SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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. 33-5524-01
----------
W-WAVES USA, INC.
-----------------
(formerly Arrow Management, Inc.)
(Exact name of Registrant as specified in its charter)
NEVADA 87-04637339
------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Les Tours Triomphe
2500, Boulevard Daniel-Johnson Blvd.
Suite 1108
Laval (Quebec)
CANADA H7T 2P6
----------------------------------------- --------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code (450) 686-6993
---------------
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 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 31, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $14,611, 287.
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 31,2000
-------------------------- ------------- -------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 11,030,700 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
------
ITEM 1. BUSINESS.
Arrow Management, Inc., (now renamed W-WAVES USA, Inc.) the "Company") was
incorporated under the laws of Nevada on January 14, 1988. The Company was
formed to look for investments, business opportunities and assets in any
industry. Initially the Company determined to acquire assets and properties in
real estate development, specifically the area of Idaho Falls, Idaho.
In furtherance of its determination to acquire real properties for
development, on September 30, 1993, the Company entered into an agreement with
the principals of Panorama Industries, Inc. ("Panorama") to issue 5,250,700
shares of its common stock to acquire 99.45% of the outstanding stock of
Panorama, an affiliated Nevada corporation, which owned real properties near
Idaho Falls, Idaho and other areas in Idaho. In December, 1996, the Company
determined that it was unable to complete the acquisition of 460,000 shares of
Panorama stock due to the failure of certain Panorama shareholders to complete
the terms of the acquisition. This reduced the shares of the Company issued to
acquire Panorama to 4,790,700 shares and the Company's ownership of Panorama to
90.73%.
An Agreement and Plan of Reorganization (the "Agreement") was made and
entered into by and among Arrow Management, Inc., a Nevada corporation (the
"Company"), Capital General Corporation, a Utah Corporation ("CGC") and W-Waves
USA Inc., a Delaware corporation ("Waves") and the shareholders of Waves ("Waves
Shareholders"). Pursuant to the Agreement, on November 19, 1999 the Company
transferred its entire interest, 4,790,700 shares of common stock, in its
subsidiary, Panorama Industries, Inc., a Nevada corporation to CGC in exchange
for 3,094,700 shares of common stock of the Company. The Company then
distributed the 3,094,700 shares together with 5,450,00 additional shares issued
by the Company from its authorized shares, a total of 8,544,700 shares of $.001
par value common stock of the Company, to Waves Shareholders in exchange for
100% of the issued and outstanding common stock of Waves.
The transaction effected pursuant to the Agreement was exempt from the
registration requirements of the Securities Act of 1933 by virtue of the Section
4(2) thereof.
Following this transaction, the former Waves Shareholders owned 77.5% of
Arrow Management, Inc. and Arrow Management was re-named W-WAVES USA, Inc.
As a result of this transaction the Company became the owner of audio
technology developed by Waves. This technology consists of a circuit which
allows the post-amplification conversion of a conventional stereophonic signal
directed to two-speaker enclosures into an ambisonic signal directed to
five-speaker enclosures. This technology can be directly installed into
manufacturers' radios, televisions, video cassette recorders, computers, and
other devices employing stereophonic sound signals, and is currently the subject
of a pending patent application.
W-WAVES USA, Inc. operates primarily through two subsidiaries, White Wolf
Canada, Inc. and Radison Aconstique Inc., a subsidiary of White Wolf. Both are
engaged in complementary aspects of audio and video research and engineering.
Each company has its own administrative and laboratory facilities. Together the
office facilities total approximately 2,000 sq. ft. The laboratory and
manufacturing facilities total approximately 20,000 sq. ft. W-WAVES, White Wolf
(Canada), Inc. and Radison employ a total of 9 persons with an additional 20
persons under contract.
ITEM 2. PROPERTIES.
See "Item 1" above. The Company also utilizes space on a rent-free basis
in the office of one of its principal shareholders, Bear Bay Holding Canada, Inc
which is the sole owner of two of the principal shareholders of the Company.
This arrangement is expected to continue until such time as the Company becomes
sufficiently developed to necessitate its relocation. The Company has no
agreements with respect to the maintenance or future acquisition of office
facilities.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings involving the Company or its
subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The only matter submitted to the Company's security holders for a vote
during the fiscal year ended December 31, 1999 was the change of the Company's
name from Arrow Management Inc. to W-WAVES USA, Inc.
