UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) March 16, 2000
Commission file Number 000-27931
DESERT HEALTH PRODUCTS, INC.
(Exact Name of Registrant as Specified in its Charter)
Arizona 86-0699108
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8221 East Evans Rd
Scottsdale, Arizona 85260
(Address of principal executive offices) (Zip Code)
(480) 951-1941
(Registrant's Executive Office Telephone Number)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Acquisition Agreement and Plan of Merger (the
"Merger Agreement") dated as of January 26, 2000 between Desert Health
Products, Inc. ("DHP"), a Arizona corporation, and Intercontinental Capital
Fund, Inc. ("ICF"), a Nevada corporation, all the outstanding shares of
common stock of ICF were exchanged for 400,000 shares of 144 restricted
common stock of DHP in a transaction in which DHP was the successor
corporation.
The Merger Agreement was adopted by the unanimous consent of the Board
of Directors of ICF on January 26, 2000. The Merger Agreement was adopted by
the unanimous consent of the Board of Directors of DHP on January 26, 2000.
The Articles of Merger were filed on February 9, 2000.
The officers of DHP will continue as officers of the successor issuer.
A copy of the Merger Agreement was filed as an exhibit to a Form 8-K on
February 10, 2000, along with the Articles of Merger.
(b) The following table contains information regarding the
shareholdings of DHP's current directors and executive officers and those
persons or entities who beneficially own more than 5% of its common stock
(giving effect to the exercise of the warrants held by each such person or
entity):
<TABLE>
Amount of Common Percent of
Stock Common Stock
Beneficially Beneficially
Name Owned (1) Owned(2)
<S> <C> <C>
Johnny Shannon - President/ Director 4,000,400 54%
Thor Lindvaag - Vice President/Director 200,000 3%
Georgia Aadland - Secretary/Treasurer 230,400 3%
Lawrence Olson - Director 102,500 1%
Raymond Quadt - Director 92,500 1%
Anthony N. DeMint 410,000 6%
</TABLE>
(1) Based upon 7,383,971 outstanding shares of common stock (subsequent to
the merger).
(2) Assumes exercise of warrants, options or other rights to purchase
securities held by the named shareholder exercisable within six months
of the date hereof.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Merger Agreement was
negotiated between ICF and DHP.
BUSINESS
Except for historical information the matters set forth herein, which
are forward-looking statements, involve certain risks and uncertainties, and
other factors which may cause the actual results, performance, or achievement
expressed or implied by such forward-looking statements to differ. There are
risks and uncertainties that the company will be unable to generate a market
for the Company's products and thus will not provide the benefits to the
Company's stockholders as anticipated. Other potential risks and
uncertainties include, but are not limited to, the market acceptance and
amount of revenues anticipated to be created, the Company's ability to raise
sufficient capital for operations.
The Company, an Arizona corporation, (the "Company") was formed in 1991
to develop dietary supplement products from natural plant extracts. The
Company is focusing its development efforts on certain plants and plant
extracts that are widely used throughout the United States and Europe to
treat a variety of diseases and physical conditions. The Company identifies
and quantifies the properties within plant sources that are believed to
provide therapeutic or other health benefits and to produce dietary
supplements.
Herbal supplements are multi-molecule compositions extracted or
otherwise derived from plants. Herbal products have been used for centuries
throughout the world to treat a variety of diseases and physical conditions.
In recent years, health consciousness and the increasing popularity of "all
natural" products have contributed to a growth in public interest in herbal
therapies.
<PAGE>
The worldwide market for natural dietary supplements is substantial.
According to NUTRITION BUSINESS JOURNAL, in 1996 approximately $3 billion was
spent in the United States for non-prescription, plant-derived dietary
supplements, with sales, according to the BOSTON GLOBE, having increased over
20% annually in the last few years. In addition, according to THE WALL STREET
JOURNAL EUROPE, approximately $6 billion was spent in Europe for prescription
and over-the-counter ("OTC") multi-molecule, plant-derived products.
The Company has implemented a commercialization strategy for its
nutritional products. The first element of this strategy entails the
development of consistent proprietary dietary supplement products. In the
United States, dietary supplements are considered food products under the
Dietary Supplement Health and Education Act of 1994 ("DSHEA") and, as such,
are not regulated as drugs by the United States Food and Drug Administration
(the "FDA") and do not require FDA approval prior to commercialization.
