U.S. SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C.  20549

                             FORM 10-KSB

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the fiscal year ended December 31, 1997  Commission File No. 333-4066

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the transition period from           to           .

                       KAYENTA KREATIONS, INC.            
            (Name of small business issuer in its charter)

           Nevada                                      87-0554463    
State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization                     Identification No.)

           1020 Belmont Avenue, Salt Lake City, Utah 84105  
         (Address of principal executive offices)  (zip code)

Issuer's telephone number, including area code:  (801) 521-4128


Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Act:  None

Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Issuer was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.                                Yes   X      No      

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.                                   [   ]

The Issuer's revenues for its most recent fiscal year.     $      654 

As of April, 1998, the aggregate market value of voting stock held by
non-affiliates was approximately $109,450. (See Item 5 herein).

The number of shares outstanding of the Issuer's common stock at March 31,
1998: 1,018,900
<PAGE>
                                PART I

ITEM 1.   DESCRIPTION OF BUSINESS

     (A)  BUSINESS DEVELOPMENT.

     Kayenta Kreations, Inc. (the "Company") was incorporated under the laws
of the State of Nevada on December 26, 1995.  In connection with the
organization of the Company, the President and founders of the Company
contributed $8,000 cash to initially capitalize the Company in exchange for
800,000 shares of Common Stock.  The Company then registered a public offering
of its securities to raise funds from such offering with which to commence
business operations.  The Company filed with the Securities and Exchange
Commission a registration statement on Form SB-2, Commission File No. 333-
4066, which became effective October 21, 1996.  Pursuant thereto the Company
sold 218,900 shares of its common stock to the public at $.25 per share and
raised gross proceeds of $54,725.  The offering was completed in February,
1997.  The Company then used the net proceeds from this offering to provide
the working capital necessary to commence business operations.  However, the
Company has not yet generated any signigicant revenues from operations and is
still considered a development stage company. 

     (B)  BUSINESS OF COMPANY.

BUSINESS OF THE COMPANY

     The Company is engaged in the business of producing and marketing
specialty children's coloring art books and art coloring pencils.  The Company
is using the funds derived from the public offering of its securities
primarily to pay for the costs of printing copies of the coloring art books
which the Company has created, and for marketing.

     The Company creates specialty children's coloring art books that depict
various aspects of Southwestern and Western heritage, traditions and culture
of the United States.  Drawings characterize various features and aspects of
the Colorado Plateau and its history, recreation, geography, archeology,
pictographs, flora and fauna.  Different editions of the coloring art book are
being produced and distributed throughout the Colorado Plateau and Great Basin
area.  The different editions are tailored to specific events or areas within
the Colorado Plateau and Great Basin and feature drawings that depict such
events or some aspects of the heritage, culture and traditions that represent
the uniqueness of a particular area.

     For instance, an example of an edition featuring a specific event is the
coloring art book known as the Safari edition, with drawings depicting the
Annual Easter Jeep Safari held in Moab, Utah, which was featured in
demonstration copies which were used by the President in initial, informal
marketing surveys, and is now featured in a regular production edition.  This
event brings over 5,000 participants and visitors from several states in the
U.S.  The Jeep Safari is just one of forty-five organized 4x4 events held
throughout the United States.  Families with children of all ages attend these
events and contribute to the large numbers of participants.  Another edition,
the Southwest edition, features places and events such as the Glen Canyon
National Recreation Area (Lake Powell), Grand Canyon National Park and other
national and state parks in Utah, Arizona, Colorado and New Mexico.  Each area
featured offers different and distinctive scenic attractions and recreational
activities, including water sports, river running, hiking and mountain biking. 
The Southwestern U.S. is also rich in Native American cultural influences, and
another edition known as the Pow-Wow edition features items associated with
those cultures. 

     In conjunction with marketing coloring art books, the Company plans to
create and market its own specialized assortment of art quality colored
pencils.  The pencil assortment will feature colors and shades specially
selected by management to match the colors and shades of soils, rocks, plants,
animals and other items commonly seen in the desert Southwest.  The pencils
will be marketed using the Company's own color names as an alternative to
crayons, which can be quite messy and are subject to melting, particularly in
the hot summer temperatures of the desert. 

