UNITED STATES
                      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

                   For the fiscal year ended June 30, 2001

[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                        Commission File No. 33-18143-D

                             USAOneStar.Net, Inc.
            (Exact name of registrant as specified in its charter)

        Nevada                                         87-0449399
(State of incorporation)                (I.R.S. Employer Identification No.)

                        416 W.  Mohammed Ali Boulevard
                          Louisville, Kentucky 40202
                                (502) 585-6364
        (Address and telephone number of principal executive offices
                       and principal place of business)


                       1 Executive Boulevard, Suite LL1
                          Owensboro, Kentucky 42301
                               (Former address)

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]

Registrants revenues for its most recent fiscal year: $459,298

The aggregate market value of the Registrant's voting stock held by
non-affiliates was approximately $4,080,200; computed with reference to the
price at which stock was sold in the over-the-counter market on September 20,
2001.

As of September 20, 2001, the Registrant had 16,000,000 outstanding 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.  Description of Property................................................8

3.  Legal Proceedings......................................................8

4.  Submission of Matters to a Vote of Security Holders....................9

PART II
-------

5.  Market for Common Equity and Related Stockholder Matters...............9

6.  Management's Discussion and Analysis..................................10

7.  Financial Statements..................................................13

8.  Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure..............................................13

PART III
--------

9. Directors, Executive Officers and Section 16(a) Compliance.............14

10. Executive Compensation................................................15

11. Security Ownership of Certain Beneficial Owners and Management........15

12. Certain Relationships and Related Transactions........................16

13. Exhibits and Reports on Form 8-K......................................17


                                      2
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                                    PART I

In this report references to "USAOneStar," "we," "us," and "our" refer to
USAOneStar.Net, 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
USAOneStar's control.  These factors include but are not limited to economic
conditions generally and in the industries in which USAOneStar may
participate; competition within USAOneStar's chosen industry, including
competition from much larger competitors; technological advances and failure
by USAOneStar to successfully develop business relationships.


                         ITEM 1.  DESCRIPTION OF BUSINESS

HISTORICAL DEVELOPMENT

      We were incorporated in the state of Nevada on September 28, 1987 as
Corvallis, Inc.  Corvallis was formed to seek business opportunities.  On
October 31, 2000, Corvallis and USAStarOne.Net, Inc., a Texas corporation
("USAStar Texas") entered into an Agreement and Plan of Reorganization by
which Corvallis merged with USAStar Texas through a stock-for-stock exchange
intended to qualify as a tax-free exchange under Section 368(a)(1)(B) of the
Internal Revenue Code, as amended.  USAStar Texas was incorporated on July 21,
2000, as an Internet service provider using a network marketing structure for
distribution of its services.

      Pursuant to the merger agreement, Corvallis issued 13,500,000 shares
valued at $13,500 in a stock-for-stock exchange for the 1,000,000 outstanding
shares of common stock of USAStar Texas.  Prior to the merger, Corvallis had
1,505,000 shares outstanding and after the merger USAOneStar had 15,005,000
shares outstanding.  The shareholders of USAStar Texas, acquired 89.9% of our
outstanding common shares.  As a result of the merger, Corvallis acquired the
business operations, products and assets of USAStar Texas, Corvallis was the
surviving entity of the merger, changed its name to USAOneStar.Net, Inc.
("USAOneStar") and the merger was completed on December 8, 2000.

      On August 31, 2001, USAOneStar and Palladium Communications, Inc., a
Kentucky corporation ("Palladium Kentucky"), entered into an Agreement and
Plan of Reorganization by which USAOneStar expects to  acquire Palladium
Kentucky as a wholly owned subsidiary through a stock-for-stock exchange
intended to qualify as a tax-free exchange under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.  Palladium Kentucky was
incorporated in April 23, 1998, to sell telecommunications services.

      Pursuant to the agreement, USAOneStar will issue 183,000,000 common
shares valued at approximately $73,200,000 to the shareholders of Palladium
Kentucky in exchange for approximately 6,500 issued and outstanding shares of
Palladium Kentucky, which represent 100% of that company's issued and
outstanding shares.  Upon completion of the share exchange, Palladium
Kentucky's shareholders will hold approximately 92% of the 199,000,000 shares
of our outstanding common stock.  We are in the process of performing the
necessary steps to complete the share exchange and expect to complete the
acquisition within the next 60 days.


                                      3
<PAGE>

BUSINESS

      Our business and results of operations during the 2001 fiscal year,
which relate to the financial statements included in this annual report, were
the operations of USAOneStar, only, doing business as USAStar.Net.Inc.  Our
recent acquisition of Palladium Kentucky has resulted in an expansion of our
business operations and a change of management (See, "Part III, Item 9:
Directors, Executive Officers and Section 16(a) Compliance," below).  As a
result, we now offer telecommunication services in addition to Internet
access.  The following discussion provides a description of our services,
products and business operations after the acquisition of Palladium.

      We offer telecommunications services and Internet access to small to
mid-sized businesses, families and individuals.  We rely on commissioned sales
persons and a network marketing structure to sell our products to customers
and independent representatives, and we rely on our independent
representatives to sponsor new representatives.  (See, "Network Marketing,"
below).  We instituted our network marketing program in July 2000 as an
approach within the Internet service provider industry to rapidly expand our
subscriber base.

      Palladium Kentucky entered the telecommunications market in 1998 to
capitalize upon the competitive opportunities which resulted from
Congressional passage of the Telecommunications Act of 1996.  The
Telecommunications Act of 1996 required incumbent local exchange carriers
("incumbent carriers"), such as the Regional Bell operating companies and GTE,
to co-operate in opening up their local telephone markets to competition, as a
"quid pro quo" for gaining access to the long-distance telephone markets.  In
order to accomplish this, the incumbent carriers now allow competitive local
exchange carriers ("local carriers") to resell local dial-tone telephone
service using the incumbent carriers' long distance transmission lines.  The
local carrier provides customer service and billing functions, using their own
switches and fiber optic networks in most areas.  We enter into agent
agreements with various local carriers and, in so doing, are able to offer our
customers cost savings without having to invest in expensive equipment or
infrastructure.

Services and Products

      Telecommunications Services:   We provide local dial-tone, unlimited
flat-rate long distance and wireless service, cellular services, data
services, voice messaging, and calling cards.  Customers are able to switch
from incumbent carriers to our service in a generally seamless manner,
maintaining their same phone numbers, phone lines, services, etc.  They are
simply re-billed from our office rather than by the incumbent or local
carrier.  In the local dial-tone arena, we can offer savings to business
customers of approximately 10% or more when compared with what the business is
charged by their local or incumbent carrier.

      Internet Service Provider:   We provide dial-up and direct service link
service to the Internet.  We provide  two types of domain hosting: One where
the user is provided a personal domain and URL with up to 25 megabytes of
storage, and the second type with shopping cart software plus 50 megabytes of
storage.

      Interactive Educational Software:   Each of our Internet service dial-up
or direct service link customers receives a CD-ROM-based interactive
educational software package, which is designed to provide these customers
with the necessary tools to access the Internet.  It includes educational
programs ranging from basic "point-and-click" techniques to the development of
web sites, along with lessons involving computer and Internet fundamentals,
the Windows operating system, word processing, spreadsheets, web site
development, etc.

