ITEM 1. BUSINESS - --------------------------------------------------------------------------------
GENERAL
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.
The Company has been inactive for the past several years, and has been attempting to locate a suitable business to acquire or a corporate enterprise with which it could enter into a merger or reorganization transaction. 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 or reorganization or merger transaction on terms which can be achieved by the Company.
HISTORY
In July, 1988, the Company completed a public offering of units, each unit consisting of one share of the Company's common stock, one class A common stock warrant, and one class B common stock purchase warrant. At the completion of the offering, the Company had sold a total of 13,140,000 (105,120 post-split) units at an offering price of $0.01 per unit, resulting in gross proceeds to the Company of $131,400, and net proceeds of $98,216 after sales commissions and other expenses of the offering in the amount of $33,184. The Class A and Class B warrants sold in the offering have expired.
In the end of August, 1989, the Registrant issued a total of 506,614 post-split shares to certain parties, including the Registrant's president, in connection with the Registrant's purchase of certain assets, and undertakings in the commercial awning business in Las Vegas, Nevada. This enterprise was unsuccessful and was terminated by the Registrant in the end of 1989 and the beginning of 1990.
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.
BUSINESS
The Registrant has not been in business since the end of 1989, and has only recently undertaken necessary activities to enable it to become engaged in business operations. The Company plans to seek out, investigate and acquire, or become engaged in, any business opportunity management believes has good business potential. No specific business or industry is presently contemplated.
Management anticipates that it will only acquire businesses which have, or can generate or provide, audited financial statements. However, management reserves the right to become engaged in a new business venture or a venture in its infancy, if management determines such venture holds good business potential.
The Registrant recognizes that because of its extremely limited financial, management and other resources, the number of quality of suitable potential business ventures available to it may be extremely limited.
The Company's principal business objective will be to seek long-term growth potential in the business venture in which it participates, rather than to seek immediate, short-term earnings. In seeking to attain the Company's business objective, it will not restrict its search to any particular business or industry, but may participate in business ventures of essentially any kind or nature, including, but not limited to, finance, high technology, manufacturing, natural resources, service, research and development, communications, insurance, transportation and others. Management's discretion will be unrestricted and it may participate in any business venture whatsoever, which meets the business objectives discussed herein. It is emphasized that the business objectives of the Registrant are extremely general and are not intended to be restrictive upon the discretion of management.
The Company plans to seek one or more potential business ventures from its known sources, but will rely heavily on personal contacts of its officers and directors, as well as indirect associations or contacts between them and other business and professional people. It is not presently anticipated that the Company will engage professional firms or individuals specializing in business acquisitions or reorganizations. However, any individual or firm, exclusive of the officers, directors and principals of the Company who find a venture in which the Company becomes engaged, may be properly compensated for their efforts. In some instances, the Company may publish notices or advertisements seeking a potential business venture in financial or trade publications.
The Company will not restrict its search to a venture in any particular stage of development, but may acquire or become engaged in a venture in its preliminary or development stage, may participate in a business which is already
in operation, or in a business in various stages of it corporate existence. It is impossible to predict at this stage the status of any venture in which the Company may participate, in that the venture may need additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company, as a public company, may offer. In some instances, the business endeavors may involve the acquisition of or merger or reorganization with a corporation which does not need substantial additional capital but which desires to establish a public trading market for it securities.
Firms which seek the Company's participation in their operations through a reorganization, asset acquisition, or some other means may desire to do so to avoid what such firms may deem to be adverse factors related to undertaking a public offering. Such factors include substantial time requirements and legal and other costs, along with other conditions or requirements imposed by various state and federal regulatory agencies.
