U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
|X| Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996.
|_| Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
----------- -----------
Commission file number: 0-6292
AAROW ENVIRONMENTAL GROUP, INC.
(Formerly RAIN FOREST - MOOSE, LTD.)
(Name of small business issuer in its charter)
Nevada 73-1491593
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5703 South Hewitt
Johnson, Arkansas 72741
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (501) 444-8688
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
such shorter period that the registrant was required to file such reports), and
has been subject to such filing requirements for the past 90 days. Yes No X
-- --
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. |_|
Issuer's revenues for its most recent fiscal year was $404,056.
The voting stock is not trading or quoted; therefore, the aggregate market
value of the voting stock held by non-affiliates based upon the average bid and
asked prices is not available or determinable.
The number of outstanding of Common Stock as of June 1, 1997, was
9,312,622.
Transitional Small Business Disclosure
Format (Check one):
Yes No X
-- --
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
Part I -1-
Item 1. Description of Business................................................................................-1-
General................................................................................................-1-
Background.............................................................................................-1-
Reincorporation Merger........................................................................-1-
RFM Arkansas Acquisition......................................................................-1-
Business...............................................................................................-2-
Marketing..............................................................................................-2-
Contractual Arrangements...............................................................................-2-
Competition............................................................................................-2-
Government Regulation..................................................................................-3-
Environmental Matters..................................................................................-3-
Employees..............................................................................................-3-
Item 2. Description of Property................................................................................-3-
Item 3. Legal Proceedings......................................................................................-3-
Item 4. Submission of Matters to a Vote of Security Holders....................................................-3-
Part II.........................................................................................................-3-
Item 5. Market for Common Equity and Related Stockholders Matters..............................................-3-
Item 6. Management's Discussion and Analysis or Plan of Operation..............................................-4-
Results of Operations..................................................................................-4-
Liquidity and Capital Resources........................................................................-6-
Item 7. Financial Statements...................................................................................-7-
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................-7-
Part III........................................................................................................-7-
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act......................................................-7-
Item 10. Executive Compensation................................................................................-8-
Compensation of Directors..............................................................................-8-
Stock Option Plan......................................................................................-8-
Officer and Director Liability.........................................................................-9-
Item 11. Security Ownership of Certain Beneficial Owners and Management.......................................-10-
Item 12. Certain Relationships and Related Transactions.......................................................-10-
Item 13. Exhibits and Reports on Form 8-K.....................................................................-11-
(a) Exhibits..................................................................................................-11-
(b) Reports on Form 8-K.......................................................................................-11-
</TABLE>
<PAGE>
Part I
Item 1. Description of Business.
General
Aarow Environmental Group, Inc., a Nevada corporation (the "Company" or
"Aarow Environmental"), through its wholly-owned subsidiary, Rain Forest -
Moose, Ltd., an Arkansas corporation ("RFM Arkansas") , develops, manufactures,
markets and distributes absorbent products, principally Peat Moose Absorbent,
and provides disposal services for end users of such absorbent products and is
licensed to incinerate the absorbent products. The absorbent products are for
both industrial and home use.
The temporary executive offices of Aarow Environmental are located at
5703 South Hewitt, Johnson, Arkansas 72741, and the telephone number of Aarow
Environmental is (501) 444-8688.
Background
Rendezvous Trails of America, Inc. (formerly Holiday Resorts
International, Inc.), the former parent of Aarow Envireonmental, was
incorporation in April 1970. Since 1986, RTA became inactive and did not conduct
any operations or activities through 1995.
Reincorporation Merger. Aarow Environmental was incorporated in Nevada
on February 21, 1996, as Rain Forest - Moose, Ltd., a wholly-owned subsidiary of
Rendezvous Trails of America, Inc., an Oklahoma corporation formed in June 1970
("RTA"). The name of Company was changed from Rain Forest -Moose., Ltd., to
Aarow Environmental Group, Ltd., on June 13, 1997. Pursuant to an Agreement and
Plan of Merger, dated February 23, 1996, RTA merged with and into Aarow
Environmental as the surviving corporation. The merger of RTA with and into
Aarow Environmental effectively changed the state of domicile of RTA to Nevada
as a result of Aarow Environmental being the surviving corporation and was
accounted for as a reorganization of entities under common control which was
recorded at historical cost. Pursuant to the Agreement and Plan of Merger, each
outstanding share of common stock of RTA was converted into one share of Common
Stock, $.001 par value, of Aarow Environmental. Furthermore, on March 5, 1996,
Aarow Environmental split each share of its outstanding Common Stock into two
shares, which effectively resulted in 4,606,234 shares of Common Stock being
issued and outstanding.
RFM Arkansas Acquisition. Pursuant to a Plan of Reorganization and
Agreement of Merger, dated March 5, 1996, RFM Acquisition Corporation of
Oklahoma, Inc., an Oklahoma corporation and wholly-owned subsidiary of Aarow
Environmental ("Acquisition Corporation") merged with and into Rain Forest -
Moose, Ltd., an Arkansas corporation ("RFM Arkansas" or "Subsidiary"), and as
the surviving corporation, became a wholly-owned subsidiary of Aarow
Environmental (the "RFM Arkansas Acquisition"). Under the terms of the Plan of
Reorganization and Agreement of Merger, Aarow Environmental issued to the
shareholders of RFM Arkansas 3,012,468 shares of Common Stock and 3,000,000
shares of Series I Convertible Preferred Stock of Aarow Environmental in
exchange for the issued and outstanding capital stock of RFM Arkansas. The RFM
Arkansas Acquisition was accounted for as a reverse acquisition of Aarow
Environmental by RFM Arkansas. Therefore, the results of operations and other
historical information of Aarow Environmental presented in this Report are those
of RFM Arkansas. See "Item 12. Certain Relationships and Related Transactions."
Upon consummation of the RFM Arkansas Acquisition, the directors and officers of
RFM Arkansas became the directors and officers of Aarow Environmental.
Business
The Company, through RFM Arkansas, its wholly-owned subsidiary,
develops, manufactures, markets and distributes absorbent products, principally
Peat Moose Absorbent, and provides disposal services for end users of the
absorbent products and is licensed to incinerate the absorbent products for
energy recovery. The absorbent products are for both industrial and home use.
