<PAGE>
FORM 10-QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 2000
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to
Commission File Number 000-06292
AAROW ENVIRONMENTAL GROUP, INC
(Exact name of small business issuer as specified in its charter)
Nevada 73-078886
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
210 Park Avenue, Suite 2100, Oklahoma City, Oklahoma 73102
(Address of principal executive offices)
(405) 415-2750
(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) filed all 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
State the number of shares outstanding of each of the issuer's classes of Common
Stock, as of the latest practicable date:
Common Stock, $.001 par value 29,369,309
Title of Class --------------------------
Number of Shares outstanding
at June 30, 2000
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I - Financial Information 3
Item 1. Financial Statements 3
Unaudited Condensed Consolidated Balance Sheets 3
Unaudited Condensed Consolidated Statements of Income 4
Unaudited Condensed Consolidated Statement of Shareholders' Equity 6
Unaudited Condensed Consolidated Statements of Cash Flows 7
Notes to Unaudited Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Part II - Other Information 12
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
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>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements within this report constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and 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 "anticipates," "believes,"
"expects," "may," "will," or "should" 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 strategies, competition, availability of key personnel, increasing
operating costs, unsuccessful advertising and marketing efforts, acceptance
of product offerings, and imposition of or the failure to comply with
government regulations, the ability of the Company to obtain financing for
future operations, and other factors.
Readers are cautioned to consider the specific business risk factors
described in our annual report on Form 10-KSB for the fiscal year ended
December 31, 1999 and not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. We
undertake no obligation to publicly revise forward-looking statements to
reflect events or circumstances that may arise after the date hereof.
2
<PAGE>
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
JUNE DECEMBER
ASSETS 30, 2000 31, 1999
------------- --------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 768,760 $ 1,248
Accounts Receivable 79,333 3,376
Inventory - 13,508
Deposits and prepaid expenses 56,201 -
------------- --------------
TOTAL CURRENT ASSETS $ 904,294 $ 18,132
PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $ 2,676 and $ 147,992 respectively) 620,759 154,641
Other Assets
Organization Costs (net of accumulated
amortization of $0 and $ 3,825 respectively) $ - $ 675
Noncompete Covenant (net of accumulated
amortization of $0 and $ 6,150 respectively) - 11,850
Intellectual Property (net of accumulated
amortization of $0 and $ 37,917 respectively) - 287,083
Other Assets 2,025 -
------------- --------------
TOTAL OTHER ASSETS $ 2,025 $ 299,608
------------- --------------
TOTAL ASSETS $ 1,527,078 $ 472,381
============= ==============
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 229,264 $ 61,261
Accrued Interest Payable 18,120 40,475
Accrued Salaries Payable 22,733 131,382
Debentures Payable 5,000 75,000
Judgment Payable 39,782 39,782
Payroll Taxes Payable 57,481 120,137
Sales Tax Payable - 12,879
Short Term Notes 30,000 252,004
Current Portion of Long Term Notes - 167,447
------------- --------------
TOTAL CURRENT LIABILITIES $ 402,380 900,367
LONG TERM LIABILITIES-Loan from Shareholder 95,000 -
------------- --------------
TOTAL LIABILITIES $ 497,380 $ 900,367
Stockholders Equity
Common Stock, $ 0.001 par value, 30,000,000 shares authorized,
29,369,309 and 16,553,457, respectively, shares issued and outstanding $ 29,369 $ 373,615
Common Stock Issuable, $ 0.001 par value, 8,650,000 shares 8,650 -
Series I Convertible Preferred Stock, $0.001 par value, 5,000,000 shares
authorized, 2,829,570 shares issued and outstanding,
liquidation preference $2,829,570 2,830 3,000
Paid in Capital 1,826,399 220,557
Accumulated Deficit ( 837,550) ( 1,025,158)
-------------- ---------------
TOTAL STOCKHOLDERS EQUITY $ 1,029,698 ($ 427,986)
------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 1,527,078 $ 472,381
============= ==============
</TABLE>
See notes to unaudited financial statements.
