UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934
ACT REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to
___________________
Commission File Number: 000-27613
DESERT WEST MARKETING, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of (I.R.S. Employer
organization) Identification No.)
2505 Rancho Bel Air, Las Vegas, NV 89107
(Address of principal executive offices)
Registrant's telephone number, including area code 702.240-0124
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes X
There are 2,650,000 shares of common stock issued and outstanding
as of September 30, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited financial statements for the quarter ended
September 30, 2000.
Desert West Marketing, Inc.
(A Development Stage Company)
Index to the Financial Statements
As of September 30, 2000 and
For the Three and Six Month Periods Ended September 30, 2000 and
1999 and
For the Period from March 5, 1999 (Inception) to September 30,
2000
(Unaudited)
Financial Statements of Desert
West Marketing, Inc.:
Balance Sheet, as of September 30, 2000 2
(Unaudited)
Statements of Operations for the Three and Six 3
Month Periods Ended September 30, 2000 and 1999
and for the Period from March 5, 1999 (Inception)
to September 30, 2000 (Unaudited)
Statement of Shareholders' Equity for the Six 4
Month Period Ended September 30, 2000 and for the
Period from March 5, 1999 (Inception) to
September 30, 2000 (Unaudited)
Statement of Cash Flows for the Six Month Periods 5
Ended September 30, 2000 and 1999 and for the
Period from March 5, 1999 (Inception) to
September 30, 2000 (Unaudited)
Notes to Financial Statements (Unaudited) 6
Desert West Marketing, Inc.
(A Development Stage Company)
Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
Accrued interest $ 1,334
Due from shareholder 10,000
--------
Total assets $ 11,334
========
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 shares issued and 2,650
outstanding.
Additional paid-in capital, 9,000
Deficit accumulated during development (1,515)
stage
--------
Total shareholders' equity 10,135
--------
Total liabilities and shareholders' $ 11,334
equity
========
The accompanying notes are an integral part of the financial
statements.
See accountants' review report.
2
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Operations
For the Three and Six Month Periods Ended September 30, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to September 30, 2000
(Unaudited)
For the
Period From
Three Month Three Month Six Month Six Month March 5, 1999
Period Ended Period Ended Period Ended Period Ended (Inception) to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
Revenue - - - - -
Cost of sales - - - - -
------- -------- --------- -------- ----------
Gross profit - - - - -
Other expenses - $ (886) - $ (886) $ (2,849)
Other income $ 438 - $ 876 - 1,334
------- -------- --------- -------- ----------
Net income (loss) $ 438 $ (886) $ 876 $ (886) $ (1,515)
======= ======== ========= ======== ==========
Net income (loss) per share - - - - -
======= ======== ========= ======== ==========
The accompanying notes are an integral part of the financial statements.
See accountants' review report.
4
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Shareholders' Equity
For the Six Month Period Ended September 30, 2000 and
For the Period from March 5, 1999 (Inception) to September 30, 2000
(Unaudited)
Deficit
Accumulated
Price Common Additional During the
Common Per Common Stock Paid-in Development
Shares Share Stock Subscribed Capital Stage Total
Formation of
corporation,
March 5, 1999 - - - - - -
Common stock 1,650,000 $ 0.001 $ 1,650 - - - $ 1,650
Common stock
subscribed - 0.010 - $ 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
Net loss - - - - 876 876
--------- -------- -------- -------- -------- --------
Balance,
September 30, 2000 2,650,000 $ 2,650 - $ 9,000 $(1,515) $ 10,135
========= ======== ======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
See accountants' review report.
5
Desert West Marketing, Inc.
