SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission File No. 33-55254-01
ARROW MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 87-0467339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3098 SOUTH HIGHLAND DRIVE, SUITE 460
SALT LAKE CITY, UTAH 84106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 485-7775
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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not 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-K
or any amendment to this Form 10-K. [X]
As of March, 1997, there is no aggregate market value of the voting stock held
by non-affiliates of the registrant.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March, 1997
$.001 PAR VALUE CLASS A COMMON STOCK 5,580,700 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1. Business.
The Company was incorporated under the laws of Nevada on January 14,
1988. The Company was formed as a Nevada corporation to look for investments,
business opportunities and assets in any industry. The Company is attempting to
acquire assets and properties in real estate development, specifically the area
of Idaho Falls, Idaho, which, according to the Census Bureau, has been reported
as one of the fastest growing states in the nation.
On September 30, 1993, the Company issued 5,250,700 shares of its
common stock to acquire 99.45% of the outstanding stock of Panorama Industries,
Inc., an affiliated Nevada corporation. Panorama became a subsidiary of the
Company. In December, 1996, the Company canceled 460,000 shares of its common
stock held for issuance to a shareholder of Panorama. As a result of this
transaction, the Company's ownership of Panorama was reduced from 99.45% to
90.73%.
David R. Yeaman, President of the Company, and Krista Nielson,
Secretary of the Company are officers, directors and controlling shareholders of
Panorama, International Association of Financial Consultants, Inc., and Capital
General Corporation. After the completion of the acquisition, the above listed
shareholders of Panorama became the holders of approximately 84% of the issued
and outstanding common shares of the Company. Through the acquisition of 99.45%
of the issued and outstanding shares of Panorama, Panorama has become a
subsidiary of the Company.
Panorama is a real estate development company with its principal asset
being approximately 300 acres of property located on the outskirts of Idaho
Falls, Idaho, presently platted for 2.5 acre lot sites, which was the minimum
allowed by the Bonneville County Planning and Zoning Commission for subdivisions
utilizing septic tanks. Approximately 55 lots were sold by the previous owner,
AMR Corporation, which filed a Chapter 11 bankruptcy and ceased development of
the property for several years. AMR Corporation then sold the property to the
Company as part of its resolving its bankruptcy condition. During this time,
economic conditions in the Idaho Falls area changed such that the Company
believes that a significantly different approach to developing the property
would achieve greater success.
In November, 1993, the Company employed Washington Development Group,
Inc. of Bellevue, Washington, a real estate development and consulting firm, to
develop a "Market and Feasibility Study with Development Recommendations". Their
report, which the Company had intended to follow, concluded that a better
approach to the development would be to re-plat the subdivision utilizing as
much as possible the existing improvements on the property to expand the number
of available homesites by sub-dividing the property into 1/3 to 1/2 acre lots
for residential housing. The new subdivision would have been renamed tentatively
"Bridle Trails" and would have consisted of approximately 578 lots after
dedicating property for an elementary school, an equestrian facility, equestrian
riding trails and new roads. Preliminary discussions with the Bonneville County
Planning and Zoning Commission resulted in their tentative approval provided
the Company install new sewer lines to replace the use of septic tanks. In
January, 1995, the Company hired an independent MAI appraiser to appraise the
lots to assist in developing its marketing strategy. The Company also hired
Benton Engineering of Idaho Falls to assist in the technical aspects of platting
out the lots, developing roads, sewer lines and other utilities.
Last year, however, the Company changed its development plans with
respect to the Panorama Hills project and is not presently pursuing plans to
develop the land, however, the land is for sale. One factor that lead to the
change in plans is the slowdown in economic development and related decrease in
consumer demand for new housing in the Idaho Falls area. Another factor is
Panorama's rescission of the media due bills, trade dollars, and other credits
for the retorn of shares of its common stock. Panorama had planned on using such
credits as a portion of the financing required for development of the land.
2
<PAGE>
During 1996, Panorama purchased a time share in a vacation resort
called the San Clemente Inn in Orange County, California. The time share was
acquired by trading $5,000 worth of ITEX trade dollars which were obtained for
consulting services.
ITEM 2. Properties.
See "Item 1" above, and also, the Company utilizes space on a rent-free
basis in the office of one of its principal shareholders, Capital General
Corporation. This arrangement is expected to continue until such time as the
Company becomes involved in a business venture which necessitates its relocation
or increased use of the available facilities. The Company has no agreements with
respect to the maintenance or future acquisition of office facilities.
ITEM 3. Legal Proceedings.
In March, 1993, the Company was advised that a lis pendens had been
filed against the Idaho Falls subdivision by Uintah Resources Company,
plaintiff, a former partner of AMR Corporation, the seller of the property to
the Company. Uintah claims that it has a 1/2 interest in the property by virtue
of agreements with the previous owner, AMR. The Company was not advised or aware
at the time of purchase of any agreements with the former owner and any other
parties. The Company secured title insurance for the purchase price of
$2,300,000 and is being defended in this action by the title insurance company
which is obligated to pay the costs of defending this action and any losses
incurred. The legal proceedings were settled in December, 1995, and the Company
now has clear title to the land.
On January 7, 1994, the Bureau of Securities of the State of New Jersey
filed a complaint in the matter of Capital General Corporation, David R. Yeaman
and 74 other named defendants, Nevada and Utah corporations including the
Company, which complaint proposes that civil monetary penalties totalling
$30,000.00 be assessed against Capital General Corporation for alleged
violations of the Uniform Securities Law (1967), N.J.S.A. 49:3-47 et. seq. by
(1) selling to 24 New Jersey residents between April 1986 and May 1991,
securities in 25 of the 74 above referred to respondent corporations named in
the proceeding, not including the Company, which were neither registered nor
exempt from registration, and (2) making untrue statements of material fact and
omitting to state material facts in connection with said New Jersey sales in 6
of the 74 above referred to resident corporations named in the proceeding, not
including the Company. Also on January 7, 1994, the Bureau of Securities of the
State of New Jersey, based on substantially similar allegations as in the above
referred complaint, issued its Order Denying Exemptions and to Cease and Desist.
