U.S. SECRUITIES AND EXCHANGE COMMSSION
                             Washington, D.C. 20549
                                   Form 10-KSB

X    Annual report under  section13 or 15(d) of the  Securities  Exchange Act of
     1934 for the fiscal year ended December 31, 1997.

     Transaction report under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition  period from  _________to  ________.  

     Commission file number: 0-6292

                         AAROW ENVIRONMENTAL GROUP, INC.
                       (Formerly RAIN FOREST-MOOSE, LTD.)
                 (Name of small business issuer in its charter)

                Nevada                                            73-1491593
(State or other jurisdiction of incorporation               (IRS Employer
 or  organization)                                           Identification No.)

                1317 S. Turner
                Springdale, Arkansas                              72764
   (Address of principal executive offices)                      (Zip Code)
Issuer's telephone number: (501) 927-1884

Securities to be registered under Section 12(b) of the Act:
       Title of each class             Name of each exchange on which registered
            None                                      None

Securities to be registered under Section12 (g) of the Act:
                                  Common Stock
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act during the past 12 months (or such
shorter period that the  registrant was required to file such reports),  and has
been subject to such filing requirements for the past 90 days. Yes No X Check if
there  is no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation  S-B is not  contained  in  this  form,  and  nondisclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements  incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. X

Issuer's revenues for its most recent fiscal year was $ 38,279.

The voting stock is not trading or quoted; therefore, the aggregate market value
of the voting stock held by  nonaffiliates  based upon the average bid and asked
prices is not available or determinable.

The number of outstanding of Common Stock as of July 13, 1998, was 9,318,904

                     Transitional Small Business Disclosure
                               Format (Check one):
                                    Yes   No X





<PAGE>



                                                 TABLE OF CONTENTS

                                                                            PAGE
Part I                                                                       -1-
Item 1. Description of Business                                              -1-
         General                                                             -1-
         Background                                                          -1-
                  Reincorporation Merger                                     -1-
                  RFM Arkansas Acquisition                                   -1-
         Business                                                            -2-
         Marketing                                                           -2-
         Contractual Arrangements                                            -2-
         Competition                                                         -2-
         Government Regulation                                               -3-
         Environmental Matters                                               -3-
         Employees.                                                          -3-
Item 2.  Description of Property                                             -3-
Item 3.  Legal Proceedings                                                   -4-
Item 4.  Submission of Matters to a Vote of Security Holders                 -4-

Part II                                                                      -4-
Item 5.  Market for Common Equity and Related Stockholders Matters           -4-
Item 6.  Management's Discussion and Analysis or Plan of Operation           -4-
         Results of Operations                                               -5-
         Liquidity and Capital Resources                                     -6-
Item 7.  Financial Statements                                                -7-
Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure                                                -7-
Part III                                                                     -7-
Item 9.  Directors, Executive Officers, Promoters, and Control Persons;
         Compliance with Section 16(a) of the Exchange Act                   -7-
Item 10.   Executive Compensation                                            -8-
           Compensation of Directors                                         -9-
           Stock Option Plan                                                 -9-
           Officer and Director Liability                                   -10-
Item 11.   Security Ownership of Certain Beneficial Owners and Management   -10-
Item 12.   Certain Relationships and Related Transactions                   -11-
Item 13.   Exhibits and Reports on Form 8-K                                 -11-
(a)   Exhibits                                                              -11-
(b)   Reports on Form 8-K                                                   -12-



<PAGE>


Part I

Item 1.  Description of Business.

General

    Aarow  Environmental  Group,  Inc., a Nevada  corporation  (the "Company" or
"Aarow Environmental"), though its wholly-owned subsidiary, Rain Forest - Moose,
Ltd., an Arkansas corporation ("RFM Arkansas"), develops, manufactures,  markets
and  distributes  a  core  of  products  and  services  which  address  specific
environmental issues. These issues are: Soil and Groundwater Remediation with an
emphasis on  bioremediation  (a form of  remediation  which  utilizes  microbial
bacteria to digest harmful  contaminants.)  Animal Waste Management  through the
development of and exclusive  marketing of a newly designed  processing  machine
that will tackle most of the problems  associated  with animal  waste.  Fuel and
Fluid  Management  by treating  various  fuels and fluids by exposing  them to a
compound magnetic field. The Company has a unique  configuration that has proven
to be far more  effective  over  conventional  methods in the  following  areas:
emissions reduction, controlling calcium scale build up, and fuel economy.

    The executive offices of Aarow  Environmental are located at 1317 S. Turner,
Springdale,  Arkansas, 72764, and the telephone number of Aarow Environmental is
(501) 927-1884.

Background

    Rendezvous Trails of America, Inc. (formerly Holiday Resorts  International,
inc.),  the former parent of Aarow  Environmental,  was  incorporation  in April
1970.  Since 1986,  RTA became  inactive and did not conduct any  operations  or
activities through 1995.

    Reincorporation  Merger.  Aarow  Environmental  was incorporate in Nevada on
February 21, 1996,  as Rain Forest - Moose,  Ltd., a wholly owned  subsidiary of
Rendezvous Trails of America,  Inc., an Oklahoma corporation formed in June 1970
("RTA").  The name of Company was changed  from Rain  Forest - Moose,  Ltd.,  to
Aarow Environmental  Group, Ltd., on June 13, 1997. Pursuant to an Agreement and
Plan of  Merger,  dated  February  23,  1996,  RTA  merged  with and into  Aarow
Environmental  as the  surviving  corporation.  The  merger of RTA with and into
Aarow  Environmental  effectively changed the state of domicile of RTA to Nevada
as a result of Aarow  Environmental  being  the  surviving  corporation  and was
accounted for as a  reorganization  of entities under common control,  which was
recorded at historical cost.  Pursuant to the Agreement and Plan of Merger, each
outstanding  share of common stock of RTA was converted into one share of Common
Stock, $.001 par value, of Aarow Environmental.  Furthermore,  on March 5, 1996,
Aarow  Environmental  split each share of its outstanding  Common Stock into two
shares,  which  effectively  resulted in 4,606,234  shares of Common Stock being
issued and outstanding.

    RFM  Arkansas  Acquisition.  Pursuant  to the  Plan  of  Reorganization  and
Agreement  of  Merger,  dated  March 5, 1996,  RFM  Acquisition  Corporation  of
Oklahoma,  Inc., and Oklahoma  corporation and wholly-owned  subsidiary of Aarow
Environmental  ("Acquisition  Corporation")  merged  with and into  Rain  Forest
-Moose, Ltd., an Arkansas corporation ("RFM Arkansas " or "Subsidiary"),  and as
the surviving corporation, became wholly-owned subsidiary of Aarow Environmental
(the "RFM Arkansas Acquisition").  Under the terms of the plan of Reorganization
and Agreement of Merger,  Aarow Environmental  issued to the shareholders of RFM
Arkansas  3,012,468  shares of Common  Stock  and  3,000,000  shares of Series I
Convertible Preferred Stock of Aarow


                                        1



<PAGE>

Environmental  in exchange for the issued and  outstanding  capital stock of RFM
Arkansas.   The  RFM  Arkansas  Acquisition  was  accounted  for  as  a  reverse
acquisition or Aarow  Environmental by RFM Arkansas.  Therefore,  the results of
the operations and other historical information of Aarow Environmental presented
in this Report are those of RFM Arkansas.  See "Item 12.  Certain  Relationships
and Related  Transactions."  Upon consummation of the RFM Arkansas  Acquisition,
the directors and officers of RFM Arkansas  became the directors and officers of
Aarow Environmental.