Product Development

      During fiscal year 2001 we recorded research and development expenses of
$175,000 for programming and software development used for establishment of
our network marketing program and production of our educational CD ROM.

                                      4
<PAGE>


Distribution

      We rely on approximately 43 commissioned sales persons and approximately
1,700 independent representatives to offer our services to individuals,
families and businesses.  We also rely on our independent representatives to
sponsor new representatives.

      In the telecommunications area, we do not rely upon any single local
carrier to supply services to our customers.  Instead, in most markets we
enter into agent agreements with multiple local carriers when there are
multiple providers of local dial-tone service.  This concept of representing
multiple suppliers to and for the benefit of a customer is a unique aspect of
our business plan.  Our contracts with local carriers also prevent such local
carriers from offering local dial-tone service at a lower price than is
charged by USAOneStar.  Thus, a customer cannot go directly to the local
carrier and get a "better deal".

      We have agent agreements with an array of telecommunication providers.
Our agreements with providers, such as, Adelphia Communications Corporation
(formerly Hyperion Communications), USLEC, NewSouth, Access Point, NuVox and
Talk America allow us to provide local dial-tone service.  We offer long
distance service through agreements with TNCI, OPEX, and AMI through
partnership agreements with Qwest, Sprint, Cable & Wireless and AT&T.  Other
agreements with telecommunications providers, including Verizon, AT&T,
Powertel, etc., allow us to provide cellular service.  Other providers permit
us to offer data services, voice messaging, calling cards and Internet
service.  These agent agreements give us the means to offer savings to
customers in approximately 125 cities in 33 states.

      We rely on the physical infrastructure of the local carrier or incumbent
carrier.  Many of the local carriers use their own fiber optic cable as
opposed to the copper cable which most incumbent carriers still use.  A fiber
optic infrastructure improves quality of service and reduces the potential for
a customer's loss of service.  If a fiber optic cable is cut, the signal is
immediately re-routed in micro-seconds along an alternative path, and the
customer is likely unaware that anything has gone wrong.  With copper cable, a
cut in the line eliminates service for up to several hours.

      As a Internet service provider we purchase access service from other
Internet access vendors, such as Net Related, Inc. and Virtual City Vision,
Inc. (See, "Major Providers," below.)  Internet access services allow Internet
service providers to interconnect business and consumer users to the
Internet's resources.  These vendors either operate their own proprietary
network infrastructure or purchase access service from a wholesale access
vendor.  Access services vary from dial-up modem access for individuals and
small businesses to high-speed dedicated transmission lines for broadband
access by large organizations.

Network Marketing

      We rely on our network marketing program, called USAStar.Net, Inc.
("USAStar.Net"), to establish and expand our network of independent
representatives.  Generally, an individual or business entity may become an
independent representative by completing an application and purchasing a
business building starter kit.  The kit includes marketing materials, policies
and training materials for business building.  In general, each independent
representative is paid a commission for signing up new customers for our
services and is paid residual commissions as those customers renew their
subscriptions.  Independent representatives are independent contractors; not
our employees.

      We believe that network marketing assists in lowering our cost of
customer acquisition, reducing variable technical support costs by utilizing
independent representatives to aid in the set-up and maintenance of new
customers and reducing customer turnover as the result of the customer's
loyalty to his or her independent representative.  As of September 15, 2001,
we had approximately 1,700 independent representatives who we encourage to
sponsor between 3-10 new subscribers.

      The basic structure of our network marketing is:


                                      5
<PAGE>

      Agent/Silver Star.   An agent has the right to sell Internet access and
telecommunications services and sponsor other agents.  Services and products
include dial-tone, unlimited flat-rate long distance and wireless service,
cellular services, replicating web sites with a separate URL; a virtual domain
at USAStar.Net; an online control panel for customer management; billing and
back up customer support; full back office support; and access to company
sponsored training.

      Internet Service Provider/ Gold Star.  An Internet Service Provider
("ISP") has the right to sell Internet access and domain hosting.  Services
and products include: online control panel for customer management; billing
and back up customer support; set up, registration, and one year of domain
hosting for a personal domain with a separate URL; and access to company
sponsored training.

      Internet Service Provider/Platinum Star.  This type of independent
representative has the right to sponsor Agents, ISP's and ISP Agents. Services
and products include all of those provided by an Agent and ISP.

      The USAStar.Net business opportunity is particularly well suited for
individuals who possess strong sales skills and are motivated by the prospect
of supplementing their sources of income under a flexible work schedule.  The
commission structure of the USAStar.Net business also creates incentives for
independent representatives to recruit other independent representatives to
the program.  For each sale of a telecommunication service or Internet access
service subscription to a new customer made by an independent representative
who has been recruited to the program by an existing independent
representative, and for each renewal of that subscription, a commission is
paid to the existing independent representative in addition to the commission
paid to the independent representative who was responsible for the new
subscription or renewal.

      Additional commissions are paid to on existing independent
representative as independent representatives that were recruited into the
program by that independent representative recruit other independent
representatives who, in turn, effect sales or renewals of services. The
commission tree grows as these recruited independent representatives recruit
other representatives.  The amount of the commission paid to an  existing
independent representative in connection with the sale or renewal will vary
according to the level of the existing independent representative within the
chain of representatives above the representative who received direct credit
for the sale or renewal.  As the program continues to develop and mature, the
total amount of commissions paid to independent representatives per new
subscriber will increase; however, we believe that such total commissions will
nonetheless be less than the costs for new subscriber acquisitions through
traditional sales and marketing activities.

Market

      Our current market focus is small- to mid-sized businesses, families and
individuals.  Our telecommunications services are primarily focused in the
state of  Kentucky; however, management anticipates geographic expansion into
other market areas, such as the Southeastern and Mid-Atlantic states.
Internet access services are not limited to any geographic area and have the
potential to be worldwide.

Competition

      The market for the provision of telecommunications services is extremely
competitive. We compete against incumbent carriers such as the "baby Bell"
companies, local carriers, other telecommunications agents, and numerous
regional and local Internet service providers.  Our current and prospective
competitors include many large companies that have substantially greater
market presence, brand name recognition and financial, technical, marketing
and other resources than we have.  We cannot assure you that it will be able
to compete successfully against current or future competitors or that
competitive pressures faced by us will not materially and adversely affect our
results or financial condition.

      We believe that the primary competitive factors determining success as a
telecommunications provider and Internet service provider are:


                                      6
<PAGE>

      1.      A reputation for reliability and high-quality service;
      2.      Effective customer support;
      3.      Access speed;
      4.      Pricing;
      5.      Effective marketing techniques for customer acquisition;
      6.      Ease of use; and
      7.      Scope of geographic coverage.

      With respect to our potential competitors, we believe that changes in
regulations will foster competition in the telecommunications market (See,
"Government Regulation," below).  In addition, we expect to face competition
in the future from companies that provide connections to consumers' homes,
such as cable companies and electrical utility companies.  For example, recent
advances in technology have enabled cable television operators to offer
Internet access through their cable facilities at significantly faster rates
than existing analog modem speeds.  Such companies could include Internet
access or telecommunications services in their basic bundle of services or
offer such access for a nominal additional charge, or could deny us access to
their proprietary wire and cable connections for purposes of providing our
services for our customers and prospective customers.  Any such developments
could materially and adversely affect our business, operating results and
financial condition.

