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) July 5, 2000
Commission file number 000-27931
DESERT HEALTH PRODUCTS, INC.
(Exact name of registrant as specified in charter)
Arizona 86-0699108
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
8221 East Evans Road
Scottsdale, Arizona 85260
(Address of Principal (Zip Code)
Executive Office)
(480) 951-1941
(Registrant's Executive Office Telephone Number)
<PAGE>
Desert Health Products, Inc. - Page Two
Item No. 1. Changes in Control of Registrant.
No events to report
Item No. 2. Acquisition or Disposition of Assets.
No events to report,
Item No. 3. Bankruptcy or Receivership.
No events to report.
Item No. 4. Changes in Registrant's Certifying Accountant.
No events to report.
Item No. 5. Other Events.
Pursuant to the terms of the Merger Agreement with Intercontinental Capital
Fund, Inc., filed in an 8-K with the SEC on February 9, 2000, the Company has
completed its December 31, 1999 year-end Audited Financial Statements.
Copies attached as exhibits filed herewith.
Item No. 6. Resignation of Registrant's Directors.
No events to report.
Item No. 7. Financial Statements, Proforma Financial Information and
Exhibits.
Exhibits
1.1 Fiscal Year End December 31, 1999 Audited Financials statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Desert Health Products, Inc.
By: Dated: July 5, 2000
Johnny Shannon, President
<PAGE>
DESERT HEALTH PRODUCTS, INC.
FINANCIAL STATEMENTS
December 31, 1999 and 1998
TABLE OF CONTENTS
<PAGE>
Independent Auditor's Report 1
Financial Statements
Balance Sheets 2
Statements of Operations and 3
Accumulated Deficit
Statements of Changes in 4
Stockholder's Equity
Statements of Cash Flow 5
Notes to the Financial Statements 7-10
<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, 1999 and 1998 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended. 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, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended 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 F 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 F. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
May 26, 2000
Mesa, Arizona
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<TABLE>
DESERT HEALTH PRODUCTS, INC.
BALANCE SHEETS
December 31,
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
Current Assets
Cash $ 124,603 $ 18,185
Accounts receivable 26,630 -
Note receivable 360,577 71,030
Inventory 131,462 119,297
Prepaid expenses 25,000 -
============ ===========
Total Current Assets 668,272 208,512
Property and Equipment
Furniture and equipment 75,643 2,862
Less: accumulated depreciation (4,943) (590)
============ ===========
70,700 2,272
Other Assets
Deferred tax benefit - 31,926
Investments 11,177 -
Intangibles 390,125 104,458
Deposits 10,000 -
------------ -----------
411,302 136,384
------------ -----------
$ 1,150,274 $ 347,168
============ ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current Liabilities
Accounts payable $ 127,059 $ 87,802
Advances 1,000 1,000
Interest payable 11,309 -
Loans payable 272,193 182,188
------------ -----------
Total Current Liabilities 411,561 270,990
Stockholders' Equity
Preferred Stock, $.001 par value, 10,000,000 375 5
shares authorized and 375,000 shares issued and
outstanding
Common stock, $.001 par value,25,000,000 shares 6,922 4,310
authorized and 6,922,521 issued and outstanding
Subscriptions receivable (1,000) -
Additional paid in capital in excess of par value 1,554,847 274,282
Accumulated deficit (822,431) (202,419)
------------ -----------
738,718 76,178
------------ -----------
$ 1,150,274 $ 347,168
============ ===========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenue $ 253,871 $ 135,359
Cost of Sales 183,351 19,884
----------- -----------
Gross Profit 70,520 115,475
Operating Expenses 640,515 237,732
Loss from operations (569,995) (122,257)
Other income (expense)
Interest expense (20,221) (15,163)
Interest income 2,025 1,259
Miscellaneous income 105 87,000
------------ -----------
(18,091) 73,096
------------ -----------
Net Loss before provision for income taxes (588,086) (49,161)
Provision for income taxes
Deferred tax benefit (expense) (31,926) 31,926
Net Loss (620,012) (17,235)
Beginning accumulated deficit (202,419) (185,184)
------------ -----------
Ending accumulated deficit $ (822,431) $ (202,419)
============ ===========
Earnings per common share $ (0.095) $ (0.012)