Business

    The  Company's  business is centered  around a core of products and services
which address specific environmental issues. These issues are:

    Soil and Groundwater  Remediation with an emphasis on bioremediation (a form
of   remediation   which   utilizes   microbial   bacteria  to  digest   harmful
contaminants.)  Along with this is the  Company's  Aarozorb  products  which are
environmentally preferred absorbent products.

     Animal Waste Management through the development of and exclusive  marketing
of a newly  designed  processing  machine  that will tackle most of the problems
associated with animal waste.

    Fuel and Fluid  Management by treating  various fuels and fluids by exposing
them to a compound magnetic field. The Company has a unique  configuration  that
has proven to be far more effective over  conventional  methods in the following
areas:  emissions  reduction,  controlling  calcium  scale  build  up,  and fuel
economy.

Marketing

    The Company markets its products directly to consumers through the Company's
marketing personnel.

Contractual Arrangements

    RFM  Arkansas  sells its  products  without a formal  contract,  other  than
pursuant  to a price list.  Because RFM  Arkansas  does not  currently  have any
long-term contracts, the Company is not dependent to any significant degree upon
any one customer or contractual relationship with a customer, the termination of
which would have a material adverse effect upon the Company.

Competition

    Soil  &   Groundwater   Remediation   Competition.   Large   engineering   &
environmental  assessment firms are the primary rivalry of Aarow within the soil
and groundwater  remediation  market.  These large firms comprise  approximately
70-80% of Aarow's  competition.  The last 20-30% of the  competitors  comes from
small  engineering & environmental  assessment firms and construction  companies
with the  capabilities to expedite large  excavation  projects,  however massive
site excavation is an outdated remediation process well into it's decline.



                                       2


<PAGE>


    Aarow's   remediation   services  emphasize  in  situ  treatment.   In  situ
technologies   are   predicted  to  continue   gaining   market  share  as  site
characterization and analysis revenues,  revenues on which our competitors rely,
will begin to decline.  Much of the site  characterization  and analysis methods
will be replaced by actual site cleanups, activities at which Aarow specializes.

    Competition  in the  animal  waste  management  market  consists  mainly  of
composting  operations.  Out of these operations the ones realizing the greatest
success  employ  enzymes to accelerate  the  decomposition  process.  Composting
methods  are time  consuming,  eliminate  only 60 to 70% of the  bacteria,  have
little effect on nitrate and phosphate  levels,  and do very little to eliminate
odor. Finally the end product left from this system has a limited use.

    Aarowaste  systems  utilize a combination of ultraviolet  light and multiple
chemical processes to eliminate all bacteria,  bind up nutrients into release on
demand forms which prevent  overloading  soil,  significantly  reduce odors, and
reduce the waste  stream up to 95% by removing the water.  This entire  process,
from start to finish,  transpires  in a matter of minutes.  The end product from
the  Aarow  waste  systems  will  benefit  several   markets  (feed   additives,
fertilizer, etc.) in ways that have never before been possible.

    Chemical  companies are the largest  competitors  in the fluid  conditioning
industry.  Currently  chemical  injection  is the method of choice for  treating
calcium scale build up in pipes and heat exchanger  systems.  Although  chemical
treatment is very effective, there is considerable ongoing expense involved.

    Over the years there have been  several  products  developed to improve fuel
economy. Of these products, not one has achieved overwhelming success. Therefore
this market continues to be wide open.

    In either  application  the  Aarow  fuel  conditioner  presents  a  solution
involving  a one time  expense.  The  unit  has no  moving  parts,  requires  no
maintenance, and will last for several years.

Government Regulation

    The  operations  of the Company are  subject to various  federal,  state and
local  regulations  which affect  businesses  generally,  such as taxes,  postal
regulations, labor law, and environmental and zoning regulations and ordinances.

Environmental Matters

    Environmental  standards  must be met by the  Company  when  doing  Soil and
Groundwater Remediation. When a cleanup site is finished it must be certified by
the appropriate governmental agency.

Employees
    Prior to May 12, 1997, the Company had six full-time employees, of which two
were employed in manufacturing,  and four were employed in sales,  marketing and
administrative   positions,   none  of  which  were   represented   by  a  labor
organization.  On May 12, 1997, a new President  and Secretary  were elected for
the Company and the total number of employees was reduced to 5.


                                       3


<PAGE>


Item 2.  Description of Property.

    The Company leases executive offices at 1317 S. Turner, Springdale, Arkansas
 72764.
                                                         
Item 3. Legal Proceedings

    On October 2, 1997 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 %.

Item 4.  Submission of Matters to a Vote of Security Holders

    During the fourth  quarter of the fiscal year ended  December 31, 1997,  the
Company  did not submit any  matters to a vote of its  shareholders  through the
solicitation of proxies or otherwise.

Part II

Item 5.  Market for Common Equity and Related Stockholders Matters.

    The Company's  Common Stock is traded on the over the counter bulletin board
under the  symbol of AARO.  On July 13,  1998,  there were  approximately  1,218
holders of the Company's Common Stock.

    The  Company's  dividend  policy is to retain its  earnings  to support  the
expansion  of its  operations.  The Board of  Directors  of the Company does not
intent to pay cash dividends on the Common Stock in the foreseeable  future. Any
future cash dividends will depend on future earnings, capital requirements,  the
Company's  financial condition and other factors deemed relevant by the Board of
Directors.  The Company's  future earnings and cash flow currently are dependent
principally  upon the operating  results of RFM Arkansas and such dependency may
continue indefinitely in the future.

Item 6. Management's Discussion and Analysis or Plan of Operation

         The  following  discussion  should  be read  in  conjunction  with  the
financial statements and notes thereto appearing elsewhere in the Report.

    Rendezvous Trails of America, Inc. (formerly Holiday Resorts  International,
Inc.); the former parent of Aarow Environmental was incorporation in April 1970.
Since 1986, RTA became inactive and did not conduct any operations or activities
through  1995  and,  as of  December  31,  1995,  did not  have  any  assets  or
liabilities.  Pursuant to an Agreement and Plan Merger, dated February 23, 1996,
RTA merged with and into Aarow Environmental as the surviving  corporation.  See
"Item 1. Description of  Business-Background-Reincorpration  Merger." The merger
of RTA  with and into  Aarow  Environmental  effectively  changed  the  state of
domicile of RTA to Nevada as a result of Aarow Environmental being the surviving
corporation  and was accounted for as  reorganization  of entities  under common
control, which was recorded at historical cost. RFM Arkansas was formed on March
15, 1994.  As a result of the RFM Arkansas  Acquisition,  RFM Arkansas  became a
wholly owned  subsidiary  of Aarow  Environmental,  which was accounted for as a
reverse  acquisition of Aarow  Environmental  by RFM Arkansas under the purchase
method of  accounting.  Therefore,  the  following  discussion  and  analysis of
results of operations  discussed  below are only those of RFM Arkansas  prior to
the   RFM    Arkansas    Acquisition.    See    "Item    1.    Description    of
Business-Background-RFM    Arkansas   Acquisition"   and   "Item   12.   Certain
Relationships and Related Transactions."