Physical Plants and Facilities. The Company's main offices are located
at 8221 East Evans Road, Scottsdale Arizona, and its telephone number is
(480) 951-1941, Fax No. (480) 661-7163. The facility is a leased
approximately 11,000 square foot facility utilized in the following manner:
a) administrative offices, b) professional offices, c) packaging area, d)
storage, and e) miscellaneous. The headquarters is ideal to commence the
pursuit of marketing activity throughout the United States, Europe and Asia;
however, additional facilities will be required to fulfill the anticipated
production requirements.
Technical Library - The Company maintains a technical library, which is
comprised of periodicals, trade journals, books, and other documents related
primarily to the basic sciences, government regulations and industry
materials. Specific coverage includes requirements related to the Food and
Drug Administration.
Personnel. The Company's plant personnel can be divided into three broad
categories, management and professional, administrative, and project
personnel. As in most small companies, the division between these three
categories are somewhat indistinct, as employees are engaged in various
functions as projects and work load demands.
General
The Products
Enhanced Performance IIr According to current studies, 20 to 30 million
men suffer from impotence. Studies have shown that more than 75% of all men
who experience diminished sexual performance can return to peak levels
quickly and easily without medical treatments, surgery or devices. Many men
over 40 today have low levels of testosterone, and testosterone deficit is
the primary hormonal cause of male impotence. If you increase your
testosterone level you also increase your libido for sex, and that is what
this product does. Enhanced Performance II contains many different herbs
which release free testosterone in the body for both men and women. Contains
among other things Avena Sativa, Saw Palmetto, Ginkgo Biloba, Sarsaparilla,
Damiana, L-Arginine, Nettles, Quebracho, Boron, and Zinc.
Glucosamine Complex - The Arthritis Pain Reliever Glucosamine sulfate is
an amino sugar necessary for the construction of connective tissue.
Glucosamine sulfate actually helps to rebuild the damaged cartilage in the
joint. Unfortunately, people in various injured or pathogenic states often
have difficulty manufacturing enough amino sugars. A young athlete under
connective tissue stress or an older osteoarthritis patient will both have
higher turnover rates of amino sugars. Thus, they may not be producing enough
amino sugars to replace those which are lost. For these types of situations,
supplementation with glucosamines could be the ideal way to compensate for
lowered Glucosamine levels. Glucosamine sulfate has even been compared to the
powerful pain reliever ibuprofen. Ibuprofen offered faster pain relief,
Glucosamine sulfate showed greater overall pain reduction.
Shark Cartilage Sharks rarely, if ever, get cancer. It is the large
amount of cartilage that gives sharks their immunity to cancer. Current
research and published scientific papers now show that Shark Cartilage will
inhibit the formation of the new blood capillary network needed to feed a
growing tumor. Without a capillary network to feed a tumor and remove its
wasted products, a tumor in metastasis will not grow. Without new and
replacement capillaries, tumors will slowly shrink in size. Scientists
published findings that an extract of Shark Cartilage contains a protein
substance that strongly inhibits the development of a new blood network. This
inhibitor is a large protein molecule found most abundantly in Shark
<PAGE>
Cartilage. Most people who have well formed blood networks will not need new
vascularization unless a blood vessel-dependent malady such as a tumor begins
to develop. Deny the network, and you will probably stop the tumor. Pregnant
women and people who have recently experienced a heart attack should
obviously not take Shark Cartilage.
NaturaLeanTM Would you like to have a product that helps you lose weight
and also lower your blood cholesterol? We have it. Research has shown that
reducing fat intake is essential for building health and longevity. Excess
dietary fat is the primary cause of obesity, heart disease, high blood
pressure, diabetes, arteriosclerosis and other diseases. This unique weight-
loss product helps reduce the amount of fat your body absorbs from the food
you eat. This natural supplement binds with fat in the digestive system and
prevents it from passing into the bloodstream. Instead, the fat is eliminated
by normal body functions. It does not interfere with the absorption of the
valuable oils, vitamins and minerals your body needs. NaturaLean also
contains cholesterol lowering agents.