1
<PAGE>
Peat Moose Absorbent is an absorbent product consisting of a young blond grade
of Canadian sphagnum peat dehydrated at the Company's manufacturing plant
located in the choska bottoms near Coweta, Oklahoma. The dehydration process
reduces the moisture content of the sphagnum peat to less than 10 percent and is
then blended with certain additives. These additives consists of sodium
bicarbonate used as a neutralizer and flammable vapor suppressant, an anionic
surfactant that allows absorption of water based materials after any oil or
hydrocarbon has been absorbed, and a rich, natural organic compost soil enhancer
in fertilizer form which consists of a proprietary product which aids in the
decomposition of hydrocarbons and accelerates the rate of remediation. The Peat
Moose Absorbent is packaged and sold in various container quantities and forms
including in loose fill bags, dip pads, cotton covered socks, boxed spill kits,
plastic drums and acrylic-ceramic contains.
The Company provides, as a service to its customers in connection with
the sale of the Peat Moose Absorbent products, an incineration disposal service
for the used Peat Moose Absorbent products which generally contain hydrocarbons
and other environmentally hazardous wastes absorbed by and contained in such
used products. This incineration disposal service is provided without cost to
the customer and user of the Peat Moose Absorbent products, other than
transportation to the disposal facility and represents an `end of liability"
disposal service.
The Company's manufacturing and incineration plant is located in
Coweta, Oklahoma and is licensed by the federal Environmental Protection Agency
and the Environmental Quality Department of Oklahoma to operate and incinerate
the used Peat Moose Products in industrial furnace. Forensic drug testing begins
with specimen collection conducted under carefully controlled conditions.
Marketing
The Company markets its products directly to consumers through both the
Company's marketing personnel and independent distributors. Independent
distributors are generally are independent contractors and are provided with
sales promotional materials. All advertising, promotional and solicitation
materials used by distributors must be approved by the Company prior to use. At
June 1, 1997, RFM Arkansas had 38 independent distributors.
Contractual Arrangements
RFM Arkansas sells its products without a formal contract, other than
pursuant to a price list. Because RFM Arkansas does not currently have any
long-term contracts, the Company is not dependent to any significant degree upon
any one customer or contractual relationship with a customer, the termination of
which would have a material adverse effect upon the Company.
Competition
The products manufactured and distributed by the Company compete with
other absorbent products primarily on the basis of technical superiority and
price. The Company believes that its products compete favorably in each of these
categories. Many of the Company's competitors have greater financial resources
than the Company and manufacturer and have diversity of other products.
Government Regulation
The operations of the Company are subject to various federal, state and
local regulation which affect businesses generally, such as taxes, postal
regulations, labor laws, and environment and zoning regulations and ordinances.
Environmental Matters
The incineration services provided by the Company are subject to
federal, state and local regulation. Failure to comply with current or future
federal, state or local environmental laws or regulations could have a material
adverse effect on the Company. The Company believes that it has adequately
warned its employees of potential risks associated with working at the Company's
manufacturing and incineration facilities and has provided a workplace safe from
hazard, as required by the Occupational Safety and Health Administration and
certain Oklahoma laws.
2
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Employees
Prior to May 12, 1997, the Company had six full-time employees, of which two
were employed in manufacturing, and four were employed in sales and marketing
and administrative positions, none of which are represented by a labor
organization. On May 12, 1997, a new President and Secretary were elected for
the Company and the total number of employees was reduced to six.
Item 2. Description of Property.
The Company maintains temporary executive office at 5703 South Hewitt,
Johnson Arkansas 72741. Prior to May 12, 1997, the Company maintained its
executive offices at 4031 B Delmon Lane, Springdale, Arkansas 72762-2179. The
Company believes permanent office space is available under favorable terms in
the Springdale - Johnson, Arkansas area.
The Company's manufacturing and waste incineration facilities are
located in approximately 5,000 square feet of space at Highway 104 South,
Coweta, Oklahoma. The Company considers its current manufacturing and waste
incineration facilities to be adequate for its current needs; however, as the
Company's product sales volume increases, it may be necessary to either relocate
such facilities or establish additional manufacturing and waste incineration
facilities in other locations.
Item 3. Legal Proceedings
The Company does not have any pending litigation.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended December 31, 1996,
the Company did not submit any matters to a vote of its shareholders through the
solicitation of proxies or otherwise.
Part II
Item 5. Market for Common Equity and Related Stockholders Matters
There is not a market for the Company's Common Stock as of the date of
this report, and there has not been any trading of the Common Stock of RTA since
1986. On June 11, 1997, there were approximately 1,157 holders of the Company's
Common Stock.
The Company's dividend policy is to retain its earnings to support the
expansion of its operations. The Board of Directors of the Company does not
intend to pay cash dividends on the Common Stock in the foreseeable future. Any
future cash dividends will depend on future earnings, capital requirements, the
Company's financial condition and other factors deemed relevant by the Board of
Directors. The Company's future earnings and cash flow currently are dependent
principally upon the operating results of RFM Arkansas and such dependency may
continue indefinitely in the future.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Report.
Rendezvous Trails of America, Inc. (formerly Holiday Resorts
International, Inc.), the former parent of Aarow Environmental was incorporation
in April 1970. Since 1986, RTA became inactive and did not conduct any
operations or activities through 1995 and, as of December 31, 1995, did not have
any assets or liabilities. Pursuant to an Agreement and Plan of Merger, dated
February 23, 1996, RTA merged with and into Aarow Environmental as the surviving
corporation. See "Item 1. Description of Business-Background-Reincorporation
Merger." The merger of RTA with and into Aarow Environmental effectively changed
the state of domicile of RTA to Nevada as a result of Aarow Environmental being
the surviving corporation and was accounted for as a reorganization of entities
under common control which was recorded at historical cost. RFM Arkansas was
formed on March 15, 1994. As a result of the RFM Arkansas Acquisition, RFM
Arkansas became a wholly-owned subsidiary of Aarow Environmental which was
accounted for as a reverse acquisition of Aarow Environmental by RFM Arkansas
under the purchase method of accounting. Therefore, the following discussion and
analysis of results of operations discussed below are only those of RFM Arkansas
prior to the RFM Arkansas Acquisition. See "Item 1. Description of
BusinessABackgroundARFM Arkansas Acquisition" and "Item 12. Certain
Relationships and Related Transactions."