      Network Marketing Companies.  We also compete for independent
representatives with other direct selling organizations, many of which have a
longer operating history and higher visibility, name recognition, and
financial resources.  The dominant network marketing companies in our existing
markets are Amway Corporation and NuSkin International, Inc.  We compete for
new independent representatives on the strength of our product line,
compensation plan and management strength.  Management envisions the entry of
many more direct selling organizations into the marketplace as this channel of
distribution expands over the next several years.

Major Providers

      We are substantially reliant upon the following service providers for
the services and products that we offer to the public and the loss of any one
of these providers would have a material adverse effect upon our operations.
The terms of our agreements with them are described below.

      Adelphia Agreement.   On October 14, 1997, Palladium's predecessor,
UniVersal Communications LLC entered into an Sales Agent Agreement for local
dial-tone service with Hyperion Telecommunications, Inc., now known as
Adelphia Communications Corporation.  Pursuant to the agreement, we have the
non-exclusive right to offer Adelphia's telecommunication services to the
public in several states.  We may negotiate sales, take orders, analyze and
design the customers proposals and coordinate with Adelphia as needed.
Adelphia installs and implements the services, invoices the customer and
collects payments and we receive a commission on all collected payments.  The
agreement renews for one year automatically after the initial two year term.
Either party may terminate the agreement by written notice within 30 days of
the renewal date.  Otherwise the agreement may be terminated for failure to
perform according to its terms, or if either party becomes insolvent or losses
authority to operate its business.

      Net Related Agreement.  On May 15, 2000, USAOneStar's predecessor, USA
Star LLC, entered into a Service Agreement with Net Related, Inc.  Net Related
created our interactive educational CD ROM with master dialer and browser
software, and provides billing services, e-mail services, technical support,
customer support and hosting services to each of our Internet subscribers.  We
paid Net Related a $7,000 set up fee and agreed to pay $11.10 per subscriber
account, committing to pay for up to 50,000 subscriber accounts on a sliding
scale over a twelve month period.  The initial term of the agreement was for a
two year period and it automatically renews for one year terms.  Either party
may terminate the agreement 30 days prior to the end of a term or a party may
terminate the agreement for default by the other party.

      Virtual City Agreement.   On September 18, 2000, USAOneStar entered into
a Technology Services and Software License Agreement with Virtual City Vision,
Inc.  The agreement became effective on July 1, 2000, and

                                      7
<PAGE>


was amended on December 1, 2000.  Under the agreement Virtual City granted
USAOneStar the right to use its network marketing company back office
software.  Virtual City installs, maintains and supports the software and
provides telecom bandwidth up to the equivalent of a T-1.  This agreement
renews automatically for a one year term after the initial 18 month term.
This agreement may be terminated with or without cause by either party with a
90 day written notice.

Trademarks, License and Intellectual Property

      We do not hold any patents, trademarks or copyrights.  As an agent of
telecommunication service providers we are not subject to licensure.

Government Regulations

      The Federal Communications Commission ("FCC") regulates rates and other
aspects of incumbent and local carriers' provision of interstate
telecommunications services.  State regulatory commissions have jurisdiction
over incumbent and local carriers' provision of intrastate telecommunications
services on their networks.  As an agent for local carriers we are not
currently subject to direct regulation by the Federal Communications
Commission or any state regulatory body, other than the type and scope of
regulation that is applicable to businesses generally.

      In April 1998 the Federal Communications Commission reaffirmed that
Internet access providers should be classified as unregulated "information
service providers" rather than regulated "telecommunications providers" under
the terms of the Federal Telecommunications Act of 1996.  As a result, we are
not subject to federal regulations applicable to telephone companies and
similar carriers merely because we provide Internet services using
telecommunications services provided by third-party carriers.  To date, no
state has attempted to exercise economic regulation over Internet access
providers.

      Governmental regulatory approaches and policies for agents of
telecommunication services are continuing to develop and in the future we may
be exposed to regulation by the FCC or other federal agencies or by state
regulatory agencies or bodies.

Employees

      We currently have 12 full time employees and one part time employee.
Our employees are not presently covered by any collective bargaining
agreement.  We believe that our relations with our employees are good, and we
have not experienced any work stoppages.


                       ITEM 2.  DESCRIPTION OF PROPERTY

      Our principal executive offices are located in downtown Louisville,
Kentucky, where we occupy office space in the Kentucky Towers, which has
recently been renovated.  We lease the property for approximately $2,136 a
month on a month-to-month basis without a formal written lease agreement.  We
also lease office space in the Executive Inn Rivermont in Owensboro, Kentucky.
This office is located in a ten acre commercial complex with retail stores,
office space, and entertainment facilities.  We conduct operations for the
USAStar.Net marketing program from the Owensboro office.  The monthly rent is
approximately $860 per month and the lease expires May 31, 2003.


                          ITEM 3.  LEGAL PROCEEDINGS

      We are not a party to any proceeding or threatened proceedings as of the
date of this filing.

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<PAGE>


      ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF  SECURITY HOLDERS

      We have not submitted a matter 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

Market

      Our shares of common stock are traded on the NASD OTC Bulletin Board
under the symbol "USAS."  There is currently a very limited trading market for
our shares of common stock and we cannot ensure that an active market will
develop.  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 for the two most recent fiscal years.  Such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-downs or commissions, and may not necessarily represent actual
transactions.

      Fiscal Quarter Ended               High Bid    Low Bid
      --------------------               ---------   -------

      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

      September 30, 2000                 $  5.00     $  4.00
      December 31, 2000                     3.25        1.25
      March 31, 2001                        3.63        1.31
      June 30, 2001                         2.25        0.59

      Our shares will be subject to Section 15(g) and Rule 15g-9 of the
Securities and Exchange Act, commonly referred to as the "penny stock" rule.
The rule defines penny stock to be any equity security that has a market price
less than $5.00 per share, subject to certain exceptions.  The rule provides
that any equity security is considered to be a penny stock unless that
security is: registered and traded on a national securities exchange meeting
specified criteria set by the Securities and Exchange Commission ("SEC");
authorized for quotation from the NASDAQ stock market; issued by a registered
investment company; excluded from the definition on the basis of price   at
least $5.00 per share   or the issuer's net tangible assets.  If our shares
are deemed to be a penny stock, trading in the shares will be subject to
additional sales practice requirements on broker-dealers who sell penny stocks
to persons other than established customers and accredited investors.
Accredited investors, in general, include individuals with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse, and certain institutional investors.

      For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such security and must
have received the purchaser's written consent to the transaction prior to the
purchase.  Additionally, for any transaction involving a penny stock, the
rules require the delivery, prior to the first transaction, of a risk
disclosure document relating to the penny stock.  A broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, and current quotations for the security.  Finally, monthly
statements must be sent disclosing recent price information for the penny
stocks.  Consequently, these rules may restrict the ability of broker-dealers
to trade or maintain a market in our common stock and may affect the ability
to shareholders to sell their shares.

                                      9
<PAGE>

Holders

      As of September 20, 2001, we had approximately 379 stockholders of
record holding 16,000,000 common shares.

