FORM 10-KSB

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 1998.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ____________.

          PALM DESERT ART, INC. (formerly DATABASE TECHNOLOGIES, INC.)
             (Exact name of registrant as specified in its charter)

        Delaware                     0-17623                    02-0429620    
(State of Jurisdiction)      (Commission File Number)      (IRS Employer ID No.)

39-725 Garand Lane, Suite J, Palm Desert, California              92211    
(Address of Principal Executive Offices)                       (Zip Code)

Registrant's telephone number, including area code 760-360-5911

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                                                   Name of each exchange on
     Title of each class                               which registered
     -------------------                               ----------------

Common Stock $.001 par value                  NASD OTC Electronic Bulletin Board

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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 filing  requirements for the
past 90 days. Yes _XX_   No ____.

Indicate by check mark if the disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form 10- K or any
amendments to this form 10-K. [ ].

Based on the closing sales price of $.0625 on June 9, 1998, the aggregate market
value of the voting stock held by non-affiliates of the registrant was $225,152.
The number of shares  outstanding of the  registrant's  common stock,  $.001 par
value was 25,000,000 on April 30, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

Location in Form 10-K                                    Incorporated Document

Part IV
Items 14(C) - Reports on Form 8-K               Form 8-K filed on May 7, 1998
                                                Form 8-K/A filed on July 7, 1998



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                              PALM DESERT ART, INC.
                     (formerly DATABASE TECHNOLOGIES, INC.)


                                TABLE OF CONTENTS

Part I                                                                      Page
------                                                                      ----

Item 1   Business...........................................................  1
         A. Historical Background
         B. Certain Transactions During the
            Reporting Period and Recent Developments
         C. Current Business Operations
         D. Risk Factors
Item 2   Properties ......................................................... 6
Item 3   Legal Proceedings .................................................. 7
Item 4   Submission of Matters to a Vote of Security Holders ................ 7

Part II

Item 5   Market for Registrant's Common Equity and
         Related Stockholders Matters ....................................... 8
Item 6   Management's Discussion and Analysis of
         Financial Condition and Results of Operations ...................... 9
Item 7   Financial Statements ...............................................11
Item 8   Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure..............................12

Part III

Item 9   Directors and Executive Officers of the
         Registrant..........................................................12
Item 10  Executive Compensation..............................................13
Item 11  Security Ownership of Certain Beneficial Owners
         and Management......................................................13
         a. Section 16(a) Beneficial Ownership
            Reporting Compliance
Item 12  Certain Relationships and Related Transactions .....................15

Part IV

Item 13  Exhibits and Reports on Form 8-K....................................15



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                              PALM DESERT ART, INC.

                     (formerly Database Technologies, Inc.)

                                     Part I

Item 1 Business

Historical Background

The  Registrant  was  incorporated  under the laws of the State of  Delaware  on
November 4, 1988,  under the name of Database  Technologies,  Inc. to engage in,
among other lawful  activities,  the business of owning and operating a database
which was  transferred  to it by Pathfinder  Data Group Inc.  ("Pathfinder"),  a
Colorado  corporation.  The database provided  information  assisting  insurance
property  adjusters in replacing  insured's  losses by identifying  discontinued
products  and  the  current  like  kind  and  quality   replacement  models  and
replacement values.

Although several small insurance companies used the Registrant's  system, one of
its larger customers  representing 50% of its revenues cancelled its contract in
October 1989 and a second customer  representing 30% of its revenues elected not
to renew its contract in 1994. The Registrant continued to suffer a downtrend in
sales in the last few quarters of its operations.

The  Registrant's  operating  cash  flow  became  insufficient  to  finance  its
operations   causing   the   Company   to  borrow   cash   from  its   principal
stockholder/officer  to enable it to meet its operating cash flow  requirements.
Larger and better capitalized competitors than the Registrant entered the market
with products that offered many of the same  features that  Registrant  had been
offering thus increasing the pressure for increased  revenues.  Eventually,  the
Registrant began exploring possible asset sales and/or merger transactions in an
effort to diversify  its business with another  business  which would be able to
generate positive cash flow.

Certain Transactions and Other Events During the Reporting Period
and Recent Developments

In April 1998, after several months of negotiations,  the Registrant concluded a
transaction  with Palm Desert Art Publishers,  Ltd., LLC, whereby the Registrant
acquired  substantially  all of the  assets of Palm  Desert  Art  Publishers  in
exchange for approximately 80.34% of Registrant's authorized stock. On April 22,
1998, in  consideration  of 32,763,661 of its $.001 par value common stock,  the
Registrant  purchased all of the assets of Palm Desert Art Publishers,  Ltd. LLC
("Palm Desert")  pursuant to an Asset Purchase and Subscription  Agreement dated
February 5, 1998.

Of the total  consideration,  20,083,918 shares of the Registrant's common stock
was  delivered to Palm Desert at the closing.  The remaining  12,679,743  shares
were  to be  delivered  to  Palm  Desert  upon  the  Registrant's  holding  of a
shareholders'  meeting to,  among  other  things,  authorize a reverse  split of
Registrant's  stock.  At  the  close  of  the  transaction,  Palm  Desert  owned
approximately  80.34% of the  25,000,000  shares of common  stock which had been
authorized and issued by Registrant.

                                        

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In  connection  with this  transaction,  Palm Desert,  as majority  shareholder,
accepted the  resignations  of Robert A. Boyd and Betty L. Wolfe as officers and
directors of the  Registrant  and appointed  Hugh G. Pike and Jurg  Mullhaupt to
serve as directors. Mr. Allan S. Wolfe remained as a director of the Registrant.
Mr. Pike was elected  President  and  Treasurer  of  Registrant  and Ms.  Sandra
Mitchell serves as Secretary and Vice President of Marketing.  (On June 12, 1998
Ms.  Mitchell  resigned as Secretary and Mr. John  Anderholt was elected to fill
the vacancy.)

Also on April 22,  1998,  the  Registrant,  Palm  Desert  and Allan S.  Wolfe (a
shareholder,  officer,  director and creditor of Registrant)  concluded an Asset
Purchase  Agreement dated February 5, 1998,  pursuant to which Registrant agreed
to transfer to Wolfe  certain  software  assets of  Registrant  together  with a
promissory  note from  Registrant  in favor of Wolfe in the amount of $90,000 in
exchange for Wolfe's  agreement to discharge  Registrant's  debt to Wolfe in the
amount of $184,000. To induce Wolfe to accept Registrant's promissory note, Palm
Desert agreed to guaranty  payment of the note and to pledge to Wolfe all shares
of the capital stock of Registrant  which Palm Desert  acquired  under the Asset
Purchase and Subscription Agreement as security for the guaranty.

