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, 1997

                                       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,  1998,  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, 1998
$.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 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
determinded  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%.

         At the  time of  the above  mentioned  acquisition, Panorama was a real
estate  development  company  with its principal asset  being approximately  300
acres of land  located on the  outskirts  of Idaho Falls, Idaho, platted for 2.5
acre lot sites,  which was the minimum allowed by the Bonneville County Planning
and Zoning Commission for subdivisions using septic tanks. Approximately 55 lots
had been  sold by the previous owner, AMR Corporation,  which filed a Chapter 11
bankruptcy and ceased  development of the  property for several years.  AMR sold
the  property  to  Panorama  in 1991 as part  of  its resolving  its  bankruptcy
proceedings.

         Upon  its  acquisition  of  the  majority  of  the Panorama shares, the
Company  determined that  a significantly  different approach  to developing the
subdivision,  i.e., installation of  sewer lines  and  replatting of smaller lot
sizes, would achieve greater success.  Although the Company began the design and
engineering for the changes, in 1996, it determined not  to develop the land but
instead to list  it for sale.   One factor that  lead to the change in plans was
the slowdown in economic development and related decrease in consumer demand for
new  housing in the Idaho Falls area.  The Company also rescinded its agreements
with ITEX  Corporation  and  Haydon,  Ives  & Neal,  Inc. for  trade credits for
television  advertising and travel  which it intended to exchange  for goods and
services  in  developing  the  land.  See  Note 7 to  the consolidated financial
statements for further information concerning this.  See also notes to financial
statements respecting sales of other  real estate and  securities.  In December,
1997, the Panorama subdivision was sold for $330,000.00.

         At present the Company  is still looking for  business opportunities in
any industry.  Until it finds one that management believes to be appropriate for
the Company, it plans to make various investments as  may seem appropriate.  For
example,  during  1997,   the  Company   loaned  $1,000,000  at  8%  to  Fortune
Thoroughbred Farms, Inc. for  the  purchase  of  960  acres  of  Southern  Idaho
farmland (see Note 5 to the consolidated financial statements).


                                       2
<PAGE>


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.

         There are  no  pending  legal proceedings  involving the Company or its
subsidiary.
                                      

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, 1997.

                                     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,  1998,  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 1997

                                                1997             1996              1995              1994             1993
<S>                                          <C>              <C>             <C>               <C>              <C>      
Total Assets...........................    2,060,428          617,513           630,357         3,987,178        4,012,213
Net Sales..............................      424,561            - 0 -             - 0 -           104,000           44,000
Operating Expenses.....................       23,290            8,983         1,975,111            84,945           23,517
Net Earnings (Loss)....................    1,492,918           11,826        (1,960,141)          (41,004)         (16,763)
Per Share Data Earnings (Loss).........          .27              .00              (.33)             (.01)            (.00)
Average Shares Outstanding.............    5,580,700        5,580,700         5,930,700         6,250,700        6,250,700

</TABLE>

                                       3
<PAGE>

ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operation.

         The Company is not now,  nor  has it at  any time,  been engaged in any
regular business operations. Its activity has consisted of isolated transactions
in parcels of real estate, most of which have now been sold, and acquisition and
sale of securities, which have now also been sold.  The Company presently is not
engaging in any significant or regular ongoing  costs of operations or debt.  It
can be said  that the  Company is  relatively  liquid under these circumstances.
However,  in the  event a business opportunity should  become available  and the
Company elects to embark on such, there is no assurance the funds of the Company
would be sufficient  for such  new endeavor.   The  Company has made no material
commitments for capital expenditures.  Until the Company identifies a particular
business opportunity it wishes to pursue, it intends  to continue to monitor its
investments and keep its liquid assets invested at reasonable interest rates.
       
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.

         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  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
----                               ---      --------
Krista Nielson                     35       President, Director

Sasha Belliston                    25       Secretary/Treasurer, Director

         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, 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.

                                       4
<PAGE>

         SASHA BELLISTON,  has been  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 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
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.

         Each of the above  directors  of the  Company  is a  director  of Saber
Capital,  Inc.,  Vicuna,  Inc.,  Why Not?, Inc.,  Kowtow, Inc., Radar Resources,
Inc.,  Gopher, Inc.,  Hyena  Capital, Inc.,  Jackal Industries, Inc.,  Longhorn,
Inc.,  Bioethics, Ltd., and Quantitative Methods Corporation 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  (former  officer and director of
the Company)  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  April  16, 1997,  Mr.  Yeaman was
convicted of  one count  of conspiracy,  five  counts of  wire fraud,  and three
counts of securities fraud.  On January 22, 1998, Mr. Yeaman was sentenced to 14
months imprisonment.  He was also fined $20,000.00.  Mr. Yeaman began his prison
sentence at FPC Nellis, Las Vegas,  Nevada on  March 3, 1998.  Upon release from
prison,  Mr. Yeaman  will be on  supervised  release for  a term of three years,
under the terms of which he is  required as follows:   (1) to not commit another
federal,  state or  local crime,  (2) to refrain from engaging in the securities
and  insurance  industries,  and   (3)  various  other  standard  conditions  of
supervised release.

