CORVALLIS INC
10-K, 1996-09-30
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

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

             For The Fiscal year Ended June 30, 1996
                  Commission File No. 33-18143-D

                          CORVALLIS, INC.
      (Exact name of Registrant as specified in its Charter)

                   Nevada                             87-0449399
      (State or other jurisdiction of             (I.R.S. Employer
       incorporation or organization)             Identification No.)

          1486 South llth East
          Salt Lake City, Utah                     84105
(Address of principal executive offices)        (Zip Code)

       Registrant's Telephone Number including Area Code:
                          (801) 487-3893

Securities Registered Pursuant to Section 12(b) of the Act:
                                                  Name of Each Exchange
     Title of Each Class                            on which Registered
             None                                           None

Securities Registered Pursuant to Section 12(g) of the Act:

                               None

     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  Exchange  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 such
filing requirements for the past 90 days. Yes [X] No [ ]

     The  aggregate  market  value  of the  Registrant's  voting  stock  held by
non-affiliates computed with reference to the bid prices in the over-the-counter
market on September 25, 1996, was approximately $33,500.

     As of the date of the filing of this report, the Registrant had outstanding
a total of 1,250,009 shares of its common stock, par value $ 0.001, after giving
effect to a 1-for-5 reverse split completed in August, 1995.

<PAGE>


               DOCUMENTS INCORPORATED BY REFERENCE

     List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g.,  Part I, Part II,  etc.) into which the document is
incorporated:  (1) any  annual  report  to  security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.

     None.

<PAGE>




                        TABLE OF CONTENTS




Item Number and Caption                                           Page No.


PART 1

1.  Business .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . . 5

2.  Properties  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . . 9

3.  Legal Proceedings. .  . .  . .  . .  . .  . .  . .  . .  . .  . . 9

4.  Submission of Matters to a Vote of Security Holders . .  . .  . . 9


PART II

5.  Market for Registrant's Common Equity and Related 
     Stockholder Matters   . . . . . . . . . . . . . . . . . . . . . 10

6.  Selected Financial Data .  . .  . .  . .  . .  . .  . .  . .  . .10

7.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations . .  . .  . .  . .  . .  . .11

8.  Financial Statements and Supplementary Data .  . .  . .  . .  . .12

9.  Changes in and Disagreements on Accounting and 
     Financial Disclosure  .  . .  . . . . . . . . . . . . . . . . . 12


PART III

10. Directors and Executive Officers of the Registrant  . .  . .  .  12

11. Executive Compensation  .  . .  . .  . .  . .  . .  . .  . .  .  14

12. Security Ownership of Certain Beneficial Owners 
     and Management  .  . .  . . . . . . . . . . . . . . . . . . . . 14

13. Certain Relationships and Related Transactions . .  . .  . .  .  16

<PAGE>

PART IV                                                           Page No.

14. Exhibits, Financial Statement Schedules and
     Reports on Form 8-K  . .  . .  . .  . .  . .  . .  . .  . . . . 18

15.  Signatures . .  . .  . .  . .  . .  . .  . .  . .  . .  . . . . 20


<PAGE>


                              PART I


                       ITEM 1.  BUSINESS


ORGANIZATION AND HISTORY

    Corvallis, Inc. (the "Company" or the "Registrant"), was organized under the
laws of the state of Nevada on September 28, 1987, for the purpose of creating a
capital  resource fund to seek,  investigate,  and, if warranted,  to acquire or
enter into any suitable business  opportunity which management believed had good
business  potential.  At the time of its  organization,  no specific business or
business area was contemplated by management.

    In July, 1988, the Company  completed a public offering of units,  each unit
consisting of one share of the Company's  common stock, one class A common stock
warrant, and one class B common stock purchase warrant. At the completion of the
offering,  the Company had sold a total of 13,140,000 (105,120 post-split) units
at an  offering  price of $0.01 per unit,  resulting  in gross  proceeds  to the
Company of $131,400,  and net proceeds of $98,216  after sales  commissions  and
other expenses of the offering in the amount of $33,184. The Class A and Class B
warrants sold in the offering have expired.

    In the end of August,  1989, the  Registrant  entered into an Asset Purchase
Agreement with DLB Enterprises,  Inc., a closely-held Nevada corporation,  under
the terms of which  the  Registrant  acquired  all of the  assets of  "Southwest
Awning  Systems",  a Las  Vegas-based  enterprise  ("Southwest")  which had been
engaged  in  the  manufacture  and   installation  of  awnings  for  commercial,
industrial and residential use. Under the terms of the Asset Purchase Agreement,
the  Registrant  acquired all of the operating  assets of  Southwest,  including
equipment,  inventory,  customer  accounts,  tradenames and trademarks and other
assets, in exchange for the issuance of a total of 253,307  post-split shares of
the  Registrant's   restricted  common  stock  to  DLB.  Concurrently  with  the
transaction  with DLB, the  Registrant  entered  into an  agreement  with W.A.M.
Industries,  Inc. ("WAM"),  a closely-held Utah corporation which had previously
owned Southwest with DLB in a joint venture, under the terms of which WAM agreed
to act as contractor on all large  commercial  jobs of the Registrant at a price
of cost plus 10%,  and  generally  agreed to  contribute  its  expertise  in the
development of the Registrant's business. In consideration of these undertakings
by WAM, the Company  issued to WAM a total of 108,560  post-split  shares of its
restricted common stock. In connection with these  transactions,  the Registrant
issued a total of  144,747  post-split  shares  of  restricted  common  stock to
Whitney O. Cluff and his affiliates,  who were  instrumental in facilitating the
negotiation and consummation of the transactions.

    The Company  attempted to operate the business of Southwest  for a period of
approximately four (4) months, at which time operations were discontinued due to
the Company's  insufficient operating income and capital to continue operations.

<PAGE>

At such time, the Company entered into an arrangement  with WAM, under the terms
of  which  WAM  assumed  the  operations  of  the  Registrant  and  assumed  all
outstanding Company liabilities and obligations.

    Since  January,  1990,  the  Company  has not had any  business  operations.
Beginning in the last quarter of 1993,  the  Registrant  began  efforts to bring
current all of its filings with state and federal agencies,  including the U. S.
Securities and Exchange  Commission,  in order that the Company could proceed to
look for a business  opportunity  for  acquisition or in which the Company could
become engaged. These activities were completed in 1995.