3
<PAGE>
Results of Operations
The following table sets forth selected results of operations for the for
the fiscal years ended December 31, 1995, and December 31, 1996, which are
derived from the audited financial statements of RFM Arkansas. See "Item 1.
Description of Business-Background-RFM Arkansas Acquisition."
<TABLE>
<CAPTION>
For the Fiscal Year Ended For the Fiscal Year Ended
December 31, 1995 December 31, 1996
<S> <C> <C> <C> <C>
Amount Percent Amount Percent
Sales income .............................. $ 630,194 100.00% $ 404,056 100.0%
--------- ------ --------- ------
Cost of Sales:
Materials ............................. 137,232 21.8% 113,269 28.0%
Warehouse labor ....................... 105,645 16.8% 49,202 12.2%
Freight ............................... 2,091 .3% 1,183 .3%
--------- ------ --------- -----
Total Cost of Sales ............... 244,968 38.9% 163,654 40.5%
--------- ------ --------- -----
Gross Profit .............................. 385,226 61.1% 240,402 59.5%
--------- ------ --------- -----
Operating Expenses ........................ 318,069 50.5% 290,044 71.8%
--------- ------ --------- -----
Income or (loss) from operations .......... 67,157 10.6% (49,642) 12.3%
--------- ------ --------- -----
Other Income and (expense):
Interest income ....................... 120 -- 934 .2%
Interest Expense ...................... (9,365) 1.5% (4,463) 1.1%
Payroll Tax Penalties and Interest .... (2,087) .3% (16,017) 4.0%
Extraordinary Item .................... -- -- (33,493) 8.3%
--------- ------ --------- -----
Total other income and (expense) . (11,332) 1.8% (53,039) 13.1%
--------- ------ --------- -----
Net Income or (Loss) ...................... $ 55,825 8.8% ($102,681) 25.4%
--------- ------ --------- -----
</TABLE>
Comparison of Fiscal 1995 and 1996
Sales income decreased to $404,056 in 1996 from $630,194 for 1995, a
decrease of 36 percent. The decrease in sales was primarily the result of the
loss of $119,282 worth of finished inventory to fire on August 8, 1996, and the
resultant effect on the Company's cash flow and operations. This inventory was
insured by Loyds of London for cost less a $100 deductible. A claim has been
filed and the Company expects payment from the insurer for the full insured
amount. The decreased sales during 1996 resulted in total costs of sales
decreasing to $163,654 in 1996, compared to $244,968 for 1995, a decrease of
33%. The decrease in total cost of sales resulted from (i) a 17% decrease in
cost of materials from $137,232 in 1995, to $113,269, in 1996, (ii) a 53%
decrease in warehouse labor cost from $105,645 in 1995 to $49,202 in 1996, and
(iii) a 43% decrease in the cost of freight from $2,091 in 1995 to $1,183 in
1996. Gross profit decreased 37% from $385,226 in 1995 to $240,044 in 1996.
Operating expenses decreased from $385,226 in 1995 to $290,044 for
1996, a 24% decrease. The decrease in operating expenses was the result of the
reduced operations following August 8, 1996, causality loss.
4
<PAGE>
The Company experienced a $49,642 loss from operations in 1996 as compared
to a $67,157 gain from operations in 1995.
Interest expense decreased from $9,365 in 1995 to $4,463 in 1996, a 52%
decrease. Payroll tax penalties and interest increased to $16,546 in 1996 from
$2,087 in 1995, a 793% increase. The Company also experienced an extraordinary
loss of $33,493 as the result of being required to write off as not collectable
a loan to the former president of the Company. Such items combined with a
$49,642 loss from operations resulted in the a $102,681 loss for 1996 as
compared with net income of $55,825 for 1995.
Quarterly Results of Operations
RFM Arkansas' operations are affected by seasonal trends principally
based upon weather conditions affecting the oil and gas and transportation
industries. In RFM Arkansas' experience, sales volume tends to be higher in the
second, third and fourth calendar quarters and lower in the first quarter.
Because the general and administrative expenses associated with maintaining and
adding to RFM Arkansas' manufacturing work force are relatively fixed over the
short term, RFM Arkansas' margins tend to increase in periods of higher sales
volume and decrease in periods of lower sales volume. These effects are not
always apparent because of the impact and timing of factors which are beyond the
control of RFM Arkansas. Nevertheless, RFM Arkansas' results of operations for a
particular calendar quarter may not be indicative of the results to be expected
during other quarters.
Income Taxes
Prior to the RFM Arkansas Acquisition, RFM Arkansas, for federal and
state income tax purposes, was taxed as a pass-through entity, and income taxes
were not imposed at RFM Arkansas's level of taxation.
Therefore, no provision for income taxes has been made.
Liquidity and Capital Resources
Historically, RFM Arkansas has financed its growth from borrowings and
shareholder contributions. Net cash provided by operating activities totaled
$38,020 in 1996, as compared with net cash provided by operating activities
totaled $34,772 in 1995. As of December 31, 1996, the Company had a working
capital of deficit of $1,984, compared to working capital of $95,100, at
December 31, 1995. The working capital deficit is the result of the suspension
of operations following the August 8, 1996, casualty loss and the write-off of
the note in the amount of $33,493. Additional net cash is expected to be
provided by the recovery of the insurance claim for the casualty loss in the
amount of $119,182, and the resumption of manufacturing and marketing
activities.
During 1996, the Company experienced operating difficulties as a result
of lack of working capital following the August 8, 1996, casualty loss and the
operational decline. The Company also experienced a period of inadequate
management until the election of new management for the Company on May 12, 1997.
The new Management for the Company has begun a plan to recapitalize the Company
and to reestablish the relationships with its distributors. There is no
assurance that the Company will be successful in its efforts to implement its
plan for recapitalization and the resumption of full operations. If the Company
is unsuccessful in its efforts, it may be necessary to undertake such other
actions as may be appropriate to preserve asset value.
