SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, for the fiscal year ended March 31, 2000
Commission File No.000-27613
DESERT WEST MARKETING, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2505 Rancho Bel Air, Las Vegas, Nevada 89107
(Address of registrant's principal executive offices) (Zip Code)
702.878.8310
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $0.00
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act). As of March 31, 2000, approximately $10,000.00.
The number of shares outstanding of the issuer's only class of Common Stock,
$.001 par value, was 2,650,000 on March 31, 2000.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
Yes [ ] No [X]
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PART I.
Item 1. Description of Business.
Overview of Our Business. We were incorporated on March 5, 1999, pursuant to the
provisions of General Corporation Law of Nevada. Our executive offices are
located at 2505 Rancho Bel Air, Las Vegas, Nevada 89107. Our telephone number is
(702)240-0124. We were organized to engage in the manufacturing, packaging and
sale and distribution of vitamins and nutritional supplements. Our original
business plan was to distribute vitamin brands of other vitamin producers, as
well as developing our own vitamin brands. We originally planned to manufacture
some of our own vitamin products.
We also planned to market health related products other than vitamins if the
opportunity presented itself. We planned to market our products to alternative
medicine practitioners, health food stores and other wholesale and resale
sources. Because research and development costs in the vitamin and health
supplement industry are so high, and our funds are limited, we decided to
acquire the right to sell or distribute existing products or obtain licensing,
marketing, distribution or other rights to those types of products.
Some of our shareholders are friends and business associates of Dr. Robert
Milne. Dr. Milne is a board-certified family practice physician with extensive
experience in alternative health care, allergy testing and preventative
medicine. He is also the inventor of a patented allergy-testing device. Before
starting his own practice at the Milne Medical Center in Las Vegas, Nevada, Dr.
Milne was Medical Director at the Omni Medical Center and also practiced
medicine at the Nevada Clinic after previous assignments in emergency medicine
and a family practice. Dr. Milne is the author of numerous papers in the medical
field and has authored several books, including The Definitive Guide to
Headaches and The Photon Connection - Energy for the New Millennium. Dr. Milne
has been developing various vitamin and health-supplement products for many
years.
In December, 1999 we entered into a licensing agreement with Dr. Milne to
acquire the rights to produce and market a natural anti-cholesterol supplement
which is taken in capsule form. This supplement is derived from fermented rice
and Peruvian plant products. The licensing agreement requires us to pay Dr.
Milne one-tenth of a cent per capsule which we sell directly, and one-twentieth
a cent per capsule which we sell through a sublicensor.
Cholesterol is a waxy substance in your blood that helps form cell membranes,
hormones and other tissue. But when there's too much of it in your bloodstream,
it clogs up your arteries and can lead to heart disease. Your body produces
about 1,000 milligrams of cholesterol a day. The rest of it comes from
animal-based food in your diet, such as meat, fish, eggs and dairy.
About 15 million Americans presently take cholesterol-lowering drugs. By
lowering the level of so-called bad or LDL cholesterol in the blood, or lowering
the amount of a fat called triglyceride, these drugs can prevent heart disease
and save lives. However, like all pharmaceuticals, cholesterol-lowering drugs
have side effects, some of which may argue against their use by certain
patients. The most commonly prescribed drugs to control cholesterol belong to a
family called statins. These types of drugs, which are marketed under the brand
names Pravacol, or pravastatin, Zocor, or simvastatin, and other names, work by
interfering with the multi-step cholesterol manufacturing process in the liver,
reducing blood cholesterol levels.
But because statins act directly on the liver, they can also cause general
inflammation, a condition that shows up in a liver-function blood test. In rare
cases, statins can also cause general muscle inflammation. If left untreated,
this condition can progress to breakdown of muscle tissue. Then, as muscle
molecules enter the blood,
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they can overload the kidneys and lead to kidney failure. Such muscle symptoms
occur mostly in people taking more than one drug. Immunosuppressants, like those
used by all transplant recipients, triglyceride-lowering drugs and even the
common antibiotic erythromycin often trigger muscle inflammation.
Another problem with statins is that they can reduce sperm count and adversely
affect a developing fetus. So men and women of childbearing age might want to
avoid taking them, or be careful about conceiving a child while on the drugs.
