U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FORM 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
1317 South Turner
Springdale, Arkansas 72764
(Address of principal executive offices) (Zip Code)
(501) 927-1884
(Issuer's telephone number)
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
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No .
Applicable only to corporate issuers
The number of outstanding of Common Stock as of August 19, 1999 was 11,155,942
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<CAPTION>
AAROW ENVIRONMENTAL GROUP, INC.
Index to Quarterly Report on Form 10-QSB
Part I - FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998 3
Unaudited Consolidated Statements of Income for the Three Months
Ended June 30, 1999 and 1998 4
Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 6
Supplemental Information 9
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
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<TABLE>
<CAPTION>
Part I - Financial Statements
Item 1. Financial Statements
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
June December
Assets 30, 1999 31, 1998
--------- --------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 65 $ 0
Inventory 32,400 32,400
--------- ---------
Total Current Assets $ 32,465 $ 32,400
PROPERTY, PLANT AND EQUIPMENT (net of accumulated
depreciation of $ 15,905 and $ 13,937 respectively) 6,191 8,159
Other Assets
Organization Costs (net of accumulated
amortization of $ 3,450 and $ 2,925 respectively) $ 1,050 $ 1,575
Noncompete Covenant (net of accumulated
amortization of $ 3,450 and $ 2,550 respectively) 14,550 15,450
--------- ---------
TOTAL OTHER ASSETS $ 15,900 $ 17,025
--------- ---------
TOTAL ASSETS $ 54,556 $ 57,584
========= =========
Liabilities and Stockholders Equity
Current Liabilities:
Accounts Payable $ 51,265 $ 41,142
Payroll Taxes Payable 120,137 103,496
Accrued Interest Payable 36,497 24,229
Judgment Payable 18,370 18,370
Short Term Notes 252,004 204,686
Accrued Salaries Payable 19,276 0
Current Portion of Long Term Notes 60,000 60,000
--------- ---------
TOTAL CURRENT LIABILITIES $ 557,549 $ 451,923
LONG TERM LIABILITIES 0 0
--------- ---------
TOTAL LIABILITIES $ 557,549 $ 451,923
Stockholders Equity
Common Stock, $ 0.001 par value, 30,000,000 shares authorized, $ 11,156 $ 10,381
11,155,942 shares issued and outstanding
Convertible Preferred Stock, $0.001 par value, 5,000,000 shares 3,000 3,000
authorized, 3,000,000 shares issued and outstanding,
one share convertible for three shares common
Paid in Capital 219,782 220,557
Retained Earnings (736,931) ( 628,277)
--------- ---------
TOTAL STOCKHOLDERS EQUITY ($502,993) ($394,339)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 54,556 $ 57,584
========= =========
</TABLE>
See notes to unaudited financial statements.
3
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<TABLE>
<CAPTION>
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended June 30, 1999, the Three Months Ended June 30, 1998,
the Six Months Ended June 30, 1999 and the Six Months Ended June 30, 1998
Three Months Three Months Six Months Six Months
6-30-99 6-30-98 6-30-99 6-30-98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales Income $ 0 $ 18,079 $ 0 $ 28,290
Cost of Sales
Materials 0 12,861 0 18,427
------------ ------------ ------------ ------------
GROSS PROFIT $ 0 $ 5,218 $ 0 $ 7,815
Operating Expenses 42,950 76,427 90,308 107,170
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS ($ 42,950) ($ 71,209) ($ 90,308) ($ 99,355)
Other Income and (Expenses)
Interest Expense ($ 6,439) ($ 7,212) ($ 12,530) ($ 12,998)
Penalties ( 3,122) ( 1,115) ( 5,817) ( 3,397)
------------ ------------ ------------ ------------
Total Other Income and (Expenses) ($ 9,561) ($ 8,327) ($ 18,347) ($ 16,395)
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 52,511) ($ 79,536) ($ 108,655) ($ 115,750)
============ ============ ============ ============
WEIGHTED AVERAGE number of common stock
and common stock equivalents outstanding 20,155,942 18,318,904 20,155,942 18,318,904
=========== =========== ========== ==========
NET INCOME (LOSS) per common stock and
common stock equivalents ($ .003) ($ .004) ($ .005) ($ .006)
============ =========== ============ ============
</TABLE>
4
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<TABLE>
<CAPTION>
AAROW ENVIRONMENTAL GROUP, INC.
