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, 2000
Commission File No. 33-18143-D
CORVALLIS, INC.
--------------------------------------------
(Name of small business issuer in its Charter)
Nevada 87-0449399
----------------------- ------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
1486 South 11th East
Salt Lake City, Utah, 84105
---------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number including Area Code: (801) 487-3893
--------------
Securities Registered Pursuant to Section 12(b) of the Act: 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 4, 2000, was approximately $4,473,445.
As of the date of the filing of this report, the Registrant had outstanding a
total of 15,005,000 shares of its common stock, par value $ 0.001.
Documents incorporated by reference: None
<PAGE>
TABLE OF CONTENTS
Item Number and Caption Page No.
PART 1
1. Description of Business..............................................3
2. Properties...........................................................6
3. Legal Proceedings....................................................6
4. Submission of Matters to a Vote of Security Holders..................6
PART II
5. Market for Common Equity and Related Stockholder Matters.............6
6. Plan of Operations...................................................7
7. Financial Statements.................................................8
8. Changes in and Disagreements on Accounting and Financial Disclosure..22
PART III
9. Directors and Executive Officers.....................................22
10. Executive Compensation...............................................23
11. Security Ownership of Certain Beneficial Owners and Management.......23
12. Certain Relationships and Related Transactions.......................24
13. Exhibits and Reports on Form 8-K.....................................24
<PAGE>
PART I
In this Form 10-KSB, references to "Corvallis", "we", "us" and "our"
refer to Corvallis, Inc.
FORWARD LOOKING STATEMENTS
This annual report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this annual report that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Corvallis's control. These factors include but are not limited to economic
conditions generally and in the industries in which Corvallis may participate;
competition within Corvallis's chosen industry, including competition from
much larger competitors; technological advances and failure by Corvallis to
successfully develop business relationships.
ITEM 1. DESCRIPTION OF BUSINESS
Corvallis, Inc., was incorporated in Nevada on September 28, 1987. Since
the end of 1995, we have been seeking a business opportunity which we could
acquire or in which we could become engaged. On August 14, 2000, we signed a
letter of intent to merge with USAStarOne.Net, Inc., a Texas corporation
("USAStar"). Corvallis expects to be the surviving corporation of the merger
and to change its name to reflect USAStar's business. Management is currently
completing the formal due diligence of USAStar and hopes to enter into a
merger agreement with USAStar within the next 60 days. The consummation of
the merger will be contingent upon shareholder approval.
In the event the merger does not come to fruition, management will
actively seek other business opportunities which we could acquire or in which
we could become engaged, as discussed below.
We plan to seek out, investigate and acquire, or become engaged in, any
business opportunity management believes has good business potential. We
recognize that because of our extremely limited financial, management and
other resources, the number and quality of suitable potential business
ventures available to us may be extremely limited.
Our principal business objective will be to seek long-term growth
potential in the business venture in which we participate, rather than to seek
immediate, short-term earnings. We will not restrict our 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,
Page 3
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transportation and others. Management's discretion will be unrestricted and
we may participate in any business venture whatsoever which meets our business
objectives. It is emphasized that our business objectives are extremely
general and are not intended to be restrictive upon the discretion of
management.
We will not restrict our 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 we
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 we, 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.
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.
We plan to seek one or more potential business ventures from our known
sources, but we will rely heavily on personal contacts of our 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 we
will engage professional firms or individuals specializing in business
acquisitions or reorganizations. However, any individual or firm, exclusive
of our officers, directors and principals who finds a venture in which we
become engaged, may be properly compensated for their efforts. In some
instances, we may publish notices or advertisements seeking a potential
business venture in financial or trade publications.
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. Management will rely on their business
judgment and may rely upon the advice of consultants to analyze business
opportunities. 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.
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
Page 4
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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 we 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 we 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.
We may acquire a business venture by conducting a reorganization or
merger involving the issuance of our securities. 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 Corvallis 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 our shareholders prior to the transaction.
