UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K AMENDED
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 2, 1999
Aarow Environmental Group, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-6292 73-1491593
(Commission File Number) (IRS Employer Identification No.)
1505 W. Walnut, Rogers, Arkansas 72756
(Address of principal executive offices) (Zip Code)
(501) 621-0044
(Registrant's Telephone Number)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Effective September 2, 1999 Aarow Environmental Group, Inc. acquired all of
the issued and outstanding shares of Utica Publishing Corporation pursuant to
the terms of a written Agreement for Stock Purchase dated September 2, 1999.
That transaction was reported by Form 8-K filed September 15, 1999. A copy of
the Agreement for Stock Purchase was attached to the September 15, 1999 Form 8-K
as Exhibit 2.1. The form 8-K and all exhibits thereto are incorporated by
reference to the Form 8-K Amended.
Utica Publishing Corporation was formed October 28, 1998 ( not October 8,
1998 as the September 15, 1999 Form 8-K reported) by the incorporation of the
Arkansas Chronicle/Copies Plus Partnership (rather than by the merger of the
Arkansas Chronicle and Copies Plus, Inc. as reported in the September 15, 1999
Form 8-K.)
<PAGE>
The required financial statements and proforma financial information of
Aarow Environmental Group, Inc. and the business acquired based on infromation
provided to Aarow and Aarow's independent auditor by the acquired business are
set forth herein below as stated in Item 7 of the September 15, 1999 Form 8-K.
(a) Financial Statements of Business Acquired.
(1) Utica Publishing Corporation balance sheet at December 31, 1998
and statements of income and retained earnings and cash flows for
the two months ended December 31, 1998. Utica Publishing
Corporation resulted from the incorporation of the Arkansas
Chronicle/Copies Plus Partnership.
(2) Arkansas Chronicle/Copies Plus Partnership balance sheet at
October 31, 1998 and statements of income and partner's capital
and cash flows for the ten months ended October 31, 1998. The
October 31, 1998 balance sheet of Arkansas Chronicle/Copies Plus
Partnership is the last date of existence of this partnership and
represents the opening balance of Utica Publishing Corporation.
(3) Arkansas Chronicle/Copies Plus Partnership balance sheet at
December 31, 1997 and statements of income and partner's capital
and cash flows for the twelve months ended December 31, 1997.
This is the normal operating year end for the partnership.
(4) Copies Plus proprietorship statement of income for the twelve
months ended December 31, 1996. This is the normal year end for
the proprietorship before becoming the partnership of Arkansas
Chronicle/Copies Plus on January 1, 1997.
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
and Stockholders of
Utica Publishing Corporation
Rogers, AR
I have audited the accompanying balance sheet of Utica Publishing Corporation
(a C corporation) as of December 31, 1998 and the related statements of income
and retained earnings, and cash flows for the two months 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 Utica Publishing Corporation as of
December 31, 1998 and the results of its operations and its cash flows for the
two months then ended in conformity with generally accepted accounting
principles.
/s/ James E. Childress
- ----------------------
Springdale, AR
November 10, 1999
<PAGE>
<TABLE>
<CAPTION>
UTICA PUBLISHING CORPORATION
BALANCE SHEET
December 31, 1998
Assets
Current Assets
<S> <C>
Cash in Bank $ 526
Accounts Receivable 1,222
Inventory 3,120
----------------
TOTAL CURRENT ASSETS $ 4,868
Property, Plant and Equipment, (net of accumulated
depreciation of $ 89,094) 191,443
Other Assets
Intellectual Property, (net of accumulated amortization of $ 16,250) 308,750
----------------
TOTAL ASSETS $ 505,061
================
Liabilities and Stockholders Equity
Current Liabilities
Accounts Payable $ 1,434
Sales Tax Payable 12,879
Current Portion of Long Term Liabilities 7,013
----------------
TOTAL CURRENT LIABILITIES $ 21,326
Long Term Liabilities, (net of current portion) 131,126
----------------
TOTAL LIABILITIES $ 152,452
Stockholders Equity
Class A Common Stock, $ 1 par $ 363,234
30 million shares authorized
1,000,000 shares issued and
outstanding (issued sub par)
Retained Earnings ( 10,625)
-----------------
TOTAL STOCKHOLDERS EQUITY $ 352,609
----------------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 505,061
================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
UTICA PUBLISHING CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Two Months Ended December 31, 1998
Sales $ 11,509
Cost of Sales
Material 2,096
----------------
GROSS PROFIT $ 9,413
Operating Expenses
Amortization Expense $ 3,611
Bank Charges 76
Contract Labor 3,958
Contributions 35
Commissions 221
Credit Card Fees 41
Depreciation 6,388
Insurance 607
Interest 2,582
Rent 2,310
Repairs 23
Utilities 186
----------------
TOTAL EXPENSES $ 20,038
----------------
NET LOSS FROM OPERATIONS ($ 10,625)
Retained Earnings, November 1, 1998 0
----------------
RETAINED EARNINGS
DECEMBER 31, 1998 ($ 10,625)
=================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
UTICA PUBLISHING COMPANY
STATEMENT OF CASH FLOWS
For the Two Months Ended December 31, 1998
Net Loss ($ 10,625)
Adjustments to reconcile net loss to net cash provided
by operating activities
Amortization Expense 3,611
Depreciation 6,388
(Increase) decrease in:
Accounts Receivable ( 145)
Inventory 669
Increase (decrease) in:
Accounts Payable ( 457)
Sales Tax Payable 771
----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 212
CASH FLOWS FROM FINANCING ACTIVITIES
Long Term Debt Reduction ($ 1,380)
Sale of Stock 1,694
----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 314
---------------
NET INCREASE IN CASH $ 526
CASH AT NOVEMBER 1, 1998 0
----------------
CASH AT END OF YEAR $ 526
================
SUPPLEMENTAL DISCLOSURES
Interest Paid $ 2,582
================
</TABLE>
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
UTICA PUBLISHING CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Two Months Ended December 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING ASSUMPTIONS
Nature of Business
- ------------------
Utica Publishing Corporation was incorporated October 28, 1998, as an Arkansas
corporation and began business on November 1, 1998. The corporation acquired the
assets and intellectual property of Arkansas Chronicle/Copies Plus (a
partnership).