         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.

                                       5
<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., and 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.

                                       6
<PAGE>

         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
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, 1997,  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(1,2,3)                          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(1,2,3)    2,952,300                    52.90%

</TABLE>

                                       7
<PAGE>

  (1)Capital  General  Corporation,  Krista  Nielson,  David R. Yeaman and Sasha
Belliston 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.
Krista  Nielson,   the  Company's  President,  owns  approximately  18%  of  the
outstanding stock  of Capital General.  The  stockholders  of Yeaman Enterprises
are the adult children of the family of David Yeaman, who resigned as an officer
and  director of  the  Company and  simultaneously  resigned  as an  officer and
director  of  Capital  General  and  Yeaman  Enterprises in  April, 1997.  Sasha
Belliston,  Mr.  Yeaman's  daughter,  is  the  principal  shareholder  of Yeaman
Enterprises.

Ms. Belliston's beneficial ownership of the securities of the Company is derived
from the shares directly  owned by Capital General  and Yeaman Enterprises.  Ms.
Belliston  beneficially owns  shares  of the Company  which are  owned by Yeaman
Enterprises and Capital General in that she 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.  Ms. Belliston  and  Ms. Nielson  control  and  have  beneficial
ownership  of the shares  owned by  Capital General  and  Yeaman Enterprises and
exercise shared  voting  power and  shared  investment power  over those shares.
While  Mr. Yeaman  has resigned  from his  affiliation  with the Company, Yeaman
Enterprises and Capital General,  he may  continue to be  deemed an affiliate of
the Company  by virtue  of  his  familial and  historical relationships with the
Company, its shareholders, officers and directors.

(3) Ms. Belliston has power of attorney over the shares owned by David Yeaman.

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, 1997, 1996 and 1995.



         Reports on Form 8-K.
         --------------------
         There were no reports on Form 8-K filed during the fourth quarter
         of 1997.




                                       8
<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: April 10, 1998             By: s\Krista Nielson
                                    --------------------------------------------
                                    Krista Nielson, 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: April 10, 1998             By: s\Krista Nielson
                                    --------------------------------------------
                                    Krista Nielson, President, CEO and Director




Date: April 10, 1998             By: s\Sasha Belliston
                                    --------------------------------------------
                                    Sasha Belliston, Secretary/Treasurer, CFO
                                        and Director


                                       9
<PAGE>

         
                                 SMITH & COMPANY
                         A PROFESSIONAL CORPORATION OF
                          CERTIFIED PUBLIC ACCOUNTANTS

MEMBERS OF:                                         10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF                                 SALT LAKE CITY, UTAH 84101
     CERTIFIED PUBLIC ACCOUNTANTS                     TELEPHONE:  (801) 575-8297
UTAH ASSOCIATION OF                                   FACSIMILE:  (801) 575-8306
     CERTIFIED PUBLIC ACCOUNTANTS              EMAIL: smith&co@smithandcocpa.com
--------------------------------------------------------------------------------



                          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,
1997  and  1996,  and  the  related   statements  of   operations,   changes  in
stockholders'  equity,  and  cash  flows for the  years ended December 31, 1997,
1996, and 1995 and for the period of  January 14, 1988  (date of  inception)  to
December 31, 1997.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to express  an  opinion on these
financial statements based on our 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, 1997 and
1996 and the results of their  operations,  changes in stockholders' equity, and
their cash flows for the years ended  December 31,  1997, 1996, and 1995 and for
the period of January  14,  1988 (date of  inception)  to  December  31, 1997 in
conformity with generally accepted accounting principles.


                                                s\Smith & Company
                                                CERTIFIED PUBLIC ACCOUNTANTS


Salt Lake City, Utah
April 6, 1998

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,
                                                                                           1997            1996
<S>                                                                               <C>              <C>          
ASSETS

  CURRENT ASSETS
       Cash in bank                                                               $      652,707   $      21,844
       Current portion of note receivable (Note 5)                                        23,000               0  
       Current portion of contracts receivable (Note 8)                                    9,189          21,945
                                                                                  --------------   -------------
                                                         TOTAL CURRENT ASSETS            684,896          43,789