.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
A trading market for the Company's $.001 par value common stock commenced
on December 8, 1999 on NASD Bulletin Board under the symbol AWMG.
The high and low sales prices of such common stock since trading commenced and
through March 31, 2000 are set forth below.
FISCAL YEAR HIGH SALES PRICE LOW SALES PRICE
1999. . . . Fourth Quarter 2.8124 2.0625
2000. . . . First Quarter 4.00 2.687
As of March 31, 2000, there were 471 record holders of the Company's common
stock and there were 11,030,700 shares outstanding. 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. The aggregate
market value held by non-affiliates on March 31, 2000 was $14,611,287 USD.
ITEM 6. SELECTED FINANCIAL DATA.
THE COMPANY AND SUBSIDIARIES*
-----------------------------
SUMMARY OF OPERATIONS
---------------------
DECEMBER 31
-----------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Total Assets . . . . . . . . . 2,124,851 2,060,428 617,513 630,357
Revenues . . . . . . . . . . . 2,335 424,561 0 0
Operating Expenses . . . . . . 7,118 23,290 8,983 1,975,111
Net Earnings (Loss). . . . . . 065,620 1,492,918 11,826 (1,960,141)
Per Share Data Earnings (Loss) .01 .27 .00 (.33)
Average Shares Outstanding . . 5,580,700 5,580,700 5,580,700 5,930,700
<FN>
* Includes Panorama Industries, Inc. through 12/31/98
* Includes W-WAVES USA and Subsidiaries but not Panorama as of 12/31/99
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Prior to the acquisition of the shares of W-WAVES USA, INC. on November 19,
1999 the Company had not engaged in any regular business operations other than
owning real estate and the collection of notes receivable from third parties.
The plan of reorganization implemented in November 1999 removed from the
Company all of the assets of its former Panorama Industries, Inc., subsidiary
and substituted the assets of W-WAVES USA, Inc. As of December 31, 1999 these
assets totalled $ __________ and consisted mainly of
_________________________________________. During the last two fiscal years the
Company through its recently acquired W-WAVES assets was primarily engaged in
research and development for three basic audio technology products on which the
Company expended approximately $800,000 in 1999 and $500,000 in 1998. The
Company expects to continue this emphasis on research and development.
Since White Wolf and Radisson, the two subsidiaries of W-WAVES USA are both
early stage research and development companies which have been engaged in
operations for only a limited period of time, and since the principal assets of
the Company prior to November 1999 were primarily real property and financial
instruments, any comparison of year to year operations would be meaningless.
LIQUIDITY AND CAPITAL REVENUES
Prior to November 1999, the Company had no need for additional capital as
it had more than ample capital available for its limited operations.
The businesses acquired by the Company through the acquisition of W-WAVES
USA will require substantial capital for their future growth. For example, in
1998 and 1999 the subsidiaries of W-WAVES USA required infusions of $800,000 and
$500,000 respectively for expenditures on research and development.
Management anticipates that substantial additional funds will be required
to bring the Company's products to market but that the needed capital will be
available on reasonable terms.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has no market risk sensitive instruments or market risk
exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On May 2, 2000 the Company retained the services of Andersen Andersen
& Strong, L.C., certified public accountants of Salt Lake City, Utah to serve as
its independent auditor. There were no disagreements with the former auditor,
Smith & Co.; the decision to change auditors was a business decision made by the
board of directors of the Company.
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 prior to November 19, 1999. Directors are appointed and 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
Krista Nielson 37 President, Director
Sasha Belliston 27 Secretary/Treasurer, Director
KRISTA NIELSON, has been a 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, a Utah-based financial
consulting firm, 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, Four Star Ranch, Inc., a farmland
development company, and Visual Impact Corporation, a financial consulting
company. Ms. Nielson devotes her time primarily to her role as President of
Capital General and to the financial consulting activities in which Capital
General engages.
SASHA BELLISTON, has been a director of the Company since April,
1997, and in addition to her management position with the Company, she has been
Vice President of Capital General since April, 1997. For the past five years,
Ms. Belliston had devoted her time primarily as a cosmetologist and homemaker.
