SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
October 31, 2000
Date of Report
(Date of Earliest Event Reported)
USAOneStar.Net, Inc.
(Exact Name of Registrant as Specified in its Charter)
1 Executive Boulevard, Suite LL1
Owensboro, Kentucky 42301
(Address of principal executive offices)
(270) 683-9090
Registrant's telephone number
Corvallis, Inc.
1486 South 11th East
Salt Lake City, Utah 84105
(Former name and address)
NEVADA 33-18143-D 87-0449399
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
<PAGE>
ITEM 1: CHANGES IN CONTROL
On October 31, 2000, Corvallis, Inc. and USAOneStar.Net, Inc., a
privately held Texas corporation ("USAOneStar Texas"), entered into an
Agreement and Plan of Reorganization by which Corvallis merged with USAOneStar
Texas through a stock-for-stock exchange intended to qualify as a tax-free
exchange. The merger was approved by written consent from a majority of the
Corvallis shareholders. On December 8, 2000, Articles of Merger were filed
with the Secretary of State of Nevada which completed the merger and changed
the corporation name from Corvallis, Inc. to USAOneStar.Net, Inc.
("USAOneStar").
Pursuant to the merger agreement, Corvallis issued 13,500,000 common
shares to the three shareholders of USAOneStar Texas' in exchange for that
company's outstanding stock. Prior to the exchange, Corvallis had 1,505,000
shares outstanding and after the exchange USAOneStar had 15,005,000 shares
outstanding. Messrs. Mims, Turner and Bowlds, individually each acquired 29%
of USAOneStar's issued and outstanding shares and after the exchange held
89.9% of USAOneStar's outstanding common shares.
The consideration exchanged in the merger was negotiated at "arms
length" and Corvallis' management used criteria used in similar proposals to
determine the consideration for the exchange, including the relative value of
the assets of USAOneStar Texas, its present and past business operations, its
future potential, its management and the potential benefit to the stockholders
of Corvallis. The source of the consideration used by Corvallis to acquire
the interest in USAOneStar Texas was 13.5 million authorized but unissued
common shares. The consideration used by the three USAOneStar Texas
shareholders to acquire their interest in Corvallis was the exchange of all
1,000,000 common shares of the issued and outstanding shares of USAOneStar
Texas which they held.
Pursuant to the terms of the merger agreement the management of
Corvallis, Whitney Cluff and John Papanikolas, resigned and the management of
USAOneStar Texas replaced them and filled the following positions:
Name Position
----- --------
Lowell G. Mims President and director
R. Eugene Bowlds Vice-President and director
Kelly Turner Secretary/Treasurer and director
J. Daniel Greene Chief Operating Officer
In January 2000 Messrs. Bowlds and Greene resigned as directors and
officers to pursue other interests. The board of directors appointed Jack T.
Wells to fill the director vacancy. Mr. Wells has been the President of Wells
Health Systems, Inc. for the past 15 years. The current officers and
directors are:
<PAGE> 2
Name Age Position
--------------- ------ --------------
Lowell G. Mims 38 President and Director
Kelly Turner 39 Vice President, Secretary/Treasurer
and Director
Jack T. Wells 45 Director
ITEM 2: ACQUISITION OF ASSETS
Corvallis had been seeking a business opportunity to become involved in
or a company it could acquire since 1995. On January 5, 2000, Principal
Holdings, Inc., which has provided Corvallis with investment banking services
in the past, provided USAOneStar Texas' business plan to Corvallis'
consultants and management. In July 2000 both companies exchanged preliminary
due diligence information and by August they signed a letter of intent to
merge. During August and September both companies continued due diligence and
negotiations working toward the merger agreement that was signed October 31,
2000.
Based on USAOneStar Texas' audited financial information as of November
30, 2000, USAOneStar Texas had total assets of $189,371, comprised mostly of
property and equipment valued at approximately $126,420. However, USAOneStar
Texas had total liabilities of $1,040,290. USAOneStar Texas had revenues of
$101,489 from inception to November 30, 2000 and recorded a net loss of
$851,919 for that period.
