U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-7841
DESERT NATIVE DESIGNS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 13-3859938
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1393 Luckspring Drive
Salt Lake City, Utah 84106
(Address of principal executive offices)
(801) 466-8928
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
The number of $.001 par value common shares outstanding at June
30, 1997: 1,000,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
___________ ___________
CURRENT ASSETS:
Cash in bank $ 2 $ 474
Inventory 6,399 6,399
___________ ___________
Total Current Assets $ 6,401 $ 6,873
___________ ___________
PROPERTY AND EQUIPMENT, net 4,513 5,136
ORGANIZATION COSTS, net 299 345
___________ ___________
$ 11,213 $ 12,354
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable 825 -
Other accrued liabilities 3,408 3,288
Note payable - related party 36,500 23,500
___________ ___________
Total Current Liabilities 40,733 26,788
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
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 at June 30, 1997
and December 31, 1996 1,000 1,000
Capital in excess of par value 11,285 11,285
Deficit accumulated during the
development stage (41,805) (26,719)
___________ ___________
Total Stockholders' Equity
(Deficit) (29,520) (14,434)
___________ ___________
$ 11,213 $ 12,354
___________ ___________
NOTE: The balance sheet at December 31, 1996 was taken from the
audited financial statements at that date and condensed.
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Six From Inception
Months Ended Months Ended on July 20,
June 30, June 30, 1995 Through
_____________________________________ June 30,
1997 1996 1997 1996 1997
__________________________________________________
REVENUE:
Sales $ - $ 1,993 $ - $ 1,993 $ 2,595
COST OF GOODS SOLD - (1,390) - (1,390) 1,790
__________________________________________________
Gross Profit - 603 - 603 805
__________________________________________________
EXPENSES:
Advertising 125 3,932 125 7,483 9,077
Operating expenses - 877 - 1,987 6,920
General and
administrative 2,164 1,238 13,374 1,395 23,728
__________________________________________________
Total expenses 2,289 6,047 13,499 10,865 39,725
__________________________________________________
OPERATING INCOME (LOSS) (2,289) (5,444) (13,499) (10,262) (38,920)
__________________________________________________
OTHER INCOME (EXPENSE):
Interest income - - - - 44
Interest expense (909) - (1,587) - (2,929)
__________________________________________________
Total Other Income
(Expense) (909) - (1,587) - (2,885)
__________________________________________________
LOSS BEFORE INCOME
TAXES (3,198) (5,444) (15,086) (10,262) (41,805)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
__________________________________________________
NET LOSS $(3,198) $(5,444)$(15,086) $(10,262) $(41,805)
__________________________________________________
LOSS PER COMMON SHARE $ (.00) $ (.00)$ (.01) $ (.00) $ (.04)
__________________________________________________
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six From Inception
Months Ended on July 20,
June 30, 1995 Through
_________________________ June 30,
1997 1996 1997
_______________________________________
Cash Flows to Operating
Activities:
Net loss $ (15,086) $(10,262) $ (41,805)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation and
amortization 669 481 1,878
Changes in assets and
liabilities:
Inventory - (2,558) (6,399)
Accounts payable 825 - 825
Accrued liabilities 120 115 3,408
_______________________________________
Net Cash Flows to
Operating Activities (13,472) (12,224) (42,093)
_______________________________________
Cash Flows to Investing
Activities:
Purchase of property and
equipment - (3,779) (6,230)
Payment of organization
costs - - (460)
_______________________________________
Net Cash to Investing
Activities - (3,779) (6,690)
_______________________________________
Cash Flows from Financing
Activities:
Proceeds from common
stock issuance - - 19,500
Payments for stock
offering costs - - (7,215)
Proceeds from notes
payable - related party 13,000 16,500 36,500
_______________________________________
Net Cash from Financing
Activities 13,000 16,500 48,785
_______________________________________
Net Increase (Decrease)
in Cash (472) 477 2
Cash at Beginning of Period 474 3,120 -
_______________________________________
Cash at End of Period $ 2 $ 3,597 $ 2
_______________________________________
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 June 30, 1997 and 1996:
None
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED 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 engaged in the
business of producing and marketing crafts. 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.
Condensed Financial Statements - The accompanying 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 June
30, 1997 and for all the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1996 audited financial
statements. The results of operations for the period ended June
30, 1997 are not necessarily indicative of the operation results
for the full year.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of asset and liabilities, the disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reported period. Actual results could differ from
those estimated.
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, at cost,
less accumulated depreciation:
June 30, December 31,
1997 1996
__________ __________
Equipment and tools $ 6,230 $ 6,230
__________ __________
6,230 6,230
Less Accumulated
depreciation (1,717) (1,094)
__________ __________
$ 4,513 $ 5,136
__________ __________
Depreciation expense for the period ended June 30, 1997 and
December 31, 1996 was $623 and $1,054, respectively.
5
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
Inventories consist of the following:
June 30, December 31,
1997 1996
__________ _________
Raw materials $ 414 $ 414
Finished goods 5,985 5,985
__________ _________
$ 6,399 $ 6,399
__________ _________
NOTE 4 - CAPITAL STOCK
Common Stock Warrants - During 1996, the Company distributed
warrants to its stockholders on a one for one basis. The
warrants were distributed to the stockholders of record as of the
effective date of a registration statement and prospectus
covering the distribution and exercise of such warrants. The
registration statement which was filed with the Securities and
Exchange Commission on Form SB-2 became effective on October 23,
1996. The warrants comprise in the aggregate 500,000 Series A
Warrants and 500,000 Series B warrants, each of which is
exercisable for one share of common stock of the Company. The
Warrants are exercisable at prices of $.25 for the Series A and
$.35 for the Series B, at any time after their issuance but in no
event after June 30, 1998.
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, 1996.
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 June 30, 1997, the Company has available
unused operating loss carryforwards of approximately $40,000,
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.
6
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY TRANSACTIONS
Management Compensation - During the six month period ended June
30, 1997, no compensation was paid to any officer or director.
Notes Payable - During the periods ended June 30, 1997 and
December 31, 1996, an entity which is a shareholder of the
Company or individuals related thereto, made several loans to the
Company with proceeds totaling $36,500. These unsecured loans
bear interest at 10% and are payable on demand. Interest of
$1,587 and $1,362 has been accrued for the periods ending June
30, 1997 and December 31, 1996.
Office Space - 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. The
Company 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.
7
<PAGE>
Item 2: Management's Discussion & Analysis or Plan of Operations
The Company is a small start up company which was
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, initial marketing efforts and
other limited operations, and the preparation and filing of a
registration statement covering distribution and exercise of
Series A and B Warrants. Such registration statement became
effective, and the Series A and B Warrants were distributed to
stockholders of record as of, October 23, 1996. As of the date
of this report, none of the Warrants have been exercised.
Operating and other expenses have to date been funded from
initial capital contributions and shareholder loans.
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 first repay monies advanced from
shareholders as loans, and then use a portion of the remaining
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 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 has also purchased and set up informational
8
<PAGE>
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.
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 pursuant to the exercise of the
Warrants or otherwise. However, there is no assurance that the
Company will be successful in raising this additional capital or
acheiving profitable operations. In the event the business of
the Company is unsuccessful, there is no assurance the Company
could successfully become involved with any other business
venture. The Company presently has no plans, commitments or
arrangements with respect to any other potential business
venture. 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."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Change in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
9
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Desert Native Designs, Inc.
Date: August 15, 1997 By:/S/Jody St. Clair, President
Jody St. Clair, President
<PAGE>
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