3
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
REGISTRANT SUBSEQUENT REGISTRANT PRIOR
TO REVERSE ACQUISITION TO REVERSE ACQUISITION
---------------------- -------------------------------------
FROM MAY 1, THROUGH FROM JANUARY 1, SIX MONTHS ENDED
JUNE 30, 2000 TO APRIL 30, 2000 JUNE 30, 1999
----------------- ----------------- ---------------
<S> <C> <C> <C>
Revenue $ 13,255 $ 44,994 $ -
Operating Expenses $ 777,744 $ 244,062 $ 90,308
----------------- -------------- --------------
INCOME/(LOSS) FROM OPERATIONS ($ 764,489) ($ 199,068) ($ 90,308)
Other Income and (Expenses)
Interest Income 1,939 - -
Interest Expense ( 75,000) ( 23,644) ( 12,530)
Other - - ( 5,817)
----------------- -------------- ---------------
Total Other Income and (Expenses) ($ 73,061) ($ 23,644) ($ 18,347)
------------------ --------------- ---------------
NET INCOME/(LOSS) BEFORE
EXTRAORDINARY ITEM ($ 837,550) ($ 222,712) ($ 108,655)
Loss on Extinguishment of Debt - 52,250 -
----------------- -------------- --------------
NET INCOME/(LOSS) ($ 837,550) ($ 274,962) ($ 108,655)
================== =============== ===============
Weighted Average common shares outstanding-
basic and diluted 29,691,961 17,314,221 10,583,566
================= ============== ==============
NET LOSS per common share before
extraordinary item-basic and diluted ($ .03) ($ .01) ($ .01)
Loss per common share-extraordinary item ($ .00) ($ .01) ($ .00)
------------------ --------------- ---------------
NET LOSS per common share -
basic and diluted ($ .03) ($ .02) ($ .01)
================== =============== ===============
</TABLE>
See notes to unaudited financial statements.
4
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
REGISTRANT SUBSEQUENT REGISTRANT PRIOR
TO REVERSE ACQUISITION TO REVERSE ACQUISITION
---------------------- -----------------------------------------
FROM MAY 1, THROUGH FROM APRIL 1, THREE MONTHS
JUNE 30, 2000 TO APRIL 30, 2000 ENDED JUNE 30, 1999
------------------ ----------------- -------------------
<S> <C> <C> <C>
Revenue $ 13,255 $ - $ -
Operating Expenses $ 777,744 $ 6,000 $ 42,950
------------------ ------------- ---------------
INCOME/(LOSS) FROM OPERATIONS ($ 764,489) ($ 6,000) ($ 42,950)
Other Income and (Expenses)
Interest Income 1,939 - -
Interest Expense ( 75,000) ( 22,000) ( 6,439)
Other - - ( 3,122)
------------------ ------------- ----------------
Total Other Income and (Expenses) ($ 73,061) ($ 22,000) ($ 9,561)
------------------ ------------ ----------------
NET INCOME/(LOSS) ($ 837,550) ($ 28,000) ($ 52,511)
=================== ============= ================
Weighted Average common shares outstanding-
basic and diluted 29,691,961 17,783,228 10,783,964
================== ============= ===============
NET LOSS per common share-
basic and diluted ($ .03) ($ .00) ($ .00)
================== ============= ================
</TABLE>
See notes to unaudited financial statements.
5
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON
COMMON STOCK PREFERRED PAID-IN ACCUMULATED
STOCK ISSUABLE STOCK CAPITAL DEFICIT TOTAL
------------- ----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 2000 $ 373,615 $ - $ 3,000 $ 220,557 ($ 1,025,158) ($ 427,986)
Net Loss through April 30, 2000 ( 274,962) ( 274,962)
Common stock exchanged for
extinguishment of debt 675 150 106,425 107,250
Common stock issued in
exchange for services 928 174,435 175,363
Capital transactions resulting from
Reverse Acquisition (345,849) (170) (812,940) 1,300,120 141,161
Transactions subsequent to
Reverse Acquisition:
Beneficial conversion feature
associated with convertible notes 75,000 75,000
Conversion of Notes 500 74,500 75,000
Private Placement 8,000 1,988,422 1,996,422
Net Loss from May 1 through
June 30, 2000 ( 837,550) ( 837,550)
------------- ----------- ------------ ------------ -------------- ------------
BALANCE, JUNE 30, 2000 $ 29,369 $ 8,650 $ 2,830 $ 1,826,399 ($ 837,550) $ 1,029,698
============= =========== ============ ============ ============== ============
</TABLE>
See notes to unaudited financial statements.