Dividends

      We have not paid cash or stock dividends and have no present plan to pay
any dividends, intending instead to reinvest our earnings, if any.  For the
foreseeable future, we expect to retain any earnings to finance the operation
and expansion of our business.  In addition, it is anticipated that the terms
of future debt and/or equity financing may restrict the payment of cash
dividends.  Therefore, the payment of any cash dividends on the common stock
is unlikely.  However, payment of future dividends will be determined from
time to time by our board of directors, based upon our future earnings,
financial condition, capital requirements and other factors.  We are not
presently subject to any restriction on our present or future liability to pay
any dividends.

RECENT SALE OF UNREGISTERED SECURITIES

      The following discussion describes all securities sold by us within the
past three years without registration:

      On December 8, 2000, we issued 13,500,000 common shares valued at
$13,500 to Lowell G. Mims, Kelly Turner and Richard E. Bowlds in exchange for
the 1,000,000 shares of  USAStar Texas they each held.  We relied on an
exemption from registration for a private transaction not involving a public
distribution provided by Section 4(2) under the Securities Act.

      On June 29, 2001, our Board authorized the issuance of an aggregate of
310,000 common shares for services valued at approximately $257,300.  Of these
shares West Park Holdings, LLC received 250,000 shares for advisory services
valued at approximately $207,500; 50,000 shares were issued to Video Plus,
Inc. for printing and video duplication services valued at approximately
$41,500; and Hand Arendall, LLC received 10,000 shares for legal services
valued at approximately $8,300.   We relied on an exemption from registration
for a private transaction not involving a public distribution provided by
Section 4(2) under the Securities Act.

     On August 31, 2001, our Board authorized the issuance of an aggregate of
183,000,000 common shares valued at approximately $73,200,000 to the
twenty-five shareholders of Palladium Kentucky in exchange for approximately
6,500 shares of Palladium Kentucky common stock outstanding.  We relied on an
exemption from registration for a private transaction not involving a public
distribution provided by Section 4(2) under the Securities Act.

REGISTERED SHARES

     On August 7, 2001, USAOneStar filed a registration statement on Form S-8
(Registration File No. 333-67016) which became effective immediately upon
filing with the SEC.  We registered 685,000 common shares with an estimated
aggregate offering price of $315,100.  The shares were issued pursuant to
certain consultant agreements with five individuals.



                ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

     As a result of a merger completed in December 2000, we have evolved from
a development stage company with no operations or revenues into a Internet
service provider with net revenues of $459,298.  However, we have a short
operating history and have recorded net operating losses of $1,010,044 for the
2001 fiscal year.  Our independent auditors have expressed an opinion that we
are dependent on financing to continue our operations.  Management believes
our acquisition of Palladium Kentucky will provide revenues which will move us
toward profitability.

                                      10
<PAGE>


Reverse Merger Treatment

      In December 2000 Corvallis, Inc. merged with USAStar Texas, with
Corvallis as the surviving entity.  In conformance with generally accepted
accounting principles, the merger has been accounted for as a "reverse merger"
and the accounting survivor is USAStar Texas.  The reverse merger was
completed by the exchange of 13,500,000 shares of the Corvallis common stock
for all the outstanding stock of USAStar Texas.  For tax purposes, the merger
was a tax free exchange pursuant to Section 368 (a)(1)(B) of the Internal
Revenue Code, as amended.  For accounting purposes, USAStar Texas was acquired
for approximately 13.5 million shares valued at $13,500.  The merger was
accounted for under the purchase method of accounting using generally accepted
accounting principles.  This means that USAStar Texas' results of operations
are included with Corvallis' from the closing date and its consolidated assets
and liabilities will be recorded at their fair values at the same date.

Palladium Acquisition

      On August 31, 2001, USAOneStar and Palladium Kentucky entered into an
Agreement and Plan of Reorganization by which USAOneStar will acquire
Palladium Kentucky's common shares through a stock-for-stock exchange intended
to qualify as a tax-free exchange under Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.  USAOneStar intends to exchange 183 million
common shares, valued at approximately $73.2 million, for approximately 6,500
shares of Palladium Kentucky common stock.  The acquisition will be accounted
for under the purchase method of accounting using generally accepted
accounting principles.  This means that Palladium Kentucky's results of
operation will be included with ours from the closing date and its
consolidated assets and liabilities will be recorded at their fair values at
the same date.  Management expects to complete the acquisition within the next
60 days.

RESULTS OF OPERATIONS

      Our fiscal year ends June 30th and the following discussions are based
on the consolidated financial statements of Corvallis, Inc. and USAStar Texas
from inception of USAStar Texas on July 21, 2000, through June 30, 2001.  No
comparative data for the 2000 fiscal year periods can be presented because
Corvallis had no operations during fiscal year 2000.

      We received revenues from the sale of Internet access, web-based
applications and from continual hosting of our client's web sites.  Our
revenues are also related to new independent representatives joining the
USAStar.Net network marketing program and the corresponding growth in our
customer base.  Revenues for the fiscal year ended June 30, 2001 were
$459,298, a $153,055 increase from third quarter revenues at March 31, 2000.
Our revenues have increased each quarter since beginning operations in July
2000.  Pursuant to SEC Staff Accounting Bulletin No. 101 our revenues related
to agreements for web-based applications and web site hosting are recognized
ratably over the initial term of the contract, which is typically one year.
Monthly charges for Internet access are recognized when billed.

      Cost of sales consist of the cost of finished products purchased from
third-party vendors.  Cost of sales were $93,124 for the 2001 fiscal year, or
20.3% of revenues.  Cost of sales as a percentage of revenues has decreased
from 23.3% of revenues for the third quarter.  Cost of sales were a higher
percentage of revenues in the earlier quarters due to the purchase of finished
products required to launch our network marketing program.   Accordingly, our
gross profit for the 2001 fiscal year was $366,174 compared to $234,827 for
the third quarter.

      Selling expenses include independent representative commissions,
marketing and customer service expenses.  Selling expenses were $136,212, or
29.7% of revenues, for the 2001 fiscal year compared to $122,389, or 40.0% of
revenues, for the third quarter.  Our selling expenses were a greater
percentage of revenues in the second and third quarter primarily as a result
of growth in our network marketing program.  Independent representative
commissions represent approximately 30% of revenues.

                                      11
<PAGE>


      General and administrative expenses include general office expense,
management and employee's salaries, and other support systems for our
independent representative network.  These expenses were $1,240,006 for the
2001 fiscal year compared to $1,046,644 for the third quarter.  The increase
is primarily due to an increase in employees salaries related to consultant
employment agreements.

      Our net operating loss was $1,010,044 for the 2001 fiscal year compared
to $934,206 for the third quarter.

      Total other expense was $133,502 for the 2001 fiscal year and was
primarily the result of $82,120 in bad debt expense related to independent
representatives charge backs, which occur when an independent representative
elects not continue his or her business.  Interest expense of $55,714 related
to debt financing was also allocated to total other expense.

      Our net loss for the 2001 fiscal year was $1,143,546 representing a net
loss per share of $0.12.