As of December 31, 1996, RFM Arkansas had two long-term loans from
Springdale Bank & Trust Company (the "Bank"), which were secured by certain a
vehicle and inventory and accounts receivable, bear interest at 10.5 percent per
annum, and required monthly principal and interest installment payments of $535
through May 1998 and monthly interest payments. At December 31, 1996, the
outstanding principal balance of these loans were $9,372 and $30,000,
respectively. On February 24, 1997, Springdale Bank and Trust called the note in
the amount of $9,372 which was in default and obtained possession of the
collateral which was a 1990 GMC truck. At December 31, 1995, RFM Arkansas had an
5
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equipment loan with Anchor Financial Corp. secured by office equipment, bears
interest at 21 percent per annum, and requiring monthly principal and interest
installment payments of $354 through June 1997. The outstanding principal amount
of this loan at December 31, 1996, was $1,173. At December 31, 1995, RFM
Arkansas also had two unsecured loans with U.S. Equipment & Services, Inc.
(which is wholly-owned by Monica Pilkington, who was, prior to May 12, 1997, an
executive officer and the wife of the President, a Director and major
shareholder of the Company) and with Dan Pilkington (who was prior to May 12,
1997, the President, Director and major shareholder of the Company) each of
which bore interest at 7.5 percent per annum, and which were due on demand. The
outstanding principal amounts of these loans were $8,409 and $17,319,
respectively, at December 31, 1995. During 1996, it was determined that Dan
Pilkington had had unauthorized loans to himself which resulted in the note
receivable write-off in the amount of $33,493. In connection with the resolution
of the note receivable from Dan Pinkington, the loans from U.S. Equipment &
Services, Inc., and from Dan Pinkington were also discharged.
Item 7. Financial Statements
The response to this Item is set forth herein in a separate section of
this Report, beginning on page F-2
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements of the type required to be reported
under this Item between management of the Company and its independent accountant
during 1995 and 1996.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The following table sets forth certain information with respect to each
executive officer and director of Rain Forest and RFM Arkansas. Directors are
generally elected at the annual shareholders' meeting and hold office until the
next annual shareholders' meeting and until their successors are elected and
qualified. Executive officers are elected by the Board of Directors and serve at
its discretion. The Bylaws of the Company authorize the Board of Directors to be
constituted of not less than one and such number as the Board of Directors may
from time to time determine by resolution or election. The Board currently
consists of three members.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Position with Aarow Position with RFM Arkansas
Environmental
- --------------------- --- -------------------------- --------------------------
Stan Sisemore(1).............................. 49 President, Chief Executive President, Chief Executive
Officer, and Chairman Officer, and Chairman
of the Board of the Board
Jeff Martin(1)(2)............................. 35 Executive Vice President Executive Vice President
and Director and Director
Lloyd Phillips(1)............................. 51 Secretary and Director Secretary and Director
</TABLE>
(1) As the holders of 1/3 each of the outstanding Series I Convertible
Preferred Stock, Mr. Sisemore, Mr. Martin, and Mr. Phillips combined
hold approximately 58 percent of the outstanding voting rights of the
shareholders of the Company. Therefore, Mr .Sisemore, Mr. Martin, and
Mr. Phillips acting in unison may be able to elect all members of the
Board of Directors of the Company. See "Item 11. Security Ownership of
Certain Beneficial Owners and Management."
(2) Member of the Stock Option Committee. See "AStock Option Plan," below.
The executive officers of the Company and RFM Arkansas devote their
full-time to the Company's business.
6
<PAGE>
The following is a brief description of the business background of the
executive officers and directors of the Rain Forest and RFM Arkansas:
Stan Sisemore has been Chairman of the Board, President and Chief
Executive Officer, and a Director of the Company and RFM Arkansas since May 12,
1997. Mr. Sisemore also serves as a menber of the Stock Option Committee. From
April 1995, Mr. Sisemore served as marketing director of the Company and will
continue to also function in that capacity. From April 1991 until April 1995,
Mr. Sisemore served as Executive Vice President of Magnadyne Industries, Inc., a
company holding over 25 patents related to Magnetic D.C. Motor technology and
Magnetic Energy. He is also a stockholder in Magnadyne. Mr. Sisemore has been
involved in marketing and manufacturing for twenty years and has been involved
in product development for the past ten years. During his employment with the
Company he has been involved in the development of the absorbent program for the
Company.
Jeff Martin is Executive Vice President and a Director of the Company
and RFM Arkansas and serves as a member of the Stock Option Committee. Prior to
becoming employed with the Company and RFM Arkansas in September 1994, Mr.
Martin was employed by First Brands Corporation as operations manager of
packaging plant operations which responsibilities included safety, quality and
production coordinator and as Industrial Engineer at Wire Mold Corporation where
he was responsible for product enhancement.. Mr. Martin received an Associate of
Arts Degree in 1993 from Mississippi County Community College and attended the
University of Arkansas with studies focused on engineering.
Lloyd Phillips was elected as Secretary and a Director of the Company
on May 12, 1997. Prior to his employment with the Company Mr. Phillips was
president of a large manufactured homes company and has been involved in the
management and development of the poultry and egg industry for the past eighteen
years. Mr.
Phillips has also has a broad background in sales and marketing.
During 1996 and until his removal in March, 1997, Dan Pilkington held
the positions of Chairman of the Board, President and Chief Executive Officer of
the Company and of RFM Arkansas.
Item 10. Executive Compensation
The following table sets forth certain information with respect to the
total cash compensation, paid or accrued, of the President of the Company and
RFM Arkansas and each of executive officer that during 1996 received
compensation in excess of $100,000. Because Rendezvous Trails of America, Inc.
(the former parent of Aarow Environmental) was in active during 1993 through
1996, its President and other executive officers were not paid any executive
compensation nor was any accrued during such years. Furthermore, because the
Company and RFM Arkansas were, inactive during much of 1996, the President and
other executive officers of RFM Arkansas were not paid any executive
compensation nor was any accrued during 1996.
<TABLE>
<CAPTION>
Annual Compensation
---------------------
<S> <C> <C> <C> <C>
All Other
Name and Principal Position Year(1) Salary(2) Bonus(3) Compensation
- --------------------------- ------ --------- -------- ------------
Dan Pilkington.......................................... 1996....... $-- $ -- $ --
President and Chief Executive Officer 1995....... $-- $ -- $ --
of RFM Arkansas
</TABLE>
(1) The executive officers, including the President, were not paid any
executive compensation during 1993 or 1994 nor was any accrued during such
year.
(2) Dollar value of base salary (both cash and non-cash) earned during the
year.
(3) Dollar value of bonus (both cash and non-cash) earned during the year.