6
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
REGISTRANT SUBSEQUENT REGISTRANT PRIOR
TO REVERSE ACQUISITION TO REVERSE ACQUISITION
---------------------- -------------------------------------
FROM MAY 1, THROUGH FROM JANUARY 1, SIX MONTHS ENDED
JUNE 30, 2000 TO APRIL 30, 2000 JUNE 30, 1999
----------------- ----------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($ 837,550) ($ 274,962) ($ 108,655)
Adjustments to reconcile net loss to net cash provided
by operating activities
Loss on Extinguishment of Debt - 52,250 -
Common Stock Issued for Services - 175,363 -
Non-cash Interest Expense 75,000 22,000 -
Depreciation 2,676 11,240 1,968
Amortization - 6,541 1,125
(Increase) decrease in:
Accounts Receivable ( 79,333) - -
Deposits, Prepaid Expenses, and Other Assets ( 58,226) - -
Increase (decrease) in:
Accounts Payable 202,648 ( 17,000) 10,123
Payroll Taxes Payable 27,344 - 16,641
Accrued Salaries Payable - - 19,276
Accrued Interest Payable ( 2,355) - 12,268
----------------- ------------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ( 669,796) ($ 24,568) ($ 47,254)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment ( 623,435) - -
Cash Acquired in Reverse Acquisition 72 - -
---------------- ------------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ( 623,363) - -
CASH FLOWS FROM FINANCING ACTIVITIES
Short-Term Borrowings - 28,720 47,319
Repayment of Borrowings ( 122,447) - -
Received from Private Placement 1,996,422 - -
Beneficial Conversion Feature on Notes Payable 75,000 - -
Capitalization of Global Wireless 17,944 - -
Note from Shareholder 95,000 - -
---------------- ------------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,061,919 28,720 47,319
---------------- ------------- -----------
NET INCREASE/(DECREASE) IN CASH 768,760 $ 4,152 $ 65
CASH AT BEGINNING OF PERIOD - 1,248 -
---------------- ------------- -----------
CASH AT END OF PERIOD $ 768,760 $ 5,400 $ 65
================ ============= ===========
</TABLE>
See notes to unaudited financial statements.
7
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
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 fair presentation.
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, 1999. The
financial data for the interim periods presented may not necessarily reflect
the results to be expected for the full year.
REVERSE ACQUISITION
On May 1, 2000, a subsidiary of AAROW Environmental Group, Inc. (AAROW)
merged with Global Wireless Technologies, Inc. (Global Wireless), resulting
in the stockholders of Global Wireless becoming the majority owners of AAROW.
Global Wireless was formed in April 2000 and did not have any significant
operations at the date of merger. This transaction is considered a capital
transaction equivalent to the issuance of stock by Global Wireless for the
net assets of AAROW, with no goodwill or other intangible assets recorded,
accompanied by a recapitalization; similar to a reverse acquisition.
As a result of the merger, certain of AAROW's assets, including UTICA
Publishing Corporation, a subsidiary, were disposed, certain of AAROW'S
liabilities were extinguished, certain of AAROW's outstanding preferred and
common stock was cancelled, and warrants exercisable for the purchase of
1,850,000 shares of common stock at $.375 were issued. These transactions
have been treated as capital transactions.
The accompanying financial statements reflect the historical operating
results of AAROW prior to May 1, 2000 as "Registrant Prior to Reverse
Acquisition" and the historical results of Global Wireless and AAROW
subsequent to May 1, 2000 as "Registrant Subsequent to Reverse Acquisition".
STOCKHOLDERS' EQUITY
The Company's common stock is quoted on the over the counter bulletin board
under the stock symbol of AARO.
Common Stock: At June 30, 2000 there were 30,000,000 shares authorized,
29,369,309 issued and outstanding at $0.001 per share par value.
Additionally, at June 30, 2000, the Company had received consideration for
issuance of 8,650,000 shares of common stock upon amendment of the Company's
Articles of Incorporation.