============ ===========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Common Stock Preferred Stock
---------- ----------
Shares Par Value Shares Par Value
----- ----- --------- -----
<S> <C> <C> <C> <C>
Common shares issued in
1998 to:
Officers for expenses 3,355,000 $ 3,355 -- $ --
Employees for services 200,000 200 -- --
Consultants for 371,000 371 5,000 5
services
Others for cash 383,900 384 -- --
Net loss for period from -- -- -- --
inception to December
31,1998
----------- ------------ ------------- ---------
Balances, December 4,309,900 4,310 5,000 5
31,1998
Common shares issued in
1999 to:
Officers for expenses 900,000 900 -- --
Employees for services 100,000 100 -- --
Consultants for 848,000 848 5,000 5
services
Others for cash 764,621 764 365,000 365
Shareholder stock -- -- -- --
subscription receivable
Net loss for year ended -- -- -- --
December 31,1999
Balances, December 6,922,521 $ 6,922 375,000 $375
31,1999
</TABLE>
See accompanying notes to the financial statements
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
(continued)
Deficit
Stock Accumulated
Additional Subscrip- during
Paid-in tion development
Capital receivable stage Total
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Common shares issued in
1998 to:
Officers for expenses $ -- $ -- $ -- $ 3,355
Employees for services -- -- -- 200
Consultants for -- -- -- 376
services
Others for cash 274,282 -- -- 274,666
Net loss for period from -- -- (202,419) (202,419)
inception to December
31,1998
----------- ----------- ------------- ---------
Balances, December 274,282 -- (202,419) 76,178
31,1998
Common shares issued in
1999 to:
Officers for expenses -- -- -- 900
Employees for services -- -- -- 100
Consultants for 4,995 -- -- 5,848
services
Others for cash 1,275,570 -- -- 1,276,699
Shareholder stock -- (1,000) -- (1,000)
subscription receivable
Net loss for year ended -- -- (620,012) (620,012)
December 31,1999
----------- ----------- ------------- ---------
Balances, December $1,554,847 $ (1,000) $ (822,431) $ 738,713
31,1999
=========== =========== ============= =========
</TABLE>
<PAGE>
<TABLE>
DESERT HEALTH PRODUCTS, INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,1999 and 1998
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Cash received from customers $ 227,241 $ 135,359
Interest income 2,025 1,259
Miscellaneous income 105 87,000
Cash paid to suppliers and employees (804,947) (364,531)
Interest expense (8,912) (15,163)
--------- ---------
Net Cash Provided (Used) in Operating Activities (584,488) (156,076)
Cash Flows from Investing Activities
Purchase of furniture and equipment (72,781) --
Purchase of intangibles (257,391) (47,040)
Increase in notes receivable (289,547) --
Purchase of marketable securities (11,177) --
--------- ---------
Net Cash Provided by Investing Activities (630,896) (47,040)
Cash Flows from Financing Activities
Issuance of common and preferred stock 1,231,797 279,598
Increase in loans 90,005 (59,668)
--------- ---------
Net Cash Provided (Used) by Financing Activities 1,321,802 219,930
Net Increase (Decrease) in Cash and Cash 106,418 16,814
Equivalents
Beginning Cash and Cash Equivalents 18,185 1,371
Ending Cash and Cash Equivalents $ 124,603 $ 18,185
</TABLE>
========= =========
See accompanying notes to the financial statements
<PAGE>
<TABLE>
<S> <C> <C>
Reconciliation of Changes in Net Operations
to Net Cash Used by Operating Activities:
Loss from operations $(620,012) $(17,235)
Adjustments to reconcile change in loss from
operations to net cash provided (used) by
operating activities:
Depreciation 4,353 335
Amortization 12,474 2,596
(Increase) decrease in operating assets
Accounts receivable (26,630) --
Inventory (12,165) (70,003)
Notes receivable -- (71,030)
Prior period adjustment -- (2,640)
Deferred tax benefit 31,926 (31,926)
Prepaid expense (25,000) --
(Increase) decrease in operating liabilities
Accounts payable 50,566 33,827
----------- -----------
Net Cash Provided (Used) by Operating $ (584,488) $ (156,076)
Activities
============== =============
Non-cash transactions
Issuance of stock for investment $ 50,800 $ --
=============== ============
</TABLE>
<PAGE>
DESERT HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 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 are 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 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.