STATEMENTS OF CASH FLOWS
For Six Months Ended June 30, 1999 and the Six Months Ended June 30, 1998
Six Months Six Months
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($108,655) ($115,750)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 1,968 1,968
Amortization 1,125 1,124
Extraordinary Items 0 0
(Increase) decrease in:
Accounts Receivable 0 (6,760)
Inventory 0 1,762
Increase (decrease) in:
Bank Overdraft 0 (1,056)
Accounts Payable 10,123 14,770
Payroll Taxes Payable 16,641 15,924
Accrued Salaries Payable 19,276 0
Accrued Interest Payable 12,268 8,469
--------- ---------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES ($ 47,254) ($ 79,549)
CASH FLOWS FROM FINANCING ACTIVITIES
New borrowings
Long-Term $ 0 $ 0
Short-Term 47,319 46,884
Debt Reduction
Long-Term 0
Sale of Stock 0 32,665
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 47,319 $ 79,549
--------- ---------
NET INCREASE IN CASH $ 65 $ 0
CASH AT BEGINNING OF THE PEROID 0 0
--------- ---------
CASH AT END OF PERIOD $ 65 $ 0
========= =========
SUPPLEMENTAL DISCLOSURES
Interest Paid $ 12,530 $ 12,998
========= =========
</TABLE>
5
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AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
STATEMENT OF SIGNIFICANT ACCOUNTING ASSUMPTIONS
BASIS OF ACCOUNTING
The financial statements of Aarow Environmental Group, Inc. (the "Company") at
June 30, 1999, have been prepared on the accrual basis of accounting. Using this
method, revenue and expenses are recognized when occurred.
The financial statements included in this report have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and include all adjustments which are, in the
opinion of management, necessary for a fair presentation. These financial
statements have not been audited by an independent accountant.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations for
interim reporting. The Company believes that the disclosures are adequate.
However, these financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the annual report on
form 10-KSB for the year ended December 31, 1998. The financial data for the
interim periods presented may not necessarily reflect the results to be expected
for the full year.
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 accelerated methods by charging against earnings amounts
sufficient to amortize the cost of the related assets over their estimated
useful lives.
INCOME TAXES
For income tax reporting and financial statement reporting at June 30, 1999, the
Company is using depreciation methods that are the same and therefore there is
no accrual for deferred income taxes at this time. However, because of various
elections available at the time of filing the income tax returns, there may be
future differences between income tax depreciation expense and financial
statement depreciation expense giving rise to accrual of deferred income taxes
Note 1: Property, Plant and Equipment
All assets are recorded at original cost. Depreciation is calculated using
accelerated methods, lives are five years for office equipment, seven years for
manufacturing equipment and furniture, and 10 years for Leasehold Improvements.
6
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AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Note 2: Noncompete Covenant
On July 29, 1998 the Company entered into an agreement with Evergreen
BioServices, Inc. whereby Evergreen grants Aarow the right to use Evergreen's
name and reputation to exclusively market remediation throughout the U.S. and
Mexican markets. Additionally, Evergreen agrees to work exclusively through
Aarow and Evergreen agrees not to compete with Aarow. Evergreen will supply the
engineering and technical support and will be responsible to accept or reject
all proposals concerning remediation through Aarow. This agreement begins on
July 29, 1998 and remains in effect for ten years at which time Aarow can renew
one time for an additional ten years
June 30, Dec. 31,
1999 1998
------------- -------------
Noncompete Covenant $ 18,000 $ 18,000
Accumulated Amortization ( 3,450) ( 2,550)
------------- -------------
Net Noncompete Covenant $ 14,550 $ 15,450
============= =============
Note 3: Judgment Payable
On October 2, 1998 a judgment was entered in the Washington County Court,
Fayetteville, AR, against the Company. This judgment is in the amount of $
18,370 and accrues interest at the rate of 10 %.