Stock Options and Warrants Outstanding at June 30, 2000:
- warrants exercisable for the purchase of 500,000 shares of
common stock at an exercise price of $.75 per share expiring
on April 24, 2005,
- warrants exercisable for the purchase of 2,950,000 shares of
common stock during various periods at exercise prices of $.25
to $.375 per share expiring on or before June 30, 2005,
- stock options granted under a stock option plan exercisable
for the purchase of 42,000 shares of common stock at $.375 per
share expiring June 30, 2005, and
- warrants exercisable for the purchase of 8,000,000 shares of
common stock at $3.00 per share expiring on June 30, 2005.
The board of directors is authorized to issue additional stock options
exercisable for the purchase of 2,458,000 shares of common stock under the stock
option plan.
8
<PAGE>
AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STOCKHOLDERS' EQUITY - CONTINUED
Convertible Preferred Stock: At June 30, 2000, there were 5,000,000 shares
authorized, 2,829,570 of Series I shares issued and outstanding. Each share
has a $ 0.001 par value, is convertible into three shares of common stock,
and has a liquidation preference of $1.00 per share.
The outstanding share amounts disclosed as of June 30, 2000, reflect
subsequent corrective action by the board of directors for common shares
inadvertently issued in excess of authorized amounts.
CONVERTIBLE NOTES
During the second quarter of 2000, the Company issued Convertible Notes of $
75,000, which contained a beneficial conversion feature and for which
conversion was automatic upon the AAROW - Global Wireless merger. The
proceeds from the notes were allocated to the beneficial conversion feature,
and upon conversion, $ 75,000 was reflected as interest expense.
PRIOR QUARTER ADJUSTMENT
During the second quarter of 2000, the Company identified certain first
quarter transactions not previously reported. These transactions related to
the issuance of common stock for services and for the extinguishment of debt.
These transactions have been reported currently in the period from January 1,
2000 to April 30, 2000, and resulted in additional first quarter operating
expenses of approximately $ 175,000 and a first quarter loss on
extinguishment of debt of approximately $ 52,000.
GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred a
loss for the period ended June 30, 2000. Management, through the merger with
Global Wireless Communications, Inc. has begun a plan to recapitalize the
Company and change its business emphasis. 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. These financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
LOSS PER COMMON SHARE
Loss per common share were computed using the weighted average number of
common shares outstanding and issuable, after giving effect to the corrective
actions taken by the board of directors as discussed previously.
Basic and diluted loss per share are the same because the Company's warrants
and convertible preferred stock are anti-dilutive.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Effective May 1, 2000, Global Wireless Technologies, Inc. merged
with our subsidiary and became our wholly-owned subsidiary. We are developing
our wireless communication services to become a fully integrated applications
service provider. In order to accomplish this goal and maintain the highest
quality of service, we are building our Carrier Class Network and utilizing
the latest in new wireless transport technology to deliver the broadband
width necessary to effectively run and provide our application services.
These services include Video Conferencing, Video on Demand and Application
Services Hosting. Our other services include Virtual Private Networks (VPN's)
and Telephony over IP (telephone service over Internet protocol), providing
both local and long-distance telephone services, that will also be available
at significantly faster speeds and lower costs. In July 2000, we made the
initial filing with the Securities and Exchange Commission to effectuate a
change in our name from Aarow Environmental Group, Inc. to aaro Broadband
Wireless Communications, Inc. We believe this name change will more closely
reflect our new business plan and direction. We also intend to amend our
Articles of Incorporation to increase our authorized shares of common stock
from 30,000,000 to 200,000,000.
We intend to offer our wireless communications services initially to
commercial office space tenants and owners who currently do not have high
bandwidth service. Due to the relatively low cost of building the wireless
network, we anticipate that we will be able to offer our services to
customers at a fraction of the cost they now incur for conventional
hard-wired services. We anticipate that our wireless communications services
offer cost savings, while achieving significant time savings and productivity
gains.
On September 2, 1999, we acquired Utica Publishing Corporation.
Utica operates a general commercial printing and copying business and
published two Spanish language magazines in Northwest Arkansas. On May 10,
2000, we transferred and assigned all of the outstanding capital stock of
Utica Publishing to Jim Bolt. Following this assignment, Utica Publishing
ceased to be our wholly-owned subsidiary. This transfer was pursuant to a
settlement agreement, which also resulted in the dismissal of pending
litigation involving us, our directors and officers and certain individuals.