This order summarily denied the exemptions contained in N.J.S.A. 49:3-50(b),
(1), (2), (3), (9), (11) and (12) of the securities of Capital General
Corporation and the other 74 respondent corporations, including the Company,
except that excluded from the summary denial of the exemption contained in
N.J.S.A. 49-3-50(b)(12) is the Offer of Rescission by Capital General
Corporation to 24 New Jersey residents pursuant to the offer of rescission which
began about April 28, 1993. This order also ordered Capital General Corporation
and David Yeaman to Cease and Desist from offering or selling any securities in
blind pool corporations into, or from the State of New Jersey.
Capital General and David Yeaman filed answers denying the material
allegations of said complaint and resisting the imposition of said civil
monetary penalties, and the said Order Denying Exemptions and to Cease and
Desist. Subsequently the issues raised in said complaint and order were settled
by agreement between the said Bureau of Securities and Mr. Yeaman and Capital
3
<PAGE>
General Corporation in a consent order dated July 11, 1994 and approved by an
administrative law judge of the State of New Jersey Office of Administrative
Law September 2, 1994. Under the terms of said consent order, all claims in the
complaint against all named respondents were settled by the payment of $3,000
civil penalty, and the order was modified so that it does not to apply to 27 of
the respondent companies; however said order does still apply to the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the Company's security holders for a vote
during the fiscal year ending December 31, 1996.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
There currently is not a trading market for the Company's $.001 par
value common stock nor has there been a trading market for the Company's stock
since its inception.
As of March, 1997, there were 425 record holders of the Company's
common stock. The Company has not previously declared or paid any dividends on
its common stock and does not anticipate declaring any dividends in the
foreseeable future.
ITEM 6. Selected Financial Data.
<TABLE>
<CAPTION>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
SUMMARY OF OPERATIONS
DECEMBER 1996
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total Assets........................... 617,513 630,357 3,987,178 4,012,213 4,023,129
Net Sales............................... - 0 - - 0 - 104,000 44,000 0
Operating Expenses.................. 8,983 1,975,111 84,945 23,517 60,990
Net Earnings (Loss)................. 11,826 (1,960,141) (41,004) (16,763) (891)
Per Share Data Earnings (Loss)... .00 (.33) (.01) (.00) (.00)
Average Shares Outstanding....... 5,930,700 5,930,700 6,250,700 6,250,700 6,250,700
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
As discussed above (see "ITEM 1. Business"), the Company has been in
existence since January 14, 1988. The Company's subsidiary, Panorama Industries,
Inc. has been in existence since August 25, 1986. On December 20, 1991, Panorama
acquired 300 acres of residential real estate overlooking Idaho Falls, Idaho.
This property was originally developed and subdivided in the late 1970's into 2
1/2 acre lots, which was the minimum allowed by the Bonneville County Planning
and Zoning Commission for subdivisions utilizing septic tanks. Approximately 55
lots were sold by the previous owner, AMR Corporation, which filed a Chapter 11
bankruptcy and ceased development of the property for several years. AMR
Corporation then sold the property to the Company as part of its resolving its
bankruptcy condition. During this time, economic conditions in the Idaho Falls
area changed such that the Company believed that a significantly different
approach to developing the property would achieve greater success.
4
<PAGE>
In November, 1993, the Company employed Washington Development Group,
Inc. of Bellevue, Washington, a real estate development and consulting firm, to
develop a "Market and Feasibility Study with Development Recommendations". Their
report, which the Company had intended to follow, concluded that a better
approach to the development would be to re-plat the subdivision utilizing as
much as possible the existing improvements on the property to expand the number
of available homesites by sub-dividing the property into 1/3 to 1/2 acre lots
for residential housing. The new subdivision would have been renamed tentatively
"Bridle Trails" and would consist of approximately 578 lots after dedicating
property for an elementary school, an equestrian facility, equestrian riding
trails and new roads. Preliminary discussions with the Bonneville County
Planning and Zoning Commission resulted in their tentative approval provided the
Company install new sewer lines to replace the use of septic tanks. The Company
hired an independent appraiser to appraise the lots to assist in developing its
marketing strategy. The Company has also hired Benton Engineering of Idaho
Falls to assist in the technical aspects of platting out the lots, developing
roads, sewer lines and other utilities.
The MAI appraisal dated January 25, 1995 showed an "as is" value of
$317,000 and a developed value of the first phase of $2,550,000. When the
Company purchased the property, it realized that the property was depressed in
value because of the previous owner's inability to complete the development of
the property and then promote and market it. However, the Company purchased the
property for $2,300,000 through a combination of cash and stock which value was
arrived at by extensive and thorough investigation, the value as determined in
the Manwaring appraisal, obtaining title insurance on the property for the full
purchase price, and representations made by AMR, the previous owner, based on
the actual costs incurred. This original valuation was recently substantiated by
the Market and Feasibility Study by Washington Development which projects
potential profit of over $1,900,000 on phases I and II. The Company believed
then and still believes the project to be worth $2,300,000. However, the Company
encountered objections to the property's valuation as well as other financial
statement valuations by the National Association of Securities Dealers, Inc.
(NASD) when the Company attempted to list its common stock on the NASD Bulletin
Board. In order to resolve the NASD's concerns over the property's valuation for
the Bulletin Board listing desired by the Company, the Company requested the new
MAI appraisal. The Company had a second appraisal performed in December, 1995,
which valued the land at $330,000. In December, 1995, the litigation over the
lis pendens was settled by the title company and the Company now has clear title
on all of its properties.
Last year, however, the Company changed its development plans with
respect to the Panorama Hills project and is not presently pursuing plans to
develop the land, however, the land is for sale. One factor that lead to the
change in plans is the slowdown in economic development and related decrease in
consumer demand for new housing in the Idaho Falls area. Another factor is
Panorama's rescission of the media due bills, trade dollars, and other credits
for the return of shares of its common stock. Panorama had planned on using such
credits as a portion of the financing required for development of the land.