Lyco/MenTM Prostate cancer is the second leading cancer killer of men.
Approximately one out of nine men will develop prostate cancer during their
lifetimes. Prostate cancer symptoms include an enlarged prostate caused by
cancerous cells. Desert Health is proud to introduce a supplement designed
with a synergistic blend of nutrients that support male prostate health based
on current scientific knowledge. Desert Health Saw Palmetto Lyco/Men is great
news for men over the age of 40. Starting at this age, the prostate may not
show any pathological change or it may undergo progressive enlargement.
Nature provides us with extraordinary nutrients for optimum prostate health.
We make it our business to keep our male consumers healthy with our
dynamically formulated Saw Palmetto Lyco/Men.
NiteLean PlusTM Lose Weight While You Sleep Obesity is clearly
associated with high blood pressure, elevated levels of cholesterol, adult
diabetes, increased risk of cancer of the colon, rectum and prostate in men,
and cancer of the gallbladder, the bile passages, breasts, cervix, uterus and
ovaries in women. Now it is time to consider NiteLean Plus, a new and
exciting weight loss program that is designed to enable you to lose weight
while you sleep. This new and exciting product is a tested and proven safe
weight loss program, with all natural ingredients that have been shown to be
effective in stimulating the body to burn up excess calories by causing the
body to increase the production of growth hormones that allow your system to
dispose of extra calories.
Brain BoostTM Your brain is a computer. Probably the most hard-working
organ in your body, it controls everything you do. And because it complains
little, and it demands no maintenance, we take it for granted. Unlike any
other organ in our body, we expect it to come with a life-time warranty. But
does it? It remembers that the capital of Hungary is Budapest, not Bucharest,
but it forgets where you left the remote control. And, whatever you may
think, we need to take care of it. We look after our eyes, we moisturize our
skin, and we spend a lot of money showing our teeth to the dentist. Isn't it
time we pay more attention to this piece of hardware we call the BRAIN -and
its software we call the MIND? Your upgrade is called Brain Boost. A totally
new "formula" incorporates several natural phytochemicals such as the
patented Leci PS, Phosphatidyl Serine, Ginkgo Biloba and Coenzyme Q10 known
as the "spark of life" or the "energy enzyme".
Melatonin Time-Released Melatonin is a pharmaceutical grade supplement
designed to improve sleep. It is chemically identical to the Melatonin
produced by the human body during the hours of darkness. Because sleep is so
important to overall health, our Time-Released Melatonin may also help
strengthen your immune system, protect you from disease and reduce the
effects of aging. Desert Health's Time-Released Melatonin is unique because
of its time-release delivery system. It supplies Melatonin throughout the
night, the way your own body does. This powerful supplement is ideal for
everyone who seeks deeper and more nourishing sleep. It can also help you
counter the effects of jet lag or shift work. Thousands of clinical trials
have shown that Melatonin is completely safe and non-addictive. It produces
no "sleeping pill hangover" and is without any side effects.
Desert BoostTM -The Whole Desert In One Caplet For the first time in
history you can now get all the nutrients from Pollen, Propolis, Royal Jelly
and Aloe Vera in one caplet. Now you don't have to take all those pills to
increase your energy and immune system, rejuvenate your body and skin. Our
Desert Boost caplet will do all these things and much more.
Euro FiberTM Euro Fiber wafers help fill the need for today's diet.
These fiber wafers contain a complete profile of all four types of dietary
fiber, cellulose, pectin, hemicellulose and lignin. This fiber is a great
snack or dieting aid, giving a full, satisfying feeling.
<PAGE>
Selenium PlusTM Selenium improves the function of white cells (T
lymphocytes) which are the body's chief defense against viruses and cancer.
Selenium supplements are not effective for preventing skin cancer but may
help protect against cancers of the lung, colon, rectum and prostate,
according to an article in The Journal of the American Medical Association.
Progesterone/Yam Cream Leading medical researchers have discovered that
wild yam may have important health benefits associated with misery and
discomfort of PMS, menopause and prevention of osteoporosis. A feeling of
euphoria, well being, happiness and energy may be experienced with this
moisturizing skin cream, which stimulates the body's own production and
regulation of Estrogen, Progesterone, Testosterone and other hormones.