MARKETING, DISTRIBUTION AND ADVERTISING STRATEGIES

     Management of the Company believes that with the dramatic increases seen
in recent years in the numbers of tourists and other visitors coming to
national and state parks and other tourist attractions in the Southwestern
U.S., particularly in the area of the Colorado Plateau, increased
opportunities are presented to market as souvenirs, a variety of products
which feature the distinctive places and events which attract people to these
destinations and/or have themes associated with such destinations.  In
addtition to the usual products marketed as souvenirs, management believes
that a potential market exists for a specialty children's coloring art book
which depicts items, places and events in or associated with the Southwestern
U.S.  However, the Company has not conducted any formal marketing surveys and
there is no assurance of any market interest or demand for such a product. 

     Management intends to pursue marketing efforts in at least two different
areas.  Since the coloring books will feature drawings depicting certain
special or distinctive events that occur in different places in the
Southwestern U.S., management intends, at least twice a year, to attend events
of this nature.  Management is aware of several special events that occur
during the Spring, Summer, and Fall throughout Utah, Arizona and Colorado,
including biking events, 4x4 events, river running expeditions, etc.  During
some of these events, booths are offered to potential vendors for a nominal
fee.  Management of the Company will be responsible to contact the organizers
of such special events to obtain booth space or otherwise acquire rights of
distribution during such events, and intends to market the products on a
retail basis to the participants and others attending such events.  

     Management also intends to contact directly in person or by mail or
telephone solicitation the owners and other proprietors of existing retail
establishments in various locations throughout the Southwest to market the
products on a wholesale basis.  Wholesale buyers would include those
businesses located in tourist destinations including airports, scenic and
recreation areas, towns and cities nearby and surrounding national and state
parks and other destination points of interest.  Examples of potential buyers
would include tourist and souvenir shops, specialty shops, grocery stores, toy
stores, drug stores, hotel and motel shops and tourist information locations,
as well as any art specialty shops. 
     
     The Company intends to prepare flyers and brochures advertising its
products, which will be distributed by mail and dropped off in direct
contacts.  Management will also prepare demonstration copies of the books for
use in direct contacts.  Management anticipates that distribution of the
Company's products will be handled through mail order or by direct delivery
for the most part.  Management intends to have printed on each copy of any
edition or version of the books, ordering information and/or forms, and
possibly a toll free 800 number for convenience in ordering. Inasmuch as the
Company's products will be targeted mainly toward tourist traffic, management
anticipates that the seasonality of the business will coincide with the
tourist season in the Colorado Plateau area, which basically begins in March
or April and continues into October or November, with its peak during the
summer months. 

COMPETITION

     The proposed business of the Company is very specialized and there is no
assurance of market interest or demand.  The tourist industry in general and
the marketing of souvenirs and other specialty items of interest to tourists
is highly competitive and most of the Company's competitors have substantially
greater financial and personnel resources than the Company.  Management is
aware of limited numbers of tourist oriented coloring books or similar
specialty items, but is not aware of anyone marketing a coloring art book
exactly like the Company intends to market. 

EMPLOYEES

     The Company presently has no salaried employees, and does not presently
anticipate the need to hire employees upon completion of the offering.  The
sole officer of the Company will not be employed full time initially and will
not receive a regular salary, wage or other cash compensation for her time,
unless and until the Company's business operations develop to the point where
a full time or other extensive time commitment is required.  

ITEM 2.   PROPERTIES

     GENERAL.

     The Company presently has no office facilities but for the time being
will use the home office facilities of Ms. Michelle Barlow, its President, in
Salt Lake City, Utah, on a rent free basis as its principal place of business. 
Management does not intend to seek other office arrangements immediately upon
completion of the offering, but will seek such arrangements at such time in
the future as the Company's business requires more extensive facilities, which
is not anticipated in the immediate future.  The Company may use a portion of
the proceeds of this offering for such purpose, if and as needed.  

ITEM 3.   LEGAL PROCEEDINGS.

     The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no action has been threatened by or against the
Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.  

                               PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     (A)  MARKET INFORMATION.  

     The Company's public offering was not closed until late February, 1997
and the Common Stock of the Company was not eligible for trading in the over-
the-counter market until after that time.  There were not any published
quotations for the securities of the Company until the 2nd quarter of 1997,
and the quoted bid price has been at $.50 since that time. 

     (B)  HOLDERS.  

     As of April 20, 1998, there were approximately 47 record holders of the
Company's Common Stock. 

     (C)  DIVIDENDS.  