In July, 1992, Panorama entered into an agreement with Haydon, Ives &
Neal, Inc. in which the Company issued 210,000 shares of its common stock in
exchange for $1,050,000 in radio and tv advertising and production credits
referred to as media due bills and $250,000 in Travel Paradise certificates
(which were substituted for ITEX trade dollars). Also, in July, 1992, the
Company entered into an agreement with ITEX Corporation to exchange 110,000
shares of the company's common stock for $400,000 in media due bills and
$150,000 in ITEX trade dollars. These acquisitions were made with the view of
utilizing them in connection with the Company's business, in particular, to
trade for goods and services which would assist the Company in developing its
Idaho Falls property. Because of the delays experienced with the
above-referenced lis pendens and the Company's inability to effectively utilize
the trade dollars in developing the property, the Company rescinded the issuance
of the 320,000 shares of common stock and transfer of the media due bills and
ITEX trade dollars.
5
<PAGE>
The Company originally anticipated selling some of its properties
including some of the new lots in the proposed Bridal Trails subdivision in
order to finance its development expenses and, as stated above, the Company
anticipated utilizing the ITEX barter credits to assist in development expenses
and marketing costs. However, because of the litigation over the lis pendens the
Company has been unable to complete its plans and market conditions have changed
in the Idaho Falls area. Further, the Company obtained an MAI appraisal in
February, 1995, and a second appraisal in December, 1995, which valued the
Panorama Hills property at $317,000 and $330,000 respectively. All of these
factors pursuaded management of the Company to modify its development plans and
consider selling the Panorama Hills property, and also played an integral part
in management's decision to rescind the acquisition of the media due bills and
ITEX barter credits and cancel the 320,000 shares which were issued as their
consideration.
There were no sales in 1995 or 1996. The Company had an operating loss
decrease from $1,975,111 in 1995 to $8,983 (general and administrative expenses)
in 1996. The 1995 operating loss was due to (1) a $1,955,000 loss from
impairment of land value write down as discussed above, and (2) general and
administrative expenses of $20,111. Interest, consulting income and government
subsidy in the amount of $20,809 ($14,970 in 1995) resulted in a 1996 net income
of $11,826 ($1,960,141 loss in 1995). Interest income for 1995 is the result of
(1) a sale of land on contract in 1993 which pays approximately $450 monthly
with an interest rate of 9%, and (2) a sale of land on contract in 1994 which
has an interest rate of 12% on the unpaid principal balance ($19,255 at December
31, 1996).
ITEM 8. Financial Statements and Supplementary Data.
See Item 14.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officers
and directors. The directors were appointed at inception and will serve until
the next annual meeting of the Company's stockholders, and until their
successors have been elected and have qualified. The officers were appointed to
their positions, and continue in such positions, at the discretion of the
directors.
Name Age Position
David R. Yeaman 50 President, Director
Krista Nielson 34 Secretary/Treasurer, Director
DAVID R. YEAMAN, has been Director of the Company since inception, and,
in addition to his management position with the Company, has been President of
Capital General Corporation since its inception in 1971 to the present. Mr.
Yeaman has been involved in numerous development stage companies since he
assisted in organizing Capital General. During the last five years, in
connection with Capital General, he has been primarily involved in the
organization and promotion of various shell companies. Mr. Yeaman serves as an
officer and/or director in the following private corporations: Yeaman
Enterprises, Inc., a family holding company, Four Star Ranch, Inc., a farmland
development company, Yeaman Auto Sales, Inc., an automobile dealership company,
Financial Connections, Inc. and Peak Experience, Inc., financial consulting
companies. Mr. Yeaman devotes his time primarily to his role as President of
Capital General and to the financial consulting activities in which Capital
General engages.
6
<PAGE>
Krista Nielson, has been Director of the Company since inception. In
addition to her management position with the Company, she has been since 1986 an
officer and director of Capital General Corporation, and has been involved in
the organization and promotion of various shell companies. Ms. Nielson received
a Business degree from Salt Lake Community College in 1987. She serves as an
officer and/or director in the following private corporations: Yeaman
Enterprises, Inc. and Universal Associates, Inc., family holding companies,
Yeaman Auto Sales, Inc., an automobile dealership company, Four Star Ranch,
Inc., a farmland development company, Creative Financial Corporation and Visual
Impact Corporation, financial consulting companies, and National Stock Transfer,
Inc., a stock transfer agency company. Ms. Nielson devotes her time primarily to
her role as Vice President of Capital General and to the financial consulting
activities in which Capital General engages.
The management of Capital General is essentially the same as that of
the Company and, as the Company's largest shareholder, Capital General exerts
considerable influence in the election of the Company's officers and directors.
Capital General is a private venture capital and financial consulting firm,
incorporated in Utah in 1971. Capital General is a closely held corporation with
eight shareholders and is not an investment company under The Investment
Companies Act of 1940. A majority of the stock of Capital General is owned by
Yeaman Enterprises, Inc., a private corporation which is, in turn, owned by
certain members of the family of David R. Yeaman; Krista Nielson is also an
officer and director of Yeaman Enterprises, Inc.
Each of the above directors of the Company is a director of Saber
Capital, Inc., Vicuna, Inc., Why Not?, Inc., Grandeur, Inc., Kowtow, Inc., Radar
Resources, Inc., Alpaca, Inc., Bonito Industries, Inc., Cetacean Industries,
Inc., Star Dolphin, Inc., Flamingo Capital, Inc., Gopher, Inc., Hyena Capital,
Inc., Jackal Industries, Inc., Longhorn, Inc., Macaw Capital, Inc.,
Environmental Development Corporation, Ultronics Corporation, Bioethics, Ltd.,
Quantitative Methods Corporation and Bio-Chem, Inc. which are companies subject
to the requirements of Section 15(d) of the Exchange Act. None of the directors
are directors or officers of any other company with a class of securities
registered pursuant to Section 12 of the Exchange Act or the requirements of
Section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940.