Note 4: Short-Term Notes
On September 15, 1997 the Company issued a series of short term notes in the
amount of $ 5,000 each for a total of $ 55,000. Each note accrues interest at
the rate of 8 % and is a single pay note due September 15, 1998. In addition
20,000 shares of common stock and 100,000 common stock warrants were issued to
each note holder. In case of default the note agreements call for the issuance
of an additional 40,000 shares of common stock to each note holder.
One of the shareholders who is also a Director loaned the Company $ 2,230. This
is an unsecured non interest demand note.
Note 5: The company's Long Term debt consists of the following:
<TABLE>
June 30, Dec. 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Springdale Bank & Trust, 10.25%, Monthly Int. Only $ 60,000 $ 60,000
Maturity Date 6-21-97
Secured by Inventory and A/R
Current Portion of Long Term debt ( 60,000) ( 60,000)
---------------- ----------------
Long Term debt, less current portion $ 0 $ 0
================ ================
The following is a summary of principal maturities of long term debt during the
next five years:
1999 60,000 60,000
</TABLE>
7
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AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Note 6: Stockholders' Equity
Common Stock: At June 30, 1999 there were 30,000,000 shares authorized,
11,155,942 issued and outstanding at $ 0.001 per share par value. At December
31, 1998 there were 30,000,000 shares authorized, 10,380,942 issued and
outstanding at $ 0.001 per share par value. The Company trades it's stock on the
over the counter bulletin board using the stock symbol of AARO.
Stock Warrants: There are 1,100,000 common stock warrants issued. Each common
stock warrant permits the holder to purchase at any time from September 15, 1998
until September 15, 2002 one share of the Company's common stock at the initial
exercise price of $ 0.50 per share. The common stock warrants are redeemable by
the Company upon thirty days written notice to the holder, at $ 0.001 per
warrant, conditioned upon the price of the common stock of the Company closing
for fourteen consecutive business days above $ 2.00 per share.
Convertible Preferred Stock: At June 30, 1999 and December 31, 1998 there were
5,000,000 shares authorized, 3,000,000 shares issued and outstanding. Each share
has a $ 0.001 par value and is convertible for three shares of common stock.
Note 7: Going Concern
As shown in the accompanying financial statements, the Company has incurred a
loss for the period ended June 30, 1999 and has a deficit in working capital.
Management has a continuing plan to recapitalize the Company, reestablish the
relationship with the distributors and development new products. 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 7: Earnings Per Share of Common Stock
Earnings per common share were computed using the weighted average number of
common shares outstanding after adding the dilutive effect of the conversion of
the preferred stock.
8
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<CAPTION>
AAROW ENVIRONMENTAL GROUP, INC.
SUPPLEMENTAL INFORMATION TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
SUPPLEMENTAL INFORMATION
Three Months Three Months Six Months Six Months
6-30-99 6-30-98 6-30-99 6-30-98
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Expenses
Accounting $ 3,200 $ 10,546 $ 4,700 $ 15,060
Advertising 0 0 614 0
Amortization 563 562 1,125 1,124
Auto & Truck 4,085 251 4,085 750
Bank Charges 1,146 7,508 1,146 7,528
Credit Card Fees 72 0 72 0
Depreciation 984 984 1,968 1,968
Dues & Subscriptions 0 65 0 65
Equipment Rental 0 132 0 224
Insurance 290 0 290 0
Legal Fees 290 4,140 290 4,892
Miscellaneous 168 196 168 196
Office Expense 234 709 1,209 1,509
Office Salaries 9,000 23,157 35,000 33,775
Payroll Tax Expense 689 1,772 2,678 2,584
Postage 0 0 0 414
Professional Fees 822 959 822 1,702
Rent 1,500 6,000 4,250 9,000
Supplies 3,200 135 3,200 365
Taxes & Licenses 775 326 775 326
Telephone 2,580 6,478 10,866 10,146
Travel 12,983 11,697 15,975 14,297
Unemployment Taxes 369 810 1,075 1,245
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $ 42,950 $ 76,427 $ 90,308 $ 107,170
=========== =========== =========== ===========
</TABLE>
See notes to unaudited financial statements.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and notes thereto appearing
elsewhere in this Report.