There are alternatives to the use of statins. Perhaps the safest
cholesterol-lowering drugs, the bile acid resins, marketed under the brand names
Questran and Colestid, never enter the blood. Instead, they remain in the
intestine, tying up bile acids. The liver manufactures bile acids from
cholesterol, so when resins disable these chemicals, the liver makes more, using
up more cholesterol, thus lowering blood cholesterol levels. But the resin drugs
can cause constipation, and they can prevent absorption of other medications.
The familiar vitamin niacin also works to lower LDL cholesterol, if taken in
high doses. Rarely, niacin can cause liver damage. But the vitamin's
blood-vessel relaxing function causes the most potential problems, says Miller.
Niacin causes a sort of super blushing or hot flashes. There are also drugs
called fibrates, marketed under the brand name Gemfibrozil and the soon-to-be
released Lipidil, which dramatically decrease triglyceride levels and, as a
bonus, raise HDLs, the so-called "good" cholesterol. Their effect on LDLs falls
short of statins, however.
Because of the existing and potential side effects of all the existing
prescription drugs, we believe our product may provide an attractive alternative
to the drug treatments presently available to lower cholesterol.
Item 2. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
--------------------------------------------------------------------------------
Property March 31, 1999 March 31, 2000
-------- -------------- --------------
--------------------------------------------------------------------------------
Cash and equivalents $0.00 $0.00
Due from Shareholder $0.00 $10,000.00
--------------------------------------------------------------------------------
The Company defines cash equivalents as all highly liquid investments with a
maturity of 3 months or less when purchased.
Item 3. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
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PART II.
Item 5. Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, commonly referred to as the SEC. The public may read and
copy any materials filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is http://www.sec.gov. We
do not currently maintain our own Internet address.
We have applied for participation on the OTC Bulletin Board, an electronic
quotation medium for securities traded outside the Nasdaq Stock Market. There
can be no assurance that we will be approved for participation on the OTC
Bulletin Board. There is presently no public market for our stock.
We are authorized to issue 10,000,000 shares of common stock, $.001 par value,
each share of common stock having equal rights and preferences, including voting
privileges. The shares of our common stock constitute equity interests in the
Company. Our common stock shareholders are entitled to one vote for each share
of record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors of the Company or any other
matter, with the result that the holders of more than 50% of the shares voted
for the election of those directors can elect all of the Directors. The holders
of our common stock are entitled to receive dividends when, as and if declared
by our Board of Directors from funds legally available for dividend payments,
provided, however, that cash dividends are at the sole discretion of our Board
of Directors. In the event of liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities of the
Company and after provision has been made for each class of stock, if any,
having preference in relation to the common stock. Holders of the shares of our
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to our common stock. All of the
outstanding shares of our common stock are duly authorized, validly issued,
fully paid and non-assessable.
Dividend Policy. We have never declared or paid a cash dividend on our common
stock and we do not expect to pay cash dividends on our common stock. We
currently intend to retain our earnings, if any, for use in our business. Any
dividends declared in the future will be at the discretion of our Board of
Directors.
Stock Option Plan. We have not approved or adopted any stock option plan. Many
company's adopt stock option plans to provide compensation to officers,
employees, and directors. We may adopt such a plan in the future but have no
plans to do so currently.