Ms. Belliston serves as an officer and/or director in the following private
corporations: Yeaman Enterprises, Inc. and Universal Associates, Inc, family
holding companies, Four Star Ranch, Inc., a farmland development company, Argon
Financial Corporation and Public Financial Corporation, investment companies.
Ms. Belliston dedicates her time primarily to her role as President of Four Star
Ranch and the farming activities in which Four Star engages.
The management of Capital General was in the past essentially the same
as that of the Company and, as the Company's largest shareholder in the past,
Capital General exerted 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 the adult children of the family of David R. Yeaman
(formerly an officer and director of the Company, Capital General and Yeaman
Enterprises, Inc.) Sasha Belliston, Mr. Yeaman's daughter, is the principal
shareholder of Yeaman Enterprises; Krista Nielson is also an officer and
director of Yeaman Enterprises, Inc. Capital General ceased being a controlling
shareholder of the Company on November 19, 1999.
Each of the above directors of the Company is a director of Saber
Capital, Inc., Longhorn, Inc., and Micro-Economics, 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.
In 1993 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.
On November 19, 1999 Krista Nielson and Sasha Belliston resigned their
positions as directors and officers of the Company and appointed the following
persons in their place to serve until the next annual meeting of the
shareholders and/or directors as the case may be.
Name Age Position
---- --- --------
Victor Lacroix 38 President and Director
Gilles Charest 46 Secretary and Director
VICTOR LACROIX has for the last five years been the principal executive
---------------
officer of Bear Bay Holding Canada, Inc. Bear Bay is a private investment firm
that concentrates primarily on early stage (venture capital) investments in high
technology. Mr. Lacroix is a graduate of the University of Montreal.
GILLES CHAREST, is also a graduate of the University of Montreal and
---------------
is a member of the Canadian Institute of Chartered Accountants, the Order of
Chartered Accountants of the Province of Quebec, and the Canadian Comprehensive
Auditing Foundation. For the last five years he has been the managing director
of the Company's principal subsidiaries and currently serves as Secretary and
Director of W-WAVES USA, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
The Company has made no arrangements for the remuneration of its
officers and directors, except that they will be entitle to receive
reimbursement for actual, demonstrable out-of-pocket expenses, including travel
expenses if any, made on the Company's behalf. No remuneration has been paid to
the Company's officers or directors prior to the filing of this Form 10-K.
There are no agreements or understandings with respect to the amount or
remuneration that officers and directors listed above are expected to receive in
the future.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth, as of March 31, 2000, 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
Title of class of beneficial owner beneficial ownership of class Percent
---------------------------- ----------------------------------- ------------------------------ --------
<S> <C> <C> <C>
Common Stock . . . . . . . . . . . . . Bear Bay Management (Caribbean) Inc. 3,000,000 27.20%
3 Lowland Heights
Christ Church
Barbados, W.I
Common Stock . . . . . . . . . . . . . Bear Bay Europe (Luxembourg) S.A. 800,000 7.25%
12 Rue Leon Thyes
L-2636, Luxembourg
Common Stock . . . . . . . . . . . . . Capital CVS Lt e 1,600,000 14.50%
17, Rue Des Camelias
Blainville, Quebec
CANADA J7C-4T2
Common Stock . . . . . . . . . . . . . 9082-8369 Quebec, Inc. 1,600,000 14.50%
3730 Blvd. Cremazie Est
Suite 501
Montreal, Quebec
CANADA
Common Stock . . . . . . . . . . . . . Corinne Lewin 900,000 8.16%
Chateau Perigord
6, Lacets St-Leon
MC 98000, Monaco
Common Stock . . . . . . . . . . . . . Chippawa Trade Limited 700,000 6.34%
P.O. Box 107
Oceanic House
Duke Street
Grand Turk
Turks and Caicos Islands, B.W.I.