   OTHER ASSETS
       Real estate (Note 6)                                                               30,000         395,000
       Investment security (Note 9)                                                            0         150,003
       Note receivable - related party (Note 5)                                          977,000               0
       Long-term portion of contracts receivable (Note 8)                                368,532          28,721
                                                                                  --------------   -------------
                                                                                       1,375,532         573,724
                                                                                  --------------   -------------
                                                                                  $    2,060,428   $     617,513
                                                                                  ==============   =============
 
LIABILITIES & EQUITY

    CURRENT LIABILITIES
       Accrued expenses payable                                                   $        1,215   $       1,215
                                                                                  --------------   -------------
                                                    TOTAL CURRENT LIABILITIES              1,215           1,215

       Minority interest in subsidiary                                                   191,000          57,000

    STOCKHOLDERS' EQUITY
       Common Stock $.001 par value:
         Authorized - 50,000,000 shares
         Issued and outstanding - 5,580,700 shares                                         5,581           5,581
       Additional paid-in capital                                                      2,380,667       2,514,667
       Deficit accumulated during development stage                                     (518,035)     (2,010,953)
       Unrealized gain on investment security (Note 9)                                         0          50,003
                                                                                  --------------   -------------
                                                   TOTAL STOCKHOLDERS' EQUITY          1,868,213         559,298
                                                                                  --------------   -------------

                                                                                  $    2,060,428   $     617,513
                                                                                  ==============   =============


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
                                                                    1997            1996            1995           12/31/97
<S>                                                            <C>            <C>             <C>            <C>           
Net sales                                                      $    424,561   $          0    $          0   $      572,561
Cost of sales                                                       371,198              0               0          489,824
                                                               ------------   ------------    ------------   --------------
                                               GROSS PROFIT          53,363              0               0           82,737

Loss from impairment of land value (Note 6)                               0              0       1,955,000        1,955,000
General and administrative expenses                                  23,290          8,983          20,111          225,816
                                                               ------------   ------------    ------------   --------------
                                           OPERATING (LOSS)          30,073         (8,983)     (1,975,111)      (2,098,079)

Other income
            Sale of securities                                    1,443,680              0               0        1,443,680
            Interest                                                 12,108          8,550           8,454           91,074
            Consulting                                                    0          5,000               0            5,000
            Government subsidy                                        7,057          7,259           6,516           40,290
                                                               ------------   ------------    ------------   --------------
                                         TOTAL OTHER INCOME       1,462,845         20,809          14,970        1,580,044
                                                               ------------   ------------    ------------   --------------
                      NET INCOME (LOSS) BEFORE INCOME TAXES       1,492,918         11,826      (1,960,141)        (518,035)

Provision for income taxes                                                0              0               0                0
                                                               ------------   ------------    ------------   --------------
                                          NET INCOME (LOSS)    $  1,492,918   $     11,826    $ (1,960,141)  $     (518,035)
                                                               ============   ============    ============   ==============
Net income (loss) per weighted average
     common shares outstanding                                 $        .27   $        .00    $       (.33)
                                                               ============   ============    ============
Weighted average number of common shares
             outstanding used to compute net income (loss)        5,580,700      5,580,700       5,930,700
                                                               ============   ============    ============



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)
     Minority interest adjustment                                                               (134,000)
     Net income for year                                                                                          1,492,918
                                                             ---------     -----------     -------------      -------------
Balances at 12/31/97                                         5,580,700           5,581     $   2,380,667      $    (518,035)
                                                             =========     ===========     =============      =============

(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
                                                                   1997             1996            1995          12/31/97
<S>                                                        <C>             <C>              <C>             <C>   
OPERATING ACTIVITIES
           Net income (loss)                               $   1,492,918   $       11,826   $  (1,960,141)  $     (518,035)
           Adjustments to reconcile net income (loss) to
              cash provided (required) by operating
              activities:
                Amortization                                           0                0               0              100
                Cost of land sold                                365,000                0               0          470,000
                Cost of securities sold                          100,000                0               0          100,000
                Non-cash income                                        0           (5,000)              0           (5,000)
                Itex Trade Dollars used                                0                0               0            8,248
                Loss from impairment of land
                  value (Note 6)                                       0                0       1,955,000        1,955,000
           Changes in assets and liabilities:
                Contracts receivable                            (327,055)          13,349          16,104         (377,721)
                Accrued expenses                                       0           (7,999)        (16,602)           1,215
                                                           -------------   --------------   -------------   --------------
                            NET CASH PROVIDED (REQUIRED)
                                 BY OPERATING ACTIVITIES       1,630,863           12,176          (5,639)       1,633,807
INVESTING ACTIVITIES
           Purchase of real estate                                     0                0               0         (105,000)
           Loan to related party                              (1,000,000)               0               0       (1,000,000)
           Organization costs                                          0                0               0             (100)
                                                           -------------   --------------   -------------   -------------- 
                                      NET CASH (USED) BY
                                    INVESTING ACTIVITIES      (1,000,000)               0               0       (1,105,100)
FINANCING ACTIVITIES
           Proceeds from sale of common stock (1)                      0                0               0          124,000
           Loans                                                       0                0           8,337           10,417
           Repayments                                                  0           (8,337)              0          (10,417)
                                                           -------------   --------------   -------------   --------------
                         NET CASH PROVIDED (REQUIRED) BY 
                                    FINANCING ACTIVITIES               0           (8,337)          8,337          124,000
                                                           -------------   --------------   -------------   --------------
                             INCREASE (DECREASE) IN CASH
                                    AND CASH EQUIVALENTS         630,863            3,839           2,698          652,707