     The Company has not previously paid any cash dividends on common stock
and does not anticipate or contemplate paying dividends on common stock in the
foreseeable future.  It is the present intention of management to utilize all
available funds for the development of the Company's business.  The only
restrictions that limit the ability to pay dividends on common equity or that
are likely to do so in the future, are those restrictions imposed by law. 
Under Nevada corporate law, no dividends or other distributions may be made
which would render the Company insolvent or reduce assets to less than the sum
of its liabilities plus the amount needed to satisfy any outstanding
liquidation preferences.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

     The Company was incorporated on December 26, 1995.  The Company has not
yet generated any significant revenues from operations and is considered a
development stage company.  To date, activities have been limited to
organizational matters, the preparation and filing of the registration
statement to register a public offering of its securities, pursuant to which
the Company offered and sold 218,900 shares of common stock and raised gross
proceeds of $54,725, the closing of such offering and the initial commencement
of limited operations.  The Company has no assets other than those acquired
with the net proceeds from the offering, and the balance of proceeds
remaining. 

     Management's plan of operation for the next twelve months is to continue
to  use the remaining net proceeds from the offering primarily to pay for the
costs of printing copies of the specialty children's coloring art books which
the Company has completed artwork for, and attempt to market them.  The
Company also used offering proceeds to make initial equipment purchases and
other capital expenditures for a computer system, a digitized scanner software
program, a plain paper laser fax machine, a laser printer and a photocopy
machine.  The remaining portion of the proceeds provides working capital for
the operation of the Company's proposed business.  

     There is absolutely no assurance that the Company will be able, with the
proceeds of the offering, to successfully develop its business. At this time,
no assurances can be given with respect to the length of time that it will be
necessary to fund operations from proceeds of this offering.  If the marketing
of the printed books is successful, management intends for the foreseeable
future to reinvest the revenues derived therefrom for additional printings and
editions of the coloring art books, and for development and marketing costs
relating to a line of colored pencils which the Company also intends to
eventually market.  

     Management believes that the net proceeds of the offering will be
sufficient for initial printing and marketing of the coloring art books, after
which time management anticipates that the Company will begin generating
revenues from sales to cover ongoing expenses.  However, there is absolutely
no assurance of this.  If the initial marketing of the coloring art books is
unsuccessful, investors will have lost their money and management will not
attempt to pursue further marketing efforts with respect to such product, and
it is unlikely the Company would have the financial ability to do so in any
event.  Instead management will call a shareholders meeting to decide whether
to liquidate the Company or what direction the Company will pursue, if any. 
However, the Company presently has no plans, commitments or arrangements with
respect to any other potential business venture and there is no assurance the
Company could become involved with any other business venture, especially any
business venture requiring significant capital. 

ITEM 7.   FINANCIAL STATEMENTS.
     
     See attached Financial Statements and Schedules.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     There are not and have not been any disagreements between the Company
and their accountants on any matter of accounting principles or practices or
financial statement disclosure. 

                               PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     (A)  IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS. 
     
     The following table sets forth the sole director and executive officer
of the Company, her age, and all offices and positions with the Company.  A
director is elected for a period of one year and thereafter serves until his
or her successor is duly elected by the stockholders and qualifies.  Officers
and other employees serve at the will of the Board of Directors. 
<TABLE>
<S>                      <C>  <C>              <C>
                              Term Served As   Positions
Name of Director         Age  Director/Officer With Company

                              
Michelle Barlow          34   Since inception  President &
                                               Secretary/Treasurer 
</TABLE>

     This individual serves as management of the Company.  A brief
description of her background and business experience is as follows:

     MICHELLE BARLOW serves as President, Secretary/Treasurer and Director of
the Company.  Ms. Barlow has completed two years of college coursework
majoring in accounting and business at the University of Utah and Salt Lake
Community College, and is currently self employed as the small business owner
of an accounting service.  Ms. Barlow owned and operated Plants by Design, a
business engaged in interior landscaping, from 1986 to 1989.  From 1989 to
1995, she was employed at the University of Utah as an Administrative
Assistant, where she was involved in various bookkeeping and accounting
procedures, including payroll, general ledger, year end tax return preparation
and submitting financial reports, as well as writing governmental proposals
and securing grants and private funds for research.  Ms. Barlow also has
operating experience in various computer software programs for both Macintosh
and IBM PC compatible systems.  Because of her personal interests, she has
travelled in and studied as a hobby the geology of the Colorado Plateau and
also its plant and animal life, culture and traditions.

     Ms. Barlow holds no directorships in any other company subject to the
reporting requirements of the Securities Exchange Act of 1934.

     (B)  IDENTIFY SIGNIFICANT EMPLOYEES.

     None other than the person previously identified.

     (C)  FAMILY RELATIONSHIPS.