Aloe Vera and Propolis Cream Aloe Vera has traditionally been used to
successfully treat burns and cuts. Desert Health utilizes only the highest
grade and quality of Aloe plants and employs the latest "cold process" method
in aloe processing technology to ensure quality products. unequaled in the
industry.
Shampoo/Conditioner with Pollen Our Shampoo/Conditioner with Pollen is
highly concentrated. You need only a few drops to give your hair a luxurious
lather. The Shampoo has no alcohol or water added to its base of Aloe Vera
and Royal Jelly. The Aloe and Pollen formula gives your hair a beautiful
shine, body and manageability.
Grape Seed Complex Grape Seed Complex is a powerful, free-radical
scavenger that can boost your body's defense system against numerous health
disorders. The Grape Seed Extract, Grape Skin Extract, Ester-C, Aloe Vera and
Wild Yam are synergistically blended and provide a wonderful anti-oxidant and
immune building supplement.
Super Minerals w/AloeTM Minerals are the basic building blocks of life.
Without them, health deteriorates, disease sets in and body functions fail.
Our minerals come in two different flavors, Kiwi and Lemon. Our minerals are
naturally chelated in their "organic" form and that allows them to be rapidly
assimilated for our health.
AlcotrolTM Many nations have tried to combat its epidemic alcohol
problem with everything from expensive therapies to prohibition. The Chinese
have long relied on a simple remedy, an extract of kudzu root. This herb is
extraordinarily effective and it takes away the cravings for alcohol, an
American study indicates. Desert Health's product has kudzu root.
Pau d'Arco A bitter herb that contains a natural antibacterial agent, it
has a healing effect and cleanses the blood. Good for smoker's cough, warts,
all types of infections, diabetes, ulcers, rheumatism, allergies, tumors and
liver disease. Especially good for pain connected with cancer. It is a
detoxifier and enhances the immune system.
Aloe Vera Juice Aloe Vera is believed to improve digestion and
assimilation of food. Aloe Vera is also known for its ability to stimulate
the growth of living cells, is reputed to enhance the immune system and to
improve the appearance and condition of both skin and hair. Our Aloe Vera
Juice has added natural orange flavor and honey.
Ultra Aloe BlendTM Our Ultra Aloe Blend is a nutritious drink of Aloe
Vera, Chlorella and Herbs synergistically blended for maximum utilization and
specifically formulated for detoxification. It also contains Honey, Ginkgo
Biloba and Ginseng.
Animal Oriented Products
Heat Lotion Contains a large percentage of Aloe Vera along with Methyl
Salicylate which helps to naturally relieve strains and sprains and also
helps reduce swelling in large and small animals.
Shampoo with Essential Oils Shampoo w/Essential Oils works well for
horses allergic to flies. For best results use at least once a week. Buffered
to the average pH of the skin of mammals and is mild to the skin and eyes.
Leaves the coat bright and sparkling.
<PAGE>
Shampoo with Blueing Shampoo with Blueing is a concentrated shampoo
containing Aloe Vera that may aid in relief of minor scrapes and skin
irritations. Shampoo with Blueing uses a safe blueing agent which helps take
out yellow, grays and greens, instead of using chemicals used in UV
absorbers. This product is designed to remove dirt, oil, perspiration, and
reduce matting without drying or irritating the skin. Aloe Vera, Protein,
Jojoba Oil and Panthenol help to promote a healthy, shiny manageable coat.
Shampoo with Blueing leaves the lighter color animals looking brighter and
whiter, but it also works well with darker color animals which leaves the
coat looking brilliant and healthy.
Aloe Coat ConditionerTM Aloe Coat Conditioner applies natural
emollients and glossing agents to the coat. Aloe Coat Conditioner leaves the
coat sparkling and maintains the healthy good looks of the coat between
shampooing. Aloe Coat Conditioner is an effective product for use on show
animals - leaving the coat sparkling. Conditioner is pH buffered to condition
the skin of the animal and is mild to the eyes. Aloe Vera contained in this
formula is a natural healing agent for minor scrapes and skin irritations.
Highly effective for the mane and tail feeling like silk and reducing
tangles.
