U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996 Commission File No. 333-7841
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
DESERT NATIVE DESIGNS, INC.
(Name of small business issuer in its charter)
Nevada 13-3859938
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1393 Luckspring Drive, Salt Lake City, Utah 84106
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code:(801) 466-8928
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Act: None
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 Issuer was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Issuer's revenues for its most recent fiscal year. $ 0.00
As of February 25, 1997, the aggregate market value of voting stock held by
non-affiliates was not determinable because of the lack of published
quotations.
(See Item 5 herein).
The number of shares outstanding of the Issuer's common stock at December 31,
1996: 1,000,000
<PAGE> 1
PART I
Item 1. Description of Business
(a) Business Development.
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 Board of Directors of the Company then declared a warrant
distribution of Common Stock Purchase Warrants to all stockholders of the
Company who were stockholders of record as of the effective date of a
registration statement and prospectus covering the distribution and exercise
of such warrants ("Warrant Record Date"). The Company filed with the
Securities and Exchange Commission a registration statement on Form SB-2,
Commission File No. 333-7841, which became effective October 23, 1996. The
Warrants were 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 is
exercisable for one (1) share of Common Stock of the Company. The Warrants
are 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 their issuance
but in no event after June 30, 1998. 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. As
of the date hereof, no warrants have been exercised.
(b) Business of Company.
General
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 4 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
<PAGE> 2
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.
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.
<PAGE> 3
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.
<PAGE> 4
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.
<PAGE> 5
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.
Employees
Initially, the only employee of the Company will be its President. The
Company presently has no other employees, and does not presently anticipate
the need to hire additional employees.
<PAGE> 6
Item 2. Properties
General.
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.
Item 3. Legal Proceedings.
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no action has been threatened by or against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market information.
There is presently no active public trading market nor have there been
any published quotations for any securities of the Company.
(b) Holders.
As of January, 19, 1996, there were approximately 91 record holders of
the Company's Common Stock.
(c) Dividends.
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 any outstanding
liquidation preferences.
Item 6. Management's Discussion and Analysis or Plan of Operation.
The Company is a small start up company which was only recently
<PAGE> 7
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 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.
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 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.
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."
Item 7. Financial Statements.
See attached Financial Statements and Schedules.
<PAGE> 8
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
There are not and have not been any disagreements between the Company
and their accountants on any matter of accounting principles or practices or
financial statement disclosure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
(a) Identify Directors and Executive Officers.
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.
Term Served As Positions
Name of Director Age Director/Officer With Company
Jody St. Clair 34 Since inception President & Secretary/Treasurer
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.
(b) Identify Significant Employees.
None other than the person previously identified.
(c) Family Relationships.
None
(d) Involvement in Certain Legal Proceedings.
Except as described hereinabove, no present officer or director of the
Company; 1) has had any petition filed, within the past five years, in Federal
Bankruptcy or state insolvency proceedings on such person's behalf or on
behalf of any entity of which such person was an officer or general partner
<PAGE> 9
within two years of filing; or 2) has been convicted in a criminal proceeding
within the past five years or is currently a named subject of a pending
criminal proceeding; or 3) has been the subject, within the past five years,
of any order, judgment, decree or finding (not subsequently reversed,
suspended or vacated) of any court or regulatory authority involving violation
of securities or commodities laws, or barring, suspending, enjoining or
limiting any activity relating to securities, commodities or other business
practice.
Compliance with Section 16(a) of the Exchange Act
The Issuer is not subject to the provisions of Section 16(a).
Item 10. Executive Compensation.
Commencing in April, 1996, the Company agreed to compensate Ms. St.
Clair for services involved in designing, producing and marketing the craft
products on the basis that she 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 was on a straight commission basis and did not
receive any guaranteed minimum salary or wage. During 1996, the Company paid
a total of $6,300 in management compensation to Ms. St. Clair.
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.
Compensation of Directors
None other than as described above.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has not entered into any contracts or arrangements with any
named executive officer which would provide such individual with a form of
compensation resulting from such individual's resignation, retirement or any
other termination of such executive officer's employment with the Company or
its subsidiary, or from a change-in-control of the Company or a change in the
named executive officer's responsibilities following a change-in-control.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock by 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:
<PAGE> 10
Title of Amount and Nature of Percent
Name and Address Class Beneficial Ownership of Class
Jody St. Clair Common 200,000 shares 18%
1393 Luckspring Dr.
Salt Lake City, UT 84106
Lynn Dixon Common 1,651,400 shares 90%
311 S. State, #460
Salt Lake City, UT 84111
All officers and directors Common 200,000 shares 18%
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 which is engaged in the business
of making investments.
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.
Item 12. Certain Relationships and Related Transactions.
