SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Fiscal year Ended June 30, 1998
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 l100 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year. None
The aggregate market value of the Registrant's voting stock held by non-
affiliates computed with reference to the average bid and asked prices in the
over-the-counter market on August 26, 1998, was approximately $399,984.
As of the date of the filing of this report, the Registrant had
outstanding a total of 1,505,000 shares of its common stock, par value $0.001.
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.
TABLE OF CONTENTS
Item Number and Caption Page No.
PART 1
1. Business 4
2. Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 8
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 8
6. Plan of Operations 9
7. Financial Statements and Supplementary Data 10
8. Changes in and Disagreements on Accounting and Financial
Disclosure 10
PART III
9. Directors and Executive Officers of the Registrant 10
10. Executive Compensation 12
11. Security Ownership of Certain Beneficial Owners
and Management 12
12. Certain Relationships and Related Transactions 14
PART IV Page No.
13. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 14
14. Signatures 16
PART I
ITEM 1. BUSINESS
BUSINESS DEVELOPMENT
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.
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.
Since the end of 1995, the Company has been seeking a business
opportunity which it could acquire or in which it could become engaged. The
Company has reviewed a number of business opportunities, but has not entered
into any transactions to date.
The Company has very limited assets, however, and any such transaction
may require the Company to raise capital or undertake some form of financing.
Because of the Company's extremely limited resources, there can be no
assurance the Company will be able to locate a suitable enterprise for an
acquisition, reorganization or merger transaction on terms which can be
achieved by the Company.
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 and 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 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 is 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 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 many 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 management 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 Company.
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.
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 fee 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 pending legal proceedings, and no such
proceedings by or, to the best of its knowledge, against the Company have been
threatened.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
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 "CVLO."
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.
Such over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-downs or commission and may not necessarily represent
actual transactions.
Fiscal Quarter Ended High Bid Low Bid
- -------------------- -------- -------
September 30, 1996 $.50 $.25
December 31, 1996 $.50 $.50
March 31, 1997 $.50 $.50
June 30, 1997 $1.25 $.50
September 30, 1997 $1.50 $1.50
December 31, 1997 $3.00 $2.50
March 31, 1998 $2.75 $2.50
June 30, 1998 $3.00 $3.00
As of September 16, 1998, the stock was quoted at $2.75 bid, $3.75 offer.
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 166
holders of record of the Company's common stock.
The Company has not sold any unregistered securities within the fourth
fiscal quarter.
ITEM 6.
PLAN OF OPERATIONS
On June 30, 1998, the Company had $0 in cash, $5,222 in liabilities, and
no other liquid assets or resources. The Company did not post any revenues
for the fiscal year and essentially had no operations during the fiscal year
ended June 30, 1998. The Company incurred expenses during the year of $4,698
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 number of possible business
opportunities during the fiscal year.
The Company anticipates that until a business opportunity is found it
will rely on the commitment of its principal shareholders to cover all
operation and other costs until sufficient revenues are generated. There is
no assurance that the shareholders' commitment will ultimately prove to be
adequate to allow the Company to enter into a business opportunity.
Currently, the Company has no plans to raise additional capital, however, the
Company may elect to do so at some future date.
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 may become
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.
ITEM 7.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are included beginning at page F-1.
ITEM 8.
CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
In July, 1997, the Registrant changed its accountants to the firm of
Crouch, Bierwolf and Chisholm, a Salt Lake City, Utah certified public
accounting firm. The former accounting firm, Jones, Jensen & Company, was
dismissed by the Registrant in July, 1997. The decision to change accountants
was approved by the Registrant's board of directors.
The report of the former accounting firm for the past two years did not
contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Registrant's two most recent fiscal years, there were not any disagreements
with the former accounting firm on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. In
addition, the Registrant has not experienced any other events pertaining to
the change of accountants, which require disclosure under this Item 8 or under
Rule 304 of Regulation S-B, of the Securities Exchange Act of 1934, as
amended.
PART III
ITEM 9.
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 48 President and Chairman September, 1989
John Papanikolas 48 Secretary/Treasurer and
Director September, 1987
Thomas Mulcock 48 Vice President and Director September, 1994
* 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.
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.
John G. Papanikolas has been, since 1993, 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. Mr. Papanikolas 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.
