UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUATERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30,2000
[ ] 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
W-WAVES USA, INC.
(formerly Arrow Management, Inc.)
(Exact name of Registrant as specified in its charter)
NEVADA 87-0467339
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2620 TransCanada Highway
Pointe-Claire (Quebec) Canada H9R 1B1
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(Address of principal executive offices) (Postal Code)
Registrant's telephone number. Including area code (514) 697-9966 ext. 230
----------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [ ] Yes [X] No
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 November 10, 2000
------------------------------------- -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 11,030,700 SHARES
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BASIS OF REPRESENTATION
General
The accompanying unaudited consolidated financial statements include the
following corporations: W-Waves USA, Inc.(Nevada), W-Waves USA, Inc. (Delaware),
XD-Lab R&D Inc., White Wolf Audio Video Electronic Systems Inc. and its
wholly-owned subsidiary Radison Acoustique Ltee. They have been prepared in
accordance with the instructions to Form 10-Q and therefore, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows and stockholder's equity in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the quarter
ended September 30, 2000, are not necessarily indicative of the results that can
be expected for the year ending December 31, 2000.
Due to the Plan of Reorganization made in November 19, 1999 and the
Development Stage of the company, no comparative figures are presented as it
would not provide valuable information for decision making.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Nature of business
W-Waves USA, Inc. is focused on the development and commercialization of
innovative sound enhancement technologies and products. The Company has Patent
Applications for its HD-AP technology and product (High Definition Audio
Processor) in over 25 countries at this time. Further, the Company has Patent
Applications Pending for the technologies and products known as ESP-3D (Enhanced
Spatialization Processor) and VRH (Virtual Reality Headset) in the United States
and also under the European Patent Cooperation Treaty (PCT). Lastly, the Company
has filed request at this time for Trade Mark protection in the United States
and Canada for HD-AP, ESP-3D, VRH and its SPACE (Surround Processing Audio
Control Enhancer) set-top box.
The Company operates primarily through two wholly-owned Canadian
subsidiaries, White Wolf Audio Video Electronic Systems Inc. and Radison
Acoustique Ltee., a subsidiary of White Wolf. Both are located in Pointe-Claire,
Quebec, Canada, and are engaged in complementary aspects of audio and video
research and engineering. W-Waves USA Inc. shares are traded on the NASDAQ
Bulletin Board under the symbol WAVSA.
Forward-looking Statements
The management strongly believes in the business potential of the new
products developed by W-Waves USA Inc. for the electronic markets, either for
new products or for products that enhance the installed base of stereophonic
equipment. However, due to the early stage of W-Waves USA Inc. technology and to
the competition, the management cannot assure the financial success of this
operation.
<PAGE>
Results of Operations
The Company had net loss of $387,844 for the three-month period ended
September 30, 2000. During that period, the company was still continuing to
improve its range of products in order to be marketable and produced at the
lowest possible cost. In the later part of the quarter, the formal marketing
activities on licenses began for the manufacturing and the sales of the "SPACE"
line of products. A first license was signed towards the end of the quarter with
a major U.S. based company with manufacturing facilities in China. Total costs
and operating expenses in the amount of $418,042 include research and
development and intensive marketing efforts. It also includes the full internal
implementation and catch up of the accounting activities that will provide more
accurate and timely financial information in the future. No deferred tax assets
have been accounted because of uncertainties to assure its realization.
Liquidity and Capital Resources
Net current assets as at September 30, 2000 were $(1,174,349). The deficit
is explained by the accumulated loss of the startup phase and the acquisition of
Radison, a wholly-owned subsidiary of White Wolf Inc. It is financed mainly by
the accounts payable and by Bear Bay Management (Caribbean) Inc. up to 1,000,000
USD.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has no market risk sensitive instruments or market risk
exposures.