Immediately prior to closing the aforementioned transactions,  it was discovered
that Registrant's Certificate of Incorporation had lapsed by proclamation of the
State of Delaware.  Registrant  was able to renew and revive its  Certificate of
Incorporation,  however,  it was  required to do so using a new  corporate  name
inasmuch as another  company  had since  registered  in Delaware  under the name
"Database Technologies." Accordingly (and in contemplation of the aforementioned
transactions),  Registrant  renewed and revived its Certificate of Incorporation
using the name "Palm Desert Art,  Inc." and is presently in good standing in the
State of Delaware.

On April  24,  1998,  the  Registrant  agreed  to sell  2,450,000  shares of its
outstanding  $.001 par value  common  stock (the  "Shares")  to Sencorp  Ltd., a
private company located at National  Westminster Bank Building,  Gibraltar.  The
shares were sold  pursuant to  Regulation S for $245,000 on April 24, 1998,  the
date  both   parties   executed  the  Offshore   Subscription   and   Investment
Representation  Agreement. The proceeds were to be used for Registrant's working
capital needs over the following months.

On July 14, 1998, a  shareholders  meeting was held at the corporate  offices of
the  Registrant  in Palm Desert,  California.  At that meeting the  shareholders
approved a 10-for-1 reverse stock split and authorized the board of directors to
take any and all action  necessary to effect a 10-for-1  reverse  stock split of
the  Company's  $.001  par  value  Common  Stock  from  25,000,000   issued  and
outstanding  shares  to  2,500,000.  On July 17,  1998 the  Registrant  filed an
Amended  Certificate of Incorporation with the Secretary of State of Delaware to
reflect the reverse stock split.

On July 31, 1998,  the  10-for-1  reverse  stock split  became  effective on the
NASDAQ OTC Bulletin  Board and  Registrant  announced  that effective as of that
date,  the new  trading  symbol for the  Registrant  is "PDAP" and the new cusip
number for the shares of common stock is 69661M-106.

On August 5, 1998,  the  Registrant  acquired six gallery and art framing retail
outlets located throughout Upstate New York. The acquisition was

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accomplished  through  a merger  of R M & M  Framemakers,  Inc.  into R. M. & M.
Acquisition, Inc., a wholly-owned subsidiary of the Registrant.

Current Business Operations

Having acquired  substantially  all of the assets of Palm Desert Art Publishers,
Ltd.,  Registrant is now an integrated publisher and retailer of limited-edition
serigraphs,  lithographs and other works of fine art created by  internationally
recognized and innovative,  contemporary  artists and owns and operates  several
art  framing  shops and  galleries.  The  Registrant  has  formally  changed its
corporate name from Database Technologies, Inc. to Palm Desert Art, Inc. and has
relocated  its principal  place of business from Bedford,  New Hampshire to Palm
Desert, California.

     Agreements with Artists

The  Registrant  has secured  the  exclusive  rights to publish the  artworks of
several  contemporary  artists who are well-recognized in the art community such
as:

     Patricia Nix, a  contemporary  master,  whose work has been acquired by the
     Smithsonian  Institution's  National  Museum of American Art in  Washington
     D.C. and has received international award.

     Elyse Cohen, an American  Watercolorist whose work has recently become part
     of the  collection  at City Hall in New York City and has been  acquired by
     numerous collectors around the world.

     Sandra Bierman, an American figurative  painter,  has earned  international
     recognition as one of today's leading contemporary artists.

     Barbara  Cleary,  whose  impressionistic  work has earned her a position in
     "Who's Who in American Art".

     Weilaing  Zhao,  a  Chinese  artist,   whose  artistic  styles  range  from
     photo-realistic portraiture to highly sophisticated, abstract canvases.

     Ali Golkar,  a  contemporary  painter who combines the  influences  of 20th
     Century  Expressionism,  Cubism and Abstraction with his own unique form of
     artistic impression.

     Publishing Techniques

The  Registrant  uses various  publishing  techniques  ranging from the classic,
hand-pulled  serigraphy to innovative new printing  techniques which incorporate
hand-painted details.

     Operations

The  Registrant  maintains art galleries in Palm Desert and Tarzana,  California
and has  recently  acquired six art framing  shops and  galleries in Upstate New
York.  In  addition,  the  Company  has  entered  two  letters  of intent and is
currently  negotiating  with three other companies to acquire  approximately  29
more  privately-owned  art  framing  shops  located  in the U.S.  Southeast  and
Midwest. With each acquisition, the space which once had been dedicated to

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art framing  services will be converted into gallery space and art framing sales
offices with all art framing  operations  to be  performed  in regional  framing
centers to be located throughout the country. The Registrant intends to continue
to obtain the exclusive rights to publish contemporary artists while growing its
gallery and publishing  business and reputation  through the  acquisition of art
framing  shops and  galleries  nationwide.  The  company's  business  plan is to
develop  a  national  chain  of  galleries  to sell  fine  artwork  and  provide
high-quality  art framing  services  while taking  advantage of the economies of
scale through regional framing centers.

     Working Capital

The  Company  anticipates  that  in the  fiscal  year  ending  April  30,  1999,
(commencing May 1, 1998) its annual working capital  requirements will be in the
range of $1 million.  To meet its initial capital  equirements,  the Company has
raised  approximately  $478,000  primarily  through the private placement of its
common stock with four non-affiliated  investors.  The company may seek to raise
additional  capital through the sale of a convertible  debenture or common stock
or bank financing during the fiscal year ending April 30, 1999.  However,  there
can be no assurances  that  financing  can be obtained or, if obtained,  that it
will be of a sufficient  quantity to meet the company's  immediate needs or that
it will be on reasonable terms.

     Competition

The primary  markets  that the company  plans to enter into in 1998 and 1999 are
the U.S. West Coast, the Northeast, the Midwest and the Mid-Atlantic.

The  Registrant's  plans to convert art  framing  retail  outlets  into fine art
gallery space and art framing  sales offices with all art framing  operations to
be performed in regional  framing centers to be located  throughout the country.
By moving all framing  operations to regional  framing  centers,  the Registrant
believes it will  realize  substantial  economies of scale while  providing  its
customers with consistent  high-quality framing services. The Registrant further
believes  that by combining  the art framing  business with the fine art gallery
business,  the Registrant  will increase the exposure of its individual  artists
while   providing  its  customers  with   exceptional   artwork  and  consistent
high-quality  framing services at reasonable prices. The Registrant is not aware
of any other companies which are engaged in the art publishing,  framing and art
gallery business.

