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: September 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
September 30, 1997: 1,000,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
See attached.
Item 2: Management's Discussion & Analysis or Plan of Operations
The Company was incorporated on July 20, 1995 to engage in
the business of producing and marketing drums, rattles and other
specialty crafts related to the shamanistic practices of Native
Americans.
The Company commenced planned principal operations, but did
not generate significant revenues therefrom. Operating and other
expenses were funded from initial capital contributions, a
limited offering of its securities and shareholder loans.
Management's plan of operation also included raising additional
funding from a public offering of securities. Pursuant thereto,
the Company commissioned the preparation and filing of a
registration statement covering distribution and exercise of
Series A and B Warrants, and shares of common stock underlying
the warrants, exercise of which would have generated gross
proceeds of as much as $300,000 to the Company. Such
registration statement became effective, and the Series A and B
Warrants were distributed to stockholders of record as of,
October 23, 1996. However, none of the Warrants were ever
exercised. Furthermore, efforts at marketing the Company's
products were unsuccessful. Because of the lack of any
significant revenues, such operations were subsequently
discontinued. The Company is still considered a development
stage company and presently has no significant assets or
operating capital.
<PAGE>
The Company began looking for other potential business
ventures with which it might become involved. During August,
1997, the Company entered into a letter of intent with respect to
a proposed acquisition (the "Acquisition") of FiberNet Telecom,
Inc. ("FiberNet"), a Delaware corporation engaged in business in
the telecommunications industry. As proposed, the Acquisition
contemplates that the Company will issue approximately 11,500,000
shares of its common stock (after effecting a 3.5 for 1 forward
stock split) in exchange for all the issued and outstanding stock
of FiberNet, in a transaction anticipated to constitute a tax-
free exchange. The parties are proceeding toward closing,
however, as of the date of filing of this report, the Acquisition
had not closed and there is no assurance that the Acquisition
will be consummated.
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 make the Acquisition and raise any necessary
additional funds not provided by operations through loans and/or
through additional sales of its capital stock. However, there is
no assurance that the Company will be successful in consummating
the Acquisition, raising 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 potential business venture other than the proposed
Acquisition. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties. See attached financial statements.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
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
<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: October 29, 1997 by: /s/ Jody St. Clair
Jody St. Clair, President
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
AND
DECEMBER 31, 1996
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
___________ ___________
CURRENT ASSETS:
Cash in bank $ 3 $ 474
___________ ___________
Total Current Assets 3 474
___________ ___________
OTHER ASSETS:
Assets of discontinued operation 3,920 11,535
Organization costs, net 276 345
___________ ___________
Total Current Assets 4,196 11,880
___________ ___________
$ 4,199 $ 12,354
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable 648 -
Other accrued liabilities 146 3,288
Note payable - related party - 23,500
___________ ___________
Total Current Liabilities 794 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 September 30, 1997
and December 31, 1996 1,000 1,000
Capital in excess of par value 52,645 11,285
Deficit accumulated during the
development stage (50,240) (26,719)
___________ ___________
Total Stockholders' Equity (Deficit) 3,405 (14,434)
___________ ___________
$ 4,199 $ 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.
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Nine From Inception
Months Ended Months Ended on July 20,
September 30, September 30, 1995 Through
________________ ______________ September 30,
1997 1996 1997 1996 1997
_________ ______ ______ ______ ________
REVENUE:
Sales $ - $ - $ - $ - $ -
_________ _______ _______ _______ ________
EXPENSES:
General and administrative - - - - -
_________ _______ _______ _______ ________
(LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES - - - - -
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
_________ _______ _______ ______ _________
(LOSS) FROM CONTINUING
OPERATIONS - - - - -
_________ _______ _______ _______ _______
DISCONTINUED OPERATIONS:
(Loss) from operations of
discontinued crafts
operations (6,234) (10,977) (21,320) (21,239) (48,039)
Estimated (Loss) on
disposition of crafts
operation (2,201) - (2,201) - (2,201)
_________ _______ ________ _______ ________
(LOSS) FROM DISCONTINUED
OPERATIONS (8,435) (10,977) (23,521) (21,239) (50,240)
_________ _______ _______ _______ _________
NET LOSS $(8,435) $(10,977) $(23,521) $(21,239) $(50,240)
________ _______ ________ _________ ________
LOSS PER COMMON SHARE $(.01) $(.01) $(.02) $ (.02) $(.05)
_______ _______ _______ _______ _______
The accompanying notes are an integral part of these financial
statements.