<PAGE>
W-WAVES USA, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT SEPTEMBER 30, 2000
September 30 December 31
2000 1999
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ASSETS
CURRENT ASSETS
Cash and cash equivalent $ 9,437 $ 27,197
Accounts receivable 19,077 19,752
Inventory 46,509 37,686
Prepaid expenses and other current assets 47,107 3,090
Goodwill, net 138,795 169,624
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260,925 257,349
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BUILDING AND EQUIPMENT, net 146,292 82,407
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OTHER ASSETS
Trade marks, patents 41,680 2,154
Advance on royalties 27,970 9,373
Organization costs 1,741 1,815
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71,391 13,342
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$ 478,608 $ 353,098
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September 30 December 31
2000 1999
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LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities 1,000,067 $ 102,564
Income taxes payable 2,608 1,561
Current portion of long-term obligations 1,636
Note payable - Acquisition 89,582 131,242
Note payable - related corporation 343,017 792,957
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1,435,274 1,029,960
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LONG-TERM DEBT OBLIGATIONS 19,131 50,879
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MINORITY INTEREST IN SUBSIDIARY 159,214 159,214
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STOCKHOLDER'S EQUITY
Common stock 11,031 11,031
Additional paid-in-capital 1,050,000 -
Accumulated deficit (2,196,042) (897,986)
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(1,135,011) (886,955)
478,608 $ 353,098
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<PAGE>
W-WAVES USA, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (UNAUDITED)
FOR THE PERIOD JANUARY 1, 2000 TO SEPTEMBER 30, 2000
From July 1 From January 1
2000 to 2000 to
September 30 September 30
2000 2000
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REVENUE $ 16,344 $ 47,620
COST OF SALES 2,955 42,239
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13,389 5,381
COSTS AND OPERATING EXPENSES 418,042 1,320,246
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LOSS FROM OPERATIONS (404,653) (1,314,865)
INCOME TAXES 932 932
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NET LOSS FROM OPERATIONS (405,585) (1,315,797)
GAIN ON DISPOSITION OF FIXED ASSETS (AFTER TAX) 17,741 17,741
NET LOSS (387,844) (1,298,056)
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DEFICIT - BEGINNING OF YEAR (897,986)
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DEFICIT - END OF YEAR $ (2,196,042)
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NET LOSS PER WEIGHTED AVERAGE COMMON SHARE (0.12)
------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED TO COMPUTED NET LOSS 11,030,700
------------
<PAGE>
W-WAVES USA, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(UNAUDITED)
FOR THE PERIOD JANUARY 1, 2000 TO SEPTEMBER 30, 2000
Common Stock
Par Value $0.001
Shares Amount
------ ------
Balance 12/31/1999 11,030,700 $ 11,031
Balance 09/30/2000 11,030,700 $ 11,031
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NET CHANGE 0 0
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<TABLE>
<CAPTION>
W-WAVES USA, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD JANUARY 1 TO SEPTEMBER 30, 2000
From July 1 From January 1
2000 2000
To September 30 to September 30
2000 2000
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
NET LOSS $ (405,585) $(1,315,797)
ADJUSTMENT TO RECONCILE NET INCOME LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 17,970 53,164
ACCOUNTS RECEIVABLE (5,678) 675
OTHER ASSETS (14,987) (71,363)
FOREIGN EXCHANGE IMPACT ON GOODWILL 4,617 3,960
ACCOUNTS PAYABLE AND OTHER LIABILITIES 227,612 897,914
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(176,051) (431,447)
INVESTING ACTIVITIES
ACQUISITION OF EQUIPMENTS AND LEASEHOLDS (73,997) (112,322)
TRADE MARKS AND PATENTS (32,683) (45,549)
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(106,680) (157,871)
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FINANCING ACTIVITIES
DISPOSITION OF FIXED ASSETS 28,165 28,165
GAIN ON DISPOSITION OF FIXED ASSETS 17,741 17,741
LONG TERM DEBT (30,810) (32,748)
NOTE PAYABLE - ACQUISITION (1,677) (41,660)
NOTE PAYABLE - RELATED CORPORATIONS 274,651 (449,940)
ADDITIONAL PAID-IN CAPITAL ON COMMON SHARES 1,050,000
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288,070 571,558
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NET CHANGE IN CASH AND CASH EQUIVALENT 5,339 (17,760)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 4,098 27,197
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END OF PERIOD $ 9,437 $ 9,437
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</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W-WAVES USA, INC.
/s/ Victor Lacroix
Dated November 10, 2000 ------------------------------------------
Victor Lacroix, President CEO and Director