We previously developed, manufactured, marketed and distributed a
core of products and services that addressed specific environmental issues.
These products and services were focused on soil and groundwater remediation
with emphasis on bioremediation.
Results of Operations
The following tables set forth selected results of operations for
the three months and six months periods ended June 30, 2000 and 1999. The
selected results of operations are derived from our unaudited condensed
consolidated financial statements presented elsewhere in this report. These
tables reflect the historical operating results of AAROW prior to May 1,
2000, as "Registrant Prior to Reverse Acquisition" and the historical results
of Global Wireless and AAROW subsequent to May 1, 2000, as "Registrant
Subsequent to Reverse Acquisition". The period from January 1, 2000 to April
30, 2000 includes the operations of Utica Publishing, which was acquired in
September 1999, while the results of operations for the period from May 1,
2000 to June 30, 2000 does not include the operations of Utica Publishing.
The three months and six months ended June 30, 1999 reflects operating
results that occurred prior to the acquisition of Utica Publishing.
Therefore, the combined periods ended June 30, 2000 is not comparable to the
three months and six months ended June 30, 1999 due to the purchase
accounting adjustments associated with the acquisition of Utica Publishing
and the inclusion of the operating results of Utica Publishing during the
period from January 1, 2000 to April 30, 2000. The results of operations for
the periods presented are not necessarily indicative of our future operations.
<TABLE>
<CAPTION>
REGISTRANT SUBSEQUENT REGISTRANT PRIOR
TO REVERSE ACQUISITION TO REVERSE ACQUISITION
---------------------- -----------------------------------------------
FROM MAY 1, THROUGH FROM APRIL 1, THREE MONTHS ENDED
JUNE 30, 2000 TO APRIL 30, 2000 JUNE 30, 1999
----------------- ------------------ --------------------
<S> <C> <C> <C>
Revenue $ 13,255 100.0% $ - N/A $ - N/A
Operating Expenses $ 777,744 5867.6% $ 6,000 N/A $ 42,950 N/A
---------- ------- ---------- ------- ----------- -------
Income/(Loss) from Operations $(764,489) 5767.6% $( 6,000) N/A $( 42,950) N/A
---------- ------- ---------- ------- ----------- -------
Other Income and (Expenses)
Interest Income $ 1,939 14.6% $ - N/A $ - N/A
Interest Expense ( 75,000) 565.8% 22,000 N/A ( 6,439) N/A
Other - N/A - N/A ( 3,122) N/A
---------- ------- ---------- ------- ----------- -------
Total Other Income and (Expense) ( 73,061) 551.2% $( 22,000) N/A $( 9,561) N/A
---------- ------- ---------- ------- ----------- -------
Net Income or (Loss) $(837,550) 6318.7% $( 28,000) N/A $( 52,511) N/A
========== ======= ========== ======= =========== =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
REGISTRANT SUBSEQUENT REGISTRANT PRIOR
TO REVERSE ACQUISITION TO REVERSE ACQUISITION
---------------------- -------------------------------------------------
FROM MAY 1, THROUGH FROM JANUARY 1, SIX MONTHS ENDED
JUNE 30, 2000 TO APRIL 30, 2000 JUNE 30, 1999
---------- ------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 13,255 100.0% $ 44,994 100.0% $ - N/A
Operating Expenses $ 777,744 5867.6% $ 244,062 542.4% $ 90,308 N/A
---------- ------- ---------- --------- ----------- ---------
Income/(Loss) from Operations $(764,489) 5767.6% $(199,068) 442.4% $ (90,308) N/A
Other Income and (Expenses)
Interest Income 1,939 14.6% - N/A - N/A
Interest Expense (75,000) 565.8% (23,644) 52.5% (12,530) N/A
Other - N/A - N/A (5,817) N/A
---------- ------- ---------- --------- ----------- ---------
Total Other Income and (Expense) $ (73,061) 551.2% $ (23,644) 52.5% $ (18,347) N/A
---------- ------- ---------- --------- ----------- ---------
Net Income/(Loss) before
extraordinary item $(837,550) 6318.7% $(222,712) 495.0% $ (108,655) N/A
Loss on extinguishment of debt - N/A 52,250 116.1% - N/A
---------- ------- ---------- --------- ----------- ---------
Net Income or (Loss) $(837,550) 6318.7% $(274,962) 611.1% $ (108,655) N/A
========== ======= ========== ========= =========== =========
</TABLE>
Discussion of Period from May 1, 2000 through June 30, 2000
During two months ended June 30, 2000, we had sales income of
$13,255 resulting from custom programming and consulting. We anticipate
commencement of customer billings and revenue recognition by the end of the
September 2000. We are currently in the process of acquiring the necessary
equipment and build-out of our Regional Hubs, National Operations Center and
individual customer sites for our wireless communications services.