    During the summer of 1995, the Company entered into a preliminary  letter of
intent providing for a reorganization  with two closely-held  companies,  a long
distance telephone carrier,  and a company which its management  represented had
substantial real estate holdings in Japan.
 This transaction was subject to numerous  conditions,  including the completion
of a due diligence review by the respective  companies,  compliance with certain
representations  regarding assets and other  covenants,  and the preparation and
execution by the parties of a definitive reorganization agreement. In connection
with this proposed  transaction,  the Company  agreed to sell a total of 360,000
post-split  shares  to a  finder  for  the  sum  of  $18,000,  and  certificates
representing such shares,  and the purchase price, were placed in escrow pending
the completion of the  reorganization  transaction.  After  reviewing  these two
companies and the proposed  transaction over the next several weeks, the Company
decided in December,  1995, to terminate this  transaction,  as agreed to by the
parties, and the shares held in escrow were cancelled.

    Since the end of 1995,  the Company has been seeking a business  opportunity
which it could acquire or in which it could become engaged.

BUSINESS

    The  Registrant has not been in business since the end of 1989, and has only
recently  undertaken  necessary  activities  to enable it to become  engaged  in
business operations.  The Company plans to seek out, investigate and acquire, or
become  engaged  in,  any  business  opportunity  management  believes  has good
business potential. No specific business or industry is presently contemplated.

    Management  anticipates that it will only acquire  businesses which have, or
can  generate or provide,  audited  financial  statements.  However,  management
reserves the right to become  engaged in a new business  venture or a venture in
its  infancy,  if  management   determines  such  venture  holds  good  business
potential.

    The Registrant  recognizes that because of its extremely limited  financial,
management  and other  resources,  the number of quality of  suitable  potential
business ventures available to it may be extremely limited.

    The Company's  principal business objective will be to seek long-term growth
potential in the business venture in which it participates,  rather than to seek
immediate,  short-term  earnings.  In seeking to attain the  Company's  business

<PAGE>

objective,  it will not  restrict  its  search  to any  particular  business  or
industry,  but may  participate in business  ventures of essentially any kind or
nature, including, but not limited to, finance, high technology,  manufacturing,
natural resources, service, research and development, communications, insurance,
transportation and others.  Management's  discretion will be unrestricted and it
may  participate in any business  venture  whatsoever,  which meets the business
objectives  discussed herein.  It is emphasized that the business  objectives of
the Registrant are extremely general and are not intended to be restrictive upon
the discretion of management.

    The Company plans to seek one or more potential  business  ventures from its
known  sources,  but will rely heavily on personal  contacts of its officers and
directors,  as well as indirect  associations or contacts between them and other
business and  professional  people.  It is not  presently  anticipated  that the
Company will engage  professional firms or individuals  specializing in business
acquisitions or reorganizations.  However,  any individual or firm, exclusive of
the  officers,  directors  and  principals  of the Company who find a venture in
which  the  Company  becomes  engaged,  may be  properly  compensated  for their
efforts.  In some instances,  the Company may publish notices or  advertisements
seeking a potential business venture in financial or trade publications.

    The  Company  will not  restrict  its search to a venture in any  particular
stage of  development,  but may  acquire  or become  engaged in a venture in its
preliminary or development stage, may participate in a business which is already
in operation,  or in a business in various stages of it corporate existence.  It
is  impossible  to predict at this stage the status of any  venture in which the
Company may participate,  in that the venture may need additional  capital,  may
desire  to  have  its  shares  publicly  traded,  or may  seek  other  perceived
advantages which the Company, as a public company, may offer. In some instances,
the  business   endeavors   may  involve  the   acquisition   of  or  merger  or
reorganization  with a corporation  which does not need  substantial  additional
capital  but  which  desires  to  establish  a  public  trading  market  for  it
securities.

    Firms which seek the Company's  participation in their operations  through a
reorganization,  asset  acquisition,  or some other means may desire to do so to
avoid what such firms may deem to be adverse  factors  related to  undertaking a
public offering.  Such factors include  substantial time  requirements and legal
and other costs, along with other conditions or requirements  imposed by various
state and federal regulatory agencies.

    To a large extent, a decision to participate in a specific business endeavor
may be made upon  management's  analysis  of the  quality  of the  other  firm's
management  and  personnel,  the  anticipated  acceptability  of  new  products,
marketing concepts or services, the merit of technological changes, and numerous
factors which may not be reflected on a balance sheet or operating statement and
are  difficult,  if not  impossible,  to  analyze  through  the  application  of
objective  criteria.  In many  instances,  it  anticipated  that the  results of
operation of a specific  venture may not be  indicative of the potential for the
future because of the requirement to substantially  shift marketing  approaches,
expand significantly, change product emphasis, change or augment management, and
other factors.  Because the Company may  participate in business  endeavors with

<PAGE>

newly organized firms or with firms which are entering a new phase of growth, it
should be emphasized that the Company will incur further risks since  management
in may  instances  will not have  proved its  abilities  or  effectiveness,  the
eventual  market  of  such  firm's  product  or  services  will  likely  not  be
established,  and the  profitability  of the firm will be unproved and cannot be
accurately predicted.

    The analysis and review of new business  ventures  will be  undertaken by or
under  the  supervision  of the  officers  and  directors,  none  of  whom  is a
professional  business  analyst.  No member of managements  has any  significant
business  experience or expertise in any type of business  which is likely to be
investigated  by the Company.  Therefore,  management will have to rely on their
common sense and business  judgment as well as upon the advice of consultants to
analyze  the  factors  described  above.  In  reviewing   prospective   business
opportunities, management will consider such matters as the available technical,
financial and  managerial  resources,  the working  capital and other  financial
requirements,  the history of operations,  if any; prospects for the future; the
nature of present  and  expected  competition;  the quality  and  experience  of
management  services  available and the depth of  management;  the potential for
growth  and  expansion;  risk  factors;  the  perceived  public  recognition  or
acceptance of products, services; and other factors.

    Generally,  management will attempt to analyze all available  factors in the
circumstances  and make a  determination  based upon a  composite  of  available
facts, without reliance upon any single factor as controlling.

    The Company is unable to predict the timing as to when it may participate in
any specific business endeavor. It expects, however, that the review of business
opportunities will commence immediately,  and that the analysis and selection of
any given venture may take several months or more.