Common Stock . . . . . . . . . . . . . Hallsbury Enterprises Ltd. 650,000 5.89%
R.G. Solomon Arcade
Suite 11
Charlestown, Nexis
West Indies
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Name Amount of
Title of class of beneficial owner beneficial ownership of class Percent
---------------------------- --------------------------------------- ----------------------------- --------
<S> <C> <C> <C>
Common Stock . . . . . . . . Victor Lacroix 3,800,000* 34.45%
President and Director
Common Stock . . . . . . . . Gilles Charest 1,600,000** 14.50%
Secretary and Director
Common Stock . . . . . . . . (All Officers and 5,400,000 48.95%
Directors as a Group)
<FN>
*Since Mr. Lacroix is the Chief Executive Officer of Bear Bay Holding Canada which controls Bear
Bay Management and Bear Bay Europe, Mr. Lacroix beneficially owns a total of 3,800,000
shares.
**Mr. Charest's beneficial ownership derives from his ownership of 50% of Capital CVS
Lt e.
</FN>
</TABLE>
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, 1999 and 1998.
<PAGE>
W-WAVES USA, INC.
AND SUBSIDIARIES
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
Financial Statements
December 31, 1999
<PAGE>
ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the AICPA
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail KAndersen @msn.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
W-Waves USA, Inc.
(Formerly Arrow Management, Inc.)
We have audited the consolidated balance sheet of W-Waves USA, Inc. (formerly
Arrow Management, Inc.)(a development stage company) as of December 31, 1999,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the period March 19, 1999 (date of inception) to December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We did not examine the
financial statements of W-Waves USA, Inc., White Wolf Audio Video Electronics
Systems, Inc., Radison Acoustique Ltee, and XD-Lab R&D Inc., consolidated
subsidiaries, which statements reflect total assets constituting 96% and 100%,
respectively, of the consolidated revenues for the year then ended. Those
statements were examined by other auditors whose reports have been furnished to
us, and our opinion expressed herein, insofar as it relates to the amounts
included for the year ended December 31, 1999, is based solely on the reports of
the other auditors.
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 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, based on our examinations and the reports of other auditors
referred to above, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
W-Waves USA, Inc., as of December 31, 1999, and the results of its operations
and its cash flows for the period March 19, 1999 (date of inception) to December
31, 1999, 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 11 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ANDERSEN ANDERSEN & STRONG, L.C.
Salt Lake City, Utah
May 19, 2000
A member of ACF International with affiliated offices worldwide
<PAGE>
FRANK TROMBINO, CA.
Comptable Agree Chartered Accountant
AUDITOR'S REPORT
To the Shareholders of W-Waves USA INC.
I have audited the non-consolidated balance sheet of W-Waves USA Inc. as at
December 31, 1999 and the non-consolidated statements of earnings, deficit and
cash flows for the period them ended. These financial statements are the
responsibility of the company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards,
Those standards require that I plan and perform an audit to obtain reasonable
assurance 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.
In my opinion, these non-consolidated financial statements present fairly, in
all material respects, the financial position to the company as at December 31,
1999 and the results of its operations and its cash flows for the period then
ended in accordance with generally accepted accounting principles.
/s/ FRANK TROMBINO
Chartered Accountant
Montreal, Quebec
May 8, 2000
4875 Boul Metropolitain EST. Bureau 202
Saint-Leonard (Quebec) H1R 3J2
Telephone: (514) 325-7000
Telecopieur: (514) 325-8980
<PAGE>
FRANK TROMBINO, CA.
Comptable Agree Chartered Accountant
AUDITOR'S REPORT
To the Shareholder of White Wolf Video Electronics Systems Inc.
I have audited the non-consolidated interim balance sheet of White Wolf Video
Electronics Systems Inc. as at December 31, 1999 and the non-consolidated
interim statements of earnings and deficit for the six month period then ended.
These financial statements are the responsibility of the company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance 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.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position to the company as at December 31, 1999
and the results of its operations and its cash flows for the six-month period
then ended in accordance with generally accepted accounting principles.
/s/ FRANK TROMBINO
Chartered Accountant
Montreal, Quebec
May 2, 2000
4875 Boul Metropolitain EST. Bureau 202
Saint-Leonard (Quebec) H1R 3J2
Telephone: (514) 325-7000
Telecopieur: (514) 325-8980
<PAGE>
FRANK TROMBINO, CA.