Item 6. Plan of Operation
THIS REPORT SPECIFIES FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY
("FORWARD-LOOKING STATEMENTS") INCLUDING, WITHOUT LIMITATION, FORWARD-LOOKING
STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS AND FUTURE
STRATEGIES. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACTS.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD- LOOKING
TERMINOLOGY, SUCH AS "COULD", "MAY", "WILL", "EXPECT", "SHALL", "ESTIMATE",
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"ANTICIPATE", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", "INTEND" OR SIMILAR
TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-
LOOKING STATEMENTS SPECIFIED IN THIS REPORT HAVE BEEN COMPILED BY MANAGEMENT OF
THE COMPANY ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY
MANAGEMENT TO BE REASONABLE. FUTURE OPERATING RESULTS OF THE COMPANY, HOWEVER,
ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE
INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THIS REPORT REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY
AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER
CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND
OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND
AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT
THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM
ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON
THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. IN ADDITION, THOSE
FORWARD-LOOKING STATEMENTS HAVE BEEN COMPILED AS OF THE DATE OF THIS REPORT AND
SHOULD BE EVALUATED WITH CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE
OF THIS REPORT. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING
TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS REPORT ARE ACCURATE, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
Our Plan of Operation for Next 12 Months. We plan to establish relationships
with alternative medicine practitioners and others interested in promoting
alternative treatments. We will focus our initial marketing efforts on the
states of Nevada, Utah and California. We plan to market our products by
distributing brochures and price lists through the mails. Follow-up calls will
be made to promising prospects. This approach will be our primary marketing
method, although, if we gain some market acceptance, we may place advertisements
in magazines that promote various sports and activities. These sources, as well
as magazines promoting health products and targeted to the alternative medicine
practitioner, will be the main focus of our magazine advertising. At this time,
until the product gains support among alternative health care providers,
advertising the product is premature. We also must arrange for commercial
manufacture of the product, which we plan to subcontract, and for packaging and
distribution, which we will also subcontract, at least initially.
Liquidity and Available Cash for Operations. We believe our current cash
resources are not sufficient to fund our marketing and promotion activities
relating to our anti-cholesterol capsules for the next 9 months. We are not
currently generating any revenues from the sale or licensing of the
anti-cholesterol supplement. Our only external source of liquidity is the sale
of our capital stock. Fortunately, because Dr. Milne developed the
anti-cholesterol capsule, he, and not the company, paid the research and other
costs of its development.
We Have No Employees. We do not currently have any employees. We anticipate
using consultants for business, accounting, marketing and legal services on an
as-needed basis. Because we plan to enter into licensing and manufacturing
agreements with third parties when we have achieved market acceptance and
support for our anti- cholesterol capsule, we anticipate that we will require
very few employees, if any, during the next fiscal year.
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Producing Our Anti-Cholesterol Capsule. We do not own production equipment and
we do not intend to purchase any production equipment or lease a production
facility until we have completed our initial marketing efforts. We do not
believe we will have any problems purchasing the rice and Peruvian plant
products necessary to produce our anti-cholesterol capsule or that availability
of those ingredients will be significantly effected by seasonal factors. Any
time you must purchase any products from outside the United States, you
encounter many potential problems, such as political instability in the country
of origin, raises in tariff rates, fluctuations in foreign exchange rates, and
general shipping and handling supplies through customs. We believe that all of
these details are manageable risks which are common risks of purchasing supplies
outside the United States.
We May Be Forced to Recall Our Product. If we receive complaints about
side-effects, or if Dr. Milne determines that there is some type of problem with
the anti-cholesterol capsules on the market, we might recall some or all of
these capsules. For example, if there was some foreign substance contaminating
the capsules during the production process, we might recall all the capsules we
had shipped, even uncontaminated capsules, to protect the public. Government
agencies having regulatory authority for product sales might order us to recall
our product due to disputed labeling claims, manufacturing issues, quality
defects or other reasons. A product recall would damage our reputation with the
public and could put us out of business.
Our business also exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of nutritional supplement
products. We do not currently have product liability insurance, and there can be
no assurance that we will be able to obtain or maintain such insurance on
acceptable terms or, if obtained, that such insurance will provide adequate
coverage against potential liabilities. We face an inherent business risk of
exposure to product liability and other claims in the event that the development
or use of our technology or products is alleged to have resulted in adverse
effects.
Changes in Number of Employees. During the next 12 months, depending on the
success of our market expansion plan, we may be required to hire additional
employees; however, we are not able to provide a reasonable estimate of the
number of such additional employees which may be required at this time.
Item 7. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The directors and principal executive officers of the Company are as specified
on the following table: 8
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--------------------------------------------------------------------------------
Name Age Position
--------------------------------------------------------------------------------
Russell Seedborg 48 President and Director
--------------------------------------------------------------------------------
Brad Aspin 36 Secretary/Treasurer and a Director
================================================================================
Biographical Information on Company's Officers and Directors.
Russell Seedborg, age 48, is the President and a director of the Company. Mr.