Vet Cream Vet Cream contains 80% Aloe Vera Gel and allows the
application of a high concentration of this natural agent in a manner that
will enable the aloe vera to remain in close contact with the affected area.
Most skin conditions, whether they are the result of injury, diseases,
topical bacteria or fungi, will cause the traumatized area to become very
dry. This cream contains natural lubricants and proteins to help alleviate
the dry condition.
Hoof & Nail Conditioner and Rebuilder Hoof & Nail Conditioner and
Rebuilder is a cream for the treatment of the hoof with natural proteins and
lubricants in a base of aloe vera which helps to promote healthy growth and
for the application to any hoof or nail suffering damage. Works well to
promote healthy nails and skin. It is also used for chapped lips and is
soothing and healthy for people who have their hands in water resulting in
irritated red skin.
Aloe Vera Gel Aloe Vera Gel is designed to apply the highest
concentration of Aloe Vera to an affected area in the event of an injury or
condition for which the use of Aloe Vera is indicated. This product provides
an immediate soothing effect. Aloe Vera Gel has also been used on people for
the treatment of sunburns and cooking burns with immediate relief. It is
especially soothing for sunburns when kept in the refrigerator for a cooling
effect. This product has also been used for dry skin in the mane. Just rub it
in close to the skin. Non-greasy.
Pet Deodorizer and Conditioner Pet Deodorizer is used on animals that
produce an offensive odor. This product not only rids the animal of the odor
with the latest odor control technology called neutronic odor control, but
leaves a very fresh smell, while also conditioning the coat of the animal
giving it additional softness.
Pet Supplement Pet Supplement contain Honeybee Pollen, a source of
Vitamins, Proteins, Enzymes and Amino Acids. The vitamins contained in
honeybee pollen include Inositol, Vitamin B-12, Vitamin D, Biotin, Thiamin,
Nicotonic Acid, Folic Acid, Vitamin B-6, Vitamin C and Panthothentic Acid.
Honeybee Pollen also contains all essential amino acids and a variety of
enzymes necessary for metabolic action in both humans and animals. Pet
Supplements also contains Trace Minerals which completes a balanced
combination of natural elements essential to the development and well-being
of pets. This product was designed to meet the nutritional and dietary needs
of pets of all ages, sizes and physical conditions and maintains proper body
weight, energy and metabolism.
Spray Bandage Spray cleansed area and allow the product to bridge over
the fur. Allow to dry to form protective barrier. Traveling with your horse,
Spray Bandage is a must! The Spray Bandage applies Aloe Vera directly to the
wound while forming a light protective barrier over the area - keeps wound
clean and insect free - while Aloe Vera helps promote healing. Water
resistant, but easily removed with soap and water. On a wound that requires
stitches, Spray Bandage can be used to keep the dirt and insects out while
aiding the healing process. This product can be used over medication.
Trailering your horse, Spray Bandage is a must!
Litigation
The Company is involved from time to time in routine legal matters
incidental to its business. Management believes that the resolution of such
matters will not have a material adverse effect on the Company's financial
position or results of operations.
<PAGE>
Property
The Company's principal office is located at 8221 East Evans Road,
Scottsdale Arizona, and its telephone number is (480) 951-1941, Fax No. (480)
661-7163, Email address: [email protected], Web site : www.dhpi.com.
Description of Securities
The Company's Articles of Incorporation authorizes the issuance of
25,000,000 shares of common stock, $.001 par value per share, of which
7,383,971 shares were outstanding as of March 16, 2000, and 10,000,000 shares
of preferred stock, of which approximately 1,280,000 shares were outstanding
as of March 16, 2000. Holders of shares of common stock are entitled to one
vote for each share on all matters to be voted on by the stockholders.
Holders of common stock have no cumulative voting rights. Holders of shares
of common stock are entitled to share ratably in dividends, if any, as may be
declared, from time to time by the Board of Directors in its discretion, from
funds legally available therefore. In the event of a liquidation,
dissolution or winding up of the Company, the holders of shares of common
stock are entitled to share pro rata all assets remaining after payment in
full of all liabilities. Holders of common stock have no preemptive rights
to purchase the Company's common stock. There are no conversion rights or
redemption or sinking fund provisions with respect to the common stock. All
of the outstanding shares of common stock are validly issued, fully paid and
non-assessable. The President of the Company holds 1,000,000 shares of
preferred (convertible to common on a 1:1 basis) which shares have voting
privileges of 10 votes for each share.