                                        4


<PAGE>


Results of Operations

    The following table sets forth selected results of operations for the fiscal
year ended December 31, 1997, and December 31, 1996,  which are derived from the
audited  financial  statements  of RFM  Arkansas.  See "Item 1.  Description  of
Business-Background-RFM Arkansas Acquisition."

<TABLE>


                                              For the Fiscal Year Ended         For the Fiscal Year Ended
                                                  December 31, 1997                 December 31, 1996
                                                  Amount       Percent            Amount       Percent
                                                  ------       -------            ------       -------
<S>                                                                               <C>          <C>     

Sales income                                      $  38,279    100.00%            $404,056     100.00%
                                                  ---------    -------            --------     -------
Cost of Sales:
    Materials                                     $  20,815     54.4%             $113,269      28.0%
    Warehouse labor                                       0      0.0%               49,202      12.2%
    Freight                                             198      0.5%                1,183       0.3%
                                                  ---------    ------             --------     ------
    Total Cost of Sales                           $  21,013     54.9%             $163,654      40.5%
                                                  ---------    ------             --------     ------
Gross Profit                                      $  17,266     45.1%             $240,402      59.5%
                                                  ---------    ------             --------     ------
Operating Expenses                                 $206,652    539.9%             $290,044      71.8%
                                                  ---------    ------             --------     ------
Income or (loss) from operations                  ($189,386)   494.75%            ($49,642)     12.3%
                                                  ----------   -------            ---------    ------
Other Income and (expense);
    Interest Income                               $       0      0.0%             $    934       0.2%
    Interest Expense                              (   7,036)    18.4%             (  4,463)      1.1%
    Payroll Tax Penalties and Interest            (   6,517)    17.0%             ( 16,017)      4.0%
    Extraordinary Item                            ( 142,934)   373.4%             ( 33,493)      8.2%
                                                  ----------   ------             ---------    ------
         Total other income and (expense)         ($156,487)   408.8%             ($53,039)     13.1%
                                                  ----------   ------             ---------    ------
Net Income or (Loss)                              ($345,873)   903.56             ($102,681)    25.4%
                                                  ==========   ======             ==========   ======

WEIGHTED AVERAGE number of
common stock and common stock
equivalents outstanding                           18,024,045                      18,312,622
                                                  ==========                      ==========

NET INCOME (LOSS) per common stock
and common stock equivalents                      ($   .019)                      ($   .006)
                                                  ==========                      ==========

</TABLE>


         Comparison of Fiscal 1997 and 1996

    Sales  income  decreased  to $ 38,279  in 1997 from $  404,056  for 1996,  a
decrease of 90.5  percent.  The decrease in sales was primarily due to decreased
sale of Peat Moose  Absorbent  products  during 1997 which was  attributable  to
continuing  operational  problems  resulting from the loss of $ 119,282 worth of
finished  inventory to a fire on August 8, 1996,  and  inadequate  management in
attempting to deal with the  difficulties  resulting from the causality.  During
the first quarter of 1997, the former  President of the Company  disappeared and
in March 1997, new officers and directors were appointed and installed to manage
the Company.  The  decreased  sales during 1997 resulted in total costs of sales
decreasing  to $ 21,013 in 1997,  compared to $ 163,654 for 1996,  a decrease of
87.1%. The decrease in total cost of sales resulted from (i) a 81.6% decrease in
cost of  materials  from $ 113,269 in 1996,  to $ 20,815,  in 1997,  (ii) a 100%
decrease in warehouse labor cost from $ 49,202 in 1996 to $ 0 in 1997, and (iii)
a 83.3%  decrease in the cost of freight  from $ 1,183 in 1996 to $ 198 in 1997.
Gross profit decreased 92.8% from $ 240,402 in 1996 to $ 17,266 in 1997.


                                       5

<PAGE>


    Operating expenses decreased from $ 290,044 in 1996 to $ 206,652 for 1997, a
28.8% decrease. The decrease in operating expenses was the result of the reduced
operations  following the August 8, 1996 causality loss and the disappearance of
the former  President  of the  Company.  During the first  quarter of 1997,  the
former President of the Company  disappeared and in March 1997, new officers and
directors were appointed and installed to manage the Company.


    The Company experienced a $ 189,386 loss from operations in 1997 as compared
to a $ 49,642 loss from operations in 1996.

    Interest expense increased from $ 4,463 in 1996 to $ 7,036 in 1997, a 57.6 %
increase. Payroll tax penalties and interest decreased to $ 6,517 in 1997 from $
16,017 in 1996, a 59.3%  decrease.  The Company also  experienced  extraordinary
losses  of $  20,455  as the  result  of  being  required  to  write  off as not
collectable  a  loan  to  the  former  President  of  the  Company,  a  loss  on
repossession  of a  Company  vehicle  as a result  of the  default  on a note to
Springdale Bank and Trust and a casualty loss in the amount of $ 119,181 when it
was  determined  that  the  insurance  company  would  not pay the  claim on the
inventory that was destroyed by fire.  Such items combined with a $ 189,386 loss
from  operations  resulted in the a $ 345,873  loss for 1997 as compared  with a
loss of $ 102,681 for 1996.

    Quarterly Results of Operations

    RFM Arkansas'  operations are affected by seasonal trends  principally based
upon weather.  In RFM Arkansas'  experience,  sales volume tends to be higher in
the second,  third and fourth calendar  quarters and lower in the first quarter.
Because the general and  administrative  expenses are relatively  fixed over the
short term,  RFM  Arkansas'  margins tend to increase in periods of higher sales
volume and  decrease in periods of lower  sales  volume.  These  effects are not
always apparent because of the impact and timing of factors which are beyond the
control of RFM Arkansas. Nevertheless, RFM Arkansas' results of operations for a
particular  calendar quarter may not be indicative of the results to be expected
during other quarters.

    Income Taxes

    Prior to the RFM Arkansas Acquisition,  RFM Arkansas,  for federal and state
income tax purposes,  was taxed as a pass-through  entity, and income taxes were
not imposed at RFM Arkansas's  level of taxation.  Therefore,  no provisions for
income taxes have been made.

Liquidity and Capital Resources

    Historically,  RFM  Arkansas  has  financed  its growth from  borrowing  and
shareholder  contributions.  Net cash (used) by operating  activities  totaled $
126,149 in 1997,  as compared  with net cash  provided by  operating  activities
totaling $ 38,020 in 1996.  As of December 31,  1997,  the Company had a working
capital deficit of $ 243,178,  compared to a working capital deficit of $ 1,984,
at  December  31,  1996.  The  working  capital  deficit  is the  result  of the
suspension  of operations  following  the August 8, 1996,  casualty loss and the
write-off of the note in the amount of $33,493.