     Employees

As of the filing of this Form 10-KSB, the Registrant has 8 full-time  employees.
Two of them are employed at the  executive  offices in Palm  Desert,  two at the
gallery in Palm  Desert  and four are at the  gallery  in  Tarzana,  California.
Another  30  persons  are  employed  at the 6 art  framing  shops and  galleries
recently acquired by R. M. & M. Acquisition,  Inc., a wholly-owned subsidiary of
the Registrant.

     Operating Results

On April 22, 1998, the Registrant  acquired  substantially  all of the assets of
Palm Desert Art Publishers, Ltd., LLC in exchange for approximately 80.34% of

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Registrant's  stock.  Since then, the company has completely changed its line of
business and has undergone a substantial  change in management.  Therefore,  for
reporting  purposes,  the revenues  indicated  in the  Financial  Statements  of
Registrant  herein  (Item 7)  represents  the  revenues  resulting  from the
operations of Palm Desert Art Publishers  Ltd., LLC for the year ended April 30,
1998. On that basis, the Registrant's  revenues for its first year of operations
ended April 30, 1998 were $864,504.

The Registrant's selling, general and administrative expenses for the year ended
April 30,  1998 were  $489,148  most of which  related  to the  start-up  of the
company's operations in the art publishing and exhibiting  business.  Management
is of the opinion that administrative expenses will continue to rise as a result
of  its  plans  to  acquire  and   consolidate  art  galleries  and  art-framing
operations.

Risk Factors

     Limited Operating History. The Registrant has had limited operating history
in its  current art  publishing  business.  On April 22,  1998,  the  Registrant
purchased all of the assets of Palm Desert Art  Publishers,  Ltd. LLC, (PDAP) in
exchange for approximately 80.34% of the Company's authorized common stock. PDAP
was a privately-held  limited  liability company which published on an exclusive
basis the artwork of various artists.  At the time of the acquisition,  PDAP had
been in the art  publishing  business for one year.  Accordingly,  the Company's
operations  are  subject  to the  risks  inherent  in the  development  of a new
business  enterprise;  specifically,  the  complications,  delays and  resulting
expenses  often  encountered  in  marketing  artwork and related  services,  the
uncertainties  of  developing  and  marketing  such artwork and services and the
difficulties in recruiting and retaining qualified personnel.

     Limited Profitability. For reporting purposes, the Company's acquisition of
PDAP's  assets  in  exchange  for  80.34% of the  Company's  common  stock  were
accounted for as a reverse acquisition of PDAP by the Company under the purchase
method of accounting.  Consequently, the financial statements for the year ended
April 30,  1998  consist of the  operations  formerly  known as Palm  Desert Art
Publishers  Ltd., LLC, which recorded net income for its first year of operation
from May 1, 1997  through  April 30, 1998 of $35,910.  There can be no assurance
that the company will be able to generate revenues or profits  sufficient to pay
its  obligations in the ordinary course of business or to acquire the operations
of other  galleries and art framing  shops,  and the Company may incur losses if
the Company increases expenditures for marketing, advertising and acquisitions.

     Uncertain  Market  Acceptance.  Since the  acquisition  of PDAP's assets in
April,  1998,  the Company has focused its efforts on  obtaining  the  exclusive
rights to publish  contemporary artists while growing its gallery and publishing
business  and  reputation  through  the  acquisition  of art  framing  shops and
galleries  nationwide.  It  is  the  Company's  business  plan  to  convert  the
newly-acquired  art framing shops into galleries and to provide off-site framing
services  through  regional  centers to take  advantage  of  economies of scale.
Although there is an existing market for such artwork, artwork is subject to the
individual  tastes of the consumer  which cannot be predicted with any degree of
accuracy and there is a risk that the Company's potential

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customers may not appreciate the quality of the Company's  publications.  Market
acceptance  of the  Company's  products  will  depend,  in large part,  upon the
ability of the Company to  demonstrate  to the art community that it can produce
high-quality  artwork  and  framing  services  at  affordable  prices.  Although
management  believes  that the artwork  published  and  exhibited by the Company
represents the significant talents of various contemporary artists, there can be
no assurance that the Company's artwork will achieve market acceptance.

     Limited Marketing Organization.  Commercialization of the Company's artwork
and framing services will be substantially dependent on the Company's ability to
develop or acquire the network of galleries  and framing  shops  throughout  the
country as well as a marketing and sales organization. There can be no assurance
that the  Company  can  develop or acquire  this  network  of  galleries  or the
marketing organization.

     Need  for  Additional  Capital.  The  Company  will  require  an  immediate
investment of approximately  $600,000 (USD) to complete the first two of several
acquisitions  which the Company is contemplating,  to hire additional  personnel
and for working capital.  Funds for these purposes may be obtained from a number
of sources, including, sales of equity and debt instruments, and bank financing.
However, the Company currently has no arrangements for such financing, and there
can be no  assurance  that any  additional  financing  can be  obtained  or,  if
obtained,  that it will  be of a  sufficient  quantity  to  meet  the  Company's
immediate needs or on reasonable terms.

     Need for Qualified Personnel. In order to meet its business objectives, the
Company will need to hire  additional  marketing and managerial  personnel.  The
Company  may be required to compete for such  personnel  with  companies  having
greater financial and other resources than the Company. Since the future success
of the  Company  will be  dependent,  in part,  upon its  ability to attract and
retain qualified  personnel,  its ability to do so could have a material adverse
effect upon the business of the Company.

     Absence of Dividends.  The Company has not paid any cash dividends and does
not anticipate paying any dividends in the foreseeable future. Earnings, if any,
will be retained to fund  development and expansion.  There is no assurance that
the Company will at any time pay cash dividends.

Item 2 Properties

The Registrant  owns no real estate.  Following its acquisition of the assets of
Palm Desert Art Publishers,  Ltd.,  LLC, the Registrant  relocated its principle
executive offices to 39-725 Garand Lane, Suite J, in Palm Desert California.  At
that  location the  Registrant  occupies one suite of 3300 square feet of office
and warehouse  space.  In addition,  the  Registrant  leases 3300 square feet of
gallery space at 73920 El Paseo Street, in Palm Desert, California.