Factors Affecting Future Performance

      Actual costs and revenues could vary from the amounts we expect or
budget, possibly materially, and those variations are likely to affect how
much additional financing we will need for our operations.  Our future cash
flows will be dependent on a number of factors, including:

      .     Our ability to promote telecommunication services and Internet
            access to our customers and independent representatives;
      .     Our ability to encourage our independent representatives to
            sponsor new representatives and increase their own personal use of
            our products and services;
      .     We may experience software defects or disruption in services
            provided by third parties which may damage customer relations;
      .     We may experience breakdowns or unauthorized entry into our
            Internet hosting services, harming our business;
      .     Our ability to develop successful new product lines and services;
      .     Effects of regulatory changes, if any; and
      .     Our ability to establish name brand recognition in our markets.

Seasonal Aspects

      In the network marketing industry, the summer months of June, July and
August, and the holiday months of November and December are relatively soft.
However, with our short operating history we are unsure how the industry-wide
fluctuations will affect our future business.

LIQUIDITY AND CAPITAL RESOURCES

      We have funded our cash requirements primarily through revenues and
loans.  For the fiscal year ended June 30, 2001, we had $60 cash on hand and
total current assets of $585,297, with $568,550 of the total current assets
amount allocated to prepaid expenses related to stock issued for consulting
services to be rendered during the 2002 fiscal year.  Our total current
liabilities were $342,891, with deferred revenue of $205,109 representing the
majority of these total current liabilities.  Our revenues have been deferred
in accordance with SAB101 and recognized on a ratable basis over the period
the service revenues are earned.  As of June 30, 2001, our accumulated deficit
totaled $1,143,546 and we had working capital totaling $242,406.

      As of June 30, 2001, our principal commitments consisted of operating
leases for office space with future minimum payments through 2003 of $19,780,
but with our acquisition of Palladium Kentucky and relocation of our principal
offices to Louisville, Kentucky, our office space commitments are now
approximately $3,000 per month.  Future minimum principal payments on long
term liabilities and computer equipment leases totaled $695,955

                                      12
<PAGE>



through 2005 at June 30, 2001.  Subsequently, in August 2001, the holder of a
note payable of $669,027, with principal and interest, forgave the debt.

      Net cash used for operations in the 2001 fiscal year was $562,237 and
net cash used by investing activities related to the purchase and sale of
equipment was $133,658.  Net cash provided by financing activities for the
2001 fiscal year was $695,955, which primarily came from loans from officers
and directors.  (See, "Item 12 - Certain Relationships And Related
Transactions," below).  In July 2000 we received loans from our officers of
$478,946 and $221,069 which were unsecured, carried 8% interest and had
balloon payments due on July 2005.  We made payments of $69,763 on these loans
and, subsequently, in August 2001, both principal and interest of $669,027 due
on the loans were forgiven.  During the fourth quarter of 2001 we received
unsecured loans from another officer totaling $14,569, with no interest and
payable upon demand.  We repaid $10,985 of this debt during the 2001 fiscal
year.

      Management believes that our cash needs for at least the next twelve
months can be met by revenues and by debt financing.  We have not investigated
the availability, source and terms for third-party financing at this time and
we can not assure that funds will be available from any source, or, if
available, that we will be able to obtain the funds on terms agreeable to us.
Also, the acquisition of funding through the issuance of debt could result in
a substantial portion of our cash flows from operations being dedicated to the
payment of principal and interest on the indebtedness, and could render us
more vulnerable to competitive and economic downturns.

      In the event these sources are insufficient to support our operations we
may sell our common stock   We intend to issue such stock pursuant to
exemptions provided by federal and state securities laws.  The purchasers and
manner of issuance will be determined according to our financial needs and the
available exemptions.  We do not currently intend to make a public offering of
our stock.  We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value per share of their common
stock.

      In anticipation of a private offering, we have entered into an
non-exclusive placement agent agreement with WestPark Capital, Inc., an
investment banking firm located in Los Angeles, California.  This agreement
has a term of twelve months, expiring in January 2002, or upon completion of
an offering, which ever occurs first.  The agreement provides for automatic
renewal for three month periods and may be terminated with thirty (30) days
written notice prior to renewal.  We are not obligated to pay any fees under
the agreement until we have completed an offering.


                        ITEM 7.  FINANCIAL STATEMENTS

      Reference is made to the financial statements for the years ended June
30, 2001 and 2000 which are attached to this Form 10-KSB report.


          ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                     ACCOUNTING AND FINANCIAL DISCLOSURE

      As previously reported, Chisholm & Associates , Certified Public
Accountants, replaced Crouch, Bierwolf & Chisholm, on August 4, 2000, as our
independent auditor.



                                   PART III


     ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, AND SECTION 16(a) COMPLIANCE

       The table below sets forth the name, age, and position of each of our
executive officers and directors.  Our bylaws provide for a board of directors
consisting of up to seven persons.  The term of office of each director is one

                                      13
<PAGE>

year or until his successor is elected and qualified.  Executive officers are
chosen by our board of directors and serve at its discretion.  Biographical
information for each officer and director is also provided below.  G. Townsend
Underhill III and Jeffrey A. Underhill are brothers.

      Name                        Age   Position
      ----                        ---   --------
      Raymond C. Dauenhauer, Jr.  58    President, CEO and Director
      Jeffrey A. Underhill        41    Secretary/Treasurer and Director
      Jon G. Shastid              53    Chief Operating Officer and Director
      G. Townsend Underhill III   46    Director
      Kelly Turner                39    Director
      Jack T. Wells               46    Director

      Raymond C. Dauenhauer, Jr.   Mr. Dauenhauer was appointed as our
President, CEO and Director on August 31, 2001.  He served as Chairman and
President of Palladium Kentucky and had been with that company since June 1,
2000.   Since March 2000, he has served as a director of ThermoView
Industries, Inc., a reporting company.  From July 1967 through September 1999
he served as Chief Executive Officer of Dauenhauer & Son Plumbing and Piping,
Inc., a plumbing operation based in Louisville, Kentucky.  Mr. Dauenhauer
currently serves as a Director of First Bank of Louisville, Kentucky and is a
life member of the Board of Directors for the Louisville Association of Home
Builders.  Additionally, he has held numerous offices in state and national
associations of the plumbing, heating and cooling industry, and is a recipient
of the "Distinguished Citizen" award from the City of Louisville.  In 1995 he
was named "Entrepreneur of the Year for Real Estate Construction for
Kentucky."

      Jeffrey A. Underhill   Jeffrey Underhill was appointed
Secretary/Treasurer and Director on August 31, 2001.  He was a co-founder of
Palladium Kentucky and served as a Director since its inception.  He is the
President of Underhill Associates, a real estate development and management
firm located in Louisville, Kentucky.  Jeffrey received a bachelor's degree in
Business from Miami University of Ohio.  He is active as an officer and
director in numerous civic and charitable organizations.

      Jon G. Shastid   Mr. Shastid was appointed as our Chief Operating
Officer and Director on August 31, 2001.  He was a co-founder of Palladium
Kentucky and served as its Chief Operating Officer.  He has over twenty years
experience in sales and marketing working for such companies as Brown-Forman
Corporation and Ernest & Julio Gallo Winery.  He has served as President of
the Callo Employees Credit Union Board; he is a member of the Anchorage Fire
Board; a member of the Kentucky Society to Prevent Blindness Board; Chairman
of the Association of National Advertisers Production Committee (New York
based); past member of the Anchorage Public Education Foundation; and past
member of the Board of Directors of Urban Juice and Soda.  He earned a
bachelor's degree from Dartmouth College and attended the University of
Louisville law school.

