SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]   Annual Report Pursuant To Section 13 or 15(d) of the  Securities  Exchange
      Act of 1934

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

                     For The Fiscal year Ended June 30, 1997
                         Commission File No. 33-18143-D

                                 CORVALLIS, INC.
          -------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

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

         1486 South llth East
         Salt Lake City, Utah                                  84105
----------------------------------------                     ----------
(Address of principal executive offices)                     (Zip Code)

             Registrant's Telephone Number including Area Code:
                                (801) 487-3893
                                --------------

Securities Registered Pursuant to Section 12(b) of the Act:

                                                      Name of Each Exchange
      Title of Each Class                              on which Registered
     ---------------------                           -----------------------
              None                                            None

Securities Registered Pursuant to Section 12(g) of the Act:

                                     None
                                   --------

      Indicate by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934,  during the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

      The  aggregate  market  value of the  Registrant's  voting  stock  held by
non-affiliates computed with reference to the bid prices in the over-the-counter
market on September 30, 1997, was approximately $73,000.

      As of  the  date  of  the  filing  of  this  report,  the  Registrant  had
outstanding a total of 1,330,009  shares of its common stock, par value $ 0.001,
after giving effect to a 1-for-5 reverse split completed in August, 1995.

                                      1

<PAGE>



                      DOCUMENTS INCORPORATED BY REFERENCE

      List hereunder the following  documents if  incorporated  by reference and
the Part of the Form 10-K (e.g.,  Part I, Part II, etc.) into which the document
is  incorporated:  (1) any annual report to security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.

      None.


                                      2

<PAGE>





                               TABLE OF CONTENTS





Item Number and Caption                                                 Page No.
-----------------------                                                 --------


PART 1

1.  Business..................................................................5

2.  Properties................................................................9

3.  Legal Proceedings.........................................................9

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


PART II

5.  Market for Registrant's Common Equity and Related Stockholder Matters ....10

6.  Selected Financial Data ..................................................11

7.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations......................................12

8.  Financial Statements and Supplementary Data ..............................13

9.  Changes in and Disagreements on Accounting and Financial Disclosure ......13


PART III

10. Directors and Executive Officers of the Registrant .......................14

11. Executive Compensation ...................................................15

12. Security Ownership of Certain Beneficial Owners and Management ...........16

13. Certain Relationships and Related Transactions ...........................18

                                      3

<PAGE>




PART IV                                                                 Page No.
-------                                                                 --------

14. Exhibits, Financial Statement Schedules and
     Reports on Form 8-K .....................................................20

15.  Signatures ..............................................................22





                                      4

<PAGE>



                                    PART I

--------------------------------------------------------------------------------
                              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.

                                      5

<PAGE>




      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


                                      6

<PAGE>



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.

                                      7

<PAGE>




      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.






                                      8

<PAGE>



      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.  PROPERTIES
--------------------------------------------------------------------------------

      The Company does not hold any properties.



--------------------------------------------------------------------------------
                          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.




--------------------------------------------------------------------------------
                                    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.



                                      9

<PAGE>




                                    PART II


--------------------------------------------------------------------------------
                                    ITEM 5.

                     MARKET FOR REGISTRANT'S COMMON EQUITY
                        AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

       There is currently  only a very limited  trading market for the Company's
shares  of common  stock;  however,  the  Company's  shares of common  stock are
eligible for quotation on the NASD Electronic Board under the symbol "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.




                                      10

<PAGE>




--------------------------------------------------------------------------------
                                    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)


                                      11

<PAGE>






--------------------------------------------------------------------------------
                                    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.





                                      12

<PAGE>

--------------------------------------------------------------------------------
                                    ITEM 8.

                  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------------------------------

 The financial statements are included beginning at page F-1.





--------------------------------------------------------------------------------
                                    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.


                                      13

<PAGE>




                                   PART III


--------------------------------------------------------------------------------
                                   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


                                      14

<PAGE>



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.  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:



                                      15

<PAGE>



                            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.

                   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:



                                      16

<PAGE>




                      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)







                                      17

<PAGE>



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. Certain Relationships and Related Transactions").

     (3) All figures  give effect to a 1-for-25  reverse  split  effectuated  in
August, 1994, and a 1-for-5 split effectuated in August, 1995.