Compensation of Directors
The directors of Aarow Environmental and RFM Arkansas are employees of
Aarow Environmental and are not currently compensated for attending meetings of
directors and committees of the Board of Directors, but are reimbursed
out-of-pocket expenses.
7
<PAGE>
Stock Option Plan
The company established the Rain Forest - Moose, Ltd. 1996 Stock Option
Plan (the "Stock Option Plan" or the "Plan") in February 1996. The Plan provides
for the issuance of incentive stock options ("ISO Options") with or without
stock appreciation rights ("SARs") and nonincentive stock options ("NSO
Options") with or without SARs to employees and consultants of the Company,
including employees who also serve as directors of the Company. The total number
of shares of Common Stock authorized and reserved for issuance under the Plan is
2,500,000.
Options have not been granted under the Plan as of the date of this Report.
The Stock Option Committee, which is currently comprised of Messrs.
Sisemore and Martin, administers and interprets the Plan and has authority to
grant options to all eligible employees and determine the types of options, with
or without SARs, granted, the terms, restrictions and conditions of the options
at the time of grant, and whether SARs, if granted, are exercisable at the time
of exercise of the Option to which the SAR is attached.
The option price of the Common Stock is determined by the Stock Option
Committee, provided such price may not be less than the fair market value of the
shares on the date of grant of the option. The fair market value of a share of
the Common Stock is determined by averaging the closing high bid and low asked
quotations for such share on the date of grant of the option or, if not quoted,
by the Stock Option Committee. Upon the exercise of an option, the option price
must be paid in full, in cash or with an SAR. Subject to the Stock Option
Committee's approval, upon exercise of an option with an SAR attached, a
participant may receive cash, shares of Common Stock or a combination of both in
an amount or having a fair market value equal to the excess of the fair market
value, on the date of exercise, of the shares for which the option and SAR are
exercised over the option exercise price.
Options granted under the Plan may not be exercised until six months
after the date of the grant and rights under an SAR may not be exercised until
six months after the SAR is attached to an option, if not attached at the time
of the grant of the option, except in the event of death or disability of the
participant. ISO Options and any SARs are exercisable only by participants while
actively employed as an employee or a consultant by Rain Forest or a subsidiary
of Rain Forest, except in the case of death, retirement or disability. Options
may be exercised at any time within three months after the participant's
retirement or within one year after the participant's disability or death, but
not beyond the expiration date of the option. No option may be granted after
December 28, 2005. Options are not transferable except by will or by the laws of
descent and distribution.
Officer and Director Liability
The Certificate and Bylaws of Aarow Environmental provide that the
Company shall indemnify its directors and officers to the full extent permitted
by the Nevada General Corporation Law. Under such provisions, any director or
officer, who in his capacity as such, is made or threatened to be made, a party
to any suit or proceeding, may be indemnified if the Board of Directors
determines such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the Company.
The Certificate and Bylaws of the Company and the Nevada General Corporation Law
further provide that such indemnification is not exclusive of any other rights
to which such individuals may be entitled under the Certificate, the Bylaws, an
agreement, vote of shareholders or disinterested directors or otherwise. Insofar
as indemnification for liabilities arising under the Act may be permitted to
directors and officers of Aarow Environmental pursuant to the foregoing
provisions, or otherwise, Aarow Environmental has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
8
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table presents certain information as to the beneficial
ownership of the Common Stock and Series I Convertible Preferred Stock as of
June 11, 1997, of (i) each person who is known to Aarow Environmental to be the
beneficial owner of more than five percent thereof, (ii) each current director
and executive officer of Aarow Environmental, and (iii) all current executive
officers and directors as a group, together with their percentage holdings of
the outstanding shares. All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated, and there is no family
relationship between the executive officers and directors of Aarow
Environmental.
<TABLE>
<CAPTION>
Series I Convertible
Preferred Stock Common Stock
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Shares Percent of Shares Percent of
Beneficially Share Beneficially Share
Owned Outstanding Owned Ownership
------------ ----------- ------------ ----------
Stanley L. Sisemore(1)............................... 1,000,000 33.3% 4,605,000 25.15%
Jeff Martin........................................... 1,000,000 33.3% 3,250,000 17.75%
Lloyd W. Phillips.................................... 1,000,000 33.3% 3,000,000 16.38%
Executive Officers and Directors as a group
(three persons)(1)................................... 3,000,000 100.0% 10,855,000 59.28%
</TABLE>
(1) With respect to the Common Stock, includes 9,000,000 shares issuable
upon conversion of the Series I Convertible Preferred Stock.
Item 12. Certain Relationships and Related Transactions
Set forth below is a description of transactions entered into between
Aarow Environmental and RFM Arkansas and certain of its officers, directors, and
shareholders during the last two years. Certain of these transactions will
continue in effect and may result in conflicts of interest between the Company
and such individuals. Although these persons have fiduciary duties to the
Company and its shareholders, there can be no assurance that conflicts of
interest will always be resolved in favor of the Company.
Pursuant to a Plan of Reorganization and Agreement of Merger, dated
February 23, 1996, Dan Pilkington and Jeff Martin exchanged their shares of the
capital stock of RFM Arkansas for 1,597,468 and 250,00 shares of Common Stock,
respectively, and Mr. Pilkington also received 3,000,000 shares of Series I
Convertible Preferred Stock. See "Item 1. Description of BusinessABackgroundAFRM
Arkansas Acquisition." The Series I Convertible Preferred Stock is convertible
into 9,000,000 shares of Common Stock of Rain Forest. In connection with RFM
Arkansas Acquisition and the transactions related thereto, an independent
determination of fairness and reasonableness of the terms of the transactions
was not obtained; however, the transactions were negotiated on an arms'-length
basis by the respective parties and are believed to have been fair by respective
parties and management of Rain Forest.
From time to time Dan Pilkington, the former President and Chairman of
the Board, has made loans to RFM Arkansas in the form of due on demand loan,
which bear interest at the rate of 7.5 percent per annum. At December 31, 1994
and 1995, the aggregate outstanding principal amounts of such loans were $32,171
and $17,319, respectively. At December 31, 1996, these loans had been discharged
in connection with the resolution of unauthorized loans from the Company to Mr.
Pilkington.