As of the filing of this Form 10-KSB, the Registrant also occupies approximately
3800  square  feet  of  gallery  space  at  18727  Ventura  Blvd.,  in  Tarzana,
California.  In addition, the Registrant's  wholly-owned subsidiary,  R. M. & M.
Acquisition, Inc., leases the following properties:

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     a.   Five Star Frame and Art Shop, 1789 Western Avenue,  Albany,  New York;

     b.   Five Star  Frame  and Art  Shop,  Polar  Plaza,  Amsterdam,  New York;

     c.   Five Star Frame and Art Shop, 715 Columbia  Turnpike,  East Greenbush,
          New York;

     d.   Five Star Frame and Art Shop,  126 Clinton  Street,  Schenectady,  New
          York; 

     e.   Artifax Gallery,  124 Cayuga Street,  Ithaca, New York;

     f.   Framecrafters Moulding & Supply, 60 Railroad Avenue, Albany, New York;

     g.   Commercial  Frame  and Art,  60  Railroad  Avenue,  Albany,  New York;

     h.   Heart of America  Portfolio,  60 Railroad  Avenue,  Albany,  New York;
          and

     i.   Frame Products Outlet, 60 Railroad Avenue,  Albany,  New York.

Item 3 Legal Proceedings

The Registrant is not a party to any legal proceedings.

Item 4 Submission of Matters to a Vote of Security Holders

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report.

As of the filing of this Form  10-KSB,  an annual  meeting  of the  Registrant's
shareholders  was held on July 14, 1998 to elect new  directors and to authorize
an amendment to the  company's  certificate  of  incorporation  to provide for a
10-for-1 reverse stock split of the company's  issued and outstanding  $.001 par
value common stock from 25,000,000  shares to 2,500,000  shares.  Messrs.  Pike,
Mullhaupt and Wolfe were re-elected as directors and the reverse stock split was
approved.



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                                     Part II

Item 5  Market for Registrant's Common Equity and Related Stockholders Matters

Market Information

Effective  July 31, 1998, the  Registrant's  common stock,  $.001 par value,  is
traded on the Over-the  Counter  Bulletin  Board (OTC)  operated by the National
Association  of Securities  Dealers under the ticker  symbol  "PDAP".  The cusip
number of the  company's  $.001 par value  common stock has also been changed to
69661M-106.  Prior to that date,  the ticker  symbol had been "DBTC".  The table
presents  its high and low market  prices for each of the four  quarters  in the
fiscal  years  ending  April 30,  1997,  and April 30,  1998.  The  prices  were
determined from information obtained from NASDAQ Trading & Market Services.  The
quotations  reflect  interdealer  prices  without retail  mark-up,  mark-down or
commissions and may not necessary represent actual  transactions.  The Company's
common stock began trading at the  beginning of June 1989.  The Company has paid
no cash  dividends  in the year  ended  April  30,  1998 and does not  expect to
changes its dividend policy in the foreseeable future.

Month                        Low Bid                High Bid
-----                        -------                --------

July 31, 1996                .0125                  .0125
October 31, 1996             .03125                 .0625
January 31, 1997             .0625                  .0625
April 30, 1997               .0625                  .0625
July 31, 1997                .0625                  .0625
October 31, 1997             .0625                  .0625
January 31, 1998             .0625                  .0625
April 30, 1998               .0625                  .0625

The number of shares of common stock issued and outstanding as of April 30, 1998
was 25,000,000. 

On April 22, 1998, the Registrant  issued to Palm Desert Art  Publishers,  Ltd.,
LLC,  ("PDAP")  20,083,918  shares of its common  stock in  exchange  for all of
PDAP's assets.  In addition,  on April 24, 1998,  the Registrant  entered into a
subscription  agreement to sell 2,450,000  shares of its  outstanding  $.001 par
value common stock to Sencorp Ltd., a private  company  located and domiciled in
Gibraltar. The shares were subscribed pursuant to Regulation S for $245,000.

The  approximate  number  of  holders  of  record  of the  Common  Stock  of the
Registrant as of June 9, 1998 was 807.

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Item 6  Management's Discussion and Analysis of Financial Condition and  Results
        of Operations

Revenues

On April 22, 1998, the Registrant  acquired  substantially  all of the assets of
Palm Desert Art Publishers,  Ltd., LLC in exchange for  approximately  80.34% of
Registrant's stock. Therefore, for reporting purposes, the revenues indicated in
the  attached  Financial  Statements  of  Registrant   represents  the  revenues
resulting from the  operations of Palm Desert Art  Publishers  Ltd., LLC for the
year ended April 30, 1998.(1) On that basis, the  Registrant's  revenues for its
first year of operations ended April 30, 1998 were $864,504.

The year ended April 30, 1998 would have been the  Registrant's  ninth full year
of operations in providing  data to the insurance  industry.  Had the Registrant
not acquired the assets of Palm Desert Art  Publishers,  Ltd. LLC,  Registrant's
revenues  for the year ended April 30, 1998 on a pro forma basis would have been
$258,013, which when compared to revenues of the prior year ended April 30, 1997
represents increased revenues of $159,701 or 162%.

Operational Expenses

The Registrant's selling, general and administrative expenses for the year ended
April 30,  1998 were  $489,148  most of which  related  to the  start-up  of the
company's operations in the art publishing and exhibiting  business.  Management
is of the opinion that administrative expenses will continue to rise as a result
of  its  plans  to  acquire  and   consolidate  art  galleries  and  art-framing
operations.

Income Taxes

The Registrant anticipates that it will pay income taxes the next fiscal year.

Liquidity and Capital Resources

Liquidity  had been a constant  problem for the  Registrant  for  several  years
because  revenues  from  operations  did not generate  sufficient  cash flow and
deficiencies  totalling  $184,000 had been funded by borrowing from Mr. Allan S.
Wolfe, who had been the principal  stockholder/officer of the Registrant.  After
the  Registrant  exchanged  approximately  80.34% of its stock for the assets of
Palm Desert Art Publishers,  Ltd. LLC, the Registrant transferred  approximately
$94,000 of its software  assets used in its previous  business of providing data
to the  insurance  industry  to Mr.  Wolfe and  executed a  promissory  note for
$90,000 in exchange for which Mr. Wolfe discharged the earlier debt.

-------- (1) Although it did not become a registered  limited  liability company
until April 18, 1997, Palm Desert Art Publishers, Ltd. LLC, began its operations
in March  1997.  Accordingly,  the  financial  information  presented  in Item 7
includes  the first two  months of  operations  which were  minimal  and have an
immaterial  impact on the financial  information  for the 12-month  period ended
April 30, 1998.

                                       9

<PAGE>

After the Registrant  purchased the assets of Palm Desert Art  Publishers,  Ltd.
LLC,  the  company's  art  publishing  operations  were  sufficient  to meet its
immediate cash flow  requirements.  In addition,  on April 24, 1998, the Company
entered into a  subscription  agreement to sell  2,450,000  shares of its common
stock to an offshore  entity for the purpose of raising  $245,000 of  additional
capital to be used to pay off the  company's  debt to Mr.  Wolfe and for working
capital.  Although the Company has received  confirmation that the proceeds have
been deposited with an escrow agent, as of April 30, 1998, the stock certificate
had not been issued because new share  certificates  were not available  bearing
the new corporate name.