    It is  anticipated  that  business  opportunities  will be  available to the
Company  from  various  sources,   including  its  officers  and  directors  and
shareholders and their business associates,  professional  advisors,  securities
broker-dealers,  venture capitalists,  members of the financial  community,  and
others who may present  unsolicited  proposals.  In certain  circumstances,  the
Company may agree to pay a finder's  fee or to otherwise  compensate  investment
banking or other  services  provided  by persons who are  unaffiliated  with the
Company but who submit a  potential  business  opportunity  in which the Company
elects to  participate.  No such  finder's fee or other fees will be paid to any
person who is an officer, director or principal of the Registrant.

    The Company may acquire a business venture by conducting a reorganization or
merger  involving  the  issuance  of  securities  of  the  Company.  Due  to the
requirements of certain provisions of the Internal Revenue Code, as amended,  in
order to obtain certain  beneficial tax consequences in such  transactions,  the
number of shares held by all of the present shareholders of the Company prior to
such transaction,  may be substantially  less than the total outstanding  shares
held by such  shareholders  in any  reorganized  entity.  The result of any such
reorganization or merger transaction could be additional substantial dilution to
the shareholders of the Company prior to the transaction.

<PAGE>


    It is anticipated that the investigation of specific business  endeavors and
the  negotiation,  drafting  and  execution of relevant  agreements,  disclosure
documents and other  instruments  will require  substantial  management time and
attention and substantial  costs for accountants,  attorneys,  and others.  If a
decision is made not to participate  in a specific  business  opportunity  under
review, the costs theretofore incurred would not be recoverable.  Further,  even
if an agreement is reached for the participation in a specific business venture,
the failure to consummate that transaction may result in the loss to the Company
of the related costs incurred.

    The Company presently has essentially no assets, and does not currently have
any specific assets,  properties or businesses in mind for potential acquisition
or involvement by the Company.  Further, the Company does not presently have any
particular  areas of  business  or  industry  in which  it  intends  to look for
business opportunities.

    In connection with a business  acquisition or  transaction,  the Company may
need to  raise  equity  or debt to fund  such  transaction,  or to  provide  the
business opportunity with necessary operating capital. There is no assurance the
Company  will be able to  raise  capital  when  needed,  or on terms  which  are
favorable to the Company.

    Offices and Employees

    The Company presently uses the offices of its  Secretary/Treasurer  and Vice
President,  at no charge.  At such time as  business  operations  commence,  the
Company  may be  charged a  reasonable  amount for its  office  facilities.  The
Company has no employees.



                       ITEM 2.  PROPERTIES


    The Company does not hold any properties.




                    ITEM 3.  LEGAL PROCEEDINGS

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

<PAGE>




                             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. In August, 1995, the board of directors and holders
of a majority of the issued and outstanding voting stock of the Company approved
a 1-for-five reverse in the issued and outstanding common stock of the Company.


                             PART II



                             ITEM 5.

              MARKET FOR REGISTRANT'S COMMON EQUITY
                 AND RELATED STOCKHOLDER MATTERS

    The Company's  securities were not traded or quoted during the quarter ended
June  30,  1995,  and did not  trade,  nor were  such  securities  quoted,  from
approximately  October, 1989, until August, 1995. There is currently only a very
limited trading market for the Company's  shares of common stock;  however,  the
Company's  shares  of  common  stock  are  eligible  for  quotation  on the NASD
Electronic  Board under the symbol  "CLOV." The  following  sets forth,  for the
respective  periods  indicated,  the high and low bid  prices  of the  Company's
common stock in the over-the-counter market:

Quarter Ended             High Bid       Low Bid

September 30, 1995          $.25           $.25

December 31, 1995           $.25           $.25

March 31, 1996              $.25           $.25

June 30, 1996               $.25           $.25

    As of September 25, 1996, the stock was quoted at $.25 bid, no offer.

<PAGE>


  Since  inception,  no dividends have been paid on the Company's  common stock,
and the Company does not anticipate paying dividends in the foreseeable future.

  As of the date of filing this report,  there were approximately 120 holders of
record of the Company's common stock.



                             ITEM 6.

                     SELECTED FINANCIAL DATA


  The  following  selected  financial  data of the  Company is not covered by an
opinion of a certified public  accountant and should be read in conjunction with
the financial statements and related notes thereto.


                           INCOME DATA
                                                        Period from Inception
                                                        (September 28, 1987)
                  For the Year Ended June 30,           through June 30, 1996
              1996    1995    1994     1993     1992

Revenue      $ -0-    $-0-    $-0-     $-0-     $-0-            $-0-

Net Income
(loss)       7,535  (7,855) (14,252)  (1,335)   (300)         (183,920)

Net Earnings
(loss)
per share    $0.01    -0-     -0-       -0-      -0-            $0.25


                        BALANCE SHEET DATA
                          AS OF JUNE 30,

              1996    1995    1994      1993     1992


Total        $333     $420    $75      $2,196    $-0-
Assets

Long Term     -0-      -0-     -0-       -0-      -0-
Liabilities

Current
Liabilities  $1,200  1,150   2,350      4,431     900


<PAGE>


Total
Liabilities  $1,200  1,150   2,350      4,431     900

Shareholder's
Equity         (865)  (750) (2,275)    (2,235)   (900)



                             ITEM 7.

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES

  At June 30, 1996,  the Company had only $335 in cash,  $1,200 in  liabilities,
and no other liquid assets or resources.

  At  present,  the  Company  does not have  adequate  capital  to  conduct  any
significant  operations.  The  Company is  engaged  in the search for  potential
business  opportunities  for  acquisition or  involvement by the Company,  which
activities are severely  limited by the Company's lack of resources.  Management
believes that any business venture in which the Company becomes involved will be
made by issuing shares of the Company's authorized but unissued common stock. It
is anticipated  that the Company's  liquidity,  capital  resources and financial
statements will be significantly different subsequent to the consummation of any
such transaction.

RESULTS OF OPERATIONS

  The Company had essentially no operations during the year ended June 30, 1996.
The Company incurred expenses during the year of $7,535 in accounting, legal and
other fees in connection with the Company's continuing efforts to file necessary
periodic reports and to reactivate its business  operations,  and in reviewing a
possible business reorganization during the fiscal year.


<PAGE>





                             ITEM 8.

           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


  The financial statements are included beginning at page F-1.



                             ITEM 9.

            CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
                     AND FINANCIAL DISCLOSURE


  Not applicable.


                             PART III



                             ITEM 10.

        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


NAMES AND TERMS OF OFFICE

  The table  below sets forth the name,  age,  and  position  of each  executive
officer and director of the Company.