U.S. Equipment & Services, Inc., which is wholly owned by Monica
Pilkington who is an a former executive officer of Aarow Environmental and RFM
Arkansas and the wife of Mr. Pilkington, made an unsecured loan to RFM Arkansas,
which bears interest at the rate of 7.5 percent per annum. At December 31, 1994
and 1995, the outstanding principal amount of such loan was $17,362 and $8,409,
respectively. At December 31, 1996, these loans had been discharged in
connection with the resolution of unauthorized loans from the Company to Mr.
Pilkington
9
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
2.1 Agreement and Plan of Merger between Rendezvous Trails of America,
Inc., Rain Forest - Moose, Ltd., dated February 23, 1996.*
2.2 Plan of Reorganization and Agreement of Merger among Rain Forest -
Moose, Ltd., a Nevada corporation, RFM Acquisition Corporation of
Oklahoma, Inc., Rain Forest - Moose, Ltd., an Arkansas corporation,
Dan Pilkington, Jeff Martin, Stan Sisemore, Jim Anderson and Bill
Hooten, dated March 5, 1996.*
3.1 Articles of Incorporation of Rain Forest - Moose, Ltd., a Nevada
corporation.*
3.2 Bylaws of Rain Forest - Moose, Ltd.*
4.1 Form of Certificate of Common Stock of Rain Forest - Moose, Ltd.*
4.2 Agreement and Plan of Merger among Rendezvous Trails of America, Inc.,
and Rain Forest - Moose, Ltd., dated February 23, 1996, filed as
Exhibit 2.1 hereto.*
4.3 Plan of Reorganization and Agreement of Merger among Rain Forest -
Moose, Ltd., a Nevada corporation, RFM Acquisition Corporation of
Oklahoma, Inc., Rain Forest - Moose, Ltd., an Arkansas corporation,
Dan Pilkington, Jeff Martin, Stan Sisemore, Jim Anderson and Bill
Hooten, dated March 5, 1996, filed as Exhibit 2.2 hereto.*
4.4 Certificate of the Powers Designation, Rights and Preferences for the
Series I Convertible Preferred Stock of Rain Forest - Moose, Ltd.,
dated March 5, 1996.*
4.4 Registration Rights Agreement between Rain Forest - Moose, Ltd. and
Dan Pilkington, dated March 5, 1996.*
4.5 Rain Forest - Moose, Ltd. 1996 Stock Option Plan, adopted February 21,
1996.*
10.1 Agreement and Plan of Merger between Rendezvous Trails of America,
Inc. and Rain Forest - Moose, Ltd., dated February 23, 1996, filed as
Exhibit 2.1 hereto.*
10.2 Plan of Reorganization and Agreement of Merger among Rain Forest -
Moose, Ltd., a Nevada corporation, RFM Acquisition Corporation of
Oklahoma, Inc., Rain Forest - Moose, Ltd., an Arkansas corporation,
Dan Pilkington, Jeff Martin, Stan Sisemore, Jim Anderson and Bill
Hooten, dated January 19, 1996, filed as Exhibit 2.2 hereto.*
21.1 Subsidiary of Registrant.*
27 Financial Data Schedule
- --------------------------------------------------------------
* Incorporated by reference to Form 10-KSB dated March 8, 1996
(b) Reports on Form 8-K
There were no reports on Form 8-K filed with the Commission during the
last quarter of 1996.
10
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AAROW ENVIRONMENTAL GROUP INC.
(Registrant)
By: /S/STANLEY L. SISEMORE
------------------------------
Stanley L: Sisemore, President
Date: June ,1997
11
<PAGE>
In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Name Title Date
Chief Executive Officer, President and
/S/STANLEY L. SISEMORE Chairman of the Board June __,1997
- ------------------------
Stanley L. Sisemore
Executive Vice President
/S/JEFF MARTIN and Director June __,1997
- ------------------------
Jeff Martin
/S/LLOYD W. PHILLIPS Secretary June __,1997
- ------------------------
Lloyd W. Phillips
12
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AAROW ENVIRONMENTAL GROUP, INC.
Independent Auditors Report............................................. F-2
Balance Sheet, December 31, 1996 and 1995............................... F-3
Statements of Income and Retained Earnings for the Twelve Months Ended
December 31, 1996 and the Twelve Months Ended December 31, 1995......... F-4
Statements of Cash Flows for the Twelve Months Ended December 31, 1996
and the Twelve Months Ended December 31, 1995........................... F-5
Notes to Financial Statements........................................... F-6
F-1
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
( Formerly RAIN FOREST MOOSE, LTD.)
FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and the
Twelve Months Ended December 31, 1995
F-2
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
and Stockholders of
Rain Forest Moose, LTD
Springdale, AR
I have audited the accompanying balance sheets of Rain Forest Moose, Ltd. (a
public corporation) as of December 31, 1996 and December 31, 1995 and the
related statements of income and retained earnings, cash flows, and supplemental
information for the years 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 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Rain Forest Moose, Ltd. as of
December 31, 1996 and December 31, 1995 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company's significant operating loss, working capital
deficit, and lack of adequate management raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Springdale, AR
June 2, 1997
F-3
<PAGE>
RAIN FOREST MOOSE, LTD
BALANCE SHEET
As of December 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Dec. 31, Dec. 31,
1996 1995
-------- --------
Assets
Current Assets:
Cash and Cash Equivalents ............................................. $ 2,147 $ 3,008
Accounts Receivable ................................................... 0 50,227
Employee Receivables .................................................. 0 1,972
Prepaid Expenses ...................................................... 0 822
Inventory ............................................................. 31,626 154,898
Insurance Claim ....................................................... 119,182 0
-------- --------
TOTAL CURRENT ASSETS $152,954 $210,927
PROPERTY, PLANT AND EQUIPMENT (net of accumulated
depreciation of $ 23,730 and $ 11,158 respectively) 46,005 57,525
Other Assets
Organization Costs (net of accumulated
amortization of $ 1,575 and $ 675) .......................... 2,925 3,825
-------- --------
TOTAL ASSETS $201,884 $272,277
======== ========
Liabilities and Stockholders Equity
Current Liabilities:
Bank Overdraft ........................................................ $ 0 $ 2,151
Accounts Payable ...................................................... 20,309 15,603
Payroll Taxes Payable ................................................. 67,005 32,325