Comptable Agree Chartered Accountant
AUDITOR'S REPORT
To the Shareholders of Radison Acoustique Ltee
I have audited the interim balance sheet of Radison Acoustique Ltee as at
December 31, 1999 and the interim statements of earnings and retained earnings
for the two-month period then ended. These financial statements are the
responsibility of the company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
- J conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance 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.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1999
and the results of its operations and its cash flows for the two-month period
then ended in accordance with generally accepted accounting principles.
/s/ FRANK TROMBINO
Chartered Accountant
Montreal, Quebec
May 3, 2000
4875 Boul Metropolitain EST. Bureau 202
Saint-Leonard (Quebec) H1R 3J2
Telephone: (514) 325-7000
Telecopieur: (514) 325-8980
<PAGE>
FRANK TROMBINO, CA.
Comptable Agree Chartered Accountant
AUDITOR'S REPORT
To the Shareholders of XD-LAB R&D INC.
I have audited the interim balance sheet of XD-LAB R&D INC. as at December 31,
1999 and the interim statements of earnings and deficit for the one-month period
then ended. These financial statements are the responsibility of the company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance 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.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position to the company as at December 31. 1999
and the results of its operations and its cash flows for the one-month period
then ended in accordance with generally accepted accounting principles.
/s/ FRANK TROMBINO
Chartered Accountant
Montreal, Quebec
May 4, 2000
4875 Boul Metropolitain EST. Bureau 202
Saint-Leonard (Quebec) H1R 3J2
Telephone: (514) 325-7000
Telecopieur: (514) 325-8980
<PAGE>
W-WAVES USA, INC.
CONSOLIDATED BALANCE SHEET
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
December 31, 1999
ASSETS
1999
----
CURRENT ASSETS
Cash and cash equivalents $ 27,197
Accounts receivable, net 19,752
Inventory 37,686
Prepaid expenses and other current assets 3,090
Goodwill, net 169,624
-------
Total Current Assets 257,349
-------
BUILDING AND EQUIPMENT, net 82,407
--------
OTHER ASSETS
Trade marks, patents 2,154
Advance on royalties 9,373
Organization costs 1,815
--------
13,342
--------
$ 353,098
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 102,564
Income taxess payable 1,561
Current portion of long-term obligations 1,636
Note payable - Acquisition 131,242
Note payable - related corporations 792,957
-------
Total Current Liabilities 1,029,960
---------
LONG-TERM DEBT OBLIGATIONS 50,879
--------
MINORITY INTEREST IN SUBSIDIARY 159,214
---------
COMMITMENTS -
STOCKHOLDERS' EQUITY
Common stock 11,031
Additional paid-in capital -
Accumulated deficit (897,986)
--------
(886,955)
-------
$ 353,098
========
See accompanying notes
<PAGE>
W-WAVES USA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
For the Period March 19, 1999 (Date of Inception) to December 31, 1999
From March 19,
1999
(Date of Inception)
to December 31,
1999
---------------
REVENUE $ 14,422
COST OF SALES
10,880
---------------
3,542
---------------
COSTS AND OPERATING EXPENSES
Consulting and professional fees 820,402
Interest expense 18,121
General and administrative 63,005
---------------
Total Costs and Expenses 901,528
---------------
LOSS FROM OPERATIONS (897,986)
INCOME TAXES -
---------------
NET LOSS $ (897,986)
===============
AVERAGE COMMON AND EQUIVALENT SHARES
2,208,382
===============
Diluted 2,208,382
===============
NET LOSS PER SHARE
Basic $ (0.41)
================
Diluted $ (0.41)
================
See accompanying notes.
<PAGE>
W-WAVES USA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
For the Period March 19, 1999 (Date of Inception) to December 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
---------------- Paid ln Treasury Accumulated
Shares Amount Capital Stock Deficit Total
--------- -------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 19, 1999 (Date of Inception) - $ - $ - $ - $ - $ -
Disposition of subsidiary (2,885) (2,885)
Acquisition of'Arrow Management, Inc. 5,580,700 5,581 - 5,581
Issuance of treasury stock upon
reorganization 2,885 2,885
Issuance of 5,450,000 shares upon
reorganization 5,450,000 5,450 5,450
Net loss - - - - (897,986) (897,986)
---------- --------- --------- -------- ----------- ---------
BALANCE December 31, 1999 11,030,700 $ 11,031 $ - $ - $ (897,986) $(886,955)
========== ========== ========= ======== =========== =========
</TABLE>
See accompanying notes.