ITEM 5: OTHER INFORMATION
On December 15, 2000 our trading symbol changed from "CVLO" to "USAS"
for our outstanding common stock listed on the OTC Bulletin Board.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements.
The audited financial statements for USAOneStar Texas from inception on
July 21, 2000 through November 30, 2000 are attached.
(b) Pro Forma Financial Information.
The accompanying unaudited pro forma consolidated financial statements
have been prepared by management of USAOneStar and give effect to the merger
of Corvallis and USAOneStar Texas. The unaudited pro forma financial
statements for the period ended November 30, 2000 are presented as if the
merger had occurred on July 21, 2000.
The pro forma adjustments include assumptions and preliminary estimates
and are subject to change. These pro forma statements may not be indicative
of the results that actually would have occurred if the acquisition had been
in effect on the dates indicated, and may not be indicative of financial
results that may be obtained in the future. These pro forma financial
<PAGE> 3
statements should be read in conjunction with the accompanying notes and with
the historical financial information on USAOneStar Texas, included in this
8-K.
(c) Exhibits.
2.1 Agreement and Plan of Reorganization between Corvallis and USAOneStar
Texas, dated October 31, 2000 (Incorporated by reference to exhibit 2.1
of Corvallis' 10-Q filed on November 14, 2000.)
3.1 Articles of Merger filed December 8, 2000, as amended
27 Financial data schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
01/11/01
Date: ____________________ USAOneStar.Net, Inc.
/s/ Lowell G. Mims
By: __________________________________________
Lowell G. Mims
President and Director
<PAGE> 4
USAOneStar.Net, Inc.
Financial Statements
November 30, 2000
<PAGE> 5
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . 6
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . . . . 8
<PAGE> 6
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
USAOneStar.Net, Inc.
Owensboro, KY
We have audited the accompanying balance sheet of USAOneStar.Net, Inc. as of
November 30, 2000 and the related statements of operations, stockholders'
equity and cash flows from inception on July 21, 2000 through November 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 USAOneStar.Net, Inc. as of
November 30, 2000 and the results of its operations and cash flows from
inception on July 21, 2000 through November 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 2, the
Company's operating loss and lack of working capital raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to those matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Chisholm & Associates
Salt Lake City, Utah
December 22, 2000
<PAGE> 7
USAOneStar.Net, Inc.
Balance Sheet
Assets
November 30,
2000
-------------
Current assets
Cash (Note 1) $ 64
Accounts Receivable (net of allowance for doubtful
accounts of $43,500) 43,528
Employee Receivable 1,000
Inventory (Note 3) 16,999
-------------
Total Current Assets 61,591
-------------
Property & Equipment, Net (Note 4) 126,420
-------------
Other Assets
Deposits 1,360
-------------
Total Other Assets 1,360
-------------
Total Assets $ 189,371
=============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 147,207
Accrued expenses 26,247
Deferred revenue (Note 1) 356,468
Current portion of long term liabilities (Note 8) 35,075
-------------
Total Current Liabilities 564,997
-------------
Long Term Liabilities (Note 8)
Note Payable - Related Party 423,752
Note Payable 20,000
Lease Obligation 66,616
Less: current portion (35,075)
-------------
Total long term liabilities 475,293
-------------
Total Liabilities 1,040,290
-------------
Stockholders' Equity
Common Stock, authorized 1,000,000 shares of no
par value, issued and outstanding 1,000,000 1,000
Accumulated Deficit (851,919)
-------------
Total Stockholders' Equity (850,919)
-------------
Total Liabilities and Stockholders' Equity $ 189,371
=============
4
<PAGE> 8
USAOneStar.Net, Inc.
Statement of Operations
From inception on
July 21, 2000
through
November 30,
2000
----------------
Revenues: $ 101,489
Cost of Sales: 67,143
----------------
Gross Profit: 34,346
Expenses:
Selling expenses 72,079
General and administrative expenses 795,278
----------------
Total Expenses 867,357
----------------
Net Operating Loss (833,011)
----------------
Other Income (Expense):
Interest expense (18,908)
----------------
Total Other Income (Expense) (18,908)
----------------
Net Loss $ (851,919)
================
Net Loss Per Share $ (.85)
================
Weighted average shares outstanding 1,000,000
================
5
<PAGE> 9
USAOneStar.Net, Inc.
Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount capital Stage
------------ ---------- ---------- -----------
Balances at July 21, 2000 - $ - $ - $ -
Stock issued for services
at $.001 per share 1,000,000 1,000 - -
Net loss for the period ended
November 30, 2000 - - - ( 851,919)
------------ ---------- ---------- -----------
Balance, November 30, 2000 1,000,000 $ 1,000 $ - $( 851,919)
============ ========== ========== ===========
6
<PAGE> 10
USAOneStar.Net, Inc.
Statement of Cash Flows
From
inception on
July 21, 2000
through
November 30,
2000
--------------
Cash Flows from Operating Activities
Net loss $ (851,919)
Adjustments to reconcile
net loss to net cash
provided by operations:
Stock for services 1,000
Depreciation & Amortization 24,936
Bad debt expense 43,500
Increase in receivables (88,028)
Increase in inventory (16,999)
Increase in payables 147,207
Increase in accrued expenses 26,247
Increase in deferred revenue 356,468
--------------
Net Cash (Used) Provided by Operating Activities (357,588)
--------------
Cash Flows from Investment Activities:
Purchase of Equipment (59,695)
Cash paid for Deposits (1,360)
--------------
Net Cash (Used) Provided by Investing Activities (61,055)
Cash Flows from Financing Activities:
Cash received from debt financing 513,515
Principal payments on long term debt (94,808)
--------------
Net Cash (Used) Provided by Financing Activities 418,707
--------------
Net increase (decrease) in cash 64
Cash, beginning of year -
--------------
Cash, end of year $ 64
==============
Supplemental Cash Flow Information
Cash paid for interest $ 4,116
Cash paid for income taxes $ -
7
<PAGE> 11
USAOneStar.Net, Inc.
Notes to the Financial Statements
November 30, 2000
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
USAOneStar.Net, Inc. (the Company) was organized under the laws of the
State of Texas on July 21, 2000. The company does business as USAStar.Net,
Inc. The Company is currently engaged in the business of direct marketing of
Internet access and services to the general public. The Company's principle
offices are located in Owensboro, Kentucky.
b. Recognition of Revenue / Deferred Revenue
The Company recognizes income and expense on the accrual basis of
accounting. The Company receives revenue from the sales of access to the
Internet, its web-based applications and from the continual hosting of its
client's web sites. The initial term of all agreements into which the company
enters with its clientele for its web-based applications and website hosting
is one year. The revenues related to these contracts are, therefore,
recognized ratably over the initial term of the contract. The monthly charges
related to Internet access are recognized when billed in accordance with SOP
97-2.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 clarifies application of generally accepted accounting
principles to revenue transactions. The change involves that of accounting
for up-front fees and, in accordance with SAB 101, the company is amortizing
such fees over one year, which generally represents the longer of the
contractual period or the expected life of the customer relationship.
Pursuant to this new accounting policy the company has deferred revenue of
$356,468 at November 30, 2000.
c. Earnings (Loss) Per Share
Earnings per share were computed by dividing net income by the total
weighted average common shares outstanding during the period. Fully dilutive
earnings per share has not been presented because it equals primary earnings
per share.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $851,919 that will be offset against
future taxable income. These NOL carryforwards begin to expire in the year
2021. No tax benefit has been reported in the financial statements because
the Company believes there is a 50% or greater chance the carryforward will
expire unused.
Deferred tax assets and the valuation account is as follows at November
30, 2000.
Deferred tax asset:
NOL carrryforward $ 290,000
Valuation allowance (290,000)
------------
Total $ -
============
8
<PAGE> 12
USAOneStar.Net, Inc.