Seedborg attended Saddleback Junior College in California from 1969 through 1971
and Cal Poly in Pomona, California from 1971 through 1973. He also attended
classes at the University of Nevada at Las Vegas ("UNLV") from 1989 through
1991, where he received a B.S. degree. Mr. Seedborg is currently employed as a
teacher at the Clark County School District in Clark County, Nevada. In addition
to teaching, Mr. Seedborg is attending classes at UNLV where he expects to
receive his Master's Degree.
Brad Aspin, age 36, is the Secretary/Treasurer and a director of the Company.
Mr. Aspin received his formal education at Orange Coast College and Arizona
State University, graduating in 1983. After graduation he became self-employed
in the healthcare services industry until 1987. From 1987 to 1996 he was
employed by EFC Mortgage, eventually becoming a loan officer for EFC in Orange
County, California. From 1996 to 1997 he was an executive with Interstate
Mortgage and Loan, also in Orange County, California. From 1997 to the present
Mr. Aspin has developed his own network marketing business. Mr. Aspin recently
moved to Las Vegas, Nevada.
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining either Mr. Seedborg or Mr. Aspin from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony,
nor are either Mr. Seedborg or Mr. Aspin the officers or directors of any
corporation or entity so enjoined.
Section 16(a) Beneficial Ownership Reporting Compliance. We do not know whether
all our officers, directors, and principal shareholders have filed all reports
required to be filed by those persons on, respectively, Form 3 ( Initial
Statement of Beneficial Ownership of Securities), a Form 4 (Statement of Changes
of Beneficial Ownership of Securities), or a Form 5 (Annual Statement of
Beneficial Ownership of Securities).
Item 10. Executive Compensation.
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on behalf of the Company. Officers did not receive any
compensation during the year ended March 31, 2000, as specified on the following
chart:
<TABLE>
<CAPTION>
Cash Auto Insurance Meals & Travel Housing Total
Compensation Expense Entertainment Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
R. Seedborg $0.00 N/A N/A N/A N/A N/A $0.00
B. Aspin $0.00 N/A N/A N/A N/A N/A $0.00
</TABLE>
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Shares Issued as Compensation for Services. In March 1999, we issued at total of
550,000 shares of our common stock as compensation for legal services provided
to the company by Thomas E. Stepp, Jr. and his paralegal, Richard Reincke. Those
shares were valued at what we believe was the fair market value at the time of
issuance, which was $0.001 per share. Also in March 1999, we issued 1,100,000
shares of our common stock to Thomas Krucker because he had expended the funds
to incorporate the company and provided services in connection with the
incorporation of the company. Those shares were valued at what we believe was
the fair market value at the time he expended those funds, which was par value.
Sale of Our Common Stock. In March 10, 1999, we sold unregistered shares of our
common stock in reliance on an exemption from registration provided by Rule 504
of Regulation D of the Securities Act of 1933. We sold a total of 1,000,000
shares of our common stock and received gross proceeds totaling $10,000 in cash
from approximately 24 non-accredited investors.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of March 31, 2000, by (i) each person
or entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive officers of the
Company as a group. The number of shares outstanding of our only class of common
stock was 2,650,000 at March 31, 2000.
(a) Security Ownership of Certain Beneficial Owners. The persons who own 5% or
more of thecompany's issued and outstanding common stock are specified on the
following chart.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Percent of
-------------- of Owner Nature of Class (approx.)
------------- Owner ---------------
----------
<S> <C> <C> <C>
$.001 par value Thomas Krucker 1,100,000 41.5%
Common Stock 2505 Rancho Bel Air Principal Shareholder
Las Vegas, NV 89107
$.001 par value Thomas E. Stepp, Jr. 366,667 13.8%
Common Stock 1301 Dove Street, #460 Principal Shareholder
Newport Beach, CA 92660
$.001 par value Richard Reincke 183,333 6.9%
Common Stock 4900 E. Chapman Ave. Principal Shareholder
Orange, CA 92869
</TABLE>
(b) Security Ownership of Management. The directors and principal executive
officers of the Company do not directly or beneficially own any of the Company's
common stock.