<PAGE>
W-WAVES USA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
For the Period March 19, 1999 (Date of inception) to December 31, 1999
From March 19, 1999
(Date or Inception)
to December 31,
1999
------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (897,986)
Adjustments to reconcile net income loss to net
cash provided by operating activities
Depreciation and amortization 9,028
Accounts receivable (19,752)
Other assets (53,385)
Accounts payable and other liabilities 105,761
------------------
(856,334)
------------------
CASH FROM INVESTING ACTIVITIES
Acquisition of equipment and leaseholds (91,302)
Goodwill on acquisitions of subsidiaries (160,611)
------------------
(251,913)
------------------
CASH FROM FINANCING ACTIVITIES
Issuance-preferred shares-minority interest 159,214
Lang term debt 50,879
Note payable - acquisition 131,242
Note payable - related corporations 792,957
------------------
1,134,292
------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 26,045
CASH AND CASH EQUIVALENTS
Beginning of period 1,152
------------------
End of period $ 21,197
==================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ -
==================
Income taxes $ -
==================
NON-CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of 5,450,000 shares upon reorganization $ 5,450
------------------
See accompanying notes.
<PAGE>
W-WAVES USA, INC.
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. ORGANIZATION AND BUSINESS ACTIVITY
Arrow Management, Inc. (Arrow) was incorporated under the laws of the State of
Nevada on January 14, 1988. On September 30, 1993, Arrow issued 5,250,700 shares
of its common stock to acquire 99.45% of the outstanding stock of Panorama, an
affiliated company. The transaction was accounted for under the
pooling-of-interests method of accounting, thus, the financial statements were
restated as if the Companies had been consolidated for all periods presented. In
December 1996, Arrow canceled 350,000 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%. On November 19, 1999,
Arrow exchanged its interest in Panorama for 3,094,700 shares held as treasury
stock. At approximately the same time, Arrow entered into a plan of
reorganization with W-Waves USA, Inc. (W-Waves) (a Delaware corporation) to
issue the 3,094,700 shares of treasury stock and an additional 5,450,000
previously unmissed shares to acquire 100% of the outstanding stock of W-Waves.
The transaction was accounted for as a reverse acquisition. On October 21, 1999,
Arrow flied a Certificate of Name Change with the State of Nevada changing its
name to W-Waves USA, Inc. (the Company). The Company and its subsidiaries market
technologies and products in the audio industry, however, they are currently in
the development stage.
The Company may pursue interests in various other business opportunities that,
in the opinion of management, may provide a profit to the Company. Additional
external financing or other capital may be required to proceed with any business
plan that may be developed by the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING Policies
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company,
W-Waves USA Inc., White Wolf Audio Video Electronics Systems Inc., Radison
Acoustique Ltee, and X-D LAD R&D Inc. All significant intercompany transactions
arid balances have been eliminated.
Revenue Recognition
-------------------
The Company recognizes revenue equal to the cash to be received from the
assembly and repair of acoustic systems when the buyer has made an unconditional
commitment to pay and the earnings process has been completed by the
finalization of a transaction.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments purchased with original
maturities of less than three months to be cash equivalents.
Inventories
-----------
Inventories consist of acoustic systems and are stated at the lower of cost
(first-in first-out basis) or market.
<PAGE>
W-WAVES USA, INC.
(Formerly Arrow Management, inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Comprehensive Income
--------------------
In l999, the Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income". This statement establishes rules for
the reporting of comprehensive income and its components. The adoption of SFAS
No. 130 had no impact on total stockholders' equity as of December 31, 1999,
Income Taxes
------------
Income taxes are computed using the asset and liability method. Under this
method, deferred income tax assets and liabilities are determined based on the
differences between the financial and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. Statement of
Financial Accounting Standards No. 109, requires a valuation allowance against
deferred tax assets if, based on the weight of available evidence, it is more
likely titan not that some or all of its deferred tax assets will not be
realized.
Depreciation and Amortization
-----------------------------
Property and equipment are stated at cost. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets, generally
five to seven years. Real property is depreciated on a straight-line basis over
a period of twenty years. Maintenance and repairs are charged to operations when
incurred. Betterments and renewals are capitalized.