On February 8, 1996, David R. Yeaman was charged in the United States
District Court for the Eastern District of Pennsylvania with conspiracy, wire
fraud and fraud in the offer, purchase and sale of securities, in violation of
18 U.S.C. Sections 2, 371 and 1343; 15 U.S.C. Sections 77q(a), 77x, 78j(b), and
78ff; and Rule 10b-5 promulgated by the Securities and Exchange Commission,
Title 17, Code of Federal Regulations, Section 240.10b-5 (1986).
On February 22, 1996, Mr. Yeaman entered his not guilty plea to all
charges. The allegations against Mr. Yeaman are based on the government's claims
that he and five of the other defendants named in the proceeding violated the
aforesaid laws by inflating the apparent worth of certain reinsurance companies
by leasing them alleged worthless securities. Specifically, it is alleged that
Mr. Yeaman, with other defendants, engaged in practices which falsely increased
the quoted prices of the securities and misrepresented restricted securities as
free trading securities. Based on these allegations, the charges against Mr.
Yeaman include one count of conspiracy, seven counts of wire fraud, six counts
of securities fraud, and aiding and abetting with respect to each count. The
trial began March 10, 1997, and is expected to last approximately six to eight
weeks.
The U.S. Securities and Exchange Commission, Securities Act of 1933
Release No. 7008 and Securities Exchange Act of 1934 Release No. 32669 announced
that on July 23, 1993, it ordered David R. Yeaman and Capital General
Corporation to permanently cease and desist from committing or causing further
violations of Section 5(a) and (c) and 17(a) of the Securities Act of 1933 and
Sections 10(b) and 13(g) of the Securities Exchange Act of 1934 and Rules 10b-5,
12b-20 and 13d-1(c) thereunder.
7
<PAGE>
Krista Nielson was ordered to permanently cease and desist from
committing or causing further violations of Section 17(a) of the Securities Act
and Section 10(b) of the Exchange Act and Rules 10b-5 and 12b-20 thereunder. In
addition, the Commission ordered the revocation of the registration of the
common stock of Altara International, Inc., Arrow Management, Inc., Atlas
Equity, Inc., Dynamic Associates, Inc., Energy Systems, Inc., Four Star Ranch,
Inc., Panorama Industries, Inc., Partisan Corporation, Quiescent Corporation,
Saber, Inc., Upsilon, Inc., Vicuna, Inc., Why Not?, Inc., Xebec Galleon, Inc.,
Zebu, Inc., and Zeus Enterprises, Inc. pursuant to Section 12(j) of the Exchange
Act. The Commission found that each of the issuers had filed a registration
statement on Form 10 that contained materially false and misleading statements
in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Each of the respondents had submitted an Offer of Settlement consenting
to the entry of the Order without admitting or denying the allegations in the
Order. Prior to the submission of the Offers of Settlement, Capital General, on
behalf of the above mentioned companies, except for Panorama Industries, Inc.,
filed a registration statement on Form S-1 during December of 1992 to register
the common stock of those companies under the Securities Act of 1933.
Concurrently with the signing of the Offers of Settlement, the Registration
Statement was declared effective on June 30, 1993. A Post Effective Amendment
was filed and declared effective September 2, 1993. Although the registration of
the common stock under Section 12(g) of the 1934 Act was revoked on July 23,
1993, the companies are now registered and reporting under the Securities Act of
1933 by virtue of the filing of Form S-1 as indicated by Commission File No.
33-55254.
During 1986 and 1987, Capital General gifted very small percentages of
stock (usually 100 shares to each giftee) in the following companies, to
approximately 1,000 persons or entities: Amenity, Inc., Dogmatic, Inc., Mystic
Industries, Inc., Highland Mfg., Inc., Kowtow, Inc., Noble Industries, Inc.,
Oryan Capital Corporation, Pegasus Star Enterprise, Inc., Showstoppers, Inc.,
Hightide, Inc., Grandeur, Inc., Fantastic Industries, Inc., Jugglar, Inc., Xebec
Galleon, Inc., Golden Home Health Care Equipment Centers, Inc., Nighthawk
Capital, Inc., Instrument Development Corporation, Panther Industries, Inc., Owl
Enterprises, Inc., Quail, Inc., GBS Technologies Corporation, H & B Carriers,
Inc., Florida Growth Industries, Inc., Macaw, Inc., Longhorn Enterprise, Inc.,
Koala Corporation, Yahwe Corporation, Star Dolphin, Inc., Jackal, Inc., Hyena
Capital, Inc., Gopher, Inc., Flamingo Capital, Inc., Egret, Inc., Cetacean
Industries, Inc., Bonito, Inc., Alpaca, Inc., Zeus Enterprise, Inc., Tamarind,
Inc., Saber, Inc., Radar, Inc., Quiescent Corporation, Vanadium, Inc., Upsilon,
Inc., Why Not?, Inc., Bestmark, Inc., Missouri Illinois Mining Co., Inc.
Capital General did not register the gifts of shares in these companies
with the Securities Division of the State of Utah or with the Securities
Exchange Commission because it believed these gifts to be outside the scope of
the Utah Uniform Securities Act and the Securities Act of 1933 in as much as
such acts require registration for sales and do not require registration of
gifts. Nevertheless, in connection with the distribution of shares of its
subsidiaries, Capital General was found by the Utah Securities Advisory Board,
in two decisions affirmed by the Utah State Courts, to have violated the
registration provisions of the Utah Uniform Securities Act. See In re Amenity
Inc., No. SD-86-11 (Utah Sec. Adv. Bd. February 18, 1987) aff'd C87-2625 (3d
Dist. Ct. September 18, 1987) aff'd sub nom Capital General Corp. v. Utah Dep't
of Business Reg., 777 P.2d 494, 498 (Utah Ct. App.) cert. denied, 781 P.2d 873
(Utah S. Ct. 1989); In re H&B Carriers Inc., No. 87-09-28-01 (Utah Sec. Adv.
Bd., Apr. 15, 1988) aff'd No. 88-5900053 (3d Dist. Ct. Sept 10, 1990) aff'd sub
nom Capital General Corp. v. Utah Dep't of Business Reg., Case No 91-196 (Utah
Ct. App. February 10, 1992. All of the remaining companies listed above were
parties to the H&B Carriers order.