  Name               Age       Position                                Since*

Whitney O. Cluff      46       President and Chairman           September, 1989

John Papanikolas      46       Secretary/Treasurer and Director September, 1987

Thomas Mulcock        46       Vice President and Director      September, 1994

<PAGE>

     * Mr. Papanikolas has been an officer and director since inception. Messrs.
Cluff and Papanikolas  were elected as officers and directors in connection with
the  acquisition  by the Company of the  operating  assets of  Southwest  Awning
Systems,  which  business was terminated by the Company in 1990. Mr. Mulcock was
elected  an  officer  and  director  in  January,  1994 in  connection  with the
Company's  effort to reactivate its business.  (See "ITEM 1. BUSINESS" and "ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION").

  The term of office of each  executive  officer  and  director  is one year and
until his successor is elected and qualified.

  Set forth below is biographical information for each of the Company's officers
and directors.

  Whitney O. Cluff has been privately engaged in a number of ventures during the
past several  years,  primarily  in the real estate  area.  For the past several
years, until 1994, he was a part-time  employee of Delta Airlines.  From 1990 to
1993, he was an employee of WAM  Enterprises.  From 1987 to 1989, he was engaged
as  an  account  executive  at  Hughes  Securities,   Inc.,  a  Salt  Lake  City
broker-dealer  firm.  For a period  of  approximately  two  years  prior to that
position,  he was employed as a registered  representative  with R.A.  Johnson &
Company,   Inc.,  a  Salt  Lake  City  broker-dealer   firm.  For  a  period  of
approximately three years prior to that position,  he was employed by Matthew R.
White Investment  Company, a broker-dealer.  Mr. Cluff is a licensed real estate
broker in the state of Utah.  From the middle of 1994 to the middle of 1995, Mr.
Cluff was a director of Digital  Scientific,  Inc., a closely  held  corporation
engaged  in the  development  of  electronics  products.  He has  served  on the
advisory board of Digital Scientific, Inc., since 1995.

  John G.  Papanikolas has been the President and owner of Emissions  Xpress,  a
Salt Lake City based owner and operator of an automobile  emissions  testing and
safety inspection  centers,  since 1993. From 1989 to the present, he has served
as a member of the board of directors of Magna Investment,  Ltd., a developer of
shopping  centers and real estate in Arizona and Utah. Since 1986, he has been a
director of Foothill  Oriental Rugs, Inc., an importer,  wholesaler and retailer
of oriental rugs and handmade  carpets,  located in Salt Lake City,  Utah.  From
1985 to 1988,  he was editor and  publisher  of Guide  Publications  7, Inc.,  a
publishing  firm.  From 1979 through  1985, he was owner and operator of Clayton
Oriental Rugs and in 1985 became  advertising  manager for Zions  Oriental Rugs.
From  1989 to 1989,  he has  worked  as a writer  and  editor  for the Salt Lake
Tribune,  a major daily  newspaper in Salt Lake City. In 1983,  Mr.  Papanikolas
earned a bachelor's  degree in business  administration  from the  University of
Utah and a bachelor's degree in behavioral science from Westminster College.

     Thomas  Mulcock has been,  since 1972,  the owner and operator of Thomas E.
Mulcock Real Estate  Appraising  Company,  a real estate  appraisal firm in Salt
Lake  City,  Utah.  Mr.  Mulcock  is a member  of the  National  Association  of
Independent Fee Appraisers,  the National Association of Real Estate Boards, and
the Salt Lake Board of Realtors.  Mr.  Mulcock  attended the  University of Utah
from 1967 to 1971, but did not receive a degree.

<PAGE>

CONTROL PERSONS

     Of the total of a 1,250,009  post-split  shares of common  stock issued and
outstanding,  (after giving effect to a 1-for-25  reverse split  effectuated  in
August,  1994 and a 1-for-5 reverse split effectuated in August,  1995), a total
of 499,687  post-split  shares are held by the CPM Group, a group  consisting of
the officers and directors, and Mitchell T. Godfrey, M. Don Nelson, and James C.
Lewis. Thus, this group, and its individuals, may be considered to be in control
of the Company.  (See "Item 12. Security  Ownership of Certain Beneficial Owners
and Management").


                 ITEM 11.  EXECUTIVE COMPENSATION

REMUNERATION DURING FISCAL YEAR

  During the fiscal year ended June 30,  1995,  no officer or director  received
any  compensation,  except for Whitney O. Cluff, who received  restricted common
stock in consideration of services rendered on behalf of the Company,  described
below. Set forth below is a summary of the compensation received by officers and
directors during the fiscal year:


                     CASH COMPENSATION TABLE

NAME OF INDIVIDUAL        CAPACITY IN WHICH                   CASH
OR NUMBER IN GROUP            SERVED                       COMPENSATION


Whitney O. Cluff          President, Director              $0 in cash (1)

John Papanikolas          Secretary/Treasurer, Director    $0

Thomas Mulcock            Vice President, Director         $0



1) During  the fiscal  year,  Mr.  Cluff was issued a total of 40,000  shares of
common  stock of the  Company in  consideration  of his efforts on behalf of the
Company, valued at approximately $1,000. (See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS; Sales, Issuances and Transfers of Restricted Common Stock").

<PAGE>




                             ITEM 12.

             SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT


  The  following  table sets forth the name and  address,  as of the date of the
filing of this report, the approximate number of shares of common stock owned of
record or beneficially  by each person who owned of record,  or was known by the
Company to own beneficially,  more than 5% of the common stock, and the name and
shareholdings of each officer and director,  and all officers and directors as a
group:


                          Amount and Nature of Ownership(1)(3)

                             Sole Voting       Shared Voting
  Name of Person            and Investment     and Investment      Percent of
     or Group                    Power              Power             Class

Principal Shareholders:

CPM Group (2)                    499,687              (2)               40.0
1486 South 1100 East
Salt Lake City, Utah  84105

Whitney O. Cluff                 231,844                                18.5
4751 Ichabod Street
Salt Lake City, Utah 84117                         499,687(2)           40.0

John Papanikolas                 110,642                                 8.9
1486 South 1100 East
Salt Lake City, Utah  84105                         499,687(2)          40.0
Thomas Mulcock                    29,867                                 2.4
1486 South 1100 East
Salt Lake City, Utah  84105                          499,687(2)         40.0
Mitchell T. Godfrey               88,059                                 7.0
230 North Fork Ray Creek
Townsend, Montana  59644                             499,687(2)         40.0

<PAGE>

James C. Lewis                    90,418                                 7.2
505 South Main
Bountiful, Utah  84010                               499,687(2)         40.0

M. Don Nelson                     65,468                                 5.2
5122 South Holladay Blvd.
Holladay, Utah  84117                                499,687(2)         40.0

Officers and Directors:

Whitney O. Cluff              (See above)

John Papanikolas              (See above)

Thomas Mulcock                (See above)

All Officers and
Directors as a
Group (3 persons):               372,353                                29.8
                                                      499,687           40.0
- -------------------

  (1)   Unless otherwise indicated, all shares are owned directly and of record.