Rendezvous Trails of America, Inc. (formerly Holiday Resorts
International, Inc.) ("RTA"), the former parent of Aarow Environmental (formerly
Rain Forest - Moose, Ltd.), was incorporated in April 1970. The name of the
Company was changed from Rain Forest - Moose, Ltd., to Aarow Environmental
Group, Inc., on June 13, 1998. 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. 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. Rain Forest - Moose, Ltd., an Arkansas corporation ("RFM Arkansas"), was
formed on March 15, 1994. Pursuant to a Plan of Reorganization and Agreement of
Merger, dated March 5, 1996, RFM Arkansas merged with a wholly-owned subsidiary
of the Company, and as the surviving corporation, RFM Arkansas became a
wholly-owned subsidiary of the Company which was accounted for as a reverse
acquisition of the Company by RFM Arkansas under the purchase method of
accounting (the "RFM Arkansas Acquisition").
Results of Operations
The following table sets forth selected results of operations for the
three months and six months ended June 30, 1999 and 1998 which are derived from
the unaudited consolidated financial statements of the Company. The results of
operations for the periods presented are not necessarily indicative of the
Company's future operations.
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------------------ ------------------ ------------------ -----------------
Amount Percent Amount Percent Amount Percent Amount Percent
--------- ------- ---------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Income $ 0 100.0% $ 18,079 100.0% $ 0 100.0% $ 26,242 100.0%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Cost of Sales
Materials 0 1000% 12,861 71.1% 0 100.0% 18,427 70.2%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Gross Profit $ 0 100.0% $ 5,218 28.9% $ 0 100.0% $ 7,815 29.8%
Operating Expenses 42,950 429.5% 76,427 422.7% 90,308 903.1% 107,170 408.4%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Income or (Loss) from Operations $(42,950) 429.5% $( 71,209) 393.8% $( 90,308) 903.1% $( 99,355) 378.6%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Other Income and (Expenses)
Interest Expense $( 6,439) 64.4% $( 7,212) 4.0% $( 12,530) 125.3% $( 12,998) 49.5%
Penalties ( 3,122) 31.2% ( 1,115) 6.2% (5,817) 58.2% ( 3,397) 12.9%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Total Other Income and (Expense) $( 9,561) 95.6% $( 8,327) 10.2% $( 18,347) 183.5% $(16,395) 62.4%
--------- ----- ---------- ------- ---------- ------- ---------- ------
Net Income or (Loss) $(52,511) 525.1% $( 79,536) 440.0% $(108,655) 1086.6% $(115,750) 441.0%
========= ====== ========== ======= ========== ======= ========== ======
</TABLE>
10
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Comparison of the Six Months Ended June 30, 1999 and 1998
Sales income decreased to $ 0 in the six months ended June 30, 1999
(the "1999 Six Month Period") from $ 26,242 for the six months ended June 30,
1998 (the "1998 Six Month Period"), a decrease of $ 26,242 (a decrease of 100
percent). The decrease in sales income was due to the concentration of the
business on the installation and set up of the first Aarowaste processor. The
first processor was installed in Mid June. The cost of sales decreased to $ 0
for the 1999 Six Month Period from $ 18,427 for the 1998 Six Month Period, a
decrease of $ 18,427 (a decrease of 100 percent).
Gross profit declined to $ 0 in the 1999 Six Month Period, from $ 7,815
during the 1998 Six Month Period. As a percent of sales income, gross profit
decreased to 0 percent during the 1999 Six Month Period from 29.8 percent during
the 1998 Six Month Period, which was attributable to the lack of sales for the
1999 Six Month Period.
Operating expenses decreased to $ 90,308 (903.1 percent of sales
income) in the 1999 Six Month Period from $ 107,170 (408.4 percent of sales
income) in the 1998 Six Month Period, which was principally due to a decrease in
accounting fees from $ 15,060 during the 1998 Six Month Period to $ 4,700 during
the 1999 Six Month Period, a decrease of $ 10,360. Also, bank charges decreased
from $ 7,528 in the 1998 Six Month Period to $ 1,146 in the 1999 Six Month
Period a decrease of $ 6,382. Legal expenses decreased from $ 4,892 in the 1998
Six Month Period to $ 290 in the 1999 Six Month Period a decrease of $ 4,602.