Both of these actions sought suspension of transactional exemptions
respecting the shares of these companies pursuant to Section 14 (3) of the Utah
Uniform Securities Act. Capital General defended both actions on the grounds
that the Utah Uniform Securities Act did not apply to gifts of securities, that
the gifts were good faith gifts specifically exempted by the Act, and that in
8
<PAGE>
any event even if it had "sold" shares in violation of the Act, suspension
of transactional exemptions was not an authorized remedy under the statute.
These defenses were rejected at the administrative agency level, and upon
judicial review at the District Court level and by the Utah Court of Appeals.
ITEM 11. Executive Compensation.
The Company has made no arrangements for the remuneration of its
officers and directors, except that they will be entitled to receive
reimbursement for actual, demonstrable out-of-pocket expenses, including travel
expenses if any, made on the Company's behalf in the investigation of business
opportunities. No remuneration has been paid to the Company's officers or
directors prior to the filing of this form. There are no agreements or
understandings with respect to the amount or remuneration that officers and
directors are expected to receive in the future. Management takes no salaries
from the Company and does not anticipate receiving any salaries in the
foreseeable future.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1996, information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding shares, by each of the directors
and by the officers and directors as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
<S> <C> <C> <C>
Common Stock David R. Yeaman(1,2) 1,534,000 27.49%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock Capital General Corporation(1,2) 1,338,300 23.98%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock Jack Kalaf 924,000 16.56%
Level 20, 56 Pitt Street
Sydney, NSW, 2000 Australia
Common Stock John Read 924,000 16.56%
Level 20, 56 Pitt Street
Sydney, NSW, 2000 Australia
Common Stock Gordon Crofts 528,000 9.46%
242 South 200 East
Salt Lake City, Utah 84111
Common Stock Krista Nielson(1,2) 80,000 1.43%
3098 So. Highland Drive, Suite 460
Salt Lake City, Utah 84106
Common Stock All Officers and Directors as a Group(1,2) 2,952,300 52.90%
</TABLE>
9
<PAGE>
(1)Capital General Corporation, Krista Nielson and David R. Yeaman may be
deemed to be the Company's "parents" and "promoters," pursuant to the Rules and
Regulations promulgated under the 1933 Act.
(2)Capital General Corporation is a private corporation. The majority of its
shares (80%) are owned by another private corporation, Yeaman Enterprises, Inc.
The stockholders of Yeaman Enterprises are members of the family of David R.
Yeaman, who is also an officer and director of the Company and Capital General.
Mr. Yeaman's beneficial ownership of the securities of the Company includes
shares directly owned by Capital General and Yeaman Enterprises. Although Yeaman
Enterprises is nominally owned by Mr. Yeaman's children, Mr. Yeaman beneficially
owns shares nominally owned by Yeaman Enterprises in that he has the power to
vote or direct the voting of the shares and the power to dispose of or to direct
the disposition of the shares. Other owners of the stock of Capital General
include Krista Nielson, the Company's Secretary/Treasurer. Mr. Yeaman and Ms.
Castleton control and have beneficial ownership of the shares owned by Capital
General and Profit Financial and exercise shared voting power and shared
investment power over those shares.
ITEM 13. Certain Relationships and Related Transactions.
No officer, director, nominee for election as a director, or associate
of such officer, director or nominee is or has been in debt to the Company
during the last fiscal year.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1996, 1995 and 1994.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the fiscal year ending
December 31, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ARROW MANAGEMENT, INC.
Date: March 3, 1997 By: s\David R. Yeaman
David R. Yeaman, President, CEO and Director
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.
Date: March 3, 1997 By: s\David R. Yeaman
David R. Yeaman, President, CEO and Director
Date: March 3, 1997 By: s\Krista Nielson
Krista Nielson, Secretary/Treasurer
and Director
11
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
Members of: Crandall Building Suite 700
American Institute of 10 West 100 South
Certified Public Accountants Salt Lake City, Utah 84101
Utah Association of Telephone: (801) 575-8297
Certified Public Accountants Facsimile: (801) 575-8306
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Arrow Management, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Arrow
Management, Inc. (a development stage company) and Subsidiary as of December 31,
1996 and 1995, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 1996, 1995
and 1994 and for the period of January 14, 1988 (date of inception) to December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Arrow Management,
Inc. (a development stage company) and Subsidiary as of December 31, 1996 and
1995 and the results of their operations, changes in stockholders' equity and
their cash flows for the years ended December 31, 1996, 1995 and 1994 and for
the period of January 14, 1988 (date of inception) to December 31, 1996 in
conformity with generally accepted accounting principles.
s\Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 28, 1997
See Notes to Consolidated Financial Statements.
F - 1
<PAGE>
<TABLE>
<CAPTION>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash in bank $ 21,844 $ 18,005
Current portion of contracts receivable (Note 8) 21,945 32,604
-------------- -------------
TOTAL CURRENT ASSETS 43,789 50,609
OTHER ASSETS
Real estate (Note 6) 395,000 390,000
Investment security (Note 9) 150,003 158,337
Long-term portion of contracts receivable (Note 8) 28,721 31,411
-------------- -------------
573,724 579,748
-------------- -------------
$ 617,513 $ 630,357
============== =============
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accrued expenses payable $ 1,215 $ 9,214
Note payable and accrued interest - related party (Note 11) 0 8,337
-------------- -------------
TOTAL CURRENT LIABILITIES 1,215 17,551
Minority interest in subsidiary 57,000 3,000
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 5,580,700 shares
(5,930,700 shares at 12/31/95) 5,581 5,931
Additional paid-in capital 2,514,667 2,568,317
Deficit accumulated during development stage (2,010,953) (2,022,779)
Unrealized gain on investment security (Note 9) 50,003 58,337
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 559,298 609,806
-------------- -------------
$ 617,513 $ 630,357
============== =============
See Notes to Consolidated Financial Statements.