  (2)    These shares are held by a group  consisting of Whitney O. Cluff,  John
Papanikolas  and Thomas  Mulcock,  officers  and  directors,  and M. Don Nelson,
Mitchell  Godfrey and James C.  Lewis.  These  shares are owned  equally by such
individuals;  therefore,  each  individual  may be deemed  to be the  beneficial
holder  of  such  shares.  (See  Item  13.  Certain  Relationships  and  Related
Transactions).

  (3)     All  figures  give  effect  to a 1-for-25 reverse split effectuated in
 August, 1994, and a 1-for-5 split effectuated in August, 1995.


                                    ITEM 13.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


TERMINATION OF TRANSACTION WITH SOUTHWEST AWNINGS

  As discussed under "ITEM 1. BUSINESS - Organization  and History",  in the end
of August,  1989, the Registrant completed the acquisition of Southwest from DLB
Enterprises,  Inc. ("DLB"),  then  unaffiliated with the Company.  In connection

<PAGE>

with  this  transaction,  the  Company  issued a total  of  253,307  shares  (as
presently  constituted after the reverse splits in August,  1994 and June, 1995)
to DLB; an additional  108,560 shares to WAM, at that time unaffiliated with the
Company; and 144,747 shares to Whitney O. Cluff and his affiliates, who was then
a shareholder of the Company.  In connection with this  transaction,  two of the
then  officers and directors of the Company  resigned,  and Ken Brown and Marvin
Dobkins,  officers  of DLB,  Rick  McKinnon,  an officer of WAM,  and Whitney O.
Cluff,  were elected as new management.  John  Papanikolas,  who was an original
officer and director of the Registrant, remained as a director.

  In the end of 1989,  and the beginning of 1990,  the business of Southwest was
terminated by the Company,  and the Company has not  conducted  any  significant
operations since that time, except payment of certain accounts  payable.  In the
beginning of 1990,  WAM assumed all of the operations of Southwest and agreed to
pay all of the  Company's  outstanding  debts.  WAM  took  over  the  assets  of
Southwest, consisting of cash, receivables and fixed assets.

SALES, ISSUANCES AND TRANSFERS OF RESTRICTED STOCK

  In the middle and end of 1989,  the Company  sold a total of 10,113 post split
shares of its restricted common stock in private transactions to a total of four
(4)  individuals,  including  John  Papanikolas,  an officer and director  since
inception, and Thomas Mulcock, an officer and director since January, 1994, at a
price of  approximately  $.9375 per share (adjusted for the stock splits),  or a
total of $9,500.  This  stock was sold to provide  the  Company  with  necessary
operating  capital to continue the business of Southwest,  which was  ultimately
discontinued in the end of 1989.

  In the end of November,  1989, the Company issued a total of 11,200 post-split
shares, to Whitney O. Cluff, as payment for salary and fees owed to Mr. Cluff in
the amount of $10,500.

  In December,  1992, WAM  transferred  to Whitney O. Cluff,  all of the 108,560
post-split  shares of  restricted  common stock of the Company  issued to WAM in
connection with the Company's  acquisition of Southwest,  discussed above.  This
stock was transferred in exchange for the  cancellation of $6,000 owed by WAM to
Mr. Cluff.  In January,  DLB transferred all of the 253,307 post split shares of
the Company's  common stock issued to DLB in connection  with the acquisition of
Southwest, in exchange for the payment of $1,500 to DLB.

  In January,  1994,  the Company  authorized  the issuance of a total of 54,933
post  split  shares  of  restricted  common  stock  to the  CPM  Group,  a group
consisting of Thomas Mulcock,  John Papanikolas,  and Whitney O. Cluff, officers
and  directors,  and M. Don Nelson,  Mitchell T. Godfrey and James C. Lewis,  in
consideration of the contribution by Messrs.  Papanikolas,  Mulcock, Godfrey and
Nelson  of the sum of  $2,227  each in cash,  and the  contribution  of time and
services by Messrs.  Cluff and Lewis. Such cash and services  contributions were
made as part of the Company's efforts to reactivate its business.  In connection
with such  arrangement,  Mr. Cluff has  transferred  to the CPM Group a total of
370,252  post  split  shares  of  restricted  common  stock  held  by him or his
affiliates,  to be owned jointly by the CPM Group. Each of the individuals named
above has an equal  interest in the shares held by the CPM Group.  Mr. Cluff has
also agreed to transfer  the  additional  shares  held by him or  affiliates  as
follows: 20,360 shares to Mr. Papanikolas; 20,000 shares to Mr. Lewis; and 8,000

<PAGE>

shares each to Messrs.  Nelson and Godfrey, and William L. Mitchell,  who served
as an  officer  for a brief  period in 1989 and 1990.  (See  "Item 12.  Security
Ownership of Certain Beneficial Owners and Management").

  During the fiscal  year ended June 30,  1995,  the  Company  issued a total of
220,000 post split shares of restricted common stock to its officers,  directors
and  other  principal  shareholders,   described  in  the  paragraph  above,  in
consideration of approximately  $9,000 in monies advanced by such individuals on
behalf of the Company, and services.

  In August,  1995, in connection  with a preliminary  letter of intent with two
private  companies,  the Company  issued a total of 360,000 shares of restricted
common stock,  registered in the name of Adrian Wilson, an unrelated third party
who was  acting as a finder,  for the  agreed  purchase  price of  $18,000.  The
purchase price and certificate for such stock,  were placed in an escrow account
pending the Company's review of a possible business  reorganization.  In the end
of 1995,  after  conducting  a  preliminary  review of these  companies  and the
proposed transaction,  the Company decided to terminate this transaction,  which
decision was accepted by the private  companies.  At such time, the stock issued
to Mr. Wilson was returned to the Company's transfer agent and cancelled.

  During the fiscal  year ended June 30,  1996,  the  Company  issued a total of
105,000 shares of its restricted common stock to an Whitney O. Cluff, an officer
and director,  for services and $2,000 in cash;  an additional  40,000 shares to
James C. Lewis for services rendered on behalf of the Company; and an additional
65,000  shares to M. Don Nelson and Mitchell T. Godfrey for the sum of $1,625 in
cash.