We are unable to predict the timing as to when we may participate in any
specific business endeavor. We expect that the analysis and selection of any
given venture may take several months or more.
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 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 our loss of the related
costs incurred.
We have very limited assets and any business opportunity may require us
to raise capital or undertake some form of financing. Because of our
extremely limited resources, there can be no assurance we will be able to
locate financing for an acquisition, reorganization or merger transaction on
terms agreeable to us.
Employees
We currently have no employees. Our management expects to confer with
consultants, attorneys and accountants as necessary. We do not anticipate a
need to engage any full-time employees so long as we are seeking and
evaluating business opportunities. We will determine the need for employees
based upon the specific business opportunity.
Page 5
<PAGE>
ITEM 2. PROPERTIES
We do not currently own or lease any properties. We presently use the
offices of our Secretary/Treasurer at no charge. Until we engage in a viable
business opportunity and recognize income, we will not seek independent office
space.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any proceeding or threatened proceedings as of the
date of this filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders through the
solicitation of proxies, or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
We have approximately 167 stockholders of record holding 15,005,000
common shares as of September 19, 2000. Our shares of common stock are traded
on the NASD OTC Bulletin Board under the symbol "CVLO." There is currently a
very limited trading market for our shares of common stock. The following
table sets forth, for the respective periods indicated, the high and low bid
prices of our 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, 1998 $ 2.75 $ 2.12
December 31, 1998 2.75 2.25
March 31, 1999 2.50 2.00
June 30, 1999 2.62 2.00
September 30, 1999 3.00 2.25
December 31, 1999 2.38 2.13
March 31, 2000 7.00 2.63
June 30, 2000 5.88 3.00
Page 6
<PAGE>
Dividends
Since inception, no dividends have been paid on our common stock, and we
do not anticipate paying dividends in the foreseeable future.
Recent Sale of Unregistered Securities
The following discussion describes all securities sold by us within the
past three years without registration:
On October 18, 1997 we issued an aggregate of 174,991 common shares
valued at approximately $10,500 for cash and services. 83,331 shares were
issued to Principal Holdings, Inc. for conversion of a $5,000 loan; 50,000
shares were issued to Whitney O. Cluff for services as our officer and
director and $500 cash; and 41,660 shares were issued to James C. Lewis for
services. The issuance of such shares was exempt from registration under the
Securities Act of 1933 by reason of Section 4(2) as a private transaction not
involving a public distribution.
On May 24, 2000 we placed 13,500,000 common shares in escrow in
anticipation of our merger with USAStar. The issuance of such shares was
exempt from registration under the Securities Act of 1933 by reason of Section
4(2) as a private transaction not involving a public distribution.
ITEM 6. PLAN OF OPERATIONS
For the fiscal year ended June 30, 2000, we had $0 in cash, $28,966 in
current liabilities, and no other liquid assets or resources. We did not post
any revenues for the fiscal year and essentially had no operations during the
fiscal year. The total current liabilities are owed to a shareholder for
legal and accounting fees paid on our behalf. Payment of these liabilities
are non-interest-bearing and will be repaid when monies are available, or we
may convert the balance into equity in Corvallis.
At the present time, we have no material commitments for capital
expenditures for the next twelve months. Historically, we have relied on our
management and principal shareholders to cover all our operating expenses and
other costs. We do not have adequate capital to conduct any significant
operations.
We hope to complete a merger with USAStar within the next six months.
Such merger will result in that company's management assuming control of our
operations. We are currently completing due diligence prior to entering a
merger agreement with USAStar. In the event the merger is consummated, we
expect revenues and/or additional funding will be needed to conduct
operations. We are unable to predict which sources the new management will
rely on to obtain additional funding, if needed.
Page 7
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Corvallis, Inc.