</TABLE>
F - 2
<PAGE>
<TABLE>
<CAPTION>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
1/14/88
(Date of
Years ended December 31, inception) to
1996 1995 1994 12/31/96
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 104,000 $ 148,000
Cost of sales 0 0 70,195 118,626
------------ ------------ ------------ --------------
GROSS PROFIT 0 0 33,805 29,374
Loss from impairment of land value (Note 6) 0 1,955,000 0 1,955,000
General and administrative expenses 8,983 20,111 84,945 202,526
------------ ------------ ------------ --------------
OPERATING (LOSS) (8,983) (1,975,111) (51,140) (2,128,152)
Other income
Interest 8,550 8,454 3,620 78,966
Consulting 5,000 0 0 5,000
Government subsidy 7,259 6,516 6,516 33,233
------------ ------------ ------------ --------------
TOTAL OTHER INCOME 20,809 14,970 10,136 117,199
------------ ------------ ------------ --------------
NET INCOME (LOSS) BEFORE INCOME TAXES 11,826 (1,960,141) (41,004) (2,010,953)
Provision for income taxes 0 0 0 0
------------ ------------ ------------ --------------
NET INCOME (LOSS) $ 11,826 $ (1,960,141) $ (41,004) $ (2,010,953)
============ ============ ============ ==============
Net income (loss) per weighted average
common shares outstanding $ .00 $ (.33) $ (.01)
============ ============ ============
Weighted average number of common shares
outstanding used to compute net income (loss) 5,930,700 5,930,700 6,250,700
============ ============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During
Par Value $.001 Paid-In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balances at 1/14/88
(Date of inception) 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted)
at $.002 per share, 1/14/88 1,000,000 1,000 1,000
Acquisition of subsidiary(1) 5,250,700 5,251 (3,251) (1,960)
Net loss for period (1,960)
--------- ----------- ------------- -------------
Balances at 12/31/88 6,250,700 6,251 (2,251) (3,920)
Net loss for year (20)
--------- ----------- ------------- -------------
Balances at 12/31/89 6,250,700 6,251 (2,251) (3,940)
Net loss for year (20)
--------- ----------- ------------- -------------
Balances at 12/31/90 6,250,700 6,251 (2,251) (3,960)
Assets acquired by subsidiary 4,420,000
Minority interest adjustment (12,000)
Net loss for year (20)
--------- ----------- ------------- -------------
Balances at 12/31/91 6,250,700 6,251 4,405,749 (3,980)
Debentures canceled (2,000,000)
Assets acquired by subsidiary 1,600,000
Minority interest adjustment (8,000)
Net loss for year (891)
--------- ----------- ------------- -------------
Balances at 12/31/92 6,250,700 6,251 3,997,749 (4,871)
Minority interest adjustment (2,000)
Net loss for year (16,763)
--------- ----------- ------------- -------------
Balances at 12/31/93 6,250,700 6,251 3,995,749 (21,634)
Net loss for year (41,004)
--------- ----------- ------------- -------------
Balances at 12/31/94 6,250,700 6,251 3,995,749 (62,638)
Trade and media credits canceled
(Note 7) (320,000) (320) (1,446,432)
Minority interest adjustment 19,000
Net loss for year (1,960,141)
--------- ----------- ------------- -------------
Balances at 12/31/95 5,930,700 5,931 2,568,317 (2,022,779)
Reissuance of erroneously canceled
shares during 1995 (Note 7) 110,000 110 (110)
Cancellation of previously issued
shares related to acquisition of
subsidiary (Note 4) (460,000) (460) 460
Minority interest adjustment (54,000)
Net income for year 11,826
--------- ----------- ------------- -------------
Balances at 12/31/96 5,580,700 $ 5,581 $ 2,514,667 $ (2,010,953)
========= =========== ============= =============
(1) Acquisition actually occurred on September 30, 1993, but is reflected
earlier under the pooling-of-interests method of accounting.
See Notes to Consolidated Financial Statements.
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
1/14/88
(Date of
Years ended December 31, inception) to
1996 1995 1994 12/31/96
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 11,826 $ (1,960,141) $ (41,004) $ (2,010,953)
Adjustments to reconcile net income (loss) to
cash provided (required) by operating
activities:
Amortization 0 0 0 100
Cost of land sold 0 0 60,000 105,000
Non-cash income (5,000) 0 0 (5,000)
Itex Trade Dollars used 0 0 0 8,248
Loss from impairment of land
value (Note 6) 0 1,955,000 0 1,955,000
Changes in assets and liabilities:
Trade dollars 0 0 6,964 0
Loans receivable 0 0 11,205 0
Contracts receivable 13,349 16,104 (41,944) (50,666)
Accrued expenses (7,999) (16,602) 16,616 1,215
------------- -------------- ------------- --------------
NET CASH PROVIDED (REQUIRED)
BY OPERATING ACTIVITIES 12,176 (5,639) 11,837 2,944
INVESTING ACTIVITIES
Purchase of real estate 0 0 0 (105,000)
Organization costs 0 0 0 (100)
------------- -------------- ------------- --------------
NET CASH (USED) BY
INVESTING ACTIVITIES 0 0 0 (105,100)
FINANCING ACTIVITIES
Proceeds from sale of common stock (1) 0 0 0 124,000
Loans 0 8,337 0 10,417
Repayments (8,337) 0 (647) (10,417)
------------- -------------- ------------- --------------
NET CASH PROVIDED (REQUIRED) BY
FINANCING ACTIVITIES (8,337) 8,337 (647) 124,000
------------- -------------- ------------- --------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,839 2,698 11,190 21,844
Cash and cash equivalents at beginning
of year 18,005 15,307 4,117 0
------------- -------------- ------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 21,844 $ 18,005 $ 15,307 $ 21,844
============= ============== ============= ==============
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 477 $ 0 $ 13 $ 676
============= ============== ============= ==============
SUPPLEMENTAL INVESTING ACTIVITY DISCLOSURE
In July, 1992, Panorama issued 320,000 shares of stock for trade credits with a
cost of $1,600,000. These shares were returned to the Company in December, 1995,
in connection with a rescission agreement. In December, 1996, 110,000 shares
were reissued. See Note 7 for details of the foregoing transactions.