           Cash and cash equivalents at beginning
              of year                                             21,844           18,005          15,307                0
                                                           -------------   --------------   -------------   --------------
                               CASH AND CASH EQUIVALENTS
                                          AT END OF YEAR   $     652,707   $       21,844   $      18,005   $      652,707
                                                           =============   ==============   =============   ==============
SUPPLEMENTAL INFORMATION
           Cash paid for interest                          $           0   $          477   $           0   $          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.


Fair value of Financial Instruments:
------------------------------------
The carrying  amount of  cash and accrued expenses approximate fair value due to
the short  maturity periods of  these instruments.  The fair value of $1,377,721
in notes  receivable  at December  31, 1997,  based  on the present value of the
receivable at interest rates of 8% and 9%, is $1,056,017.


                                      F - 6

<PAGE>

                      ARROW MANAGEMENT, INC. AND SUBSIDIARY
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Cash and Cash Equivalents:
--------------------------
For  financial  statement  purposes,  the Company  considers  all highly  liquid
investments  with an original maturity of three months or less when purchased to
be cash equivalents.

Concentration of Credit Risk:
-----------------------------
The Company maintains deposits in excess of federally insured limits.  Statement
of  Financial  Accounting  Standards   No.  105  identifies  these  items  as  a
concentration of credit  risk requiring  disclosure, regardless of the degree of
risk.  The risk is managed by maintaining all deposits in high quality financial
institutions.

The  Company  requires  collateral  to  support  notes and contracts receivable.
Management considers  the real  property  pledged as  security for its notes and
contracts to be reasonable in the circumstances.

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%.


                                      F - 7

<PAGE>


                      ARROW MANAGEMENT, INC. AND SUBSIDIARY
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

In December  1997, the Company  loaned $1,000,000 to Fortune Thoroughbred Farms,
Inc.  The President of  Fortune is  the brother-in-law of the Company's majority
shareholder.  The note bears interest at 8%.  Annual payments  of $103,000 begin
December 31, 1998, with a balloon payment due in December 31, 2007.  The note is
secured by a mortgage on 960 acres of land near Twin Falls, Idaho.

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.  The Company sold the  land for $330,000 in December of
1997.

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, 1997, the current
portion of the receivable was $2,942 and the long-term portion was $25,779 for a
total of $28,721.

In November  1997, a  real estate  parcel was  sold on  contract.   The contract
requires quarterly payments of $2,500 at an interest rate of 9%. At December 31,
1997, the current  portion  of  the  receivable  was $6,247,  and  the long-term
portion was $37,753 for a total of $44,000.

In December 1997, another real estate parcel was sold on contract.  The contract
requires annual payments of $55,000 in 1999 and  $50,000 each year thereafter at
an interest  rate of 8%.   At December 31, 1997, the  entire balance of $305,000
was a long-term asset.

NOTE 9:  INVESTMENT SECURITY
The investment  consisted of 66,668 shares of Profit Financial Corporation.  The
quoted market value at December 31, 1996, was $2.25 per share.  Pursuant to SFAS
No.  115,  the  investment  was  considered  to  be  an  equity security and was
categorized  as  available-for-sale,  and the  increase  in the  market value of
$50,003  at  December 31, 1996,  was shown in the  equity section of the balance
sheet.  The shares were sold in 1997 for $1,543,680.

NOTE 10:  NET OPERATING LOSS CARRYOVER
The Company and Panorama  had  a  net operating   loss carryover  of $516,035 at
December 31, 1997, 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
                           December 31, 1997              December 31, 2012                         0              462,082
                                                                                       --------------       --------------
                                                                                       $        2,000       $      516,035
                                                                                       ==============       ==============
</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, 1997,
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) was $2,285,000  and  $330,000 for  financial reporting purposes.  At  the
time of disposal of  the land, the gain or loss for income tax purposes is based
on  the  original recorded  cost of  the  property  ($2,285,000).  For financial
reporting  purposes, gain or loss on  disposal of the land is based on the "new"
cost basis ($330,000).


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