(A Development Stage Company)
Statement of Cash Flows
As of September 30, 2000 and
For the Three and Six Month Periods Ended September 30, 2000 and
1999 and
For the Period from March 5, 1999 (Inception) to September 30,
2000
(Unaudited)
For the
Period From
Six Month Six Month March 5, 1999
Period Ended Period Ended (Inception) to
September 30 September 30 September 30
2000 1999 2000
Cash flows from operating
activities:
Net income (loss) $ 876 $ (886) $ (1,515)
Adjustments to reconcile net
income
(loss) to net cash
Increase in assets:
Accrued Interest (876) - (1,334)
Due from shareholder - - (10,000)
Increase in liabilities:
Accounts payable - 886 1,199
------ --------- --------
Cash used in operating activities - - (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 11,650
------ --------- --------
Cash provided by financing - 10,000 11,650
activities
------ --------- --------
Net increase in cash - 10,000 -
Cash at beginning of period - - -
------ --------- --------
Cash at end of period - $ 10,000 -
====== ========= ========
Supplemental Disclosure of Cash Flow Information
Interest paid - - -
Income taxes paid - - -
The accompanying notes are an integral part of the financial
statements.
See accountants' review report.
6
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of September 30, 2000 and
For the Three and Six Month Periods Ended September 30, 2000 and
1999 and
For the Period from March 5, 1999 (Inception) to September 30,
2000
(Unaudited)
1. Basis of Presentation
In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments,
consisting of only normal recurring adjustments, necessary to
present fairly its financial position as of September 30, 2000
and the related results of its operations, shareholders'
equity and cash flows for the three and six month periods
ended September 30, 2000 and 1999 and for the period from
March 5, 1999 (inception) to September 30, 2000. The results
of operations for the three and six months ended September 30,
2000, are not necessarily indicative of the results to be
expected for the full year. These statements are condense and
therefore do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. The statements should be read
in conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10KSB for the
year ended March 31, 2000.
2. 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 with no revenues and no
products or technology ready for the market. 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 photon light activated food 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.
7
Desert West Marketing, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of September 30, 2000 and
For the Three and Six Month Periods Ended September 30, 2000 and
1999 and
For the Period from March 5, 1999 (Inception) to September 30,
2000
(Unaudited)
3. Income (Loss) Per Common Share
The income (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 computations of the income (loss) per common share for the
three and six month periods ended September 30, 2000 and 1999
and for the period from March 5, 1999 (inception) to September
30, 2000 follow.
The Company does not have any potentially dilutive securities.
For the For the
Three Month Three Month
Period Ended Period Ended
September 30, September 30,
2000 1999
Net income (loss) available
to common shareholders $ (438) $ (886)
Weighted-average shares 2,650,000 2,650,000
--------- ---------
Income (loss) per common - -
share
========= =========
For the
Period From
Six Month Six Month March 5, 1999
Period Ended Period Ended (Inception) to
September 30, September 30, September 30,
2000 1999 2000
Net income (loss)
available
to common shareholders $ 876 $ (886) $ (1,515)
Weighted-average shares 2,650,000 2,650,000 2,603,125
--------- --------- ----------
Income (loss) per common - - $ -
share
========= ========= ==========
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATIONS
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", "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.
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, 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.
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, and possibly
the use of leased facilities and equipment.
Liquidity and Available Cash for Operations. 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. However, we will have to raise
additional funds or collect funds owed to the Company to continue
with our business plan.
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.
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 would 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal actions pending against the Company nor are
any such legal actions contemplated.
ITEM 2. CHANGES IN SECURITIES
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 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. 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) (1)
3.2 Certificate of Amendment to Articles of Incorporation
(Charter Document) (1)
3.3 Bylaws (1)
10.1 Material Contracts - License Agreement dated
December 21, 1999 with Dr. Robert Milne (2)
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(included in Financial Statements in Item 1
of this Quarterly Report on Form 10-QSB)
18 Letter on Change in Accounting Principles (Not
applicable)
19 Reports Furnished to Security Holders (Not applicable)
22 Published Report Regarding Matters Submitted to Vote
(not applicable)
24 Power of Attorney (1)
27 Financial Data Schedule
99 Other (not applicable)
(1) Previously filed as exhibits to Registration Statement on
Form 10-SB filed with the Securities and Exchange Commission
on October 13, 1999.
(2) Previously filed as exhibits to Form 10-QSB for the quarter
ended December 31, 1999 filed with the Securities and
Exchange Commission on July 20, 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 Las
Vegas, Nevada, on December 6, 2000.
Desert West Marketing, Inc.,
a Nevada corporation
/s/ Russell Seedborg
By: Russell Seedborg
President