                                    6


<PAGE>


    During 1996, the Company experienced  operating  difficulties as a result of
lack of working  capital  following  the August 8, 1996,  casualty  loss and the
operational  decline.  The  Company  also  experienced  a period  of  inadequate
management until the election of new management for the Company on May12,  1997.
The new Management for the Company has begun a plan to recapitalize  the Company
and  to  reestablish  the  relationships  with  its  distributors.  There  is no
assurance  that the Company will be  successful  in its efforts to implement its
plan for recapitalization and the resumption of full operations.  If the Company
is  unsuccessful  in its efforts,  it may be  necessary to undertake  such other
actions as may be appropriate to preserve asset value.
                                                         
    As of December 31, 1197,  RFM Arkansas had one loan from  Springdale  Bank &
Trust  Company  (the  "Bank"),  which was  secured  by  inventory  and  accounts
receivable, bears interest at 10.25 percent per annum. At December 31, 1997, the
outstanding  principal  balance of this loan was $ 60,000. On February 24, 1997,
Springdale  Bank & Trust  called a note in the  amount  of $ 9,372  which was in
default and obtained possession of the collateral which was a 1990 GMC truck. At
December 31, 1996,  RFM  Arkansas  had an equipment  loan with Anchor  Financial
Corp.  secured by office  equipment,  bear interest at 21 percent per annum, and
requiring  monthly principal and interest  installment  payments of $354 through
June 1997. The outstanding  principal  amount of this loan at December 31, 1996,
was  $1,173.  During  1996,  it was  determined  that  Dan  Pilkington  had  had
unauthorized loans to himself which resulted in the note receivable write-off in
the amount of $33,493.

Item 7. Financial Statements

    The response to this Item is set forth herein in a separate  section of this
Report, beginning on page F-2

Item 8. Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure

    There have been no  disagreements  of the type required to be reported under
this Item  between  management  of the  Company and its  independent  accountant
during 1997 and 1996.

Part III

Item 9. Directors,  Executive Officers, Promoters and Control Person; Compliance
with Section 16(a) of the Exchange Act.

    The  following  table sets  forth-certain  information  with respect to each
executive  officer and director of Rain Forest and RFM  Arkansas.  Directors are
generally elected at the annual shareholders'  meeting and hold office until the
next annual  shareholders'  meeting and until their  successors  are elected and
qualified. Executive officers are elected by the Board of Directors and serve at
its discretion. The Bylaws of the Company authorize the Board of Directors to be
constituted  of not less than one and such number as the Board of Directors  may
from time to time  determine  by  resolution  or election.  The Board  currently
consists of three members.

<TABLE>


Name                   Age     Position with Aarow             Position with RFM
----                   ---     Environmental                   ------------------
                               --------------------------   
<S>                                                             <C>    
     
Stan Sisemore          50      President, Chief Executive       President, Chief Executive
                               Officer, and Chairman            Officer, and Chairman
                               of the Board                     of the Board

Jeff Martin(1)(2)      36      Executive Vice President         Executive Vice President
                               and  Director                    and Director

Lloyd Phillips(1)      52      Secretary and Director           Secretary and Director

</TABLE>
-------------------------

(1)  As holders of 1/3 each of the  outstanding  Series I Convertible  Preferred
     Stock,  Mr.  Sisemore,   Mr.  Martin,   and  Mr.  Phillips   combined  hold
     approximately   58  percent  of  the  outstanding   voting  rights  of  the
     shareholders of the Company.  Therefore,  Mr. Sisemore,  Mr. Martin and Mr.
     Phillips  acting in unison may be able to elect all members of the Board of
     Directors  of the  Company.  See"Item  11.  Security  Ownership  of Certain
     Beneficial Owners and Management."
(2)  Member of the Stock Option Committee. See"-Stock Option Plan,"below.


                                        7


<PAGE>



    The  executive  officers  of the  Company  and  RFM  Arkansas  devote  their
full-time to the Company's business.

    The  following  is a brief  description  of the business  background  of the
executive officers and directors of the Rain Forest and RFM Arkansas.

    Stan Sisemore has been Chairman of the Board,  President and Chief Executive
Officer,  and a Director of the Company and RFM Arkansas since May 12, 1997. Mr.
Sisemore also serves as a member of the Stock Option Committee. From April 1995,
Mr.  Sisemore  served as marketing  director of the Company and will continue to
also function in that capacity.  From April 1991 until April 1995, Mr.  Sisemore
served as Executive  Vice  President of  Magnadyne  Industries,  Inc., a company
holding over 25 patents  related to Magnetic D.C. Motor  technology and Magnetic
Energy. He is also a stockholder in Magnadyne. Mr. Sisemore has been involved in
marketing  and  manufacturing  for twenty years and has been involved in product
development  for the past ten years.  During his employment  with the Company he
has been involved in the development of the absorbent program for the Company.

    Jeff Martin is Executive  Vice  President  and a Director of the Company and
RFM Arkansas serves as a member of the Stock Option Committee. Prior to becoming
employed  with the Company and RFM Arkansas in September  1994,  Mr.  Martin was
employed by First Brands  Corporation as operations  manager of packaging  plant
operations.   His  responsibilities  included  safety,  quality  and  production
coordinator  and as Industrial  Engineer at Wire Mold  Corporation  where he was
responsible  for product  enhancement.  Mr. Martin received an Associate of Arts
Degree in 1993 from  Mississippi  County  Community  College  and  attended  the
University of Arkansas with studies focused on engineering.

    Lloyd Phillips was elected as Secretary and a Director of the Company on May
12, 1997. Prior to his employment with the Company Mr. Phillips was president of
a large  manufactured  homes company and has been involved in the management and
development  of the poultry and egg industry for the past  eighteen  years.  Mr.
Phillips also has a broad background in sales and marketing.

    During  1996 and until his removal in March 1997,  Dan  Pilkington  held the
positions of Chairman of the Board, President and Chief Executive Officer of the
Company and of RFM Arkansas.

Item 10.  Executive Compensation

    The following table sets forth-certain information with respect to the total
cash  compensation,  paid or accrued,  of the  President  of the Company and RFM
Arkansas and each of the executive officers that received compensation in excess
of $100,000 during 1997. Because Rendezvous Trails of America,  Inc. (the former
parent of Aarow  Environmental)  was  inactive  during 1993  through  1996,  its
President and other executive officers were not paid any executive  compensation
nor was any accrued during such years. Furthermore,  because the Company and RFM
Arkansas were,  inactive  during much of 1997, the President and other executive
officers of RFM Arkansas  were not paid any executive  compensation  nor was any
accrued during 1997.











                                        8


<PAGE>

     
<TABLE>
                                                                  Annual Compensation
                                                                  -------------------
                                                                                               All Other
Name and Principal Position                 Year(1)           Salary(2)         Bonus(3)    Compensation
---------------------------                 --------          ---------         --------    ------------

<S>                                                                             <C>           <C>     

Stanley L. Sisemore                             1997          $ 23,000          $      0      $       0
    President and Chief Executive Officer       1996          $      0          $      0      $       0
    of RFM Arkansas

Jeff Martin                                     1997          $ 26,000          $      0      $       0
    Executive Vice President                    1996          $      0          $      0      $       0
    and Director

Lloyd Phillips                                  1997          $ 23,000          $      0      $       0
    Secretary and Director                      1996          $      0          $      0      $       0
</TABLE>
-------------------------------
(1)  The  executive  officers,  including  the  President,  were  not  paid  any
     executive  compensation during 1993 or 1994 nor was any accrued during such
     year.
(2)  Dollar  value of base salary  (both cash and  non-cash)  earned  during the
     year.
(3) Dollar value of bonus (both cash and non-cash) earned during the year.

Compensation of Directors

    The directors of Aarow Environmental and RFM Arkansas are employees of Aarow
Environmental  and are nor  currently  compensated  for  attending  meetings  of
directors  and  committees  of  the  Board  of  Directors,  but  are  reimbursed
out-of-pocket expenses.