     None

     (D)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. 

     Except as described hereinabove, no present officer or director of the
Company; 1) has had any petition filed, within the past five years, in Federal
Bankruptcy or state insolvency proceedings on such person's behalf or on
behalf of any entity of which such person was an officer or general partner
within two years of filing; or 2) has been convicted in a criminal proceeding
within the past five years or is currently a named subject of a pending
criminal proceeding; or 3) has been the subject, within the past five years,
of any order, judgment, decree or finding (not subsequently reversed,
suspended or vacated) of any court or regulatory authority involving violation
of securities or commodities laws, or barring, suspending, enjoining or
limiting any activity relating to securities, commodities or other business
practice.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The Issuer is not subject to the provisions of Section 16(a). 

ITEM 10.  EXECUTIVE COMPENSATION.

     The sole officer/director is entitled to reimbursement of any out of
pocket expenses reasonably and actually incurred on behalf of the Company. 
Presently, the officer only devotes a portion of her time to the affairs of
the Company.  She is not employed full time and does not receive a regular
salary, wage for her time, and will not unless and until the Company's
business operations develop to the point where a full time or other extensive
time commitment is required.  The officer did receive approximately $250 in
sales commissions during 1997. The Company presently has no formal employment
agreements or other arrangements or understandings with the officer regarding
the commitment of time or the payment of salaries or other compensation. 
However, the officer is prepared to devote such time as may be necessary to
the development of the Company's business.  The amounts of compensation and
other terms of any full time employment arrangements with Ms. Barlow would be
determined if and when such arrangements become necessary.  

COMPENSATION OF DIRECTORS

     None

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

     The Company has not entered into any contracts or arrangements with any
named executive officer which would provide such individual with a form of
compensation resulting from such individual's resignation, retirement or any
other termination of such executive officer's employment with the Company or
its subsidiary, or from a change-in-control of the Company or a change in the
named executive officer's responsibilities following a change-in-control.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock with respect to each
director of the Company, each person known to the Company to be the beneficial
owner of more than five percent (5%) of said securities, and all directors and
executive officers of the Company as a group:
<TABLE>
<S>                  <C>       <C>                   <C>
                     Title of  Amount and Nature of  Percent
Name and Address      Class    Beneficial Ownership  of Class

                                                  
Michelle Barlow       Common     250,000 shares         25%
1020 Belmont Ave.                                 
Salt Lake City, UT               
84105                                             
                      
Eslie Barlow          Common     275,000 shares         27%
1354 S. 1000 W.                  
Salt Lake City, UT                                
84104                 
                                                  
Lynn Dixon            Common     275,000 shares         27%
311 S. State, #460                                
Salt Lake City, UT    
84111                                             
                                                  
All officers and      
directors as a                                    
group (1 person)      Common     250,000 shares          25%
</TABLE>

     The foregoing amounts include all shares these persons are deemed to
beneficially own regardless of the form of ownership.  See "Certain
Transactions."

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Company has entered into certain transactions with officers,
directors or affiliates of the Company which include the following:

     In connection with the organization of the Company, its founding
shareholders paid an aggregate of $8,000 cash to purchase 800,000 shares of
Common Stock of the Company.  Upon incorporation, $5,000 was initially
contributed in exchange for 500,000 shares of Common Stock.  Subsequently in
March of 1996, an additional $3,000 was contributed in exchange for 300,000
shares of Common Stock.  See "Principal Shareholders."  

     It is contemplated that the Company may enter into certain transactions
with officers, directors or affiliates of the Company which may involve
conflicts of interest in that they will not be arms' length transactions. 
These transactions include the following:

     The Company presently has no office facilities but for the time being
will use as its business address the home of Ms. Michelle Barlow on a rent
free basis, until such time as the business operations of the Company may
require more extensive facilities and the Company has the financial ability to
rent commercial office space.  There is presently no formal written agreement
for the use of such facilities, and no assurance that such facilities will be
available to the Company on such a basis for any specific length of time.  

     The Company has no formal written employment agreement or other
contracts with its President, and there is no assurance that the services and
facilities to be provided by Ms. Barlow will be available for any specific
length of time in the future.  Ms. Barlow anticipates initially devoting up to
approximately 20% of her time to the affairs of the Company.  If and when the
business operations of the Company increase and a more extensive time
commitment is needed, Ms. Barlow is prepared to devote more time to the
Company, in the event that becomes necessary.  The amounts of compensation and
other terms of any full time employment arrangements with Ms. Barlow would be
determined if and when such arrangements become necessary.  