MANAGEMENT
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows:
<TABLE>
Name Age Title
<S> <C> <C>
Johnny Shannon 63 Chief Executive Officer, Chairman, President,
and Director
Georgia Aadland 62 Secretary/Treasurer
Thor Lindvaag 52 Director, Sr. Vice President of International
Marketing
Lawrence G. Olson 58 Director
Raymond A. Quadt 84 Director
</TABLE>
Duties, Responsibilities and Experience
Johnny Shannon has been President and a Director of the Company since 1996.
From 1991 - 1996 Mr. Shannon was at various times a Director of Baywood
International, Inc., a publicly traded corporation and was a major shareholder
in that corporation.
Georgia Aadland. is Secretary/Treasurer of the Company since 1997 and a
Director. From 1991 - 1996 Ms. Aadland was a director, corporate secretary,
office manager, and Vice President of Operations of Baywood International,
Inc.
Thor Lindvaag. Director and Senior Vice President of International Marketing
of the Company since 1996. 1991 - 1996, Mr. Lindvaag was President of Trim &
Fit International; 1988 - 1991 was Managing Director of Arizona Health
Holding.
Lawrence G. Olson, Director of the Company, is currently an officer and
director of Olson Precast of Arizona, Inc. Mr. Olson has been a director of
several public companies, including the Phoenix National Bank. Mr. Olson
graduated from the School of Engineering at the University of Southern
California in 1959.
Raymond A. Quadt. Director of the Company. Mr. Quadt received a Bachelor of
Science degree from Rutgers University, an M. A from Columbia University and
an M.S. from Stevens Institute of Technology. He has been an officer and
director of a number of companies including Sun State Bancshares, Inc.,
Republic National Bank, and is a member of the American Society of Metals.
<PAGE>
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Desert Health Products was the successor company and its officers and
directors maintained their positions post merger.
ITEM 7. FINANCIAL STATEMENTS
Financial statements of Desert Health Products are filed herewith.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
EXHIBITS
1.1* Agreement and Plan of Merger between Intercontinental Capital Fund, Inc.
and Desert Health Products, Inc.
1.2* Articles of Merger between Intercontinental Capital Fund, Inc. and
Desert Health Products, Inc.
1.3** Desert Health Products, Inc. Audited Financials Pre Merger
______
*filed by Form 8-K on February 10, 2000
**filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
DESERT HEALTH PRODUCTS, INC.
By /s/ Johnny Shannon
Johnny Shannon, President
Date: March 16, 2000
DESERT HEALTH PRODUCTS, INC.
FINANCIAL STATEMENTS
December 31, 1998 and June 30, 1999
<PAGE>
Independent Auditor's Report
Board of Directors and Stockholders
Desert Health Products, Inc.
I have audited the accompanying balance sheets of Desert Health Products,
Inc. as of December 31, 1998 and June 30, 1999, and the related statements of
operations, changes in stockholders' equity and cash flows for the year
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Desert Health Products, Inc.