To a large extent, a decision to participate in a specific business endeavor may be made upon management's analysis of the quality of the other firm's management and personnel, the anticipated acceptability of new products, marketing concepts or services, the merit of technological changes, and numerous factors which may not be reflected on a balance sheet or operating statement and are difficult, if not impossible, to analyze through the application of objective criteria. In many instances, it anticipated that the results of operation of a specific venture may not be indicative of the potential for the future because of the requirement to substantially shift marketing approaches, expand significantly, change product emphasis, change or augment management, and other factors. Because the Company may participate in business endeavors with newly organized firms or with firms which are entering a new phase of growth, it should be emphasized that the Company will incur further risks since management in may instances will not have proved its abilities or effectiveness, the eventual market of such firm's product or services will likely not be established, and the profitability of the firm will be unproved and cannot be accurately predicted.
The analysis and review of new business ventures will be undertaken by or under the supervision of the officers and directors, none of whom is a professional business analyst. No member of managements has any significant business experience or expertise in any type of business which is likely to be investigated by the Company. Therefore, management will have to rely on their common sense and business judgment as well as upon the advice of consultants to analyze the factors described above. In reviewing prospective business opportunities, management will consider such matters as the available technical, financial and managerial resources, the working capital and other financial requirements, the history of operations, if any; prospects for the future; the nature of present and expected competition; the quality and experience of management services available and the depth of management; the potential for growth and expansion; risk factors; the perceived public recognition or acceptance of products, services; and other factors.
Generally, management will attempt to analyze all available factors in the circumstances and make a determination based upon a composite of available facts, without reliance upon any single factor as controlling.
The Company is unable to predict the timing as to when it may participate in any specific business endeavor. It expects, however, that the review of business opportunities will commence immediately, and that the analysis and selection of any given venture may take several months or more.
It is anticipated that business opportunities will be available to the Company from various sources, including its officers and directors and shareholders and their business associates, professional advisors, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. In certain circumstances, the Company may agree to pay a finder's fee or to otherwise compensate investment banking or other services provided by persons who are unaffiliated with the Company but who submit a potential business opportunity in which the Company elects to participate. No such finder's fee or other fees will be paid to any person who is an officer, director or principal of the Registrant.
The Company may acquire a business venture by conducting a reorganization or merger involving the issuance of securities of the Company. Due to the requirements of certain provisions of the Internal Revenue Code, as amended, in order to obtain certain beneficial tax consequences in such transactions, the number of shares held by all of the present shareholders of the Company prior to such transaction, may be substantially less than the total outstanding shares held by such shareholders in any reorganized entity. The result of any such reorganization or merger transaction could be additional substantial dilution to the shareholders of the Company prior to the transaction.
It is anticipated that the investigation of specific business endeavors and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, and others. If a decision is made not to participate in a specific business opportunity under review, the costs theretofore incurred would not be recoverable. Further, even if an agreement is reached for the participation in a specific business venture, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.
The Company presently has essentially no assets, and does not currently have any specific assets, properties or businesses in mind for potential acquisition or involvement by the Company. Further, the Company does not presently have any particular areas of business or industry in which it intends to look for business opportunities.
In connection with a business acquisition or transaction, the Company may need to raise equity or debt to fund such transaction, or to provide the business opportunity with necessary operating capital. There is no assurance the Company will be able to raise capital when needed, or on terms which are favorable to the Company.
Offices and Employees
The Company presently uses the offices of its Secretary/Treasurer and Vice President, at no charge. At such time as business operations commence, the Company may be charged a reasonable amount for its office facilities. The Company has no employees.
- -------------------------------------------------------------------------------- ITEM 2.
ITEM 2. PROPERTIES - --------------------------------------------------------------------------------
The Company does not hold any properties.
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ITEM 3. LEGAL PROCEEDINGS - --------------------------------------------------------------------------------
The Company is not a party to any material pending legal proceedings, and no such proceedings by or, to the best of its knowledge, against the Company have been threatened.
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ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - --------------------------------------------------------------------------------
No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report. In August, 1995, the board of directors and holders of a majority of the issued and outstanding voting stock of the Company approved a 1-for-five reverse in the issued and outstanding common stock of the Company.