CONFLICTS OF INTEREST

     In addition to the conflicts of interest that are inherent in the
foregoing transactions, conflicts of interest may also arise from the fact
that the President and director of the Company will not be employed full time
and will have other activities and business interests, to which she will also
devote time and attention.  Inasmuch as the President will not receive any
regular salary or wage from the Company, at least initially, these other
activities include other employment or business activities to obtain her
livelihood, as well as schooling activities, inasmuch as the President is
still continuing to pursue her educational goals.  These other activities
could give rise to a conflict with respect to certain operations of the
Company, particularly with respect to the amount of time management devotes to
the Company and to these other activities.  

     A director of the Company owes fiduciary duties to the Company which may
conflict with these other interests.  The Company has not entered into any non
compete, confidentiality or similar agreements with the director.  The
fiduciary duties that directors owe to a Company include the duty not to
withhold from the Company, or appropriate, any corporate opportunity which the
Company may be able to exploit, the duty not to use for their personal benefit
or the benefit of any other individual or entity any information not generally
known which they acquire through their association with the Company, and in
short, the duty to deal fairly with the Company.  The Company's current
director intends to submit to the Company any potential business she becomes
aware of which may constitute a corporate opportunity to the Company.  The
Company's policy is that all transactions between the Company and any
affiliates be on terms no less favorable to the Company than could be obtained
from unaffiliated parties.

INDEMNIFICATION

     The general corporation law of Nevada permits provisions in the
articles, by-laws or resolutions approved by shareholders which limit
liability of directors and officers for breach of fiduciary duty to certain
specified circumstances, namely, breaches of their duties of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, acts involving unlawful payment of dividends or unlawful
stock purchases or redemptions, or any transaction from which a director or
officer derives an improper personal benefit.  The Company's by-laws indemnify
its officers and directors to the full extent permitted by Nevada law.  The
by-laws with these exceptions eliminate any personal liability of an officer
or director to the Company or its shareholders for monetary damages for the
breach of fiduciary duty and therefore an officer or director cannot be held
liable for damages to the Company or its shareholders for gross negligence or
lack of due care in carrying out his or her fiduciary duties.  The Company's
Articles provide for indemnification to the full extent permitted under law
which includes all liability, damages and costs or expenses arising from or in
connection with service for, employment by, or other affiliation with the
Company to the maximum extent and under all circumstances permitted by law. 
Nevada law permits indemnification if a director or officer acts in good faith
in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation.  A director or officer must be indemnified as to
any matter in which he or she successfully defends himself or herself. 
Indemnification is prohibited as to any matter in which the director or
officer is adjudged liable to the corporation.  Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.

     Except as disclosed in this item, in notes to the financial statements
or elsewhere in this report, the Company is not aware of any indebtedness or
other transaction in which the amount involved exceeds $60,000 between the
Company and any officer, director, nominee for director, or 5% or greater
beneficial owner of the Company or an immediate family member of such person;
nor is the Company aware of any relationship in which a director or nominee
for director of the Company was also an officer, director, nominee for
director, greater than 10% equity owner, partner, or member of any firm or
other entity which received from or paid the Company, for property or
services, amounts exceeding 5% of the gross annual revenues or total assets of
the Company or such other firm or entity.


                               PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (A)  EXHIBITS to this report are all documents previously filed which
are incorporated herein as exhibits to this report by reference to
registration statements and other reports previously filed by the Company
pursuant to the Securities Act of 1933 and the Securities Exchange Act of
1934.

     (B)  REPORTS ON FORM 8-K have not been filed during the last quarter of
the fiscal year ended December 31, 1997.

<PAGE>
                              SIGNATURES


In accordance with Section 12 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


KAYENTA KREATIONS, INC.



By:     /s/ Michelle Barlow                   Date: April 21, 1998         
     Michelle Barlow, President and Secretary/Treasurer
     Chief Executive Officer and 
     Chief Financial Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and the
dates indicated.



By:     /s/ Michelle Barlow                   Date: April 21, 1998         
     Michelle Barlow, President and Secretary/Treasurer
     Chief Executive Officer and 
     Chief Financial Officer



<PAGE>

Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non Reporting Issuers

No annual report or proxy statement has been sent to security holders.