Stock Option Plan

    The company established the Rain Forest - Moose, Ltd. 1996 Stock Option Plan
(the "Stock Option Plan" or the "Plan") in February  1996. The plan provides for
the issuance of incentive  stock options ("ISO  Options")  with or without stock
appreciation  rights ("SARs") and nonincentive stock option ("NSO Options") with
or without SARs to employees and consultants of the Company, including employees
who also serve as directors of the Company. The total number of shares of Common
Stock authorized and reserved for issuance under the Plan is 2,500,000.  Options
have not been granted under the Plan as of the date of this Report.

    The Stock Option Committee, which is currently comprised of Messrs. Sisemore
and Martin,  administers  and  interprets  the Plan and has  authority  to grant
options to all  eligible  and  determine  the types of options,  with or without
SARs, granted, the terms, restrictions and conditions of the options at the time
of grant, and whether SARs, if granted,  are exercisable at the time of exercise
of the Option to which the SAR is attached.

    The  option  price of the Common  Stock is  determined  by the Stock  Option
Committee, provided such price may not be less than the fair market value of the
shares on the date of grant of the option.  The fair market  value of a share of
the Common Stock is  determined  by averaging the closing high bid and low asked
quotations  for such share on the date of grant of the option or, if not quoted,
by the Stock Option Committee.  Upon the exercise of an option, the option price
must be paid in  full,  in cash  or with an SAR.  Subject  to the  Stock  Option
Committee's  approval,  upon  exercise  of an  option  with an SAR  attached,  a
participant may receive cash, shares of Common Stock or a combination of both in
an amount or having a fair  market  value equal to the excess of the fair market
value,  on the date of exercise,  of the shares for which the option and SAR are
exercised over the option exercise price.

    Options granted under the Plan  may not be  exercised until six months after
the date of the grant and


                                        9

<PAGE>

rights  under an SAR may not be  exercised  until  six  months  after the SAR is
attached to an option,  if not  attached at the time of the grant of the option,
except in the event of death or disability of the  participant.  ISO Options and
any SARs are  exercisable  only by  participants  while actively  employed as an
employee or a consultant by Rain Forest or a subsidiary  of Rain Forest,  except
in the case of death, retirement or disability.  Options may be exercised at any
time within three months after the  participant's  retirement or within one year
after the participant's  disability or death, but not beyond the expiration date
of the option. No option may be granted after December 28, 2005. Options are not
transferable except by will or by the laws of descent and distribution.

Officer and Director Liability

    The Certificate and Bylaws of Aarow  Environmental  provide that the Company
shall  indemnify its directors and officers to the full extent  permitted by the
Nevada General Corporation Law. Under such provisions,  any director or officer,
who in his capacity as such, is made, a party to any suit or proceeding,  may be
indemnified if the Board of Directors  determines such director or officer acted
in good faith and in a manner he reasonably  believed to be in or not opposed to
the best interest of the Company.  The Certificate and Bylaws of the Company and
the Nevada General Corporation Law further provide that such  indemnification is
not  exclusive  of any other  rights to which such  individuals  may be entitled
under the  Certificate,  the  Bylaws,  an  agreement,  vote of  shareholders  or
disinterested directors or otherwise. Insofar as indemnification for liabilities
arising  under the Act may be  permitted  to  directors  and  officers  of Aarow
Environmental  has been  advised  that in the  opinion  of the  Commission  such
indemnification  is  against  public  policy  as  expressed  in the  Act and is,
therefore, unenforceable.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

    The  following  table  presents  certain  information  as to the  beneficial
ownership of the Common  Stock and Series I  Convertible  Preferred  Stock as of
July 9, 1998, of (i) each person who is known to Aarow  Environmental  to be the
beneficial owner of more than five percent  thereof,  (ii) each current director
and executive  officer of Aarow  Environmental,  and (iii) all current executive
officers and directors as a group together with their percentage holdings of the
outstanding  shares.  All persons listed have sole voting and  investment  power
with respect to their share unless otherwise  indicated,  and there is no family
relationship   between  the   executive   officers   and   directors   of  Aarow
Environmental.

<TABLE>

                                                 Series I Convertible
                                                        Preferred Stock                Common Stock
                                             ----------------------------          -------------------------
                                            Shares               Percent of        Shares         Percent of
                                            Beneficially         Share             Beneficially   Share
      Owned                                 Outstanding          Owned             Ownership
      -----                                 ------------         -----             =========
<S>                                                                                <C>            <C>    

Name and Address of Beneficial Owner
------------------------------------
Stanley L. Sisemore(1)                      1,000,000            33.3%             4,440,000      24.24%
Jeff Martin                                 1,000,000            33.3%             3,250,000      17.74%
Lloyd W. Phillips                           1,000,000            33.3%             3,100,000      16.90%
Executive Officers and Directors as a group
   (three persons)(1                        3,000,000            100.0%            10,790,000     58.88%

</TABLE>
----------------------------
(1)  With respect to the Common Stock,  includes  9,000,000 shares issuable upon
     conversion of the Series I Convertible Preferred Stock.





                                       10

<PAGE>


Item 12.  Certain Relationships and Related Transactions

    Set forth below is a description of transactions  entered into between Aarow
Environmental  and RFM  Arkansas  and certain of its  officers,  directors,  and
shareholders  during the last two  years.  Certain  of these  transactions  will
continue in effect and may result in conflicts  of interest  between the Company
and such  individuals.  Although  these  persons  have  fiduciary  duties to the
Company  and its  shareholders,  there can be no  assurance  that  conflicts  of
interest will always be resolved in favor of the Company.

    Pursuant to a Plan of Reorganization and Agreement of Merger, dated February
23, 1996, Dan Pilkington and Jeff Martin  exchanged  their shares of the capital
stock of RFM  Arkansas  for  1,597,468  and  250,000  shares  of  Common  Stock,
respectively,  and Mr.  Pilkington  also received  3,000,000  shares of Series I
Convertible    Preferred    Stock.    See   "    Item    1.    Description    of
Business-Background-RFM   Arkansas   Acquisition."   The  Series  I  Convertible
Preferred  Stock is convertible  into  9,000,000  shares of Common Stock of Rain
Forest. In connection with RFM Arkansas Acquisition and the transactions related
thereto,  an independent  determination  of fairness and  reasonableness  of the
terms of the  transactions  was not obtained;  however,  the  transactions  were
negotiated on an arms'-length  basis by the respective  parties and are believed
to have been fair by respective parties and management of Rain Forest.

    From time to time Dan Pilkington,  the former  President and Chairman of the
Board,  has made loans to RFM Arkansas in the form of due on demand loan,  which
bear  interest at the rate of 7.5 percent  per annum.  At December  31, 1994 and
1995, the aggregate outstanding principal amounts of such loans were $32,171 and
$17,319,  respectively. At December 31, 1996, these loans had been discharged in
connection with the resolution of unauthorized loans from the Company to Mr.
Pilkington.