Sales Tax Payable ..................................................... 0 31
Accrued Interest Payable .............................................. 733 1,313
Current Portion of Long Term Notes .................................... 66,891 64,404
-------- --------
TOTAL CURRENT LIABILITIES .................................... $154,938 $115,827
LONG TERM LIABILITIES ................................................. 3,654 10,477
-------- --------
TOTAL LIABILITIES ..................................................... $158,592 $126,304
Stockholders Equity
Common Stock at Dec. 31, 1996, $ 0.001 par value, 30,000,000 shares ... $ 7,619 $ 5
authorized, 9,312,622 shares issued and outstanding
Convertible Preferred Stock, $0.001 par value, 5,000,000 shares ....... 3,000 0
authorized, 3,000,000 shares issued and outstanding,
one share convertible for three shares common
Paid in Capital ....................................................... 99,881 110,495
Retained Earnings ..................................................... (67,208) 35,473
-------- --------
TOTAL STOCKHOLDERS EQUITY ............................................. $ 43,292 $145,973
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY .................... $201,884 $272,277
======== ========
</TABLE>
SEE ACCOUNTANTS REPORT AND NOTES
RAIN FOREST MOOSE, LTD
F-4
<PAGE>
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Dec. 31 Dec. 31,
1996 1995
--------------- ---------------
Sales Income $ 404,056 $ 630,194
Cost of Sales
Materials $ 113,269 $ 137,232
Warehouse Labor 49,202 105,645
Freight 1,183 2,091
--------------- ---------------
Total Cost of Sales $ 163,654 $ 244,968
--------------- ---------------
GROSS PROFIT $ 240,402 $ 385,226
Operating Expenses 290,044 318,069
--------------- ---------------
GAIN OR (LOSS) FROM OPERATIONS ($ 49,642) $ 67,157
Other Income and (Expenses)
Interest Income $ 934 $ 120
Interest Expense ( 4,463) ( 9,365)
Payroll Tax Penalties and Interest ( 16,017) ( 2,087)
---------------- ----------------
Total Other Income and (Expense) ($ 19,546) ($ 11,332)
---------------- ----------------
INCOME OR (LOSS) BEFORE
EXTRAORDINARY ITEM ($ 69,188) $ 55,825
Extraordinary Item-Note Receivable ( 33,493) 0
---------------- ---------------
NET INCOME OR (LOSS) ($ 102,681) $ 55,825
Retained Earnings at Beginning of Year 35,473 ( 20,352)
--------------- ----------------
RETAINED EARNINGS AT END OF YEAR ($ 67,208) $ 35,473
================ ===============
</TABLE>
SEE ACCOUNTANTS REPORT AND NOTES
RAIN FOREST MOOSE, LTD
STATEMENTS OF CASH FLOWS
F-5
<PAGE>
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Dec. 31, Dec. 31,
1996 1995
--------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income or (Loss) ($ 102,681) $ 55,825
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 12,572 9,732
Amortization 900 675
Extraordinary Item-Note Receivable 33,493 0
(Increase) decrease in:
Accounts Receivable 50,227 ( 47,226)
Employee Receivable 1,972 ( 400)
Prepaid Expenses 822 ( 822)
Inventory 123,272 ( 24,672)
Insurance Claim ( 119,182) 0
Increase (decrease) in:
Bank Overdraft ( 2,151) 1,722
Accounts Payable 4,706 7,417
Payroll Taxes Payable 34,681 32,325
Sales Taxes Payable ( 31) 31
Accrued Interest Payable ( 580) 165
---------------- ---------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ 38,020 $ 34,772
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment ($ 1,052) ($ 52,612)
Organization Costs 0 ( 4,500)
Extraordinary Item-Note Receivable ( 33,493) 0
---------------- ---------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES ($ 34,545) ($ 57,112)
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings
Long-Term $ 0 $ 27,205
Short-Term 0 80,900
Debt Reduction
Long-Term ( 4,336) ( 82,757)
---------------------- --------------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES ($ 4,336) $ 25,348
---------------- ---------------
NET INCREASE (DECREASE) IN CASH ($ 861) $ 3,008
CASH AT BEGINNING OF YEAR 3,008 0
--------------- ---------------
CASH AT END OF YEAR $ 2,147 $ 3,008
=============== ===============
SUPPLEMENTAL DISCLOSURES
Interest Paid $ 4,463 $ 9,365
</TABLE>
SEE ACCOUNTANTS REPORT AND NOTES
F-6
<PAGE>
RAIN FOREST MOOSE, LTD
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
STATEMENT OF SIGNIFICANT ACCOUNTING ASSUMPTIONS
Nature of Business
The Company develops, manufactures, markets and distributes absorbent
products, principally Peat Moose Absorbent, and provides disposal
services for end users of the absorbent products and is licensed to
incinerate the absorbent products for energy recovery. The absorbent
products are for both industrial and home use. Peat Moose Absorbent is
an absorbent product consisting of a young blond grade of Canadian
sphagnum peat which has been dehydrated and blended with certain
additives. The most significant additive is a proprietary product which
aids in the decomposition of hydrocarbons and accelerates the rate of
remediation. The Peat Moose Absorbent is packaged and sold in various
container quantities and forms including loose fill bags, dip pads,
cotton covered socks, boxed spill kits, plastic drums and
acrylic-ceramic containers.
Basis of Accounting
The financial statements of Rain Forest Moose, Ltd, a public
corporation, have been prepared on the accrual basis of accounting.
Using this method, revenue and expenses are recognized when incurred.
Inventory
Inventory is carried at the lower of cost or market and consists of raw
materials and ready to sell products.
Property and Equipment
Property and Equipment are recorded at acquisition cost. Depreciation
is computed using straight line methods by charging against earnings
amounts sufficient to amortize the cost of the related assets over
their estimated useful lives.
Income Taxes
No allowance has been made for income tax expense for the year ended
December 31, 1995 because the company was a recognized subchapter S
corporation and as such the income from the corporation was passed
through to the stockholders and taxed on their personal returns.
SEE ACCOUNTANTS REPORT
F-7
<PAGE>
RAIN FOREST MOOSE, LTD
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
Note-1: Insurance Claim
On August 8, 1996 a fire destroyed $ 119,282 worth of finished
inventory. This inventory was insured by Loyds of London for cost less
a $ 100 deductible. The company has submitted a claim for payment and
expects payment from the insurer for the full insured amount.