--------------------------------------------------------------------------------
                                   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.


                                      18

<PAGE>



     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.

                                      19

<PAGE>




                                    PART IV

--------------------------------------------------------------------------------
              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                                                            F-3

Balance Sheets as of June 30, 1997 and 1996                             F-4

Statement of Operations for the three
   years ended June 30, 1997, 1996 and 1995                             F-5
   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                          F-6

Statement of Cash Flows for the three
   years ended June 30, 1997, and
   from inception through June 30, 1997                                 F-9

Notes to Financial Statement                                            F-10


(a)(2).  FINANCIAL STATEMENT SCHEDULES

 None.

(a)(3).  EXHIBITS:
  EXHIBIT NO. SEC Reference No.  Title of Document Location
  ----------- -----------------  ----------------- --------

     1             (3)             *Articles of    Form 10-K
                                   Incorporation   for fiscal
                                                   year ended
                                                   June, 1989


                                      20

<PAGE>



                                                   

     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.


                                      21

<PAGE>







--------------------------------------------------------------------------------
                              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


                                       22

<PAGE>





                                 Corvallis, Inc.
                          (a Development Stage Company)
                              Financial Statements
                             June 30, 1997 and 1996


<PAGE>











                                 C O N T E N T S



Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .  3

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .  5

Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . .  6

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . .  10


<PAGE>







                          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


<PAGE>



                                 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

                                        4

<PAGE>


<TABLE>

                                 Corvallis, Inc.
                          (a Development Stage Company)
                            Statements of Operations
<CAPTION>

                                                                                         
                                                                                       Cumulative
                                              For the years ended June 30,               Total 
                                          -----------------------------------------      Since
                                              1997           1996            1995       Inception
                                          -----------    -----------    -----------    -----------   
<S>                                       <C>            <C>            <C>            <C>      
Revenues                                  $      --      $      --      $      --      $      --

Expenses:

  Consulting fees                               2,000          1,395          3,425          9,047
  Legal                                         2,200          3,200          1,400          9,627
  Accounting                                    2,015          1,983          1,175          9,948
  General & Administrative                      3,625            957          1,855          8,384
                                          -----------    -----------    -----------    -----------   

      Total Expenses                            9,840          7,535          7,855         37,006
                                          -----------    -----------    -----------    -----------   

Net loss before discontinued operations   $    (9,840)   $    (7,535)   $    (7,855)   $   (37,006)
                                          -----------    -----------    -----------    -----------   

Loss on disposed of operations                   --             --             --         (156,754)
                                          -----------    -----------    -----------    -----------   

Net Loss                                  $    (9,840)   $    (7,535)   $    (7,855)   $  (193,760)
                                          ===========    ===========    ===========    ===========

Net Loss Per Share                        $     (.007)   $     (.006)   $     (.008)   $     (.248)
                                          ===========    ===========    ===========    ===========   

Weighted average shares outstanding         1,306,994      1,104,301        910,000        779,687
                                          ===========    ===========    ===========    ===========   



</TABLE>






























    The accompanying notes are an integral part of these financial statements

                                        5

<PAGE>


<TABLE>

                                 Corvallis, Inc.
                          (a Development Stage Company)
                        Statement of Stockholders' Equity

<CAPTION>

                                                                                   Deficit
                                                                                 Accumulated
                                                                     Additional   During the
                                                 Common Stock         paid-in    Development
                                               Shares      Amount     Capital       Stage
                                             ---------   ----------  ----------  -----------
<S>                                          <C>         <C>         <C>         <C>       
Balance, June 30,1995                        1,020,002   $   1,020   $ 174,635   $(176,385)

Capital contributed by                  
  extinguishment of
  stockholders' payable                           --          --         1,150        --

Issuance of common stock for
  extinguishment of stockholders'
  payable at $0.05 per share in
  September, 1995                               20,000          20         980        --

Issuance of common stock for
   extinguishment of stockholders'
  payable at $0.025 per share in
  March, 1996                                  130,000         130       3,120        --

Issuance of common stock for
  services rendered at $0.025
  per share in March, 1996                      80,000          80       1,920        --

Fractional shares from reverse
  stock split                                        7        --          --          --

Net loss for the year ended
  June 30, 1996                                   --          --          --        (7,535)
                                             ---------   ---------   ---------   ---------    