The Company's primary line of business is providing copy and printing services
to the general public. The Company also publishes two magazines as described in
note 4.
Cash and Cash Equivalents
- -------------------------
The Company considers all cash accounts and short term debt securities purchased
with a maturity of three months or less to be cash equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
NOTE 2: Inventories
- --------------------
Inventories consist of various papers, inks, bindery, lamination materials and
expendable supplies for copiers and are stated at the lower of cost or market
value.
SEE ACCOUNTANT'S REPORT
<PAGE>
UTICA PUBLISHING CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Two Months Ended December 31, 1998
NOTE 3: Property and Equipment
- -------------------------------
Property and Equipment were acquired from a major stockholder at the
stockholder's cost basis less the stockholder's accumulated depreciation in
exchange for common stock. Depreciation of property and equipment is provided
using the straight-line method for financial reporting purposes at rates based
on the following estimated useful lives:
Accum. Depr.
December 31, 1998 Cost Depr Expense
----------- ----------- ------------
Furniture and Fixtures $ 71,715 $ 26,452 $ 1,691
Computers 28,122 9,870 802
Printers 113,300 35,217 2,542
Equipment 67,400 17,555 1,353
----------- ----------- ------------
Total $ 280,537 $ 89,094 $ 6,388
=========== =========== ============
For federal income tax purposes, depreciation is computed using the modified
accelerated cost recovery system. Expenditures for major renewals and
betterment's that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.
NOTE 4: Amortization of Intellectual Property
- ----------------------------------------------
Intellectual property consists of two magazines acquired from a major
stockholder in exchange for common stock. The intellectual property was recorded
at market value at time of acquisition from the stockholder, which was less than
the stockholder's cost. The two magazines are La Cronica, a bilingual monthly
magazine (ISSN 1091-1928) and Arkansas Chronicle, an electronically distributed
daily newsmagazine (ISN 1091-XXXX). La Cronica has published continuously since
January, 1996. Arkansas Chronicle has functioned as a local wire service since
January, 1996. In April, 1998, work commenced, by the partners of Arkansas
Chronicle/Copies Plus partnership, on developing and expanding Arkansas
Chronicle and La Cronica as paid subscription, Internet electronic publications.
The intellectual property is amortized using the straight-line method over 40
years.
SEE ACCOUNTANT'S REPORT
<PAGE>
UTICA PUBLISHING CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Two Months Ended December 31, 1998
NOTE 5: Long Term Notes
- --------------------------
Long term notes payable consisted of the following:
Farm Credit Services of Western Arkansas
Interest 9.2%, $ 1,196.38 per month,
Maturity Date: June 1, 2015 $ 121,634
Secured by substantially all assets of the Company
And guaranteed by a major stockholder
First National Bank of Rogers, AR
Interest 9.5%, $ 255.66 per month,
Maturity Date: March 18, 2001 6,190
Secured by Equipment
First National Bank of Rogers, AR
Interest 10.0%, $ 150 per month,
Maturity Date: August 10, 2003 10,029
Secured by a Cannon Laser Copier model 320
First National Bank of Rogers, AR
Interest 10.0%, $ 161.32,
Maturity Date: Feb. 1, 1999
Secured by a Cannon Color Laser Copier 500 286
------------
Total Long Term Notes $ 138,139
Less Current Portion ( 7,013)
-------------
Long Term Notes net of Current Portion $ 131,126
============
Maturities of Long Term debt are as follows:
1999 $ 7,013
2000 7,388
2001 5,734
2002 5,471
2003 112,533
------------
$ 138,139
SEE ACCOUNTANT'S REPORT
<PAGE>
UTICA PUBLISHING CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Two Months Ended December 31, 1998
NOTE 6: Capital Stock
- ----------------------
The Corporation is authorized to issue 30 million shares of $ 1 par Class A
Common Stock. On November 1, 1998, 4,770,000 shares of Common Stock were issued
in exchange for the equipment, furniture and intellectual property owned by Sam
D. Yates and Jim W. Bolt operating as Arkansas Chronicle/Copies Plus
partnership. The assets acquired were valued at the stockholder's cost basis
less the stockholders accumulated depreciation in exchange for common stock
except for the intellectual property which at the time of transfer had a market
value less than the stockholder's cost and was therefore recorded at the market
value. The corporation assumed $ 153,518 of debt at the time of acquisition and
the shares issued were recorded on the balance sheet at sub-par, $ 363,234,
representing $ 0. 076 per share.