The  Company's new  management  does  anticipate  it will sell  inventory in the
current  fiscal year through its galleries  which sales are expected to generate
positive  cash flow.  In  addition,  the  Company  may seek to raise  additional
capital  through the  issuance of  convertible  debt and common stock to provide
additional working capital.



                                       10

<PAGE>

Item 7  Financial Statements 

Index to Consolidated Financial Statements

                                                                      Page
                                                                      ----

Report of Independent Certified Public Accountants                     F-1

Financial Statements:

  Balance Sheet, April 30, 1998                                        F-2

  Statement of Income Year Ended
  April 30, 1998                                                       F-4

  Statement of Changes in Stockholders' Equity
  Year Ended April 30, 1998                                            F-5

  Statement of Cash Flows, Year Ended
  April 30, 1998                                                       F-6

  Notes to Consolidated Financial Statements                           F-7


                                       11


<PAGE>


                              PALM DESERT ART, INC.

                              FINANCIAL STATEMENTS

                                 April 30, 1998

                       With Independent Auditors' Report


<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
Palm Desert Art, Inc.

We have audited the  accompanying  balance  sheet of Palm Desert Art, Inc. as of
April 30, 1998, and the related  statements of income,  changes in stockholders'
equity and cash flows for the year then ended.  These  financial  statements are
the  responsibility of the Company.  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 Palm Desert Art, Inc. as of
April 30,  1998,  and the results of its  operations  and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.



Manchester, New Hampshire
June 17, 1998

                                       F-1
                                     
<PAGE>

                              PALM DESERT ART, INC.

                                  Balance Sheet

                                 April 30, 1998

                                     ASSETS


Current assets
   Accounts receivable                                                  $ 83,319
   Inventory                                                             273,043
   Prepaid expense                                                         3,600
   Direct response advertising                                           158,462
                                                                        --------

            Total current assets                                         518,424
                                                                        --------

Property and equipment
   Leasehold improvements                                                 38,661
   Furniture and fixtures                                                  6,500
   Vehicles                                                                4,552
   Equipment                                                               6,957
                                                                        --------

                                                                          56,670
   Less accumulated depreciation                                           3,642
                                                                        --------

            Net property and equipment                                    53,028
                                                                        --------

Other assets
   Deposits                                                               31,836
   Direct response advertising                                            39,615
                                                                        --------

            Total other assets                                            71,451
                                                                        --------

            Total assets                                                $642,903
                                                                        ========


--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.

                                       F-2

<PAGE>

                             PALM DESERT ART, INC.

                                  Balance Sheet

                                 April 30, 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Cash overdraft                                                       $ 13,270
  Loan payable                                                           90,000
  Accrued liabilities                                                     9,893
                                                                       --------

           Total current liabilities                                    113,163
                                                                       --------

Commitments and contingencies (Notes 5 and 6)

Stockholders' equity
  Common stock - $.01 par value, authorized 25,000,000 shares,
       22,575,000 shares outstanding                                    225,750
  Common stock subscribed                                               245,000
  Common stock subscription receivable                                 (245,000)
  Additional paid-in capital                                            268,080
  Retained earnings                                                      35,910
                                                                       --------

           Total stockholders' equity                                   529,740
                                                                       --------

           Total liabilities and stockholders' equity                  $642,903
                                                                       ========


--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.

                                       F-3

<PAGE>

                             PALM DESERT ART, INC.

                               Statement of Income

                            Year Ended April 30, 1998


Sales                                                                 $ 864,504

Costs of sales                                                          328,426
                                                                      ---------

           Gross profit                                                 536,078
                                                                      ---------

Selling, general, and administrative expenses                           489,148
                                                                      ---------

           Operating income

Interest expense                                                        (11,020)
                                                                      ---------
           Net income                                                 $  35,910
                                                                      =========



--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>

                             PALM DESERT ART, INC.

                  Statement of Changes in Stockholders' Equity

                            Year Ended April 30, 1998

<TABLE>
<CAPTION>
                                                           Common         Common Stock      Additional  Retained Earnings
                                            Common          Stock         Subscription       Paid-In       (Accumulated
                                             Stock        Subscribed       Receivable        Capital         Deficit)       Total
                                           ---------      ----------      ------------      ----------  ----------------- ---------
                                                                                                         
<S>                                        <C>             <C>             <C>              <C>             <C>           <C>       
Balance, beginning of year                 $   2,466       $      --       $      --        $  12,179       $(208,944)    $(194,299)
                                                                                                         
  Net income                                      --              --              --               --          35,910        35,910
                                                                                                         
  Effect of reverse acquisition                                                                          
    Elimination of Database Technologies,                                                                
      Inc.'s accumulated deficit                  --              --              --               --         208,944       208,944
                                                                                                         
  Common stock issued                        223,284              --              --          255,901              --       479,185
                                                                                                         
                                                                                                         
  Common stock subscribed                         --         245,000        (245,000)              --              --            --
                                           ---------       ---------       ---------        ---------       ---------     ---------
                                                                                                         
Balance, end of year                       $ 225,750       $ 245,000       $(245,000)       $ 268,080       $  35,910     $ 529,740
                                           =========       =========       =========        =========       =========     =========
</TABLE>


--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.

                                       F-5

<PAGE>

                             PALM DESERT ART, INC.

                             Statement of Cash Flows

                            Year Ended April 30, 1998

Cash flows from operating activities
   Net income                                                         $  35,910
   Adjustments to reconcile net income to net cash used
      by operating activities
       Depreciation                                                       3,642
       (Increase) in
           Accounts receivable                                          (83,319)
           Inventory                                                    (68,593)
           Prepaid expense                                               (3,600)
           Deposits                                                     (31,836)
           Direct response advertising                                 (198,077)
       Increase in
           Accrued liabilities                                            9,893
                                                                      ---------
                Net cash used by operating activities                  (335,980)
                                                                      ---------

Cash flows from investing activities
   Additions to property and equipment                                  (51,670)
                                                                      ---------

Cash flows from financing activities
   Net short-term borrowings - cash overdraft                            13,270
   Stockholders' contributions                                          374,380
                                                                      ---------
                Net cash provided by financing activities               387,650
                                                                      ---------

                Net increase in cash and cash equivalents                    --

Cash and cash equivalents, beginning of year                                 --
                                                                      ---------

Cash and cash equivalents, end of year                                $      --
                                                                      =========

Supplemental disclosures of cash flow information
   Cash paid for interest                                             $  11,020

Supplemental schedule of noncash investing and financing activities
   Contributed artwork                                                $ 204,450
   Contributed equipment                                                  5,000
   Loan payable                                                          90,000


--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.