Estimates and Assumptions
-------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.
Basic and Diluted Net income (Loss) Per Share
---------------------------------------------
Basic net income (loss) per share is computed using the weighted average number
of shares outstanding during the period. Diluted net income (loss) per share is
computed using the weighted average number of common shares and common
equivalent shares outstanding during the period. Common equivalent shares
consist of shares issuable upon the exercise of stock options and stock
warrants.
Allowance for Doubtful Accounts
-------------------------------
The Company provides an allowance for uncollectible accounts which are doubtful
of collection. The allowance is based upon management's periodic analysis of
receivables, evaluation of current economic conditions and other economic
factors. Ultimate losses may vary from current estimates and, as additions to
the allowance become necessary, they are charged against earnings in the period
they become known. Losses are charged and recoveries are credited to the
allowance.
<PAGE>
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Impairment of Long-Lived Assets
-------------------------------
The Company evaluates the recoverability of long-lived assets in accordance with
"SFAS" No. 121, `~Accounting for the Impairment of Long-Lived Assets to be
Disposed of". SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets.
Advertising Costs
-----------------
The Company recognizes advertising expenses in accordance with Statement of
Position 93-7, "Reporting on Advertising Costs ", As such, the Company expenses
the cost of communicating advertising in the period in which the advertising
space or airtime is used. There were no advertising expenses for any of the
years presented.
Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and accounts receivable.
Cash is deposited with high credit, quality financial institutions. Accounts
receivable are typically unsecured and are derived from revenues earned from
customers located throughout the United States. The Company performs ongoing
credit evaluations of its customers and maintains reserves for potential credit
losses; historically, such losses have been within management's expectations. At
December 31, 1999 and 1998, no one customer accounted for 10% or more of the
accounts receivable balance.
Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments, including cash, accounts receivable,
accounts payable, notes payable and long-term obligations are carried at cost,
which approximates their fair value because of the short-term maturity of these
instruments.
Goodwill
--------
Goodwill resulting from acquisition of subsidiaries is being amortized on a
straight-line basis over the estimated life of the benefit of five years.
Recent Accounting Pronouncements
--------------------------------
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), `Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use ". This standard requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company does not expect that the adoption of SOP 98-1
will have a material impact on its consolidated financial statements,
<PAGE>
W-WAVES LISA, INC.
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Recent Accounting Pronouncements
--------------------------------
In April 1998, the American Institute of Certified Public Accountants issued SOP
98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 is effective for
the Company's fiscal year ending June 30, 2000. SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
is not expected to have a material effect on the Company's consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," SEAS No, 133 is effective for fiscal years
beginning after June 15, 1999. SEAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designed as pan of a
hedge transaction and, if it is, the type of hedge transaction. The Company does
not expect that the adoption of SFAS No, 133 will have a material impact on its
consolidated financial statements because the Company does not currently hold
any derivative instruments.
3. PROPERTY AND EQUIPMENT
Building and equipment consisted of the following at December 31, 1999.
Office equipment $59,859
Laboratory equipment 8,570
Computer equipment 3,166
Building 40,382
------
111,977
Less: Accumulated depreciation (29,570)
------
$82,407
=======
Depreciation expense for the year ended December 31, 1999 was $9,028.
<PAGE>
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
4. NOTES PAYABLE
At December 31, 1999, long-term obligations consisted of the following:
Note payable to bank, payable in monthly installments
of $428 including interest at 8.2% per annum,
collateralized by real estate due (and
renewable) at June 20, 2000. $30,755
Note payable to former shareholder payable on
demand including interest imputed interest
at 8% 21,760
--------
52,515
Less current portion (1,636)
--------
$50,879
========
5. NOTE PAYABLE - ACQUISITION
On November 1, 1999, 100 % of the common stock of Radison Acoustique Ltee was
acquired by White Wolf Audio Video Electronics Systems, Inc. (a wholly-owned
subsidiary of the Company) for the purchase price of $181,719. As of December
31, 1999, the outstanding balance on the transaction was $13 1,242. The balance
was satisfied in January 2000.
6. ADVANCES PROM RELATED PARTIES
During 1999, advances totaling $776,619 were made to the Company by related
parties. Such advances include imputed interest at 8% per annum and are due upon
demand.