Balance, June 30, 1996                       1,250,009       1,250     181,805    (183,920)

Shares issued for cash in
  October 1996                                  60,000          60       5,940        --

Issuance of common stock for
  services rendered at $0.025 per
  share in October 1996                         20,000          20       2,000        --

Net Loss for the year ended
 June 30,1997                                     --          --          --        (9,840)
                                             ---------   ---------   ---------   ---------  

Balance June 30, 1997                        1,330,009   $   1,330   $ 189,745   $(193,760)
                                             =========   =========   =========   =========

</TABLE>



    The accompanying notes are an integral part of these financial statements

                                        6

<PAGE>






<TABLE>

                                 Corvallis, Inc.
                          (a Development Stage Company)
                        Statement of Stockholders' Equity
<CAPTION>


                                                                                 Deficit
                                                                               Accumulated
                                                                   Additional   During the
                                                 Common Stock        paid-in   Development
                                              Shares      Amount     Capital      Stage
                                             --------   ---------  ----------  -----------
<S>                                           <C>       <C>         <C>         <C>       
Balance, June 30, 1992                        745,066   $     745   $ 151,298   $(152,943)

Net loss for the year ended
  June 30, 1993                                  --          --          --        (1,335)
                                            ---------   ---------   ---------    --------- 

Balance, June 30, 1993                        745,066         745     151,298    (154,278)

Issuance of common stock for
  extinguishment of stockholders'
  payable at $0.2587 per share                 54,936          55      14,157        --

Net loss for the year ended
  June 30, 1994                                  --          --          --       (14,252)
                                            ---------   ---------   ---------    --------- 

Balance, June 30, 1994                        800,002         800     165,455    (168,530)

Issuance of common stock for
  extinguishment of stockholders'
  payable at $0.04 per share in
  March, 1995                                  85,000          85       3,315        --

Issuance of common stock for
  extinguishment of stockholders'
  payable at $0.05 per share in
  March, 1995                                  60,000          60       2,940        --

Issuances of common stock for
  services rendered at $.04 per
  share in March, 1995                         75,000          75       2,925        --

Net loss for the year ended
  June 30, 1995                                  --          --          --        (7,855)
                                            ---------   ---------   ---------    ---------  

Balance, June 30, 1995                      1,020,002   $   1,020   $ 174,635    $(176,385)
                                            ---------   ---------   ---------    ---------  

</TABLE>













    The accompanying notes are an integral part of these financial statements

                                        7

<PAGE>




<TABLE>

                                 Corvallis, Inc.
                          (a Development Stage Company)
                        Statement of Stockholders' Equity
<CAPTION>

                                     Deficit
                                                                                  Accumulated
                                                                      Additional   During the
                                                  Common Stock         paid-in    Development
                                                Shares     Amount      Capital       Stage
                                               --------  ---------   ----------- ------------
<S>                                            <C>       <C>         <C>         <C>    
Balance at inception                              --     $    --     $    --     $    --

Issuance of common stock
  at inception at $0.1875 per share            112,000         112      20,888        --

Issuance of common stock in
  July, 1988 at $1.25 per share,
  less deferred offering costs
  offset against paid-in capital               105,120         105      91,630        --

Net loss from inception to
  June 30, 1989                                   --          --          --       (19,673)
                                             ---------   ---------   ---------    ---------  

Balance, June 30, 1989                         217,120         217     112,518     (19,673)

Issuance of common stock for
  fixed assets and services in
  August, 1989                                 506,613         507      18,801        --

Issuance of common stock
  in private placement at $0.9375
  per share in November, 1989                   21,333          21      19,979        --

Net loss for the year ended
  June 30, 1990                                   --          --          --      (132,670)
                                             ---------   ---------   ---------    ---------  

Balance, June 30, 1990                         745,066         745     151,298    (152,343)

Net loss for the year ended
   June 30, 1990                                  --          --          --          (300)
                                             ---------   ---------   ---------    ---------  

Balance, June 30, 1991                         745,066         745     151,298    (152,643)

Net loss for the year ended
  June 30, 1992                                   --          --          --          (300)
                                             ---------   ---------   ---------    ---------  

Balance, June 30, 1992                         745,066   $     745   $ 151,298    $(152,943)
                                             ---------   ---------   ---------    ---------  
</TABLE>