(a Development Stage Company)
Financial Statements
June 30, 2000 and 1999
<PAGE> 9
C O N T E N T S
Dependent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 10
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . 11
<PAGE> 10
CHISHOLM & ASSOCIATES
Certified Public Accountants
P.O. Box 540216
North Salt Lake, Utah 84054
Office (801) 292-8756
fax (801) 292-8809
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 years ended June 30, 2000 and 1999 and the
related statements of operations, stockholders' equity and cash flows for the
years ended June 30, 2000, 1999 and 1998 and from inception on September 28,
1987 through June 30, 2000. 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, 2000 and 1999 and the results of its
operations and cash flows for the years ended June 30, 2000, 1999 and 1998 and
from inception on September 28, 1987 through June 30, 2000 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/ Chisholm & Associates
Salt Lake City, Utah
August 16, 2000
<PAGE> 11
Corvallis, Inc.
(a Development Stage Company)
Balance Sheets
Assets
June 30
---------------------------
2000 1999
------------- -------------
Current assets
Cash $ - $ -
------------- -------------
Total Assets $ - $ -
============= =============
Liabilities and Stockholders' Equity
Liabilities
Accounts Payable-related party (Note 6) 28,966 5,966
------------- -------------
Total liabilities 28,966 5,966
------------- -------------
Stockholders' Equity
Common Stock, authorized
200,000,000 shares of $.001 par value,
issued and outstanding 1,505,000 shares 1,505 1,505
Additional Paid-in Capital 201,799 201,799
Deficit Accumulated During the Development Stage (232,270) (209,270)
------------- -------------
Total Stockholders' Equity (28,966) (5,966)
------------- -------------
Total Liabilities and Stockholders' Equity $ - $ -
============= =============
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 12
Corvallis, Inc.
(a Development Stage Company)
Statements of Operations
Cumulative
Total
For the years ended June 30, Since
2000 1999 1998 Inception
------------ ------------ ------------ ------------
Revenues $ - $ - $ - $ -
Expenses:
General & Administrative 23,000 2,473 13,037 75,516
------------ ------------ ------------ ------------
Total Expenses 23,000 2,473 13,037 75,516
------------ ------------ ------------ ------------
Net loss before
discontinued operations $ (23,000) $ (2,473) $ (13,037) $ (75,516)
------------ ------------ ------------ ------------
Loss on disposed of
operations - - - (156,754)
------------ ------------ ------------ ------------
Net Loss $ (23,000) $ (2,473) $ (13,037) $ (232,270)
============ ============ ============ ============
Net Loss Per Share $ (.015) $ (.002) $ (.007) $ (.231)
============ ============ ============ ============
Weighted average shares
outstanding 1,505,000 1,505,000 1,454,660 1,004,449
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 13
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)
Forgiveness of debt by
shareholders classified as
capital contributions - - 1,729 -
Net loss for the year ended
June 30,1999 - - - (2,473)
------------ ------------ ------------- ------------
Balance June 30, 1999 1,505,000 1,505 201,799 (209,270)
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
<PAGE> 14
<TABLE>
<PAGE>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount Capital Stage
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Balance June 30, 1999 1,505,000 $ 1,505 $ 201,799 $ (209,270)
Net loss for the year ended
June 30, 2000 - - - (23,000)
------------ ------------ ------------- ------------
Balance June 30, 2000 1,505,000 $ 1,505 $ 201,799 $ (232,270)
============ ============ ============= ============
The accompanying notes are an integral part of these financial statements.
7
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
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.
8
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Corvallis, Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
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 financial statements.
9
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Corvallis, Inc.