      G. Townsend Underhill III   Townsend Underhill was appointed as our
Director on August 31, 2001.  He was a co-founder of Palladium Kentucky and
served as a Director for that company.  He and Jeffrey Underhill are brothers.
Townsend is the Treasurer of Underhill Associates, located in Louisville,
Kentucky and is a partner in numerous real estate entities.  He is founder and
Director of Premiere Technologies, located in Atlanta, Georgia.  Since October
2000, he has served as a Director of ThermoView Industries, a reporting
company.  Townsend received a bachelor's degree in Business and Accounting
from Miami University of Ohio and received a Juris Doctorate degree from the
University of Louisville.  He maintains licenses for the practice of law, real
estate and public accounting in the Commonwealth of Kentucky.   He also
maintains director positions with numerous charitable and civic organizations
located within the Louisville, Kentucky, metropolitan area.

      Kelly Turner   Mr. Turner served as our Secretary/Treasurer from
November 2000 through August 2001.  He was appointed President in May 2001 and
served in that position through August 2001.  We relieved him of his duties as
President and Secretary/Treasurer on August 31, 2001.  He was the President,
Director and a founding member of USAStar Texas.  From 1988 to the present he
has served as Pastor for the United Christian Fellowship Church.   He has 15
years of experience in the network marketing industry including being a
consultant to the industry and assisting in the design of marketing plans for
two network marketing companies.  He built a downline

                                      14
<PAGE>

in excess of 80,000 people from February 1996 to May 1998 with Destiny Telecom
in Oakland, California.  He founded "Inform Magazine," a publication for the
network marketing industry.  He also owned a retail jewelry store from 1987
until 1998.

      Jack T. Wells  Mr. Wells was appointed as Chairman of the Board in
January 2001.  On August 31, 2001, we relieved him of his duties as Chairman
and he remained a Director.  He is the President of Wells Health Systems, a
health care provided which has over 2000 employees.

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

      None of our named executive officers received any cash compensation,
bonuses, stock appreciation rights, long term compensation, stock awards or
long-term incentive rights in excess of $100,000 from us during the past three
fiscal years.  None of our chief executive officers, or officers acting in
that capacity, have received compensation during the past fiscal year.  We
have not entered into employment contracts with our executive officers and
their compensation, if any, will be determined at the discretion of our Board
of Directors.  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 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 percentage of beneficial ownership is based
on 199,000,000 common shares which includes 16,000,000 shares of common stock
outstanding as of September 20, 2001, and 183,000,000 shares to be issued
within the next 60 days in connection with the share exchange between
Palladium Kentucky and USAOneStar.

                          CERTAIN BENEFICIAL OWNERS

                                 Amount and
Name and Address of              Nature of              Percent of
Beneficial Owner                 Beneficial Owner       Class
--------------------             -----------------      ----------

Conquest Investments             12,029,042 (1)         6.0%
1905 Stonegate Road
Louisville, KY 40223

                                      15
<PAGE>

                                  MANAGEMENT

                                 Amount and
Name and Address of              Nature of              Percent of
Beneficial Owner                 Beneficial Owner       Class
-------------------              ----------------       ----------

Raymond C. Dauenhauer, Jr.       34,247,262             17.2%
416 W.  Mohammed Ali Blvd.
Louisville, KY 40202

Jeffrey A. Underhill             34,192,262             17.2%
416 W.  Mohammed Ali Blvd.
Louisville, KY 40202

Jon G. Shastid                   39,563,347             19.9%
416 W.  Mohammed Ali Blvd.
Louisville, KY 40202

G. Townsend Underhill III        32,747,610 (1)         16.5%
416 W.  Mohammed Ali Blvd.
Louisville, KY 40202

Kelly Turner                     1,297,500              Less than 1%
1 Executive Boulevard, Suite LL1
Owensboro, KY 42301

Jack T. Wells                    2,017,000              1.0%
1 Executive Boulevard, Suite LL1
Owensboro, KY 42301

Directors and officers
as a group                       144,064,981            72.4%

      (1) Mr. Townsend Underhill beneficially owns 15,846,807 individually, he
is an affiliate of Conquest Investments which beneficially owns 12,029,042,
and his immediate family members beneficially own 4,871,761 shares.


           ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The following information summarizes certain transactions exceeding
$60,000 we have either engaged in since the beginning of our past fiscal year
or propose to engage in involving our executive officers, directors, more than
5% stockholders, or immediate family members of such persons.

      On October 31, 2000, we signed a reorganization agreement to acquire all
of the outstanding shares of USAOneStar Texas.  As a result of this
transaction, Kelly Turner, our Director, was appointed to our board of
directors, appointed as our Secretary/Treasurer and received 2,787,500 common
shares valued at $2,787.50, representing a 29% interest in USAOneStar.

      In July 2000, Richard E. Bowlds, our former Director, loaned USAOneStar
$478,946 as an unsecured loan with 8% interest and with a balloon payment due
in July 2005.  At the same time, Jack T. Wells, Chairman of the Board, loaned
USAOneStar $221,069 as an unsecured loan, with 8% interest and with a balloon
payment due in July 2005.  Mr. Wells assumed Mr. Bowlds' note payable during
the fiscal year.  USAOneStar made payments of $55,194 on the first loan and
$14,569 on the second loan.  Subsequently, in August 2001, Mr. Wells forgave
the remaining principal and interest of $669,027 owed on the combined loans.

      During the fourth quarter of the 2001 fiscal year, Kelly Turner, our
Director, loaned USAOneStar a total of $14,569 without interest, unsecured and
payable upon demand.  We repaid $10,985 of this debt during the fiscal year
2001.

      On August 31, 2000 we signed a reorganization agreement to acquire all
of the outstanding shares of Palladium Kentucky.  As a result of this
transaction, Messrs. Dauenhauer, Shastid, Jeffery Underhill and Townsend
Underhill were appointed to our board of directors and appointed as officers.
They each received a controlling interest in USAOneStar which is valued as
follows:

      Name                         Amount of shares         Value
      -----                        ----------------     ------------
      Raymond C. Dauenhauer, Jr.   34,192,262           $ 13,676,905
      Jeffrey A. Underhill         34,192,262             13,676,905
      Jon G. Shastid               39,563,347             15,825,339
      G. Townsend Underhill III    32,692,610             13,077,044

      Of the 32,692,610 shares to be issued to Mr. Townsend Underhill, a
company he controls, Conquest Investments, will receive 12,029,042 common
shares, valued at approximately $4,811,617, representing a 6.0% interest in
USAOneStar.  His sister, Deborah Underhill, will receive 60,145 shares valued
at approximately $24,058.  His four children, A. Channing, E. Jordan, J. Colin
and G. Townsend will receive 1,202,904 shares, each, valued at approximately
$481,162 each.



                  ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS:

EXHIBIT NO.   Title of Document
-----------   ------------------

  2.1         Agreement and Plan of Reorganization between Corvallis and
              USAStar Texas, dated October 31, 2000 (Incorporated by reference
              to exhibit 2.1 of Form 10-Q filed on November 14, 2000.)

  2.2         Agreement and Plan of Reorganization between USAOneStar and
              Palladium Kentucky, dated August 31, 2001 (Incorporated by
              reference to exhibit 2.1 of Form 8-K filed on September 14,
              2000.)