7. COMMON STOCK
The Company is authorized to issue 50,000,000 shares of' $.001 par value common
stock. As of December 31, 1999 and 1998, the Company has 11,030,700 and
2,580,700 shares of common stock outstanding, respectively.
During 1999, Arrow Management, Inc. (Arrow) exchanged its interest in Panorama
for 3,094,700 shares held as treasury stock. At approximately the same time,
Arrow entered into a plan of reorganization with W-Waves USA, Inc. (W-Waves) (a
Delaware corporation) to issue the 3,094,700 shares of treasury stock and an
additional 5,450,000 of previously unissued shares to acquire 100% of the
outstanding stock of W-Waves. On October 21, 1999, Arrow filed a Certificate of
Name Change with the State of Nevada changing its name to W-Waves USA, Inc. (the
Company).
<PAGE>
W-WAVES USA, INC.
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
7. COMMON STOCK (Continued)
236,627 shares of (Class "B") preferred stock of White Wolf Audio Electronics
Systems, Inc. is owned by shareholders other than the Company and is treated as
a minority interest. Such preferred stock is non-voting, bearing non-cumulative
dividends to be determined by the board of directors and is redeemable at par by
the Company or the bearer(s)
8. INCOME TAXES
The components of the provision for income taxes at December 31, 1999 are as
follows;
Current - Federal $ -
Deferred - Federal -
---------
Income tax prevision $ -
=========
A reconciliation of the consolidated income tax provision to the amount expected
using the U.S. Federal statutory rate follows:
Expected amount using U.S. Federal statutory rate
Non-deducible expenses $ -
Depreciation and bad debts allowance -
---------
Effective Tax $ -
=========
Deferred tax assets (liabilities) consisted of the following at December 31,
1999.
Deferred tax assets
Net operating loss carryforwarde $ 298,000
---------
298,000
Deferred tax liability -
298,000
Valuation allowance (298,000)
---------
-
=========
At December 31, 1999, the Company has net operating loss (NOL) carryforwards
totaling approximately $882,000. The carryforwards begin to expire in fiscal
year 2114. Deferred tax assets have been reduced by a valuation allowance
because of uncertainties as to future recognition of taxable income to assure
realization.
<PAGE>
W-WAVES USA, INC.
(Formerly Arrow Management, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
9. Commitments
Office services are provided, without charge, by Capital General Corporation, a
major shareholder of the Company. 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 fox' the resolution of such conflicts.
10. LOSS PER SHARE
Net loss available to common $ (897,986) $ (897,986)
Shareholders
Weighted average Shares 2,208,382 2,208,382
Effect of dilutive securities
Option - -
Warrants - -
------------- --------------
2,208,382 2,208,382
Basic income loss per share
(based on Weighted average
shares) $ (0.41) $ (0.41)
Diluted loss per share $ (0.41) $ (0.41)
Following is a reconciliation of the numerators of the basic and diluted income
(loss) per share for the years ended December 31, 1999 and 1998:
11. GOING-CONCERN
As shown in the accompanying financial statements, the Company incurred net
losses during the period March 19, 1999 (date of inception) to December 31, 1999
of $897,986, and as of December 31, 1999, current liabilities exceeded its
current assets by $772,611. Those factors could create an uncertainty about the
Company's ability to continue as a going concern.
Continuation of the Company as a going concern is dependent upon obtaining
additional capital and ultimately, upon the Company's attaining profitable
operations. The management of the Company intends to seek additional funding
which will be utilized to fund additional product development and continue
operations. The Company recognizes that, if it is unable to raise additional
capital, it may find it necessary to substantially reduce or cease operations.
<PAGE>
REPORTS ON FORM 8-K.
A) A report on Form 8-K was filed during the fourth quarter of 1999.
That report is incorporated by reference. The financial statements called for
in that report are filed as part of this annual report on Form 10-K.
<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.
W-WAVES USA, INC.
(formerly Arrow Management, Inc.)
Date: May _____, 2000 By: Victor Lacroix, President 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: May ____, 2000 By: Victor Lacroix, President and Director
Date: May ____, 2000 By: Gilles Charest, Secretary and Director