  None of the transactions described above can be considered to be the result of
arms' length negotiations.  All of the share figures described above give effect
to a 1-for-25 reverse split and completed by the Company in August,  1994, and a
1-for-5 reverse split completed in August, 1995.


                             PART IV


        ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                     AND REPORTS ON FORM 8-K

  The following  financial  statements  and  schedules are included  immediately
following the signature page to this report.

(a)(1) FINANCIAL STATEMENTS

TITLE                                                    PAGE NO.

Independent Accountants' Report of Jones, Jensen
  & Company                                                  22

<PAGE>


Balance Sheets as of June 30, 1996 and 1995                  23

Statement of Operations for the three
  years ended June 30, 1996, 1995 and 1994                   24
  and from inception through June 30, 1996

Statement of  Stockholders'  Equity for the 
   three years ended June 30, 1996, and
   the period from inception through June 30, 1996           25

Statement of Cash Flows for the three
   years ended June 30, 1996, and
   from inception through June 30, 1996                      27

Notes to Financial Statements                                29

(a)(2).  FINANCIAL STATEMENT SCHEDULES

  None.

(a)(3).  EXHIBITS:
         EXHIBIT NO.    SEC Reference No.     Title of Document    Location

             1                 (3)              *Articles of        Form 10-K
                                                Incorporation        for fiscal
                                                                     year ended
                                                                     June, 1989

             2                 (3)              *Bylaws                same

*These documents are incorporated herein by reference.

(b)     REPORTS ON FORM 8-K

  During the fiscal year ended June 30,  1996,  the Company  filed no reports on
Form 8-K.

<PAGE>







                         SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
    Exchange Act of 1934, as amended,  the  Registrant has caused this report to
    be signed on its behalf by the undersigned, hereunto duly authorized.





                      REGISTRANT:

                      CORVALLIS, INC.

    Dated:  September 25, 1996    By /s/Whitney O. Cluff
                                  Whitney O. Cluff (Principal Executive Officer)

    Dated:  September 25, 1996    By /s/John Papanikolas
                                  John Papanikolas (Principal Financial and
                                  Accounting 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:

    Dated:  September 25, 1996    By /s/Whitney O. Cluff
                                  Whitney O. Cluff, President and Chairman of 
                                  the Board

    Dated:  September 25, 1996    By /s/Thomas Mulcock
                                  Thomas Mulcock, Vice President and Director


    Dated:  September 25, 1996    By /s/John Papanikolas
                                  John Papanikolas, Director


<PAGE>







                    INDEPENDENT AUDITORS' REPORT



    The Board of Directors
    Corvallis, Inc. (A Development Stage Company)
    Salt Lake City, Utah

    We have  audited  the  accompanying  balance  sheets of  Corvallis,  Inc. (a
    development  stage  company),  as of June 30,  1996 and 1995 and the related
    statements of operations, stockholders' equity (deficit), and cash flows for
    the  years  ended  June 30,  1996,  1995 and  1994 and for the  period  from
    inception on September  28, 1987  through  June 30,  1996.  These  financial
    statements  are  the  responsibility  of  the  Company's   management.   Our
    responsibility is to express an opinion on these financial  statements based
    on our audits.

    We conducted  our audits 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  audits  provide 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 Corvallis,  Inc. as of
    June 30, 1996 and 1995, and the results of its operations and its cash flows
    for the years  ended June 30,  1996,  1995 and 1994 and for the period  from
    inception on September  28, 1987  through June 30, 1996 in  conformity  with
    generally accepted accounting principles.

    The accompanying  financial  statements have been prepared assuming that the
    Company  will  continue as a going  concern.  As  discussed in Note 5 to the
    financial  statements,  the Company is a  development  stage company with no
    significant  operating  results to date. These conditions raise  substantial
    doubt about its ability to continue as a going concern.  Management's  plans
    in regard  to these  matters  are also  described  in Note 5. The  financial
    statements do not include any adjustments that might result from the outcome
    of this uncertainty.



    Jones, Jensen & Company
    August 14, 1996


<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
                           Balance Sheets

                               ASSETS

                                                    June 30,
                                               1996         1995
    CURRENT ASSETS

      Cash                                   $  335       $  420

         Total Current Assets                   335          420

         TOTAL ASSETS                        $  335       $  420



           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

    CURRENT LIABILITIES

      Accounts payable                      $  1,200      $   -
      Stockholders' payable (Note 6)             -          1,150

         Total Current Liabilities             1,200        1,150

    STOCKHOLDERS' EQUITY (DEFICIT)

      Common stock; authorized 200,000,000
       common shares at $0.001 par value;
       1,250,009 and 1,020,002  shares
       issued and outstanding as of June 30,
       1996 and 1995, respectively             1,250        1,020
      Additional paid-in capital             181,805      174,635
      Deficit accumulated during the
        development stage                   (183,920)    (176,385)

         Total Stockholders' Equity 
          (Deficit)                             (865)        (730)

         TOTAL LIABILITIES AND STOCKHOLDERS' 
          EQUITY (DEFICIT)                  $    335      $   420


The accompanying notes are an integral part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
                      Statements of Operations

                                                                      From
                                                                  Inception On
                                                                  September 28,
                                                                  1987 Through
                                   For the Years Ended June 30,       June 30,
                                 1996         1995          1994         1996

    REVENUE                   $   -         $   -         $   -       $    -

    EXPENSES

      Consulting fees           1,395         3,425          2,227        7,047
      Legal                     3,200         1,400          2,827        7,427
      Accounting                1,983         1,175          4,775        7,933
      General and 
       administrative             957         1,855          1,947        4,759

         Total Expenses         7,535         7,855         11,776       27,166

    LOSS FROM
     OPERATIONS                (7,535)       (7,855)       (11,776)     (27,166)

    LOSS ON  DISCONTINUED
     OPERATIONS                    -            -           (2,476)    (156,754)

    NET LOSS                 $ (7,535)      $(7,855)      $(14,252)   $(183,920)

    WEIGHTED AVERAGE
      NET LOSS PER SHARE     $  (0.01)      $ (0.01)      $  (0.02)   $   (0.25)

    WEIGHTED AVERAGE 
     NUMBER OF SHARES 
     OUTSTANDING            1,104,301       910,000        772,534      721,320

The accompanying notes are an integral part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit)

                                                                     Deficit
                                                                   Accumulated
                                                       Additional   During the
                                  Common Stock           Paid-in    Development
                               Shares      Amount         Capital      Stage