PART II
- -------------------------------------------------------------------------------- ITEM 5.
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 "CLOV." The following sets forth, for the respective periods indicated, the high and low bid prices of the Company's common stock in the over-the-counter market:
Quarter Ended High Bid Low Bid - ------------- -------- -------
September 30, 1995 $.25 $.25
December 31, 1995 $.25 $.25
March 31, 1996 $.25 $.25
June 30, 1996 $.25 $.25
September 30, 1996 $.50 $.25
December 31, 1996 $.50 $.50
March 31, 1997 $.50 $.50
June 30, 1997 $.50 $1.25
As of September 30, 1997, the stock was quoted at $.50 bid, no 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 180 holders of record of the Company's common stock.
- -------------------------------------------------------------------------------- ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA - --------------------------------------------------------------------------------
The following selected financial data of the Company is not covered by an opinion of a certified public accountant and should be read in conjunction with the financial statements and related notes thereto.
INCOME DATA ----------- Period from Inception (September 28, 1987) For the Year Ended June 30, through June 30, 1996 --------------------------- --------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ----
Revenue $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Net Income (loss) (9,840) (7,535) (7,855) (14,252) (1,335) (183,920)
Net Earnings (loss) per share $.007 $.006 -0- -0- -0- $ 0.25
BALANCE SHEET DATA AS OF JUNE 30, ------------------
1997 1996 1995 1994 1993 ---- ---- ---- ---- ----
Total $ 44 $ 333 $ 420 $ 75 $2,196 Assets
Long Term -0- -0- -0- -0- -0- Liabilities
Current Liabilities $2,729 1,200 1,150 2,350 4,431
Total Liabilities $1,200 1,150 2,350 4,431 900
Shareholder's Equity (2,685) (865) (750) (2,275) (2,235)
- -------------------------------------------------------------------------------- ITEM 7.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES - -------------------------------
At June 30, 1997, the Company had only $44 in cash, $2,729 in liabilities, and no other liquid assets or resources.
At present, the Company does not have adequate capital to conduct any significant operations. The Company is engaged in the search for potential business opportunities for acquisition or involvement by the Company, which activities are severely limited by the Company's lack of resources. Management believes that any business venture in which the Company becomes involved will be made by issuing shares of the Company's authorized but unissued common stock. It is anticipated that the Company's liquidity, capital resources and financial statements will be significantly different subsequent to the consummation of any such transaction.
RESULTS OF OPERATIONS - ---------------------
The Company had essentially no operations during the year ended June 30, 1997. The Company incurred expenses during the year of $9,840 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.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - --------------------------------------------------------------------------------
The financial statements are included beginning at page.
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ITEM 9.
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 9 or under Rule 304 of Regulation S-K, of the Securities Exchange Act of 1934, as amended.
PART III
- -------------------------------------------------------------------------------- ITEM 10.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - --------------------------------------------------------------------------------
NAMES AND TERMS OF OFFICE - -------------------------
The table below sets forth the name, age, and position of each executive officer and director of the Company.
Name Age Position Since* ---- --- -------- -----
Whitney O. Cluff 47 President and Chairman September, 1989
John Papanikolas 47 Secretary/Treasurer and Director September, 1987
Thomas Mulcock 47 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 the President and owner of Emissions Xpress, a Salt Lake City based owner and operator of an automobile emissions testing and safety inspection centers, since 1993. From 1989 to the present, he has served as a member of the board of directors of Magna Investment, Ltd., a developer of shopping centers and real estate in Arizona and Utah. Since 1986, he has been a director of Foothill Oriental Rugs, Inc., an importer, wholesaler and retailer of oriental rugs and handmade carpets, located in Salt Lake City, Utah. From 1985 to 1988, he was editor and publisher of Guide Publications 7, Inc., a publishing firm. From 1979 through 1985, he was owner and operator of Clayton Oriental Rugs and in 1985 became advertising manager for Zions Oriental Rugs. From 1989 to 1989, he has worked as a writer and editor for the Salt Lake Tribune, a major daily newspaper in Salt Lake City. In 1983, Mr. Papanikolas earned a bachelor's degree in business administration from the University of Utah and a bachelor's degree in behavioral science from Westminster College.