ITEM 10. EXECUTIVE COMPENSATION
During the fiscal year ended June 30, 1998, no officer or director
received a salary or bonus, however, Whitney O. Cluff, received restricted
common stock in consideration of services rendered on behalf of the Company,
as described below. Set forth below is a summary of the compensation received
by officers and directors during the fiscal year:
Summary of Compensation Table
-----------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other
Annual Restricted Other
Name & Principal Fiscal Compen- Stock Options LTIP Compen-
Position Year Salary Bonus sation Award(s) SAR's Payout sation
- -------- ---- ------ ----- ------- -------- ------ ------ ------
Whitney O. Cluff(1) 1998 $0 $0 $0 $3,000(1) $0 $0 $0
President and 1997 $0 $0 $0 $0 $0 $0 $0
Director 1996 $0 $0 $0 $0 $0 $0 $0
John Papanikolas 1998 $0 $0 $0 $0 $0 $0 $0
Secretary/Treasurer 1997 $0 $0 $0 $0 $0 $0 $0
and Director 1996 $0 $0 $0 $0 $0 $0 $0
Thomas Mulcosk 1998 $0 $0 $0 $0 $0 $0 $0
Vice President and 1997 $0 $0 $0 $0 $0 $0 $0
Director 1996 $0 $0 $0 $0 $0 $0 $0
</TABLE>
1) Mr. Cluff was issued a total of 50,000 shares of restricted common stock
of the Company, valued at $.06 per share, in consideration of his efforts on
behalf of the Company.
ITEM 11.
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:
CERTAIN BENEFICIAL OWNERS
-------------------------
Amount and
Name and Address of Percent of
Beneficial Owner Amount and Nature of Ownership (1) Class
- ---------------- ---------------------------------- -----
Mitchell T. Godfrey 191,340 (2) 14.4
230 North Fork Ray Creek
Townsend, Montana 59644
James C. Lewis 225,359 (2) 15
West 100 South, Suite 600
Salt Lake City, Utah 84101
M. Don Nelson 157,999 (2) 11.9
5122 South Holladay Blvd.
Holladay, Utah 84117
Principal Holdings, Inc. 833,331 5.5
215 South State Street
Suite 1100
Salt Lake City, Utah 84111
OWNERSHIP OF MANAGEMENT
-----------------------
Officers and Directors:
- -----------------------
Amount and
Name and Address of Nature of Percent of
Beneficial Owner Beneficial Owner Class
- ---------------- ---------------- -----
Whitney O. Cluff 375,126 25
Ichabod Street
Salt Lake City, Utah 84117
John Papanikolas 213,248 16.0
1486 South 1100 East
Salt Lake City, Utah 84105
Thomas Mulcock 113,148 8.5
1486 South 1100 East
Salt Lake City, Utah 84105
All Officers and
Directors as a
Group (3 persons): 701,522 46.6
(1)Unless otherwise indicated, all shares are owned directly and of record.
(2) During the fiscal year, these individuals each received 83,281 shares
distributed from the "CPM Group", a partnership consisting of these
individuals. CPM Group held a total of 499,687 shares, representing 33.2% of
the total outstanding shares, all of which was distributed to the partners.
Thus CPM Group and these individuals may be considered to be in control of the
Company.
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1998 the Company issued an
aggregate of 174,991 shares to an officer and director and principal
shareholders. The Company issued 50,000 restricted shares to Whitney O.
Cluff, an officer and director, for services rendered to the Company; 41,660
shares were issued to James C. Lewis, a principal shareholder, for services
rendered on behalf of the Company; and an additional 83,331 shares to
Principal Holdings, Inc., for services rendered on behalf of the Company,
which made it a principal shareholder.
None of the transactions described above can be considered to be the
result of arms' length negotiations.
PART IV
ITEM 13. EXHIBITS 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 F-3
Balance Sheets as of June 30, 1998 and 1997 F-4
Statement of Operations for the three
years ended June 30, 1998, 1997 and 1996 F-5
and from inception through June 30, 1998
Statement of Stockholders' Equity for the
three years ended June 30, 1998, and the
period from inception through June 30, 1998 F-6
Statement of Cash Flows for the three
years ended June 30, 1998, and
from inception through June 30, 1998 F-9
Notes to Financial Statement F-10
(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
None
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 28, 1998 By:/s/ Whitney O. Cluff
-----------------------
Whitney O. Cluff (Principal Executive
Officer)
Dated: September 28, 1998 By:/s/ John Papanikolas
-----------------------
John Papanikolas (Principal Financial and
Accounting Officer)
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Financial Statements
June 30, 1998 and 1997
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . 3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations . . . . . . . . . . . . . . . . . 5
Statements of Stockholders' Equity . . . . . . . . . . . . 6
Statements of Cash Flows . . . . . . . . . . . . . . . . 9
Notes to the Financial Statements . . . . . . . . . . . . 10
<PAGE>
<Letterhead >
Crouch, Biierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
(801) 363-1175 (FAX) (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Corvallis, Inc.
We have audited the accompanying balance sheets of Corvallis, Inc. (a
Development Stage Company) for the year ended June 30, 1998 and 1997 and the
related statements of operations, stockholders' equity and cash flows for the
years then ended. 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 audits 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. (a
Development Stage Company) as of June 30 1998 and 1997 and the results of its
operations and cash flows for the years then ended 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 plan 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.
/s/Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
August 20, 1998
Corvallis, Inc.