In December, 1996, the Company canceled 460,000 shares of its common stock as
set forth in Note 4.
(1) Stock of subsidiary was $122,000.
See Notes to Consolidated Financial Statements.
</TABLE>
F - 5
<PAGE>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
The Company's accounting policies reflect current
accounting practices and conform to generally accepted
accounting principles. The following policies are
considered to be significant.
Accounting Method
The accompanying financial statements have been prepared
on the accrual method using generally accepted accounting
principles applicable to a going concern which
contemplates the realization of assets and the liquidation
of liabilities in the normal course of business. All
assets are listed at historical cost as adjusted for asset
impairment.
Revenue Recognition
Revenue is recognized upon completion of sales including
adequate payment arrangements to reasonably assure
collection of related receivables, if any.
Dividend Policy:
The Company has not yet adopted any policy regarding
payment of dividends.
Income Taxes:
The Company utilizes the liability method of accounting
for income taxes as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the liability method, deferred
taxes are determined based on the difference between the
financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. An
allowance against deferred assets is recorded when it is
more likely than not that such tax benefits will not be
realized.
Basis of Presentation
The consolidated financial statements include the accounts
of the Company and Panorama Industries, Inc. ("Panorama"),
a subsidiary owned 90.73% by the Company. All significant
intercompany transactions and balances have been
eliminated.
Earnings (Loss) per Share
Earnings (loss) per share are computed by dividing net
income (loss) by the weighted average common shares
outstanding during each period.
F - 6
<PAGE>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2: DEVELOPMENT STAGE COMPANY AND BUSINESS ACTIVITY
The Company was incorporated under the laws of the State
of Nevada on January 14, 1988 and has been in the
development stage since incorporation. The Company
acquired a substantial amount of land through its
acquisition of Panorama (See Notes 4 and 6). The Company
holds real estate for investment and possible future
development and sales. The Company also may acquire
interests in various other business opportunities which,
in the opinion of management, will provide a profit to the
Company. Additional external financing or other capital
may be required to proceed with any business plan which
may be developed by the Company.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000
shares of its common stock to Capital General Corporation
for $2,000 cash for an average consideration of $.002 per
share. The Company's authorized common stock consists of
50,000,000 shares at $.001 par value.
NOTE 4: ACQUISITION OF SUBSIDIARY
On September 30, 1993, the Company issued 5,250,700 shares
of its common stock to acquire 99.45% of the outstanding
stock of Panorama, an affiliated company. Panorama became
a subsidiary of the Company. The transaction has been
accounted for under the pooling-of-interests method of
accounting. Therefore, the financial statements have been
restated as if the Companies had been consolidated for all
periods presented. In December, 1996, the Company canceled
460,000 shares of its common stock held for issuance to a
shareholder of Panorama. As a result of this transaction,
Arrow's ownership of Panorama was reduced from 99.45% to
90.73%.
NOTE 5: RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real property,
other than the land held for development. Office services
are provided, without charge, by Capital General
Corporation. Such costs are immaterial to the financial
statements, and, accordingly, have not been reflected
therein. The officers and directors of the Company are
involved in other business activities and may, in the
future, become involved in other business opportunities.
If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the
Company and their other business interests. The Company
has not formulated a policy for the resolution of such
conflicts.
During 1994, Panorama paid a $520 fee to a related party
for services. During 1996, Panorama repaid a loan that was
obtained from a related party during 1995 (see Note 11).
F - 7
<PAGE>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6: REAL ESTATE AND LAND
On December 20, 1991, Panorama acquired various parcels of
real estate for 460,000 shares of its common stock,
$120,000 cash, and assumption of approximately $30,000 in
unpaid property taxes. The real properties located in the
State of Idaho consist of 100 acres of Tall Timber
Estates, Bingham County; 300 acres of Panorama Hills,
Bonneville County; two building lots in Arco; Mt. Juniper
building lot in Lava Hot Springs; Salem River lot, Lemhi
County; and six Hall City Townsite lots in Bannock County.
The property acquired in the State of Utah consists of six
town home lots in St. George, Washington County. The
properties purchased were believed by Company management
to have a retail market value of approximately $2,600,000.
During 1993, one of the properties in Bannock County was
sold. During 1994, the St. George property was sold (see
Note 8).
Panorama retained a development planning firm in November,
1993, to conduct a new feasibility study and to make
development recommendations for the Panorama Hills
project. The study was completed with the recommendation
by the consultant that the project be renamed "Bridal
Trails" and be replatted to consist of approximately 578
1/3 to 1/2 acre lots. This proposed change would increase
the number of lots by over 300%. An engineering firm was
retained to plan for water, sewer, roads and other
improvements. The actual construction was expected to
commence within the next six to nine months.
A January, 1995, MAI appraisal determined the value of the
Panorama Hills land on an "as is" basis to be $317,000. At
December 31, 1994, the Company had no intention or need to
sell the land. The land was acquired for development over
a period of time. After development, improvements, and
implementation of marketing plans, the Company expected to
realize income substantially in excess of its costs in the
land. A market feasibility report (see preceding
paragraph) projected potential profit of over $1,900,000
on phases I and II (276 lots - out of a total of 578
lots). At December 31, 1994, management felt that any
decline in value was temporary.
During 1994, a Lis Pendens (pending lawsuit) was recorded
against the Panorama Hills land relating to title to the
land. The cost of defending this legal action and any loss
sustained is covered by a title insurance company. This
action caused a delay in the timetable for development of
the land. The Lis Pendens was settled in December, 1995,
and the Company now has clear title to the land.
F - 8
<PAGE>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6: LAND (continued)
During December, 1995, the Company changed its development
plans with respect to the Panorama Hills project and is
not presently pursuing plans to develop the land, however,
the land is available for sale. One factor that lead to
the change in plans is the slowdown in economic
development and related decrease in consumer demand for
new housing in the Idaho Falls area. Another factor is
Panorama's rescission of the media due bills, trade
dollars, and other credits (as discussed in Note 7) for
the return of shares of its common stock. Panorama had
planned on using such credits as a portion of the
financing required for development of the land.