as of December 31, 1998 and June 30, 1999, and the results of its operations
and its cash flows for the year ended December 31, 1998 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 G to the
financial statements, the Company has suffered substantial recurring losses
from operations that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note G. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ James Raftery
September 19, 1999
Mesa, Arizona
<PAGE>
TABLE OF CONTENTS
Independent Auditor's Report 1
Financial Statements
Balance Sheets 2
Statement of Operations and Accumulated Deficit 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6-8
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
BALANCE SHEETS
December 3 1, June 30,
1998 1999
ASSETS
<S> <C> <C>
Current Assets
Cash 18,185 $ 11,143
Note Receivable 71,030 104,112
Inventory 119,297 143,443
------------- -----------
Total Current Assets 208,512 258,698
Proper(y and Equipment
Furniture and Equipment 2,862 10,830
Less: accumulated depreciation (590) (882)
------------- -----------
2,272 9,948
OtherAssets
Deferred tax benefit 31,926 39,187
Trademarks, net of amortization 104,458 105,756
Deposits - 10,000
------------- -----------
136,384 154,943
------------- -----------
$ 347,168 $ 423,590
========== =========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 87,802 $ 130,543
Advances 1,000 1,000
Current portion of long term debt 182,188 200,954
------------- -----------
Total Current Liabilities 270,990 332,497
Stockholders' Equity
Common stock, $.001 par value, 25,000,.000
shares
authorized and 5,736,121 issued and 4,305 5,736
outstanding
Subscriptions receivable - (1,000)
Preferred Stock, $.001 par value,
10,000,000 shares
authorized and 10,000 shares issued and 5 10
outstanding
Additional paid in capital in excess of par 274,287 625,199
value
Accumulated deficit (202,419) (538,852)
------------- -----------
76,178 91,093
------------- -----------
$ 347,168 $ 423,590
========== ========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC
STATEMENT OF OPERATION AND ACCUMULATED DEFICIT
Year Ended December 31, 1998
<S> <C>
Revenue $135,359
Cost of sales (19,884)
------------------
Gross Profit 115,475
Operating Expenses 237,732
------------------
Loss from Operations (122,257)
Other income (expense)
Interest expense (15,163)
Interest income 1.259
Miscellaneous income 87,000
-------------------
73,096
------------------
Net loss before provision for income taxes (49,161)
Provision for income taxes
Deferred tax benefit 31,926
-------------------
Net Loss (17,235)
------------------
Beginning accumulated deficit (185,184)
------------------
Ending accumulated deficit $(202,419)
==========
Earnings per common share $(0.012)
==========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 31, 1998
<S> <C>
Common Stock
Balance at the beginning of the year $ -
Par value of shares issues
1998 - 4,309,900 shares at $.001 4,305
-------------
BALANCE AT END OF YEAR $ 4,305
===========
Preferred Stock
Balance at the beginning of the year $ -
Par value of shares issues
1998 - 4,309,900 shares at $.001 5
-------------
BALANCE AT END OF YEAR $ 5
===========
Additional Paid-In Capital
Balance at the beginning of the year $ -
Proceeds in excess of par value of
Shares of common stack issued: 274,287
----------
BALANCE AT END OF YEAR $ 274,287
===========
Balance at beginning of year $(185,184)
Net loss for the year (17,234)
-------------
BALANCE AT END OF YEAR (202,419)
------------
TOTAL STOCKHOLDERS' EQUITY $76,178
============
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1998
<S> <C>
Cash Flows from Operating Activities
Cash received from customers $ 135,359
Interest 'income 1,259
Miscellaneous income 87,000
Cash paid to suppliers and employees (364,531)
Interest expense (15,163)
----------
Net Cash Provided (Used) in Operating Activities (156,076)
Cash Flows from Investing Activities
Cash used for purchase of trademarks (47,040)
Additional paid in capital in excess of par value 275,288
----------
Net Cash Provided by Investing Activities 228,248
Cash Flows from Financing Activities
Cash Provided by notes and loans
Issuance of common stock 4,305
Issuance of preferred stock
Payments on notes and loans (59,668)
----------
Net Cash Provided (Used) by Financing Activities (55,358)
Net Increase (Decrease) in Cash and Cash Equivalents 16,814
Beginning Cash and Cash Equivalents 1,371
----------
Ending Cash and Cash Equivalents $ $ 18,185
===========
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Reconciliation of Changes in Net Operations to Net Cash Used
by Operating Activities:
Loss from operations $ (17,235)
Adjustments to reconcile change in loss from operations
to
net cash provided (used) by operating activities:
Depreciation 335
Amortization 2,596
(Increase) decrease in operating assets
Inventory (70,003)
Notes receivable (71,030)
Prior period adjustment (2,640)
Deferred tax benefit (31,926)
Increase (decrease) in operating liabilities
Accounts payable 33,827
-----------
Net Cash Provided (Used) by Operating Activities $(156,076)
===========
</TABLE>
<PAGE>
DESERT HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and June 30, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Desert Health Products,
Inc. (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations
of the Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principals and have been consistently applied in the preparation
of the financial statements.