(a Development Stage Company)
Balance Sheets
Assets
June 30
--------------------------
1998 1997
-------------- --------------
Current assets
Cash $ - $ 44
-------------- --------------
Total Assets $ - $ 44
============== ==============
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 4,698 $ 2,205
Accounts Payable-related party (Note 6) 524 524
-------------- --------------
Total liabilities 5,222 2,729
-------------- --------------
Stockholders' Equity
Common Stock, authorized
200,000,000 shares of $.001 par value,
issued and outstanding 1,505,000 shares
and 1,330,009 shares issued and outstanding 1,505 1,330
Additional Paid-in Capital 200,070 189,745
Deficit Accumulated During the
Development Stage (206,797) (193,760)
-------------- --------------
Total Stockholders' Equity (5,222) (2,685)
Total Liabilities and Stockholders' Equity $ - $ 44
============== ==============
The accompanying notes are an integral part of these financial statements
4
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Cumulative
Total
For the years ended June 30, Since
1998 1997 1996 Inception
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Expenses:
Consulting fees 3,493 2,000 1,395 12,540
Legal 1,500 2,200 3,200 11,127
Accounting 1,515 2,015 1,983 11,463
General & Administrative 6,529 3,625 957 14,913
------------- ------------- ------------- ---------------
Total Expenses 13,037 9,840 7,535 50,043
------------- ------------- ------------- ---------------
Net loss before discontinued
operations $ (13,037) $ (9,840) $ (7,535) $ (50,043)
------------- ------------- ------------- ----------------
Loss on disposed of operations - - - (156,754)
------------- ------------- ------------- ---------------
Net Loss $ (13,037) $ (9,840) $ (7,535) $ (206,797)
============= ============= ============= ===============
Net Loss Per Share $ (.007) $ (.007) $ (.006) $ (.228)
============= ============= ============= ===============
Weighted average shares
outstanding 1,454,660 1,306,994 1,104,301 904,338
============= ============= ============= ===============
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount Capital Stage
------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
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)
------------- ----------- ------------ --------------
Balance, June 30, 1996 1,250,009 1,250 181,805 (183,920)
Shares issued for cash in
October 1996 60,000 60 5,940 -
Issuance of common stock for
services rendered at $0.025 per
share in October 1996 20,000 20 2,000 -
Net Loss for the year ended
June 30,1997 - - - (9,840)
------------- ---------- ------------- --------------
Balance June 30, 1997 1,330,009 1,330 189,745 (193,760)
Shares issued for services and
expenses paid at $.06 per share 174,991 175 10,325 -
Net Loss for the year ended
June 30,1998 - - - (13,037)
------------- ---------- ------------- --------------
Balance June 30, 1998 1,505,000 $ 1,505 $ 200,070 $ (206,797)
============= ========== ============= ==============
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount Capital Stage
------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
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 -
Issuances 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 integral part of these financial statements.
7
</TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount Capital Stage
------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
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, 1990 - - - (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 financials statements,
8
</TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
September
28, 1987
(inception)
For the years ended June 30, to June 30,
1998 1997 1996 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Cash Flows form Operating
Activities:
Net loss $ (13,037) $ (9,840) $ (7,535) $ (206,797)
Discontinued operations - - - 19,308
Non-cash services rendered
and expenses paid by
stockholders' 10,500 2,020 6,250 39,357
Increase (decrease) in
current liabilities 2,493 1,529 1,200 5,222
------------- ------------- ------------- ----------------
Net Cash Provided (Used)
by Operating Activities (44) (6,291) (85) (142,910)
------------- ------------- ------------- ----------------
Cash Flows from Investment
Activities: - - - -
------------- ------------- ------------- ----------------
Cash Flows from Financing
Activities:
Issuance of common stock - 6,000 - 142,910
------------- ------------- ------------- ----------------
Net Cash Provided by
Financing Activities - 6,000 - 142,910
------------- ------------- ------------- ----------------
Net increase (decrease) in cash (44) (291) (85) -
Cash, beginning of year 44 335 420 -
------------- ------------- ------------- ----------------
Cash, end of year $ - $ 44 $ 335 -
============= ============= ============= ================
Cash, paid during
the year for:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
9
</TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and 1996
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of Corvallis, Inc., a
development stage stage company. 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 computation of net loss per share of common stock is 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 Income 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, 1998 the Company had net operating loss carryforwards of
approximately $206,000 that may be offset against future taxable income through
2013. 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.
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.
10
<PAGE>
Corvallis, Inc.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and 1996
NOTE 1 - Summary Of Significant Accounting Policies (Continued)
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 Forms 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. 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 4).
11
<PAGE>
Corvallis, Inc.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and 1996
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
Whitney Cluff an officer and shareholder of the Company has paid all
expenses on behalf of the Company. The amount un-reimbursed of $524 is non-
interest bearing and will be repaid to the stockholder when monies are
available or will be converted to equity.
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.
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 5,222
<BONDS> 0
0
0
<COMMON> 1,505
<OTHER-SE> (6,727)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 13,037
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,037)
<EPS-PRIMARY> (.007)
<EPS-DILUTED> 0
</TABLE>