<PAGE>


















                    KAYENTA KREATIONS, INC.
                 (A Development  Stage Company)

                      FINANCIAL STATEMENTS
                                
         FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                                
                              WITH

                 INDEPENDENT  AUDITOR'S REPORT
                                
                                <PAGE>
                    KAYENTA KREATIONS, INC.
                 (A Development Stage Company)


                            CONTENTS


                                                  PAGE

Independent Auditor's Report                                              1

Balance Sheets, December 31, 1997 and 1996                                2

Statements of Operations, for the years ended
     December 31, 1997 and 1996                                           3

Statement of Stockholders' Equity, for the years
     ended December 31, 1997 and 1996                                     4
                                
Statements of Cash Flows, for the year ended
     December 31, 1997 and 1996                                           5

Notes to Financial Statements                                           6-7


<PAGE>










Independent Auditor's Report

Board of Director
KAYENTA KREATIONS,  INC.
Salt Lake City, Utah

I have audited the accompanying balance sheets of Kayenta Kreations, Inc.  (a
development stage company) as of December 31, 1997 and 1996 and the related
statements of operations, stockholders' equity and cash flows for the years
then ended and from inception (December 26, 1995) to December 31, 1997.  These
financial statements are the responsibility of the Company's management.  My
responsibility is to express an opinion on the financial statements based on
my audits.

I conducted my audits in accordance with generally accepted auditing
standards.  Those  standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  I believe that my audits provide a reasonable basis
for  my opinion.

In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kayenta Kreations (a
development stage company)   as of December 31, 1997 and 1996 and the results
of its operations and its cash flows for the years then ended from inception
(December 26, 1995) to December 31, 1997 in conformity with generally accepted
accounting principles.


                                     /s/ David T. Thomson, P.C.



Salt Lake City, Utah
March 30, 1996


<PAGE>
KAYENTA KREATIONS, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
                                       December 31,  December 31,
                                            1997        1996
                                   ________________________________
CURRENT ASSETS
  Cash in bank                               $16,777  $1,036
  Deferred offering costs                          0   5,819
  Inventory                                    1,113       0
                                            ________________

       Total Current Assets                   17,890   6,855
                                            ________________
EQUIPMENT AND DISPLAYS
  Office equipment                             5,379       0
  Displays                                     3,931       0
                                            ________________

                                               9,310       0
  Less depreciation                             (930)      0
                                            ________________

                                               8,380       0
                                            ________________
OTHER ASSETS                                          
  Organization costs, less                       598     798
   amortization of $402 and $202            ________________

       Total Other Assets                        598     798
                                            ________________

TOTAL ASSETS                                 $26,868  $7,653
                                             ===============
LIABILITIES AND STOCKHOLDERS' EQUITY                  

CURRENT LIABILITIES                                   
  Accounts payable                              $542      $0
  State franchise tax payable                    100       0
                                            ________________

       Total current Liabilities                 642       0
                                            ________________
NONCURRENT LIABILITIES                                
  Deferred taxes payable                          86       0
                                            ________________
STOCKHOLDERS' EQUITY                                  
  Preferred stock; $.001 par value,
   5,000,000 shares authorized, no 
   shares issued and outstanding                   0       0
  Common stock; $.001 par value,                   
   50,000,000 shares authorized,                         
   1,018,900 and 800,000 shares                1,019     800
   issued and outstanding respectively
  Capital in excess of par value              47,193   7,220
  Earnings (deficit) accumulated             (22,072)   (367)
   during the development stage             ________________

       Total Stockholders' Equity             26,140   7,653
                                            ________________

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $26,868  $7,653
                                            ================

The accompanying notes are an integral part of these financial statements.
<PAGE>
KAYENTA KREATIONS, INC.
(A Development Stage Company)

STATEMENTS OF OPERATIONS                                     
                                  For the      For the   Cumulative
                                Year Ended   Year Ended  During the
                              December 31, December 31, Development
                                   1997         1996       Stage 

SALES
  Sales - net                          $654      $0     $654
  Less cost of Sales                   (358)      0     (358)
                                   _________________________

    Gross Margin                        296       0      296
                                   _________________________

SELLING, GENERAL AND ADMINISTRATIVE                    
  Accounting and legal                2,895       0    2,895
  Amortization                          200     200      402
  Travel                              1,873       0    1,873
  Wages                               2,017       0    2,017
  Marketing                           5,307       0    5,307
  Equipment rental                    2,171       0    2,171
  Administrative                      1,865     172    2,037
  Office supplies                     3,091       0    3,091
  Utilities                             743       0      743
  Meals and entertainment               721       0      721
  Depreciation                          930       0      930
  Taxes                                 200       0      200
  Equipment repairs                     283       0      283
  Miscellaneous                         137       0      137
                                   _________________________