Notes to the Financial Statements
November 30, 2000
NOTE 1 - Summary of Significant Accounting Policies (continued)
h. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and expenses during the reporting period. In these financial statements,
assets, liabilities and expenses involve extensive reliance on management's
estimates. Actual results could differ from those estimates.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has operating
losses and is dependent upon financing to continue operations. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty. It is management's plan to merge with a public company
and raise capital through a stock offering to expand operations, thus
creating necessary operating revenue.
NOTE 3 - Inventory
Inventories are valued at the lower of cost or market and consist
primarily of videos, brochures, and other marketing tools. The balance of
inventory is $16,999 at November 30, 2000.
NOTE 4 - Property and Equipment
Property and Equipment consists of the following at November 30, 2000:
Furniture & Fixtures $ 7,983
Equipment 131,890
Leasehold improvements 11,483
Accumulated Depreciation (24,936)
------------
Total Property & Equipment $ 126,420
============
The provision for depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. Depreciation expense
for the period ended November 30, 2000 is $24,936.
In accordance with Financial Accounting Standards Board Statement No.121,
the Company records impairment of long-lived assets to be held and used or to
be disposed of when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
carrying amount. At November 30, 2000, no impairments were recognized.
NOTE 5 - Related Party Transactions
The president loaned the Company $478,946 during the period ended November
30, 2000. The Company made payments toward the loan of $55,194. The note
bears interest at 8% annually, is unsecured, and a balloon payment is due in
five years. (Note 8)
9
<PAGE> 13
USAOneStar.Net, Inc.
Notes to the Financial Statements
November 30, 2000
NOTE 6 - Equity
During July 2000, the Company issued 1,000,000 shares of common stock to
officers for services valued at $1,000.
NOTE 7 - Commitments and Contingencies
On July 5, 2000 the Company committed to an operating lease for office
space. The lease requires the Company to pay monthly rent of $1,725 and
expires July 31, 2003.
On October 23, 2000 the Company committed to an operating lease for living
quarters for some employees. The lease requires the Company to pay monthly
rent of $795 and expires March 30, 2001.
Future minimum lease payments on operating lease obligations are as follows
at November 30, 2000:
2000 2,520
2001 23,085
2002 20,700
20031 2,075
----------
Total Operating Lease Obligations $ 58,380
==========
Rent expense from operating leases for the period ending November 30,
2000 was $11,466.
NOTE 8 - Long Term Liabilities
Notes Payable-Related Party are detailed as follows:
November 30,
2000
--------------
Note payable to an officer, bears interest
at 8%, balloon payment due July 2005 423,752
--------------
Total Notes Payable-Related Party $ 423,752
--------------
Notes payable are detailed as follows:
Note payable to an individual, bears interest
at 8%, balloon payment due July 2005 20,000
--------------
Total Notes Payable $ 20,000
--------------
Lease Obligations are detailed as follows:
Lease obligation to a corporation, bears interest
at 13%, secured by computer equipment, payments
due monthly of $3,058 through November 2002 66,616
--------------
Total Lease Obligations $ 66,616
--------------
10
<PAGE> 14
USAOneStar.Net, Inc.
Notes to the Financial Statements
November 30, 2000
NOTE 8 - Long Term Liabilities (continued)
Total Long Term Liabilities $ 510,368
--------------
Less current portion $ (35,075)
--------------
Net Long Term Liabilities $ 475,293
==============
Future minimum principle payments on long term liabilities are as follows at
November 30, 2000:
2000 4,691
2001 30,384
2002 31,541
2003 -
2004 -
2005 443,752
------------
Total Long Term Liabilities $ 510,368
============
NOTE 9 - Financial Instruments
The recorded amounts for financial instruments, including cash
equivalents, receivables, investments, accounts payable and accrued expenses,
and long-term debt approximate their market values as of November 30, 2000.
The Company has no investments in derivative financial instruments.
NOTE 10 - Subsequent Event / Merger
On December 8, 2000, Corvallis, Inc., a public Nevada corporation,
issued 13,500,000 shares to the Company in exchange for all of the
outstanding shares of the Company. The transaction was recorded as a reverse
acquisition, therefore the Company became the accounting survivor.