Beneficial Ownership. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power with
respect to securities. In accordance with Commission rules, shares of the
Company's common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days of the date of the table are deemed
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beneficially owned by the optionees. Subject to community property laws, where
applicable, the persons or entities named in the table above have sole voting
and investment power with respect to all shares of the Company's common stock
indicated as beneficially owned by them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
Licensing Agreement Was Not the Result of Arms-Length Negotiations. As set forth
above, in December, 1999, we licensed the rights to produce and market a natural
anti-cholesterol supplement which is taken in capsule form from Robert D. Milne,
M.D., who was, at that time, a director and major shareholder of Elast
Technologies, Inc., a Nevada corporation. Thomas Krucker, one of our principal
shareholders, was also a principal shareholder and a director of Elast
Technologies, Inc. at the time the license was acquired.
Item 13. Exhibits and Reports on Form 8-K
a) Exhibits
1 Underwriting Agreement (not applicable)
2 Plan of Merger (not applicable)
3.1 Articles of Incorporation* (Charter Document)
3.2 Certificate of Amendment to Articles of Incorporation*
(Charter Document)
3.3 Bylaws*
4. Instruments Defining the Rights of Holders (not applicable)
9. Voting Trust Agreement - Not Applicable
10.1 Material Contracts - License Agreement dated December 21, 1999 with Dr.
Robert Milne**
11. Statement Re: Computation of Per Share Earnings (included in Footnote 2 of
the Financial Statements in Item 1 of this Quarterly Report on Form 10-QSB)
15. Letter on Unaudited Interim Financial Information(not applicable)
16. Letter on change in certifying accountant (Not applicable)
18. Letter on Change in Accounting Principles (not applicable)
19. Reports Furnished to Security Holders (not applicable)
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21. Subsidiaries of the Registrant (not applicable)
22. Published Report Regarding Matters Submitted to Vote (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel
24. Power of Attorney
27. Financial Data Schedule
99 Other (not applicable)
*Previously filed as exhibits to Registration Statement on Form 10-SB filed with
the Securities and Exchange Commission on October 13, 1999.
**Previously filed as an exhibit to the Quarterly Report on Form 10-QSB filed
with the Securities and Exchange Commission on July ___, 2000.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Newport Beach, State of California, on July 3, 2000.
Desert West Marketing, Inc.,
a Nevada corporation
/s/
By: Russell Seedborg
President
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 on the
dates indicated.
DESERT WEST MARKETING, INC.
---------------------------- July 3, 2000
Director
---------------------------- July 3, 2000
Director
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Desert West Marketing, Inc.
(A Development Stage Company)
Financial Statements
As of March 31, 2000 and 1999 and
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Index to the Financial Statements
As of March 31, 2000 and 1999 and
For the Year Ended March 31, 2000, and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
Report of Independent Auditors 1
Financial Statements of Desert West Marketing, Inc.:
Balance Sheets as of March 31, 2000 and 1999 2
Statements of Operations for the Year Ended
March 31, 2000, for the Period from March 5,
1999 (Inception) to March 31, 1999 and for
the Period from March 5, 1999 (Inception) To
March 31, 2000 3
Statement of Shareholders' Equity for the Year
Ended March 31, 2000, for the Period from
March 5, 1999 (Inception) to March 31, 1999
and for the Period from March 5, 1999
(Inception) To March 31, 2000 4
Statement of Cash Flows for the Year Ended
March 31, 2000, for the Period from March 5,
1999 (Inception) to March 31, 1999 and for
the Period from March 5, 1999 (Inception) To
March 31, 2000 5
Notes to Financial Statements 6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Desert West Marketing, Inc.
We have audited the accompanying balance sheets of Desert West Marketing, Inc.