    Total Selling, General           22,433     372   22,807
     and Administrative
                                   _________________________

NET INCOME FROM OPERATIONS          (22,137)   (372) (22,511)

OTHER INCOME (EXPENSE)                                 
  Interest income                       534       7      541
  Interest expense                      (15)      0      (15)
                                   _________________________

NET INCOME BEFORE TAXES             (21,618)   (365) (21,985)

PROVISIONS FOR INCOME TAXES             (87)      0      (87)
                                   _________________________

NET INCOME (LOSS)                  $(21,705)  $(365)$(22,072
                                   ================ ========

EARNINGS (LOSS) PER SHARE            $(0.02) $(0.00)  $(0.03)
                                   ================ ========

The accompanying notes are an integral part of these financial statements.
<PAGE>
KAYENTA KREATIONS, INC.
(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' EQUITY

                                                            Earnings
                                                            (Loss)
                                                            Accumulated
                                                Capital in  During the
                                  Common Stock   Excess of  Development
                                  Shares Amount  Par Value  Stage

BALANCE, December 26,                  0     $0      $0      $0
1995 (Inception)                               

Shares issued to                               
initial stockholders                           
for cash December 26, 1995
at $.01 per share                500,000    500   4,500       0

Net income (loss) from                         
December 21, 1995 (inception)
to December 31, 1995                   0      0       0      (2)
                                 ______________________________

BALANCE, December 31, 1995       500,000    500   4,500      (2)

Additional shares issued to 
initial stockholders for cash
March 6, 1996 at $.01 per share  300,000    300   2,700       0

Capital contributed by 
officer and shareholder                0      0      20       0

Net income (loss) for the year
ended December 31, 1996                0      0       0    (365)
                                 ______________________________

BALANCE, December  31, 1996      800,000    800   7,220    (367)

Shares issued pursuant to a
sale of common to the public 
for cash February 1997 at 
$.25 per share                   218,900    219  54,506       0

Direct costs of offering               0      0 (14,533)      0

Net income (Loss) for the 
year ended December 31, 1997           0      0       0 (21,705)
                                 ______________________________

BALANCE, December  31, 1997    1,018,900 $1,019 $47,193$(22,072)
                               ================================

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

<PAGE>
KAYENTA KREATIONS, INC.
(A Development Stage Company)

STATEMENTS OF CASH FLOWS

                                           For the     For the    Cumulative
                                         Year Ended   Year Ended  During the
                                        December 31, December 31, Development
                                            1997         1996       Stage

CASH FLOWS FROM OPERATING ACTIVITIES                          
  Cash from sales                                  $654       $0     $654
  Cash paid for organization costs                    0     (250)  (1,000)
  Cash from interest                                534        7      541
  Cash paid for interest                            (15)       0      (15)
  Cash paid for supplies and employee services  (22,033)    (172) (22,205)
  Cash paid for taxes                              (100)       0     (100)
                                               ________ ________ ________

    Net Cash (Used) by Operating Activities     (20,960)    (415) (22,125)
                                               ________ ________ ________

CASH FLOWS FROM INVESTING ACTIVITIES                          
  Acquisition of equipment                       (9,310)       0   (9,310)
                                               ________ ________ ________ 

    Net cash (Used) by Investing Activities      (9,310)       0   (9,310)
                                               ________ ________ ________

CASH FLOWS FROM FINANCING ACTIVITIES                          
  Sale of common stock                           54,725    3,000   62,725
  Direct offering costs                          (8,714)  (5,569) (14,533)
  Contributed capital                                 0       20       20
                                               ________ ________ ________

    Net Cash Provided (Used) By Financing        46,011   (2,549)  48,212
Activities                                     ________ ________ ________

NET INCREASE (DECREASE) IN CASH                  15,741   (2,964)  16,777

CASH - BEGINNING OF PERIOD                        1,036    4,000        0
                                               ________ ________ ________

CASH - END OF PERIOD                            $16,777   $1,036  $16,777
                                               ======== ======== ========
RECONCILIATION OF NET INCOME TO NET CASH 
 PROVIDED (USED) BY OPERATING ACTIVITIES