  3.1         Articles of Incorporation (Incorporated by reference to exhibit
              4 of Form S-18 filed on November 9, 1987.)

  3.2         Articles of Merger filed December 8, 2000, as amended
             (Incorporated by reference to exhibit 3.1 of Form 8-K, filed
              January 12, 2001.)

  3.3         Bylaws (Incorporated by reference to exhibit 5 of Form S-18
              filed on November 9, 1987.)

  3.4         Resolution dated October 20, 2000 amending bylaws (Incorporated
              by reference to exhibit 3.1 of Form 10-Q filed on November 14,
              2000.)

  10.1        Agreement between Net Related, Inc. and USA Star L.L.C., dated
              May 15, 2000. (Incorporated by reference to exhibit 10.1 of Form
              10-Q filed on February 14, 2001.)

  10.2        Agreement between Virtual City Vision, Inc. and USAOneStar.Net,
              Inc. dated September 18, 2000.  (Incorporated by reference to
              exhibit 10.2 of Form 10-Q filed on February 14, 2001.)


  10.3        Agreement between Hyperion Telecommunications, Inc. and
              UniVersal Communications LLC, dated October 14, 1997, as amended


                                      17
<PAGE>

(b)    REPORTS ON FORM 8-K

     On September 14, 2001, we filed a Current Report on Form 8-K under Items
1, 2 and 7 regarding the acquisition of Palladium Kentucky.  No financial
statements were filed.

                                      18
<PAGE>

                                  SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                              USAOneStar.Net, Inc.



                                  /s/ Raymond C. Dauenhauer, Jr.
Date: 9/26, 2001              By:_____________________________________
                                      Raymond C. Dauenhauer, Jr.
                                      President, CEO and Director


      In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

                                  /s/ Raymond C. Dauenhauer, Jr.
Date: 9/26, 2001              By:_____________________________________
                                      Raymond C. Dauenhauer, Jr.
                                      President, CEO and Director


                                  /s/ Jeffrey A. Underhill
Date: 9/26, 2001              By:_____________________________________
                                      Jeffrey A. Underhill
                                      Secretary/Treasurer and Director


                                  /s/ Jon G. Shastid
Date: 9/26, 2001              By:_____________________________________
                                      Jon G. Shastid
                                      Chief Operating Officer and Director

                                  /s/ G. Townsend Underhill III
Date: 9/26, 2001              By:_____________________________________
                                      G. Townsend Underhill III
                                      Director

                                  /s/ Kelly Turner
Date: 9/26, 2001              By:_____________________________________
                                      Kelly Turner
                                      Director


                                      19
<PAGE>






                             USAOneStar.Net, Inc.
                             Financial Statements
                                 June 30, 2001




<PAGE> 20




                               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> 21

                            CHISHOLM & ASSOCIATES
                         CERTIFIED PUBLIC ACCOUNTANTS
                               P.O. BOX 540216
                         NORTH SALT LAKE, UTAH 84054
                     (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
June 30, 2001 and the related statements of operations, stockholders' equity
and cash flows from inception on July 21, 2000 through June 30, 2001.  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 in the United States of America.  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
June 30, 2001 and the results of its operations and cash flows from inception
on July 21, 2000 through June 30, 2001 in conformity with generally accepted
accounting principles in the United States of America.

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

North Salt Lake, UT
August 22, 2001

<PAGE> 22


                             USAOneStar.Net, Inc.
                                Balance Sheet

                                    Assets


                                                               June 30,
                                                                 2001
                                                             -------------

Current assets
   Cash                                                      $         60
   Accounts receivable (net of allowance for doubtful
    accounts of $16,000)                                           16,687
   Prepaid expenses                                               568,550
                                                             -------------
Total Current Assets                                              585,297
                                                             -------------

Property & Equipment, Net                                          85,953
                                                             -------------

     Total Assets                                            $    671,250
                                                             =============


                     Liabilities and Stockholders' Equity

Current Liabilities
   Accounts payable                                          $     29,781
   Accrued expenses                                                57,101
   Deferred revenue                                               205,109
   Current portion of long term liabilities                        50,900
                                                             -------------
Total Current Liabilities                                         342,891
                                                             -------------
Long Term Liabilities
   Note payable - related party                                   634,252
   Lease obligation                                                61,703
   Less: current portion                                          (50,900)
                                                             -------------
Total Long Term Liabilities                                       645,055
                                                             -------------

   Total Liabilities                                              987,946
                                                             -------------

Stockholders' Equity
   Common stock, authorized
     200,000,000 shares of $.001 par value,
     issued and outstanding 16,000,000                             16,000
   Additional paid in capital                                     810,850
   Retained earnings (deficit)                                 (1,143,546)
                                                             -------------
Total Stockholders' Equity                                       (316,696)
                                                             -------------

Total Liabilities and Stockholders' Equity                   $    671,250
                                                             =============



   The accompanying notes are an integral part of the financial statements.

                                      4

<PAGE> 23



                             USAOneStar.Net, Inc.
                           Statement of Operations


                                                           From inception on
                                                             July 21, 2000
                                                               through
                                                               June 30,
                                                                 2001
                                                             -------------
Revenues:                                                    $    459,298

Cost of Sales:                                                     93,124
                                                             -------------

Gross Profit:                                                     366,174

Expenses:

   Selling expenses                                               136,212
   General and administrative expenses                          1,240,006
                                                             -------------

     Total Expenses                                             1,376,218
                                                             -------------

Net Operating Loss                                             (1,010,044)
                                                             -------------

Other Income (Expense):
   Gain on sale of assets                                           4,332
   Bad debt expense                                               (82,120)
   Interest expense                                               (55,714)
                                                             -------------

      Total Other Income (Expense)                               (133,502)
                                                             -------------

Net Loss                                                     $ (1,143,546)
                                                             =============

Net Loss Per Share                                           $       (.12)
                                                             =============

Weighted average shares outstanding                             9,054,971
                                                             =============


   The accompanying notes are an integral part of the financial statments.

                                      5

<PAGE> 24

                             USAOneStar.Net, Inc.
                      Statement of Stockholders' Equity



                                                       Additional   Retained
                                     Common Stock      paid-in      Earnings
                               Shares       Amount     capital      (Deficit)
                            ------------ ----------- ------------ ------------
Balance at July 21, 2000              -  $        -  $         -  $         -

Stock issued for services
 at $.001 per share          15,005,000      15,005      (14,005)           -

Stock issued for services
 at $.83 per share              995,000         995      824,855            -

Net loss for the period
 ended June 30, 2001                  -           -            -   (1,143,546)
                            ------------ ----------- ------------ ------------

Balance June 30, 2001        16,000,000  $   16,000  $   810,850  $(1,143,546)
                           ============= =========== ============ ============



   The accompanying notes are an integral part of the financial statements.