Thomas Mulcock has been, since 1972, the owner and operator of Thomas E. Mulcock Real Estate Appraising Company, a real estate appraisal firm in Salt Lake City, Utah. Mr. Mulcock is a member of the National Association of Independent Fee Appraisers, the National Association of Real Estate Boards, and the Salt Lake Board of Realtors. Mr. Mulcock attended the University of Utah from 1967 to 1971, but did not receive a degree.
CONTROL PERSONS
Of the total of a 1,250,009 post-split shares of common stock issued and outstanding, (after giving effect to a 1-for-25 reverse split effectuated in August, 1994 and a 1-for-5 reverse split effectuated in August, 1995), a total of 499,687 post-split shares are held by the CPM Group, a group consisting of the officers and directors, and Mitchell T. Godfrey, M. Don Nelson, and James C. Lewis. Thus, this group, and its individuals, may be considered to be in control of the Company. (See "Item 12. Security Ownership of Certain Beneficial Owners and Management").
- -------------------------------------------------------------------------------- ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION - --------------------------------------------------------------------------------
REMUNERATION DURING FISCAL YEAR - -------------------------------
During the fiscal year ended June 30, 1997, no officer or director received any compensation, except for Whitney O. Cluff, who received restricted common stock in consideration of services rendered on behalf of the Company, described below. Set forth below is a summary of the compensation received by officers and directors during the fiscal year:
CASH COMPENSATION TABLE
- -------------------------------------------------------------------------------- NAME OF INDIVIDUAL CAPACITY IN WHICH CASH OR NUMBER IN GROUP SERVED COMPENSATION - --------------------------------------------------------------------------------
Whitney O. Cluff President, Director $0 in cash (1)
John Papanikolas Secretary/Treasurer, Director $0
Thomas Mulcock Vice President, Director $0
- -----
1) During the fiscal year, Mr. Cluff was issued a total of 20,000 shares of common stock of the Company in consideration of his efforts on behalf of the Company, valued at approximately $2,000. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; Sales, Issuances and Transfers of Restricted Common Stock").
- -------------------------------------------------------------------------------- ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - --------------------------------------------------------------------------------
The following table sets forth the name and address, as of the date of the filing of this report, the approximate number of shares of common stock owned of record or beneficially by each person who owned of record, or was known by the Company to own beneficially, more than 5% of the common stock, and the name and shareholdings of each officer and director, and all officers and directors as a group:
Amount and Nature of Ownership(1)(3)
Sole Voting Shared Voting Name of Person and Investment and Investment Percent of or Group Power Power Class -------------- -------------- -------------- ---------- Principal Shareholders:
Whitney O. Cluff 325,126 24.4 (2) 4751 Ichabod Street -0- -0- Salt Lake City, Utah 84117
John Papanikolas 213,248 16.0 (2) 1486 South 1100 East -0- -0- Salt Lake City, Utah 84105
Thomas Mulcock 113,148 8.5 (2) 1486 South 1100 East -0- -0- Salt Lake City, Utah 84105
Mitchell T. Godfrey 191,340 14.4 (2) 230 North Fork Ray Creek -0- -0- Townsend, Montana 59644
James C. Lewis 183,699 13.8 (2) 10 West 100 South, Suite 600 -0- -0- Salt Lake City, Utah 84101
M. Don Nelson 157,999 11.9 (2) 5122 South Holladay Blvd. -0- -0- Holladay, Utah 84117
Officers and Directors: - -----------------------
Whitney O. Cluff (See above)
John Papanikolas (See above)
Thomas Mulcock (See above)
All Officers and Directors as a Group (3 persons): 651,522 48.9 -0- -0-
(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, all of which was distributed to the partners. (See "Item 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - --------------------------------------------------------------------------------
SALES, ISSUANCES AND TRANSFERS OF RESTRICTED STOCK
In the middle and end of 1989, the Company sold a total of 10,113 post split shares of its restricted common stock in private transactions to a total of four (4) individuals, including John Papanikolas, an officer and director since inception, and Thomas Mulcock, an officer and director since January, 1994, at a price of approximately $.9375 per share (adjusted for the stock splits), or a total of $9,500. This stock was sold to provide the Company with necessary operating capital to continue the business of Southwest, which was ultimately discontinued in the end of 1989.