                                       F-6


<PAGE>

                              PALM DESERT ART, INC.

                          Notes to Financial Statements

                                 April 30, 1998

Nature of Business, Organization, and Basis of Presentation

On March 19, 1998, the Company changed its name from Database Technologies, Inc.
to Palm Desert Art, Inc. (the Company).  On April 22, 1998, the Company executed
two transactions which changed the operations of the Company.

One  transaction  involved a sale of all of the assets  and  liabilities  of its
database  business to the Company's  then-majority  stockholder  in exchange for
reducing its stockholder obligations to $90,000. Consequently, the Company is no
longer in the database business.

The other  transaction  resulted in the acquisition of substantially  all of the
outstanding  assets of Palm Desert Art Publishers,  Ltd., L.L.C.  ("PDAP,  Ltd.,
LLC") in exchange  for common  stock of the  Company.  This  reorganization  was
accounted for as a reverse  acquisition of PDAP,  Ltd., LLC by the Company under
the purchase  method of  accounting,  as the  shareholders  of PDAP,  Ltd.,  LLC
controlled the entity immediately  following the  reorganization.  Consequently,
the reporting  entity consists of the operations  formerly known as PDAP,  Ltd.,
LLC.

The Company is now in the business of publishing  artwork and  distributing  its
artwork to independent art galleries  throughout the country. In addition to the
publishing business, the Company owns an art gallery in Palm Desert, California,
which sells the Company's published artwork and other pieces of art.

For reporting purposes, PDAP, Ltd., LLC's first year of operations commenced May
1, 1997.  Consequently,  these financial statements are single-year  statements,
since the reporting entity was not in existence prior to May 1, 1997.

1.   Summary of Significant Accounting Policies

     Revenue Recognition Policy

     The Company records revenue on sales after the approval period, if any, has
     expired. Approval periods do not typically extend beyond 30 days.

     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.

--------------------------------------------------------------------------------

                                       F-7

<PAGE>

1.   Summary of Significant Accounting Policies (Continued)

     Cash and Cash Equivalents

     For  purposes  of  reporting  the  statement  of cash  flows,  the  Company
     considers  all  cash   accounts,   which  are  not  subject  to  withdrawal
     restrictions  or  penalties,  and  all  highly  liquid  investments  with a
     maturity of three months or less to be cash equivalents.

     Allowance for Doubtful Accounts

     The Company's policy for allowance for doubtful  accounts is evolving as it
     establishes relationships with its gallery customers. As of April 30, 1998,
     management deems the accounts  receivable as fully collectible.  Management
     has also  obtained  from  PDAP,  Ltd.,  LLC a written  guarantee  as to the
     collectibility of any outstanding receivable as of April 30, 1998.

     Inventory

     Inventory  includes cost of publishing and reproducing giclee and serigraph
     reproductions  of original works of art of artists under agreement with the
     Company.  All  inventory  items are  stated at the lower of cost  (specific
     identification  by print) or market value. All inventory costs are expensed
     as cost of sales when the inventory item is sold.

     Advertising

     The  Company   expenses  the  costs  of  advertising  the  first  time  the
     advertising takes place, except for direct-response  advertising,  which is
     capitalized and amortized over its expected period of future benefits.

     Direct-response  advertising consists primarily of magazine  advertisements
     that include  response  coupons for the Company  products.  The capitalized
     costs of the  advertising  are  amortized  as sales are  recognized  over a
     period, not to exceed three years.

     At April 30, 1998,  approximately  $198,000 of advertising  was reported as
     assets,  of  which  $39,615  was  non-current  and  $158,462  was  current.
     Advertising expense was approximately $89,000 in 1998.

--------------------------------------------------------------------------------

                                       F-8

<PAGE>

1.   Summary of Significant Accounting Policies (Concluded)

     Property and Equipment

     Furniture and  fixtures,  equipment,  vehicles and  leasehold  improvements
     purchased are  depreciated and amortized by the  straight-line  method over
     the estimated useful lives of the respective assets.

     Income Taxes

     Deferred  income  taxes  are  provided  for the  expected  tax  effects  of
     differences  between the  financial  statement  and tax basis of assets and
     liabilities.

     Due to the change in  control  and the change in  continuity  of  business,
     there are no net operating loss carryforwards.

     For the period May 1, 1997 to April 22,  1998,  the Company was taxed under
     sections of the federal  income tax law,  which  provide  that,  in lieu of
     corporation  federal income taxes, the owners separately  account for their
     prorata shares of the Company's  items of income,  deduction,  losses,  and
     credits.  Therefore,  these  statements  do not include any  provision  for
     corporation  federal and state  income  taxes for the period May 1, 1997 to
     April 22,  1998.  During the period from April 23, 1998 to April 30,  1998,
     the Company was subject to corporate income taxes.  However,  the corporate
     income tax effect for this period is immaterial to the financial statements
     and no provision for income taxes is deemed necessary.

     Comprehensive Income

     The Company has no  components of  comprehensive  income.  Consequently,  a
     statement of comprehensive income is not required.

2.   Cash Overdraft

     The  Company  experienced  a cash  overdraft  as of  April  30,  1998.  The
     overdraft  was funded by the  Company's  bank in  accordance  with a verbal
     agreement  between  management and the bank to fund overdrafts.  Management
     has chosen this cash management technique, because it has pledged its stock
     to collateralize the debt described in Note 3.

--------------------------------------------------------------------------------

                                       F-9

<PAGE>

3.   Loan Payable - Stockholder

     Loan payable to a minority stockholder, interest at 9%, due July 1998. This
     $90,000 note is guaranteed by the majority  stockholder,  and the guarantee
     is collateralized by all of the shares the majority stockholder owns of the
     Company's stock. The pledged stock is in the hands of the noteholder.

4.   Stockholders' Equity

     The  Company  has  entered  into a  stock  subscription  agreement  for the
     issuance of 2,450,000 shares of common stock for $245,000.  The Company has
     received  confirmation that the proceeds have been deposited with an escrow
     agent. As of April 30, 1998,  however,  the stock  certificate had not been
     issued,  because no new share  certificates  were available bearing the new
     corporate name.

5.   Commitments and Contingencies

     Substantially  all of the Company's  inventory is located at locations that
     are not owned by the Company.  The Company does not have insurance coverage
     on  the   inventory   at  these   locations.   The  Company  has   obtained
     representation  from the  management  of  these  locations  that  insurance
     coverage is being maintained on its inventory.