Prior to December 31, 1998 there was a reverse stock split at the ratio of 1 to
4.77 shares of outstanding common stock. After this reverse split the total
number of outstanding common stock shares was 1,000,000.
NOTE 7: Related Party Transactions
- -----------------------------------
As described in Notes 1, 3, 4 and 6, the assets of Utica Publishing Corporation
were acquired November 1, 1998, by assumption of debts and the issue of
1,000,000 shares of Class A Common Stock to Sam Yates and Jim Bolt.
SEE ACCOUNTANT'S REPORT
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Partners of
Arkansas Chronicle/Copies Plus
Rogers, AR
I have audited the accompanying balance sheet of Arkansas Chronicle/Copies Plus
(a partnership) as of October 31, 1998 and the related statements of income and
partner's capital, and cash flows for the ten months 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 Arkansas Chronicle/Copies Plus as
of October 31, 1998 and the results of its operations and its cash flows for the
ten months then ended in conformity with generally accepted accounting
principles.
/s/ James E. Childress
- ------------------------
Springdale, AR
November 10, 1999
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS CHRONICLE/COPIES PLUS
BALANCE SHEET
October 31, 1998
Assets
Current Assets
<S> <C>
Cash in Bank $ 1,694
Accounts Receivable 1,077
Inventory 3,789
----------------
TOTAL CURRENT ASSETS $ 6,560
Property, Plant and Equipment, (net of accumulated
depreciation of $ 82,706) 197,831
Other Assets
Intellectual Property, (net of accumulated amortization of $ 12,639) 312,361
----------------
TOTAL ASSETS $ 516,752
================
Liabilities and Partner's Capital
Current Liabilities
Accounts Payable $ 1,890
Sales Tax Payable 12,109
Current Portion of Long Term Liabilities 7,826
----------------
TOTAL CURRENT LIABILITIES $ 21,825
Long Term Liabilities, (net of current portion) 131,692
----------------
TOTAL LIABILITIES $ 153,517
Partner's Capital 363,235
TOTAL LIABILITIES AND
PARTNER'S CAPITAL $ 516,752
================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
STATEMENT OF INCOME AND PARTNER'S CAPITAL
For the Ten Months Ended October 31, 1998
Sales $ 100,365
Cost of Sales
Material $ 25,524
Outside Printing 3,323
----------------
$ 28,847
----------------
GROSS PROFIT $ 71,518
Operating Expenses
Advertising $ 1,197
Amortization Expense 12,639
Auto 5,551
Bank Charges 468
Contract Labor 26,262
Contributions 82
Commissions 7,677
Credit Card Fees 196
Depreciation 31,938
Freight 305
Insurance 2,244
Interest 11,800
Legal and Accounting 226
Miscellaneous 6,426
Rent 13,315
Repairs 2,268
Small Equipment 1,208
Tax & Permits 489
Travel 500
Utilities 1,761
----------------
TOTAL EXPENSES $ 126,552
----------------
NET LOSS FROM OPERATIONS ($ 55,034)
Partner's Capital, January 1, 1998 52,015
Partner's Contribution 366,254
----------------
PARTNER'S CAPITAL
OCTOBER 31, 1998 $ 363,235
================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
STATEMENT OF CASH FLOWS
For the Ten Months Ended October 31, 1998
Net Loss ($ 55,034)
Adjustments to reconcile net loss to net cash provided
by operating activities
Amortization Expense 12,639
Depreciation 31,938
(Increase) decrease in:
Accounts Receivable 6,479
Inventory ( 2,589)
Increase (decrease) in:
Accounts Payable ( 182)
Sales Tax Payable 8,510
----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,761
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment Purchases ($ 43,402)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Long Term Debt $ 7,978
Long Term Debt Reduction ( 5,915)
Partner's Cash Contribution 41,253
----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 43,316
----------------
NET INCREASE IN CASH $ 1,675
CASH AT JANUARY 1, 1998 19
----------------
CASH AT OCTOBER 31,1998 $ 1,694
================
SUPPLEMENTAL DISCLOSURES
Interest Paid $ 11,800
================
</TABLE>
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Ten Months Ended October 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING ASSUMPTIONS
Nature of Business
- ------------------
Arkansas Chronicle/Copies Plus is a partnership formed January 1, 1997 between
Sam Yates and Jim Bolt.