In the end of November, 1989, the Company issued a total of 11,200 post-split shares, to Whitney O. Cluff, as payment for salary and fees owed to Mr. Cluff in the amount of $10,500.
In December, 1992, WAM transferred to Whitney O. Cluff, all of the 108,560 post-split shares of restricted common stock of the Company issued to WAM in connection with the Company's acquisition of Southwest, discussed above. This stock was transferred in exchange for the cancellation of $6,000 owed by WAM to Mr. Cluff. In January, DLB transferred all of the 253,307 post split shares of the Company's common stock issued to DLB in connection with the acquisition of Southwest, in exchange for the payment of $1,500 to DLB.
In January, 1994, the Company authorized the issuance of a total of 54,933 post split shares of restricted common stock to the CPM Group, a group consisting of Thomas Mulcock, John Papanikolas, and Whitney O. Cluff, officers and directors, and M. Don Nelson, Mitchell T. Godfrey and James C. Lewis, in consideration of the contribution by Messrs. Papanikolas, Mulcock, Godfrey and Nelson of the sum of $2,227 each in cash, and the contribution of time and services by Messrs. Cluff and Lewis. Such cash and services contributions were made as part of the Company's efforts to reactivate its business. In connection with such arrangement, Mr. Cluff has transferred to the CPM Group a total of 370,252 post split shares of restricted common stock held by him or his affiliates, to be owned jointly by the CPM Group. Each of the individuals named above has an equal interest in the shares held by the CPM Group. Mr. Cluff has also agreed to transfer the additional shares held by him or affiliates as follows: 20,360 shares to Mr. Papanikolas; 20,000 shares to Mr. Lewis; and 8,000 shares each to Messrs. Nelson and Godfrey, and William L. Mitchell, who served as an officer for a brief period in 1989 and 1990. During the fiscal year, the partners of the CPM Group elected to have the shares held by CPM Group disbursed to each of them. As a result of such action, a total of 83,281 shares were transferred from CPM Group to each of the partners. (See "Item 12. Security Ownership of Certain Beneficial Owners and Management").
During the fiscal year ended June 30, 1995, the Company issued a total of 220,000 post split shares of restricted common stock to its officers, directors and other principal shareholders, described in the paragraph above, in consideration of approximately $9,000 in monies advanced by such individuals on behalf of the Company, and services.
During the fiscal year ended June 30, 1996, the Company issued a total of 105,000 shares of its restricted common stock to an Whitney O. Cluff, an officer and director, for services and $2,000 in cash; an additional 40,000 shares to James C. Lewis for services rendered on behalf of the Company; and an additional 65,000 shares to M. Don Nelson and Mitchell T. Godfrey for the sum of $1,625 in cash. During the fiscal year ended June 30, 1997, the Company issued a total of 80,000 shares or restricted common stock to the following persons for the consideration indicated: M. Don Nelson - 10,000 shares for $1,000; Mitchell T. Godfrey - 20,000 for $2,000 cash; John Papanikolas - 20,000 shares for $2,000 cash; James C. Lewis - 1,000 shares for services; and Whitney O. Cluff - 2,000 shares for services.
None of the transactions described above can be considered to be the result of arms' length negotiations. All of the share figures described above give effect to a 1-for-25 reverse split and completed by the Company in August, 1994, and a 1-for-5 reverse split completed in August, 1995.