    The accompanying notes are an integral part of these financial statements

                                        8

<PAGE>


<TABLE>

                                 Corvallis, Inc.
                          (a Development Stage Company)
                             Statement of Cash Flows
<CAPTION>

                                                                                               
                                                                                 September
                                                                                 28, 1987
                                             For the years ended, June 30,      (inception)
                                        --------------------------------------- to June 30,
                                             1997         1996         1995        1997
                                        ------------- ------------ ------------ ----------- 
Cash Flows form Operating
  Activities:

<S>                                      <C>          <C>          <C>          <C>       
     Net loss                            $  (9,840)   $  (7,535)   $  (7,855)   $(193,760)
     Discontinued operations                  --           --           --         19,308
     Non-cash services rendered
       and expenses paid by
       stockholders'                         2,020        6,250        9,400       28,857
     Increase (decrease) in
       current liabilities                   1,529        1,200       (1,200)       2,729
                                         ---------    ---------    ---------    ---------

     Net Cash Provided (Used)
       by Operating Activities              (6,291)         (85)         345     (142,866)
                                         ---------    ---------    ---------    ---------

Cash Flows from Investment
  Activities:                                 --           --           --           --
                                         ---------    ---------    ---------    ---------

Cash Flows from Financing
  Activities:

     Issuance of common stock                6,000         --           --        142,910
                                         ---------    ---------    ---------    ---------

     Net Cash Provided by
       Financing Activities                  6,000         --           --        142,910
                                         ---------    ---------    ---------    ---------

Net increase (decrease) in cash               (291)         (85)         345           44

Cash, beginning of year                        335          420           75         --
                                          --------    ---------    ---------    ---------

Cash, end of year                        $      44    $     335    $     420          44
                                         =========    =========    =========    =========

Cash, paid during the year for:

     Interest                            $    --      $    --      $    --      $    --
     Income taxes                        $    --      $    --      $    --      $    --



</TABLE>

    The accompanying notes are an integral part of these financial statements

                                        9

<PAGE>



                                 Corvallis, Inc.
                          (a Development Stage Company)
                        Notes to the Financial Statements
                             June 30, 1997 and 1996

NOTE 1 - Summary of Significant Accounting Policies

         a.  Organization

             The financial statements presented are those of Corvallis,  Inc., a
             development  stage stage company.  The Company was incorporated for
             the  purpose of  providing  a vehicle  which could be used to raise
             capital  and  seek  business   opportunities  believed  to  hold  a
             potential for profit.  The Company has not  presently  identified a
             specific business area or direction that it will follow. Therefore,
             no principal operations have yet begun.

         b.  Accounting Method

              The Company's financial  statements are prepared using the accrual
              method of accounting.  The Company elected a June 30th fiscal year
              end.

         c.  Net Loss Per Share

             The  computation  of net loss per share of common stock is based on
             the weighted  average  number of shares  outstanding at the date of
             the financial statements.

         d. Deferred  Stock Offering Costs

             In  connection  with the public  offering of the  Company's  common
             stock (see Note 2), all costs were accumulated as deferred charges.
             The deferred charges were offset against proceeds received from the
             stock offering.

         e.  Provision for Income Taxes

              The Company accounts for income taxes using Statement of Financial
              Accounting Standards No. 109, "Accounting for Income Taxes." Under
              Statement  109, the  liability  method is used in  accounting  for
              income taxes.

              At June 30, 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

                                       10

<PAGE>



                                 Corvallis, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                             June 30, 1997 and 1996


NOTE 1 - Summary Of Significant Accounting Policies (Continued)

         g.  Office Space

               A director of the Company  provides  office space in his home for
               the Company.  The space is used primarily by the director for his
               personal  affairs.   The  value  to  the  Company  is  considered
               immaterial. Accordingly, no benefit has been recorded.

         h.   Estimates

               The  preparation  of  financial  statements  in  conformity  with
               generally accepted  accounting  principles requires management to
               make estimates and assumptions  that affect the reported  amounts
               of assets and liabilities and disclosure of contingent assets and
               liabilities  at the  date  of the  financial  statements  and the
               reported  amounts of revenues and expenses  during the  reporting
               period. Actual results could differ from those estimates.