(a development stage company) as of March 31, 2000 and 1999, and the related
statements of operations, shareholders' equity, and cash flows for the year
ended March 31, 2000, for the period from March 5, 1999 (inception) to March 31,
1999, and for the period from March 5, 1999 (inception) to March 31, 2000. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Desert West Marketing, Inc. (a
development stage company) as of March 31, 2000 and 1999, and the results of its
operations and cash flows for the year ended March 31, 2000, for the period from
March 5, 1999 (inception) to March 31, 1999 and for the period from March 5,
1999 (inception) to March 31, 2000 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has limited operations and facilities, and
requires significant resources to implement its plan of operations that raises
substantial doubt about its ability to be a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Kelly & Company
Newport Beach, California
July 5, 2000
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Balance Sheets
March 31, 2000 and 1999
--------------------------------------------------------------------------------
ASSETS
2000 1999
-------- --------
Cash -- --
Due from shareholder $ 10,000 --
Accrued interest 458 --
Stock subscriptions receivable -- $ 10,000
-------- --------
Total assets $ 10,458 $ 10,000
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 1,199 --
-------- --------
Total liabilities 1,199 --
-------- --------
Shareholders' equity:
Common stock, $.001 par value;
10,000,000 shares authorized;
2,650,000 and 1,650,000 shares
issued and outstanding at March 31,
2000 and 1999, respectively 2,650 $ 1,650
Common stock subscribed -- 1,000
Additional paid-in capital 9,000 9,000
Accumulated deficit (2,391) (1,650)
-------- --------
Total shareholders' equity 9,259 10,000
-------- --------
Total liabilities and shareholders' equity $ 10,458 $ 10,000
======== ========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Operations
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ended (Inception) to (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
------------------- ------------------ ------------------
<S> <C> <C> <C>>
Revenue -- -- --
Cost of sales -- -- --
------- ------- -------
Gross profit -- -- --
General and administrative expenses $ (741) $(1,650) $(2,391)
------- ------- -------
Net loss $ (741) $(1,650) $(2,391)
======= ======= =======
Loss per common share -- -- --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Shareholders' Equity
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price Common Additional
Common Per Common Stock Paid-in Accumulated
Shares Share Stock Subscribed Capital (Deficit) Total
--------- ---------- --------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Formation of corporation,
March 5, 1999 -- -- -- -- -- --
Common stock 1,650,000 $ 0.001 $ 1,650 -- -- -- $ 1,650
Common stock subscribed -- $ 0.001 -- $ 1,000 $ 9,000 -- 10,000
Net loss -- -- -- -- $ (1,650) (1,650)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 1999 1,650,000 1,650 1,000 9,000 (1,650) 10,000
Issuance of common stock
on collection of stock
subscription receivable 1,000,000 1,000 (1,000) -- -- --
Net loss -- -- -- -- (741) (741)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 2000 2,650,000 $ 2,650 -- $ 9,000 $ (2,391) $ 9,259
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ended (Inception) to (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- ----- -------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (741) $ (1,650) $ (2,391)
Adjustments to reconcile net loss to net
cash:
Increase in assets:
Due from sharehol (10,000) -- (10,000)
Accrued interest (458) -- (458)
Increase in liabilities:
Accounts payable 1,199 -- 1,199
-------- -------- --------
Cash used in operating activities (10,000) (1,650) (11,650)
-------- -------- --------
Cash flows used in investing activities:
Cash used in investing activities -- -- --
-------- -------- --------
Cash flows provided by financing activities:
Issuance of common stock 10,000 1,650 11,650
-------- -------- --------
Cash provided by financing activities 10,000 1,650 11,650
-------- -------- --------
Net increase (decrease) in cash -- -- --
Cash at inception -- -- --
-------- -------- --------
Cash at end of period -- -- --
======== ======== ========
Supplemental Disclosure of Cash Flow Information
Interest paid -- -- --
Income taxes paid -- -- --
Supplemental Schedule of Non-cash Investing and Financing Activities
Common stock subscriptions:
Stock subscriptions receivable -- $ 10,000 --
Common stock subscribed -- $ (1,000) --
Additional paid-in capital -- $ (9,000) --
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
1. Development Stage Operations
Desert West Marketing, Inc. (a development stage company) (the "Company")
was incorporated in the state of Nevada on March 5, 1999 and has no
operating history and no revenues. The Company's initial business plan
anticipates engaging in the manufacture and/or sale of vitamins and
nutritional supplements, and to that end, has obtained an exclusive license
to manufacture and market a natural anti-cholesterol encapsulated health
supplement. The implementation of these plans requires, among other things,
significant resources and may involve the use of leased facilities and
equipment, subcontract manufacturing, consultants, outside sales
representatives, and/or merger with an operating entity. While management
believes the Company has adequate cash resources to meet its immediate
liquidity needs, the Company's ability to be a going concern is predicated
on its ability to raise additional necessary capital to implement its
plans, achievement of successful operations, and or the completion of a
merger with an operating entity. There is no assurance that any of these
will occur or be successful.