PART IV
- -------------------------------------------------------------------------------- ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - --------------------------------------------------------------------------------
The following financial statements and schedules are included immediately following the signature page to this report.
(a)(1) FINANCIAL STATEMENTS
TITLE PAGE NO. - ----- --------
Independent Accountants' Report of Jones, Jensen & Company
Balance Sheets as of June 30, 1997 and 1996
Statement of Operations for the three years ended June 30, 1997, 1996 and 1995 and from inception through June 30, 1997
Statement of Stockholders' Equity for the three years ended June 30, 1997, and the period from inception through June 30, 1997
Statement of Cash Flows for the three years ended June 30, 1997, and from inception through June 30, 1997
Notes to Financial Statement
(a)(2). FINANCIAL STATEMENT SCHEDULES
None.
(a)(3). EXHIBITS: EXHIBIT NO. SEC Reference No. Title of Document Location ----------- ----------------- ----------------- --------
1 (3) *Articles of Form 10-K Incorporation for fiscal year ended June, 1989
2 (3) *Bylaws same *These documents are incorporated herein by reference.
(b) REPORTS ON FORM 8-K
During the fiscal year ended June 30, 1997, the Company filed no reports on Form 8-K.
- -------------------------------------------------------------------------------- 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: October 2, 1997 By /s/Whitney O. Cluff ----------------------------------------------- Whitney O. Cluff (Principal Executive Officer)
Dated: October 2, 1997 By /s/John Papanikolas ----------------------------------------------- John Papanikolas (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Dated: October 2, 1997 By /s/Whitney O. Cluff ----------------------------------------------- Whitney O. Cluff, President and Chairman of the Board
Dated: October 2, 1997 By/s/Thomas Mulcock ----------------------------------------------- Thomas Mulcock, Vice President and Director
Dated: October 2, 1997 By/s/John Papanikolas ----------------------------------------------- John Papanikolas, Director
Corvallis, Inc. (a Development Stage Company) Financial Statements June 30, 1997 and 1996
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
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, 1997 and the related statements of operations, stockholders' equity and cash flows for the year then ended and from inception of the development stage on September 28, 1987 through June 30, 1997. 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. The financial statements of Corvallis, Inc. as of June 30, 1996, were audited by other auditors whose report dated August 14,1996, expressed an unqualified opinion on those statements.
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 Corvallis, Inc. (a Development Stage Company) as of June 30 1997 and the results of its operations and cash flows for the year then ended and from inception of the development stage on September 28, 1997 through June 30, 1997 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/Couch, Bierwolf & Chisholm
Salt Lake City, Utah August 15, 1997
Corvallis, Inc. (a Development Stage Company) Balance Sheets
Assets
June 30 ---------------------- 1997 1996 -------- --------
Current assets Cash $ 44 $ 335 --------- ---------
Total Assets $ 44 $ 335 ========= =========
Liabilities and Stockholders' Equity
Liabilities Accounts payable $ 2,205 $ 1,200 Accounts Payable-related party (Note 6) 524 -- --------- ---------
Total liabilities 2,729 1,200 --------- ---------
Stockholders' Equity
Common Stock, authorized 200,000,000 shares of $.001 par value, issued and outstanding 1,330,009 shares and 1,250,000 shares issued and outstanding 1,330 1,250
Additional Paid-in Capital 189,745 181,805
Deficit Accumulated During the Development Stage (193,760) (183,920) --------- ---------
Total Stockholders' Equity (2,685) (865) --------- ---------
Total Liabilities and Stockholders' Equity $ 44 $ 335 ========= =========
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
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, 1997 the Company had net operating loss carryforwards of approximately $193,000 that may be offset against future taxable income through 2012. 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.
The accompanying notes are an integral part of these financial statements
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).
The accompanying notes are an integral part of these financial statements
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.
The accompanying notes are an integral part of these financial statements