(a Development Stage Company)
Statement of Cash Flows
September
28, 1987
(inception)
For the years ended, June 30, to June 30,
2000 1999 1998 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (23,000) $ (2,473) $ (13,037) $ (232,270)
Discontinued operations - - - 19,308
Non-cash services rendered and
expenses paid by stockholders - - 10,500 39,357
Increase (decrease) in current
liabilities 23,000 744 2,493 28,966
------------ ------------ ------------ ------------
Net Cash Provided (Used)
by Operating Activities - (1,729) (44) (144,639)
------------ ------------ ------------ ------------
Cash Flows from Investment Activities: - - - -
------------ ------------ ------------ ------------
Cash Flows from Financing Activities:
Issuance of common stock - - - 142,910
Capital Contribution - 1,729 - 1,729
------------ ------------ ------------ ------------
Net Cash Provided by
Financing Activities - 1,729 - 144,639
------------ ------------ ------------ ------------
Net increase (decrease) in cash - - (44) -
Cash, beginning of year - - 44 -
------------ ------------ ------------ ------------
Cash, end of year $ - $ - $ - -
============ ============ ============ ============
Cash, paid during the year for:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
10
</TABLE>
<PAGE> 18
Corvallis, Inc.
(a Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and 1999
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 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
No provision for income taxes has been recorded due to net operating loss
carry forwards totaling approximately $232,000 that will be offset against
future taxable income. These NOL carry forwards have already begun to expire.
No tax benefit has been reported in the financial statements because the
Company believes there is a 50% or greater chance the carry forward will
expire unused.
Deferred tax assets and the valuation account is as follows at June 30,
2000 and 1999:
June 30,
2000 1999
------------- -------------
Deferred tax asset:
NOL carry forward $ 73,835 $ 71,000
Valuation allowance (73,835) (71,000)
------------- -------------
Total $ - $ -
============= =============
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.
11
<PAGE> 19
Corvallis, Inc.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and 1999
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).
12
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Corvallis, Inc.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and 1999
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 - Accounts Payable-Related Party
A shareholder of the Company has paid expenses on behalf of the Company.
The amount due at June 30, 2000 and 1999 is $28,966 and $5,966, respectively.
The balance 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.
NOTE 8 - Forgiveness of Debt
During the year ended June 30, 2000 shareholders of the Company forgave
debts owed them by the Company in the amount of $1,729. The forgiveness was
classified as a capital contribution.
NOTE 9 - Agreement and Plan of Reorganization
On May 24, 2000, 13,500,000 shares of the Company's common stock
were placed into escrow as part of a pre-negotiation for a merger between the
Company and USA One StarNet.Com, Inc., a Texas corporation. Upon completion
of the agreement, USA One StarNet.Com will merge into the Company and the
Company will be the surviving corporation. As of the audit report date, the
merger has not occurred. The companies have until October 14, 2000 to
finalize the agreement.
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ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 4, 2000, Chisholm & Associates replaced Crouch, Bierwolf &
Chisholm, as our independent auditor. The decision to change accountants was
approved by our Board of Directors. Crouch, Bierwolf & Chisholm had audited
our financial statements for June 30, 1999 and 1998. Crouch, Bierwolf &
Chisholm's report on such financials, dated July 25, 1999, did not contain an
adverse opinion, disclaimer of opinion nor was it modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with
Crouch, Bierwolf & Chisholm on any matter regarding accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
Neither we, nor someone on our behalf, consulted with Chisholm &
Associates regarding the application of accounting principles to a specific
completed or contemplated transaction or the type of audit opinion that might
be rendered on our financial statements. Nor was a written report or oral
advice provided to us that Chisholm & Associates considered was an important
factor we relied on in reaching decisions about accounting, auditing or
financial reporting issues.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the name, age, and position of each of our
executive officers and directors. The term of office of each executive
officer and director is one year or until his successor is elected and
qualified. Set forth below is biographical information for each of our
officers and directors. There are no existing family relationships between or
among any of our executive officers or directors.
Name Age Position Since
---------------- ----- -------------- -------
Whitney O. Cluff 49 President and Chairman September 1989
John Papanikolas 49 Secretary/Treasurer and Director September 1987
Whitney O. Cluff has served as President and Chairman of the Board since
1989. Mr. Cluff is a licensed real estate broker in the state of Utah and is
primarily engaged in real estate ventures. 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 an officer and a director since our
inception in 1987. He is the President and owner of Emissions Xpress, which
are Salt Lake City based emissions testing and safety inspection centers. 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. He has
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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. 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 bachelor degrees in business administration and behavioral science
from Westminster College.