The Company has entered into certain transactions with officers,
directors or affiliates of the Company which include the following:
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. 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 was on a straight commission basis and did not receive
any guaranteed minimum salary or wage. $6,300 was paid to her in 1996.
<PAGE> 11
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 $25,500. These
advances will be repaid from any proceeds of Warrant exercise. See "Principal
Shareholders"
Except as disclosed in this item, in notes to the financial statements
or elsewhere in this report, the Company is not aware of any indebtedness or
other transaction in which the amount involved exceeds $60,000 between the
Company and any officer, director, nominee for director, or 5% or greater
beneficial owner of the Company or an immediate family member of such person;
nor is the Company aware of any relationship in which a director or nominee
for director of the Company was also an officer, director, nominee for
director, greater than 10% equity owner, partner, or member of any firm or
other entity which received from or paid the Company, for property or
services, amounts exceeding 5% of the gross annual revenues or total assets of
the Company or such other firm or entity.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits to this report are all documents previously filed which
are incorporated herein as exhibits to this report by reference to
registration statements and other reports previously filed by the Company
pursuant to the Securities Act of 1933 and the Securities Exchange Act of
1934.
(b) Reports on Form 8-K have not been filed during the last quarter of
the fiscal year ended December 31, 1996.
<PAGE> 12
SIGNATURES
In accordance with Section 12 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DESERT NATIVE DESIGNS, INC.
By: /s/ Jody St. Clair Date: February 25, 1997
Jody St. Clair, President and Secretary/Treasurer
Chief Executive Officer and
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and the
dates indicated.
By: /s/ Jody St. Clair Date: February 25, 1997
Jody St. Clair, President and Secretary/Treasurer
Chief Executive Officer and
Chief Financial Officer
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non Reporting Issuers
No annual report or proxy statement has been sent to security holders.
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
CONTENTS
PAGE
_ Independent Auditors' Report 1
_ Balance Sheet, December 31, 1996 and 1995 2
_ Statement of Operations, for the year ended
December 31, 1996 and from inception
on July 20, 1995 through December 31,
1995 and 1996 3
_ Statement of Stockholders' Equity (Deficit),
from inception on July 20, 1995 through
December 31, 1995 and 1996 4
_ Statement of Cash Flows, for the year ended
December 31, 1996 and from inception
on July 20, 1995 through December 31,
1995 and 1996 5
_ Notes to Financial Statements 6 - 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
DESERT NATIVE DESIGNS, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Desert Native
Designs, Inc. [a development stage company] at December 31, 1996
and 1995, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the year ended December 31,
1996 and for the periods from inception on July 20, 1995 through
December 31, 1995 and 1996. 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 audits 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 audits provide 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, 1996 and 1995, and
the results of its operations and its cash flows for the year
ended December 31, 1996 and for the periods from inception
through December 31, 1995 and 1996, 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.
January 20, 1997
<PAGE> 1
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
BALANCE SHEETS
ASSETS
December 31,
_______________________
1996 1995
___________ ___________
CURRENT ASSETS:
Cash in bank $ 474 $ 3,120
Inventory 6,399 3,885
___________ ___________
Total Current Assets 6,873 7,005
PROPERTY AND EQUIPMENT, net 5,136 2,390
ORGANIZATION COSTS, net 345 437
___________ ___________
$ 12,354 $ 9,832
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ -
Other accrued liabilities 3,288 -
Notes payable - related party 23,500 -
___________ ___________
Total Current Liabilities 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 December 31,
1996 and 1995 1,000 1,000
Capital in excess of par value 11,285 11,285
Deficit accumulated during the
development stage (26,719) (2,453)
___________ ___________
Total Stockholders' Equity
(Deficit) (14,434) 9,832
___________ ___________
$ 12,354 $ 9,832
___________ ___________
The accompanying notes are an integral part of these financial statements.