Nature of Operations
The Company was incorporated in the state of Arizona on July 21, 1991 to
develop dietary supplement products from natural plant extracts. The Company
is focusing its development efforts on certain plants and plant extracts that
are widely used throughout the United States and Europe to treat a variety of
diseases and physical conditions. The Company identifies and quantifies the
properties within plant resources that are believed to provide therapeutic or
other health benefits and to produce dietary supplements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the company considers all short-
term debt securities purchased with a maturity of three months or less to be
cash equivalents.
Inventories
Inventories consist primarily of health food supplements and vitamin products
and are stated at the lower of cost (first-in, first-out) or market value.
Depreciation
Depreciation is computed by using the straight-line method for financial
reporting purposes and the accelerated cost recovery method for federal
income tax purposes.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of certain assets and
liabilities for financial and tax reporting. The deferred taxes represent
the future tax return consequences of those differences, which will either be
taxable when the assets and liabilities are recovered or settled.
Use of 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 disclose 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.
<PAGE>
DESERT HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and June 30, 1999
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged against operations. /renewals and betterments that
materially extend the life of the assets are capitalized.
Property and equipment are summarized by major classifications as follows:
<TABLE>
1998 1999
<S> <C> <C>
Equipment $ 2,862 $ 10,830
Less: Accumulated Depreciation (590) (882)
----------------- ----------------
$ 2,272 $ 9,948
================ =================
</TABLE>
NOTE C -LONG TERM DEBT
Long term notes payable at December 31, 1998 and June 30, 1999, consisted of
the following:
<TABLE>
1998 1999
<S> <C> <C>
Demand notes payable to various
individuals bearing Interest rates of
10% to 25% secured by major assets of
the company and personally guaranteed
by the major shareholder of the
corporation. Due and payable on
demand.
$ 182,188 $ 200,954
</TABLE>
NOTE D - INCOME TAXES
The Company has loss carryforwards totaling $106,647 that may be offset
against future taxable income. If not used, the carryforwards will expire as
follows:
<TABLE>
<S> <C>
Year 18 $ 3,377
Year 19 86,270
Year 20 17,000
-------------
$ 106,647
==============
</TABLE>
<PAGE>
DESERT HEALTH PRODUCTS. INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and June 30, 1999
NOTE D - INCOME TAXES, cont..
Deferred tax assets consist of the following:
<TABLE>
1999 1998
<S> <C> <C>
Current $31,926 $39,187
</TABLE>
NOTE E - STOCKHOLDER'S EQUITY
On August 16, 1996, the number of authorized shares of common stock and
preferred stock was increased to 25,000,000 and 10,000,000, respectively. At
December 31, 1998 and June 30, 1999 there were 4,309,900 and 5, 000 shares
issued and 5,736,121 and 10,000 respectively, of common and non-cumulative
preferred stock. The par value of the stock is $.001 for December 31, 1998
and June 30, 1999.
NOTE F - RELATED PARTY TRANSACTIONS
The Company is affiliated with another corporation to whom they sell product,
advance money for operating expenses and sublease their operating facilities
on a month-to-month basis. These two companies have a common majority
shareholder. For the year December 31, 1998 and the six months ended June
30, 1999, a total of $40,830 and $56,237, respectively, have been advanced to
the related entity.
NOTE H - GOING CONCERN
As indicated in the accompanying financial statements, the Company's gross
revenue is not sufficient to meet its operating expenses for the year ended
December 31, 1998. Additionally, as of that date the Company's current
liabilities exceeded its current assets by $62,478. Those factors create an
uncertainty regarding the Company's ability to continue as a going concern.
Management of the Company has developed the following plan to reduce its
liabilities and increase its gross revenues as follows. A registered 504(d)
public offering of $995,000 and the acquisition of Essential Support, LLC a
line of dietary/nutritional supplements and vitamins for women. A stock
exchange agreement was executed between the Company and Essential Support,
LLC on July 1, 1999. The ability of the Company to continue as a going
concern is dependent upon the aforementioned public offering. The financial
statements do not include any adjustments that might be necessary were the
Company unable to continue as a going concern.
NOTE I - CONCENTRATIONS
For the year ended December 31, 1998, a significant volume of sales were
concentrated with one vendor. Of the total revenue for the year, 62% or
$83,857 was received from that single source.