11
<PAGE> 15
Corvallis, Inc.
Pro Forma Consolidated Financial Statements
November 30, 2000
<PAGE> 16
Corvallis, Inc.
Proforma Consolidated Balance Sheet
November 30, 2000
<TABLE>
<CAPTION>
Proforma
Corvallis USAOneStar.Net Eliminating Consolidated
Balance Balance Adjustments Balance
11/30/00 11/30/00 DR CR 11/30/00
----------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents - 64 64
Accounts Receivable (Net of
Allowance of $43,500) - 43,528 43,528
Employee Receivable - 1,000 1,000
Inventory - 16,999 16,999
----------- -------------- ------------
Total Current Assets - 61,591 61,591
Property and Equipment, Net - 126,420 126,420
Other Assets
Deposits - 1,360 1,360
----------- -------------- ------------
Total Other Assets - 1,360 1,360
----------- -------------- ------------
Total Assets - 189,371 189,371
=========== ============== ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable - 147,207 147,207
Accounts Payable-Related Party 28,966 - 28,966
Accrued Expenses - 26,247 26,247
Deferred Revenue - 356,468 356,468
Current Portion of Long Term Debt - 35,075 35,075
----------- -------------- ------------
Total Current Liabilities 28,966 564,997 593,963
Long Term Liabilities
Note Payable - Related Party - 423,752 423,752
Note Payable - 20,000 20,000
Lease Obligation - 66,616 66,616
Less: current portion - (35,075) (35,075)
----------- -------------- ------------
Total Long Term Liabilities - 475,293 475,293
Stockholders' Equity
Common Stock, authorized 200,000,000
shares of $.001 par value,
issued and outstanding 15,005,000
shares 1,505 1,000 1,000 13,500 15,005
Additional Paid in Capital/
(Discount on Stock) 201,799 - 245,770 1,000 (42,971)
Retained Earnings (232,270) (851,919) 232,270 (851,919)
----------- -------------- ------------
Total Stockholders Equity (28,966) (850,919) (879,885)
----------- -------------- ------------
Total Liabilities and
Stockholders Equity - 189,371 189,371
=========== ============== ============
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Corvallis, Inc.
Proforma Consolidated Statement of Operations
USAOneStar.Net
Corvallis From
From Inception on Proforma
July 1, 2000 July 21, 2000 Consolidated
through through Proforma Balance
November 30, November 30, Adjustments November 30,
2000 2000 2000
------------ -------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues - 101,489 101,489
------------ -------------- ------------
Cost of Goods Sold - 67,143 67,143
------------ -------------- ------------
Gross Profit - 34,346 34,346
Selling Expenses - 72,079 72,079
General & Administrative - 795,278 795,278
------------ -------------- ------------
Total Operating Expenses - 867,357 867,357
------------ -------------- ------------
Income/(Loss) from Operations - (833,011) (833,011)
Interest Expense - (18,908) (18,908)
------------ -------------- ------------
Net (Loss) - (851,919) (851,919)
============ ============== ============
</TABLE>
<PAGE> 18
Corvallis, Inc.
Notes to Pro Forma Consolidated Financial Statements
November 30, 2000
NOTE 1 - Summary of Transaction
On December 8, 2000, the Company completed an Agreement and Plan of
Reorganization between Corvallis, Inc. a public Nevada corporation (Corvallis)
(the Company)and USAOneStar.Net, Inc. a private Texas corporation
(USAOneStar). Corvallis issued 13,500,000 shares of common stock for all the
stock of USAOneStar. The transaction was recorded as a reverse acquisition;
therefore USAOneStar becomes the accounting survivor.
NOTE 2 - Management Assumptions
The pro forma consolidated financial statements assume that the entities
were together as of July 21, 2000. The adjustments to the pro forma financial
statements are as follows: a) the value of the shares issued by Corvallis for
USAOneStar was $13,500, b) the retained earnings of Corvallis were
reorganized, c) and the value of the common stock of USAOneStar was
eliminated.
