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>