     The  Company  has not made an  assessment  of the Year 2000  issue that may
     affect the computer applications of its operations and those of its vendors
     and customers. The Company plans to make an assessment of the impact of the
     Year 2000 issue in fiscal year 1998.  The operations of the Company are not
     expected to be materially affected by this issue.

     As  part  of  the   acquisition   described  in  the  Nature  of  Business,
     Organization,  and Basis of Presentation  footnote, the Company is required
     to issue approximately  12,700,000 additional shares to PDAP, Ltd., LLC. It
     is expected that those shares will be issued by April 30, 1999.

     Management  intends  to have  the  Company's  stockholders  approve  a 10-1
     reverse stock split at its annual meeting in July 1998.

--------------------------------------------------------------------------------

                                      F-10

<PAGE>

6.   Operating Leases

     The Company leases certain retail and storage  facilities  under  operating
     leases that expire from 1999 through 2002.  Future  minimum lease  payments
     under noncancelable operating leases are:

              1999                                   $ 124,408
              2000                                     124,408
              2001                                     124,408
              2002                                      15,125
                                                     ---------

                                                     $ 388,349
                                                     =========

     Total rental expense for operating leases approximated $51,000 in 1998.

7.   Income (Loss) Per Share

     As of April 30, 1998, the earnings per share and the fully diluted earnings
     per share are $.01 and $.00, respectively.

8.   Disclosure About Fair Value of Financial Instruments

     The  Company's  financial  instruments  consist of cash,  short-term  trade
     receivables  and payables,  and short-term  debt. The carrying value of all
     instruments approximates their fair value.

9.   Subsequent Events

     In June  1998,  the  Company  opened a second art  gallery in Los  Angeles,
     California  which  will  operate  substantially  in the same  manner as the
     gallery in Palm Desert.

     The  Company  has  letters of intent to acquire  art  galleries  in various
     regions of the United States.

--------------------------------------------------------------------------------

                                      F-11

<PAGE>

Item 8  Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure             

None.

                                    Part III

Item 9  Directors and Executive Officers of the Registrant

The  following  provides  certain  information   concerning  the  directors  and
executive officers of the Company as of the filing of this Form 10-KSB.

                                 Age                 Position
                                 ---                 --------

Hugh G. Pike                     60                  Chairman of the Board
                                                     President and Treasurer

Allan S. Wolfe                   66                  Director

Jurg Mullhaupt                   50                  Director

John Anderholt                   55                  Secretary(2)


HUGH G. PIKE, age 60, is the President,  Treasurer, and Chairman of the Board of
Directors. He has served in these capacities since April 22, 1998, the date upon
which the Company purchased the assets of Palm Desert Art Publishers, Ltd., LLC,
which owned and operated an art gallery and owned the exclusive right to publish
the  artwork  of several  contemporary  artists  and which is now the  Company's
majority  shareholder.  Mr.  Pike had  been the  President  of Palm  Desert  Art
Publishers, Ltd. LLC since April 1997. For approximately ten years prior to that
time, Mr. Pike provided  consulting  services to the real estate  industry.  Mr.
Pike  is the  father-in-law  to Mr.  Mullhaupt  who is  also a  Director  of the
Company.

ALLAN S. WOLFE,  age 66, is the President of Dataware  Technologies,  LLC, a New
Hampshire  limited  liability  company  which  provides  software  data  to  the
insurance  industry.  From November 1988 to April 22, 1998,  Mr. Wolfe served as
President, Treasurer and Chairman of the Board and was a majority shareholder of
the Company.  Prior to that time, Mr. Wolfe had been Chief Executive  Officer of
Pathfinder Data Group, Inc., a company which provided insurance  replacement and
software  data.  From 1980 to 1984, Mr. Wolfe was Vice President of Audio of New
England, Inc., a corporation engaged in the same business as Pathfinder, as well
as the retailing of hi-fi equipment to the public.

JURG  MULLHAUPT, age  50,  has  been a  Director of the  Company since April 22,

--------
     (2) From April 22, 1998 to June 12, 1998,  Sandra Mitchell had been serving
as Secretary of the company. On June 12, 1998 Ms. Mitchell resigned as Secretary
and Mr. Anderholt was appointed to fill the vacancy.

                                       12

<PAGE>

1998. Mr.  Mullhaupt is President and Chief Executive  Officer of First National
Environmental   Technologies  Inc.,  a  privately-held  company  which  provides
equipment and consulting  services to  municipalities  in connection  with their
underground  infrastructure  for the  delivery of water.  Mr.  Mullhaupt  is the
son-in-law of Mr. Pike, the Company's President and Chairman of the Board.

JOHN ANDERHOLT,  age 55, has been Secretary of the Company since June 12, 1998.
Mr.  Anderholt  is an attorney  in private  practice  with the firm  Anderholt &
Bonnheim in Indian Wells, California. Mr. Anderhold has been a general civil
attorney for 30 years practicing primarily in the areas of corporate and real
estate law. He is admitted to practice before the United States Supreme Court,
and the California Bar, and he is a member of the Los Angeles County, Riverside
County, and Desert Bar Associations.

Item 10 Executive Compensation

The  following  table shows all  remuneration  in excess of $100,000 paid by the
Company  during the fiscal year ending  April 30,  1998,  to all  directors  and
officers as a group:

<TABLE>
<CAPTION>
                                                           Cash and Cash
                                                           Equivalent Forms
                                                           of Remuneration 
                                                           --------------- 
                                                           Securities or
                                                           Property
Name of                                                    Insurance
Individual                            Salaries, Fees       Benefits or            Aggregate
or Number            Capacities       Directors Fees       Reimbursement          Contingent
of Persons           in which         Commissions &        Personal               Form of
in Group             Served           Bonuses              Benefits               Remuneration
--------             ------           -------              --------               ------------

<S>                  <C>              <C>                  <C>                    <C>
All Directors
and Officers
as a Group
(pre-4/22/98)                         NONE                 NONE                   NONE


All Directors
and Officers
as a Group
(post-4/22/98)                        NONE                 NONE                   NONE
</TABLE>


Item 11 Security Ownership of Certain Beneficial Owners and Management

The following table sets forth  information with respect to each person known to
the  management of the Company who are the  beneficial  owners of more than five
percent of the common stock of the Company, that which is owned by each director
and officer of the Company and that which is owned by all directors and officers
of the Company as a group, 4 persons, as of June 9, 1998.