    U.S.  Equipment & Services,  Inc. which is wholly owned by Monica Pilkington
who is a former executive  officer of Aarow  Environmental  and RFM Arkansas and
the wife of Mr. Pilkington,  made an unsecured loan to RFM Arkansas, which bears
interest at the rate of 7.5 percent  per annum.  At December  31, 1994 and 1995,
the  outstanding   principal  amount  of  such  loan  was  $17,362  and  $8,409,
respectively.  At  December  31,  1996,  these  loans  had  been  discharged  in
connection  with the  resolution of  unauthorized  loans from the Company to Mr.
Pilkington.

Item 13.  Exhibits and Reports on form 8-K

     2.1  Agreement  and Plan of Merger  between  Rendezvous  Trails of America,
          Inc., Rain Forest - Moose, Ltd., dated February 23, 1996. *
     2.2  Plan of  Reorganization  and  Agreement  of Merger among Rain Forest -
          Moose,  Ltd., a Nevada  corporation,  RFM  Acquisition  Corporation of
          Oklahoma,  Inc., Rain Forest - Moose, Ltd., and Arkansas  corporation,
          Dan  Pilkington,  Jeff Martin,  Stan  Sisemore,  Jim Anderson and Bill
          Hooten, dated March 5, 1196*
     3.1  Articles  of  Incorporation  of Rain  Forest - Moose,  Ltd.,  a Nevada
          corporation.*
     3.2  Bylaws of Rain Forest - Moose, Ltd. *
     4.1  Form of Certificate of Common Stock of Rain Forest - Moose, Ltd.*
     4.2  Agreement and Plan of Merger among Rendezvous Trails of America, Inc.,
          and Rain  Forest - Moose,  Ltd.,  dated  February  23,  1996  filed as
          Exhibit 2.1 hereto.*
     4.3  Plan of  Reorganization  and  Agreement  of Merger among Rain Forest -
          Moose,  Ltd., a Nevada  corporation,  RFM  Acquisition  Corporation of
          Oklahoma,  Inc., Rain Forest - Moose,  Ltd., an Arkansas  corporation,
          Dan  Pilkington,  Jeff Martin,  Stan  Sisemore,  Jim Anderson and Bill
          Hooten, dated March 5, 1996, filed as Exhibit 2.2 hereto.*


                                       11


<PAGE>


     4.4  Certificate of the Powers Designation,  Rights and Preferences for the
          Series I  Convertible  Preferred  Stock of Rain Forest - Moose,  Ltd.,
          dated March 5, 1996.*
     4.5  Registration  Rights Agreement  between Rain Forest - Moose,  Ltd. and
          Dan Pilkington, dated March 5, 1996.*
     4.6  Rain Forest - Moose, Ltd. 1996 Stock Option Plan, adopted February 21,
          1996.*
     10.1 Agreement  and Plan of Merger  between  Rendezvous  Trails of America,
          Inc. and Rain Forest - Moose,  Ltd., dated February 23, 1996, filed as
          Exhibit 2.1 hereto.*
     10.2 Plan of  Reorganization  and  Agreement  of Merger among Rain Forest -
          Moose,  Ltd., a Nevada  corporation,  RFM  Acquisition  Corporation of
          Oklahoma,  Inc., Rain Forest - Moose,  Ltd., an Arkansas  corporation,
          Dan  Pilkington,  Jeff Martin,  Stan  Sisemore and Bill Hooten,  dated
          January 19, 1996, filed as Exhibit 2.2 hereto.*
     21.1 Subsidiary of Registrant.*

     27   Financial Data Schedule

--------------------------------------------
*    Incorporated by reference to Form 10-KSB dated March 8, 1996

((b) Reports on Form 8-K

         There were no reports on Form 8-K filed with the Commission  during the
last quarter of 1996.

SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                      AAROW ENVIRONMENTAL GROUP, INC.
                                               (Registrant)

                                      By:  /s/ Stanley L. Sisemore
                                           ----------------------------------
                                               Stanley L. Sisemore, President

Date: July 13, 1998


         In accordance  with the Exchange Act, this Report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

<TABLE>

         Name                         Title                                          Date
         ----                          ----                                          ----
<S>                                                                                  <C>    

        Stanley L. Sisemore           Chief Executive Officer, President and
                                      Chairman of the Board                          July 13, 1998

        Jeff Martin                   Executive Vice President
                                      and Director                                   July 13, 1998

        Lloyd W. Phillips             Secretary                                      July 13, 1998
       
</TABLE>


                                       12

<PAGE>

<TABLE>
<CAPTION>


                          INDEX TO FINANCIAL STATEMENTS


AAROW ENVIRONMENTAL GROUP, INC.
<S>                                                                                  <C>    

         Independent Auditors Report                                                  F-2

         Balance Sheet, December 31,1997 and 1996                                     F-3

         Statements of Income and Retained Earnings for the Twelve Months
         Ended December 31, 1997 and the Twelve Months Ended December 31, 1996        F-5

         Statements of Cash Flows for the Twelve Months Ended December 31, 1997
         and the Twelve Months Ended December 31, 1996                                F-6

         Notes to Financial Statements                                                F-7

         Supplemental Information                                                     F-12

</TABLE>

                                     







                                                                             F-1

<PAGE>



                           INDEPENDENT AUDITORS REPORT



To the Board of Directors
and Stockholders of
Aarow Environmental Group, Inc.
Springdale, AR


I have audited the  accompanying  balance sheets of Aarow  Environmental  Group,
Inc. (a public  corporation)  as of December  31, 1997 and December 31, 1996 and
the  related  statements  of income  and  retained  earnings,  cash  flows,  and
supplemental  information for the years then ended.  These financial  statements
are the  responsibility  of the Company's  management.  My  responsibility is to
express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally  accepted auditing  standards.
Those standards  require that I plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects,  the financial position of Aarow Environmental Group, Inc. as
of December 31, 1997 and December 31, 1996 and the results of its operations and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
company  will  continue  as a going  concern.  As  discussed  in  Note-11 to the
financial statements,  the Company's significant operating loss, working capital
deficit, and prior lack of adequate management raise substantial doubt about its
ability to continue as a going concern.  The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.






Springdale, AR
May 28, 1998



                                                                            
                                                                             F-2

<PAGE>



                                                        
AAROW ENVIRONMENTAL GROUP, INC.
BALANCE SHEET
As of December 31, 1997 and December 31, 1996
                                                             Dec. 31,   Dec. 31,
Assets                                                         1997       1996
                                                             --------   --------

Current Assets:
Cash and Cash Equivalents                                    $      0   $  2,147
Accounts Receivable                                             1,043          0
Inventory                                                      33,668     31,626
Insurance Claim                                                     0    119,182
                                                             --------   --------
                                TOTAL CURRENT ASSETS         $ 34,711   $152,954

PROPERTY, PLANT AND EQUIPMENT (net of  accumulated
     depreciation of $ 10,001 and $ 23,730 respectively)       12,095     46,005

Other Assets
Organization Costs (net of accumulated
     amortization of  $ 2,475 and $ 1,575 respectively)      $  2,025   $  2,925
Noncompete Covenant (net of accumulated
     amortization of $ 750)                                    17,250          0
                                                             --------   --------
                                TOTAL OTHER ASSETS           $ 19,275   $  2,925
                                                             --------   --------

                                TOTAL ASSETS                 $ 66,081   $201,884
                                                             ========   ========