The Company's primary line of business is providing copy and printing services
to the general public. The Company also began publishing two magazines as
described in note 4.
Cash and Cash Equivalents
- -------------------------
The Company considers all cash accounts and short term debt securities purchased
with a maturity of three months or less to be cash equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
NOTE 2: Inventories
- --------------------
Inventories consist of various papers, inks, bindery, lamination materials and
expendable supplies for copiers and are stated at the lower of cost or market
value.
SEE ACCOUNTANT'S REPORT
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Ten Months Ended October 31, 1998
NOTE 3: Property and Equipment
- -------------------------------
Property and Equipment is recorded at the partnership's original cost or the
partner's original cost less any accumulated depreciation taken by the partner.
Depreciation of property and equipment is provided using the straight-line
method for financial reporting purposes at rates based on the following
estimated useful lives:
Accum. Depr.
October 31, 1998 Cost Depr Expense
------------- ------------- --------------
Furniture and Fixtures $ 71,715 $ 24,761 $ 8,457
Computers 28,122 9,069 4,008
Printers 113,300 32,675 12,712
Equipment 67,400 16,201 6,761
------------- ------------- --------------
Total $ 280,537 $ 82,706 $ 31,938
============= ============= ==============
For federal income tax purposes, depreciation is computed using the modified
accelerated cost recovery system. Expenditures for major renewals and
betterment's that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.
NOTE 4: Amortization of Intellectual Property
- ----------------------------------------------
Intellectual property consists of two magazines contributed by a partner. The
intellectual property was recorded at market value at time of contribution,
which was less than cost. The two magazines are La Cronica, a bilingual monthly
magazine (ISSN 1091-1928) and Arkansas Chronicle, an electronically distributed
daily newsmagazine (ISN 1091-XXXX). La Cronica has published continuously since
January, 1996. Arkansas Chronicle has functioned as a local wire service since
January, 1996. In April, 1998, work commenced by the partners, on developing and
expanding Arkansas Chronicle and La Cronica as paid subscription, Internet
electronic publications. The intellectual property is amortized using the
straight-line method over 40 years.
SEE ACCOUNTANT'S REPORT
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Ten Months Ended October 31, 1998
NOTE 5: Long Term Notes
- --------------------------
Long term notes payable consisted of the following:
Farm Credit Services of Western Arkansas
Interest 9.2%, $ 1,196.38 per month,
Maturity Date: June 1, 2015 $ 122,156
Secured by substantially all assets of the Company
And guaranteed by a major stockholder
First National Bank of Rogers, AR
Interest 9.5%, $ 255.66 per month,
Maturity Date: March 18, 2001 6,598
Secured by Equipment
First National Bank of Rogers, AR
Interest 10.0%, $ 150 per month,
Maturity Date: August 10, 2003 10,164
Secured by a Cannon Laser Copier model 320
First National Bank of Rogers, AR
Interest 10.0%, $ 161.32,
Maturity Date: Feb. 1, 1999
Secured by a Cannon Color Laser Copier 500 600
----------------
Total Long Term Notes $ 139,518
Less Current Portion ( 7,826)
----------------
Long Term Notes net of Current Portion $ 131,692
================
Maturities of Long Term debt are as follows:
Oct. 31, 1999 $ 7,826
Oct. 31, 2000 7,592
Oct. 31, 2001 6,426
Oct. 31, 2002 5,729
Oct. 31, 2003 111,945
----------------
$ 139,518
SEE ACCOUNTANT'S REPORT
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Partners of
Arkansas Chronicle/Copies Plus
Rogers, AR
I have audited the accompanying balance sheet of Arkansas Chronicle/Copies Plus
(a partnership) as of December 31, 1997 and the related statements of income and
partner's capital, and cash flows for the twelve months 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 Arkansas Chronicle/Copies Plus as
of December 31, 1997 and the results of its operations and its cash flows for
the twelve months then ended in conformity with generally accepted accounting
principles.