Operating expenses of $777,744, consists predominately of employee
costs, occupancy costs, telecom charges and public relations expenses. Our
efforts to build a wireless, carrier-class network requires a substantial
investment in employee costs due to the technical nature of the business and
the requirement to obtain qualified personnel. These employee costs totaled $
518,770 for the two months ended June 30, 2000. Occupancy costs of $ 115,291
include the cost of acquiring rooftop leases needed for wireless
transmission, office leases and office related expenses. Telecom charges of $
41,688 were incurred as we connected offices and Regional Hubs with the
National Operations Center. Public relations expenses to promote our products
and services amounted to $ 36,330, which included trade show and promotional
costs. Other miscellaneous operating expenses for the two months ended June
30, 2000, amounted to $ 65,665.
Interest Expense of $75,000 is a result of the accretion of the
discount on convertible notes issued in April 2000 and converted to common
stock upon completion of the merger-acquisition of Global. This discount was
a non-cash expense. The discount resulted from the beneficial conversion
feature of these notes.
Liquidity and Capital Resources
Historically, we have financed our growth from borrowings and sale
of our equity securities. Net cash used by operating activities totaled
$669,796 in the period May 1, 2000 through June 30, 2000. Net cash used by
investing activities in the same period totaled $623,363 due to the purchase
of equipment. Cash flows provided by financing activities were $2,061,919
during the two months ended June 30, 2000. During the first the two months
ended June 30, 2000, we had a net cash increase of $768,760.
On June 30, 2000 we completed a private offering of 8,000,000 units,
each unit consisting of one share of common stock and one redeemable warrant
at $.25 per unit. We received net proceeds from this offering of $2,000,000.
Each of the redeemable warrants is exercisable until June 30, 2005 for the
purchase of one share of common stock for $3.00. These funds are being
utilized for the purpose of payment of current liabilities and development of
our wireless communications networks and marketing of the related products
and services.
We do not have any financing arrangements with lending institutions.
Additionally, our loan repayment history adversely affects our near term
ability to establish financing arrangements with traditional lending
institutions.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On May 24, 2000, an action styled BROADBAND WIRELESS INTERNATIONAL
CORPORATION, F/K/A BLACK GIANT OIL COMPANY V. RONALD L. BAKER, AAROW
ENVIRONMENTAL GROUP, INC. A/K/A AARO BROADBAND WIRELESS COMMUNICATIONS
CORPORATION AND GETMORE COMMUNICATIONS, INC., Case No. CJ-2000-3816, was
filed in the District Court of Oklahoma County, Oklahoma. The plaintiffs are
seeking to
- prohibit further conduct, statements or actions in anyway made
to appear as acts of Broadband,
- prohibit the continued conversion by Baker of Broadband's
name, accounts, property or business opportunities,
- damages exceeding $10,000 for conversion, fraud and negligent
misrepresentation from the defendants,
- punitive damages for conversion, fraud, and negligent
misrepresentation,
- interest, attorney fees and cost.
We are defending this case and have filed our answer denying the plaintiffs'
allegations.
On July 14, 2000, an action styled BROADCOM WIRELESS COMMUNICATIONS, CORP.,
AND BLACK GIANT RESOURCES CORPORATION V. RONALD L. BAKER, ARROW ENVIRONMENTAL
GROUPS, INC. A/K/A AARO BROADBAND WIRELESS COMMUNICATIONS CORPORATION, AND
GETMORE COMMUNICATIONS, INC., Case No. CJ-2000-5129-63, was filed in the
District Court of Oklahoma County, Oklahoma. The plaintiffs are seeking to
receive actual damages exceeding $10,000, punitive damages, interest,
attorney's fees, and the costs of the action and such other and further
relief that appears just and proper. As of the date of this Report, we have
neither been served nor entered an appearance in this case. Until we are
served or enter an appearance in this case, procedurally this case has not
been commenced for purposes of defense.