NET INCOME (LOSS)                              $(21,705)  $ (365)$(22,072)
                                               ________ ________ ________
Adjustments to reconcile net income (loss)
 to net cash provided (used) by operating
 activities        
    Amortization of organization costs              200      200      402
    Depreciation                                    930        0      930
    Deferred taxes                                   86        0       86
    Change in assets and liabilities                                   
      Organization costs                              0     (250)  (1,000)
      Inventory                                  (1,113)       0   (1,113)
      Accounts payable                              542        0      542
      Franchise taxes payable                       100        0      100
                                               ________ ________ ________

        Total Adjustments                           745      (50)     (53)
                                               ________ ________ ________

NET CASH PROVIDED (USED) BY OPERATING          $(20,960)   $(415)$(22,125)
ACTIVITIES                                     ======== ======== ========

The accompanying notes are an integral part of these financial statements.
<PAGE>
                    KAYENTA KREATIONS, INC.
                 (A Development Stage Company)
                                
                 NOTES TO FINANCIAL STATEMENTS

NOTE   1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization  -  The Company was organized under the laws of the State
     of Nevada on December 26, 1995, and has elected a fiscal year end of
     December 31st.  The Company was formed to engage in the business of
     producing and marketing a children's coloring art book depicting various
     aspects of life in the Southwestern and Western United States. The
     Company is considered a development stage Company as defined in   SFAS
     No 7.  The Company, has at the present time, not paid any dividends and
     any dividends that may be paid in the future will depend upon the
     financial requirement of the Company and other relevant factors.

     Net income per Share  -  The computation of net income (loss) per share
     of common stock is based on the weighted average number of shares
     outstanding during the period presented.

     Organization Costs  -  The Company is amortizing its organization costs,
     which reflect amounts expended to organize the Company, over sixty (60)
     months using the straight-line method.

     Income Taxes  -  Due to losses at December 31, 1997 and 1996 no
     provision for income taxes has been made.  There is deferred income
     taxes resulting from income and expense items being reported for
     financial accounting and tax reporting purposes in different periods.

     Cash and Cash Equivalents  -  For purposes of the statement of cash
     flows, the Company considers all highly liquid debt instruments
     purchased with a maturity of three months or less to be cash
     equivalents.  At December 31, 1997 and 1996 the Company did not have
     non-cash investing and financing activities.
     
     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.
     
     Inventory  -  Inventories are stated at the lower of cost, determined by
     the First-in, First-out method, or market. Cost includes materials and
     conversion costs.

     Equipment and displays  -  Equipment and displays are recorded at cost.
     The Company uses the straight line method of computing depreciation for
     financial reporting purposes and generally uses accelerated methods for
     income tax purposes. The estimated lives of the equipment and displays
     is 5 to 7 years.

NOTE   2  -  COMMON STOCK TRANSACTIONS

     The Company was formed through the issuance of 800,000 shares of common
     stock for $8,000.

     During February 1997, the Company completed an offering of stock to the
     public at a price of $.25 per share. The Company sold 218,900 shares for
     a total of $54,725. The direct costs of the offering were $14,533.

                                <PAGE>
                    KAYENTA KREATIONS, INC.
                 (A Development Stage Company)
                             
                 NOTES TO FINANCIAL STATEMENTS

NOTE   3  -  RELATED PARTY TRANSACTIONS

     The Company is using the home of its President as its office on a rent
     free basis.  As of December 31, 1997 and 1996 no compensation has been
     paid or accrued to any officers or directors of the Corporation.
     
NOTE   4  -  INCOME TAXES

     The income tax provision consists of the following:

     Current income taxes payable       $      -
     Deferred tax liability                   87
                                         -------
                                        $     87

     The income tax provision differs from the expense that would result from
     applying federal statutory tax rates to income before income taxes because
     certain entertainment and business meal expenses are not deductible for
     tax purposes, as well as temporary differences in depreciation expense
     calculated for book and for tax purposes.

     Deferred income tax liability or benefit results from timing differences
     in the recognition of revenues and expenses for tax and financial
     statement purposes. The sources of these differences and the tax effects
     of each are as follows:

     Tax liability
          Accelerated depreciation      $    86
     
     The change in the tax liability this year was $86.

     At December 31, 1997 and 1996 the Company had net federal operating losses
     (NOL) of $22,203 and $367 respectively which can be carried forward to
     offset operating income. The NOL will expire as shown below. Valuation
     allowances of $3,330 and $55 respectively, have been established for those
     tax credits which are not expected to be realized. The change in the NOL
     allowances for 1997 and 1996 was $3,275 and $55. The net operating losses
     expire as follows:
     
             Year of  
            Expiration               Amount
                 2010                $      2
                 2011                $    365
                 2012                $ 21,836