Compliance with Section 16(a) of the Exchange Act.
We do not have a class of securities registered under the Securities
Exchange Act of 1934, and, therefore, our officers, directors and holders of
more than 10% of our outstanding shares are not subject to the provisions of
Section 16(a).
ITEM 10. EXECUTIVE COMPENSATION
During the fiscal year ended June 30, 2000, no officer or director
received a salary or bonus. The following table details the compensation
received by our officers and directors during the past three fiscal years:
Summary of Compensation Table
Annual Compensation
--------------------------------------
Fiscal Other Annual
Name & Principal Position Year Salary Bonus Compensation
------------------------- ------ ----------- ---------- ---------------
Whitney O. Cluff 2000 $ 0 $ 0 $ 0
President and 1999 0 0 0
Director 1998 0 0 3,000*
*Mr. Cluff was issued a total of 50,000 shares of our common stock valued
at $.06 per share, in consideration for his services, valued at approximately
$2,500, and $500 cash.
We have not entered into employment contracts with our executive officers
and we do not have any standard arrangement for compensation of our directors
for any services provided to us.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding stock by our management. No person is known by us to own
beneficially more than 5% of our common stock. Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to the securities. Except as
indicated by footnote, the persons named in the table below have sole voting
power and investment power with respect to all shares of common stock shown as
beneficially owned by them. The
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percentage of beneficial ownership is based on 15,005,000 shares of common
stock outstanding as of September 19, 2000.
MANAGEMENT
Amount and
Name and Address of Nature of Percent of
Beneficial Owner Beneficial Owner Class
--------------------------- ------------------ ------------
Whitney O. Cluff 375,126 2.5%
4751 Ichabod Street
Salt Lake City, Utah 84117
John Papanikolas 135,775 less than 1%
1486 South 1100 East
Salt Lake City, Utah 84105
All Officers and
Directors as a
Group (2 persons): 510,901 3.4%
Changes in Control
We have placed 13,500,000 shares of our common stock in escrow with the
intent that these shares will be used in a stock for stock exchange with
USAStar. In the event the stock exchange occurs, USAStar's shareholders will
hold approximately 90% of our outstanding shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have not engaged in any transactions in excess of $60,000 during the
past two years involving our executive officers, directors, 5% or more
stockholders or immediate family members of such persons.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT NO. Title of Document
----------- -----------------
2.1 Letter of Intent between Corvallis, Inc. and USAStarOne.Net,
Inc. dated August 14, 2000. (Incorporated by reference to
exhibit 2.1 of Form 8-K filed August 29, 2000.)
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3.1 Articles of Incorporation (Incorporated by reference to
exhibit 4 of Form S-18 filed on November 9, 1987.)
3.2 Bylaws (Incorporated by reference to exhibit 5 of Form S-18
filed on November 9, 1987.)
16.1 Letter of agreement from Crouch, Bierwolf & Chisholm, dated
August 31, 2000. (Incorporated by reference to exhibit 16 of
Form 8-K filed September 1, 2000.)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
On September 1, 2000, we filed a current report on Form 8-K under Item 4
concerning the replacement of our auditor, Crouch, Bierwolf & Chisholm, with
Chisholm & Associates.
On August 29, 2000 we filed a current report on Form 8-K under Item 5
regarding the signing of the letter of intent between Corvallis and USAStar.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Corvallis, Inc. has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
Corvallis, Inc.
Dated: September 25, 2000 By /s/ Whitney O. Cluff
-----------------------------
Whitney O. Cluff, President and
Director
Dated: September 25, 2000 By /s/ John Papanikolas7
-------------------------------
John Papanikolas,
Secretary/Treasurer and Director
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