                                       13

<PAGE>

Name and Address                      Amount and Nature              Percent
of Beneficial Owner                of Beneficial Ownership          of Class
-------------------                -----------------------          --------

Non-Management
Beneficial Owners:

    Palm Desert Art                      20,083,918                  80.34%
      Publishers, Ltd.(1)
      39-725 Garand Lane,
      Suite J
      Palm Desert, CA

    Sencorp Ltd.(2)                       2,450,000                   9.80
      National Westminster
      Bank Building
      57/63 Line Wall Road
      P. O. Box 199
      Gibraltar

Directors/Officers:

    Hugh G. Pike                                  0                   0.00%

    Allan S. Wolfe(3)                     1,313,658                   5.25%

    Jurg Mullhaupt                                0                   0.00%

    Sandy Mitchell                                0                   0.00%

Directors/Officers
    as a Group:                           1,313,658                   5.25%

(1)  As reported in Schedule 13-D relating to events as of April 22, 1998, filed
     with the  Securities  and  Exchange  Commission,  20,083,918  shares of the
     company  are held by Palm Desert Art  Publishers,  Ltd.,  LLC,  ("PDAP") of
     which Elaine  Mullhaupt is a member.  Ms. Mullhaupt is the daughter of Hugh
     G. Pike and is the wife of Jurg  Mullhaupt.  Mr. Pike is the  President and
     Director  of the Company  and is  President  of PDAP.  Mr.  Mullhaupt  is a
     director of the Company.  PDAP has sole voting and  dispositive  power with
     respect to all shares held by PDAP.

(2)  As reported in Schedule  13-D relating to events as of April 24, 1998 filed
     with the  Securities  and  Exchange  Commission,  2,450,000  shares  of the
     Company's  Common Stock is held by Sencorp Ltd., a  privately-held  trading
     company which has sole voting and dispositive power over all shares held.

(3)  Allan S. Wolfe holds 1,312,658  shares of the Company's  Common Stock.  His
     wife,  Betty L. Wolfe, a former director and officer of the company,  holds
     1,000 shares. In the aggregate, they have voting and dispositive power over
     1,313,658 shares held by them, respectively.

                                       14

<PAGE>

Item 12 Certain Relationships and Related Transactions

On April 22, 1998, the Company sold to Allan S. Wolfe (a shareholder,  director,
former  officer and  creditor of the  Company)  certain  software  assets of the
Company  together with a promissory  note from the Company in favor of Mr. Wolfe
in the amount of $90,000 in exchange for which Mr. Wolfe agreed to discharge the
Company's  debt to him in the amount of $184,000.  To induce Mr. Wolfe to accept
the Company's promissory note, the Company's majority  shareholder,  Palm Desert
Art Publishers, Ltd., LLC, agreed to guaranty payment of the note and pledged to
Mr. Wolfe as security  for the  guaranty all shares of the capital  stock of the
Company which Palm Desert Art Publishers, Ltd., LLC had acquired under the Asset
Purchase and Subscription Agreement between itself and the Company.

                                     Part IV

Item 13 Exhibits and Reports on Form 8-K

(a)  (1) The following financial  statements and supplementary data are included
     in Part II, Item 7:                                                    Page
                                                                            ----

     Report of Independent Certified Public Accountants                     F-1

     Financial Statements:

       Balance Sheet, April 30, 1998                                        F-2

       Statement of Income Year Ended
       April 30, 1998                                                       F-4

       Statement of Changes in Stockholders' Equity
       Year Ended April 30, 1998                                            F-5

       Statement of Cash Flows, Year Ended
       April 30, 1998                                                       F-6

       Notes to Consolidated Financial Statements                           F-7

     (2) Schedules included herein:

         None. All other schedules are omitted because they are not
         applicable or the required information is shown in the financial
         statements or notes thereto.

     (3) Exhibits included herein:

                                       15

<PAGE>

     3.1  Certificate of Incorporation as filed with the Secretary of State
          of  Delaware  on   November 4, 1988,   filed  with  the   Registrant's
          Registration  Statement  Form 10 on April 17, 1989,  (File No. 0-
          17623) and by this reference  incorporated herein and made a part
          hereof.

     3.2  Certificate  for  Renewal  and  Revival  of  Charter as filed with the
          Secretary of State of Delaware on March 19, 1998.

     3.3  Amendment to Certificate of  Incorporation as filed with the Secretary
          of State of Delaware on March 19, 1998.

     3.4  Amendment to Certificate of  Incorporation as filed with the Secretary
          of State of Delaware on July 17, 1998.

     3.5  By-Laws  of  the  Registrant  as  filed  with  the   Registrant's
          Registration  Statement  Form 10 on April 17, 1989,  (File No. 0-
          17623) and by this reference  incorporated herein and made a part
          hereof.

     21.  Subsidiaries of Registrant

     22.  Notice of and Proxy  Materials  relating  to  Annual  Meeting  of
          Shareholders   held  July  14,  1998,  filed  with  Form  14A  on
          June 24, 1998  (File  No.  0-172623)  and  by  this  reference
          incorporated herein and made a part hereof.

     27.  Financial Data Schedule

     99.  Additional Exhibits

     99.1 Asset Purchase and Subscription Agreement dated February 5, 1998

     99.2 Asset Purchase Agreement dated February 5, 1998

     99.3 Promissory Note dated April 22, 1998

     99.4 Guaranty dated April 22, 1998

     99.5 Stock Pledge Agreement dated April 22, 1998

     99.6 Offshore Subscription Agreement



(b)  Reports on Form 8-K:

     The following  reports on Form 8-K were filed by the Registrant during
     the year covered by this report:

     May 7, 1998    Acquisition  of Assets of Palm  Desert Art  Publishers,
                    Ltd., LLC and Sale of Software to Allan Wolfe

     July 7, 1998   Amendment  to  above  Form  8-K  to  include  financial
                    information of Palm Desert Art Publishers, Ltd., LLC

(c)  Copies of Exhibits 3.2 - 3.4,  21, 27 and 99.1 - 99.6 are attached  hereto.
     Exhibits  3.1 and 3.5 are  incorporated  by  reference as described in Item
     14(a)(3).

(d)  Not applicable.

                                       16
                                       
<PAGE>

                                 SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  Palm Desert Art,  Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                               PALM DESERT ART, INC.


                                               By: /s/  Hugh G. Pike
                                                   -----------------------------
                                                   Hugh G. Pike
                                                   President
                                                   (Duly Authorized Officer)
                                                   (Principal Financial Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:



                                   By: /s/  Hugh G. Pike
                                      ------------------------------------------
                                      Hugh G. Pike, President, Treasurer
                                      and Director


                                   By: /s/  Jurg Mullhaupt
                                      ------------------------------------------
                                      Jurg Mullhaupt, Director


                                   By: /s/ Allan S. Wolfe
                                      ------------------------------------------
                                      Allan S. Wolfe, Director



Dated:  August 13, 1998


                                       17