NOTE 2 - Public Offering

               In 1988  the  Company  completed  a  public  offering  which  was
               registered on Forms S-18 in accordance with the Securities Act of
               1933.  A  total  of  105,120  units  were  sold  having  a  gross
               subscription price of $131,400.  Deferred offering costs totaling
               $39,665 were offset against additional paid-in capital.

NOTE 3 - Asset Purchase Agreement

               In September  1989,  the Company  completed the terms of an Asset
               Purchase   Agreement  with  DLB   Enterprises,   Inc.  (DLB"),  a
               closely-held Nevada corporation, providing for the acquisition by
               the Company of all of the operating  assets of  Southwest,  a Las
               Vegas- based enterprise which had been engaged in the manufacture
               and  installation  of  awnings  for  commercial,  industrial  and
               residential use for  approximately the past fourteen (14) months.
               Southwest was previously a joint enterprise owned and operated in
               Las Vegas by DLB and WAM Industries,  Inc.  ("WAM"),  a Salt Lake
               City-based  corporation  which  has been  engaged  in the  awning
               business for several years. Under the terms of the Asset Purchase
               Agreement,  the Company  acquired all of the operating  assets of
               Southwest,  including  equipment,  inventory,  customer accounts,
               tradenames  and  trademarks  and other assets in exchange for the
               issuance  to DLB of a total of  253,306  shares of the  Company's
               restricted common stock.  Concurrently,  the company also entered
               into a separate  agreement  with WAM under the terms of which WAM
               agreed to act as contractor on all large  commercial  jobs of the
               Company  at a price of cost  plus  10% and  generally  agreed  to
               contribute  its  expertise in the  development  of the  Company's
               business,  in  consideration of which the Company issued to WAM a
               total of  108,560  shares  of its  restricted  common  stock.  In
               connection with these transactions, the Company issued a total of
               144,747 shares of restricted common stock to Whitney O. Cluff and
               certain  of his  business  associates  who were  instrumental  in
               facilitating    the   negotiation   and   consummation   of   the
               transactions.  The assets were subsequently written off (see Note
               4).





    The accompanying notes are an integral part of these financial statements

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<PAGE>



                                 Corvallis, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                             June 30, 1997 and 1996



NOTE 4 -Discontinued Operations

         The Company, on January 1, 1990, decided to discontinue its operations.
         Therefore, the Company entered into an agreement with WAM industries in
         which  WAM  took  over  the  operations  of the  Company  and  paid its
         outstanding  debts, and in consideration,  WAM industries was given all
         of its assets. The assets consisted of all cash,  receivables and fixed
         assets.  The Company has not had any operations  since that date except
         for some  incidental  expenditures to keep the Company on active status
         with the State and stock exchanges.

NOTE 5 - Going Concern

         The  Company's  financial   statements  are  prepared  using  generally
         accepted  accounting  principles  applicable  to a going  concern which
         contemplates  the  realization of assets and liquidation of liabilities
         in the normal  course of business.  However,  the Company does not have
         significant  cash  or  other  material  assets,  nor  does  it  have an
         established source of revenues  sufficient to cover its operating costs
         and to allow it to continue as a going concern. It is the intent of the
         Company  to  seek  a  merger  with  an  existing,   operating  company.
         Currently,  the  stockholders  are committed to cover all operating and
         other costs until sufficient revenues are generated.

NOTE 6 - Stockholders'  Payable

         Whitney  Cluff an officer and  shareholder  of the Company has paid all
         expenses on behalf of the Company.  The amount un-reimbursed of $524 is
         non-interest  bearing and will be repaid to the stockholder when monies
         are available or will be converted to equity.

NOTE 7 - Reverse Stock Split

         On July 21, 1994 during a special meeting of shareholders, a motion was
         approved  authorizing  a reverse  split of the issued  and  outstanding
         common  stock of the Company  with one new share being issued for every
         twenty-five (25) shares previously held.

         On August 22, 1995 the  shareholders  of the Company  approved a motion
         authorizing an additional  reverse split of the issued and  outstanding
         common  stock of the  company on a 1-for-5  basis.  All  references  to
         shares outstanding and net loss per share have been adjusted to reflect
         the effects of these stock splits on a retroactive basis.

    The accompanying notes are an integral part of these financial statements

                                       12