During 1996, Panorama purchased a time share in a vacation
resort called the San Clemente Inn in Orange County,
California. The time share was acquired by trading $5,000
worth of ITEX Trade Dollars which were obtained for
consulting services.
Impairment of Land Value
In 1995, the Financial Accounting Standards Board ("FASB")
adopted SFAS No. 121 entitled "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". Adoption of this SFAS is required for
financial statements for fiscal years beginning after
December 15, 1995, however, earlier application is
encouraged. The Company has elected to adopt SFAS No. 121
effective for 1995. SFAS No. 121 provides that restatement
of previously issued financial statements is not
permitted. In conformity with SFAS No. 121 and based on an
A.R.A. appraisal in December, 1995, which valued the land
at $330,000, Panorama is showing the value of the Panorama
Hills land at $330,000 at December 31, 1995. The loss from
write-down of the land value from $2,285,000 to $330,000
is accounted for in the 1995 statement of operations as an
operating loss of $1,955,000. The new cost basis of such
land for financial reporting purposes is now $330,000.
NOTE 7: MEDIA DUE BILLS, TRADE DOLLARS AND TRAVEL CERTIFICATES
In July, 1992, Panorama entered into an agreement with
ITEX Corporation ("ITEX") to exchange 110,000 shares of
its common stock for $550,000 in trade credits ($400,000
in radio and television advertising and production credits
referred to as media due bills and $150,000 in ITEX Trade
Dollars).
Also in July, 1992, Panorama entered into an agreement
with Haydon, Ives & Neal, Inc. ("Haydon") to exchange
210,000 shares of its common stock for $1,050,000 in trade
credits ($800,000 in radio and television advertising and
production credits referred to as media due bills and
$250,000 in Travel Paradise certificates). Panorama
intended to exchange the advertising and production
credits, trade dollars and travel certificates for goods
and services for the land development projects and other
business activities. During 1993, the travel certificates
were exchanged for $250,000 of additional ITEX Trade
Dollars.
In December, 1995, Panorama entered into a rescission
agreement with Haydon whereby Panorama received back the
320,000 shares of its common stock in exchange for the
remaining balance of $1,446,752 of advertising credits and
ITEX Trade Dollars (the amount on hand at December 31,
1994). The transaction has been accounted for by reducing
common stock at par value by $320 and additional paid-in
capital by $1,446,432. No gain or loss on the transaction
was recorded in accordance with the terms of the
agreement. In December, 1996, 110,000 shares relating to
the ITEX Trade Dollars were reissued due to an erroneous
cancellation. Common stock was therefore increased by $110
and additional paid-in capital decreased by $110.
F - 9
<PAGE>
ARROW MANAGEMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8: CONTRACTS RECEIVABLE
During 1993, real estate was sold on contract. The
contract requires monthly payments of $451 at an interest
rate of 9%. At December 31, 1996, the current portion of
the receivable was $2,690 and the long-term portion was
$28,721 for a total of $31,411.
During 1994, additional real estate was sold on contract.
The balance of $44,000 was due in September, 1995. The
contract was renegotiated in November, 1995, after being
paid down to $29,840. The interest rate on the note is
12%. At December 31, 1996, the balance owing on the note
was $19,255 (including accrued interest of $94).
NOTE 9: INVESTMENT SECURITY
The investment consists of 66,668 shares of Profit
Financial Corporation (an entity that was affiliated with
the Company at December 31, 1994, but not at December 31,
1995 or 1996). The quoted market value at December 31,
1996, was $2.25 per share. Pursuant to SFAS No. 115, the
investment is considered to be an equity security and is
categorized as available-for-sale and the increase in the
market value of $50,003 at December 31, 1996, is shown in
the equity section of the balance sheet.
NOTE 10: NET OPERATING LOSS CARRYOVER
The Company and Panorama had a net operating loss
carryover of $55,953 at December 31, 1996, that if not
used will expire as follows:
<TABLE>
<CAPTION>
Company's Panorama's
Year Ended Expiration Date Loss Loss
<S> <C> <C> <C>
December 31, 1988 December 31, 2003 $ 1,950 $ 0
December 31, 1989 December 31, 2004 10 0
December 31, 1990 December 31, 2005 10 0
December 31, 1991 December 31, 2006 10 0
December 31, 1992 December 31, 2007 20 0
December 31, 1993 December 31, 2008 0 7,808
December 31, 1994 December 31, 2009 0 41,004
December 31, 1995 December 31, 2010 0 5,141
$ 2,000 $ 53,953
</TABLE>
Due to the Company's activities as a development stage
company, there is not a sufficient basis for making an
estimate of future income. At December 31, 1996, the
Company has not recorded a deferred tax asset. There may
be a deferred tax asset, but the amount, if any, cannot be
determined at this time, therefore, the amount has been
reserved 100%.
The tax basis of the Panorama land (see Note 6 regarding
impairment of land value) is $2,285,000 (now $330,000 for
financial reporting purposes). At the time of disposal of
such land, the gain or loss for income tax purposes will
be based on the original recorded cost of the property
($2,285,000). For financial reporting purposes, gain or
loss on disposal of such land will be based on the "new"
cost basis ($330,000).
NOTE 11: NOTE PAYABLE - RELATED PARTY
In July, 1995, Panorama borrowed $8,000 from a related
party. The note had an interest rate of 9% and was due
July, 1996. The balance of the note including accrued
interest was $8,337 at December 31, 1995. The note plus
accrued interest was paid in full in March, 1996 for a
total of $8,477.
F - 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Arrow
Management, Inc. and Subsidiary December 31, 1996 financial statements
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000860401
<NAME> Arrow Management, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,844
<SECURITIES> 0
<RECEIVABLES> 50,666
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,789
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 617,513
<CURRENT-LIABILITIES> 1,215
<BONDS> 0
0
0
<COMMON> 5,581
<OTHER-SE> 553,717
<TOTAL-LIABILITY-AND-EQUITY> 617,513
<SALES> 0
<TOTAL-REVENUES> 15,809
<CGS> 0
<TOTAL-COSTS> 8,983
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 11,826
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,826
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