/s/ James E. Childress
- ----------------------
Springdale, AR
November 10, 1999
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS CHRONICLE/COPIES PLUS
BALANCE SHEET
December 31, 1997
Assets
Current Assets
<S> <C>
Cash in Bank $ 19
Accounts Receivable 7,556
Inventory 1,200
----------------
TOTAL CURRENT ASSETS $ 8,775
Property, Plant and Equipment, (net of accumulated
depreciation of $ 50,768) 186,367
----------------
TOTAL ASSETS $ 195,142
================
Liabilities and Partner's Capital
Current Liabilities
Accounts Payable $ 2,073
Sales Tax Payable 3,598
Current Portion of Long Term Liabilities 5,841
----------------
TOTAL CURRENT LIABILITIES $ 11,512
Long Term Liabilities, (net of current portion) 131,615
----------------
TOTAL LIABILITIES $ 143,127
Partner's Capital 52,015
TOTAL LIABILITIES AND
PARTNER'S CAPITAL $ 195,142
================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
STATEMENT OF INCOME AND PARTNER'S CAPITAL
For the Twelve Months Ended December 31, 1997
Sales $ 160,872
Cost of Sales
Material $ 38,617
Outside Printing 4,248
----------------
$ 42,865
----------------
GROSS PROFIT $ 118,007
Operating Expenses
Advertising $ 1,912
Auto 8,494
Bank Charges 578
Contract Labor 30,075
Contributions 65
Commissions 3,957
Credit Card Fees 655
Depreciation 33,212
Dues & Memberships 125
Freight 1,087
Insurance 5,606
Interest 13,496
Legal and Accounting 714
Miscellaneous 3,413
Payroll Tax Expense 690
Rent 13,286
Repairs 2,083
Salaries 9,020
Tax & Permits 1,218
Travel 2,760
Utilities 10,294
----------------
TOTAL EXPENSES $ 142,740
----------------
NET LOSS FROM OPERATIONS ($ 24,733)
Partner's Capital, January 1, 1997 0
Partner's Contribution 76,748
----------------
PARTNER'S CAPITAL
DECEMBER 31, 1997 $ 52,015
================
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
STATEMENT OF CASH FLOWS
For the Twelve Months Ended December 31, 1997
Net Loss ($ 24,733)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 33,212
(Increase) decrease in:
Accounts Receivable ( 4,254)
Increase (decrease) in:
Accounts Payable 37
Sales Tax Payable 3,598
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 7,860
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment Purchases ($ 2,983)
CASH FLOWS FROM FINANCING ACTIVITIES
Long Term Debt Reduction ($ 4,858)
----------------
NET INCREASE IN CASH $ 19
CASH AT JANUARY 1, 1997 0
----------------
CASH AT DECEMBER 31,1997 $ 19
================
SUPPLEMENTAL DISCLOSURES
Interest Paid $ 13,496
================
</TABLE>
SEE ACCOUNTANT'S REPORT AND NOTES
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING ASSUMPTIONS
Nature of Business
- ------------------
Arkansas Chronicle/Copies Plus is a partnership formed January 1, 1997 between
Sam Yates and Jim Bolt.
The Company's primary line of business is providing copy and printing services
to the general public.
Cash and Cash Equivalents
- -------------------------
The Company considers all cash accounts and short term debt securities purchased
with a maturity of three months or less to be cash equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
NOTE 2: Inventories
- --------------------
Inventories consist of various papers, inks, bindery, lamination materials and
expendable supplies for copiers and are stated at the lower of cost or market
value.
SEE ACCOUNTANT'S REPORT
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997
NOTE 3: Property and Equipment
- -------------------------------
Property and Equipment is recorded at the partnership's original cost or the
partner's original cost less any accumulated depreciation taken by the partner.
Depreciation of property and equipment is provided using the straight-line
method for financial reporting purposes at rates based on the following
estimated useful lives:
Accum. Depr.
December 31, 1997 Cost Depr Expense
------------- ------------- --------------
Furniture and Fixtures $ 70,645 $ 16,304 $ 9,832
Computers 19,990 5,061 3,470
Printers 100,300 19,963 13,565
Equipment 46,200 9,440 6,345
------------- ------------- --------------
Total $ 237,135 $ 50,768 $ 33,212
============= ============= ==============
For federal income tax purposes, depreciation is computed using the modified
accelerated cost recovery system. Expenditures for major renewals and
betterment's that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.
SEE ACCOUNTANT'S REPORT
<PAGE>
ARKANSAS CHRONICLE/COPIES PLUS
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997
NOTE 4: Long Term Notes
- --------------------------
Long term notes payable consisted of the following:
Farm Credit Services of Western Arkansas
Interest 9.2%, $ 1,196.38 per month,
Maturity Date: June 1, 2015 $ 124,588
Secured by substantially all assets of the Company
And guaranteed by a major stockholder
First National Bank of Rogers, AR
Interest 10.0%, $ 150 per month,
Maturity Date: August 10, 2003 10,773
Secured by a Cannon Laser Copier model 320
First National Bank of Rogers, AR
Interest 10.0%, $ 161.32,
Maturity Date: Feb. 1, 1999
Secured by a Cannon Color Laser Copier 500 2,094
----------------
Total Long Term Notes $ 137,455
Less Current Portion ( 5,841)
-----------------
Long Term Notes net of Current Portion $ 131,614
================
Maturities of Long Term debt are as follows:
1998 $ 5,841
1999 4,707
2000 4,843
2001 5,309
2002 116,755
----------------
$ 137,455
SEE ACCOUNTANT'S REPORT
<PAGE>
Sam Yates
Copies Plus
Rogers, Arkansas
I have compiled the accompanying income statement of Copies Plus (a
proprietorship) for the year ended December 31, 1996, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of the owner. I have not audited or
reviewed the accompanying income statement and, accordingly, do not express an
opinion or any other form of assurance on it.
