE BACK COVER PAGE BEGINS HERE]
No dealer, salesman or other person is authorized to give any information or to
make any representations other than those contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities covered hereby in any
jurisdiction or to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, in any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION. . . . . . . . . . . . . . . .. . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 5
DILUTION . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 9
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 10
MANAGEMENT'S PLAN OF OPERATION . . . . . . . . . . .. . . . . . . . . . . . 10
BUSINESS . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 11
MANAGEMENT . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 15
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . .. . . . . . . . . . . . 16
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . .. . . . . . . . . . . . 18
WARRANT DISTRIBUTION . . . . . . . . . . . . . . . .. . . . . . . . . . . . 19
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . .. . . . . . . . . . . . 19
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . .. . . . . . . . . . . . 23
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 24
EXPERTS. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . .. . . . . . . . .See Index
DESERT NATIVE
DESIGNS, INC.
1,000,000 Shares
Common Stock
PROSPECTUS
, 1996
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or
officers of the registrant are insured or indemnified in any
manner against any liability which they may incur in such
capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act
provides that each corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party
or is threatened to be made party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the corporation, by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, does not, of
itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and that,
with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
<PAGE>
liable to the corporation or for amounts paid in settlement to
the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent
jurisdiction, determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter
therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered
by a court or advanced pursuant to subsection 5, must be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or
proceeding;
(c) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by
independent legal counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
5. The certificate or articles of incorporation, the bylaws or
an agreement made by the corporation may provide that the
expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any
rights to advancement of expenses to which corporate personnel
other than director of officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in
or ordered by a court pursuant to this section:
<PAGE>
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the certificate or articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
2 or for the advancement of expenses made pursuant to subsection
5, may not be made to or on behalf of any director or officer if
a final adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing violation of
the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person."
(b) The registrant's Articles of Incorporation limit liability
of its Officers and Directors to the full extent permitted by the
Nevada Business Corporation Act.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth all estimated costs and expenses,
other than underwriting discounts, commissions and expense
allowances, payable by the registrant in connection with the
maximum offering for the securities included in this registration
statement:
Amount
SEC registration fee $ 100.00
Blue sky fees and expenses 3,000.00
Printing and shipping expenses 300.00
Legal fees and expenses 11,000.00
Accounting fees and expenses 500.00
Transfer and Miscellaneous expenses 100.00
-----------
Total $ 15,000.00
* All expenses are estimated except the Commission filing fee.
ITEM 26. Recent Sales of Unregistered Securities
In connection with the organization of the Company, its founding
shareholders paid an aggregate of $9,500 cash to purchase 950,000
shares of Common Stock of the Company. Subsequently in October
of 1995, an additional $10,000 was raised in an offering of
50,000 shares of Common Stock. These transactions were not
registered under the Securities Act of 1933 (the "Act") in
reliance on exemptions from registration in Sections 3(b) and
4(2) of the Act, and Regulation D promulgated thereunder.
Securities offered and sold to persons affiliated with the Issuer
are subject to the resale provisions of Rule 144 and may not be
<PAGE>
sold or transferred without registration except in accordance
with Rule 144 and will bear such a legend.
ITEM 27. Exhibits Index
SEC No. Document Exhibit No.
3 Articles of Incorporation 3.1
3 By-Laws 3.3
4 Common Stock Specimen Certificate 4.1
5,24 Opinion & Consent of Counsel 5.1 & 24.1
23 Consent of Accountants 23.1
27 Financial Data Schedule 27.1
(All exhibits were previously filed with the original
registration statement. The only exhibit refiled with this
amendment is the consent of accountants.)
ITEM 28. Undertakings
The registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Include any additional or changed material information on
the plan of distribution; and
(iii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment as a new Registration
Statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form
SB-2 and authorized this Registration Statement to be signed on
its behalf by the undersigned, in the City of Salt Lake, State of
Utah, on August 5th , 1996.
DESERT NATIVE DESIGNS, INC.
By: /s/ Jody St. Clair
President (Chief Executive and Financial Officer)
In accordance with the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities and on the date indicated.
Signatures: /s/ Jody St. Clair
Title: President & Director (Chief Executive and Financial
Officer)
Date: August 5th , 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
amendment No. 1 to the Registration Statement on Form SB-2 for Desert
Native Designs, Inc., of our report dated March 12, 1996, relating to the
December 31, 1995 financial statements of Desert Native Designs, Inc.,
which appears in such Prospectus. We also consent to the reference to us
under the heading "Experts".
/s/ PRITCHETT, SILER & HARDY, P.C.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
August 6, 1996