SEE ACCOUNTANTS REPORT AND NOTES

                                                                             F-3









<PAGE>

<TABLE>
<CAPTION>

                                                         
AAROW ENVIRONMENTAL GROUP, INC.
BALANCE SHEET
As of December 31, 1997 and December 31, 1996
                                                                       Dec. 31,     Dec. 31,
Liabilities and Stockholders Equity                                      1997        1996
                                                                      ---------    ---------
<S>                                                                                <C>     

Current Liabilities:
Bank Overdraft                                                        $   2,316    $       0
Accounts Payable                                                         26,538       20,309
Payroll Taxes Payable                                                   107,965       67,005
Accrued Interest Payable                                                  7,700          733
Judgment Payable                                                         18,370            0
Short Term Notes                                                         55,000            0
Current Portion of Long Term Notes                                       60,000       66,891
                                                                      ---------    ---------
         TOTAL CURRENT LIABILITIES                                    $ 277,889    $ 154,938

LONG TERM LIABILITIES                                                         0        3,654
                                                                      ---------    ---------

         TOTAL LIABILITIES                                            $ 277,889    $ 158,592

Stockholders Equity
Common Stock at Dec. 31, 1997, $ 0.001 par value, 30,000,000 shares   $   9,024    $   7,619
     authorized,  9,024,045 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                                                         189,249       99,881
Retained Earnings                                                      (413,081)     (67,208)
                                                                      ---------    ---------
TOTAL STOCKHOLDERS EQUITY                                             $(211,808)   $  43,292
                                                                      ---------    ---------

         TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                    $  66,081    $ 201,884
                                                                      =========    =========


</TABLE>




SEE ACCOUNTANTS REPORT AND NOTES
                                                                             F-4



<PAGE>



AAROW ENVIRONMENTAL GROUP, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996
                                               Dec. 31      Dec. 31,
                                                 1997         1996
                                              ---------    ---------

Sales Income                                  $  38,279    $ 404,056

Cost of Sales
         Materials                            $  20,815    $ 113,269
         Warehouse Labor                              0       49,202
         Freight                                    198        1,183
                                              ---------    ---------
Total Cost of Sales                           $  21,013    $ 163,654
                                              ---------    ---------

         GROSS PROFIT                         $  17,266    $ 240,402

Operating Expenses                              206,652      290,044
                                              ---------    ---------

         GAIN  OR (LOSS) FROM OPERATIONS      $(189,386)   $ (49,642)

Other Income and (Expenses)
         Interest Income                      $       0    $     934
         Interest Expense                        (7,036)      (4,463)
         Payroll Tax Penalties and Interest      (6,517)     (16,017)
                                              ---------    ---------
Total Other Income and (Expense)              $ (13,553)   $ (19,546)
                                              ---------    ---------

         INCOME OR (LOSS) BEFORE
         EXTRAORDINARY ITEM                   $(202,939)   $ (69,188)

Extraordinary Items
         Note Receivable                      $ (20,455)   $ (33,493)
         Loss on Repossession                    (3,298)           0
         Casualty Loss                         (119,181)           0
                                              ---------    ---------
Total Extraordinary Items                     $(142,934)   $ (33,493)
                                              ---------    ---------

         NET INCOME OR (LOSS)                 $(345,873)   $(102,681)

Retained Earnings at Beginning of Year          (67,208)      35,473
                                              ---------    ---------

         RETAINED EARNINGS AT END OF YEAR     $(413,081)   $ (67,208)
                                              =========    =========





SEE ACCOUNTANTS REPORT AND NOTES
                                                                             F-5


<PAGE>


<TABLE>
<CAPTION>

AAROW ENVIRONMENTAL GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996
                                                                Dec. 31,     Dec. 31,
                                                                  1997         1996
                                                              ----------   ----------
<S>                                                                             <C>         

         CASH FLOWS FROM OPERATING ACTIVITIES
Net Income or (Loss)                                          $(345,873)   $(102,681)
     Adjustments to reconcile net loss to net cash provided
     by operating activities
     Depreciation                                                 3,383       12,572
     Amortization                                                 1,650          900
     Extraordinary Items                                         23,753       33,493
(Increase) decrease in:
     Accounts Receivable                                         (1,043)      50,227
     Employee Receivable                                              0        1,972
     Prepaid Expenses                                                 0          822
     Inventory                                                   (2,042)     123,272
     Insurance Claim                                            119,181     (119,182)
Increase (decrease) in:
     Bank Overdraft                                               2,316       (2,151)
     Accounts Payable                                             6,229        4,706
     Payroll Taxes Payable                                       40,960       34,681
     Sales Taxes Payable                                              0          (31)
     Accrued Interest Payable                                     6,967         (580)
     Judgment Payable                                            18,370            0
                                                              ---------    ---------
         NET CASH PROVIDED (USED)
              BY OPERATING ACTIVITIES                         $(126,149)   $  38,020

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of Equipment                                    $  (4,887)   $  (1,052)
     Noncompete Covenant                                        (18,000)           0
     Extraordinary Item-Note Receivable                              (0)     (33,493)
                                                              ---------    ---------
              NET CASH PROVIDED (USED)
              BY INVESTING ACTIVITIES                         $ (22,887)   $ (34,545)

CASH FLOWS FROM FINANCING ACTIVITIES
     New borrowings
     Long-Term                                                $       0    $       0
     Short-Term                                                  59,500            0
Debt Reduction
     Long-Term                                                  (15,045)      (4,336)
     Sale of Stock                                              102,434
                                                              ---------
              NET CASH PROVIDED (USED)
              BY FINANCING ACTIVITIES                         $ 146,889    $  (4,336)
                                                              ---------    ---------

              NET INCREASE (DECREASE) IN CASH                 $  (2,147)   $    (861)

CASH AT BEGINNING OF YEAR                                         2,147        3,008
                                                              ---------    ---------
              CASH AT END OF YEAR                             $       0    $   2,147
                                                              =========    =========

SUPPLEMENTAL DISCLOSURES
Interest Paid                                                 $   7,036    $   4,463

</TABLE>


SEE ACCOUNTANTS REPORT AND NOTES
                                                                             F-6


<PAGE>


AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996

STATEMENT OF  SIGNIFICANT ACCOUNTING ASSUMPTIONS

Nature of Business

The Company's  business is centered around a core of products and services which
address specific environmental issues. These issues are:

Soil and Groundwater  Remediation with an emphasis on  bioremediation (a form of
remediation which utilizes microbial  bacteria to digest harmful  contaminants.)
Along with this is the Company's  Aarozorb  products  which are  environmentally
preferred absorbent products.

Animal Waste Management through the development of and exclusive  marketing of a
newly  designed  processing  machine  that  will  tackle  most  of the  problems
associated with animal waste.

Fuel and Fluid  Management by treating various fuels and fluids by exposing them
to a compound  magnetic field. The Company has a unique  configuration  that has
proven to be far more  effective  over  conventional  methods  in the  following
areas:  emissions  reduction,  controlling  calcium  scale  build  up,  and fuel
economy.

The Company  trades it's stock on the over the counter  bulletin board using the
stock symbol of AARO.

Name Change

On May 12, 1997 the Company  formally  changed it's name from Rain Forest Moose,
Ltd. to Aarow Environmental Group, Inc.

Basis of Accounting

The  financial   statements  of  Aarow  Environmental   Group,  Inc.,  a  public
corporation,  have been prepared on the accrual basis of accounting.  Using this
method, revenue and expenses are recognized when incurred.