Because of the recent filing of both cases, we are currently unable to fully
and completely assess the merits of the claims made. We are vigorously
defending the first case and intend to pursue all claims that we and the
other defendants have against the plaintiffs.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 30, 2000, we completed a private placement offering of 8,000,000
units, each consisting of one share of common stock and one redeemable
warrant. Each redeemable warrant is exercisable for the purchase of one share
of common stock for $3.00 and is subject to being called by us anytime after
the common stock has a closing sale price of $4.50 per share for five
consecutive business days. This offering was completed, for cash proceeds of
$2,000,000 ($.25 per unit). These funds have been utilized to settle certain
debts incurred prior to the merger with Global Wireless, purchase
communications equipment and computer equipment, complete the Tulsa regional
hub build-out, and for working capital including payroll, rents, operating
expenses, etc. The units were sold to 77 investors each qualifying as an
accredited investor within the meaning Rule 501(a).
On May 1, 2000, as a result of the merger-acquisition of Global Wireless
Technologies, Inc., five convertible promissory notes, in the aggregate
principal amount of $75,000, held by five lenders were converted into 500,000
shares of common stock. Each holder of these promissory notes qualified as an
accredited investor within the meaning Rule 501(a). The original issuance of
these promissory notes and there conversion to common stock were made without
payment of sales commissions or other remuneration.
Effective May 1, 2000, in connection with the merger-acquisition of Global
Wireless Technologies, Inc., AAROW issued 22,175,961 shares of common stock
to the shareholders of Global Wireless Technologies, Inc. in exchange for the
capital stock of Global Wireless Technologies, Inc. Furthermore, 1,850,000
warrants exercisable for the purchase of common stock were issued to five
individuals and one limited liability company. Each warrant is exercisable on
or before June 30, 2005 for the purchase of one share of common stock for
$.375.
The Company relied on Rule 147 and Section 4(2) of the Securities Act of 1933
and Rule 506 of Regulation D for exemption from the registration requirements
of the Act. Each investor was furnished with information concerning the
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formation and operations of the Company, and each had the opportunity to
verify the information supplied. Additionally, the Company obtained a
representation from each of the acquiring persons his or her intent to
acquire the securities for the purpose of investment only, and not with a
view toward the subsequent distribution thereof. Each of the certificates
representing the common stock and the warrant agreements carries a legend
restricting transfer of the securities represented thereby. Furthermore, the
Company has issued stop transfer instructions to Securities Transfer
Corporation, the transfer agent for the common stock, covering the
certificates representing the Common Stock issued in the above-described
transactions.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits--
<TABLE>
<S> <C>
10.1 Agreement and Plan of Merger, amongst Registrant,
Aarow-Global Wireless Acquisition, Inc., Global
Wireless Technologies, Inc., Ronald L. Baker, Stan
Sisemore, Lloyd Phillips, Jeff Martin, David
Surgnier, Virgil Plagge, Mitch Villines, D. Fred
Shefte, Sam Yates, and Tommy Phillips, dated May 1,
2000, is incorporated by reference to Exhibit 2.1 of
the Form 8-K filed with the Commission on May 16,
2000.
10.2 Settlement Agreement amongst Jim Bolt, Tony Amend,
Marie Forehand, Mel Robinson, Lucia Kugler, Aarow
Environmental Group, Inc., Fred Shefte, Sam D. Yates
and Stan Sisemore, dated May 10, 2000.
27 Financial Data Schedule
</TABLE>
Reports on Form 8-K--
Item 1. Changes in Control of Registrant, filed with the
Commission on May 16, 2000.
Item 2. Acquisition or Disposition of Assets, filed with the
Commission on May 16, 2000.
Item 4. Changes in Registrant's Certifying Accountant filed
July 17,2000.
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<PAGE>
SIGNATURES
In accordance with the requirements 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)
Date: August 21, 2000 By /S/RONALD L. BAKER
---------------------------------------------
Ronald L. Baker, President
By /S/MICHAEL W. CANFIELD
---------------------------------------------
Michael W. Canfield, Chief Financial Officer
14