    Balance at inception          -        $  -           $  -        $   -

    Issuance of common stock
      at inception at $0.1875 
      per share                112,000       112           20,888         -

    Issuance of common stock 
      in July 1988 at $1.25 
      per share, less deferred 
      offering costs offset 
      against paid-in capital  105,120       105           91,630         -

    Net loss from inception to
      June 30, 1989               -           -               -        (19,673)

    Balance, June 30, 1989     217,120       217          112,518      (19,673)

    Issuance of common stock 
     for fixed assets and 
     services in August 1989   506,613       507           18,801          -

    Issuance of common stock
      in private placement 
      at $0.9375 per share 
      in November 1989          21,333       21            19,979          -

    Net loss for the year 
      ended June 30, 1990          -         -                -       (132,670)

    Balance, June 30, 1990      745,066      745          151,298     (152,343)

    Net loss for the year 
     ended June 30, 1991           -         -                -           (300)

    Balance, June 30, 1991      745,066      745          151,298     (152,643)

    Net loss for the year 
     ended June 30, 1992           -          -               -           (300)

    Balance, June 30, 1992      745,066   $  745        $ 151,298   $ (152,943)

The accompanying notes are an integral part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit)

                                                                   Deficit
                                                                 Accumulated
                                                    Additional    During the
                                  Common Stock        Paid-in     Development
                               Shares    Amount       Capital        Stage

    Balance, June 30, 1992     745,066    $ 745      $ 151,298     $(152,943)

    Net loss for the year ended
      June 30, 1993                -         -            -           (1,335)

    Balance, June 30, 1993     745,066      745        151,298      (154,278)

    Issuance of common stock 
     for extinguishment of 
     stockholders' payable 
     at $0.2587 per share       54,936       55         14,157            -

    Net loss for the year 
     ended June 30, 1994           -          -            -         (14,252)

    Balance, June 30, 1994     800,002      800        165,455      (168,530)

    Issuance of common stock 
     for extinguishment of 
     stockholders' payable 
     at $0.04 per share in
     March, 1995                85,000       85          3,315            -

    Issuance of common stock 
     for extinguishment of 
     stockholders' payable at 
     $0.05 per share in
     March, 1995                60,000      60           2,940            -

    Issuance of common stock 
     for services rendered at 
     $.04 per share in 
     March, 1995                75,000      75           2,925            -

    Net loss for the year 
     ended June 30, 1995          -         -               -          (7,855)

    Balance, June 30, 1995   1,020,002    $1,020       $174,635     $(176,385)

The accompanying notes are an integreal part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit)

                                                                     Deficit
                                                                   Accumulated
                                                      Additional   During the
                                   Common Stock         Paid-in   Development
                               Shares       Amount       Capital      Stage


    Balance, June 30, 1995    1,020,002     $1,020       $174,635    $(176,385) 
    Capital contributed by
     extinguishment of
     stockholders' payable        -            -            1,150         -

    Issuance of common stock 
     for extinguishment of 
     stockholders' payable 
     at $0.05 per share in
     September, 1995            20,000         20            980          -

    Issuance of common stock 
     for extinguishment of 
     stockholders' payable at 
     $0.025 per share in
     March, 1996               130,000        130         3,120           -

    Issuance of common stock 
     for services rendered at 
     $0.025 per share in 
     March, 1996                80,000         80         1,920           -

    Fractional shares from 
     reverse stock split             7         -             -             -

    Net loss for the year 
     ended June 30, 1996            -          -             -         (7,535)

                              1,250,009     $1,250      $181,805    $(183,920)

The accompanying notes are an integral part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
                      Statements of Cash Flows

                                                                      From
                                                                  Inception On
                                                                  September 28,
                                                                  1987 Through
                                   For the Years Ended June 30,      June 30,
                                    1996        1995       1994         1996
    CASH FLOWS FROM
      OPERATING ACTIVITIES

       Net loss                    $(7,535)    $(7,855)   $(14,252)   $(183,920)
       Discontinued operations         -           -          -          19,308
       Non-cash services rendered
        and expenses paid by
        stockholders'                6,250       9,400      14,212       26,837
       Increase (decrease) in
         current liabilities         1,200      (1,200)     (2,081)       1,200

           Net Cash Provided (Used)
             by Operating Activities   (85)        345      (2,121)    (136,575)

    CASH FLOWS FROM
      INVESTING ACTIVITIES              -           -          -           -

    CASH FLOWS FROM
      FINANCING ACTIVITIES

        Issuance of common stock        -           -          -        136,910

           Net Cash Provided
             by Financing Activities    -           -          -        136,910

    NET INCREASE (DECREASE)
      IN CASH                         (85)         345       (2,121)        335

    CASH AT BEGINNING OF YEAR         420           75        2,196          -

    CASH AT END OF YEAR           $   335        $ 420      $    75    $    335

    CASH PAID DURING
     THE YEAR FOR

      Interest                    $    -         $   -      $    -     $    -
          Income taxes            $    -         $   -      $    -     $    -


  The accompanying notes are an integral part of these financial statements

<PAGE>


                           CORVALLIS, INC.
                    (A Development Stage Company)
                Statements of Cash Flows (Continued)

                                                                      From
                                                                  Inception On
                                                                  September 28,
                                                                   1987 Through
                                      For the Years Ended June 30,     June 30,
                                      1996        1995        1994        1996
    NON-CASH FINANCING
     ACTIVITIES

      Issuance of common stock
       for fixed assets             $  -         $  -        $ -       $ 19,308
      Issuance of common stock
       for extinguishment of
       stockholders' payable        $4,250       $ 6,400     $14,212   $ 20,612
      Issuance of common stock
       for services rendered        $2,000       $ 3,000     $ -       $  5,000


  The accompanying notes are an integral part of these financial statements

<PAGE>


                            CORVALLIS, INC.
                     (A Development Stage Company)
                   Notes to the Financial Statements
                        June 30, 1996 and 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    a.   Organization

    The  financial  statements  presented  are  those  of  Corvallis,   Inc.,  a
    development  stage  company.  The Company was  incorporated  in the State of
    Nevada on September 28, 1987. The Company was  incorporated  for the purpose
    of  providing  a  vehicle  which  could  be used to raise  capital  and seek
    business  opportunities believed to hold a potential for profit. The Company
    has not presently  identified a specific  business area or direction that it
    will follow. Therefore, no principal operations have yet begun.

    b.   Accounting Method

    The Company's financial  statements are prepared using the accrual method of
    accounting. The Company elected a June 30th fiscal year end.

    c.   Net Loss Per Share

    The  computations  of net loss per  share of  common  stock are based on the
    weighted  average number of shares  outstanding at the date of the financial
    statements.

    d.   Deferred Stock Offering Costs

    In connection  with the public  offering of the Company's  common stock (see
    Note 2),  all costs were  accumulated  as  deferred  charges.  The  deferred
    charges were offset against proceeds received from the stock offering.

    e.   Provision for Taxes

    The  Company   accounts  for  income  taxes  using  Statement  of  Financial
    Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement
    109, the liability method is used in accounting for income taxes.