<PAGE> 2
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
For the Year From Inception
Ended on July 20,
December 31, 1995 Through
____________________________ December 31,
1996 1995 1996
_______________________________________
REVENUE:
Sales $ 2,595 $ - $ 2,595
COST OF GOODS SOLD 1,790 - 1,790
_______________________________________
Gross Profit 805 - 805
_______________________________________
EXPENSES:
Advertising 7,433 1,519 8,952
Operating expenses 6,221 699 6,920
General and administrative 10,075 279 10,354
_______________________________________
Total expenses 23,729 2,497 26,226
_______________________________________
OPERATING INCOME (LOSS) (22,924) (2,497) (25,421)
_______________________________________
OTHER INCOME (EXPENSE):
Interest income - 44 44
Interest expense (1,342) - (1,342)
_______________________________________
Total Other Income
(Expense) (1,342) 44 (1,298)
_______________________________________
LOSS BEFORE INCOME TAXES (24,266) (2,453) (26,719)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
_______________________________________
NET LOSS $(24,266) $(2,453) $(26,719)
_______________________________________
LOSS PER COMMON SHARE $ (.02) $ (.00) $ (.03)
_______________________________________
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM THE DATE OF INCEPTION ON JULY 20, 1995
THROUGH DECEMBER 31, 1996
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 $ - - 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 December 31,
1996 - - - - - (24,266)
__________________________________________________________
BALANCE, December 31,
1996 - $ - 1,000,000 $1,000 $11,285 $(26,719)
__________________________________________________________
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
For the Year From Inception
Ended on July 20,
December 31, 1995 Through
_________________________ December 31,
1996 1995 1996
_______________________________________
Cash Flows to Operating
Activities:
Net loss $ (24,266) $ (2,453) $ (26,719)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and
amortization 1,146 63 1,209
Changes in assets
and liabilities:
Inventory (2,514) (3,885) (6,399)
Accrued liabilities 3,288 - 3,288
_______________________________________
Net Cash Flows to
Operating Activities (22,346) (6,275) (28,621)
_______________________________________
Cash Flows to Investing
Activities:
Purchase of property
and equipment (3,800) (2,430) (6,230)
Payment of organization
costs - (460) (460)
_______________________________________
Net Cash to
Investing Activities (3,800) (2,890) (6,690)
_______________________________________
Cash Flows from Financing
Activities:
Proceeds from common
stock issuance - 19,500 19,500
Payments for stock
offering costs - (7,215) (7,215)
Proceeds from notes
payable - related party 23,500 - 23,500
_______________________________________
Net Cash from Financing
Activities 23,500 12,285 35,785
_______________________________________
Net Increase (Decrease) in Cash (2,646) 3,120 474
Cash at Beginning of Period 3,120 - -
_______________________________________
Cash at End of Period $ 474 $ 3,120 $ 474
_______________________________________
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, 1996 and 1995:
None
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
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. 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, 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.
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 assets 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 reporting 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:
December 31,
______________________
1996 1995
__________ __________
Equipment and tools $ 6,230 $ 2,430
__________ __________
6,230 2,430
Less Accumulated
depreciation (1,094) (40)
__________ __________
$ 5,136 $ 2,390
__________ __________
Depreciation expense for the period ended December 31, 1996 and
1995 was $1,054 and $40, respectively.
<PAGE> 6
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
Inventories consist of the following:
December 31,
_____________________
1996 1995
__________ _________
Raw materials $ 414 $ 3,885
Finished goods 5,985 -
__________ _________
$ 6,399 $ 3,885
__________ _________
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 December 31, 1996, the Company has available
unused operating loss carryforwards of approximately $20,000,
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.
<PAGE> 7
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY TRANSACTIONS
Management Compensation - During 1996, the Company has paid
compensation of $6,300 to its officers and directors. The
Company had previously 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 year ending December 31, 1996 the compensation
arrangements for the Company's president were changed to a
minimum salary of $1,200 per month for the period from March 15,
1996 through July 31, 1996. The president's commission
calculation was changed to fifty percent of net sales less direct
materials cost.
The compensation has been allocated as follows:
December 31,
1996
__________
Inventory $ 1,105
Cost of goods sold 1,790
Selling expense 838
General and administrative
expense 2,567
__________
$ 6,300
__________
Notes Payable - During the year ended 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 $23,500. These unsecured loans bear interest at 10% and
are payable on demand. Interest of $1,362 has been accrued for
the year ending 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.
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.
<PAGE> 8
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - SUBSEQUENT EVENTS
Shareholder Loans - Subsequent to year end, a shareholder of the
Company, or individuals related thereto, made a loan to the
Company. The total amount advanced was $2,000.
<PAGE> 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 FINANCIAL STATEMENTS OF DESERT NATIVE DESIGNS, INC. AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001001868
<NAME> DESERT NATIVE DESIGNS, INC.
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 474 3,120
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 6,399 3,885
<CURRENT-ASSETS> 6,873 7,005
<PP&E> 6,230 2,430
<DEPRECIATION> 1,094 40
<TOTAL-ASSETS> 12,354 9,832
<CURRENT-LIABILITIES> 26,788 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,000 1,000
<OTHER-SE> (14,434) 8,832
<TOTAL-LIABILITY-AND-EQUITY> 12,354 9,832
<SALES> 2,595 0
<TOTAL-REVENUES> 2,595 44
<CGS> 1,790 0
<TOTAL-COSTS> 1,790 0
<OTHER-EXPENSES> 23,729 2,497
<LOSS-PROVISION> (22,924) (2,497)
<INTEREST-EXPENSE> 1,342 0
<INCOME-PRETAX> (24,266) (2,453)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (24,266) (2,453)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (24,266) (2,453)
<EPS-PRIMARY> (.02) (.00)
<EPS-DILUTED> (.02) (.00)
</TABLE>