<PAGE>
DESERT HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 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:
1999 1998
$ 75,643
Equipment $ 2,862
Less: Accumulated Depreciation (4,843) (590)
$ 70,800 $ 2,272
NOTE C -LOANS PAYABLE
Loans payable at December 31, 1999 and 1998, consisted of the following:
1999 1998
Loans 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. $ 272,193 $ 182,188
NOTE D - INCOME TAXES
The Company has loss carryforwards totaling $694,734 that may be offset
against future taxable income. If not used, the carryforwards will expire as
follows:
Year 17 $ 3,377
Year 18 86,270
Year 19 17,000
Year 20 588,087
$ 694,734
<PAGE>
DESERT HEALTH PRODUCTS. INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE D - INCOME TAXES, cont.
A deferred tax liability results from the use of accelerated methods of
depreciation of property and equipment. A deferred tax asset results from
the difference in inventory basis due to overhead costs capitalized in
accordance with tax law and the tax benefits generated from the significant
net operating losses discussed above. Because the tax benefits from the
net operating losses far exceed the tax liabilities generated, a large tax
benefit would occur. Because of the going concern issue discussed in Note G
a 100% allowance has been placed on the recognition of any tax benefits
recognized for the net operating losses.
NOTE E - 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 years ended December 31, 1999 and 1998, a total of
$12,086 and $40,830, respectively, have been advanced to the related entity.
NOTE F - GOING CONCERN
As indicated in the accompanying financial statements, the Company's gross
revenue is not sufficient to meet its operating expenses for the years ended
December 31, 1999 and 1998. This factor creates an uncertainty regarding the
Company's ability to continue as a going concern. Management of the Company
has developed the following plan to increase its cash flows and gross
revenues.
On February 9, 2000 the Company acquired Intercontinental Capital Fund, Inc.
(ICP) in a reverse acquisition merger. ICP is a reporting public shell with
no material assets or liabilities and no operations. This acquisition
should give the Company the ability to access capital funding at an
undetermined future point in time.
The Company is contemplating a private placement funding agreement for
$1,000,000 of convertible debt financing effective August 10, 2000.
The Company acquired the inventory, trademark, formula and website of
Essential Support, L.L.C. (ES). ES has a history of being able to develop
and market successful health products in the nutrition industry.
The Company has also extended its marketing efforts to include trade shows in
conjunction with the U.S. Department of Commerce and expanding its website to
include Europe, Central America, Canada and the Far East.
The ability of the Company to continue as a going concern is dependent upon
the aforementioned ability to raise additional outside capital and/or
significantly increase its market share to return itself to profitability.
The financial statements do not include any adjustments that might be
necessary were the Company unable to continue as a going concern.
<PAGE>
DESERT HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE G - CONCENTRATIONS
For the years ended December 31, 1999 and 1998, a significant volume of sales
was concentrated with one vendor. Of the total revenue for the years ended
1999 and 1998, 63% or $144,095, and 62% or $83,857 were received from that
single source for the respective year-ends.
NOTE H - SUBSEQUENT EVENTS
Effective February 9, 2000 the Company completed a Rule 12g3 merger where in
exchange for 400,000 shares of the Company's common stock, the Company
acquired 100% of the outstanding shares of Intercontinental Capital Fund,
Inc., (a reporting company under the Exchange Act of 1934), in a transaction
where the Company was the successor. In addition, the Company paid $100,000
and issued 50,000 shares of common stock under rule 701 for legal fees.
During January 2000 the Company issued 13,000 shares of common stock in two
private placements for $13,000.
The Board of Directors approved a transaction during January 2000 with Johnny
Shannon, President and Chairman of the company, wherein Mr. Shannon received
1,000,000 shares of preferred stock, convertible to common stock at a ratio
of 1:1, and voting rights of 10:1, in exchange for the acquisition by the
Company from Shannon of certain worldwide patents and trademarks deemed to be
essential by the Board of Directors for future expansion.
During February 2000 the Company issued 3,450 shares of common stock pursuant
to Rule 701, to an outside consultant assisting the Company in bookkeeping
functions.
During May 2000 the Company issued 50,000 shares of common stock in a private
placement for $50,000. In a separate transaction the Company received a loan
of $30,000 for a period of 90 days in exchange for 25,000 shares of common
stock, and collateralized by an additional 75,000 shares of common stock.
During the first quarter of 2000 the company issued 73,500 shares of preferred
stock in sixteen private placements for $73,500.