The owner has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included with the income statement, they might influence the user's conclusions
about the Company's results of operations. Accordingly, this income statement is
not designed for those who are not informed about such matters.
/s/ James E. Childress
- ----------------------
Springdale, AR
November 10, 1999
<PAGE>
<TABLE>
<CAPTION>
COPIES PLUS
STATEMENT OF INCOME
For the Twelve Months Ended December 31, 1996
<S> <C>
Sales $ 92,560
Cost of Goods Sold
Labor $ 4,464
Materials 20,091
Outside Printing 4,233
----------------
Total Cost of Goods Sold $ 28,788
GROSS PROFIT $ 63,772
Operating Expenses
Advertising $ 1,082
Bank Charges 436
Depreciation 12,158
Dues and Subscriptions 150
Insurance 1,124
Office Expense 1,800
Rent 21,394
Repairs 11,256
Supplies 1,262
Tax and Permits 9,276
Utilities 1,516
Wages 9,577
----------------
TOTAL EXPENSES $ 71,031
----------------
NET LOSS FROM OPERATIONS ($ 7,259)
=================
</TABLE>
SEE ACCOUNTANT'S REPORT
<PAGE>
Item 7. Financial Statements, Pro Forma Financial and Exhibits-continued.
(b) Proforma Financial Information
(1) Unaudited pro forma combined condensed balance sheet of Aarow
Environmental Group, Inc. and Utica Publishing Corporation at
June 30, 1999.
(2) Unaudited pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. and Utica Publishing Corporation
for the six months ended June 30, 1999.
(3) Unaudited Pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. and Arkansas Chronicle/Copies
Plus (the predecessor partnership of Utica Publishing
Corporation) for the six months ended June 30, 1998.
(4) Unaudited pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1998 and Utica Publishing Corporation for the two
months ended December 31, 1998 and Arkansas Chronicle/Copies Plus
(the predecessor partnership of Utica Publishing Corporation) for
the ten months ended October 31, 1998.
(5) Unaudited proforma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1997 and Arkansas Chronicle/Copies Plus (the
predecessor partnership of Utica Publishing Corporation) for the
twelve months ended December 31, 1997.
(6) Unaudited proforma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1996 and Copies Plus proprietorship for the twelve
months ended December 31, 1996.
(b) Exhibits.
7.1 Unaudited Pro Forma Combined Condensed Balance Sheet
7.2 Unaudited Pro Forma Combined Condensed Statements of Income June
30,1999
7.3 Unaudited Pro Forma Combined Condensed Statements of Income June
30, 1998
7.4 Unaudited Pro Forma Combined Condensed Statements of Income
December 31, 1998
<PAGE>
7.5 Unaudited Pro Forma Combined Condensed Statements of Income
December 31, 1997
7.6 Unaudited Pro Forma Combined Condensed Statements of Income
December 31, 1996
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AAROW ENVIRONMENTAL GROUP, INC.
By: /s/ D. Frederick Shefte
-------------------------
Name: D. Frederick Shefte
Title: Vice President
Date: November 15, 1999
<PAGE>
Exhibit 7
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements give
effect to the merger of Aarow Environmental Group, Inc. and Utica Publishing
Corporation under the purchase method of accounting. That merger was consummated
on September 2, 1999. These pro forma statements are presented for illustrative
purposes only, and therefore are not necessarily indicative of the operating
results and financial position that might have been achieved had the merger
occurred as of an earlier date, nor are they necessarily indicative of operating
results or financial position which may occur in the future.
(1) Unaudited pro forma combined condensed balance sheet of Aarow
Environmental Group, Inc. and Utica Publishing Corporation at
June 30, 1999.
(2) Unaudited pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. and Utica Publishing Corporation
for the six months ended June 30, 1999.
(3) Unaudited Pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. and Arkansas Chronicle/Copies
Plus (the predecessor partnership of Utica Publishing
Corporation) for the six months ended June 30, 1998.
(4) Unaudited pro forma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1998 and Utica Publishing Corporation for the two
months ended December 31, 1998 and Arkansas Chronicle/Copies Plus
(the predecessor partnership of Utica Publishing Corporation) for
the ten months ended October 31, 1998.
(5) Unaudited proforma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1997 and Arkansas Chronicle/Copies Plus (the
predecessor partnership of Utica Publishing Corporation) for the
twelve months ended December 31, 1997.
(6) Unaudited proforma combined condensed statements of income of
Aarow Environmental Group, Inc. for the twelve months ended
December 31, 1996 and Copies Plus proprietorship for the twelve
months ended December 31, 1996.