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine From Inception
Months Ended on July 20,
September 30, 1995 Through
_______________________ September 30,
1997 1996 1997
___________ __________ _____________
Cash Flows to Operating Activities:
Net loss $(23,521) $(21,239) $ (50,240)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Non-cash expenses 2,201 - 2,201
Depreciation and amortization 1,004 988 2,213
Changes in assets and liabilities:
Inventory 4,479 (2,514) (1,920)
Accounts payable 648 930 648
Accrued liabilities 718 900 4,006
___________ __________ ___________
Net Cash Flows to Operating
Activities (14,471) (20,935) (43,092)
___________ __________ ___________
Cash Flows to Investing Activities:
Purchase of property and equipment - (3,800) (6,230)
Payment of organization costs - - (460)
____________ _________ ___________
Net Cash to Investing Activities- (3,800) (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 14,000 23,500 37,500
______________ _________ ___________
Net Cash from Financing
Activities 14,000 23,500 49,785
______________ _________ ____________
Net Increase (Decrease) in Cash (471) (1,235) 3
Cash at Beginning of Period 474 3,120 -
______________ _________ ____________
Cash at End of Period $ 3 $ 1,885 $ 3
______________ _________ ____________
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 September 30, 1997 and 1996:
Notes payable of $37,500 and accrued interest of $3,860 were
converted to contributed capital.
The accompanying notes are an integral part of these financial
statements.
<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 and was engaged in the business
of producing and marketing crafts. The Company has subsequently
discontinued its crafts business and has been seeking other
business opportunities. 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
September 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
September 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 - DISCONTINUED OPERATIONS
The Company previously was in the business of producing and
marketing crafts consisting of drums, rattles and other crafts.
During 1997, management determined to discontinue these
operations and began looking for other potential business
ventures. At December 31, 1996 the Company had inventory of $
6,399 and property and equipment (net of depreciation) of $5,136
which was related to the craft operations. At September 30, 1996
the Company has reclassified the assets related to the
discontinued operations under the balance sheet classification
"Assets of Discontinued Operation". The following is a summary
of the items included in assets of discontinued operations
September 30, December 31,
1997 1996
__________ __________
Inventories $ 1,920 $ 6,399
Equipment and tools 6,230 6,230
Less accumulated depreciation (2,029) (1,094)
Allowance for loss on
disposition (2,201) -
__________ __________
$ 3,920 $ 11,535
__________ __________
<PAGE>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 2 - DISCONTINUED OPERATIONS (continued)
The statements of operations for all periods presented have been
reclassified to segregate the discontinued operations from
continuing operations. Total revenues received from the
discontinued operations amounted to $2,595 for the period ended
December 31, 1996. There were no revenues received during 1997.
The Company has accrued $2,201 which is the estimated loss to be
incurred upon disposition of the remaining assets of the discontinued
crafts operation.
NOTE 3 - 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. Two principle shareholders have agreed
to cancel 925,700 of these warrants without consideration leaving
a total of 74,300 warrants outstanding. On October 24, 1997, the
Company announced its intention to redeem the remaining outstanding
warrants effective November 24, 1997.
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 4 - 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 September 30, 1997, the Company has available
unused operating loss carryforwards of approximately $45,000,
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>
DESERT NATIVE DESIGNS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 5 - RELATED PARTY TRANSACTIONS
Management Compensation - During the nine month period ended
September 30, 1997, no compensation was paid to any officer or
director.
Notes Payable - An entity which is a shareholder of the
Company or individuals related thereto, made several loans to the
Company with proceeds totaling $37,500. During the nine month
period ended September 30, 1997, $14,000 was advanced and $23,500
was advanced through the period ended December 31, 1996. These
unsecured loans provided for interest at 10% and were
payable on demand. Interest of $2,518 and $1,362 had been
accrued for the periods ending September 30, 1997 and
December 31, 1996. Effective September 30, 1997, these notes
were cancelled and converted to capital contributions (see below).
Capital Contributions - During September, 1997, an entity which
is a shareholder of the Company or individuals related thereto,
agreed not to pursue collection of certain notes payable in the
amount of $37,500 and related interest of $3,860. These amounts
have been reclassified and accounted for as additional capital
contributions.
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 6 - 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 make the Acquisition
(See Note 7) and raise any necessary additional funds not
provided by operations through loans and/or through additional
sales of its common stock. There is no assurance that the Company
will be successful in consummating the Acquisition, raising
additional capital or achieving profitable operations. The
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
NOTE 7 - PROPOSED ACQUISITION
During August, 1997 the Company entered into a letter of intent
with respect to a proposed acquisition of FiberNet Telecom, Inc.
("FiberNet"), a Delaware corporation engaged in business in the
telecommunications industry. The Company is proposing to issue
approximately 11,500,000 shares of post-split common stock (after
effecting a 3.5 to 1 forward stock split) for all the issued and
outstanding stock of FiberNet. The acquisition has not closed
and there is no assurance that the acquisition will ultimately
occur.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,199
<CURRENT-LIABILITIES> 794
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 2,405
<TOTAL-LIABILITY-AND-EQUITY> 4,199
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (23,521)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,521)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