    At June 30,  1996,  the  Company had net  operating  loss  carryforwards  of
    approximately  $183,920 that may be offset  against  future  taxable  income
    through  2011.  No provision for income taxes has been made due to these net
    operating  loss  carryforwards.  The tax benefit of the net  operating  loss
    carryforwards  is offset by a valuation  allowance of the same amount due to
    the uncertainty that the carryforwards will be used before they expire.

    Utilization  of the net  operating  losses may be  subject to a  substantial
    annual  limitation  due to  the  "change  in  ownership"  provisions  of the
    Internal  Revenue  Code of 1986 and  similar  state  provisions.  The annual
    limitation  may result in the  expiration  of net  operating  losses  before
    utilization.


<PAGE>


                            CORVALLIS, INC.
                     (A Development Stage Company)
                   Notes to the Financial Statements
                        June 30, 1996 and 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    f.   Statement of Cash Flows

    For  purposes of the  Statement  of Cash Flows,  the Company  considers  all
    highly liquid  investments with an original maturity of three months or less
    to be cash equivalents.

    g.   Office Space

    A director of the Company provides office space in his home for the Company.
    The space is used  primarily by the director for his personal  affairs.  The
    value to the Company is considered immaterial.  Accordingly,  no benefit has
    been recorded.

    h.   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.

NOTE 2 - PUBLIC OFFERING

    In 1988 the Company completed a public offering which was registered on Form
    S-18 in accordance with the Securities Act of 1933. A total of 105,120 units
    were sold having a gross subscription  price of $131,400.  Deferred offering
    costs totaling $39,665 were offset against additional paid-in capital.

NOTE 3 - ASSET PURCHASE AGREEMENT

    In September  1989,  the Company  completed  the terms of an Asset  Purchase
    Agreement  with  DLB  Enterprises,   Inc.  ("DLB"),  a  closely-held  Nevada
    corporation,  providing  for the  acquisition  by the  Company of all of the
    operating assets of Southwest,  a Las Vegas-based  enterprise which had been
    engaged in the  manufacture  and  installation  of awnings  for  commercial,
    industrial  and  residential  use for  approximately  the past fourteen (14)
    months.  Southwest was previously a joint  enterprise  owned and operated in
    Las Vegas by DLB and WAM Industries,  Inc.  ("WAM"),  a Salt Lake City-based
    corporation which has been engaged in the awning business for several years.


<PAGE>


                            CORVALLIS, INC.
                     (A Development Stage Company)
                   Notes to the Financial Statements
                        June 30, 1996 and 1995


NOTE 3 - ASSET PURCHASE AGREEMENT (Continued)

    Under the terms of the Asset Purchase Agreement, the Company acquired all of
    the operating assets of Southwest, including equipment,  inventory, customer
    accounts,  tradenames  and  trademarks  and other assets in exchange for the
    issuance  to DLB of a total of 253,306  shares of the  Company's  restricted
    common  stock.  Concurrently,  the  Company  also  entered  into a  separate
    agreement  with WAM under the terms of which WAM agreed to act as contractor
    on all large  commercial jobs of the Company at a price of cost plus 10% and
    generally  agreed to  contribute  its  expertise in the  development  of the
    Company's  business,  in  consideration of which the Company issued to WAM a
    total of 108,560 shares of its restricted  common stock.  In connection with
    these  transactions,  the  Company  issued  a total  of  144,747  shares  of
    restricted  common  stock to Whitney O.  Cluff and  certain of his  business
    associates  who  were  instrumental  in  facilitating  the  negotiation  and
    consummation of the transactions.  The assets were subsequently  written off
    (see Note 5).

NOTE 4 - DISCONTINUED OPERATIONS

    The Company,  on January 1, 1990,  decided to  discontinue  its  operations.
    Therefore,  the Company  entered into an agreement  with WAM  Industries  in
    which WAM took over the  operations of the Company and paid its  outstanding
    debts, and in consideration, WAM Industries was given all of its assets. The
    assets consisted of all cash,  receivables and fixed assets. The Company has
    not  had  any  operations   since  that  date  except  for  some  incidental
    expenditures  to keep the Company on active  status with the State and stock
    exchanges.

NOTE 5 - GOING CONCERN

    The Company's  financial  statements are prepared using  generally  accepted
    accounting  principles  applicable to a going concern which contemplates the
    realization of assets and liquidation of liabilities in the normal course of
    business.  However,  the  Company  does not have  significant  cash or other
    material  assets,  nor  does it  have  an  established  source  of  revenues
    sufficient  to cover its  operating  costs and to allow it to  continue as a
    going  concern.  It is the intent of the  Company  to seek a merger  with an
    existing,  operating company.  Currently,  the stockholders are committed to
    cover all operating and other costs until sufficient revenues are generated.

NOTE 6 - STOCKHOLDERS' PAYABLE

    Some  stockholders  of the Company  have paid all  expenses on behalf of the
    Company.  The amount paid on behalf of the Company is  non-interest  bearing
    and will be repaid to the stockholders  when monies are available or will be
    converted to equity.


<PAGE>


                            CORVALLIS, INC.
                     (A Development Stage Company)
                   Notes to the Financial Statements
                        June 30, 1996 and 1995


NOTE 7 - REVERSE STOCK SPLIT

    On July 21,  1994  during a special  meeting of  shareholders,  a motion was
    approved  authorizing a reverse split of the issued and  outstanding  common
    stock of the Company with one new share being  issued for every  twenty-five
    (25) shares previously held.

     On August  22,  1995 the  shareholders  of the  Company  approved  a motion
authorizing  an additional  reverse split of the issued and  outstanding  common
stock of the Company on a 1-for-5 basis.  All  references to shares  outstanding
and net loss per share have been  adjusted to reflect the effects of these stock
splits on a retroactive basis.

<PAGE>



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