Certain reclassifications have been made to the unaudited pro forma combined
condensed financial statements to conform to the presentation expected to be
used by the merged companies. No adjustments have been made in these unaudited
pro forma combined condensed financial statements to conform the accounting
policies of the combining companies. The nature and extent of such adjustments,
if any, are not expected to be significant.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.1
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
PRO FORMA
Aarow at Utica at Combined at
June 30, June 30, Pro Forma June 30,
1999 1999 Adjustments 1999
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $ 65 $ 310 $ 0 $ 375
Accounts Receivable 0 985 0 985
Inventory 32,400 2,975 0 35,375
------------- -------------- --------------- -------------
Total Current Assets $ 32,465 $ 4,270 $ 0 $ 36,735
Property, Plant and Equipment
Net of Depr. 6,191 172,279 0 178,470
Other Assets 15,900 297,917 0 313,817
------------- -------------- --------------- -------------
Total Assets $ 54,556 $ 474,466 $ 0 $ 529,022
============= ============== =============== =============
Liabilities
Accounts Payable $ 51,265 $ 960 $ 0 $ 52,225
Payroll Liabilities 139,413 12,879 0 152,292
Current Portion of LT Notes 60,000 7,013 0 67,013
Other Current Liabilities 306,871 12,879 0 319,750
------------- -------------- --------------- -------------
Total Current Liabilities $ 557,549 $ 33,731 $ 0 $ 591,280
Long Term Debt 0 106,951 0 106,951
------------- -------------- --------------- -------------
Total Liabilities $ 557,549 $ 140,682 $ 0 $ 698,231
Stockholders Equity
Common Stock $ 11,156 $ 363,234 $ 0 $ 374,390
Preferred Stock 3,000 0 0 3,000
Paid in Capital 219,782 0 0 219,782
Retained Earnings ( 736,931) ( 29,450) 0 ( 766,381)
-------------- -------------- --------------- --------------
Total Stockholders
Equity ($ 502,993) $ 333,784 $ 0 ($ 169,209)
-------------- -------------- --------------- --------------
Total Liabilities and
Stockholders Equity $ 54,556 $ 474,466 $ 0 $ 529,022
============= ============== =============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.2
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
PRO FORMA
Aarow Utica Combined
For the Six For the Six For the Six
Months Ended Months Ended Months Ended
June 30, June 30, Pro Forma June 30,
1999 1999 Adjustments 1999
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales Income $ 0 $ 91,011 $ 0 $ 91,011
Cost of Sales 0 16,969 0 16,969
------------- -------------- --------------- -------------
Gross Profit $ 0 $ 74,042 $ 0 $ 74,042
Operating Expenses:
Selling, General and Admin. 90,308 86,656 0 176,964
------------- -------------- --------------- -------------
Operating Income (Loss) ($ 90,308) ($ 12,614) $ 0 ($ 102,922)
Other Income and Expense ( 5,817) 0 0 ( 5,817)
Interest Expense ( 12,530) ( 6,211) 0 ( 18,741)
-------------- --------------- --------------- --------------
Net Income (Loss) ($ 108,655) ($ 18,825) $ 0 ($ 127,480)
============== =============== =============== ==============
Weighted Average number of
common stock and
common stock equivalents
outstanding 20,155,942 1,000,000 400,000 21,555,942
============= ============== =============== =============
Net Income (Loss) per
Common stock and
Common stock equivalents ($ .005) ($ .019) .018 ($ .006)
============ ============= =============== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.3
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
PRO FORMA
Aarow AR Chronicle/Copies Plus Combined
For the Six For the Six For the Six
Months Ended Months Ended Months Ended
June 30, June 30, Pro Forma June 30,
1998 1998 Adjustments 1998
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales Income $ 26,242 $ 71,522 $ 0 $ 97,764
Cost of Sales 18,427 11,696 0 30,123
------------- -------------- --------------- -------------
Gross Profit $ 7,815 $ 59,826 $ 0 $ 67,641
Operating Expenses:
Selling, General and Admin. 107,170 58,754 0 165,924
------------- -------------- --------------- -------------
Operating Income (Loss) ($ 99,355) $ 1,072 $ 0 ($ 98,283)
Other Income and Expense ( 3,397) ( 0) ( 0) ( 3,397)
Interest Expense ( 12,998) ( 0) ( 0) ( 12,998)
-------------- --------------- ---------------- --------------
Net Income (Loss) ($ 115,750) ($ 1,072) ($ 0) ($ 114,678)
============== =============== ================ ==============
Weighted Average number of
common stock and
common stock equivalents
outstanding 18,318,904 0 1,400,000 19,718,904
============= ============== =============== =============
Net Income (Loss) per
Common stock and