Note-2: Property , Plant and Equipment
All assets are recorded at original cost. Depreciation is calculated
using the straight line method, lives are five years for autos and
office equipment, seven years for manufacturing equipment and
furniture, and 10 years for Leasehold Improvements. A schedule of
assets is as follows:
<TABLE>
<CAPTION>
December 31, 1996
<S> <C> <C> <C>
Accum. Depr.
Cost Depr. Expense
------------- ------------- -----------
Auto $ 42,639 $ 13,563 $ 7,750
Office Equipment 14,139 5,953 2,888
Equipment 8,061 3,030 1,444
Leasehold Improvements 4,896 1,184 490
------------- ------------- -------------
Total $ 69,735 $ 23,730 $ 12,572
============= ============= =============
</TABLE>
The autos are pledged as collateral to Springdale Bank and Trust of
Springdale, AR.
<TABLE>
<CAPTION>
December 31, 1995
<S> <C> <C> <C>
Accum. Depr.
Cost Depr. Expense
------------- ------------- -----------
Auto $ 42,639 $ 5,813 $ 5,813
Office Equipment 13,387 3,065 2,337
Equipment 8,061 1,586 1,2,15
Leasehold Improvements 4,896 694 367
------------- ------------- -------------
Total $ 68,683 $ 11,158 $ 9,732
============= ============= =============
</TABLE>
The autos are pledged as collateral to Springdale Bank and Trust of
Springdale, AR.
SEE ACCOUNTANTS REPORT
F-8
<PAGE>
RAIN FOREST MOOSE, LTD
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
Note-3: The company's Long Term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Dec. 31, Dec. 31,
1996 1995
---------------- ----------------
Anchor Financial, 21 % interest, $ 354.39 per month $ 1,173 $ 5,462
Maturity Date: 6-30-1997
Secured by computer printers and a copier
Springdale Bank & Trust, 10.25%, $ 534.58 per month 9,372 13,691
Maturity Date: 5-10-98
Secured by 90 GMC truck
Springdale Bank & Trust, 10.25%, Monthly Int. Only 60,000 30,000
Maturity Date 6-21-97
Secured by Inventory and A/R
U. S. Equipment, Inc. 7.5%, Payable on Demand 0 8,409
Maturity Date Payable on Demand
Unsecured
Note Payable Dan Pilkington, 7.5%, Payable on Demand 17,319
Maturity Date Payable on Demand
Unsecured
Current Portion of Long Term debt ( 66,891) ( 64,404)
----------------- -----------------
Long Term debt, less current portion $ 3,654 $ 10,477
================ ================
</TABLE>
The following is a summary of principal maturities of long term debt
during the next five years:
1997 $ 66,891
1998 3,654
Note-4: Related Party Transactions and Extraordinary Item-Note Receivable
At December 31, 1996 Dan Pilkington was the president of the Company.
As president, Mr. Pilkington made various unauthorized loans to himself
which totaled $ 33,493. These transactions were originally recorded as
a note receivable from officer. It has been determined that this
receivable is not collectable and is being recognized as an
extraordinary item on the December 31, 1996 income statement.
SEE ACCOUNTANTS REPORT
F-9
<PAGE>
RAIN FOREST MOOSE, LTD
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
Note-5: Going Concern
As shown in the accompanying financial statements, the Company has
incurred a sizable loss for the year ended December 31, 1996 and has a
deficit in working capital. Due to inadequate management there has been
a reduction in the number of distributors for the Company's product
resulting in a corresponding drop in overall sales. As discussed in
Note 6 the existing president at December 31, 1996 was removed and new
officers were elected. The new management has begun a plan to
recapitalize the Company and to reestablish the relationship with the
distributors. There can be no assurance that the Company will be
successful in its efforts to implement this plan. If the Company is
unsuccessful in its efforts, it may be necessary to undertake such
other actions as may be appropriate to preserve asset value. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Note-6: Subsequent Events
Subsequent to the balance sheet date the president at December 31, 1996
was replaced and a new president, officers, and board of directors were
elected on May 12, 1997.
On February 24, 1997 Springdale Bank and Trust, a note holder, called a
note in the amount of $ 9,372 that was in default. Springdale Bank and
Trust obtained possession of the collateral which was a 90 GMC truck.
SEE ACCOUNTANTS REPORT
F-10
<PAGE>
SUPPLEMENTAL INFORMATION
F-11
<PAGE>
RAIN FOREST MOOSE, LTD
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1996 and
the Twelve Months Ended December 31, 1995
Dec. 31, Dec. 31,
1996 1995
--------------- ------------
Operating Expenses
Accounting $ 21,371 $ 2,666
Advertising 100 7,617
Amortization 900 675
Auto & Truck 11,391 22,448
Bank Charges 98 2,206
Contributions 500 11,313
Contract Labor 20,094 0
Depreciation 12,572 9,732
Dues & Subscriptions 641 1,020
Entertainment 0 5,350
Equipment Rental 171 6,361
Insurance 9,316 7,112
Management Expense 1,345 350
Miscellaneous 739 1,514
Office Expense 7,307 3,684
Office Salaries 31,435 44,261
Payroll Tax Expense 8,166 9,837
Postage 1,664 204
Rent 25,483 28,454
Repairs 285 399
Sales Commission 26,103 72,111
Supplies 22,453 6,767
Taxes & Licenses 189 3,446
Telephone 24,026 24,587
Travel 59,499 38,337
Unemployment Taxes 1,776 4,687
Utilities 2,420 2,931
---------------- ------------
$ 290,044 $ 318,069
================ ============
SEE ACCOUNTANTS REPORT
F-12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,147
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 31,626
<CURRENT-ASSETS> 152,954
<PP&E> 46,005
<DEPRECIATION> 34,888
<TOTAL-ASSETS> 1,201,884
<CURRENT-LIABILITIES> 154,938
<BONDS> 0
0
3,000
<COMMON> 7,619
<OTHER-SE> 32,673
<TOTAL-LIABILITY-AND-EQUITY> 201,884
<SALES> 0
<TOTAL-REVENUES> 404,056
<CGS> 113,269
<TOTAL-COSTS> 163,654
<OTHER-EXPENSES> 290,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,463
<INCOME-PRETAX> (69,188)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (33,493)
<CHANGES> 0
<NET-INCOME> (102,681)
<EPS-PRIMARY> (.011)
<EPS-DILUTED> (.006)
</TABLE>