2. Summary of Significant Accounting Policies Management 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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Disclosures about Fair Value of Financial Instruments
The Company accounts for the value of financial instruments using the fair
value method.
Start-up Costs
The Company expenses start-up costs as they are incurred.
Income Taxes
The Company accounts for deferred income taxes using the liability method
in
7
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
accordance with Statement of Financial Accounting Standards No. 109.
Deferred income taxes are computed based on the tax liability or benefit in
future years of the reversal of temporary differences in the recognition of
income or deduction of expenses between financial and tax
2. Summary of Significant Accounting Policies, Continued Income Taxes,
Continued
reporting purposes. The net difference between tax expense and taxes
currently payable will be reflected in the financial statements as deferred
taxes. Deferred tax assets and/or liabilities will be classified as current
and noncurrent based on the classification of the related asset or
liability for financial reporting purposes, or based on the expected
reversal date for deferred taxes that are not related to an asset or
liability. For tax purposes the Company will be all capitalizing incurred
during the development stage.
3. Income Taxes
The components of the provision for income taxes are as follows:
2000 1999
---- ----
Current tax expense:
Federal -- --
State -- --
---- ----
Deferred tax expense:
Federal -- --
State -- --
---- ----
Total provision -- --
==== ====
Significant components of the Company's deferred income tax asset at March
31, 2000 and 1999 are as follows:
2000 1999
------- -------
Deferred income tax asset:
Capitalized start-up expenses $ 2,391 $ 1,650
------- -------
Total deferred income tax asset 2,391 1,650
Valuation allowance (2,391) (1,650)
------- -------
Net deferred income tax asset -- --
======= =======
8
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
The Company, based upon its history of losses and management's assessment
of when operations are anticipated to generate taxable income, has
concluded that it is more likely than not that none of the net deferred
income tax assets will be realized through future taxable earnings and has
established a valuation allowance for them.
9
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
3. Income Taxes, Continued
Reconciliation of the effective tax rate to the U.S. statutory rate is as
follows:
2000 1999
----- ----
Tax expense at U.S. statutory rate 34% 34%
Change in the valuation allowance (34) (34)
----- ----
Effective income tax rate -% -%
===== ===
4. Loss Per Common Share
The loss per common share has been computed by dividing the loss available
to common shareholders by the weighted-average number of common shares for
the period.
The Company does not have any potentially dilutive securities.
The computations of loss per common share for the year ended March 31, 2000, the
from March 5, 1999 (inception) to March 31, 1999, and the period from March 5,
1999 (inception) to March 31, 2000 are as follows:
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ende (Inception) to (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
<S> <C> <C> <C>
Net loss available to common shareholders $ 573 $ 1,650 $ 2,223
Weighted-average shares 2,650,000 1,000,000 2,573,077
---------- ---------- ----------
Loss per common share -- -- --
========== ========== ==========
</TABLE>
10
<PAGE>
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
--------------------------------------------------------------------------------
5. Stock Transactions
The Company issued a total of 1,650,000 common shares to founders and legal
consultants in connection with their formation of the Company. The Company
has recorded this transaction at the par value of the shares issued and
correspondingly recognized other expense of $1,650.
In 1999, the Company, in a private placement offering, sold 1,000,000
shares of its common stock at $.01 per share under Regulation D of the
securities laws and recorded as a stock subscription receivable and in 2000
collected the total stock subscription receivable proceeds of $10,000 from
twenty-four investors.
6. License Agreement
In December 1999, the Company obtained an exclusive license to manufacture
and market a natural anti-cholesterol encapsulated health supplement. Under
this agreement, the Company has the exclusive right to manufacture and
market this health supplement. In exchange for this exclusive licensing
agreement, the Company is required to pay a fee in the amount of $.10 for
each 100 capsules of product sold. The license has a term of five years
with automatic renewals for three years unless either party provides notice
prior to its expiration.
11