Inventory

Inventory  is  carried  at the  lower  of cost or  market  and  consists  of raw
materials and ready to sell products.

Property and Equipment

Property  and  Equipment  are  recorded at  acquisition  cost.  Depreciation  is
computed  using  straight  line  methods by charging  against  earnings  amounts
sufficient  to  amortize  the cost of the related  assets  over their  estimated
useful lives.


SEE ACCOUNTANTS REPORT
                                                                             F-7


<PAGE>

AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996

Income Taxes

For income tax reporting and financial  statement reporting 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.

Corporate Charter

On December 31, 1997 the Company's Charter giving it authority to operate in the
State of Arkansas was in a revoked status.  This Charter has been reinstated and
the Company was in good standing on the date of issuance of this audit report.

Management  Change  On May 12,  1997 a new  president,  officers,  and  board of
directors were elected.

Note-1:  Insurance Claim

On August 8, 1996 a fire destroyed $ 119,282 worth of finished  inventory.  This
inventory was insured by Lloyds of London for cost less a $ 100 deductible.  The
Company and legal  representatives at December 31, 1996 were of the opinion that
this claim would be paid in 1997, However,  during the year 1997, it was decided
that the claim would not be paid and an  extraordinary  item,  casualty loss has
been recorded.

Note-2:  Property , Plant and Equipment

All assets are recorded at original cost.  Depreciation is calculated  using the
straight line method, lives are five years for office equipment, seven years for
manufacturing equipment and furniture. A schedule of assets is as follows:
                                                   Accum.            Depr.
December 31, 1997                  Cost             Depr.           Expense
                              -------------    -------------    -------------
Office Equipment              $      16,079    $       7,372    $       2,524
Equipment                             6,017            2,629              860
                              -------------    -------------    -------------
Total                         $      22,096    $      10,001    $       3,384
                              =============    =============    =============

                                                   Accum.            Depr.
December 31, 1996                  Cost             Depr.           Expense
                              -------------    -------------    -------------
Auto                          $      42,639    $      13,563    $       7,750
Office Equipment                     14,139            5,953            2,888
Equipment                             8,061            3,030            1,444
Leasehold Improvements                4,896            1,184              490
                              -------------    -------------    -------------
Total                         $      69,735    $      23,730    $      12,572
                              =============    =============    =============

The autos are pledged as collateral to Springdale  Bank and Trust of Springdale,
AR.


SEE ACCOUNTANTS REPORT
                                                                             F-8


<PAGE>


AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996

Note-3: Noncompete Covenant

On  July  29,  1997  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,  1997 and remains in effect for ten years at which time Aarow can renew
one time for an additional ten years

                                               Dec. 31,              Dec. 31,
                                                 1997                  1996
                                             -----------           -----------
     Noncompete Covenant                     $   18,000            $        0
     Accumulated Amortization                      (750)                   (0)
                                             -----------           ----------
     Net Noncompete Covenant                 $   17,250            $        0
                                             ==========            ==========

Note-4:  Judgment Payable

On October 2, 1997 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-5:  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.












SEE ACCOUNTANTS REPORT
                                                                             F-9


<PAGE>



AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996

Note-6: The company's Long Term debt consists of the following:
                                                          Dec. 31,    Dec. 31,
                                                            1997        1996
                                                         ---------    ----------
Anchor Financial, 21 % interest, $ 354.39 per month      $       0    $   1,173
Maturity Date:  6-30-1997
Secured by computer printers and a copier

Springdale Bank & Trust, 10.25%, $ 534.58 per month              0        9,372
Maturity Date:  5-10-98
Secured by 90 GMC truck

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)     (66,891)
                                                         ----------   ----------

Long Term debt, less current portion                     $       0    $   3,654
                                                         =========    =========

The following is a summary of principal  maturities of long term debt during the
next five years:

                  1997                                   $       0    $  66,891
                  1998                                      60,000        3,654

Note-7:  Stockholders' Equity

Common  Stock:  At December 31, 1997 there were  30,000,000  shares  authorized,
9,024,045 issued and outstanding at $ 0.001 per share par value. At December 31,
1996  there were  30,000,000  shares  authorized,  9,312,622  shares  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, 1997
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 December 31, 1997 and 1996 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.




SEE ACCOUNTANTS REPORT
                                                                            F-10


<PAGE>


AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996

Note-8:  Related Party Transactions and Extraordinary Item-Note Receivable

At  December  31, 1996 Dan  Pilkington  was the  president  of the  Company.  As
president,  Mr.  Pilkington  made various  unauthorized  loans to himself  which
totaled  $  33,493.  These  transactions  were  originally  recorded  as a  note
receivable  from officer.  It has been  determined  that this  receivable is not
collectable and is being recognized as an extraordinary item on the December 31,
1996 income statement.

On February 24, 1997 Springdale Bank and Trust, a note holder,  called a note in
the amount of $ 9,372 that was in default.  Springdale  Bank and Trust  obtained
possession of collateral which was a 90 GMC truck.

Note-10:  Casualty Loss  See note-1 insurance claim.

Note-11:  Going Concern

As shown in the accompanying  financial  statements,  the Company has incurred a
sizable  loss for the year ended  December 31, 1997 and has a deficit in working
capital.  Due to inadequate  prior  management there has been a reduction in the
number of distributors  for the Company's  product  resulting in a corresponding
drop in overall sales.  As disclosed in the statement of significant  accounting
assumptions  the  existing  president  at December  31, 1996 was removed and new
officers were elected.  The new management has begun a plan to recapitalize  the
Company and to reestablish the relationship with the distributors.  There can be
no  assurance  that the Company will be  successful  in its efforts to implement
this plan. If the Company is unsuccessful in its efforts, it may be necessary to
undertake such other actions as may be appropriate to preserve asset value.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.















SEE ACCOUNTANTS REPORT
                                                                            F-11


<PAGE>












                            SUPPLEMENTAL INFORMATION










<PAGE>


AAROW ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 1997 and
the Twelve Months Ended December 31, 1996
                                                 Dec. 31,              Dec. 31,
                                                   1997                   1996
                                               ----------            ----------
Operating Expenses
Accounting                                     $   18,416            $   21,371
Advertising                                           400                   100
Amortization                                        1,650                   900
Auto & Truck                                        5,688                11,391
Bank Charges                                           81                    98
Contributions                                           0                   500
Contract Labor                                          0                20,094
Depreciation                                        3,383                12,572
Dues & Subscriptions                                    0                   641
Entertainment                                           0                     0
Equipment Rental                                        0                   171
Insurance                                             222                 9,316
Legal Expense                                       8,960                     0
Management Expense                                      0                 1,345
Miscellaneous                                           0                   739
Office Expense                                     13,048                 7,307
Office Salaries                                    99,567                31,435
Payroll Tax Expense                                 7,617                 8,166
Postage                                                22                 1,664
Rent                                                9,091                25,483
Repairs                                                 0                   285
Sales Commission                                        0                26,103
Supplies                                            9,882                22,453
Taxes & Licenses                                        0                   189
Telephone                                          16,506                24,026
Travel                                             10,341                59,499
Unemployment Taxes                                  1,778                 1,776
Utilities                                               0                 2,420
                                               ----------           -----------
                                               $ 206,652            $   290,044







SEE ACCOUNTANTS REPORT
                                                                            F-12