Rent expense decreased from $ 9,000 in the 1998 Six Month Period to $ 4,250 in
the 1999 Six Month Period a decrease of $ 4,750.
The Company experienced a loss from operations of $ 108,655 during the
1999 Six Month Period compared to a loss from operations of $ 115,750 in the
1998 Six Month Period. The loss from operations in the 1999 Six Month Period was
1086.6 percent of sales income and 441.0 percent of sales income in the 1998 Six
Month Period.
During the 1999 Six Month Period the Company was engaged in the
development of the sales and marketing plan for an animal waste processor unit
for which the Company has secured exclusive worldwide marketing rights.
The Aarowaste processor, as it is called, is completed and ready for market.
A net loss was sustained during the 1999 Six Month Period of $ 108,655 compared
to a loss of $ 115,750 during the 1998 Six Month Period.
Quarterly Results of Operations
During this three month period, management was restructured and significant time
was devoted to solidifying the company's current financial operations and
positioning itself to seek new product opportunities and to expand its marketing
and sales efforts of existing product lines. Additionally, the Company entered
into a Letter of Intent with Utica Publishing Corporation of Rogers, Arkansas.
Under the terms of which, if completed and put into effect, the Company will
purchase all of the issued and outstanding shares of Utica Publishing
Corporation. The Company expects to complete this acquisition during the third
quarter of 1999. If completed this acquisition will add two areas of operations
and sales that will effectively use the current marketing resources of the
Company. However, the Company may be unsuccessful in completing this acquisition
during the third quarter or at any time in the foreseeable future.
Income Taxes
For income tax reporting and financial statement reporting at June 30,
1999 and 1998, the Company is using depreciation methods that are the same and
therefore there is no accrual for deferred income taxes at this time. However,
because of various elections available at the time of filing the income tax
returns, there may be future differences between income tax depreciation expense
and financial statement expense giving rise to accrual of deferred income tax.
11
<PAGE>
Because of continuing losses the Company has not incurred any income
tax expense.
Liquidity and Capital Resources
The Company incurred a loss for the three months ended June 30, 1999 and had a
deficit in working capital of $ 525,084. Under new management, the Company began
a plan to recapitalize the Company and to reestablish the relationships with its
former distributors and channels of product distribution. However, there can be
no assurance that future cash flows from operations and availability of credit
from vendors will be sufficient to implement management's business plan or that
the Company will be successful in its efforts to implement such 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.
Due to the Company's operating history, its lack of substantial equity,
its working capital deficit and volume of sales, traditional bank lending
facilities are not currently available. Historically, the Company financed its
growth from borrowings and shareholder contributions and depended in part upon
credit terms from its various vendors as a source of financing. Arrangements
with such vendors have generally been informal, without specific agreements as
to terms and payments. The availability of credit from vendors, or the terms of
any such credit, cannot be assured. Because future cash flows and the
availability of vendor credit or other financing are subject to a number of
variables, there can be no assurance that the Company's cash flows and capital
resources will be sufficient to enable the Company to service its outstanding
debt and liabilities or to maintain currently planned levels of sales and
product distribution.
Net cash used by operating activities totaled $ 47,254 in the 1999 Six
Month Period, while net cash used by operating activities totaled $ 79,549 in
the 1998 Six Month Period. During the 1999 Six Month Period the Company
experienced operating difficulties as a result of the lack of working capital
following the August 8, 1996, casualty loss and the resulting operational
decline and inactivity of the Company during the first calendar quarter of 1998.