                                      6
<PAGE> 25



                             USAOneStar.Net, Inc.
                           Statement of Cash Flows

                                                             From inception on
                                                               July 21, 2000
                                                                  through
                                                                  June 30,
                                                                    2001
                                                                -------------
Cash Flows from Operating Activities:
  Net loss                                                      $ (1,143,546)
  Adjustments to reconcile net loss to net cash
   provided by operations:
     Stock for services                                              258,300
     Depreciation & Amortization                                      52,037
     Bad debt expense                                                 16,000
     Gain on sale of assets                                           (4,332)
     (Increase) decrease in current assets net of acquisition:
        Increase in receivables                                      (32,687)
     Increase (decrease) in current liabilities
      net of acquisition:
        Increase in payables                                          29,781
        Increase in accrued expenses                                  57,101
        Increase in deferred revenue                                 205,109
                                                                -------------

Net Cash (Used) Provided by Operating Activities                    (562,237)
                                                                -------------
Cash Flows from Investment Activities:
  Purchase of equipment                                             (148,658)
  Proceeds from the sale of equipment                                 15,000
                                                                -------------

Net Cash (Used) Provided by Investing Activities                    (133,658)
                                                                -------------

Cash Flows from Financing Activities:
  Proceeds from debt financing                                       806,661
  Principal payments on capital lease                                (29,958)
  Principal payments on long term debt                               (80,748)
                                                                -------------

Net Cash (Used) Provided by Financing Activities                     695,955
                                                                -------------

Net increase (decrease) in cash                                           60

Cash, beginning of year                                                    -
                                                                -------------

Cash, end of year                                               $         60
                                                                =============
Supplemental Cash Flow Information
  Cash paid for interest                                        $     12,689
  Cash paid for income taxes                                    $          -

Non-Cash Financing Activities:
  Stock issued for services                                     $    826,850


  The accompanying notes are an integral part of the financials statements.

                                      7

<PAGE> 26

                             USAOneStar.Net, Inc.
                      Notes to the Financial Statements
                                 June 30, 2001

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.

         On December 8, 2000, Corvallis, Inc., a public Nevada company with no
operations, issued 13,500,000 shares of its common stock to the Company in
exchange for all of the outstanding shares of common stock of the Company.
Pursuant to the merger, Corvallis, Inc. ceased to exist and the Company became
the surviving corporation.  The merger was treated as a reverse merger for
accounting purposes.  The Company's common stock has been retroactively
restated to reflect the reverse merger.

         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
$205,109 at June 30, 2001.

         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.

                               Income (loss)  Shares          Per Share
                               (Numerator)    (Denominator)   Amount
                               ------------   -------------   ----------
  Basic EPS:
  Income (loss) to common
    shareholders               $ (1,143,546)   9,054,971      $ (.12)
                               =============  ==============  =========

        d.  Cash and Cash Equivalents

        The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.


                                      8
<PAGE> 27



                             USAOneStar.Net, Inc.
                      Notes to the Financial Statements
                                June 30, 2001

NOTE 1 - Summary of Significant Accounting Policies (Continued)

         e.  Provision for Income Taxes

         No provision for income taxes has been recorded due to net operating
loss carryforwards totaling approximately $1,143,546 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 June
30, 2001:

         Deferred tax asset:
           NOL carrryforward             $  343,000
           Valuation allowance             (343,000)
                                         -----------
           Total                         $        -
                                         ===========

         f.  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.

         g.  Financial Instruments

         The recorded amounts for financial instruments, including cash
equivalents, receivables,  accounts payable, accrued expenses, deferred
revenues and long-term debt approximate their market values as of January 31,
2001.  The Company has no investments in derivative financial instruments.

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 Palladium
Communications, Inc. (Palladium), a private Kentucky corporation.  Palladium's
management consists of experienced personnel who currently operate a
profitable business.  Under their management, the Company anticipates a
successful future.  See Note 8, Subsequent Events, for details of the merger.

NOTE 3 - Property and Equipment

         Property and Equipment consists of the following at June 30, 2001:

         Furniture & Fixtures            $  4,935
         Equipment                        119,490
         Leasehold improvements            11,483
         Accumulated Depreciation         (49,955)
                                         ---------
         Total Property & Equipment      $ 85,953
                                         =========


                                      9
<PAGE> 28

                             USAOneStar.Net, Inc.
                      Notes to the Financial Statements
                                June 30, 2001

NOTE 3 - Property and Equipment (Continued)

         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 June 30, 2001 is $52,037 .

         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 June 30, 2001, no impairments were recognized.

NOTE 4 - Related Party Transactions

         A former director loaned the Company $478,946 during the period ended
June 30, 2001.  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 July 2005.  The remaining loan balance of $423,752 and the terms of the
note were assumed during the year by the chairman of the board.

         The chairman of the board loaned the Company $221,069 during the
period ended June 30, 2001.  The Company made payments toward the loan of
$14,569.  The note bears interest at 8% annually, is unsecured and a balloon
payment is due in July 2005.

         The president loaned the Company $14,985 during the period ended June
30, 2001.  The Company made payments toward the loan of $10,985.  The note is
non-interest bearing, is unsecured and payable upon demand.

NOTE 5 - Equity

         During July 2000, the Company issued 1,000,000 shares of common stock
to officers for services valued at $1,000.  These shares have been
retroactively restated to15,005,000 shares to reflect the reverse merger with
Corvallis, Inc.

         During June 2001, the Company issued 995,000 shares of common stock
for services.  The value of the shares was  based on a 30 day weighted average
price per share which was $.83 per share.  The value of the services was
$825,850.  Of the total amount, $568,550 has been recognized as a prepaid
expense since the issuances are for services to be performed during the fiscal
year ended June 30, 2002.

NOTE 6 - 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 $860
which expires May 31, 2003.

         Future minimum lease payments on operating lease obligations are as
follows at June 30, 2001:

           2002                               $  10,320
           2003                                   9,460
                                              ---------
         Total Operating Lease Obligations    $  19,780
                                              =========

         Rent expense from operating leases for the period ending June 30,
2001 was approximately  $19,000.


                                      10
<PAGE> 29


                             USAOneStar.Net, Inc.
                      Notes to the Financial Statements
                                June 30, 2001

NOTE 7 - Long Term Liabilities

         Notes Payable-Related Party are detailed as follows:
                                                                  June 30,
                                                                    2001
                                                                 -------------
           Note payable to an officer, bears interest at
           8 %, balloon payment due July 2005                    $    630,252

           Note payable to an officer, non-interest bearing,
           payable upon demand                                          4,000
                                                                 -------------

           Total Notes Payable - Related Party                        634,252
                                                                 -------------
         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                                               61,703
                                                                 -------------

           Total Lease Obligations                                     61,703
                                                                 -------------

         Total Long Term Liabilities                                  695,955
                                                                 -------------

         Less current portion                                         (50,900)
                                                                 -------------

           Net Long Term Liabilities                             $    645,055
                                                                 =============

         Future minimum principle payments on long term liabilities are as
follows at June 30, 2001:

            2002                          $    50,900
            2003                               14,803
            2004                                    -
            2005                              630,252
                                         ------------

         Total Long Term Liabilities     $    695,955
                                         ============

NOTE 8 - Subsequent Events

         In August 2001, the chairman of the board forgave both principal and
interest due on the loan  payable to him by the Company.  The amount of
principal and interest due at June 30, 2001 was  $669,027.

         In August 2001, per an agreement and plan of reorganization, the
Company issued approximately 183,000,000 shares of its common stock for all of
the approximate 6,500 shares of common stock of Palladium Communications,
Inc.,  a seller of various telecommunication products.  Palladium
Communications, Inc. has become a wholly owned subsidiary of the Company.

                                      11