Common stock equivalents ($ .006) ($ .000) ($ 0) ($ .006)
============ ============= ================ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.4
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
PRO FORMA
Arkansas Chronicle/
Aarow Copies Plus Utica Combined
For the Twelve For the Ten For the Two For the Twelve
Months Ended Months Ended Months Ended Months Ended
Dec. 31, Oct. 31, Dec. 31, Pro Forma Dec. 31,
1998 1998 1998 Adjustments 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales Income $ 26,242 $ 100,365 $ 11,509 $ 0 $ 138,116
Cost of Sales 14,418 28,847 2,096 0 45,361
----------- ----------- ----------- ---------- -----------
Gross Profit $ 11,824 $ 71,518 $ 9,413 $ 0 $ 92,755
Operating Expenses:
Selling, General and Admin. 197,119 114,752 17,456 0 329,327
----------- ----------- ----------- ---------- -----------
Operating Income (Loss) ($ 185,295) ($ 43,234) ($ 8,043) $ 0 ($ 236,572)
Other Income and Expense ( 7,722) ( 0) ( 0) ( 0) ( 7,722)
Interest Expense ( 22,179) ( 11,800) ( 2,582) ( 0) ( 36,561)
------------ ------------ ------------ ----------- ------------
Net Income (Loss) ($ 215,196) ($ 55,034) ($ 10,625) ($ 0) ($ 280,855)
============ ============ ============ =========== ============
Weighted Average number of
common stock and
common stock equivalents
outstanding 19,380,942 0 1,000,000 400,000 20,780,942
=========== =========== =========== ========== ===========
Net Income (Loss) per
Common stock and
Common stock equivalents ($ .011) ($ .000) ($ .011) $ .008 ($ .014)
============ ========== ============ ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.5
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
PRO FORMA
Aarow AR Chronicle/Copies Plus Combined
For the Twelve For the Twelve For the Twelve
Months Ended Months Ended Months Ended
Dec. 31, Dec. 31, Pro Forma Dec. 31,
1997 1997 Adjustments 1997
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales Income $ 38,279 $ 160,872 $ 0 $ 199,151
Cost of Sales 21,013 42,865 0 63,878
------------- -------------- --------------- -------------
Gross Profit $ 17,266 $ 118,007 $ 0 $ 135,273
Operating Expenses:
Selling, General and Admin. 206,652 129,244 0 335,896
------------- -------------- --------------- -------------
Operating Income (Loss) ($ 189,386) ($ 11,237) $ 0 ($ 200,623)
Other Income and Expense ( 6,517) ( 0) ( 0) ( 6,517)
Interest Expense ( 7,036) ( 13,496) ( 0) ( 20,532)
-------------- --------------- ---------------- --------------
Net Income (Loss) before
Extraordinary Items ($ 202,939) ($ 24,733) ($ 0) ($ 227,672)
Extraordinary Items ( 142,934) ( 0) ( 0) ( 142,934)
-------------- --------------- ---------------- --------------
Net Income (Loss) ($ 345,873) ($ 24,733) ($ 0) ($ 370,606)
============== =============== ================ ==============
Weighted Average number of
common stock and
common stock equivalents
outstanding 18,024,045 0 1,400,000 19,424,045
============= ============== =============== =============
Net Income (Loss) per
Common stock and
Common stock equivalents ($ .019) ($ .000) ($ .000) ($ .019)
============ ============= =============== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7.6
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
PRO FORMA
Aarow Copies Plus Combined
For the Twelve For the Twelve For the Twelve
Months Ended Months Ended Months Ended
Dec. 31, Dec. 31, Pro Forma Dec. 31,
1996 1996 Adjustments 1996
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales Income $ 404,056 $ 92,560 $ 0 $ 496,616
Cost of Sales 163,654 28,788 0 192,442
------------- -------------- --------------- -------------
Gross Profit $ 240,402 $ 63,772 $ 0 $ 304,174
Operating Expenses:
Selling, General and Admin. 290,044 71,031 0 361,075
------------- -------------- --------------- -------------
Operating Income (Loss) ($ 49,642) ($ 7,259) $ 0 ($ 56,901)
Other Income and Expense ( 15,083) ( 0) ( 0) ( 15,083)
Interest Expense ( 4,463) ( 0) ( 0) ( 4,463)
-------------- --------------- ---------------- --------------
Net Income (Loss) before
Extraordinary Items ($ 69,188) ($ 7,259) ($ 0) ($ 76,447)
Extraordinary Items ( 33,493) ( 0) ( 0) ( 33,493)
-------------- --------------- ---------------- --------------
Net Income (Loss) ($ 102,681) ($ 7,259) ($ 0) ($ 109,940)
============== =============== ================ ==============
Weighted Average number of
common stock and
common stock equivalents
outstanding 18,312,622 0 1,400,000 19,712,622
============= ============== =============== =============
Net Income (Loss) per
Common stock and
Common stock equivalents ($ .006) ($ .000) ($ 0) ($ .006)
============ ============= ================ =============
</TABLE>