The Company also experienced inadequate management until the election of new
management for the Company in March 1998. The new management for the Company
began a plan to augment the capital of the Company and to resume full
operations. However, there is no assurance that the Company will be successful
in its efforts to implement its capital augmentation plan and the resumption of
full business operations, including the reestablishment of its former channels
of product distribution. During the 1999 Six Month Period, net cash flows
provided by financing activities totaled $ 47,319, while, in comparison net cash
flows provided by financing activities totaled $ 79,549 during the 1998 Six
Month Period. During the 1999 and 1998 Six Month Periods, the Company had no
investing activities.
Currently cash flows from operations are not sufficient to service its
obligations under the various financing arrangements and maintain operations of
the Company. Management of the Company has developed a plan to augment its
capitalization in order to resume full manufacturing and marketing operations.
However, there is no assurance that the Company will be successful in its
efforts to implement its plan for additional capitalization and the resumption
of full business operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Report constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Certain, but not necessarily all, of such forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should" or "anticipates" or other
variations thereon, or by discussions of strategies that involve risks and
uncertainties. The actual results of the Company or industry results may be
materially different from any future results expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include general economic and business conditions; the ability of the
Company to implement its business plan and strategy; industry changes; changes
in customer preferences; product competition; availability of key personnel;
increasing operating costs; unsuccessful advertising and promotional efforts;
changes in brand awareness and preferences; acceptance of new product offerings;
and changes in, or the failure to comply with, government regulations
(especially environmental protection laws and regulations); the ability of the
Company to obtain vendor credit or other financing; and other factors.
12
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the period
covered by this report.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger between Rendezvous Trails of
America, Inc. and Rain Forest-Moose, Ltd., dated February 23,
1996.*
2.2 Certificate and Articles of Merger of Rendezvous Trails of
America, Inc. with and into Rain Forest - Moose, Ltd.*
2.3 Plan of Reorganization and Agreement of Merger between Rain
Forest - Moose, Ltd., a Nevada corporation, RFM Acquisition
Corporation of Oklahoma, Inc., an Oklahoma corporation, Rain
Forest - Moose, Ltd., an Arkansas corporation, Dan Pilkington,
Jeff Martin, Stan Sisemore, Jim Anderson and Bill Hooten,
dated March 5, 1996.**
2.4 Certificate of Merger of RFM Acquisition Corporation of
Oklahoma, Inc. with and into Rain Forest - Moose, Ltd.**
4.1 Agreement and Plan of Merger between Rendezvous Trails of
America, Inc. and Rain Forest-Moose, Ltd., dated February 23,
1996.*
4.2 Plan of Reorganization and Agreement of Merger between Rain
Forest - Moose, Ltd., a Nevada corporation, RFM Acquisition
Corporation of Oklahoma, Inc., an Oklahoma corporation, Rain
Forest - Moose, Ltd., an Arkansas corporation, Dan Pilkington,
Jeff Martin, Stan Sisemore, Jim Anderson and Bill Hooten,
dated March 5, 1996**.
4.2 Certificate of the Powers Designation, Rights and
Preferences for the Series I Convertible Preferred Stock of
Rain Forest - Moose, Ltd., dated March 5, 1996.**
4.3 Registration Rights Agreement between Rain Forest-Moose, Ltd.
and Dan Pilkington, dated March 5, 1996.**
13
<PAGE>
10.1 Plan of Reorganization and Agreement of Merger between Rain
Forest - Moose, Ltd., a Nevada corporation, RFM Acquisition
Corporation of Oklahoma, Inc., an Oklahoma corporation, Rain
Forest - Moose, Ltd., an Arkansas corporation, Dan Pilkington,
Jeff Martin, Stan Sisemore, Jim Anderson and Bill Hooten,
dated March 5, 1996.**
10.2 Registration Rights Agreement between Rain Forest-Moose, Ltd.
and Dan Pilkington, dated March 5, 1996.**
27 Financial Data Schedule.
- -----------
* Incorporated by reference to Form 8-K, dated March 5, 1996, filed with the
Commission on March 20, 1996. ** Incorporated by reference to Form 8-K, dated
March 7, 1996, filed with the Commission on March 22, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
In accordance with 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/ Lloyd W. Phillips
---------------------------------
Lloyd W. Phillips, President
Date: August 20, 1999
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